Real-estate management technology company AppFolio (APPF +0.13%) 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.
NASDAQ: APPF
Key Data Points
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.
