AppFolio Q3 2025: Contradictions Emerge in Revenue Growth, Operating Margins, and High Interest Rate Impact

Date of Call: None provided

Financials Results

• Revenue: $249 million, growing 21% year over year
• Operating Margin: Non-GAAP operating margin 23.5%, compared to 28.7% prior year; excluding bonus overattainment impact, ~29% of revenue

Guidance:

• 2025 revenue raised to $945M–$950M (full-year midpoint growth ~19%).
• Non-GAAP operating margin expected between 23.5% and 24.5%.
• Diluted weighted average shares expected ~36 million for the full year (vs 37M in 2024).
• Cost of revenue ex D&A to be higher as % of revenue due to product mix, bonus overattainment accruals, and increased data center spend.
• Too early to guide 2026; prioritizing efficiency as we scale.

Business Commentary:

* Revenue Growth and AI Integration: - AppFolio reported revenue of $249 million for Q3, growing 21% year over year. - The growth was driven by strong demand for its AI-driven solutions and strategic execution in the real estate performance management market.

• Unit Management and Customer Growth:
• The company managed approximately 9.1 million units from 21,759 customers at the end of the quarter, representing a 7% increase in units and a 7% increase in customers.

• This growth was attributed to winning new customers and increased adoption of its performance management platform.

• Value-Added Services and AI Adoption:

• Revenue from value-added services grew 22% year over year to $192 million.

• This increase was due to greater adoption of risk mitigation services, new screening offerings, and the integration of AI capabilities, such as Folio Space and the RealmX embedded AI suite.

• Operating Margin and Bonus Plan Impact:

• Non-GAAP operating margin was 23.5%, influenced by a $13 million expense due to expected bonus plan overattainment.
• The expense was driven by strong new business unit acquisition and revenue growth, highlighting the company's market success.

Sentiment Analysis:

Overall Tone: Positive

• CEO: "we’re winning in the market"; revenue $249M, up 21% YoY. Management raised 2025 revenue guidance to $945–$950M and highlighted product-led momentum (RealmX Performers) with customer benefits: vacancies filled 5+ days faster, renewals +20%, ~3% higher NOI.

Contradiction Point 1

Revenue Growth Expectations

It involves changes in financial forecasts, specifically regarding revenue growth expectations, which are critical indicators for investors.

Revenue exceeded expectations and operating margin improved. What drove this performance? - Lori Barker(The Blueshirt Group, LLC)

2025Q3: Revenue grew 21% year over year to $249 million. - Tim Eaton(CFO)

Transition to Shane Trigg - Lori Barker(The Blueshirt Group, LLC)

2025Q2: Revenue grew 19% year-over-year to $220.3 million. - Shane Trigg(CEO)

Contradiction Point 2

Operating Margin Improvement

It involves changes in financial performance, specifically regarding operating margin improvements, which are key metrics for assessing company efficiency and profitability.

Revenue exceeded expectations and operating margins improved. What drove this performance? - Lori Barker(The Blueshirt Group, LLC)

2025Q3: Non-GAAP operating margin was 27.9% compared to 26.2% in the prior year quarter. - Tim Eaton(CFO)

N/A - Lori Barker(The Blueshirt Group, LLC)

2025Q2: Non-GAAP operating margin of 26.2%, up 20 basis points compared to Q1. - Shane Trigg(CEO)

Contradiction Point 3

Revenue Growth Expectations

It involves changes in financial forecasts, specifically regarding revenue growth expectations, which are critical indicators for investors.

Is AppFolio raising its 2025 revenue guidance to $945–$950 million? - Lori Barker (Investor Relations)

2025Q3: The 2025 revenue guidance is now $945 to $950 million, reflecting a full-year midpoint growth rate of 19%. - Tim Eaton(CFO)

Can you clarify your revenue guidance for the year? - Tim Arcuri (UBS)

2025Q1: Full-year 2025 revenue guidance remains at $910 to $920 million. - Tim Eaton(CFO)

Contradiction Point 4

Impact of High Interest Rates

It involves differing perspectives on how the high interest rate environment affects the company's growth strategies, impacting investor confidence.

Revenue exceeded expectations with an improved operating margin. What were the key drivers behind this outperformance? - Lori Barker (Investor Relations)

2025Q3: We are seeing strong momentum across new business units, which are outpacing the market growth. - Tim Eaton(CFO)

How will current high interest rates impact AppFolio's financial performance? - Lori Barker (Investor Relations)

2024Q4: We believe the high interest rate environment will continue to limit our current customers' ability to expand their portfolios. - Shane Trigg(CEO)