appf-20260331

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 March 31, 2026.

☐ 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 April 16, 2026, the number of shares of the registrant’s Class A common stock outstanding was 24,028,908 and the number of shares of the registrant’s Class B common stock outstanding was 11,329,625.

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 March 31, 202 6 and December 31, 20 25						2
Condensed Consolidated Statements of Operations for the Three Months Ended March 31 , 202 6 and 20 2 5						3
Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 202 6 and 20 25						4
Condensed Consolidated Statements of Stockholders' Equity for the Three Months Ended March 31, 2026 and 20 25						5
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 and 20 25						6
Notes to Condensed Consolidated Unaudited Financial Statements						7
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 2. Unregistered Sales of Equity Securities and Use of Proceeds						24
Item 5. Other Information						24
Item 6. Exhibits						25
Signatures

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2026 (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, the benefits or performance of our strategic investments, 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, 2025 (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.

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

APPFOLIO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands)


	March 31, 2026		December 31, 2025
Assets
Current assets
Cash and cash equivalents	$	147,412	$	106,967
Investment securities—current	4,241		144,256
Accounts receivable, net	43,966		36,873
Prepaid expenses and other current assets	59,323		65,218
Total current assets	254,942		353,314
Property and equipment, net	22,449		23,228
Operating lease right-of-use assets	15,364		15,924
Capitalized software development costs, net	11,416		11,324
Goodwill	96,410		96,410
Intangible assets, net	36,269		38,826
Deferred income taxes	50,795		58,823
Long-term investments	77,668		77,033
Other long-term assets	15,247		14,085
Total assets	$	580,560	$	688,967
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	3,740	$	4,123
Accrued employee expenses	25,163		59,774
Accrued expenses	21,436		20,829
Other current liabilities	22,018		22,121
Total current liabilities	72,357		106,847
Operating lease liabilities	31,981		33,287
Other liabilities	5,994		6,254
Total liabilities	110,332		146,388
Commitments and contingencies (Note 6)
Stockholders’ equity:
Class A common stock	3		3
Class B common stock	1		1
Additional paid-in capital	295,114		284,054
Accumulated other comprehensive (loss) Income	(12)		30
Treasury stock	(298,273)		(172,480)
Retained earnings	473,395		430,971
Total stockholders’ equity	470,228		542,579
Total liabilities and stockholders’ equity	$	580,560	$	688,967

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

APPFOLIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share amounts)


	Three Months Ended March 31,
	2026		2025
Revenue	$	262,214	$	217,702
Costs and operating expenses:
Cost of revenue (exclusive of depreciation and amortization)(1)	94,975		79,498
Sales and marketing(1)	37,501		31,057
Research and product development(1)	49,629		43,758
General and administrative(1)	24,341		23,351
Depreciation and amortization	5,020		6,255
Total costs and operating expenses	211,466		183,919
Income from operations	50,748		33,783
Other income, net	569		56
Interest income, net	1,784		2,953
Income before provision for income taxes	53,101		36,792
Provision for income taxes	10,677		5,409
Net income	$	42,424	$	31,383

Net income per common share:
Basic	$	1.19	$	0.86
Diluted	$	1.18	$	0.86
Weighted average common shares outstanding:
Basic	35,699		36,302
Diluted	35,812		36,648

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


	Three Months Ended March 31,
	2026		2025
Stock-based compensation expense included in costs and operating expenses:
Cost of revenue (exclusive of depreciation and amortization)	$	1,088	$	1,287
Sales and marketing	3,340		2,848
Research and product development	7,882		6,931
General and administrative	5,679		5,305
Total stock-based compensation expense	$	17,989	$	16,371

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

APPFOLIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(in thousands)


	Three Months Ended March 31,
	2026		2025
Net income	$	42,424	$	31,383
Other comprehensive loss:
Changes in unrealized losses on investment securities, net of tax	(42)		(207)
Comprehensive income	$	42,382	$	31,176

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

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, 2025	24,335	$	3	11,655	$	1	$	284,054	$	30	$	(172,480)	$	430,971	$	542,579
Exercise of stock options and issuance of common stock under the Employee Stock Purchase Plan	7	—		—	—		998		—		—		—		998
Stock-based compensation	—	—		—	—		18,219		—		—		—		18,219
Vesting of restricted stock units, net of shares withheld for taxes	65	—		—	—		(8,157)		—		—		—		(8,157)
Conversion of Class B common stock to Class A common stock	325	—		(325)	—		—		—		—		—		—
Repurchase of common stock	(703)	—		—	—		—		—		(125,793)		—		(125,793)
Other comprehensive loss	—	—		—	—		—		(42)		—		—		(42)
Net Income	—	—		—	—		—		—		—		42,424		42,424
Balance at March 31, 2026	24,029	$	3	11,330	$	1	$	295,114	$	(12)	$	(298,273)	$	473,395	$	470,228


									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, 2024	23,241	$	2	13,163	$	2	$	254,821	$	173	$	(25,756)	$	290,048	$	519,290
Exercise of stock options	1	—		—	—		11		—		—		—		11
Stock-based compensation	—	—		—	—		16,483		—		—		—		16,483
Vesting of restricted stock units, net of shares withheld for taxes	60	—		—	—		(9,078)		—		—		—		(9,078)
Conversion of Class B common stock to Class A common stock	182	—		(182)	—		—		—		—		—		—
Repurchase on common stock	(445)	—		—	—		—		—		(95,763)		—		(95,763)
Other comprehensive loss	—	—		—	—		—		(207)		—		—		(207)
Net Income	—	—		—	—		—		—		—		31,383		31,383
Balance at March 31, 2025	23,039	$	2	12,981	$	2	$	262,237	$	(34)	$	(121,519)	$	321,431	$	462,119

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


APPFOLIO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)

	Three Months Ended March 31,
	2026		2025
Cash from operating activities
Net income	$	42,424	$	31,383
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	5,020		6,255
Amortization of operating lease right-of-use assets	560		501
Amortization of costs capitalized to obtain revenue contracts	3,168		2,720
Deferred income taxes	8,028		(5,541)
Stock-based compensation, including as amortized	17,989		16,371
Other	(523)		(917)
Changes in operating assets and liabilities:
Accounts receivable	(7,443)		(3,116)
Prepaid expenses and other assets	(8,206)		(5,460)
Accounts payable	(382)		2,546
Operating lease liabilities	(1,180)		(1,051)
Accrued expenses and other liabilities	(25,157)		(5,226)
Net cash provided by operating activities	34,298		38,465
Cash from investing activities
Purchases of available-for-sale investments	(42,663)		(62,302)
Proceeds from sales of available-for-sale investments	140,154		102,718
Proceeds from maturities of available-for-sale investments	42,360		42,150
Purchases of property and equipment	(231)		(230)
Capitalization of software development costs	(1,304)		(636)

Cash paid in business acquisition, net of cash acquired	—		(906)
Net cash provided by investing activities	138,316		80,794
Cash from financing activities
Proceeds from stock option exercises and the issuance of common stock under the Employee Stock Purchase Plan	998		11
Tax withholding for net share settlement	(8,157)		(9,078)
Purchase of common stock	(125,010)		(95,763)
Net cash used in financing activities	(132,169)		(104,830)
Net increase in cash, cash equivalents and restricted cash	40,445		14,429
Cash, cash equivalents and restricted cash
Beginning of period	107,217		42,754
End of period	$	147,662	$	57,183
Cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents	$	147,412	$	56,933
Restricted cash included in prepaid expenses and other current assets	250		250
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows	$	147,662	$	57,183
Supplemental disclosure of cash flow information

Cash paid for amounts included in the measurement of lease liabilities included in operating cash flows	$	1,666	$	1,558

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

APPFOLIO, INC.

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

1. Nature of Business

AppFolio, Inc. ("we," "us" or "our") is a technology leader powering the future of the real estate industry. We provide a cloud-based platform on which our customers operate their businesses. Our services enable our customers to connect communities, increase operational efficiency, deliver exceptional customer experiences, and improve financial and operational performance.

2. Summary of Significant Accounting Policies

Basis of Presentation and Significant Accounting Policies

The accompanying unaudited Condensed Consolidated Financial Statements were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these Condensed Consolidated Financial Statements should be read in conjunction with our audited consolidated financial statements and the related notes included in our Annual Report, which was filed with the SEC on February 5, 2026. The year-end condensed balance sheet was derived from our audited consolidated financial statements. Our unaudited interim Condensed Consolidated Financial Statements include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair statement of our Condensed Consolidated Financial Statements. The operating results for the three months ended March 31, 2026 are not necessarily indicative of the results expected for the full year ending December 31, 2026.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue, expenses, other income, and provision for income taxes during the reporting period. Assets and liabilities which are subject to judgment and use of estimates include the fair value of financial instruments, the fair value of privately-held strategic investments, useful lives of property and equipment and intangible assets, capitalized software development costs, incremental borrowing rate applied in lease accounting, the period of benefit associated with deferred costs, stock-based compensation, income taxes, and contingencies. Actual results could differ from those estimates and any such differences may have a material impact on our Consolidated Financial Statements.

Segment Information

Our chief operating decision maker ("CODM"), the Chief Executive Officer, allocates resources and assesses financial performance based upon discrete financial information at the consolidated level. There are no segment managers who are held accountable by our CODM, or anyone else, for operations, operating results and planning for levels or components below the consolidated unit level. Accordingly, we have determined that we operate as a single operating and reportable segment.

Our CODM uses consolidated net income (loss) as the sole measure of segment profit or loss. Significant segment expenses include cost of revenue (excluding depreciation and amortization), sales and marketing, research and product development, general and administrative expenses, and depreciation and amortization. For expenses incurred during the three months ended March 31, 2026 and 2025, refer to our Condensed Consolidated Statements of Operations. Stock-based compensation expense is also recognized as a significant segment expense. Details regarding this expense for the three months ended March 31, 2026 and 2025 is included in the parenthetical note to the respective Condensed Consolidated Statements of Operations.

Recent Accounting Pronouncements Adopted

In July 2025, the Financial Accounting Standards Board ("FASB") issued ASU 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets, which amends ASC 326-202 to provide a practical expedient (for all entities) and an accounting policy election (for all entities, other than public business entities, that elect the practical expedient) related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606. The guidance will be applied on a prospective basis and is effective for calendar year-end public business entities in the 2026 annual period and its interim periods, with early adoption permitted. We adopted the standard from January 1, 2026 prospectively. The adoption of the standard has no material impact on our financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In November 2024, FASB issued ASU 2024-03, Disaggregation of Income Statement Expense. The new standard requires additional disclosures about specific types of expenses included in the expense captions presented on the face of income statements as well as disclosures about selling expenses. The guidance applies prospectively with the option to apply the standard retrospectively and is effective for calendar year-end public business entities in the 2027 annual period and in 2028 for interim periods with early adoption permitted. We are currently evaluating the impact of ASU 2024-03 on our Consolidated Financial Statements.

In September 2025, the FASB issued ASU 2025-06, Targeted Improvements to the Accounting for Internal-Use Software, to modernize the accounting guidance for the costs to develop software for internal use. The new guidance amends the existing standard that refers to various stages of a software development project to align better with current software development methods, such as agile programming. The new guidance will be effective for calendar year-end public business entities in the 2028 annual period. The guidance can be applied on a fully prospective basis, a modified basis for in-process projects, or a full retrospective basis. We are currently evaluating the impact of this ASU on our Consolidated Financial Statements.

3. Revenue and Deferred Costs

The following table presents our revenue categories for the three months ended March 31, 2026 and 2025 (in thousands):


	Three Months Ended March 31,
	2026		2025
Subscription Services	$	58,222	$	49,513
Value Added Services	201,363		164,706
Other	2,629		3,483
Total revenue	$	262,214	$	217,702

Our revenue is generated primarily from customers in the United States.

Deferred Costs

Deferred costs were $23.8 million and $22.8 million as of March 31, 2026 and December 31, 2025, respectively, of which $11.8 million and $11.2 million, respectively, are included in Prepaid expenses and other current assets and $12.0 million and $11.6 million, respectively, are included in Other long-term assets in the accompanying Condensed Consolidated Balance Sheets. Amortization expense for deferred costs was $3.2 million, and $2.7 million for three months ended March 31, 2026 and 2025, respectively. For the three months ended March 31, 2026 and 2025, no impairments were identified in relation to the costs capitalized for the periods presented.

Remaining Performance Obligations

Transaction price allocated to remaining performance obligations (“RPO”) represents contracted revenue that has not been recognized, which includes deferred revenue and non-cancelable amounts that will be invoiced and recognized as revenue in future periods. RPO does not include revenue related to performance obligations that are part of a contract with an original expected duration of one year or less or related to usage-based Value Added Services that are billed in arrears.

As of March 31, 2026, the total non-cancelable RPO under our contracts with customers was $103.6 million, and we expect to recognize revenue on approximately 40.3% of these RPO over the following 12 months, with the balance to be recognized thereafter. During the three months ended March 31, 2026, we recognized revenue of $8.9 million, that was included in the RPO at the beginning of the period presented.

4. Investment Securities and Fair Value Measurements

Investment Securities

Investment securities classified as available-for-sale consisted of the following as of March 31, 2026 and December 31, 2025 (in thousands):


	March 31, 2026
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. government and agency securities	4,242		—		(1)		4,241
Total available-for-sale investment securities	$	4,242	$	—	$	(1)	$	4,241


	December 31, 2025
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. government and agency securities	144,216		40		—		144,256
Total available-for-sale investment securities	$	144,216	$	40	$	—	$	144,256

As of March 31, 2026, for available-for-sale debt securities in an unrealized loss position, the Company evaluated whether any portion of the decline in fair value below amortized cost was due to credit losses. Based on this evaluation, and considering that it is more likely than not that the Company will hold the securities until maturity or recovery of the cost basis, no allowance for credit losses was recorded for available-for-sale investment securities as of March 31, 2026 or December 31, 2025.

The fair values of available-for-sale investment securities, by remaining contractual maturity, are as follows (in thousands):


	March 31, 2026				December 31, 2025
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	4,242	$	4,241	$	144,216	$	144,256

Total available-for-sale investment securities	$	4,242	$	4,241	$	144,216	$	144,256

During the three months ended March 31, 2026 and 2025, we had sales and maturities of investment securities, as follows (in thousands):


	Three Months Ended March 31, 2026
	Gross Realized Gains		Gross Realized Losses		Gross Proceeds from Sales		Gross Proceeds from Maturities
U.S. government and agency securities	$	—	$	(61)	$	140,154	$	42,360
Total	$	—	$	(61)	$	140,154	$	42,360


	Three Months Ended March 31, 2025
	Gross Realized Gains		Gross Realized Losses		Gross Proceeds from Sales		Gross Proceeds from Maturities
U.S. government and agency securities	61		(5)		102,718		42,150
Total	$	61	$	(5)	$	102,718	$	42,150

The tables above do not include our strategic investments of non-marketable equity investments in privately-held companies, which are recorded in long-term investments in our Condensed Consolidated Balance Sheets. These strategic investments consist of the following as of March 31, 2026 and December 31, 2025 (in thousands):


	March 31, 2026		December 31, 2025
Second Nature	$	75,000	$	75,000
Others	2,668		2,033
Total long-term investments	$	77,668	$	77,033

The cumulative amount of upward adjustments recognized on our strategic investments of non-marketable equity investments was $0.6 million, all of which was recorded during the first quarter of 2026 for our investment in a privately held technology company. There is no cumulative amount of downward adjustment as of March 31, 2026.

There were no realized or unrealized gains or losses from remeasurement of investments in equity securities under the measurement alternative for the three months ended March 31, 2025.

Fair Value Measurements

Recurring Fair Value Measurements

The following tables present our financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2026 and December 31, 2025 by level within the fair value hierarchy (in thousands):


	March 31, 2026
	Level 1		Level 2		Total Fair Value
Cash equivalents:
Money market funds	$	108,701	$	—	$	108,701
Available-for-sale investment securities:
U.S. government and agency securities	—		4,241		4,241
Total	$	108,701	$	4,241	$	112,942


	December 31, 2025
	Level 1		Level 2		Total Fair Value
Cash equivalents:
Money market funds	$	89,365	$	—	$	89,365
Available-for-sale investment securities:
U.S. government and agency securities	—		144,256		144,256
Total	$	89,365	$	144,256	$	233,621

The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate their fair value because of the short maturity of these items.

Fair value for our Level 1 investment securities is based on market prices for identical assets. Our Level 2 securities were priced by a pricing vendor. The pricing vendor utilizes the most recent observable market information in pricing these securities or, if specific prices are not available for these securities, other observable inputs like market transactions involving comparable securities are used.

Strategic Investments Measured and Recorded at Fair Value on a Non-Recurring Basis

Strategic investments primarily include equity investments in privately-held companies, which do not have a readily determinable fair value. Strategic investments are classified as Level 3 in the fair value hierarchy, as their nonrecurring fair value measurements may include observable and unobservable inputs. As of March 31, 2026 and December 31, 2025, the balance of strategic investments was $77.7 million and $77.0 million, respectively. We recognized a net unrealized gain of $0.6 million in connection with our investment in a privately held technology company in Other income, net in our Condensed Consolidated Statements of Operations for the three months ended March 31, 2026. We did not recognize any net unrealized gain or loss for our strategic investments for the three months ended March 31, 2025.

5. Other Balance Sheet Components

Prepaid expenses and other current assets

Prepaid expenses and other current assets consisted of the following (in thousands):


	March 31, 2026		December 31, 2025
Income tax receivable(1)	$	17,365	$	27,133
Prepaid expenses	24,151		15,707
Deferred commissions(2)	11,784		11,166
Deposits for insurance services(3)	4,545		7,765
Other	1,478		3,447
Total Prepaid expenses and other current assets	$	59,323	$	65,218

(1)For additional information on income tax, refer to Note 9, Income Taxes.

(2)For additional information on deferred commissions, refer to Deferred Costs in Note 3, Revenue and Deferred Costs.

(3)For additional information on deposits held with a third party related to requirements to maintain collateral for insurance services, refer to "Legal Liability to Landlord Insurance" in Note 6, Commitments and Contingencies.

Accrued Employee Expenses

Accrued employee expenses consisted of the following (in thousands):


	March 31, 2026		December 31, 2025
Accrued bonuses(1)	$	7,985	$	43,298
Accrued payroll and other	17,178		16,476
Total accrued employee expenses	$	25,163	$	59,774

(1)Accrued bonuses decreased significantly as of March 31, 2026, due to the payment of 2025 annual bonuses in the first quarter of 2026.

Other Current Liabilities

Other current liabilities consisted of the following (in thousands):


	March 31, 2026		December 31, 2025
Unearned premium liabilities(1)	$	7,422	$	6,662
Insurance reserves(2)	7,482		6,630
Operating lease liabilities-current	4,998		4,873
Other	2,116		3,956
Total other current liabilities	$	22,018	$	22,121

(1)Unearned premium liabilities are the refundable portion of commissions received in connection with the sale of renters insurance policies to residents through AppFolio Insurance Services, Inc., our wholly owned subsidiary. In the event a resident cancels their renters insurance policy prior to the end of such policy, we may be required to refund a pro rata portion of the commission paid on such policy.

(2)For additional information on insurance reserves, refer to "Legal Liability to Landlord Insurance" in Note 6, Commitments and Contingencies.

6. Commitments and Contingencies

Legal Liability to Landlord Insurance

We have a wholly owned subsidiary, Terra Mar Insurance Company, Inc., which was established in connection with reinsuring liability to landlord insurance policies offered to our customers by our third-party service provider. We assume a 100% quota share of the liability to landlord insurance policies placed with our customers by our third-party service provider. We accrue for reported claims, and include an estimate of losses incurred but not reported by our property manager customers, in cost of revenue because we bear the risk related to all such claims. Our estimated liability for reported claims and incurred but not reported claims as of March 31, 2026 and December 31, 2025 was $7.5 million and $6.6 million, respectively, and is included in Other current liabilities on our Condensed Consolidated Balance Sheets.

Included in Prepaid expenses and other current assets as of March 31, 2026 and December 31, 2025 are $4.5 million and $7.8 million, respectively, of deposits held with a third party related to requirements to maintain collateral for this insurance service.

Commitments

In January 2026, we entered into an agreement with vendors for certain cloud computing services. We are committed to spend a minimum of at least $219.3 million through 2031, of which $36.2 million is short-term. We may pay more than the minimum purchase commitment to our cloud-computing vendors based on usage.

Credit Facility

On September 30, 2025, we entered into a credit agreement by and among AppFolio, Inc., certain of our subsidiaries as guarantors, the lender(s) party thereto, and PNC Bank, National Association, in its capacity as Administrative Agent, Swingline Loan Lender and Issuing Lender (the “Credit Facility”).

The Credit Facility provides for a $150.0 million senior secured revolving credit facility, including sublimits of $25.0 million for letters of credit and $25.0 million for swingline loans, and is scheduled to mature on September 30, 2030. We may, subject to customary conditions and consent of the applicable lenders, increase the revolving commitment or incur term loans thereunder (capped at amounts specified in the Credit Facility) or extend the maturity date of the Credit Facility.

Borrowings under the Credit Facility bear interest at variable rates based, at our option, on Term Secured Overnight Financing Rate Data ("SOFR"), Daily Simple SOFR, or a Base Rate, plus an applicable margin (ranging from 125.0 to 200.00 basis points in the case of Term SOFR and Daily Simple SOFR and 25.0 to 100.00 basis points in the case of the Base Rate) determined by our Consolidated Net Leverage Ratio, all as defined in the Credit Facility. We also pay a quarterly commitment fee (ranging from 15.0 to 30.0 basis points depending on our Consolidated Net Leverage Ratio) on unused amounts, as well as customary letter of credit and agency fees.

The obligations under the Credit Facility are guaranteed by certain of our subsidiaries and secured by a first-priority security interest in substantially all of our and our guarantors' personal property, subject to customary exclusions and exceptions. The Credit Facility includes customary representations, warranties, and affirmative and negative covenants, including a financial covenant requiring maintenance of a Consolidated Net Leverage Ratio. The negative covenants include, among other things, restrictions on our and our subsidiaries' ability to incur indebtedness and liens, make investments, pay dividends or distributions or repurchase equity interests, merge, consolidate or otherwise dispose of assets, enter into transactions with affiliates, and prepay, redeem, purchase or otherwise retire junior indebtedness, all subject to certain exceptions.

As of March 31, 2026, there were no outstanding borrowings under the Credit Facility, and we were in compliance with the covenants under the Credit Facility.

Legal Proceedings

From time to time, we are involved in various investigative inquiries, legal proceedings and disputes arising from or related to matters incident to the ordinary course of our business activities, including actions with respect to intellectual property, employment, labor, regulatory and contractual matters. Although the ultimate outcome of such investigative inquiries, legal proceedings and other disputes cannot be predicted with certainty, we do not believe that any such investigative inquires, legal proceedings and other disputes, if determined adversely to us, would, individually or taken together, have a material adverse effect on our business, operating results, financial condition or cash flows.

Indemnification

In the ordinary course of business, we may provide indemnification of varying scope and terms to customers, business partners, investors, directors, officers, and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of any applicable agreements, intellectual property infringement claims made by third parties, and other liabilities relating to or arising from our services or our acts or omissions. These indemnification provisions may survive termination of the underlying agreement and the maximum potential amount of future payments we could be required to make under these indemnification provisions may not be subject to maximum loss clauses and is indeterminable. We have not incurred any costs as a result of such indemnification obligations and have not recorded any liabilities related to such obligations in the Condensed Consolidated Financial Statements.

7. Share Repurchase Program

On February 20, 2019, our Board of Directors (our "Board") authorized a $100.0 million share repurchase program (the "2019 Stock Repurchase Program") relating to our outstanding shares of Class A common stock. Under the 2019 Stock Repurchase Program, we were authorized to repurchase shares of our Class A common stock from time to time in open market purchases or privately negotiated transactions. The 2019 Stock Repurchase Program did not obligate us to repurchase any minimum dollar amount or number of shares, did not have an expiration date, and it could have been modified, suspended or terminated at any time and for any reason.

During the first quarter of 2025, we repurchased 445,311 shares of our Class A common stock through open market repurchases under the 2019 Stock Repurchase Program at an average purchase price of $215.05 per share, inclusive of broker commissions, for an aggregate repurchase price of $95.8 million which was recorded as a reduction to stockholders' equity. As a result of the repurchases, we substantially exhausted the remaining shares available for purchase under the 2019 Stock Repurchase Program, and it has terminated.

On April 23, 2025, our Board authorized a $300.0 million share repurchase program (the "2025 Stock Repurchase Program") relating to our outstanding shares of Class A common stock. Under the 2025 Stock Repurchase Program, we are authorized to repurchase shares of our Class A common stock from time to time in open market purchases or privately negotiated transactions. The 2025 Stock Repurchase Program does not obligate us to repurchase any minimum dollar amount or number of shares, has no expiration date, and can be modified, suspended or terminated at any time and for any reason. The timing and actual number of shares repurchased will depend on a variety of factors, including price, corporate and legal requirements, market conditions and other factors. During the second quarter of 2025, we repurchased 243,987 shares of our Class A common stock through open market repurchases under the 2025 Stock Repurchase Program at an average purchase price of $204.77 per share, inclusive of broker commissions, for an aggregate repurchase price of $50.0 million which was recorded as a reduction to stockholders' equity. We did not repurchase any shares of our Class A common stock during the third or fourth quarter of 2025.

During the first quarter of 2026, we repurchased 702,502 shares of our Class A common stock through open market repurchases under the 2025 Stock Repurchase Program at an average purchase price of $177.95 per share, inclusive of broker commissions, for an aggregate repurchase price of $125.0 million, which was recorded as a reduction to stockholders' equity. As of March 31, 2026, the amount remaining available for repurchases under the 2025 Stock Repurchase Program was $125.0 million.

8. Stock-Based Compensation

Restricted Stock Units

A summary of activity in connection with our restricted stock units ("RSUs") for the three months ended March 31, 2026, is as follows (number of shares in thousands):


	Number of Shares	Weighted Average Grant Date Fair Value per Share
Unvested as of December 31, 2025	627	$	200.81
Granted	402	201.66
Vested	(108)	180.60
Forfeited	(13)	203.14
Unvested as of March 31, 2026	908	$	203.45

Unvested RSUs as of March 31, 2026 were composed of 0.8 million RSUs with only service conditions and 0.1 million performance share units ("PSUs") with both service conditions and performance conditions. RSUs granted with only service conditions generally vest over a four-year period, assuming continued employment through the applicable vesting date. The number of PSUs granted, as included in the above table, assumes achievement of the performance metrics at 100% of the performance target. The unvested PSUs as of March 31, 2026, are subject to vesting based on the achievement of pre-established performance metrics for the year ending December 31, 2026 and will vest over a three year period, assuming continued employment through each applicable vesting date. The actual number of shares to be granted at the end of the performance period will range from 0% to 150% of the target number of shares depending on achievement relative to the performance metrics over the applicable period; however, performance-based compensation expense is included in calculating achievement of the performance metrics, resulting in an effective maximum payout of approximately 135% of target.

We recognized stock-based compensation expense for the RSUs and PSUs of $17.7 million and $16.0 million for the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026, the total estimated remaining stock-based compensation expense for the aforementioned RSUs and PSUs was $148.3 million, which is expected to be recognized over a weighted average period of 2.7 years.

9. Income Taxes

We calculate our provision for income taxes on a quarterly basis by applying an estimated annual effective tax rate to income (loss) from operations and by calculating the tax effect of discrete items recognized during the quarter.

For the three months ended March 31, 2026, we recorded income tax expense of $10.7 million, representing an effective tax rate of 20.1%. Our effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to research and development tax credits, partially offset by state income taxes and non-deductible officers' compensation. For the three months ended March 31, 2025, our effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to excess tax benefits from stock-based compensation and research & development tax credits, partially offset by state income taxes and non-deductible officers' compensation.

We assess our ability to realize our deferred tax assets on a quarterly basis and we establish a valuation allowance if it is more-likely-than-not that some portion of deferred tax assets will not be realized. We weigh all available positive and negative evidence, including our earnings history and results of recent operations, scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies. During the three months ended December 31, 2024, we assessed all available evidence and determined that there was sufficient positive evidence to overcome the negative evidence, including our past and current financial results, growth demonstrated in our top-line performance, as well as projected profitability. Accordingly, we determined it is more likely than not that the deferred tax assets will be realized and we released our valuation allowance at December 31, 2024.

10. Net Income Per Share

Net income per common share was the same for shares of our Class A and Class B common stock because they are entitled to the same liquidation and dividend rights and are therefore combined in the table below. The following table sets forth the computation of basic and diluted net income per common share (in thousands):


	Three Months Ended March 31,
	2026		2025
Basic net income per share:
Numerator


Net income attributable to common stockholders	$	42,424	$	31,383
Denominator


Weighted average common shares outstanding; basic	35,699		36,302
Net income per common share; basic	$	1.19	$	0.86
Diluted net income per share:
Numerator
Net income attributable to common stockholders	$	42,424	$	31,383
Denominator
Weighted average common shares outstanding; basic	35,699		36,302
Add: Weighted average dilutive options outstanding	22		39
Add: Weighted average dilutive restricted stock units outstanding	91		307
Weighted average common shares outstanding; diluted	35,812		36,648
Net income per common share; diluted	$	1.18	$	0.86

Potentially dilutive securities that are not included in the calculation of diluted net income per share because doing so would be antidilutive are as follows (in thousands):


	Three Months Ended March 31,
	2026	2025


Restricted stock units	385	45
Total potentially dilutive securities	385	45

11. Subsequent Event

In April 2026, we purchased a minority, non-controlling equity interest in a private company, for $10.0 million, paid with cash on hand.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition, results of operations and liquidity should be read together with our Condensed Consolidated Financial Statements and the related notes included elsewhere in this Quarterly Report and in our Annual Report.

Overview

We are a technology leader powering the future of the real estate industry. We provide a cloud-based platform on which our customers operate their businesses. We help our customers navigate an increasingly interconnected and growing network of stakeholders in their business ecosystems, including property managers, property investors, potential residents, residents, and vendors. We also provide key functionality related to critical transactions across the real estate lifecycle, including screening potential residents, sending and receiving payments, and providing insurance-related risk mitigation services. Our services enable our customers to connect communities, increase operational efficiency, deliver exceptional customer experiences, and improve financial and operational performance.

Financial Highlights for the First Quarter of 2026

•Revenue grew 20% year-over-year to $262.2 million.

•Total property management units under management grew 8% year-over-year to 9.5 million.

•GAAP operating income was $50.7 million, or 19.4% of revenue, compared to GAAP operating income of $33.8 million, or 15.5% of revenue in Q1 2025.

•Non-GAAP operating income was $71.5 million, or 27.3% of revenue, compared to non-GAAP operating income of $53.0 million, or 24.3% of revenue in Q1 2025.

•Net cash provided by operating activities was $34.3 million, or 13.1% of revenue, compared to $38.5 million, or 17.7% of revenue in Q1 2025.

•Repurchased 703 thousand shares of the Company's Class A common stock for $125 million.

Key Business Metric

Property management units under management. We believe that our ability to increase our number of property management units under management is an indicator of our market penetration, growth, and potential future business opportunities. We define property management units under management as active or committed units under management at the period end date. We had 9.5 million and 8.8 million property management units under management as of March 31, 2026 and 2025, respectively.

Key Components of Results of Operations

Revenue

Our Subscription Services and certain of our Value Added Services are offered on a subscription basis. The subscription fees for our services vary by property type and are designed to scale with the size of our customers’ businesses. We recognize revenue for subscription-based services on a straight-line basis over the contract term beginning on the date that our service is made available. We generally invoice monthly or, to a lesser extent, annually in advance of a subscription period.

We also offer certain Value Added Services, which are not covered by our subscription fees, on a per-use basis. Usage-based fees are charged either as a percentage of the transaction amount (e.g., for certain of our electronic payment services) or on a flat fee per transaction basis generally with no minimum usage commitments (e.g., for our tenant screening and risk mitigation services). We recognize revenue for usage-based services in the period the service is rendered. Our payments services fees are recorded gross of any interchange and payment processing related fees. We generally invoice our usage-based services on a monthly basis or collect the fee at the time of service. A significant majority of our Value Added Services revenue comes from the use of our electronic payment services, tenant screening services, and risk mitigation services.

Other revenue includes fees from one-time services related to the implementation of our software solutions and other recurring or one-time fees related to our customers who are not otherwise using our Subscription Services. This includes legacy customers of businesses we have acquired where the customers haven't migrated to our Subscription Services. The fees for implementation and data migration services are billed upon signing our core subscription contract and are recognized as revenue in the period the service is rendered. Other services are billed when the services rendered are completed and delivered to the customer or billed in

SEC Form 10-Q filed by AppFolio Inc.