appf-20240630

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024.

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________.

Commission File Number 001-37468

AppFolio, Inc.

(Exact name of registrant as specified in its charter)

Delaware

26-0359894

(State of incorporation or organization)

(I.R.S. Employer Identification No.)

70 Castilian Drive

93117

Santa Barbara,

California

(Address of principal executive offices)

(Zip Code)

(805) 364-6093

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Class A common stock, $0.0001 par value	APPF	NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 19, 2024, the number of shares of the registrant’s Class A common stock outstanding was 23,008,417 and the number of shares of the registrant’s Class B common stock outstanding was 13,264,148.

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TABLE OF CONTENTS


						Page No.
Forward-Looking Statements						1
Part I. Financial Information						2
Item 1. Condensed Consolidated Financial Statements (Unaudited)						2
Condensed Consolidated Balance Sheets as of June 3 0 , 2024 and December 31, 2023						3
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30 , 2024 and 2023						4
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 3 0 , 2024 and 2023						5
Condensed Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended June 30, 202 4 and 20 23						6
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 202 4 and 20 2 3						8
Notes to Condensed Consolidated Unaudited Financial Statements						9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						16
Item 3. Quantitative and Qualitative Disclosures about Market Risk						22
Item 4. Controls and Procedures						23
Part II. Other Information						24
Item 1. Legal Proceedings						24
Item 1A. Risk Factors						24
Item 5. Other Information						24
Item 6. Exhibits						25
Signatures

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2024 (this "Quarterly Report"), contains forward-looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995 (the “PSLRA”), which statements involve substantial risks and uncertainties. The forward-looking statements made in this Quarterly Report are intended to qualify for the protection of the safe harbor provided by the PSLRA and are based primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, operating results, cash flows and/or prospects. Forward-looking statements include all statements that are not statements of historical fact. Forward-looking statements can also be identified by words such as “may,” “will,” “should,” “might,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” “future,” or “continue,” or the negative of these words or other similar terms or expressions. Examples of forward-looking statements include, among others, statements regarding changes in the competitive environment, responding to customer needs, research and product development plans, future products and services, growth in the size of our business and number of customers, strategic plans and objectives, business forecasts and plans, our future or assumed financial condition, results of operations and liquidity, trends affecting our business and industry, capital needs and financing plans, capital resource allocation plans, share repurchase plans, and commitments and contingencies, including with respect to the outcome of legal proceedings or regulatory matters. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors, including those risks, uncertainties and other factors described in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report and "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (our "Annual Report"), as well as in the other reports we file with the Securities and Exchange Commission (the "SEC"). You should read this Quarterly Report, and the other documents we file with the SEC, with the understanding that our actual future results may be materially different from the results expressed or implied by these forward-looking statements. As such, you should not rely upon forward-looking statements as predictions of future events. Any forward-looking statement made by us in this Quarterly Report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report to reflect events or circumstances after the date of this Quarterly Report or to reflect new information or the occurrence of unanticipated events, except as required by law.

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PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

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APPFOLIO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands)


	June 30, 2024		December 31, 2023
Assets
Current assets
Cash and cash equivalents	$	59,639	$	49,509
Investment securities—current	221,693		162,196
Accounts receivable, net	25,691		20,709
Prepaid expenses and other current assets	41,774		39,943
Total current assets	348,797		272,357

Property and equipment, net	26,700		28,362
Operating lease right-of-use assets	18,232		19,285
Capitalized software development costs, net	17,345		21,562
Goodwill	56,060		56,060


Other long-term assets	12,183		11,263
Total assets	$	479,317	$	408,889
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	1,256	$	1,141
Accrued employee expenses	31,962		35,567
Accrued expenses	16,423		21,723


Other current liabilities	13,708		11,335

Total current liabilities	63,349		69,766


Operating lease liabilities	39,447		41,114



Other liabilities	5,109		697
Total liabilities	107,905		111,577
Commitments and contingencies (Note 8)
Stockholders’ equity:

Class A common stock	2		2
Class B common stock	2		2
Additional paid-in capital	243,040		236,985
Accumulated other comprehensive Income (loss)	(184)		99
Treasury stock	(25,756)		(25,756)
Retained earnings	154,308		85,980
Total stockholders’ equity	371,412		297,312
Total liabilities and stockholders’ equity	$	479,317	$	408,889

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

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APPFOLIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue	$	197,375	$	147,075	$	384,805	$	283,175
Costs and operating expenses:
Cost of revenue (exclusive of depreciation and amortization)(1)	69,601		57,854		134,247		114,062
Sales and marketing(1)	27,300		27,002		51,755		56,400
Research and product development(1)	39,522		37,263		77,417		74,925
General and administrative(1)	20,254		18,819		41,386		50,510
Depreciation and amortization	4,670		6,816		9,882		14,487
Total costs and operating expenses	161,347		147,754		314,687		310,384
Income (loss) from operations	36,028		(679)		70,118		(27,209)
Other income (loss), net	—		(54)		—		(34)
Interest income, net	3,476		1,478		6,468		2,839
Income (loss) before provision for income taxes	39,504		745		76,586		(24,404)
Provision for income taxes	9,839		19,646		8,258		29,607
Net income (loss)	$	29,665	$	(18,901)	$	68,328	$	(54,011)

Net income (loss) per common share:
Basic	$	0.82	$	(0.53)	$	1.89	$	(1.52)
Diluted	$	0.81	$	(0.53)	$	1.86	$	(1.52)
Weighted average common shares outstanding:
Basic	36,241		35,565		36,164		35,505
Diluted	36,742		35,565		36,720		35,505

(1) Includes stock-based compensation expense as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Stock-based compensation expense included in costs and operating expenses:
Cost of revenue (exclusive of depreciation and amortization)	$	1,175	$	988	$	2,135	$	1,756
Sales and marketing	1,703		444		3,213		2,861
Research and product development	6,472		4,348		12,154		9,787
General and administrative	5,444		4,992		10,766		10,271
Total stock-based compensation expense	$	14,794	$	10,772	$	28,268	$	24,675

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

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APPFOLIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income (loss)	$	29,665	$	(18,901)	$	68,328	$	(54,011)
Other comprehensive income (loss):
Changes in unrealized (losses) gains on investment securities, net of tax	(69)		334		(283)		1,097
Comprehensive income (loss)	$	29,596	$	(18,567)	$	68,045	$	(52,914)

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

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APPFOLIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(UNAUDITED)

(in thousands)


									Accumulated
							Additional		Other
	Common Stock			Common Stock			Paid-in		Comprehensive		Treasury		Retained
	Class A			Class B			Capital		Income (Loss)		Stock		Earnings		Total
	Shares	Amount		Shares	Amount
Balance at December 31, 2023	21,749	$	2	14,116	$	2	$	236,985	$	99	$	(25,756)	$	85,980	$	297,312
Exercise of stock options	244	—		—	—		3,874		—		—		—		3,874
Stock-based compensation	—	—		—	—		13,646		—		—		—		13,646
Vesting of restricted stock units, net of shares withheld for taxes	89	—		—	—		(14,086)		—		—		—		(14,086)
Conversion of Class B common stock to Class A common stock	199	—		(199)	—		—		—		—		—		—
Other comprehensive loss	—	—		—	—		—		(214)		—		—		(214)
Net Income	—	—		—	—		—		—		—		38,663		38,663
Balance at March 31, 2024	22,281	$	2	13,917	$	2	$	240,419	$	(115)	$	(25,756)	$	124,643	$	339,195
Exercise of stock options	3	—		—	—		25		—		—		—		25
Stock based compensation	—	—		—	—		15,032		—		—		—		15,032
Vesting of restricted stock units, net of shares withheld for taxes	71	—		—	—		(12,436)		—		—		—		(12,436)
Conversion of Class B common stock to Class A common stock	644	—		(644)	—		—		—		—		—		—
Other comprehensive loss	—	—		—	—		—		(69)		—		—		(69)
Net Income	—	—		—	—		—		—		—		29,665		29,665
Balance at June 30, 2024	22,999	$	2	13,273	$	2	$	243,040	$	(184)	$	(25,756)	$	154,308	$	371,412

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

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									Accumulated
							Additional		Other
	Common Stock			Common Stock			Paid-in		Comprehensive		Treasury		Retained
	Class A			Class B			Capital		Income (Loss)		Stock		Earnings		Total
	Shares	Amount		Shares	Amount
Balance at December 31, 2022	20,569	$	2	14,746	$	2	$	209,704	$	(1,684)	$	(25,756)	$	83,278	$	265,546
Exercise of stock options	64	—		—	—		834		—		—		—		834
Stock-based compensation	—	—		—	—		14,075		—		—		—		14,075
Vesting of restricted stock units, net of shares withheld for taxes	79	—		—	—		(