AppFolio, Inc.

Good afternoon. Thank you for standing by and welcome to AppFolio Inc's third quarter 2024 financial results conference call. Please be advised that today's conference is being recorded and it 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, Victor. Good afternoon, everyone. I'm Lori Barker, investor relations for AppFolio. I'd like to thank you for joining us today as we report AppFolio's third quarter 2024 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, business performance, or future product enhancements or development is a forward-looking statement. AppFolio's actual future results could differ materially from those expressed in such forward-looking statements for any reason, including those listed in 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 filings, including our Form 10-K for the year ended December 31st, 2023, which was filed with the SEC on February 1st, 2024. 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 third quarter earnings release, which has been posted to the investor relations section of our website. With that, I'll turn the call over to Shane Trigg. Shane, please go ahead.

Thanks, Lori, and welcome to everyone joining us for AppFolio's third quarter 2024 financial results, results that demonstrate strong performance and reflect our relentless focus on customers. Revenue was up 24% year over year to $206 million in the third quarter, while non-GAAP operating margin expanded to 29%, and non-gap-free cash flow margin grew to 27%. We continue to invest in innovation that builds the platform where the real estate industry comes to do business. For several quarters, you've heard me talk about the exciting potential we see in creating additional value for residents through our platform, a key component of our long-term vision. Yesterday, we unveiled FolioSpace, a next-generation resident experience that will redefine how property managers and residents connect throughout the entire resident journey. FolioSpace will enable AppFolio's 20,000 property management customers to create a unified and elevated experience for the millions of residents they serve, from application through renewal. A recent survey we conducted of more than 2,000 U.S. renters shows their expectations are growing across all aspects of the resident experience, from timely communication to on-demand digital experiences and a frictionless move-in process. Meeting these expectations is critical for property managers to gain an edge in an increasingly competitive market, and FolioSpace is poised to help them attract and retain residents. Our acquisition of LiveEasy, which we also announced yesterday, accelerates the potential we see in the resident industry segment. By vertically integrating LiveEasy and offering its services as part of FolioSpace resident onboarding, we will reduce the stress of moving, deliver increased convenience, and save renters time and money. We're excited to welcome LiveEasy's team and customers to AppFolio. FolioSpace is just one example of new innovation we are delivering that helps us differentiate to win, which is one of our enduring strategic pillars. We continue to lead the industry by embracing generative AI technology for the benefit of our customers. Starting next week, we are releasing RealmX Assistant and Messages to all customers and RealmX Flows to customers on our AppFolio Property Manager Plus and Max plans. These AI-powered solutions automate routine tasks and key workflows, streamline communications, and enable property managers to transform their operational performance. We worked with hundreds of customers to jointly develop this technology and ensure it is secure, easy to use, and delivers the outcomes they're looking for. The average time saved by our RealmX beta customers in completing their to-dos is a remarkable 10 hours each week based on their feedback. We also looked at hard data. In the last 30 days, our beta customers have sent almost half a million RealmX generated messages saving 26 seconds on average compared to a message composed without it. That's three full work weeks every year that each beta customer has saved just from implementing RealmX messages. The impact of RealmX extends beyond time savings, improving our customers' performance. Take the example of Atlas Real Estate, with 6,500 multi-family, single-family, and commercial units running on AppFolio Property Manager Max. Recently, Atlas ran a competition for the staff member achieving the highest number of lease renewals. At the time, Atlas was participating in the RealmX beta program, testing our RealmX renewal flow at one of its property portfolios. The property manager overseeing this particular portfolio outperformed their colleagues by a significant margin, claiming victory in the competition. Impressed by these results, Atlas quickly adopted Romex Flows across all its properties. The outcome has been remarkable, an 8% overnight increase in renewal rates. Just imagine an 8% improvement in your business overnight. The future is here, and we can't wait to get it into the hands of our customers to help them be more productive give their teams and customers an exceptional experience, and fuel the performance of their business. A second component of our strategy is to unlock upmarket customers. We are winning larger customers by extending the value of our platform to scale with their complex operations. In the accounting domain, we are beta launching a new budget creation tool for plus and max customers where users can input and adjust their assumptions for future leasing metrics, and watch the system predict the resulting revenue in real time. Additionally, our bill approvals process has a new interface that allows users to design custom approval workflows that run automatically based on conditions they establish, improving the pace and accuracy of their monthly payable cycles. Another way we support mixed portfolio customers, both large and small, is by expanding our coverage of property types. We continue to innovate in the area of affordable housing, exemplified by our new waitlist capabilities that allow customers managing HUD units to oversee critical waitlist requirements directly in AppFolio Property Manager. Pat Shoemaker, Executive Vice President of Artcraft Management with 5,300 units on AppFolio Property Manager Plus, recently told us, quote, At Folio's HUD waitlist feature enhances our ability to efficiently manage applicant queues, ensuring compliance and transparency throughout the rental process. This feature will make it easier to manage our HUD properties, but also improve the overall experience for both our team and prospective residents, aligning perfectly with our commitment to providing quality management services, end quote. A third component of our strategy is to elevate our customer by driving their adoption and success on our platform. Across the industry, cases of rental fraud are rising, and consequently, so are the time and resources it takes to qualify prospects for units. To help our property management customers combat this with less effort and better accuracy, we're launching new anti-fraud solutions like document verification, which detects pay stub tampering and proves authenticity, and a new ID verification solution that verifies an applicant's identity in real time. Combined with our existing income verification offering, these services give customers access to a complete integrated anti-fraud screening solution. It's one way we're delivering on our company value to build trust every day. The final strategic pillar I'd like to cover today is great people and culture. Thoughtfully evolving our organization as we scale continues to enable our strategy. Since our last call, we have onboarded Marcy Campbell as our new Chief Revenue Officer, leading our sales and client services organizations where she will focus on optimizing the customer journey and strengthening our go-to-market capabilities. Her leadership will be instrumental in inspiring new customers to choose Appfolio in elevating existing customers to grow with us. Through our progress in the strategic areas I've highlighted, AppFolio's future has never been brighter. Speaking of the future, I look forward to seeing many of you at our future conference in San Diego next week, where our industry-leading innovation and customer impact will be on full display. As you may have seen in our 8K, Facey and Goon, our CFO, is leaving the company. Tim Eaton, our Chief of Staff, will assume the role of Interim CFO while we conduct an extensive and inclusive search for her successor. As I hand it over to Faecian to share more about Apfulia's third quarter financial results, I also want to take an opportunity to thank her for her leadership over the past three years. She has helped foster an efficiency-driven mindset across the organization and brought deep finance expertise to streamline and optimize our processes. On behalf of the entire Appfolio team, we wish her the best in her next chapter. Take it away, Feixian.