appf-20220331

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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 March 31, 2022.

☐ 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.)

50 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 and posted 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 and post 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 May 2, 2022, the number of shares of the registrant’s Class A common stock outstanding was 20,063,547 and the number of shares of the registrant’s Class B common stock outstanding was 14,836,256.

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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 March 31, 2022 and December 31, 2021						3
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021						4
Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three Months Ended March 31, 2022 and 2021						5
Condensed Consolidated Statements of Stockholders' Equity for the Three Months Ended March 31, 2022 and 2021						6
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 21, 2022 and 2021						7
Notes to Condensed Consolidated Unaudited Financial Statements						9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						19
Item 3. Qualitative and Quantitative Disclosure about Market Risk						24
Item 4. Controls and Procedures						25
Part II. Other Information						26
Item 1. Legal Proceedings						26
Item 1A. Risk Factors						26
Item 6. Exhibits						26
Signatures

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2022 (this "Quarterly Report"), contains forward-looking statements within the meaning of federal securities laws, which statements involve substantial risks and uncertainties. The forward-looking statements made in this Quarterly Report 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, and prospects and relate only to events as of the date on which the statements are made. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “might,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. 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. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled "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, 2021 (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. Examples of forward-looking statements include, among others, statements made 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. 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, except par values)


	March 31, 2022		December 31, 2021
Assets
Current assets
Cash and cash equivalents	$	49,536	$	57,847
Investment securities—current	78,389		64,600
Accounts receivable, net	16,154		12,595
Prepaid expenses and other current assets	25,495		23,553
Total current assets	169,574		158,595
Investment securities—noncurrent	45,851		61,076
Property and equipment, net	30,582		30,479
Operating lease right-of-use assets	40,570		41,710
Capitalized software development costs, net	39,277		41,212
Goodwill	56,147		56,147
Intangible assets, net	10,558		11,711

Other long-term assets	7,475		7,087
Total assets	$	400,034	$	408,017
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	4,809	$	1,704
Accrued employee expenses—current	25,151		30,065
Accrued expenses	14,470		13,284
Deferred revenue	3,692		2,512

Other current liabilities	5,898		5,077

Total current liabilities	54,020		52,642


Operating lease liabilities	54,985		55,733



Other liabilities	2,286		2,261
Total liabilities	111,291		110,636
Commitments and contingencies (Note 8)
Stockholders’ equity:

Class A common stock	2		2
Class B common stock	2		2
Additional paid-in capital	178,924		171,930
Accumulated other comprehensive loss	(1,539)		(194)
Treasury stock	(25,756)		(25,756)
Retained earnings	137,110		151,397
Total stockholders’ equity	288,743		297,381
Total liabilities and stockholders’ equity	$	400,034	$	408,017

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 March 31,
	2022		2021
Revenue	$	105,296	$	78,921
Costs and operating expenses:
Cost of revenue (exclusive of depreciation and amortization)(1)	43,347		33,298
Sales and marketing(1)	24,919		16,179
Research and product development(1)	24,320		14,383
General and administrative(1)	18,964		13,361
Depreciation and amortization	8,415		7,369
Total costs and operating expenses	119,965		84,590
Loss from operations	(14,669)		(5,669)
Other (loss) income, net	(10)		562
Interest income	107		53
Loss before benefit from income taxes	(14,572)		(5,054)
Benefit from income taxes	(285)		(5,533)
Net (loss) income	$	(14,287)	$	479

Net (loss) income per common share:
Basic	$	(0.41)	$	0.01
Diluted	$	(0.41)	$	0.01
Weighted average common shares outstanding:
Basic	34,836		34,409
Diluted	34,836		35,712

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


	Three Months Ended March 31,
	2022		2021
Stock-based compensation expense included in costs and operating expenses:
Cost of revenue (exclusive of depreciation and amortization)	$	358	$	471
Sales and marketing	1,460		402
Research and product development	2,806		857
General and administrative	2,794		1,046
Total stock-based compensation expense	$	7,418	$	2,776

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 (LOSS) INCOME

(UNAUDITED)

(in thousands)


	Three Months Ended March 31,
	2022		2021
Net (loss) income	$	(14,287)	$	479
Other comprehensive loss:
Changes in unrealized losses on investment securities	(1,345)		(18)
Comprehensive (loss) income	$	(15,632)	$	461

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		Loss		Stock		Earnings		Total
	Shares	Amount		Shares	Amount
Balance December 31, 2021	19,417	$	2	15,408	$	2	$	171,930	$	(194)	$	(25,756)	$	151,397	$	297,381
Exercise of stock options	17	—		—	—		100		—		—		—		100
Stock based compensation	—	—		—	—		7,967		—		—		—		7,967
Vesting of restricted stock units, net of shares withheld for taxes	17	—		—	—		(1,073)		—		—		—		(1,073)
Conversion of Class B shares to Class A shares	572	—		(572)

SEC Form 10-Q filed by AppFolio Inc.