AppFolio (APPF) and Veracyte (VCYT) Report
AppFolio (APPF) reported Monday night that revenue in Q2 2019 grew by 35% to $63.6 million and that EPS jumped 210% to $0.65. That EPS figure was boosted by a one-time tax benefit so don’t read too much into that big jump. There weren’t any big surprises in the quarter, which is fine by me. Property management customer count was up 12% (to 13,737), which drove a 19% increase in units under management (to 4.23 million units), which drove core solutions revenue up 27% to $21.6 million. In the Legal vertical, customer count was up 6% to 10,631.
The bigger part of revenue comes from Value+ services, which was up 36% to $39.1 million. And this is mostly what management talked about on the call (though, they reveal very little). Commentary focused on continuing adoption of electronic payments, tenant screening, insurance services, and then the new Value+ services, which include LISA, an AI leasing assistant, a new utility management service, and an investment management solution. As I said, no big surprises and the business continues to truck along. Shares were volatile after the report, but just as after Q1 2019 they bounced back later in the day. Keep Holding. HOLD.
Veracyte (VCYT) reported last night and beat on both the top and bottom line. Revenue was up 32.5% to $30.1 million while adjusted EPS of -$0.05 beat by $0.05. Genomic test volume was up 26% to 9,663, full-year guidance was raised to a range of $119 million to $122 million (from $117 million to $121 million) and the forecast for cash used in operating activities was cut by $2 million. Management reiterated its intent to be cash flow breakeven by the end of the year, which is a major milestone.
The Afirma Genomic Sequencing Classifier (GSC) for diagnosing thyroid cancer grew test volume by 19%, to almost 8,800 tests. The Percepta lung cancer screening and diagnostic test (the first genomic test of this kind to achieve Medicare coverage) was introduced in 2018 and grew revenue by 160%, to over $1 million. And the Envisia IPF test, which began generating revenue in Q1, is doing well with test volume and ordering institutions each up over 100%, to 130 tests and 76 sites, respectively. Management sees 500 to 1,000 Envisia tests ordered this year.
Management went through a ton of data, which I won’t repeat, but which essentially shows it’s on the right track to advance its pipeline, which is now completely being developed on its proprietary RNA whole-transcriptome sequencing platform. There was no meaningful update on the potentially huge nasal swab test for lung cancer being developed with J&J. Management said it will have early data and information on where this test fits into clinics by the end of the year.
Big picture, things look good and I’m keeping Veracyte at Buy. The stock didn’t have much of a reaction and is down as of this afternoon, but that’s not a stock specific thing as the broad market is selling off. I don’t think there’s a huge rush to buy this second, and if you’re on the fence because of the market’s action just sit tight—you’ll be getting another brief update on the stock this Friday with updated guidance. BUY.