AppFolio, Inc. (APPF) Q4 2025 Earnings Call Prepared Remarks Transcript

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Overview

The earnings call highlights strong financial performance with a 22% YoY increase in Q4 revenue and a 20% increase for the full year, driven by AI innovation and unit growth. Positive guidance for 2025 and 2026, including increased revenue and operating margins, supports optimism. Despite risks like rising costs and AI reliability concerns, the strategic focus on premium offerings and operational efficiency is promising. The absence of negative sentiment in the Q&A further supports a positive outlook, predicting a stock price increase of 2% to 8% over the next two weeks.

Key Financial Performance

Fourth Quarter Revenue $248 million, a 22% year-over-year increase, driven by AI-powered innovation and accelerating unit growth.

Full Year Revenue $951 million, representing 20% year-over-year growth, attributed to new business growth and increased units on the platform.

Non-GAAP Operating Margin (Q4) 24.9%, compared to 20.2% last year, reflecting operational efficiencies and revenue growth.

Non-GAAP Operating Margin (Full Year) 24.7%, compared to 25.2% last year, with a decline due to a $15 million expense from the 2025 corporate incentive plan over-attainment.

Subscription Services Revenue (Q4) $56 million, a 17% year-over-year increase, driven by new customers, unit growth, and adoption of premium tiers.

Subscription Services Revenue (Full Year) $211 million, representing 17% growth year-over-year, attributed to similar factors as Q4.

Value-Added Services Revenue (Q4) $185 million, a 20% year-over-year increase, driven by greater adoption of risk mitigation services, online payments, and new partnerships.

Value-Added Services Revenue (Full Year) $722 million, representing 19% growth year-over-year, due to increased usage of services and unit growth.

Units Under Management (End of Q4) 9.4 million units, an 8% increase from 8.7 million units last year, driven by new customer acquisition.

Customers (End of Q4) 22,096 customers, a 6% increase from 20,784 customers last year, reflecting successful market expansion.

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Operating Highlights

Realm-X Performers: Introduced three new AI-driven tools at their flagship event, Future. These tools focus on goal-driven AI to enhance customer performance. Rapid adoption has been observed, especially in leasing tools.

Resident Onboarding Lift: A new service co-created with Second Nature, offering a seamless move-in experience and new revenue opportunities. Includes group rate Internet for residents.

Market Expansion: Added over 500,000 units to the platform in the second half of 2025. Premium tiers (Plus and Max) adoption exceeded 25%, indicating success in both SMB and upmarket segments.

Operational Efficiency: Achieved a 24.9% non-GAAP operating margin in Q4 2025, up from 20.2% last year. Full-year margin was 24.7%, with scale and operational efficiencies offsetting bonus plan impacts.

Customer Growth: Increased units under management to 9.4 million from 8.7 million year-over-year, representing an 8% growth. Customer base grew by 6%.

AI Integration: 98% of customers actively use one or more AI capabilities. The company is focusing on consolidating software solutions to provide a unified platform.

Strategic Pillars: Focused on three pillars: Differentiating to win, delivering performance efficiently, and fostering great people and culture.

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Risk or Challenges

Performance Gap: Despite optimism among property managers, a persistent performance gap remains a challenge, impacting operational efficiency and profitability.

Rising Operating Costs: Increasing operating costs are putting pressure on property managers' bottom lines, potentially affecting their financial performance.

Occupancy Rates: Pressure on occupancy rates continues to challenge profitability for property managers, which could impact AppFolio's customer base.

AI Reliability in the Industry: Half of AI users in the property management industry report they cannot rely on the AI features embedded in their systems, highlighting a potential barrier to technology adoption.

Fragmented Software Solutions: 45% of survey respondents plan to consolidate software solutions, indicating dissatisfaction with fragmented systems, which could pose a challenge for AppFolio to differentiate its offerings.

Cost of Revenue: Increased data center spending to support AI product capabilities and bonus plan over-attainment have raised the cost of revenue, potentially impacting margins.

Economic Uncertainty: General economic conditions and uncertainties could affect customer growth and adoption of premium tiers and services.

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Guidance & Outlook

2026 Annual Revenue Guidance: AppFolio projects annual revenue for 2026 to be between $1.1 billion and $1.12 billion, representing a midpoint growth rate of 17%.

Non-GAAP Operating Margin for 2026: The company expects a non-GAAP operating margin between 25.5% and 27.5% for the full year.

Revenue Seasonality: Revenue seasonality in 2026 is anticipated to be mostly consistent with 2025.

Growth Drivers for 2026: Revenue growth is expected to be fueled by adoption of premium tier offerings, growth in new business units, and increasing adoption of AI-native performers and new resident services.

Cost of Revenue: Cost of revenue, exclusive of depreciation and amortization, is expected to remain relatively flat as a percentage of revenue compared to 2025.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:Review of Unclear Management Responses

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

APPF Transcript

AppFolio, Inc. (APPF) Q4 2025 Earnings Call Prepared Remarks Transcript

Positive1-29

AppFolio, Inc. (APPF) Q3 2025 Earnings Call Prepared Remarks Transcript

Unknown10-30

The earnings call presented mixed signals: positive revenue growth and increased guidance for 2025 suggest optimism, but rising costs and margin pressures are concerns. The partnership with Procore is a potential catalyst, yet market pressures and operational challenges pose risks. The Q&A lacked clarity, leaving some analyst concerns unaddressed. Overall, these factors balance out to a neutral sentiment, suggesting minimal stock movement.

Earnings call transcript: AppFolio Q1 2025 earnings miss, stock falls

Positive4-24

The earnings call highlights strong revenue growth, positive customer metrics, and strategic initiatives like AI and partnerships. Despite some challenges in operating margins and cash flow, the new $300M share repurchase program and optimistic guidance suggest confidence in future performance. The Q&A reinforces positive sentiment with strategic partnerships and AI adoption, although some concerns about fee reductions remain. Overall, the company's strong financials and strategic direction support a positive outlook, likely resulting in a stock price increase of 2% to 8%.

AppFolio, Inc. (APPF) Q1 2025 Earnings Call Transcript

Unknown4-24

The earnings call presents mixed signals. Financial performance shows growth, but guidance is cautious. The acquisition and AI innovation are positives, yet regulatory challenges and supply chain issues pose risks. The share repurchase program is a positive sign, but the non-GAAP operating margin decline and management's reluctance to provide clear guidance suggest uncertainty. Given these factors, along with the absence of market cap data, a neutral sentiment is justified.

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