Software-as-a-service (SaaS) company Appfolio (NASDAQ:APPF) shares raced ahead 44.3% in May, according to data provided by S&P Global Market Intelligence. Appfolio's primary product is a comprehensive cloud-based property management software system, and, to a much lesser extent, software to small law firm customers.
The upward surge came on the heels of first quarter 2020 results, reported on May 7. Investors cheered revenue and customer growth, which contrasted with many other companies' dismal reporting during the COVID-19 pandemic.
First quarter total revenue came in at $72.5 million, a 27% increase year over year. GAAP net income was $2 million, or $0.06 per diluted share during the quarter, compared to GAAP net income of $3.7 million, or $0.11 per diluted share in the first quarter of last year. Included in first quarter results was $1.9 million in non-cash charges related to stock-based compensation.
Property manager clients increased 10%, and property manager units under management increased 18%. The increase translates to 14,729 real estate property manager clients managing 4.8 million units in their portfolios at the end of the first quarter 2020, compared to 13,409 customers and 4.08 million units under management year over year.
As far as liquidity, the quarter closed with approximately $71.4 million in cash, cash equivalents, and investment securities; and $97.4 million of total debt. This includes $49 million that was drawn down from Appfolio's revolving facility during the quarter.
According to data provider CSI Market, as of the end of the first quarter 2020, Appfolio had 20.76% of market share. The company has focused on ease of use rather than addition of unneeded bells and whistles, attracting customers.
At the same time, Appfolio has implemented key platform enhancements that help clients better manage their businesses during the COVID-19 crisis. Since social distancing has become both the challenge and the norm in real estate, Appfolio's virtual showings, communication tools, and payment system make the platform even more valuable to property managers than it was before.
The property management industry provides an attractive opportunity, given the urgent digital transformation needs and reluctance until the COVID-19 crisis for many property managements to educate themselves on the technology. Appfolio is in the right place at the right time.
Now that I've acknowledged the opportunity and Appfolio's product usefulness, it's time to speak to the invest-ability of the stock. Appfolio stock is performing well. In fact, it has shown incredible growth, up 57% so far this year.
With a price-to-sales (P/S) ratio of 14, I don't see this as a value-investor stock.
However, real estate leasing demand is growing due to the current scarcity of homes for sale, and sales reflect property managers' positive view of Appfolio's software tools. Given the market opportunity and the company's growth, growth investors should keep Appfolio on their radar and begin to accumulate shares, especially on any overall market pullbacks.