AppFolio (NASDAQ:APPF) reported its third-quarter results on Monday, Oct. 29. The provider of software used in niche business segments posted revenue of 32% and earnings growth of 49%. The fast growth enabled management to boost its full-year revenue guidance for the third time this year.

AppFolio Q3 results: The raw numbers

Metric

Q3 2018

Q3 2017

Change (YOY)

Sales

$50.1 million

$37.9 million

32%

GAAP net income

$5.5 million

$3.7 million

49%

GAAP earnings per share 

$0.16

$0.10

60%

Data source: AppFolio. YOY = year over year. GAAP = generally accepted accounting principles.

What happened with AppFolio this quarter

  • Subscription revenue, which the company calls Core solutions, rose 22% to $17.9 million.
  • Usage-based revenue, which the company calls Value+ services, rose 42% to $30.8 million. On the call with investors, management stated that the big increase was driven by increases in electronic payment services, screening services, and insurance.
  • Property manager units increased 20% to 3.7 million. Property management customers grew 12% to 12,640. 
  • Customers of MyCase -- the company's product used by small law firms -- grew 11% to 10,170. 
  • The company acquired WegoWise in August for $14.4 million. This business helps property managers to lower their utility costs.
  • Operating expenses increased by 30% during the quarter. This was a slower pace than revenue growth and explains why profit growth continues to grow so quickly.
Smartphone with real estate app on screen.

Image source: Getty Images.

What management had to say

As usual, AppFolio's management preferred to let the numbers speak for themselves.

On the call with investors -- which doesn't include a Q&A session -- CEO Jason Randall expounded on the company's decision to purchase WegoWise and also talked up some new features that are in the hopper:

In our real estate vertical, we announced the acquisition of substantially all of the assets of WegoWise, a cloud-based utility analytics software company, serving building owners and third-party property managers to help them better manage operating and capital expenditures related to utilities. We expect that the acquisition will provide enhanced functionality to AppFolio real estate customers over time. We also released AppFolio Property Manager Plus, a new tier of AppFolio Property Manager designed to empower larger organizations to gain key insights and make strategic decisions to drive the performance of their businesses at scale. 

Randall also shared that the company has rolled out a number of new features on MyCase that are designed to make the product more attractive to potential customers. 

Looking forward

For the third time this year management decided to raise its full-year revenue guidance. The company now expects revenue to land between $187 million and $188 million, which is a $3.5 million bump at the midpoint from its prior outlook. This new range represents year-over-year growth of about 30%.

With another nearly flawless quarterly report in the books, Randall ended his prepared remarks on the investor call by restating that the company remains head-down focused on execution: "[W]e remain focused on executing against our mission of revolutionizing vertical industry businesses by providing great cloud-based business management software and services to our customers." 

Brian Feroldi owns shares of AppFolio. The Motley Fool owns shares of AppFolio. The Motley Fool has a disclosure policy.