Core Insights - AppFolio reported revenue of $235.58 million for the quarter ended June 2025, reflecting a year-over-year increase of 19.4% [1] - The earnings per share (EPS) for the quarter was $1.38, up from $1.12 in the same quarter last year [1] - The reported revenue exceeded the Zacks Consensus Estimate of $231.16 million by 1.91%, while the EPS surpassed the consensus estimate of $1.28 by 7.81% [1] Revenue Breakdown - Revenue from Other services was $2.96 million, compared to the average estimate of $3.5 million, marking a year-over-year increase of 70.8% [4] - Revenue from Value Added Services reached $180.15 million, exceeding the average estimate of $176.21 million, with a year-over-year growth of 18.8% [4] - Revenue from Core Solutions was $52.47 million, surpassing the average estimate of $50.84 million, representing a year-over-year increase of 19.2% [4] Stock Performance - AppFolio's shares have returned +11.4% over the past month, outperforming the Zacks S&P 500 composite's +2.7% change [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Core Viewpoint - AppFolio reported quarterly earnings of $1.38 per share, exceeding the Zacks Consensus Estimate of $1.28 per share, and showing an increase from $1.12 per share a year ago, indicating a positive earnings surprise of +7.81% [1][2] Financial Performance - The company achieved revenues of $235.58 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.91%, and up from $197.38 million in the same quarter last year [2] - Over the last four quarters, AppFolio has exceeded consensus EPS estimates two times and topped consensus revenue estimates three times [2] Stock Performance and Outlook - AppFolio shares have increased approximately 5.1% since the beginning of the year, while the S&P 500 has gained 8.2% [3] - The company's future stock performance will largely depend on management's commentary during the earnings call and the trends in earnings estimate revisions [3][4] Earnings Estimates - The current consensus EPS estimate for the upcoming quarter is $1.40, with projected revenues of $243.52 million, and for the current fiscal year, the estimate is $5.15 on revenues of $932.5 million [7] Industry Context - The Internet - Software industry, to which AppFolio belongs, is currently ranked in the top 30% of over 250 Zacks industries, suggesting a favorable outlook for stocks within this sector [8]

Financial Data and Key Metrics Changes - Revenue for Q2 2025 was $236 million, reflecting a 19% year-over-year growth with a non-GAAP operating margin of 26.2% [5][19] - Core solutions revenue increased to $52.5 million, also a 19% year-over-year increase, driven by more customers choosing premium tiers and growth in total units under management [16] - Revenue from value-added services grew 19% year-over-year to $180 million, attributed to increased adoption of screening and risk mitigation services [18] Business Line Data and Key Metrics Changes - The company managed approximately 8.9 million units from 21,403 customers, representing a 6% increase in both ending units and customers compared to the previous year [17] - The adoption of AI-powered solutions has been significant, with 96% of customers utilizing one or more solutions since the beginning of 2025 [8] Market Data and Key Metrics Changes - There has been a 46% increase in property management professionals' plans to use AI or agentic technology in the past nine months, indicating a growing market trend towards AI integration [6] Company Strategy and Development Direction - The company is focusing on three strategic pillars: innovation through AI, delivering value efficiently, and cultivating a strong company culture [11][14] - Partnerships are being prioritized to enhance customer value, with the AppFolio stack marketplace now having 80 partners [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory, expecting annual revenue guidance to increase to between $935 million and $945 million for 2025, representing an 18% growth rate [20] - The company plans to continue investing in high-priority initiatives while maintaining operational efficiency [21] Other Important Information - The company has initiated a stock repurchase program of $300 million and has repurchased 244,000 shares in Q2 2025 [19] - Tim Eaton has been appointed as the Chief Financial Officer, having previously served as Interim CFO [15] Q&A Session Summary - No specific questions or answers were provided in the content regarding the Q&A session.

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q%20Header) This section provides the official filing details for AppFolio, Inc.'s Quarterly Report on Form 10-Q [Registrant Information](index=1&type=section&id=Registrant%20Information) This section provides the official filing details for AppFolio, Inc.'s Quarterly Report on Form 10-Q for the period ended June 30, 2025, including its incorporation state, principal executive offices, and stock exchange listing - AppFolio, Inc. is a Delaware corporation with its principal executive offices in Santa Barbara, California[3](index=3&type=chunk) - The company's Class A common stock, with a **$0.0001 par value**, is registered on the NASDAQ Global Market under the trading symbol APPF[3](index=3&type=chunk) - AppFolio, Inc. is classified as a large accelerated filer[3](index=3&type=chunk) [Shares Outstanding](index=2&type=section&id=Shares%20Outstanding) This section reports the total number of Class A and Class B common shares outstanding as of a specific date following the reporting period Common Stock Outstanding as of July 24, 2025 | Class of Stock | Shares Outstanding | | :--------------- | :----------------- | | Class A common stock | 22,871,704 | | Class B common stock | 12,981,324 | [FORWARD-LOOKING STATEMENTS](index=4&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section cautions that future results may differ from forward-looking statements due to inherent risks and uncertainties [Forward-Looking Statements Disclosure](index=4&type=section&id=Forward-Looking%20Statements%20Disclosure) This section outlines the nature of forward-looking statements in the report, emphasizing that actual results may differ materially due to risks and uncertainties. It advises against undue reliance on these statements and notes no obligation to update them, except as required by law - Forward-looking statements are based primarily on current expectations and projections about future events and trends that may affect business, financial condition, operating results, cash flows, and prospects[8](index=8&type=chunk) - Actual results, events, or circumstances could differ materially from those described in forward-looking statements due to risks and uncertainties, including those detailed in 'Management's Discussion and Analysis of Financial Condition and Results of Operations' and 'Risk Factors'[8](index=8&type=chunk) - The company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the report date, except as required by law[8](index=8&type=chunk) [PART I. FINANCIAL INFORMATION](index=5&type=section&id=Part%20I.%20Financial%20Information) This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This item presents AppFolio, Inc.'s unaudited condensed consolidated financial statements for the periods ended June 30, 2025, and December 31, 2024 (balance sheet), and for the three and six months ended June 30, 2025, and 2024 (operations, comprehensive income, stockholders' equity, cash flows), prepared in accordance with GAAP for interim financial information [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section details the company's financial position, including assets, liabilities, and equity, at specific reporting dates Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change (2025 vs 2024) | | :-------------------- | :------------ | :---------------- | :-------------------- | | **Assets** | | | | | Cash and cash equivalents | $73,478 | $42,504 | $30,974 | | Investment securities—current | $54,088 | $235,745 | $(181,657) | | Total current assets | $197,135 | $335,402 | $(138,267) | | Total assets | $567,403 | $626,678 | $(59,275) | | **Liabilities** | | | | | Total current liabilities | $67,589 | $63,280 | $4,309 | | Total liabilities | $111,757 | $107,388 | $4,369 | | **Stockholders' Equity** | | | | | Total stockholders' equity | $455,646 | $519,290 | $(63,644) | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section presents the company's revenues, expenses, and net income for the reported periods Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $235,575 | $197,375 | $453,277 | $384,805 | | Total costs and operating expenses | $195,063 | $161,347 | $378,982 | $314,687 | | Income from operations | $40,512 | $36,028 | $74,295 | $70,118 | | Net income | $35,980 | $29,665 | $67,363 | $68,328 | | Basic Net income per common share | $1.00 | $0.82 | $1.87 | $1.89 | | Diluted Net income per common share | $0.99 | $0.81 | $1.85 | $1.86 | Stock-Based Compensation Expense (in thousands) | Stock-based compensation expense included in costs and operating expenses | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenue (exclusive of depreciation and amortization) | $1,419 | $1,175 | $2,706 | $2,135 | | Sales and marketing | $3,045 | $1,703 | $5,893 | $3,213 | | Research and product development | $8,176 | $6,472 | $15,107 | $12,154 | | General and administrative | $5,659 | $5,444 | $10,964 | $10,766 | | **Total stock-based compensation expense** | **$18,299** | **$14,794** | **$34,670** | **$28,268** | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This section reports net income and other comprehensive income or loss components for the periods Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $35,980 | $29,665 | $67,363 | $68,328 | | Other comprehensive loss: Changes in unrealized losses on investment securities, net of tax | $(37) | $(69) | $(244) | $(283) | | **Comprehensive income** | **$35,943** | **$29,596** | **$67,119** | **$68,045** | [Condensed Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section details changes in equity accounts, including common stock, additional paid-in capital, and retained earnings Condensed Consolidated Statements of Stockholders' Equity (in thousands) - 2025 | Stockholders' Equity | Balance at Dec 31, 2024 | Balance at Mar 31, 2025 | Balance at June 30, 2025 | | :-------------------------------- | :---------------------- | :---------------------- | :----------------------- | | Class A Common Stock (Amount) | $2 | $2 | $2 | | Class B Common Stock (Amount) | $2 | $2 | $2 | | Additional Paid-in Capital | $254,821 | $262,237 | $270,782 | | Accumulated Other Comprehensive (Loss) Income | $173 | $(34) | $(71) | | Treasury Stock | $(25,756) | $(121,519) | $(172,480) | | Retained Earnings | $290,048 | $321,431 | $357,411 | | **Total Stockholders' Equity** | **$519,290** | **$462,119** | **$455,646** | Condensed Consolidated Statements of Stockholders' Equity (in thousands) - 2024 | Stockholders' Equity | Balance at Dec 31, 2023 | Balance at Mar 31, 2024 | Balance at June 30, 2024 | | :-------------------------------- | :---------------------- | :---------------------- | :----------------------- | | Class A Common Stock (Amount) | $2 | $2 | $2 | | Class B Common Stock (Amount) | $2 | $2 | $2 | | Additional Paid-in Capital | $236,985 | $240,419 | $243,040 | | Accumulated Other Comprehensive (Loss) Income | $99 | $(115) | $(184) | | Treasury Stock | $(25,756) | $(25,756) | $(25,756) | | Retained Earnings | $85,980 | $124,643 | $154,308 | | **Total Stockholders' Equity** | **$297,312** | **$339,195** | **$371,412** | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net cash provided by operating activities | $91,108 | $93,823 | | Net cash provided by (used in) investing activities | $104,559 | $(61,071) | | Net cash used in financing activities | $(164,693) | $(22,622) | | **Net increase in cash, cash equivalents and restricted cash** | **$30,974** | **$10,130** | | Cash, cash equivalents and restricted cash, End of period | $73,728 | $59,889 | [Notes to Condensed Consolidated Unaudited Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Unaudited%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [Note 1. Nature of Business](index=12&type=section&id=Note%201.%20Nature%20of%20Business) This note describes AppFolio, Inc.'s core business as a technology provider for the real estate industry - AppFolio, Inc. is a technology leader powering the future of the real estate industry, offering a cloud-based platform for customers to operate their businesses[25](index=25&type=chunk) - The company's services enable customers to connect communities, increase operational efficiency, deliver exceptional customer experiences, and improve financial and operational performance[25](index=25&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=12&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and estimates used in preparing the financial statements - The unaudited Condensed Consolidated Financial Statements are prepared in accordance with GAAP for interim financial information, with certain disclosures condensed or omitted[26](index=26&type=chunk) - Management makes estimates and assumptions affecting reported amounts, including fair value of assets/liabilities, useful lives, capitalized software, stock-based compensation, and income taxes[27](index=27&type=chunk) - The company operates as a single operating and reportable segment, with the CEO as the CODM assessing performance at the consolidated level[30](index=30&type=chunk) [Note 3. Investment Securities and Fair Value Measurements](index=15&type=section&id=Note%203.%20Investment%20Securities%20and%20Fair%20Value%20Measurements) This note details the company's investment securities and their fair value measurements Available-for-Sale Investment Securities (in thousands) | Investment Securities | June 30, 2025 (Estimated Fair Value) | December 31, 2024 (Estimated Fair Value) | | :--------------------------------- | :----------------------------------- | :--------------------------------------- | | U.S. government and agency securities | $54,088 | $235,745 | | **Total available-for-sale investment securities** | **$54,088** | **$235,745** | Strategic Long-Term Investments (in thousands) | Strategic Investments | June 30, 2025 | December 31, 2024 | | :--------------------------------------------- | :------------ | :---------------- | | Second Nature | $75,000 | $— | | Others | $2,033 | $2,033 | | **Total long-term investments** | **$77,033** | **$2,033** | - In April 2025, AppFolio purchased a minority, non-controlling equity interest in Second Nature Holdings, L.P. for **$75.0 million**, classified as an investment in equity securities without readily determinable fair value[38](index=38&type=chunk) [Note 4. Accrued Employee Expenses](index=17&type=section&id=Note%204.%20Accrued%20Employee%20Expenses) This note provides a breakdown of accrued employee-related liabilities Accrued Employee Expenses (in thousands) | Accrued Employee Expenses | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Accrued bonuses | $14,745 | $17,092 | | Accrued payroll and other | $11,039 | $13,065 | | **Total accrued employee expenses** | **$25,784** | **$30,157** | [Note 5. Other Current Liabilities](index=17&type=section&id=Note%205.%20Other%20Current%20Liabilities) This note details other short-term liabilities, including unearned premiums and insurance reserves Other Current Liabilities (in thousands) | Other Current Liabilities | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Unearned premium liabilities | $6,140 | $5,455 | | Insurance reserves | $4,741 | $3,908 | | Operating lease liabilities-current | $4,466 | $4,273 | | Other | $5,101 | $2,451 | | **Total other current liabilities** | **$20,448** | **$16,087** | - Unearned premium liabilities represent refundable commissions from renters insurance policies, which may require pro rata refunds upon cancellation[44](index=44&type=chunk) [Note 6. Commitments and Contingencies](index=17&type=section&id=Note%206.%20Commitments%20and%20Contingencies) This note discloses the company's various commitments and potential liabilities, including legal proceedings - Terra Mar Insurance Company, Inc., a wholly-owned subsidiary, reinsures **100%** of liability to landlord insurance policies, accruing for reported and incurred but not reported claims[46](index=46&type=chunk) - Estimated liability for insurance claims was **$4.7 million** as of June 30, 2025, up from **$3.9 million** at December 31, 2024[46](index=46&type=chunk) - The company is involved in various legal proceedings in the ordinary course of business but does not believe any would have a material adverse effect on its financial condition or operations[48](index=48&type=chunk) [Note 7. Share Repurchase Program](index=18&type=section&id=Note%207.%20Share%20Repurchase%20Program) This note outlines the company's share repurchase activities and authorized programs - During Q1 2025, AppFolio repurchased **445,311 Class A common shares** for **$95.8 million** under the 2019 Stock Repurchase Program, exhausting and terminating it[51](index=51&type=chunk) - On April 23, 2025, the Board authorized a new **$300.0 million** 2025 Stock Repurchase Program for Class A common stock, with no expiration date[52](index=52&type=chunk) - Under the 2025 program, **243,987 shares** were repurchased for **$50.0 million** during Q2 2025, leaving **$250.0 million** available as of June 30, 2025[52](index=52&type=chunk) [Note 8. Stock-Based Compensation](index=19&type=section&id=Note%208.%20Stock-Based%20Compensation) This note details the accounting for stock-based compensation, including RSU activity and expense recognition Restricted Stock Unit (RSU) Activity (in thousands) | RSU Activity | Number of Shares | Weighted Average Grant Date Fair Value per Share | | :-------------------------- | :--------------- | :--------------------------------------------- | | Unvested as of Dec 31, 2024 | 785 | $159.98 | | Granted | 358 | $224.41 | | Vested | (216) | $153.81 | | Forfeited | (47) | $158.31 | | **Unvested as of June 30, 2025** | **880** | **$187.79** | - Stock-based compensation expense for RSUs and PSUs was **$17.9 million** (Q2 2025) and **$33.9 million** (YTD Q2 2025), with **$130.1 million** remaining to be recognized over a weighted average of **2.4 years**[54](index=54&type=chunk) [Note 9. Income Taxes](index=19&type=section&id=Note%209.%20Income%20Taxes) This note provides information on income tax expense, effective tax rates, and deferred tax assets Income Tax Metrics | Income Tax Metrics | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :----------------- | :------------------------------- | :----------------------------- | | Income tax expense | $6.0 million | $11.4 million | | Effective tax rate | 14.3% | 14.5% | - The effective tax rate differs from the **21% U.S. federal statutory rate** primarily due to excess tax benefits from stock-based compensation and R&D tax credits, partially offset by state income taxes and non-deductible officers' compensation[56](index=56&type=chunk) - A valuation allowance against deferred tax assets was released at December 31, 2024, due to sufficient positive evidence of future realization[57](index=57&type=chunk) [Note 10. Revenue and Other Information](index=20&type=section&id=Note%2010.%20Revenue%20and%20Other%20Information) This note breaks down revenue by category and provides other related financial information Revenue Categories (in thousands) | Revenue Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Core solutions | $52,473 | $44,024 | $101,986 | $86,944 | | Value Added Services | $180,145 | $151,620 | $344,851 | $293,951 | | Other | $2,957 | $1,731 | $6,440 | $3,910 | | **Total revenue** | **$235,575** | **$197,375** | **$453,277** | **$384,805** | [Note 11. Subsequent Event](index=20&type=section&id=Note%2011.%20Subsequent%20Event) This note discloses significant events occurring after the reporting period, such as new legislation - The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, allowing immediate expensing of domestic R&D and certain capital expenditures[60](index=60&type=chunk) - The company believes the impact of OBBBA on income tax expense is not material and is currently evaluating its full impact on Consolidated Financial Statements[60](index=60&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition, results of operations, and liquidity, discussing key factors influencing performance, revenue and expense trends, and future outlook [Overview](index=20&type=section&id=Overview) This section provides a high-level summary of the company's business model and operational highlights - AppFolio provides a cloud-based platform for the real estate industry, enabling customers to connect communities, increase operational efficiency, and improve financial performance[62](index=62&type=chunk) Property Management Units Under Management | Metric | June 30, 2025 | June 30, 2024 | YoY Growth | | :----- | :------------ | :------------ | :--------- | | Property management units under management | 8.9 million | 8.4 million | 6% | - The company had **21,403 property management customers** as of June 30, 2025, up from **20,167** in the prior year[67](index=67&type=chunk) [Key Components of Results of Operations](index=20&type=section&id=Key%20Components%20of%20Results%20of%20Operations) This section explains the primary drivers of revenue and expense categories - Revenue is primarily generated from subscription-based core solutions and per-use Value Added Services, with a significant majority of VAS revenue from electronic payments, tenant screening, and risk mitigation[64](index=64&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk) - Cost of revenue includes third-party service provider costs for Value Added Services (e.g., payment processing, credit reporting) and personnel-related costs for customer service and operations[68](index=68&type=chunk) - Research and product development focuses on expanding functionality, ease of use, and developing new products, with capitalized software development costs amortized over their useful lives[70](index=70&type=chunk)[72](index=72&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance across various income statement line items [Revenue](index=22&type=section&id=Revenue_MD%26A) This section analyzes the company's revenue performance, including growth drivers and future expectations Revenue Performance (in thousands) | Revenue Category | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change Amount | Change % | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change Amount | Change % | | :------------------------------ | :--------------------------- | :--------------------------- | :------------ | :------- | :--------------------------- | :--------------------------- | :------------ | :------- | | Core solutions | $52,473 | $44,024 | $8,449 | 19% | $101,986 | $86,944 | $15,042 | 17% | | Value Added Services | $180,145 | $151,620 | $28,525 | 19% | $344,851 | $293,951 | $50,900 | 17% | | Other | $2,957 | $1,731 | $1,226 | 71% | $6,440 | $3,910 | $2,530 | 65% | | **Total revenue** | **$235,575** | **$197,375** | **$38,200** | **19%** | **$453,277** | **$384,805** | **$68,472** | **18%** | - The increase in revenue was primarily attributable to increased usage of payments, tenant screening, and risk mitigation services, and **6% growth** in property management units under management[75](index=75&type=chunk) - Total revenue for the year ending December 31, 2025, is expected to increase due to new customers, more units under management, and increased adoption of Value Added Services[76](index=76&type=chunk) [Cost of Revenue (Exclusive of Depreciation and Amortization)](index=22&type=section&id=Cost%20of%20Revenue%20(Exclusive%20of%20Depreciation%20and%20Amortization)_MD%26A) This section examines the trends and drivers of the company's cost of revenue Cost of Revenue Performance (in thousands) | Cost of Revenue | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change Amount | Change % | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change Amount | Change % | | :----------------------------- | :--------------------------- | :--------------------------- | :------------ | :------- | :--------------------------- | :--------------------------- | :------------ | :------- | | Cost of revenue (exclusive of D&A) | $83,827 | $69,601 | $14,226 | 20% | $163,325 | $134,247 | $29,078 | 22% | | Percentage of revenue | 35.6% | 35.3% | | | 36.0% | 34.9% | | | - The increase was primarily driven by higher third-party service provider costs (**$13.0 million** for 3 months, **$25.9 million** for 6 months) due to increased adoption and usage of Value Added Services[77](index=77&type=chunk) - Cost of revenue (exclusive of depreciation and amortization) is expected to remain relatively flat as a percentage of revenue for the year ending December 31, 2025[78](index=78&type=chunk) [Sales and Marketing](index=23&type=section&id=Sales%20and%20Marketing_MD%26A) This section analyzes sales and marketing expenses, including personnel and advertising costs Sales and Marketing Expense (in thousands) | Sales and Marketing | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change Amount | Change % | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change Amount | Change % | | :--------------------------------- | :--------------------------- | :--------------------------- | :------------ | :------- | :--------------------------- | :--------------------------- | :------------ | :------- | | Sales and marketing expense | $36,776 | $27,300 | $9,476 | 35% | $67,833 | $51,755 | $16,078 | 31% | | Percentage of revenue | 15.6% | 13.8% | | | 15.0% | 13.4% | | | - Increase driven by **$5.2 million** (3 months) and **$9.3 million** (6 months) in personnel-related costs (including stock-based compensation) and **$2.0 million** (3 months) and **$2.7 million** (6 months) in advertising and promotion[79](index=79&type=chunk) - Sales and marketing expense is expected to remain relatively flat as a percentage of revenue for the year ending December 31, 2025[80](index=80&type=chunk) [Research and Product Development](index=23&type=section&id=Research%20and%20Product%20Development_MD%26A) This section discusses research and product development expenses and their impact on innovation Research and Product Development Expense (in thousands) | R&D Expense | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change Amount | Change % | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change Amount | Change % | | :------------------------- | :--------------------------- | :--------------------------- | :------------ | :------- | :--------------------------- | :--------------------------- | :------------ | :------- | | R&D expense | $46,674 | $39,522 | $7,152 | 18% | $90,432 | $77,417 | $13,015 | 17% | | Percentage of revenue | 19.8% | 20.0% | | | 20.0% | 20.1% | | | - Increase primarily due to **$5.5 million** (3 months) and **$9.2 million** (6 months) in personnel-related costs (net of capitalized software development) and **$0.8 million** (3 months) and **$1.3 million** (6 months) in software license fees[81](index=81&type=chunk) - Research and product development expenses are expected to remain relatively flat as a percentage of revenue for the year ending December 31, 2025[82](index=82&type=chunk) [General and Administrative](index=23&type=section&id=General%20and%20Administrative_MD%26A) This section analyzes general and administrative expenses, including personnel and overhead costs General and Administrative Expense (in thousands) | G&A Expense | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change Amount | Change % | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change Amount | Change % | | :------------------------- | :--------------------------- | :--------------------------- | :------------ | :------- | :--------------------------- | :--------------------------- | :------------ | :------- | | G&A expense | $21,936 | $20,254 | $1,682 | 8% | $45,287 | $41,386 | $3,901 | 9% | | Percentage of revenue | 9.3% | 10.3% | | | 10.0% | 10.8% | | | - Increase primarily due to **$3.2 million** (3 months) and **$6.0 million** (6 months) in personnel-related costs, including stock-based and performance-based compensation, driven by headcount growth[83](index=83&type=chunk) - General and administrative expenses are expected to remain relatively flat as a percentage of revenue for the year ending December 31, 2025[85](index=85&type=chunk) [Depreciation and Amortization](index=24&type=section&id=Depreciation%20and%20Amortization_MD%26A) This section details depreciation and amortization expenses and their contributing factors Depreciation and Amortization Expense (in thousands) | D&A Expense | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change Amount | Change % | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change Amount | Change % | | :------------------------- | :--------------------------- | :--------------------------- | :------------ | :------- | :--------------------------- | :--------------------------- | :------------ | :------- | | D&A expense | $5,850 | $4,670 | $1,180 | 25% | $12,105 | $9,882 | $2,223 | 22% | | Percentage of revenue | 2.5% | 2.4% | | | 2.7% | 2.6% | | | - Increase primarily due to amortization of intangible assets recognized from the acquisition of Move EZ, Inc. in Q4 2024[86](index=86&type=chunk) - Depreciation and amortization expenses are expected to remain relatively flat as a percentage of revenue for the year ending December 31, 2025[87](index=87&type=chunk) [Interest Income, Net](index=24&type=section&id=Interest%20Income,%20Net_MD%26A) This section analyzes net interest income, including factors influencing its changes Interest Income, Net (in thousands) | Interest Income, Net | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change Amount | Change % | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change Amount | Change % | | :---------------------------------- | :--------------------------- | :--------------------------- | :------------ | :------- | :--------------------------- | :--------------------------- | :------------ | :------- | | Interest income, net | $1,466 | $3,476 | $(2,010) | (58)% | $4,419 | $6,468 | $(2,049) | (32)% | | Percentage of revenue | 0.6% | 1.8% | | | 1.0% | 1.7% | | | - Decrease primarily due to the sale of available-for-sale investment securities and lower interest rates[88](index=88&type=chunk) [Provision for income taxes](index=24&type=section&id=Provision%20for%20income%20taxes_MD%26A) This section discusses the company's income tax provision and effective tax rates Income Tax Provision (in thousands) | Income Tax Metrics | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change Amount | Change % | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change Amount | Change % | | :-------------------------------- | :--------------------------- | :--------------------------- | :------------ | :------- | :--------------------------- | :--------------------------- | :------------ | :------- | | Income before provision for income taxes | $41,967 | $39,504 | $2,463 | 6% | $78,759 | $76,586 | $2,173 | 3% | | Provision for income taxes | $5,987 | $9,839 | $(3,852) | (39)% | $11,396 | $8,258 | $3,138 | 38% | | Effective tax rate | 14.3% | 24.9% | | | 14.5% | 10.8% | | | - Q2 2025 effective tax rate decrease (**14.3% vs 24.9%**) due to valuation allowance released at Dec 31, 2024, and increased R&D tax credits[90](index=90&type=chunk) - YTD Q2 2025 effective tax rate increase (**14.5% vs 10.8%**) due to decreased excess tax benefits from stock-based compensation and changes in valuation allowance[90](index=90&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its short-term and long-term financial obligations - Principal sources of liquidity are cash, cash equivalents, and investment securities totaling **$127.6 million**, and cash flows from operations[92](index=92&type=chunk) - Existing liquidity is believed to be sufficient to meet working capital and capital expenditure requirements for at least the next twelve months[92](index=92&type=chunk) - Future capital requirements depend on market acceptance, customer growth, new product introductions, and strategic investments, potentially requiring additional equity or debt financing[93](index=93&type=chunk)[94](index=94&type=chunk) [Cash Flows](index=25&type=section&id=Cash%20Flows_Liquidity) This section summarizes the overall cash flow performance from operating, investing, and financing activities Summary of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net cash provided by operating activities | $91,108 | $93,823 | | Net cash provided by (used in) investing activities | $104,559 | $(61,071) | | Net cash used in financing activities | $(164,693) | $(22,622) | | **Net increase in cash, cash equivalents and restricted cash** | **$30,974** | **$10,130** | [Operating Activities](index=25&type=section&id=Operating%20Activities_Liquidity) This section analyzes cash flows generated from the company's primary business operations - Net cash provided by operating activities decreased for the six months ended June 30, 2025, primarily due to higher increases in personnel-related operating expenditures[98](index=98&type=chunk) [Investing Activities](index=25&type=section&id=Investing%20Activities_Liquidity) This section details cash flows related to the acquisition and disposal of long-term assets and investments - Net cash provided by investing activities increased from **$(61.1) million** in 2024 to **$104.6 million** in 2025[96](index=96&type=chunk)[100](index=100&type=chunk) - Increase primarily due to higher sales and maturities of investment securities and lower purchases of available-for-sale investment securities, partially offset by a **$75.0 million** strategic investment in Second Nature[100](index=100&type=chunk) [Financing Activities](index=25&type=section&id=Financing%20Activities_Liquidity) This section examines cash flows from debt, equity, and dividend transactions - Net cash used in financing activities increased from **$(22.6) million** in 2024 to **$(164.7) million** in 2025[96](index=96&type=chunk)[102](index=102&type=chunk) - Increase primarily due to repurchases of Class A common stock[102](index=102&type=chunk) [Critical Accounting Policies and Estimates](index=26&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights accounting policies requiring significant judgment and estimation - No material changes to critical accounting policies and estimates from the Annual Report, except for Strategic Investments as disclosed in Note 2[104](index=104&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This item discusses the company's exposure to market risks, specifically interest rate risk related to its investment securities - As of June 30, 2025, the company held **$54.1 million** in U.S. government and agency securities, exposed to interest rate fluctuations[105](index=105&type=chunk) - A hypothetical **100 basis point decrease** in interest rates would increase the fair value of investment securities by approximately **$0.1 million**, while a **100 basis point increase** would decrease it by approximately **$0.1 million**[106](index=106&type=chunk) [Item 4. Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) This item confirms that management, with the involvement of the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2025, concluding they were effective at a reasonable assurance level. No material changes in internal control over financial reporting were identified during the period - Management, with CEO and CFO supervision, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[107](index=107&type=chunk) - No material changes in internal control over financial reporting occurred during the period covered by this Quarterly Report[108](index=108&type=chunk) [PART II. OTHER INFORMATION](index=27&type=section&id=Part%20II.%20Other%20Information) This part includes disclosures on legal proceedings, risk factors, equity sales, and other significant corporate information [Item 1. Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) This item refers to Note 6, Commitments and Contingencies, for information regarding legal proceedings, indicating no new material legal proceedings beyond what is already disclosed - Information regarding legal proceedings is referenced to Note 6, Commitments and Contingencies, in the Condensed Consolidated Financial Statements[109](index=109&type=chunk) [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) This item highlights specific risks related to the company's strategic investments and share repurchase program, supplementing the general risk factors disclosed in the Annual Report - New risk factors include those associated with strategic investments, which are non-marketable equity investments in privately-held companies, carrying risks of partial or complete loss of invested capital and potential volatility to the statement of operations due to fair value changes or impairments[111](index=111&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) - Risks related to Class A common stock include increased volatility and diminished cash reserves due to share repurchases, with no guarantee that the program will enhance long-term stockholder value[115](index=115&type=chunk)[116](index=116&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=28&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item summarizes the company's repurchases of Class A common stock during the three months ended June 30, 2025, under the newly authorized $300.0 million 2025 Stock Repurchase Program Class A Common Stock Repurchases (Three Months Ended June 30, 2025) | Period (2025) | Total Number of Shares Repurchased (in thousands) | Average Price Paid Per Share | Approximate Dollar Value Remaining (in millions) | | :------------ | :---------------------------------------------- | :--------------------------- | :----------------------------------------------- | | April | 119 | $201.23 | $276.0 | | May | 125 | $208.15 | $250.0 | | June | — | $— | $250.0 | | **Total** | **244** | **$204.77** | | - The 2025 Stock Repurchase Program, authorized on April 23, 2025, allows for repurchases of up to **$300.0 million** of Class A common stock and has no expiration date[118](index=118&type=chunk) [Item 5. Other Information](index=28&type=section&id=Item%205.%20Other%20Information) This item reports on significant corporate governance changes, specifically the appointments of a new Chief Financial Officer and Principal Accounting Officer, and details their compensation and severance arrangements [Appointment of Chief Financial Officer](index=28&type=section&id=Appointment%20of%20Chief%20Financial%20Officer) This section details the appointment of the new CFO, including their background and compensation package - Tim Eaton was appointed Chief Financial Officer on July 30, 2025, previously serving as Interim CFO and Principle Accounting Officer[119](index=119&type=chunk) - Mr. Eaton's compensation package includes an annual base salary of **$400,000**, a **60% target annual bonus**, a **$71,250 cash spot bonus**, and a **$2.5 million promotional equity award** (50% time-based RSUs, 50% performance-based RSUs)[121](index=121&type=chunk)[122](index=122&type=chunk) - Severance benefits include nine months of base salary continuation, earned and pro-rated annual bonuses, and COBRA premiums for termination without cause or resignation for good reason[124](index=124&type=chunk) [Appointment of Principal Accounting Officer](index=29&type=section&id=Appointment%20of%20Principal%20Accounting%20Officer) This section reports the appointment of the new Principal Accounting Officer and their professional background - Don Rigler was appointed Principal Accounting Officer on July 30, 2025, succeeding Tim Eaton[129](index=129&type=chunk) - Mr. Rigler joined AppFolio in March 2025 as Vice President of Accounting, with prior finance leadership roles at Salesforce, Inc[129](index=129&type=chunk) - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[131](index=131&type=chunk) [Item 6. Exhibits](index=30&type=section&id=Item%206.%20Exhibits) This item lists the exhibits filed with the Quarterly Report, including the Employment Agreement for Tim Eaton, CEO and CFO certifications, and XBRL-related documents - Exhibits include the Employment Agreement for Tim Eaton (Exhibit 10.1), CEO and Principal Financial Officer certifications (Exhibits 31.1, 31.2, 32.1), and Inline XBRL documents (Exhibits 101.INS to 101.PRE, and 104)[132](index=132&type=chunk) [SIGNATURES](index=31&type=section&id=SIGNATURES) This section contains the official certifications and signatures for the submitted Quarterly Report [Report Signatures](index=31&type=section&id=Report%20Signatures) This section contains the official signatures of the Chief Executive Officer and Chief Financial Officer, certifying the submission of the Quarterly Report on behalf of AppFolio, Inc - The report was signed by Shane Trigg, CEO, and Tim Eaton, CFO, on July 31, 2025[136](index=136&type=chunk)

[Executive Summary & Q2 2025 Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Q2%202025%20Highlights) AppFolio reported strong Q2 2025 financial results, driven by AI-native platform adoption, with significant revenue growth and improved non-GAAP operating income [Q2 2025 Performance Overview](index=1&type=section&id=Q2%202025%20Performance%20Overview) AppFolio, Inc. announced strong financial results for the second quarter ended June 30, 2025, driven by the adoption of its AI-native platform and Realm-X through premium tiers and value-added services - AppFolio announced its financial results for the second quarter ended June 30, 2025, highlighting strong revenue growth driven by Realm-X adoption through premium tiers and value-added services[1](index=1&type=chunk) [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO Shane Trigg emphasized the company's market success and the tangible performance benefits customers are experiencing from adopting AppFolio's central, AI-native platform, with 96% of customers utilizing AI-powered solutions - CEO Shane Trigg stated that the second quarter results reflect continued market success, with **96% of customers** using one or more AI-powered solutions and seeing tangible performance benefits from the AI-native platform[2](index=2&type=chunk) [Key Financial Highlights (Q2 2025)](index=1&type=section&id=Key%20Financial%20Highlights%20%28Q2%202025%29) AppFolio reported significant year-over-year growth in revenue and units under management for Q2 2025, alongside improved non-GAAP operating income, demonstrating strong operational efficiency Q2 2025 Key Financial Highlights | Metric | Q2 2025 | Q2 2024 | YoY Change | Notes | | :-------------------------------- | :------ | :------ | :--------- | :---- | | Revenue (Millions USD) | $236 | - | 19% growth | | | Total Units Under Management (Millions) | 8.9 | - | 6% growth | | | GAAP Operating Income (Millions USD) | $41 | $36 | 13.9% growth | 17.2% of revenue (Q2 2025) vs 18.3% (Q2 2024) | | Non-GAAP Operating Income (Millions USD) | $62 | $51 | 21.6% growth | 26.2% of revenue (Q2 2025) vs 26.0% (Q2 2024) | | Net Cash Provided by Operating Activities (Millions USD) | $53 | $51 | 3.9% growth | 22.3% of revenue (Q2 2025) vs 25.8% (Q2 2024) | [Financial Outlook](index=1&type=section&id=Financial%20Outlook) AppFolio provides its fiscal year 2025 financial guidance, projecting revenue and non-GAAP operating margin targets [Fiscal Year 2025 Guidance](index=1&type=section&id=Fiscal%20Year%202025%20Guidance) AppFolio provided its financial outlook for the full fiscal year 2025, projecting revenue within a specific range and a target for non-GAAP operating margin Fiscal Year 2025 Financial Outlook | Metric | Guidance | | :-------------------------------- | :-------------------- | | Full Year Revenue (Millions USD) | $935 to $945 | | Full Year Non-GAAP Operating Margin | 24.5% to 26.5% of revenue | | Diluted Weighted Average Shares Outstanding (Millions) | Approximately 37 | [Corporate & Legal Information](index=1&type=section&id=Corporate%20%26%20Legal%20Information) This section provides an overview of AppFolio's corporate identity, investor relations, and forward-looking statement disclaimers [About AppFolio](index=2&type=section&id=About%20AppFolio) AppFolio is recognized as a technology leader in the real estate industry, offering an innovative platform and partnership to enhance community connections, operational efficiency, and business growth for its customers - AppFolio is a technology leader powering the future of the real estate industry, providing an innovative platform and trusted partnership to enable customers to connect communities, increase operational efficiency, and grow their business[6](index=6&type=chunk) [Investor Relations & Conference Call](index=1&type=section&id=Investor%20Relations%20%26%20Conference%20Call) The company provided details for its Q2 2025 earnings conference call and highlighted its investor relations website as a primary channel for disclosing material nonpublic information - AppFolio hosted a conference call on July 31, 2025, at 2:00 p.m. PT / 5:00 p.m. ET to discuss Q2 financial results, with a live webcast and replay available[3](index=3&type=chunk) - The company uses its Investor Relations website (https://ir.appfolioinc.com/) for disclosing material nonpublic information and complying with Regulation FD[5](index=5&type=chunk) [Forward-Looking Statements](index=2&type=section&id=Forward-Looking%20Statements) The report includes a standard disclaimer regarding forward-looking statements, emphasizing that future results may differ due to various known and unknown risks and uncertainties, and the company does not undertake to update these statements - Forward-looking statements are subject to considerable risks and uncertainties that may cause actual results to differ materially from those expressed or implied[7](index=7&type=chunk)[8](index=8&type=chunk) - These statements relate to future operating results, financial position, fiscal year 2025 outlook, anticipated expenses, business opportunities, and the impact of strategic actions and AI-powered solutions[7](index=7&type=chunk) - The company undertakes no obligation to update any forward-looking statements, except as required by law[10](index=10&type=chunk) [Condensed Consolidated Financial Statements](index=4&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents AppFolio's condensed consolidated balance sheets, statements of operations, and cash flows for the reported periods [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of June 30, 2025, shows a decrease in total assets compared to December 31, 2024, primarily due to a reduction in investment securities, while total liabilities saw a slight increase Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total Assets | $567,403 | $626,678 | | Total Liabilities | $111,757 | $107,388 | | Stockholders' Equity | $455,646 | $519,290 | | Cash and Cash Equivalents | $73,478 | $42,504 | | Investment Securities—Current | $54,088 | $235,745 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended June 30, 2025, AppFolio reported a significant increase in revenue and net income compared to the prior year, reflecting strong top-line growth and improved profitability Condensed Consolidated Statements of Operations Highlights (in thousands, except per share) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $235,575 | $197,375 | $453,277 | $384,805 | | Income from Operations | $40,512 | $36,028 | $74,295 | $70,118 | | Net Income | $35,980 | $29,665 | $67,363 | $68,328 | | Diluted EPS | $0.99 | $0.81 | $1.85 | $1.86 | [Revenue Breakdown](index=5&type=section&id=Revenue%20Breakdown) Revenue growth for Q2 2025 was primarily driven by Value Added Services, which continued to be the largest contributor, alongside solid growth in Core Solutions Revenue Categories (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Core Solutions | $52,473 | $44,024 | $101,986 | $86,944 | | Value Added Services | $180,145 | $151,620 | $344,851 | $293,951 | | Other | $2,957 | $1,731 | $6,440 | $3,910 | | Total Revenue | $235,575 | $197,375 | $453,277 | $384,805 | [Stock-Based Compensation in Operations](index=5&type=section&id=Stock-Based%20Compensation%20in%20Operations) Stock-based compensation expense increased across all operating expense categories for both the three and six months ended June 30, 2025, with research and product development showing the largest absolute increase Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of Revenue | $1,419 | $1,175 | $2,706 | $2,135 | | Sales and Marketing | $3,045 | $1,703 | $5,893 | $3,213 | | Research and Product Development | $8,176 | $6,472 | $15,107 | $12,154 | | General and Administrative | $5,659 | $5,444 | $10,964 | $10,766 | | Total Stock-Based Compensation Expense | $18,299 | $14,794 | $34,670 | $28,268 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities remained strong in Q2 2025, while investing activities shifted to a net cash inflow, primarily due to proceeds from sales and maturities of investments. Financing activities resulted in a significant net cash outflow, largely due to common stock purchases Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Cash Provided by Operating Activities | $52,643 | $50,869 | $91,108 | $93,823 | | Net Cash Used in Investing Activities | $23,765 (inflow) | $(38,034) (outflow) | $104,559 (inflow) | $(61,071) (outflow) | | Net Cash Used in Financing Activities | $(59,863) | $(12,410) | $(164,693) | $(22,622) | | Net Increase in Cash, Cash Equivalents and Restricted Cash | $16,545 | $425 | $30,974 | $10,130 | | Cash, Cash Equivalents and Restricted Cash, End of Period | $73,728 | $59,889 | $73,728 | $59,889 | [Non-GAAP Financial Measures](index=2&type=section&id=Non-GAAP%20Financial%20Measures) This section explains AppFolio's use of non-GAAP financial measures, their reconciliation to GAAP, and the rationale for their presentation [Introduction to Non-GAAP Measures](index=2&type=section&id=Introduction%20to%20Non-GAAP%20Measures) AppFolio utilizes non-GAAP financial measures to supplement GAAP results, providing additional insights into operating performance, but notes that it cannot provide GAAP equivalent guidance for certain forward-looking non-GAAP metrics due to the unpredictable nature of some excluded items - AppFolio uses non-GAAP financial measures in addition to GAAP, including non-GAAP income from operations, costs, operating margin, net income, and EPS, which exclude certain non-cash or non-recurring items[6](index=6&type=chunk) - The company is unable to provide GAAP equivalent guidance for non-GAAP operating margin on a forward-looking basis due to the uncertainty and unpredictability of items like stock-based compensation expense[6](index=6&type=chunk) [Reconciliation from GAAP to Non-GAAP Results](index=7&type=section&id=Reconciliation%20from%20GAAP%20to%20Non-GAAP%20Results) Detailed reconciliations are provided to bridge GAAP financial measures to their non-GAAP counterparts, primarily by adjusting for stock-based compensation expense and amortization of purchased intangibles, offering a clearer view of core operational performance [Operating Expenses Reconciliation](index=7&type=section&id=Operating%20Expenses%20Reconciliation) Non-GAAP operating expenses, excluding stock-based compensation, show a lower percentage of revenue compared to GAAP figures, indicating improved efficiency when non-cash expenses are removed Non-GAAP Operating Expenses Reconciliation (in thousands) | Metric | Three Months Ended June 30, 2025 (GAAP) | Three Months Ended June 30, 2025 (Non-GAAP) | Three Months Ended June 30, 2024 (GAAP) | Three Months Ended June 30, 2024 (Non-GAAP) | | :------------------------------------------ | :-------------------------------------- | :---------------------------------------- | :-------------------------------------- | :---------------------------------------- | | Cost of Revenue (excl. D&A) | $83,827 (36% of revenue) | $82,408 (35% of revenue) | $69,601 (35% of revenue) | $68,426 (35% of revenue) | | Sales and Marketing | $36,776 (16% of revenue) | $33,731 (14% of revenue) | $27,300 (14% of revenue) | $25,597 (13% of revenue) | | Research and Product Development | $46,674 (20% of revenue) | $38,498 (16% of revenue) | $39,522 (20% of revenue) | $33,050 (17% of revenue) | | General and Administrative | $21,936 (9% of revenue) | $16,277 (7% of revenue) | $20,254 (10% of revenue) | $14,810 (8% of revenue) | | Depreciation and Amortization | $5,850 (2% of revenue) | $3,051 (1% of revenue) | $4,670 (2% of revenue) | $4,081 (2% of revenue) | [Income from Operations and Net Income Reconciliation](index=8&type=section&id=Income%20from%20Operations%20and%20Net%20Income%20Reconciliation) Non-GAAP income from operations and net income significantly exceed their GAAP equivalents, primarily due to the exclusion of stock-based compensation and amortization of purchased intangibles, resulting in higher non-GAAP operating margins and EPS Non-GAAP Income from Operations and Net Income Reconciliation (in thousands, except per share) | Metric | Three Months Ended June 30, 2025 (GAAP) | Three Months Ended June 30, 2025 (Non-GAAP) | Three Months Ended June 30, 2024 (GAAP) | Three Months Ended June 30, 2024 (Non-GAAP) | | :------------------------------------------ | :-------------------------------------- | :---------------------------------------- | :-------------------------------------- | :---------------------------------------- | | Income from Operations | $40,512 | $61,610 | $36,028 | $51,411 | | Operating Margin | 17.2% | 26.2% | 18.3% | 26.0% | | Net Income | $35,980 | $49,821 | $29,665 | $41,165 | | Net Income Per Share, Basic | $1.00 | $1.39 | $0.82 | $1.14 | | Net Income Per Share, Diluted | $0.99 | $1.38 | $0.81 | $1.12 | [Statement Regarding the Use of Non-GAAP Financial Measures](index=9&type=section&id=Statement%20Regarding%20the%20Use%20of%20Non-GAAP%20Financial%20Measures) AppFolio uses non-GAAP measures internally for performance assessment and budgeting, and externally to provide investors with supplemental information, specifically excluding stock-based compensation, amortization of purchased intangibles, and related income tax effects, which are considered non-operational or non-recurring - Non-GAAP financial measures are used internally to assess and compare operating results, for budgeting, and to evaluate financial performance, and are believed to provide useful supplemental information to investors[21](index=21&type=chunk) - Excluded items include stock-based compensation expense (for attracting/retaining employees, not operational performance), amortization of purchased intangibles (arising from pre-acquisition activities), and the income tax effect of these adjustments (using a fixed long-term projected tax rate)[21](index=21&type=chunk)[23](index=23&type=chunk) - Non-GAAP measures may not be directly comparable to other companies and should not be considered in isolation from GAAP financial information due to potential material impact of excluded expenses[22](index=22&type=chunk)

Core Insights - AppFolio reported strong revenue growth of 19% year-over-year, reaching $236 million for Q2 2025, driven by the adoption of its AI-native platform and premium services [6][2] - The company highlighted that 96% of its customers utilized one or more AI-powered solutions, indicating a competitive advantage in the property management sector [2][6] - The financial outlook for the full year 2025 anticipates revenue between $935 million and $945 million, with a non-GAAP operating margin expected to range from 24.5% to 26.5% [6][3] Financial Performance - Total units under management increased by 6% year-over-year to 8.9 million [6] - GAAP operating income was reported at $41 million, representing 17.2% of revenue, compared to $36 million or 18.3% of revenue in Q2 2024 [6] - Non-GAAP operating income rose to $62 million, or 26.2% of revenue, compared to $51 million or 26.0% of revenue in the same quarter last year [6] - Net cash provided by operating activities was $53 million, or 22.3% of revenue, compared to $51 million or 25.8% of revenue in Q2 2024 [6] Revenue Breakdown - Revenue from core solutions was $52.5 million, up from $44.0 million in Q2 2024 [16] - Value-added services generated $180.1 million, compared to $151.6 million in the prior year [16] - Other revenue sources contributed $3.0 million, an increase from $1.7 million in Q2 2024 [16] Balance Sheet Highlights - As of June 30, 2025, total assets amounted to $567.4 million, down from $626.7 million a year earlier [13] - Current assets included cash and cash equivalents of $73.5 million, up from $42.5 million in the previous year [12] - Total liabilities were reported at $111.8 million, compared to $107.4 million in Q2 2024 [13] Cash Flow Analysis - The company reported a net cash increase of $16.5 million in cash, cash equivalents, and restricted cash during the quarter [19] - Cash from operating activities for the first half of 2025 was $91.1 million, slightly down from $93.8 million in the same period last year [18] - Investing activities resulted in a net cash outflow of $23.8 million, compared to an outflow of $38.0 million in the previous year [19]

Core Viewpoint - AppFolio has appointed Tim Eaton as the Chief Financial Officer, effective July 30, 2025, reflecting the company's commitment to leadership continuity and strategic growth in the real estate technology sector [1][3]. Group 1: Appointment Details - Tim Eaton's appointment follows his role as Interim Chief Financial Officer since October 2024, and he has been with AppFolio since 2020, holding various leadership positions [2]. - Eaton has a strong background in finance and operations, having previously worked at Visa, Google, and Goldman Sachs, and holds an M.B.A. from the Wharton School [2]. Group 2: Leadership Perspective - CEO Shane Trigg emphasized Eaton's impactful leadership in positioning AppFolio for long-term growth and success, indicating a positive outlook for the company's future [3]. - Eaton expressed pride in being part of an organization focused on innovation and customer partnerships, highlighting the company's mission to enhance the real estate industry [3]. Group 3: Company Overview - AppFolio is recognized as a technology leader in the real estate industry, providing innovative platforms that enhance operational efficiency and community connections for its customers [4].

Core Viewpoint - AppFolio, Inc. (APPF) is identified as a potential stock pick due to a recent "golden cross" event, indicating a bullish trend from a technical perspective [1][4]. Technical Indicators - A "golden cross" occurs when a stock's short-term moving average (50-day) crosses above its long-term moving average (200-day), signaling a bullish breakout [2]. - The formation of a golden cross involves three stages: a downtrend that bottoms out, the crossover of moving averages, and subsequent upward momentum [3]. Stock Performance - Over the past four weeks, APPF shares have increased by 13.1%, suggesting positive momentum [4]. - The stock currently holds a 2 (Buy) rating on the Zacks Rank, indicating strong potential for further breakout [4]. Earnings Outlook - The earnings outlook for APPF is positive, with no earnings estimates cut and one revision higher in the past 60 days, leading to an increase in the Zacks Consensus Estimate [4]. - Investors are encouraged to consider adding APPF to their watchlist due to the favorable technical indicators and positive earnings revisions [5].

Core Viewpoint - The market anticipates AppFolio (APPF) will report a year-over-year increase in earnings driven by higher revenues for the quarter ended June 2025, with actual results being crucial for stock price movement [1][2]. Earnings Expectations - AppFolio is expected to post quarterly earnings of $1.28 per share, reflecting a year-over-year increase of +14.3% [3]. - Revenues are projected to reach $231.16 million, which is a 17.1% increase from the same quarter last year [3]. Estimate Revisions - The consensus EPS estimate has remained unchanged over the last 30 days, indicating a stable outlook from covering analysts [4]. - The Most Accurate Estimate for AppFolio is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -1.37%, suggesting a bearish sentiment among analysts [12]. Earnings Surprise History - In the last reported quarter, AppFolio was expected to earn $1.22 per share but delivered $1.21, resulting in a surprise of -0.82% [13]. - Over the past four quarters, the company has beaten consensus EPS estimates two times [14]. Industry Comparison - Confluent (CFLT), another player in the Zacks Internet - Software industry, is expected to report earnings of $0.08 per share for the same quarter, indicating a year-over-year change of +33.3% [18]. - Confluent's revenues are expected to be $277.76 million, up 18.2% from the previous year, with an Earnings ESP of +10.2%, suggesting a likely beat of the consensus EPS estimate [19].

Core Viewpoint - Growth investors are increasingly focused on stocks with above-average financial growth, but identifying such stocks can be challenging due to inherent risks and volatility [1] Group 1: AppFolio's Growth Potential - AppFolio (APPF) is currently recommended as a cutting-edge growth stock by the Zacks Growth Style Score system, which evaluates a company's real growth prospects beyond traditional metrics [2] - The stock has a favorable Growth Score and a top Zacks Rank, indicating strong potential for growth investors [2][11] Group 2: Earnings Growth - AppFolio has a historical EPS growth rate of 15%, with projected EPS growth of 17.9% this year, surpassing the industry average of 17.6% [5] - Double-digit earnings growth is preferred by growth investors as it signals strong future prospects [4] Group 3: Cash Flow Growth - AppFolio's year-over-year cash flow growth stands at an impressive 170.5%, significantly higher than the industry average of -18% [6] - The company's annualized cash flow growth rate over the past 3-5 years is 16.5%, compared to the industry average of 15% [7] Group 4: Earnings Estimate Revisions - The current-year earnings estimates for AppFolio have been revised upward, with the Zacks Consensus Estimate increasing by 0.3% over the past month [9] - Positive trends in earnings estimate revisions are correlated with near-term stock price movements, further validating AppFolio's growth potential [8] Group 5: Overall Assessment - AppFolio has achieved a Zacks Rank of 2 (Buy) and a Growth Score of B, indicating it is a solid choice for growth investors [11]