Real-estate management technology company AppFolio (APPF 12.05%) reported financial results for the fourth quarter of 2023 after the market closed on Thursday. Investors clearly liked what they saw: Shares rocketed higher Friday morning, and as of 1 p.m. ET, AppFolio stock was up by more than 29% and had even hit a new all-time high.
The company is growing profitably
In Q4, AppFolio's revenue rose a whopping 39% year over year to $172 million. This was its fastest quarterly growth rate in nearly a decade and ahead of what management had guided for. That growth was achieved, in part, due to a 13% increase in rental units under management with its software.
CEO Shane Trigg said that AppFolio prioritized profitable growth in 2023, and that showed in its financial results. The company's operating margin was 16.4% in Q4 compared to an operating loss in the prior-year period. Moreover, its free-cash-flow margin expanded to nearly 20%, compared with just a 1% margin in the same quarter of last year.
Guidance wasn't bad either
For 2024, management believes AppFolio will generate revenue of $755 million to $765 million, which would be 22% to 23% growth. That would be a step back from its 31% growth in 2023. But it's still a decent growth rate.
On an adjusted basis, AppFolio expects further improvements to profitability as well. Management is guiding for its adjusted operating margin to expand from 12.2% in 2023 to at least 21% in 2024. And it expects its adjusted free-cash-flow margin to expand from about 12% in 2023 to at least 17% in 2024.
With its current market capitalization of about $8 billion, AppFolio stock is trading at a pricey valuation compared to its guidance for 2024. This is worth considering. However, it's undeniable that the company is unlocking better growth and profits, so the market's enthusiasm is understandable.
