AppFolio, Inc. (APPF) Earnings Call Transcript & Summary

[Presentation] Great. Thank you. Welcome to AppFolio's Investor Day 2022. We're very excited that you're all here with us today. It's great to have the people here in person through so many months in COVID. We're welcoming you to Santa Barbara. And people online, we're super pleased that you can join us today as well. I'm Lori Barker. I'm a Managing Director of The Blueshirt Group, Investor Relations, and I represent Investor Relations for AppFolio. Today we're going to hear from a number of AppFolio speakers. We'll begin with AppFolio's vision and strategy, Jason Randall, President and CEO, will be our first presenter. Following that, Shane Trigg, General Manager of Real Estate, will present customer-centric innovation, the key to our future. Will Moxley, Senior Vice President of Product, will talk you through One powerful platform, the key to AppFolio's differentiation. We'll come back after a break and hear from a customer panel moderated by Shane Trigg. We'll complete the formal presentation with Fay Sien Goon, Chief Financial Officer. And for today's meeting, I'd like to ask you to save your Q&A for that portion of our program at the end. At that time, we'll take questions both in person and online for those streaming. We'll conclude our program around noon or shortly thereafter. And at that time, for in-person attendees, we'll move on to lunch and onto the patio. We'll say goodbye at that time to those of us that are streaming. So this presentation contains forward-looking statements that are based on management's beliefs and assumptions, which are formed from currently available information. Forward-looking statements include any statement that refers to possible or assumed strategy, trend analysis, future product developments, future market conditions and size and other characteristics of future events. We assume no obligation to update any such forward-looking statements. For greater detail about risks and uncertainties please see our filings with the SEC, including our Form 10-K for the year ended December 31, 2021, and our most recent quarterly report on Form 10-Q, which can be found on the Investor Relations website. Without further ado, Jason Randall.

Is that working? Okay. Sounds good. Good morning. Welcome. It's great to be back together. Thank you for joining us today. It's wonderful to see everyone in person. Again, it's been a couple of years since we had an Investor Day. And I'm also welcoming all of our streaming attendees. So it's a particularly exciting time for AppFolio hosting our 10th customer conference here at the hotel over the next couple of days. For those of you who have followed us for a number of years, you know how important spending time with our customers is to us. So we hope that this session will help you better understand our business, our long-term strategies and the real estate customers we serve. So let's get started. We were founded in 2006 with a mission to revolutionize vertical industry businesses, providing great software and services. Today, our vertical -- market focus is the real estate industry. So our mission is even more relevant today as digital transformation is effective -- is effectively a requirement for any business success. In the modern world, the way we work today requires powerful software solutions. And our business model, which we have built to be both scalable and repeatable, gives us an advantage to capture new parts of the real estate ecosystem. So we've worked to build a consistent strategy focused on long-term sustainable growth. So today, you're going to learn more about our growth that include our long-term investments; our intense customer focus, driving continued learning; our passion for innovative products; solve customer problems in new ways that make their lives easier and more productive; and of course, our dedicated team is inspired to build and sustain a thriving culture. All of these elements have allowed us to deliver sustained revenue growth and resilience during evolving conditions like COVID and now staffing, considerations, inflationary pressures. You're going to hear a lot more about that today. So you can see all this action through our consistent compound annual growth rate of 30% for real estate revenue, which we have been normalized following the divestiture of MyCase. So let's take a look at the contributors to consistent growth. So our goal is to have continued opportunity as we execute our strategy. We want to methodically layer new revenue streams alongside growing, well profitable and productive lines of business. Our model can be broken into repeatable stages. First, land new customers, expand into new value streams, grow as our customers grow, retain the customers for long-term relationships and scale our business through each and every step. So as we reported in Q2 of 2022, we added more than 1 million units to the platform on a year-over-year basis, an example of every one of these elements in action. Today, you're going to hear each of our speakers describe these elements and how they apply to our business. So let's look at some high points in our history. In 2009, we launched our first value-added service, followed quickly by payments, screening and insurance. And we continue to launch value-added services to serve the needs of our customers. In 2015, AppFolio became a public company, and then we launched AppFolio Property Manager PLUS -- I'm sorry, in 2015, we became a public company, in 2018 to serve larger and more complex portfolios and to move upmarket. You've heard us talk a lot about that. And now in 2022, we continue to focus on these key strategic areas around innovation, as demonstrated by our recent launch of AppFolio Stack, which you'll hear more about; our culture, we recently named a Glassdoor Best Place to Work; and then growth, surpassing $100 million in quarterly revenue. So today, we have a substantial market for AppFolio products. Residential real estate TAM, 51 million units with Community Association TAM at 28 million units. We believe the real estate property management market is healthy and growing. You're going to hear more about the resilience later on as well. AppFolio is growing faster than the TAM due to our increase in our product market fit and innovation across all of our segments and our products. Today, AppFolio has 6.8 million units on our platform. And as you know, those units comprise subscription to our core platform. We believe it's an exciting time to be in property management. We also continue to look for opportunities to expand into new markets adjacent to the property management space. Two areas that we are currently investing in are Investment Management, which we launched in 2019, and to be announced tomorrow at our customer conference kickoff, Short-term Rentals. Shane Trigg, GM of Real Estate, will take -- will talk a lot more about residential opportunities, our residential segments and how we continue to increase our product market fit innovation across all of our segments and products. So our focus on customers has resulted in consistent growth in our Property Management platform, resulting in 9% compound annual growth rate. You'll hear more today at our customer panel about how property managers need products and services to increase efficiency, grow revenue, especially around workflows like leasing, maintenance and accounting and how our services are constantly updated to keep them happy so they can expand their adoption and use. Our deep and rich ecosystem of users on our platform allows us to be well positioned to explore entry into new real estate markets and expand products and services. We continue to broaden our executive leadership team, leading into deep experience in developing SaaS businesses and strong leadership with tenure and private and public companies. The leaders you will hear from today, Shane Trigg, who I mentioned earlier, who's held various leadership positions for other publicly traded SaaS companies, including Salesforce and Intuit Real Estate Solutions; Fay Sien Goon, our CFO, with over 20 years of financial and accounting expertise, a proven track record of scaling and leading in high-growth SaaS environments, most recently for ServiceNow. And then you're also going to hear from Will Moxley, our Senior VP of Product, who brings extensive experience in the cloud technology and software industries, both from RingCentral and from Salesforce. So our company values guide our business and our team and are deeply embedded in our culture. Our values have been in place since the early days of our company, they are a foundation of who we are and how we think about meeting the challenges ahead. Our values are material to our culture as well as to our brand. This is because we know that happy and engaged employees deliver the best service and customer experience. So we work hard to have these values to be truly reflective of who we are. You see listening to customers is in our DNA, which is what we try to do every single day. These values continue to be foundational to our success and goals as we continue to build our business. So as I spoke about earlier, our business model, which we've built to be both scalable and repeatable gives us a unique advantage to capture new opportunities while applying our consistent strategy focused on long-term sustainable growth. This is underpinned by operational excellence to ensure scaling across the business and enables continued focus on our long-term strategy. So it starts by keeping our existing customers happy. We believe customer success is essential to our long-term success. We work to have loyal, engaged, long-term customer relationships. We will -- we place significant emphasis on customer experience to differentiate our solution from competing products. And this is going to continue to be a critical component of our growth going forward. Next, we look to acquire new customers, growing our base and subsequently the number of units managed on our platform. This is done with continued investments in the development of valuable solutions across not only the existing property types we currently serve, but new ones as well. To do this, we'll deliver innovative marketing and sales programs, including real estate industry thought leadership and education, harnessing the referral power of satisfied customers. Our new growth initiatives in the areas of affordable housing and partnerships and integrations through AppFolio Stack allow us to acquire more units in all segments while making us more competitive, especially in the corporate segment. We then work to expand adoption and use by existing customers with our value-added services. So you're going to hear more today about how our improvements are designed to streamline workflows essential to our customers, while simultaneously providing value to their customers as well. This results in increased adoption and usage of the entire platform contributing to growth and retention. We also look to enter and expand into new adjacent market. Today, we're focused on success in the real estate industry, but we are also leveraging our growing footprint to expand both within the Property Management market and into adjacent markets as well. As I mentioned, AppFolio Investment Manager, which targets investment managers as our customers is designed to enable real estate investment management organizations to better manage investor relations by increasing transparency and streamlining certain business processes. By leveraging our knowledge, expertise, customers in the real estate industry to grow AppFolio Investment Management, we may eventually develop investment management solutions for markets in other industries. Short-term Rentals, which I mentioned earlier, is another example. Many of our customers have short-term rental units in their mix portfolios, and this capability allows us to expand the types of customers that we then go and target, which is an opportunity to provide a purpose-built solution to enable our customers to manage their full business in one place on one powerful platform. As you saw in my previous slide, showing the leadership team, we've added the role of Chief Strategy Officer in GM Growth filled by Jay Choy. Jay will be leading company strategic development and inorganic growth across AppFolio as well as managing the portfolio of adjacent growth businesses. He brings a wealth of experience in these areas to the team. Our strategy for long-term growth is rooted in our success to date, leveraging the strengths of our model to achieve our strategic objectives. So now, customer-centric innovation has always been at the heart of AppFolio's success. The progress we're making and the product innovations we'll showcase tomorrow at our customer conference, continue that legacy. This supports our customers as they navigate an ever-changing industry. And to tell us more about it, let's welcome Shane Trigg, General Manager of Real Estate. Thanks, Shane.

Thank you. Well, thank you Jason, I couldn't agree more with your vision for the future here at AppFolio. We truly have a lot of room to grow and sustain that growth for a very long time. In driving innovation within our core platform AppFolio Property Manager is our biggest lever to unlocking growth. Our customers expect it, and we know that delivering differentiated experiences inspires choosing AppFolio, expanding AppFolio. It maintains high retention rates and aligns customer value to the growth of our business. Now Jason gave a high level of our TAM, and I want to break this down for you a little bit more. What we're looking here specifically with the residential property management market, and this is based off the most recent data from the Rental Housing Finance survey. Currently, we are looking at U.S. only, and we always continue to look at evolving our approach to the fidelity of our data sources. The majority of our revenue is -- in our business is tied to this space, a market where we believe, like Jason said, the opportunity is healthy and continues to grow. Our market covers both single-family residential, multifamily residential, including single-family homes, multifamily apartments, mobile homes, affordable housing, student housing and senior housing. Many of our customers have mixed use portfolios, which means within their portfolio, they have at least 2 property types within their portfolio. But we also have a number of customers that only have one property type within their portfolio. It's worth noting that this TAM does not include the $28 million that Jason highlighted for our community associations. And it does not include the TAM for short-term rentals where we see a growing opportunity moving forward. Now how do we take advantage of these opportunities? The levers for success in our business are actually pretty simple. At every stage, we look to land, we look to expand, we look to grow, retain and scale. And we look to increase the value we deliver for our customers over time. When we think about expanding or landing, that's really acquiring customers in bringing units onto our platform. And as Jason referenced, we have 6.8 million units under management today. And we have plenty of opportunities to bring new customers on board onto our platform and expand our business. When we think about expanding our business, once we land a customer, they expand their unit footprint across our platform as they bring more of their portfolio or growing opportunities onto our platform. So as our customers grow, we grow with them. When we think about growing with every unit that comes onto our platform, there's a resident that's actually attached to that unit, where we provide value-added services, particularly around payments, screening and insurance. And the adoption of these services increases our average revenue per unit or what we call ARPU. Value-added services is just one of the ways that we grow revenue and our ARPU over time with our customer base. Another way our existing customer revenue has grown since the last investor meeting that we had a few years ago is the increasing number of customers that are choosing the robust capabilities of APM PLUS, which includes additional software capabilities as well as a higher level of service. We not only see customers upgrading to PLUS, but we're seeing many net new customers start on PLUS, which is increasing that ARPU. Then, of course, we look to retain our customers and have high retention rates. And we do this by delivering product innovation, which we will talk about here a little bit later. Ease of use, we pride ourselves on exceptional service, and we really look to offer a complete customer experience for our customers. Ultimately, by retaining them, we look to scale their business. Recently, you've seen and we'll talk about a little bit more later about our B2B integration marketplace, AppFolio Stack. And that allows our customers to extend the use of our platform by taking advantage of many of the proptech solutions that are out there, but still having the same customer and user experience they've grown accustomed to with an AppFolio. Now let's talk a little bit more about who our customers are and what they do. As you'll hear from Will in a few minutes, our evolved product vision captures the importance of delivering exceptional value to an increasingly interconnected and growing customer base. Our customer base is a mix of owners and investors, property managers and residents with critical transactions across the real estate life cycle. Our focus on positioning our platform to meet the demands of our growing portfolio of customers means we expand our capabilities as both a B2B and a B2C business. Now who are these customers? Today, our customer base is larger than ever and more balanced than ever. This is how we think about our market segments. When you look at that $51 million in TAM, we internally break them down and segment our customers, and this is the internal view of how we go to market to go acquire, serve and grow those customers. We are focused on growth and scale, rapidly building on our residential SMB leadership to further penetrate the market and add new upmarket customers on a path to achieving our long-term goal of being the leader in all the residential segments in which we focus. We consider upmarket growth to come from the higher or upper end of mid-market and the corporate segments. Now that we know how we segment our customers, which ultimately drives focus, ownership and accountability and helps us stay close to meeting the unique needs of those customers in those segments, let's talk about the repeatable process that drive successful outcomes for our customers and AppFolio. We have a disciplined market validation process to ensure that we are building the things that really matter to our customers. Jason referenced, listening to our customers is in our DNA. And so everything we do, we want to build things that are valuable for our customers, and that's how we do it. Our software solutions are designed to be a system of record to centralize and automate essential business processes. It's also meant to be a system of engagement to enhance the business interactions between our customers and their business ecosystems. And we are a system of intelligence, where we leverage data to predict and optimize business workflows in order to enable exceptional customer experiences and increase efficiency across our customers' businesses. We also look to align the offering of our service with the size, scale and complexity of our customers to promote the growth of their business. We have customers that start on APM core, then they upgrade potentially to APM PLUS or they may start on APM PLUS, depending on the offering and where they are in their journey. We then will layer on value-added services, as discussed earlier. And of course, we try to deliver an exceptional service experience. Ultimately, this unlocks more value for our customers, helping them keep up and exceed the pace of digital transformation across the real estate industry. Now our customers rely on our cloud-based software to power their business, especially as they adapt to the evolving needs and expectations of their own customers and businesses. Despite a historic climb in rent prices and a surging demand of units nationwide, today's property managers are contending with a host of challenges from rising material costs, to cut-throat competition and perhaps belt-tightening efforts amid wider economic concerns. We recently surveyed 1,000 property managers to understand what are the key challenges that you're facing today. As external economic pressures increase, it's not surprising to see operational efficiency and revenue generation jump to the top as the 2 commonly most cited challenges. And despite indications that the talent market is normalizing, they still view HR staffing and recruitment as a top challenge, which is not surprising given for any successful business, the competition for talent out there is never ending. We believe a superior and sophisticated property management software platform is the single, most critical factor in solving all the challenges that our customers are facing. Now in order to help our customers overcome these challenges, deliver exceptional experiences for them and exceptional value and achieve our goals. We have 5 areas that we focus on in order to make that happen. The first area, and some of this has already been mentioned, is that we are focused on property-type expansion and upmarket growth. We will continue to bring units onto our platform across our market segments as well as add new capabilities that improve our ability to win upmarket. To further our customer and unit acquisition, I'm excited that we'll be adding new property types through some multiyear investments around affordable housing and short-term rentals. We believe the additions will offer capabilities for our customers coming to our platform and most importantly, for our mixed portfolio of customers. The second area of focus is around customer experience. As Jason shared when discussing our values, and I just mentioned a few minutes ago, listening to customers is in our DNA. We are evolving and simplifying our already industry-leading customer experience to meet the unique demands of our growing customer base, from onboarding, to training, to customer care, to customer success and growth, we're focused on delivering product-driven, effortless service experience that/enables our customers to gain value quickly, adopt more of our workflows and achieve their business goals. My favorite example of how we're applying listening to our customers is through our product suggestion board. And I'm happy to say that over the past year, we've addressed and resolved a 107 ideas that customers have shared with us this year. In the product suggestion board, our customers vote on what's most important, based on the number of votes that goes to the top. So with these 107 that we resolved, that's added up to more than 20,000 votes from our customer base. One example that has kind of bubble to the top that we've solved for them is we are now refunding security deposits through our electronic payments platform, which -- the benefit for our customers means no more paper checks. So there you go. And you'll hear more from Will on this here a little bit. The third area of focus is around product innovation. We will focus on continuing to accelerate growth upmarket by delivering solutions through innovation. Orienting our product and engineering teams around market segments to understand the unique needs of our customers in each of those segments, while also having a focus on end-to-end workflows with leasing, maintenance and accounting is helping us bring innovation to market faster. Solving new customer problems, helping create new revenue streams for AppFolio Property Manager and prioritizing our path to profitability, which Fay Sien will touch on here later today. A great example of new revenue streams for AppFolio is AppFolio Stack, our new integration marketplace that we launched in June. AppFolio Stack helps us move upmarket and it also creates an opportunity to drive more value and revenue. Customers can upgrade AppFolio Property Manager PLUS, and that -- the Stack is included with APM PLUS. And for our customers using our core AppFolio Property Manager, they can add these capabilities but for $0.50 per unit per month or $6 a year, increasing ARPU. Now the fourth area of focus is really around differentiation. With the growth of our customer base, we recognize that one size does not fit all. Continued innovation in data, mobile and AI is foundational to how we'll operate and win. Data is critical to AppFolio to meet our near- and long-term goals, whether through driving insights, creating new products, helping to develop more efficient processes, data empowers our ability to drive growth at scale. We are building a data platform capable of supporting a diverse set of customer-facing and internal applications, machine learning models, delivering magical product features and functionality. Turning to mobile because we've always focused been 100% SaaS from the beginning. When mobile computing really became mainstream, we were well positioned to deliver a mobile experience, and we continue to do that. As we expand our capabilities around B2C, we continue to focus on mobile, creating consumer-grade mobile experiences, setting the stage to unlock future resident-focused growth opportunities. And for AI, we are at a stage now where AI is assisting in every single one of our customers' key workflows, in marketing and leasing, in maintenance, in accounting and these are translating into real business outcomes. We no longer think of AI as a product, and we're using our AI development capabilities to solve unmet needs for our customers that not only deliver more value for them, but allow us to capture more value in the future. Today, nearly 40% of all APM customers are actively using at least one AI feature or service, and we want to expand the impact AI can have to help our customers be successful. And the fifth area of focus is around partnerships and integrations. The ability to integrate into a single system of record is particularly important for our larger upmarket customers, enabling them to manage complex portfolios and run their entire business from a centralized hub. AppFolio Stack seamlessly integrates our customers' preferred software applications, with AppFolio Property Manager, giving customers more choices as they focus on boosting productivity and improving their resident experiences. We announced our initial round of Stack partners back in June. And tomorrow, at the customer conference, we're going to announce 7 more, which means we've more than doubled the partners that are in our AppFolio Stack marketplace over that period of time. And we're just getting started here with these integration partnerships and AppFolio Stack gives our customers a choice to use the tools familiar and extend the capabilities of our platform. It also creates powerful network effects across the board for our customer base, by building early customer pipeline, and we see customer wins coming through this and use this to fuel sales and attract more partners to the, Stack integration marketplace. Now we've talked about our TAM. We've talked about our opportunities, the challenges we solve for customers and our areas of focus. All of this builds confidence that we can achieve long-term sustainable growth and deliver exceptional experiences to our growing customer base. It also enables the execution that we have around 3 strategic pillars. Those pillars are: number one, to win upmarket; number two, to continue our SMB leadership; and number three, to grow value-added services. Let's take a minute and we'll dive into each one. The first is to win upmarket. Our largest growth area is in the corporate segment. We drive growth up market by expanding our capabilities through additional property types. Examples are affordable housing, like we just talked about. Short-term rentals are another example and enabling innovation through our platform. And I've already discussed these property types, but also through our integration marketplace as well. It's so critical that we remain the source of record for property-level accounting and reporting are the pipes of our customers' business and will continue to remain one of the most important areas of our product investment, and we're hyper-focused on delivering more features and themes to make sure that we're delivering automation, centralization and flexibility for our customers. With our push up market, we will continue to position fully a property manager plus to our customers, to the upper end of mid-market as well as our corporate customers and for any customer that's poised to take advantage of APM PLUS. And what we've seen with this push up market is that it's actually working and working really well, and Fay Sien will provide more on this shortly. Now the second strategic pillar is to continue our leadership in SMB. Our history of delivering differentiated experiences for SMB customers has resulted in great success. The SMB segment represents our largest concentration of customers and units on platform. We also recognize that many customers may start as an SMB customer, but because of their success on our platform, they grow for years and years. Though we are focused on upmarket growth, we will continue our SMB leadership by adding capabilities, simplifying the service experience and driving deep adoption across leasing, accounting and maintenance workflows. Now the third strategic pillar is focused on value-added services growth. In addition to our efforts to grow our customer base and unit counts, we also want to continue to grow our average revenue per unit or ARPU, while maintaining high customer retention. We do this by adding and expanding our value-added services, which are designed to enhance, automate and streamline critical processes and workflows. Our strategy is working. For example, in Q2, we announced that value-added services revenue grew 35% year-over-year, which was more than $80 million in revenue for the quarter. Now this strategy has been particularly successful with value-added services around payments, screening and insurance. The combination of these 3 value-added services represent the most significant revenue coming from value-added services and are currently the fastest growing of any of the services that we provide. These value-added services will continue to fuel growth for our customers. and we'll continue to grow ARPU for folio overall. Now to give you a sense of the power of our model, want to take a look at one of our customers and their experience with us. That customer is Alexander Forest Investments or who we call AFI. They're an investment manager with property portfolios across the U.S., and they're a customer in our corporate segment. Having the primary goal of increasing their net operating income, they look to take over management of properties and in their words, run them to their fullest potential. This goal and mindset has really set them apart, and they have experienced fast exponential growth in the marketplace, doubling their portfolio size year-over-year. AFI began using AppFolio in 2014. But given their rapid trajectory, it was important that we set them up to handle their growth and success and could also enable their future growth goals. So we recently upgraded them to a fully a Property Manager PLUS. This has resulted in AFI being a high adopters of many of our value-added services, including our AI leasing assistant, Lisa, and being an ARPU multiplier in the process, a trend the Fay Sien will also talk more about later when she gets up here. Now through everything that we've described, we're building a competitive remote for AppFolio on our path to being the leader in our residential market segments. One of the ways that we measure our success and awareness is how often organizations search for our brand because that's often the first step of many steps in the buying process when making a decision. And you can see in recent years that AppFolio has started to separate ourselves from the competition. We really separate ourselves because we offer a seamless, modern SaaS platform. We have strong product-led organic growth. We are loved by our customers and users and take a tremendous amount of pride in that. And we consistently grow market share for the market segments in which we focus, and we also deliver an exceptional customer experience through product innovation, mobile, AI and the service that we provide. Now the strategic bets that we're making are fueling our go-to-market efforts in improving our ability to win. By aligning -- enabling our go-to-market teams to our strategic pillars, we're able to deliver a cohesive and consistent customer experience across all customer touch points, bringing innovation to market faster and creating both differentiation and productivity along the chain from first engagement to onboarding to retention. We're designing and nurturing our partner marketing strategy and programs to leverage our new Proptech ecosystem partners through AppFolio Stack. By leveraging our property manager partners, we not only look to expand our capabilities, but we also think we can reduce the rate of effort required to create demand in the market. Now nothing has been more foundational to AppFolio driving focus on differentiation and the customer experience than AppFolio's refreshed and inspiring product vision and product strategy. So I want to bring up Will Moxley, our Senior Vice President of Product, to tell us more about that. Welcome, Will.

Thank you, Shane. Can you all hear me? Yes. Excellent. So what you -- the 2 gentlemen you see here on the slide there from the video we showed earlier this morning. And it's Jordan and Joseph. And my favorite part of the video is when Joseph says -- refers to us as a Swiss Army knife. And because of our versatility in the cutting-edge features that we offer with our One powerful platform. Now Shane earlier mentioned those 3 big challenges that our customers face, operational efficiency, growing their revenues and profits and HR staffing. And that's really the problems we're trying to solve with our platform. That's what we're trying to solve for our customers. And that's captured in our product vision. And our product vision is to create a world we're choosing, living in, owning and managing communities, feels magical and effortless for everyone to thrive. And those people were freeing are the people that Shane mentioned as our customers, the property managers, the owners, the residents. Now why does this matter? Why is this our vision? Well, it's because payroll is the number 2 expense that our customers face right now right after taxes. And anything we can do to make them more operationally efficient and help them with staffing is going to have a big impact on their business. And in fact, 40% of our customers' time, the property manager's time, I should say, is spent doing busy work. And one of our customers refers to this as turning the crank. And what is turning the crank? It is manually entering invoices. It is typing in work orders. It is backing out erroneous accounting transactions. That's what turning the crank is. And it takes them about -- eats up about 2 days of their week. And our goal is to help them stop turning the crank. That's where that magical and effortless comes in. And what we mean by that is we want to eliminate crank turning for them so that they can spend their time growing their business, increasing their resident retention rates and not doing all that manual busy work that they have to spend 2 days out of the week doing right now. So the way we deliver on this vision is through our platform. And so I'm going to walk you through what's in the platform. It starts with the foundation. Our cloud operations that delivers reliability, performance and security and then capabilities to rapidly release new innovation to them. Now I've worked at companies where we had 3 releases a year, and then I worked at another company where we had 1 release every month, but we're releasing brand-new capabilities to our customers every single week. So every week, they're getting something new. In fact, I looked this morning, they got new search capabilities this week where they can now categorize what area of the product they want to search. That's just an example of the new innovation that we're constantly adding to the product. We also have something that we refer to as our AI factory, where we're able to rapidly deploy machine learning capabilities to any one of our workflows, so that our customers can get new automation, and new recommendations in their business. And then Shane mentioned AppFolio Stack. AppFolio Stack allows them to extend the capabilities of the product with our ecosystem of partners. Now above that, sits our application layer. And there's 2 elements here I want to talk about. First is these common components. These are things like our reporting engine, our mobile capabilities, our communication capabilities and SMS, for example, document management and our workflows. These are all capabilities that are consistent throughout the entire application so that customers get a consistent user experience, which is one of the reasons that our customers love us. And then above that, we have support for various property types. Each property type has its own unique requirements that we need to meet. And I want to give you an example on affordable housing, there's all these compliance requirements that they have to file with state government or federal government, and we build specific capabilities to meet the needs of their compliance needs and affordable housing. Now the 3 main workflows that all of this enables are leasing, which is really just marketing for property managers. That's really what it is. Maintenance and Accounting. And so these are the -- this is the work that a property manager has to do. And all of this foundation is really around solving for these 3 key workflows that encapsulates all the work they have to do. And we provide one consistent interface and one application that they log into to do all of those workflows and they're all integrated. Some of our legacy competitors take a different approach and they maybe make you log into different modules for each one of these or they put a single sign, on a thin layer of integration on top of a series of acquisitions. We instead give you one application you log in to achieve all of those capabilities. On top of those 3 workflows, we layer our value-added services, which are the ability to send and receive payments, the ability to screen a new applicant or make sure that your properties are insured or resolve a customer issue in maintenance, right? So we layer these on top of all of these workflows and certain value-added services are relevant to certain workflows. Now my goal over the past 2 years has to been rapidly increase the pace of innovation. As you can see, we've been releasing more and more capabilities each year. And my goal is to continue this trajectory and to continue to add new capabilities every year at a faster pace than ever before. Now what are our innovation themes? What are we focused on? You're going to hear a lot of the same things that Jason and Shane talked about. I'm going to speak about 3 in particular here, which is expanding upmarket, winning in the corporate segment, what are we doing there, how we're using AI to differentiate our product. And I'll dig into some of the new features that we're going to be talking about this week that we're doing to deliver on that AI vision. And then how are we focused on the customer experience, how are we improving our customer experience to remove this busy work that eats up so much of their time. So first, we're going to talk about expanding up market. And there's 3 things I'm going to cover here in expanding up market. The first is adding new property types. So I'm going to dig into that. The second is Stack. Stack is really important for increasing that product market fit with our larger customers. And the third thing I'll talk about is just basic product market fit, new features that are really relevant to that upmarket customer, and that's another area. So let's dig into each of these. We'll start with property types. So earlier, we mentioned the Short-term Rentals. So one of the new products we'll be talking about at the conference this week is AppFolio State Manager, which is our new capability to manage short-term rentals. Now the short-term rental space has been growing tremendously because of the changing attitudes about remote work. Last year, the average revenue for short-term rental grew 35% according to AirDNA, it's a research firm there, and it's expected to grow about 14% again this year. So our customers are leveraging short-term rentals to really grow their business. And some short-term rentals, that's all they are. They're always a short-term rental. Other times, property manager will take a conventional unit and convert it into a short-term rental and then look -- might convert it back. So having that integrated experience where they have the flexibility of switching property, the use of a property and tracking it all in one system, is really important to our customers. So by adding this property type, we can get more customers upmarket with these mixed portfolios. Now another property type that we're investing in is affordable housing. Now we've had affordable housing capabilities, but we're going deeper, and we're investing more to support things like HUD project-based Section 8 housing and enhancing other types of programs like low income housing tax credits. Sometimes we refer to that as LIHTC. So if you hear that term, that's what it stands for. And then housing choice vouchers. So we're investing new capabilities here because as you go upmarket, the majority of affordable housing units are in that upmarket segment. And if you want to acquire these larger customers that have affordable housing units, you really need to have this be part of your platform. So it's another property type we're adding so that we can address more of these mixed portfolios and acquire more corporate and upmarket customers, while staying compliant with the government programs, of course. That's what it's all about with affordable housing. Now I've mentioned Stack. As we go upmarket and we get into the corporate space, customers are more sophisticated. They use third-party property technology, and they expect you to be able to integrate these solutions. And we knew that. And that is really what drove Stack, is to win these customers that need -- who want to use these cutting-edge partners that we offer. So earlier this year, we announced AppFolio Stack, where we launched with 6 customers at the NAA conference -- or 6 partners, I should say, at the NAA conference, and we're adding 7 more partners here. And it's been really well received by our customers. We now have hundreds of thousands of our units leveraging Stack, and it's driven some customers to upgrade to APM PLUS, and that's an important point. Stack is offered as a part of APM PLUS. So it's one of the reasons you might want to upgrade in addition to other ones or it can be purchased separately for $0.50 a unit a month so that you can access the partners that are part of Stack. Now we don't just let anyone sign up to be a Stack partner. It's a curated list. And the way we curate it is based on customer demand. What are the partners that our customers are telling us they want us to integrate with? That's how we prioritize the partners. And how does it complement our existing product set? Is it complementary? Is it something that makes sense? And then we work with the partners to build that great customer experience. So we work in conjunction with them to build that integration, define the workflows we want to support to make sure that the experience is phenomenal because that's one thing we don't want to happen. Sometimes when you do integrations, people take shortcuts on the experience, and we do not want to do that. We want to keep that great customer experience, whether you're leveraging a partner or not. Now I'm going to switch over into new capabilities that we're building to be a better fit for the corporate customer. So there's been a trend -- there are some trends in the property management space as you go upmarket, and some of those are centralization and automation. So before, you might have a leasing team and maintenance team and maybe an accounting team at each property. But now increasingly, companies are centralizing those functions. And they're saying, let's have one leasing team that handles all properties that we manage. Let's have one maintenance team that handles all properties that we manage. And there's been -- with these changes, there's more complexity, there's more requirements that customers have. And some of those have come in the accounting space. So we've been enhancing our accounting capabilities to meet these new increasing complexity features that customers need, things like cost centers, things like loan tracking, managing your loans. And things like project budgeting as well. So we've been adding these throughout the course of the year. We're going to continue to add more capabilities like this to meet their accounting requirements. Another area that larger, more sophisticated customers need is reporting. They have more sophisticated reporting requirements. And we've always had an extensive set of reports for everything you want to access, and they can be customized. But sometimes customers want to go further. They want to take data from different reports and different tables, combine it together into a new type of report. And so we're announcing at the conference, our report builder where customers with a few clicks can build the brand-new report and then save it and use it again later so that they never ever have to build that report again. And so we're going to actually show you a quick demo of what this looks like. I'm going to switch over. All right. So this is our report screen, and I'm going to bring up a report here called the rent roll. Rent roll shows all the units, who's renting them, how much they're paying in rent, et cetera. But you'll notice there's no contact information. There's no e-mail. There's no phone number, and there's no security deposit amount. And let's say that one of my owners wants that information. Well, normally, I'd have to download 3 different reports, combine them in Excel and then send them the results. But now with the Report Builder, you go in and you select your base report. We're going to start with that same report, the rent roll report. And I want to find their phone number and their e-mail, their contact information. So I search for that. And I'm able to then pull that in off of another report called the Tenant Directory. So I pick the phone number. I'm going to add their e-mail contact as well. And let's say that they also -- the owner that I need to provide this report to also wants to know how much they have in security deposit. I go ahead and pick those fields. And now I just constrain it down to the property that this owner has, and I run my report. And when the results come up here, you'll see that over on the right now, we've added the phone number. We've added the e-mail. We've added that security deposit amount. And if I need to do this report and send it to this owner repeatedly, I can just go ahead and save this, so I never ever have to do this again. I've made this new report that solves this particular issue that my owner has and I'm able to save that and reuse it from now on again, I'll never need to do this again. This is a onetime thing. And that's work that we've just taken off their plate. So back to the slide. So that's the Report Builder, which we'll be talking about tomorrow, and I think it's going to be quite popular. So now I'm going to switch over to AI differentiation and what are we doing with AI to really differentiate our product. And AI, I used that word magical and effortless in the product vision, AI brings a lot of that magic. So when Lisa, which is our AI leasing assistant, first scheduled this showing without any human involved, that felt magical. When Smart Bill Entry scanned a bill and then automatically did the accounting entries for you, that felt magical to our customers. And when Smart Maintenance prioritized an urgent customer need without a human being involved just automatically did it, that felt magical to our customers. So we've been working over the past few years on building something we refer to internally as our AI factory, which is the ability to apply machine learning, AI to every one of our workflows and for every single segment. And we're now at a point where in leasing, in maintenance, in accounting, we're paying some capabilities of AI to improve that customer experience to remove that busy work, to make that crank turning, I talked about, disappear. And I'm going to give you 2 examples of things we're going to talk about this week where we applied AI to make our customers' lives easier. The first one is the bank fee. So bank reconciliation is just a typical process that property managers have to go through all the time, but it is no fun. And it's a lot of manual work, and you have to manually match transactions that happen in the bank account where the transactions that happened in AppFolio in the accounting system. And so what the bank fee does is applying AI to automatically match transactions that happen in the banking system or in your bank account with what's happening in AppFolio. So -- and it also will take transactions that happened inside of the bank, but aren't captured in AppFolio and automatically create those accounting entries for you. So it is going to remove a lot of the manual matching process and the manual data entry processes that were there, and it's going to dramatically simplify this bank reconciliation process, which our customers, quite frankly, do not enjoy doing, right? And this is a going to remove a lot of the time from -- off their plate. It's going to make their lives easier. And it's an example of how AI can really create that more effortless and magical experience that we talk about. Another example is Smart Insure. So when many of our -- many of the property managers will require you to have liability insurance for a tenant when they move into a property, and they allow the tenant to upload their own insurance policy, maybe they have a renter's insurance policy or some other policy that covers that liability. Well, they'll say, okay, if you have your own insurance, please upload it. What typically then happens is the property manager has to load up that document, read through it, make sure that the dates still apply that the policy covers what it needs to cover. But now with Smart Insure, you upload it and AI scans that document and lets you know whether it's valid or not. So property managers no longer need to go in and read through that document to make sure that they have liability coverage for the particular unit. It's just taking care of it for them. So that's an enhancement we've added to our insurance products, applying AI to remove work off their plate. And now I'm going to transition over and talk about some of the other capabilities we're enhancing to be a better need for all of our customers. And it doesn't always take AI and these examples don't take AI, but they are things that our customers really value that we've been working on. So Shane talked earlier about security deposit alternatives. This is an -- just -- it's what the name says, it's an alternative as a security deposit. Renters don't like security deposit because it locks up cash, right? It locks up a lot of cash. Sometimes they don't have it. And sometimes they just want access to it. This is an alternative product that allows them to pay a smaller fee upfront and then not have the security deposit. This is something we partnered with to deliver a [indiscernible]. So this is a [indiscernible] plus we're making available to our customers. And it makes -- it's attractive to property managers because it makes their properties more competitive. If you don't have to supply a security deposit, that's great for them because it makes it more attractive to residents. And residents like it because they don't lock up all their cash, especially at low interest rates. I was joking yesterday [indiscernible] interest rate's a little better, but still not good enough. And so this is a [indiscernible] plus that we're pretty excited about and our customers are excited about. And it's just another one of the new services we're making available to our customers. We've also been investing a lot in the customer payment experience, what is the experience for them. And on the payable side, one of the new capabilities we're adding is security deposit refund. So instead of having to write a check, do a paper check and mail it out, then the residents to go and take it to the bank and deposit it they can just now do the whole thing electronically, right? And so this is fantastic for the property manager because they don't need to go through that process and for the resident because they get their cash back earlier. And this was -- I think Shane referred to this, this is a top idea on the product suggestion board. This is one of the things our customers were asking. I think it was like #2 or 3 on the list. And so we saw that. We want to make customers happy and we deliver this, plus it drives usage of our payables capabilities. We've also been enhancing the receivables capability with Apple Pay support. So now when a resident wants to pay their rent, they don't need to type in their credit card information, they can just click twice on their phone, and they pay. So it removes friction in that payment process, which is great for the property manager because they get -- they're getting their rent. And it's great for the resident because all they have to do is just do 2 clicks, and they can pay their rent. And this removes friction in that payment process. And that will drive adoption of our payments platform. And that's why we're excited about it, and customers are excited because of the great experience. And then finally, screening is one of our really critical value-added services, and we recently introduced income verification capabilities to it. And we've enhanced those income verifications even more recently to drive more adoption of it. So what this does is in the screening process, resident have to provide some proof of income so that you know that they can pay the rent, but this is a high friction process. People have to upload pay stub, you have to go do calculations, et cetera. And we're automating this a way with the income verification service, so that we do all the validations and make sure that they have the right coverage to be able to pay this. And one -- our customers have shared with us and part of our interview process here that 75 -- one customer in particular told us 75% of time saved in the application review process, there are saving a lot of that application review process time because of this. This is another example of removing that busy work, removing that manual repetitive tasks so that they can focus on more important things like growing their business or making the residents happy or making their owners happy. And just to recap, expanding upmarket, AI differentiation and just the customer product experience. Those are the 3 areas we're focusing on. And with that, I'll turn it back to Lori.

Thank you, Will. So we'll take about a 15-minute break, and get set up for our customer panel. There are coffee and snacks in the hallway. And if you're streaming, please note that we'll get started in 15 minutes. [Break]

We're going to get started here in about 1 minute. All right. We are live. We are ready to hear from some customers. So I'm pretty excited to have our customers here. So I'm pretty excited to have our customers here. We've talked a lot about our values this morning and how listening to customers is in our DNA. And the reason that's important is we obviously want to solve challenges for them and stay very close and make sure we're delivering value for them each and every day. We're honored to have our trusted partners up here with this group of customers. And our goal is really to create space so they can focus on what matters most, running their business and delivering for their customers. Thrilled to welcome 5 customers here that we really see as trusted partners, both in how they leverage our platform, but also how they hold us accountable to making sure we're delivering value now and in the future. So with that, let's go ahead and get started, and we'll meet our panelists. I'm going to start by asking each of you as we go around. I'll call your name out, your organization. Talk about your business to give some background. And then share just one top business goal that you have for this year as we go across. So let's go ahead and jump into it. And first, we'll start with Brooks Baskin, Founder and CEO of 2B Living. Brooks, go ahead.

Hi, everyone. Brooks Baskin, Founder and CEO of 2B Living, nice to meet everyone. We are a San Francisco Bay Area-based property management company, a little over 3,000 units right now and growing. I think I have the designation of being one of the few people who actually loves property management, which I get asked all the time, what's wrong with me. But I love the business. One objective of ours this year, what we call our SBO or single objective is stable foundation. Business is growing. We're doing very well. And so that obviously dovetails a lot with our relationship with AppFolio. And so yes, excited to chat with you today.

Thank you, Brooks. Appreciate it. Next up is Gozen Hartman, Co-Founder and CEO of Fairlawn Management. Gozen, why don't you go...

Gozen Hartman, Co-Founder and Chief Operating Officer of Fairlawn Real Estate. We are based in Champaign, Illinois. We founded the company in 2015 with just under 300 units, and we have under 5,000 today. So it's been massive growth. We joined AppFolio in 2019, and AppFolio has really been a trusted partner. So thank you very much for that.

Thank you very much. All right. Now let's meet J.T. Morrison, President of Horizon's Asset Management. Go ahead,.

Yes, my name is J.T. Morrison. I am from Columbus, Ohio. We do multifamily for conventional residents, and our goals for the next year are really to expand. Last few years, we kind of shrunk a bit to try to centralize our management and the help that AppFolio has given us -- gives us the ability to run with that smaller focus. And we've made a little mistake that we can start grabbing some more properties now. So we're ready to take care of the market.

That's great. Thank you very much, J.T. And now Ross Nelson, CEO and broker with Marshall Reddick Real Estate.

I started with Marshall Reddick in 2009. I actually was a realtor. It's been my first and only job since college. So it's been a lot of fun. In 2014, Marshall retired, I had the opportunity to acquire the company. At that time, we only did real estate investment sales. Since then, 2017, we started property management. In 2014, we started private lending. And then 2020, we started investment funds. So we have 8 offices across the country and property management represents about 25% of our business. In terms of goals for this year, AppFolio property management, major goal is to finish integrating their API into our CRM. And then as far as unit count, we'd like to end the year at about 3,500 units. And then for AppFolio Investment Management, a major goal for us is working with their product team to complete the waterfall calculation and then have $75 million in client capital invested.

Great. Thank you, Ross. Appreciate it. And last but not least, let's meet Marco Vartanian, President and CEO of Sullivan Property Management.. Go ahead.

Thanks, Shane. Good morning, everyone. My background through 2012 was on the private equity side and then all in real estate operations. In 2012, I joined a company called Waypoint Homes, which was an early adopter of single-family rental, and we scaled that company through a mix of M&A and finished as EVP of Operations with a company called Invitation Homes, which is the ultimate entity that we ended up with. And then all along that ride was questioning, well, why hasn't -- I mean why haven't we institutionalized small multifamily in the same way that as an analog to what we did in single family. And so in the end of -- at the end of 2018, I acquired a small management company based in Orange County, California, which is about 800 units. And 3 years ago, we've scaled that to about 5,000 units using a very similar playbook that we scale operationally with the single family company.

Top business goal.

Top business goal. I would just say scale creates digestion problems. And so our goal in the near term is develop master at 5,000 units, plateau there and then build our ecosystem. So we have aspirations to get to 25,000, 30,000 homes under management pretty quickly.

Exciting. Thank you very much, Marco. Appreciate it. All right. Now that we've had a chance to meet everyone, I'd like to dive into a few questions before we open it up to our audience. So we'll go through some questions and then we'll do a Q&A. And the first question, I'm going to ask Marco and goes in to answer. And the question is -- no industry is without its challenges and property management certainly has its share of challenges. What would you say is the biggest challenge your business faces today? Gozen, we'll start with you, and then we'll finish with the Marco.

Sure. The biggest challenge that we face today is probably finding and retaining talent. It used to be that we would get floods of applications for every open roll. That is not really the case anymore. Now we have to worry about things like our people going to show up to the interview. Are they going to show up to their first day of work once they've accepted an offer. And so really, it's made it all the more important that when we do find the right people that we are taking care of them in the best way. So that means having a really robust onboarding process, training them in the right things and basically creating a really fulfilling day to day for each of our team members.

Yes, I think about our business challenge as we look at, again, the single-family space, where we owned all 82,000 units, and we have the dynamic of a third-party owner client. And so their aspirations for their property don't always perfectly align with what our goals are. And so being able to satisfy that cohort in a scalable way is a challenge for us. And then on the resident side, the technology adoption has been outstanding. The resident expects the types of technology tools that AppFolio provides. -- are owner clients, it takes time. They want to build trust. They ask the question, why do I need this once they see the benefits and build that trust, then they're all in with us. We just continue to communicate that the very best residents today. They expect that technology engagement. So that's one. The other piece is omnichannel communication. I think we have a mix of call tech, chat, e-mail and so being able to equip our team to handle all that inbound communication flow. And once again, Appfolio does a good job of giving us that information we need. Last piece is speed. The expectation of delivery for what we all do today from our residents and our owners is immediate. And again, once again, AppFolio helps us there because the expectation of service is right away.

Well, thank you. Next question, I'm going to ask Brooks first to answer and then Ross. Creating exceptional experiences for our residents is one of our top priorities here at AppFolio. What are your customers' top goals and needs? And what are you focusing on to exceed their expectations?

So a little bit of what Marco was talking about as a third-party PM company, we kind of have 2 masters, if you will. We have our owners and our tenants. We try to pride ourselves on being a tenant-focused management company. It's very interesting for us being kind of in [indiscernible] where the very high expectations on technology and customer service. And so what we've focused on is not so much taking the people out of property management, which is a little bit of a trend going on. We think it's very important that people are delivering great customer service, but it's a very hard job. And so that's part of what we've been very successful of leveraging AppFolio is that by having really good tech that's easy to use, used by our entire team, nearly 100 people from maintenance tech to property manager were able to make their job easier, give them more time and they can actually focus on good customer service and responsiveness. And it really is crazy, like the demands on speed, it's really hard, like tenants expect immediate responsiveness on everything for maintenance to rent to other things, which has put a huge challenge on the operation. But that's really where strong companies who've leveraged technology, particularly AppFolio, have been able to thrive like we have.

Great. And Ross, why don't you go ahead?

So, because property management and investment management are service industry, our biggest cost is labor. So I'm constantly trying to retain the best talent and the best way to do that is to eliminate mindless busy work. So the more mindless busy work, the more employees quit. So we're looking at making the business more efficient, so we can not only have happier staff, but we can have higher profit margin. So we're constantly looking at number of units we managed per employee as well as a number of dollars of capital invested per employee without declining our quality of service. In terms of our customer, we're also in California. I view our customer as the owner investor. And I think from property managers, investment managers, you guys, AppFolio employees at the end of the day, we always tell our staff like, who writes our paycheck? Our paycheck is written by the landlord, right, the owner of the asset. If that individual decides to not work with us, literally everybody in this room doesn't get a paycheck. So we're constantly looking at that as our customer. Our customer's #1 goal is collecting as much money as possible with as little effort as possible. If they have to talk to us, that's a bad thing, right? The less communication, the better because that means that we've provided that to them upfront. We've anticipated that need. So in terms of my customers' top need, it's real-time communication. So the #1 reason that owners, landlords, investors, fire, property managers and investment managers is hands-down communication. It's the quality of communication and the timeliness of communication. So a faster response with no answers equals an angry owner, right? A slow response with answers equals an angry owner. So what am I focusing on to provide that real-time owner communication? Sorry, it's a technical question, and you guys are technical people. So I want to give you a technical answer. So we really are focusing this next year on automating owner notifications. How are we doing this? We use Suite CRM and directly integrate that with AppFolio API to notify our owners when key activities occur. If an owner is not notified, the owner will be angry. So what are examples of that? Key activities, key events. So tenant payment being received, tenant rent past due, tenant 3-day notices, receiving tenant notices to vacate, lease renewals, tenant leases coming due, owners low on maintenance funds, work orders. I mean we literally have hundreds of these. These are all automatable transactional e-mails that -- we have all the activity and we have all triggers in AppFolio we just need to provide that in real time, and that will accomplish 2 things: one, it will give our owners real-time communication on activities that are happening with their assets; but number two, it's going to eliminate my labor. So it's going to increase my profit margin because now my staff is happier because they're not sending out these mindless brain-dead e-mails constantly about we received your rent, right? Or we didn't receive your rent. And the software will just do that automatically for us through that API integration. So that's my answer.

It's a very good answer. Thank you. I enjoyed listening to you. All right. Next question, I'm going to ask J.T. to answer first and then any one of you finish the answer with your answer. Each of you are leveraging AppFolio in unique and innovative ways. How has AppFolio helped you the most? And what are the things that really enable you and your teams to be successful?

So for us, it really goes back to our staff and how we can communicate with them, with the tenants in a timely fashion. Some of the big things that we started out the year or even last year with AppFolio wasn't really providing to us, but with -- working with them, they were able to get up is this smart managed module, where when we got work order requests like emergency request or whatnot to get them out to the proper tech is on duty. We don't want one tech on duty all the time throughout the night. So to be able to have that cascading tree, get the right information to the right people and in a very timely fashion, was not something that was real nice in AppFolio about a year or so ago. And then with working with them and helping them out on that, we came to a beautiful situation where comes in, we get text directly to everybody that's in the tree that has assigned to the work order. We got buying power that's already there if they need to get an emergency vendor out for a plumbing situation or whatever. It's just now the employee is empowered to get on site, get the job done and get back to their family, which, again, is all part of the great culture that we're trying to build in our company by taking those tasks, automation of any of the reports, those kind of things off of them where they can focus us on their relationship. They can focus on their home life and want to come to work every day.

Great. Thank you.

Very, very similar to us. I mean AppFolio has meant an integration of so much of what we do versus our previous solution and really, in the end, it means that we're taking these manual, cumbersome tasks off of our front line because they are busy and it is a really demanding role. Some of the -- it's really changed the nature of people's day-to-day within our company. So for example, we subscribe to the maintenance call center. So there was a time not very long ago where there might be 10 technicians across our entire system who are on call, and they could receive calls directly from residents in the middle of the night. Now we actually have the AppFolio's Maintenance call center to vet what is an emergency and what isn't, therefore, relieving that front line. We subscribed to Lisa, the artificial intelligence leasing agent. She has completely changed the nature of our leasing agents so they can focus on a different part of the sales funnel and really focus on the tour and then everything that goes beyond that, the experience, yes. So our accounts payable specialists, we use smart bills and they used to spend a significant portion of their time literally scanning it and loading in invoices, how boring, right? And so now that has freed up tons of time and they're able to focus again on the most meaningful task, which hopefully makes for a more fulfilling day to day.

I have to say it's so fun for me to listen to. You -- all the things you're using with AppFolio and the value you're getting from it. So it's exciting for me, not that it's about me. Okay. Well, you've heard some great examples of how our customers are leveraging AppFolio. The next question is really for you all to answer, so we'll start with Brooks at the end here. And what's something that's coming up in the real estate industry that AppFolio should be thinking about in the future?

I think one of the interesting trends going on right now is real estate in Proptech is, I think, kind of a hot industry, and there's lots of innovative software companies popping up. And I think AppFolio made a very smart decision, in my opinion, to become a more open software and integrate with other softwares and not just rely on being able to build everything themselves. So it's very exciting what's happening in our industry, frankly, it's long overdue. You wouldn't normally say property management is a tech-forward type of industry, which is really changing. And so I think to me, that's AppFolio's biggest opportunity is to be able to leverage, not just themselves, but leverage their platform to enable customers like us to really be using best-in-breed technology for every single vertical.

Yes. I think something that we're thinking a lot about is the downturn and how to maximize performance in the downturn. And so with AppFolio, I think that there's maybe a couple of things. Number one is, on the analytics side. So how can we use data to help? And then also just, again, some of the things we have been talking about is how can you do more with less, right? And that could be through -- I mean, there is some artificial intelligence incorporated into the product, but where can we do that more again to free up our staff to do the most meaningful activities.

Yes, definitely on that aspect of doing more with the artificial intelligence, we're looking at more centralized management, trying to get our staff focusing on what they do best of closing residents or servicing residents and the paperwork, the analytics, all the other stuff, try to keep that to some higher-tier people who just config the inputs in there. And so the more that AI grows and the more that we can make our people more effective in the task that actually make us money versus the support aspect, which -- we want to keep everybody happy, but the easier that we can keep our team happy that helps out. And then, of course, the integration. Opening that up just so that -- AppFolio does great in a lot of things, but some things that are a little maybe clunky and not more efficient. So we can look now to other events where other programs where they can bring them in, using the database we already have, not having a big headache of having to have double implementation. That's the stuff we're really excited for and what we want to use.

All right. So one thing that I think is coming is large, sophisticated residential property management companies are coming. They're coming as private companies, they're coming as public companies, they're coming as built for rent, REITs, private equity. Residential property managers are evolving from this small mom-and-pop local companies to these large professionally managed national companies. No one wakes up, graduates college, gets their MBA and says, I'm going to go be a residential property manager, right? Usually, right -- everyone's laughing because it's true. Like you fall into it. I looked at commercial real estate and I looked at residential real estate, and I was like, wow, everyone's intelligent, everyone's hard working. Everyone has their MBAs in commercial real estate. I'm going to love residential real estate. This is awesome. Like I got -- no one's to compete with. So until recently, that's starting to change. There's a lot of money. There's a lot of talent. There's a lot of resources that are moving into the residential management space. and I've not seen that before. I'm starting to recruit a lot of talent from other industries, which has been really, really fun, and they just have a passion for residential real estate investing. Large companies are going to be much more sophisticated users. Their software needs and expectations will be significantly higher than these traditional mom-and-pop managers. These large management companies are going to want automated owner, tenant and staff notifications. They're going to want really robust APIs for custom integrations. They're going to want in-depth customer reporting, they're going to want customizable dashboards. Their user roles are going to be very different. Their user roles are going to be multiple offices, multiple teams, multiple staff members, multiple properties, multiple portfolios. And those need to be highly customizable with reporting just because they're running such a large organization, and their KPIs are going to be so much more complicated. So that's something I think we need to look at in the near future.

That's great. Marco?

I think automation, it will be tested as the market is shifting, automation will be tested because successful operations historically has been a roll-up-your-sleeve boots-on-the-ground business. And so the automation is great. If you think of like a leasing funnel, it's awesome to have self-show, but the question is if there's not as much pull-through demand or tailwind in the market, do you need that human to get that lead over the hump to lease from us. So I think that's something to watch. And then to Gozen's point, I think BI tools, analytics, expense containment ratios at the property level due to the surge in inflation. So having better analytics to drive decisions. We have all the data. So I think AppFolio's ability to give us more of those tools to customer port and export information that we can digest and use will be very valuable as the market shifts.

Great. Thank you very much. and thank you for all of your answers, very thoughtful, and we're very grateful. Now with the time we have left, we want to open up this conversation for questions from the audience. For those of you that are here in person, we have 2 kind of microphone runners as we'll call them, Xiao is over here, and Luca is over here. So if you have a question, let us know and they will provide microphone. [Operator Instructions].

Ross, maybe one for you is just what do you feel is a best-in-class units per employee and sort of how much room do you have between an average operation and a best-in-class operation on that metric?

Yes. How do you bake a chocolate cake. So there's a lot of different recipes to go about this. A good rule of thumb I have found is 100 units per employee. Some managers tend to be more siloed. They literally have somebody who does everything, leasing, maintenance, renovations, owner communication, tenant communication. Other companies tend to be more of an apartment model, and they're going to run off of more teams. And that team is going to have a team lead, a property manager and then everyone follows suit. So tenant coordinators, maintenance managers, maintenance coordinators, et cetera. And so one of the tricky things that I found is that management roll up top is really going to define the quantity of units per employee managed. So I found that average employees with a high-performing leader can bump that up to around 125 to 130 units per employee. And I've also found that a low performing manager regardless of their staff is going to be around that 80 units per employee.

Yes. And we generally think of it in terms of 100 units. And for us, that's really sort of frontline staff at the property. So we think about the people, if you have a property that's its own operating bubble, right? 300 units. Traditionally, you might have a property manager and assistant property manager and a part or full-time leasing specialists. So that's -- and I think probably the number that you're talking about, so those sort of office-based management staff and leasing staff. On the maintenance side, we generally look at about 100 units per maintenance technician. It is very hard to hire maintenance technicians right now. I'm not sure if anyone is experiencing that. We -- but we -- it also depends on how you manage your properties so you might have each property be its own bubble or you might have a scattered site operation, which I think some of you guys have as well. And so there, you can get a little bit more efficient with your centralized office, managing those scattered site operations where you don't actually have staff who are physically based at the properties?

I completely agree with that. So those numbers I was providing were for people that are touching the property. So that number does not include back-end staff, and that number does not include maintenance workers. That is just staff touching the property.

I completely agree.

This is Devin Au from KeyBanc here for Jason Celino. Maybe a question that's applicable to everyone on the panel. I want to ask macro, just given the rising interest rate and potential recession happening. How do you think about -- how do you think that would impact your budget and spend with AppFolio, but also how do you think that would impact unit additions and unit growth in the near term?

Thanks for the question. So I think one interesting part about property management is I think it's a very good down market business. And so certainly, for us, we actually see even more opportunity now than we did before. Obviously, there's additional pressures on things particularly labor. But for us, like our spend on AppFolio, if anything, I think, would go up and not down with they call it, an inflationary market because we find it to be very good value for what it's providing in particular when you're making the trade between software and labor, which that's the hardest thing in our business right now is finding talent, but also just the cost of labor is also going up. And so Macro, to me, that's one of the things I'm very excited about our industry is. I think it performs well in inflationary times, right? Rents are going up. A lot of our fees are tied to that. But at least we found, especially the last couple of years with all kinds of challenges, there's been a surge in demand for good property management and good property management goes hand-in-hand with companies that leverage technology.

I think Brooks is correct. What we do with AppFolio and the continued evolution of their tech stack, that's table stakes at a 5,000-unit operator and above, we're hungry for every new release, every new product. If you think about all of our collective businesses, it's a large payroll. And so anything we can do at the margins with that portfolio to help us reduce that payroll or that be for our earlier salary employees we're all 4. So there's major cost benefit for us. I would see us, to Brook's point, expanding as we get tight around payroll.

I just want to mention something macro data. So we're coming into this recession or in a recession, depending on the sources of data. But one thing to look at is 2008, 2009, we had 40% of all residential 1 to 4 unit mortgages or ARM products. Today, that's sitting at 2%. The other thing we're looking at is, today, 40% of all residential 1 to 4 unit mortgages are below a 4% interest rate. So we're not going to talk about brokerage today because that's a little bit depressing. But we usually sell about 800 to 900 investment properties a year. That's obviously down about 60% right now for us. But with that said, why is that down? We're having a ton of listings right now where traditionally, the seller wants us to sell it, great, lower the price, lower the price, lower the price. And why is that? Because their mortgage payment, their PITI is significantly higher than the rent. So they're going to take a $1,000, $2,000 a month negative. So if you look at a 2008 dynamic, you had an ARM loan that maybe was a $5,000 a month rent -- mortgage payment -- sorry, a $5,000 month mortgage payment. And when that was adjusting that mortgage payment might go up to $8,000. Now the market rent for that was $4,000. So what does that mean? If that owner didn't sell that property, they're going to be feeding a $4,000 a month negative. Now let's look at today's dynamic with today's recession. You have a 3% interest rate, you have a $4,200 a month mortgage payment to have a $6,000 a month market rent. So as a listing, when that seller is not getting what they want, they say fine. -- manage it, rent it out for 2 or 3 years, let's put it on the market later, I'll just make $2,000 a month in positive cash flow. So I think we're going to see a huge boom on the macroeconomics of property management because there is so many positive cash flow houses right now, and there's nowhere else to place that capital and you have this 15- or 30-year fixed mortgage that just is free money below the rate of inflation. So that's something that we're looking at with our data.

Okay. Okay. The next question comes from the web, Ryan Tomasello. Did you consider other property management tech providers before getting AppFolio? And if so, which ones? And why did you choose AppFolio over the competition?

So we started in 2015, and we had a property management software that worked well for smaller operators. We were growing really fast, and we knew that we needed to choose something different and better. And we did actually, at the time, look at a few different solutions, Yardi and Entrata were 2 of the major ones we looked at the same time as AppFolio. AppFolio's sales process, number one -- now that doesn't always correlate to customer service later on, but AppFolio's sales process was really amazing. They were vested early on and made it very clear that this would be a partnership. And so that was just really enticing for us because we were growing really fast, but so is AppFolio. And so we thought, okay, well, we can potentially grow together and give feedback on products and that sort of thing. One of the other solutions we looked into felt like a dinosaur in comparsion. We could barely get calls back. And when we had meetings, they were several weeks out and short and uninformative. And I think that the other solutions that we looked at were very narrow in terms of the services that they offered. Another thing that was enticing about AppFolio was its flexibility. I mean we were coming in. We own the bulk of our assets, but we also do third-party management. So we do have management clients. We manage everything from single-family homes to larger communities. We do student, we do commercial. It allows us to really be nimble, but we needed a solution that could do at all.

Yes. And I'd say that's -- when we were looking at it, we were looking at Yardi, we're looking at OneSite. And the biggest thing is, like you were saying that it has a lot of different functions built into it. that are very user friendly, very fast, able to do with your mobile phone. A lot of the other companies didn't have that at the time. And so being able to add that being able to have -- not having to pay an extra $10,000 to add another feature, add this feature just to get it to your specific likening. And then when you try to call tech support, it's hard for them to help you out because you have such modifications from the original source. So we get great support on both ends because it's together now with this new integration, the way that they're handling that, we're able to add these third parties and because that integration is a little bit more limited for an API. But because of that, it's very locked down and it has been working very well for the few that we've added at least at my company.

So we were on a mix of Salesforce and Yardi at the large public. And we used Salesforce as really the operational tool, the logistics piece of getting people they were supposed to go. And then Yardi was our partner for back-end accounting and reporting. And so my expectation when I started down the path along with my current company was that we would have something like that. And I think AppFolio really excels at the logistics side of our business. Our business isn't that complicated. It's more of a logistics business than a real estate business, if you think about it. The things we do each day are not that hard but it's doing them in a standardized manner over and over consistently. And so AppFolio, I was very surprised, was the right partner for us, and again, so far has been great. The other piece I want to share is AppFolio does a good job of listening. I'll give you an example. I was at NAA in San Diego, and I got an e-mail from Shane. I never met Shane. Shane says, hey, Marco, I hear you're doing some interesting things. I'd like to meet you at NAA. So we spent an hour and he just asked about the company, what we were doing how AppFolio could help us? And that's cultural. So that's something Jason and Shane and team are doing at the very top, and we see that at every level of my company, whether it's our director of maintenance, he's constantly on with AppFolio, trying to figure out how Smart Maintenance can be approved, how we can do more together. And so that's a cultural differentiator for the team.

Keeping [indiscernible] I love being your cupholder. I think Brooks is...

just wanted to add one other thing on that, that I think might be interesting. So we did a big expansion last year in the summer and added about 1,200 units. And that portfolio was all on Yardi. And so we did a pretty exhaustive review. There's a little bit of a narrative in the market of once you get to a certain size, you need to use Yardi, which I actually think Aople is helping to that I actually think it's kind of a false premise out there. So we stacked the 2 up against each other very thoroughly, and we were never been more happy with our decision to stay with AppFolio. We're actually not impressed at all with the yards offering. It was actually kind of a muddled and confusing sales process. And so we ended up migrating those 1,200 units from Yardi over to AppFolio, have been very happy doing it. And I think that's part of my almost challenge to our team at AppFolio 2 or 3 years ago was, hey, we have visions of being a much larger company, 5,000, 10,000 units and up. And frankly, we want nothing to do with changing software, but we want to see that you're capable of doing large portfolio management, and we've been very happy with AppFolio's growth since then.

I'm not getting paid to say this, and I'll provide data behind it. But AppFolio is definitely best-in-class. We were on Propertyware previously. PropertyWare is a RealPage company that used to be public, which recently went private. RealPage has a reputation of acquiring software companies and absolutely killing the R&D and software development, but need software development as a soft company, right? And they outsource that overseas. They had significant database issues. I mean significant. We have software teams on staff, and I'm very well versed in software development. Simple, simple examples of this. They -- you couldn't have multiple tabs open on a browser, like literally, you could have one tab. That's absolutely insane. We have multiple offices. So you have to have multiple Propertyware accounts for multiple offices. That makes absolutely no sense, right? Why wouldn't it all just roll up into one software platform. Even worse, if you had a client that had an e-mail address with property manager A in Texas, and you were a competing property manager or property management B, they share databases, meaning you can't have the e-mail address as a unique identifier with that landlord on 2 separate companies. So your clients literally creating e-mail addresses just for you to manage it if you're using Propertyware, absolutely insane. RentManager isn't even a browser-based software. They were created on servers way back when, and they just haven't overhauled it. Yardi is the exact same way, and they're trying to become browser-based, but I think AppFolio had an extreme competitive advantage because they started way after everybody when technology had come so much farther along. So their platform, the technologies they're using are significantly more robust and built for mobile and remote application.

Love the passion and enthusiasm of course.

Sorry. I don't drink coffee either believe it or not. Could you imagine if I drink coffee, that would be bad.

And we can see why you're leading your company. That's it. So we're going to extend our time about another 5 minutes, so we'll go to about 11:15. And for the remaining questions that come up, we ask that we limit it to 1 or 2 of you answering, and that's for the audience in your ask as well. So Go head.

Let's take one more from the floor here, and then we've got one more on the Internet. Great.

Marco, I wanted to follow up on your answer earlier. So if you had to think about ROI from what you get from the core or from APM PLUS and then the value you're getting from the Value+ services. Like how would you characterize the value or the ROI from the Value+ services versus the core?

Yes. As I said earlier, I think for -- if you're running a 300 to 500 unit operation, then maybe the base product works. But once you step into whether that's adding ancillary tools, tech tools that you want to bolt in to what we talked about earlier, where you're trying to do some analytics, BI, it's really required, the PLUS tool. We've been very happy with it. And there was a lot of decision-making that went in to convert to PLUS. The support has also been great at every level. So we can train more quickly. We can onboard staff and they can get going more quickly because of the support of PLUS to get them familiar with the tool.

I'll let you down to I got you. Yes. Sorry, I was also looking for the Value+ services. So things like lease screening?

As far as -- well, of course, yes, any time, whether it be Lisa, the screening products, we're definitely able to place value on them. That's why we use them. We do like the opportunity of testing products through AppFolio and through strategic accounts, there they've been client test drive this for 30 days, and some of it hasn't worked for us and that's been okay.

Thank you. And so let's go ahead and go to the next question online comes from John Campbell. Outside of the Property Management solution, what are the top 2 or 3 ancillary products, i.e., payments and screening that you view as the must-haves?

I intend screening, absolutely, we've got to have that. Protecting our asset is our #1 responsibility. Additional items that are outside I guess that was -- I guess I implied that in BI, but being able to collect money from different areas being able to be online, be on the website, that kind of stuff, but that's all included in core and things like that. So I'm trying to think of -- these are all the extra added on services, absolutely. I thought you were [indiscernible] outside. But yes, AI, absolutely Lisa helping out, being able to -- she's definitely worth every penny that you put into there versus the staff you have in running 24 hours is awesome. So yes.

Well, just to plug on Lisa, she enables us to do things that we could never do before. People want immediate answers. Most people are searching for housing at night on the weekends. And our best case scenario before, if somebody clicked on one of our listings, let's say, on a Saturday was maybe that a human would get back to them on Monday afternoon. I used to think that Mondays were just -- nobody wanted to tour on Mondays, but it turns out that we were just not booking tours because nobody was communicating with people in a way that they could book for Monday. So she has completely change the dynamic. She is accountable for the top of sales funnel. And so she is taking that repetitive lead follow-up off of the plates of our frontline leasing staff. They used to spend probably half of their time following up with leads that would never materialize into anything and that can be demoralizing, and it results in less satisfaction in your role. And so we were one of the test customers of Lisa in fall 2019, and we were really, really happy going into the pandemic that we had her because we're ahead of all of our competitors because she was able to keep working through everything.

Thank you. And a follow-on from John, one more thing. Can you talk about your appetite for marketing spend relative to the various points in the cycle? How much do you turn the dial as occupancy drops?

For us, we keep our marketing spend up. I mean, Apartments.com, things like that, more of the on-demand or the per click, we still want to keep our voice out there, our ads out there just to make sure that we honestly keep having people coming in, we always want to have that waiting list. And to do that, we've got to always be present. So for us, we pretty much -- we lock in what we do for the year and very rarely do we change that. And we find that fluctuating to get back and forth really doesn't achieve the same thing as just sticking to the plan.

Go ahead.

Okay. I mean there's 2 different ways to look at that. One is marketing spend for tenants. One is marketing spend for landlords or prospective landlords. We found that with tenants, the 2 main websites are Zillow and realtor.com. There's a lot of other websites, but as long as you have it on those 2, you're going to be just fine. So in terms of occupancy, occupancy only declines if you're not at market rent. You don't answer the phone. I know that sounds weird, but a lot of people think you can lease properties without answering the phone or auction in the property. So in terms of ad spend as long as you're on realtor.com, as long as you're on Zillow, that's going to cover 99% of your prospective tenants. On landlords, different businesses scale differently. So ad spending budget is all over the place.

Thank you. I think we have time for one more question.

It's Stephen Sheldon from William Blair. Marco, a question for you. I think you talked about going from 800 units to 5,000. I think you talked aspiration without getting to 25,000 to 30,000. And what do you need to get right to do that? And how does AppFolio play into that? Are there any concerns that you have about AppFolio's ability to scale with you as you target that?

Yes, no concerns about AppFolio's ability to scale with us. We just -- if you think about our operational business, we think about every day, people process and tech. And so tech the foundation of that, that feeds processes that then informs employees what type do each day when they show up work. And so we feel very good about the foundation with AppFolio. But as I said at the outset, like digestion, scaling a company, we went from about 1,200 units at my last company to 82,000 operationally, that creates chaos. And so most days, we're focused on scale, plateau and digest and then gear up to scale again, plateau and digest [indiscernible] to repeat. And then last piece is standardization of activities. So you break out what roles can I standardize and do centrally, and AppFolio helps us with a lot of that. And then there are certain manual tasks that are regionally focused that just have to be done boots on the ground. And so every day, you're trying to deconstruct the best way, most efficient to tackle those.

Yes. So when we joined AppFolio, we had 1,000 units, and we were adding 1,000 more at the time, which really triggered the change and we're at just shy of 5,000 today. And you asked about confidence in AppFolio scaling I mean even in the 3 years, which is not a lot of time, I feel that AppFolio has scaled a lot. The product has changed a sent to our feedback. There are very simple things that are being tweaked all the time that make meaningful differences in what we do. And so just the way we manage as well, we're testing some more remote management type of things, which we don't think that we would be able to do with other solutions. So looking at different ways to manage properties and AppFolio has been with us every step of the way.

Well, this is going to conclude our customer panel. Thank you for all your questions in the room and online. And thank you for all of your answers. A round of applause. We are truly grateful for this, and it's an honor. So with that, we'll let our customers exit the room, and we look forward to seeing you over the next 48 hours here. All right. Now for the final presentation of the morning. I'm delighted to welcome our Chief Financial Officer, Fay Sien Goon. Fay Sien, take it away.

Well, thank you, Shane, and welcome, everybody. It's good to be back here after 3 years. Before I get started, I just want to thank everyone here for your interest in AppFolio for investing in us, for covering us. And for being here. Thank you all for making the journey here. It's really good to see you. And lastly, I want to just thank you for the time that you've spent with me in the past year while I get up to speed. The feedback and input that we have provided has been very helpful and insightful. I'm coming up to my 1-year anniversary here at AppFolio in the next few days. And I've learned a lot in the past year. The one thing that has stood out for me the most is just how resilient this company is and how resilient businesses. And you heard our customers talk about being a good down market business. So I will share a little bit more of opportunities in front of us and what this means. And so let's get started. Before I get started in today's presentation, I won't be discussing or updating our guidance. I won't be providing color on our Q3 results. We'll cover Q3 in about 2 weeks. So let's check back on that Okay. So I'll cover 3 areas today. In the first area, I'll talk about what moving up market means to our revenue. Then I'll talk about the resiliency of our business and our industry. And then we'll talk about the path to profitability. So you've heard Shane and Jason talk about land, expand, grow retain and scale. I'll dive into more specifics on how these elements contributed to a 30% revenue CAGR. Land and grow. You heard Jason mention that we are landing new customers at a 9% CAGR. We're adding new units to our property to our platform at a 17% CAGR. And Shane went over our strategy on winning upmarket and continuing our lead in SMB. We are just getting started in our move-up market. I will show you in the next slide. We're adding ARPU at -- or growing ARPU at a 12% CAGR. And the increase is due to mainly the increase in our value-added services usage, specifically payments, screening and insurance and the adoption of our APM PLUS product, a double click on what this means when we move our market. This slide shows the -- our ending active units on platform from Q1 '20 to Q2 '22. You see a 17% CAGR over that time. And our move up market can be seen in the bottom row in the dark blue. As you can see, we are just getting started. The other, it is our fastest-growing segment. We are also growing very nicely in the other segments will spoke about our continued mission to bring in value to all our customers through AI and just through more innovation. At the top, I want to just point out the yellow bars. Community association units. It is important that we continue meeting our customers' needs in different property types. And Community Association is an example of that. Community Association is small limited in scope compared to residential units. And so the ARPU is generally lower, but we still see good success here. Our focus and investments, however, will be more focus on the residential units. This slide shows you just how much room we have in our ARPU. You see a wide spread between the customers buying the cell platform at the low end to the heavy use of value-added services at the high end. The customers at the high end are usually APM PLUS customers. This slide is what gets me most excited about our move up market. Our corporate customers adopt APM PLUS 6x more than the customers in the other segments. APM PLUS, as you have heard from our customers earlier today, has features that are very important for the corporate customers. They like the dedicated support the customizable workflow, the AI-enabled tools. And now we have a AppFolio Stack in the AppFolio Stack is a gateway to our point solution ecosystem. What APM PLUS gets us is 60% more ARPU than the core APM customers. So APM PLUS customers are generally 60% higher ARPU than core APM customers. And this difference in ARPU is more than the pricing differential between APM PLUS and APM Core. It is really the heavier usage of our value-added services. And so what this means is our APM PLUS customers are more deeply and better within our ecosystem. You saw earlier, we are just scratching the surface with the corporate segment. And with 6x more penetration of corporate customers in APM PLUS and 60% more ARPU in the APM PLUS customers, we have a long journey of growth ahead of us. Switching gears now. You heard from our customers earlier about the impact of the macroeconomic environment on the industry. We have high inflation, high interest rates. SMB is it to be the most at risk during a recession. But you heard from them, we also -- we are also in times of high occupancy and higher rent prices. And both of those factors are good for our property managers. And this is why the property management industry is resilient. This slide shows you how AppFolio is resilient. Our product is deeply embedded within the real estate life cycle. Our product drives efficiencies from the investors and owners to the property managers to the vendors that they work with and to the residents. Our product's ease of use, as you have heard from our customers and our ability to scale with our customers, make it compelling for them to switch to AppFolio especially in these times where there's a labor crunch. This slide is another view of our impact of our product on the real estate life cycle. This is a slide that is showing the revenue mix between our residents and the property managers and owners. This is a testament of the resiliency of AppFolio. Look at our balance sheet. We have a debt-free balance sheet with a healthy cash position. Okay. Now we talk about profitability. So I know you all want to know how much and when. But we are not getting into those details today. We will be talking about what we're doing and how we'll get there. profitability is very important for us as we continue our growth journey. We have taken steps, actively taken steps to reverse our negative free cash flow. We believe we will be able to reverse our negative free cash flow in the short term. We will continue taking steps to increase our free cash flow margin to a healthy level. But those -- but that journey will take a few years. The path to profitability is a company-wide initiative to be more lean and efficient. We will share some examples of what we've been doing and how we're thinking about it. And you'll hear a theme of process optimization and automation. Customer service, which is part of our [indiscernible] of revenue is no different. We're increasing the use of self-service and standardization to bring value to our customers quicker. We will continue scaling customer service. Sales and marketing. We are using technology and data-driven insights to drive higher-quality pipelines. We're also working to increase usage on our value-added services through in-app optimization so that we can increase ARPU without spending more on sales costs. You heard Will talk about his personal goal of increasing the rate of innovation. And you saw the list of new products that we are introducing. We will be increasing the rate of innovation. In G&A, we'll also be optimizing and scaling G&A. We started with our office footprint. In this hybrid environment where we're working remotely and in the office. We have taken this opportunity to rightsize our office footprint. We have made some of our offices available to be subleased. We're also optimizing our processes in finance, specifically. You saw last quarter that we released our financials 11 days earlier than before. The 11 days that we got back is really increasing the capacity of the finance team. I'll share some examples here of what we are doing. We will continue optimizing our process, our processes and automating to scale the company. I want to reiterate that getting to a healthy free cash flow margin is important to us in our journey through our growth. We started actively taking this journey of optimizing and scaling. And we believe we will be able to reverse our negative free cash flow margin in the short term. But the journey to a healthy free cash flow margin is multiyear Okay. Let's bring this all together. Long-term growth starts with keeping our existing customers happy. Listening to our customers is what we do well. We are investing in our platform and in our product to scale with our customers. We are providing our customers exceptional customer service. We are moving up market to accelerate landing new customers and adding new units to our platform. We're adding new property types, affordable units to win up market and to have that market product fit -- the product market fit. We are introducing new products and entering into adjacent markets, short-term rentals for now and growing ARPU while driving efficiencies for our customers. Underlying the growth strategy is a foundation of operational excellence and scale to drive through a healthy free cash flow margin. As you have seen, AppFolio is a resilient business in a resilient industry. The strategy that we walked you through is set up for us to have a long journey of growth ahead of us. On behalf of all AppFolio-ians, I want to thank you for the confidence you have in us and for being on this journey with us. Before I close, I want to give a shout out to the team that have put this event a success and made this event of success. Lori Barker and [indiscernible] from the Blueshirt Group, Kerry, Stephanie, Alina and Ryan Harris Suzi from our comms team. Thank you all.

Thank you, Fay Sien. I'd like to welcome the AppFolio management team back to the stage for question and answers. For those of you in the room, you can let us know when you have a question, and we'll come to you for the microphone so that everybody on the webcast can hear your questions. For those of you on the webcast, please type your questions in, and I'll be reading them out to the group. [Operator Instructions]. All right. Let's take the one from the in-person audience. And the first question comes from over there.

Curious, the average rev or units per customer has been trending a lot higher pretty consistently over the last 5 years. How much of that -- and we've had a lot of customers up here that have been talking about going from 3-digit number of units to well into the thousands. I guess how much of the revenue -- or sorry, unit per customer growth is being driven by your customers organically expanding the units covered versus maybe landing with larger customers than you have historically, if there's a way to break that out?

Well, thanks for the question. No, we currently don't break out the expansion from our customers. It is a healthy level between the expansion and the new units. But as you heard from our customers, they are expanding as well in this environment. Maybe Jason could ask you to share about what you have heard from our customers as they think about the expansion opportunities to have?

Yes. I think there's a mix happening there, driving the expansion of units per customer. I think you heard very much. This is a common commonly what we see, customers start at a certain level and then grow over time. That is certainly happening. Our expansion upmarket and targeting larger customers bringing on larger unit counts. And I think there's also an underlying trend when we brought in the CA business, CA customers have larger unit counts. That's how their economics were. And so I think those 3 -- those are the 3 factors driving that.