5 Fascinating Learnings from AppFolio at $660,000,000 in “ARR”

So AppFolio is a giant vertical SaaS+ success story I frankly don’t know as a lot about as I ought to.  There are a number of massive leaders in property administration software program, and AppFolio is one among them.

It’s doing properly, particularly in right now’s markets.  At $660m in “ARR” (loads of that isn’t software program, as we’ll see beneath), it’s buying and selling at a $7.2 Billion market cap, even with decrease than customary gross margins.  That’s fairly wholesome.  Progress is robust if not loopy, at +29% at $660m in “ARR”.  Importantly, it’s environment friendly progress as we’ll see.

And its inventory is up 87% this 12 months!  AppFolio is what the markets need in a software program+ firm, at the very least in 2023.

Let’s dig in.

5 Fascinating Learnings:

#1.  Regular, Sturdy Progress — Since 2006

Appfolio was based manner again in 2006, and so they by no means stop.  10 years later, they hit $100m ARR in 2016 and progress simply compounded from there.  Immediately, at a $660m run-rate, they’re rising 29% a 12 months, with substantial free-cash move.

#2.  Gotta Radically Extra Environment friendly in 2023

That is actually the theme of the 12 months in SaaS and Cloud.   As you’ll be able to see beneath, whereas non-GAAP working margins dipped in 2022, they got here roaring again in 2023, with 20% free money move and an enormous acquire in working margins.

#3.  Freezing Headcount is How They Bought So A lot Extra Environment friendly

Once more, a typical story.  Many who did at the moment are re-hiring, from Monday to Salesforce and extra.  However for now, AppFolio is staying leaner, with much less headcount this 12 months than final — regardless of spectacular +29% progress.

#4.  About Half Progress From Increasing ARPU

With 29% general progress and 16% ARPU progress a 12 months, a bit greater than half of their progress has come from promoting extra to the bottom — in addition to elevating costs.  Models beneath administration have grown 14% a 12 months, so materially, however not sufficient to gas 29% income progress on their very own.


#5  Most of Their Income, Like Shopify and Invoice, is Not From Software program.  And Decrease Gross Margins of 62% Because of Funds and Companies Income

A giant studying.  AppFolio doesn’t escape their revenues by section as a lot as they used to, however as you’ll be able to see beneath, solely 30% of income really comes from SaaS charges, that they name “Core options”.  Funds and repair charges make up 70%.  That’s key to their top-line progress, similar to it’s at Shopify and different leaders.  However the trade-off often is decrease margins, and that’s what we see right here.  At 62%. AppFolio’s revenues are larger than some that mix funds and software program, however properly beneath the standard 75%-80% we see with pure software program firms.

They’ve made up for it by being leaner, as we see above.

AppFolio, up 87% this 12 months when many in SaaS and Cloud have struggled.  Worthwhile (or at the very least, cash-flow constructive and non-GAAP Working Maring constructive) leaders with good progress AND good effectivity earn larger multiples.

AppFolio is within the uncommon 10x+ ARR membership right now.  A membership that used to have much more members.

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