Good afternoon. Thank you for standing by and welcome to AppFolio, Inc.'s First Quarter 2025 Financial Results Conference Call. Please be advised today's conference is being recorded, and a replay will be available on AppFolio's Investor Relations website. I would now like to hand the conference over to Lori Barker, Investor Relations. You may begin..
Thank you. Good afternoon, everyone. I am Lori Barker, Investor Relations for AppFolio, and I would like to thank you for joining us today as we report AppFolio's first quarter 2025 financial results. With me on the call today is Shane Trigg, AppFolio's President and CEO.
This call is being simultaneously webcast on the Investor Relations section of our website at appfolioinc.com. Before we get started, I would like to remind everyone of AppFolio's safe harbor policy.
Comments made during this conference call and webcast contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties.
Any statement that refers to expectations, projections, or other characterizations of future events, including financial projections, future market conditions, business performance, or future product enhancements or development, is a forward-looking statement.
AppFolio's actual future results could differ materially from those expressed in such forward-looking statements for any reason, including those listed in our SEC filings. AppFolio assumes no obligation to update any such forward-looking statements except as required by law.
For greater detail about risks and uncertainties, please see our SEC filings, including our Form 10-K for the fiscal year ended December 31, 2024, which was filed with the SEC on February 6, 2025. In addition, this call includes non-GAAP financial measures.
Reconciliations of these non-GAAP financial measures with the most directly comparable GAAP measures are included in our fourth quarter earnings release posted on the Investor Relations section of our website. With that, I will turn the call over to Shane Trigg. Shane, please go ahead..
Assistant, Messages, and Flows. Realmex is maximizing and delivering real performance for these customers, who report saving an average of 9.7 hours each week on reporting tasks. More importantly, they are generating an incredible 73% higher lead-to-showing conversion rate. As one customer recently told us, lease renewal rates are up 8%.
We continue to see strong upgrades for AppFolio Property Manager core customers to our Plus and Max plans in order to leverage the powerful automation made possible by Realmex Flows, as well as to take advantage of additional Realm products like Smart Maintenance, Leasing CRM, and Leasing Signals.
One of these customers is 2B Living, which manages more than 5,000 multifamily, single-family, and commercial units across the Bay Area on AppFolio. They have expanded rapidly, adding 1,500 units to AppFolio just last year.
With a significant percentage of their portfolio on AppFolio Property Manager Max, 2B Living has been able to streamline their operations as they take on more units without needing to add extra headcount. As early adopters of Realmex, 2B Living is taking advantage of generative AI to transform the way their team manages day-to-day tasks.
According to Brooke Brooks Baskin, founder and CEO, "We find Realmex to be a great empowerment tool that has helped us with two really important functions. One, we are able to build our processes and workflows in AppFolio so tasks happen through automation without losing a hands-on touch.
Two, Realmex has allowed us to get tasks done using Realmex Assistant. This has really helped us gain efficiency as our business continues to grow." The third pillar of our strategy is great people and culture. Since our last call, AppFolio was recertified as a great place to work for the eighth time.
Part of what makes AppFolio a great place to work is our ability to attract AppFolians who exemplify our values, live the AppFolio way, cultivate exceptional teams, and deeply care about customers. Our Chief Legal Officer, Matt Mazza's role has been expanded to Chief Trust Officer.
In his new role, he will continue to lead our legal and compliance functions while strengthening cross-functional partnerships to enhance data governance and security, protect our software and infrastructure, modernize internal systems and processes, and develop an external trust center demonstrating our commitment to data security transparency and our company value to build trust every day.
Additionally, Lisa Horner has been promoted to Chief Marketing Officer, and Matthew Baird has been promoted to Chief Technology Officer. Evolving our organization as we scale enables our strategy, and we will continue to cultivate our talent, build a robust pipeline for AppFolio's future, and deliver exceptional value to our customers.
To that end, we are making good progress in recruiting our next CFO. With that, let me share more about AppFolio's first quarter financial results. In the first quarter, we delivered revenue of $218 million, growing 16% year over year.
Core solutions revenue was $49.5 million in the first quarter, a 15% year-over-year increase, driven by more customers choosing our Plus and Max plans, winning new customers, and growth in total units under management.
At the end of the quarter, we managed approximately 8.8 million units from 21,105 customers compared to 8.3 million units from 19,941 customers a year earlier. This represents a 6% increase in ending units and a 6% increase in customers as we continue to emphasize residential portfolios.
First quarter revenue from value-added services grew 16% year over year to $165 million. This increase reflects greater use and adoption of payments, risk mitigation services, and screening, as well as growth in units under management. These drivers were partially offset by the April 2024 reduction in fees associated with certain card-based payments.
Turning to spending, we exited the quarter with 1,648 employees, which is an increase of 1% from the fourth quarter of 2024. This reflects modest growth in most functional areas as we continue to invest in go-to-market initiatives and innovation, partially offset by efficiencies in our operations.
Cost of revenue, exclusive of depreciation and amortization in the first quarter, was 36% of revenue compared to 34% last year, primarily due to the reduction in fees associated with certain card-based transactions and the mix of revenue as the adoption of credit cards for payments increased.
As a percent of revenue in the first quarter, combined sales and marketing, R&D, and G&A expense was flat at 38% compared to last year. Sales and marketing expenses as a percentage of revenue increased from 12% in the first quarter of last year to 13% this quarter. This includes additional hiring and the impact of the LiveEasy acquisition.
Our R&D expenses as a percentage of revenue were consistent with the prior year at 17%. Our G&A expenses as a percentage of revenue were also comparable to the first quarter of last year at 8%.
Overall, the first quarter non-GAAP operating margin was 24.3% compared to 25.7% last year, and net cash provided by operating activities this quarter was 17.7% compared to 22.9% in the first quarter last year. Our growth and profitability have empowered us to deliver customer value, accelerate our resident strategy, and repurchase stock.
We ended the quarter with $211 million in cash and current investment securities. Under a previously approved share repurchase program, during the first quarter, we bought approximately 445,000 shares for $96 million, completing the previously authorized $100 million program.
In addition, the board approved a new stock repurchase program of $300 million on April 23. Also, to enhance the resident experience, early in the second quarter, we announced our strategic partnership with Second Nature and purchased a minority non-controlling equity interest for $75 million.
Our 2025 guidance for annual revenue remains $920 million to $940 million for a full-year growth rate of 17% based on the midpoint and fueled by Plus and Max upgrades, growth in customers and new business units, and increasing adoption of our products and services.
We expect to deliver a non-GAAP operating margin between 24.5% and 26.5%, and diluted weighted average shares outstanding are anticipated to be approximately 37 million for the full year. Our guidance reflects what we are seeing in today's dynamically changing environment. We anticipate 2025 revenue seasonality to be mostly consistent with 2024.
Cost of revenue, exclusive of depreciation and amortization, is expected to remain relatively flat as a percentage of revenue compared to the prior year, as we believe the benefit from operational efficiencies will be mostly offset by product mix.
Our 2025 pending headcount is projected to grow as we continue to invest in high-priority initiatives that enable us to achieve our strategic objectives. However, we expect the rate of headcount growth to be less than revenue growth as we maintain our focus on operational efficiency.
Wrapping up, this quarter's results underscore that our ongoing commitment to delivering industry-leading innovation and exceptional service is driving new customer adoption of our products and services.
By connecting our acquisition of LiveEasy with new industry-leading partners such as Zillow and Second Nature, all enabled through FolioSpace, we have accelerated our resident strategy, creating value for our customers. We are well-positioned to win for all stakeholders as the platform powering the future of the real estate industry.
Thank you all for joining us today. Operator, this concludes today's call..
Ladies and gentlemen, that concludes today's conference call. You may now disconnect. Goodbye..