AppFolio(APPF) - 2025 Q2 - Quarterly Report

FORM 10-Q Filing Information This section provides the official filing details for AppFolio, Inc.'s Quarterly Report on Form 10-Q Registrant Information 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] - 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] - AppFolio, Inc. is classified as a large accelerated filer[3] Shares Outstanding 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 This section cautions that future results may differ from forward-looking statements due to inherent risks and uncertainties Forward-Looking Statements Disclosure 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] - 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] - 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] PART I. FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Condensed Consolidated Financial Statements (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 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 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) 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 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 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 This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1. Nature of Business 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] - The company's services enable customers to connect communities, increase operational efficiency, deliver exceptional customer experiences, and improve financial and operational performance[25] Note 2. Summary of Significant Accounting Policies 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] - 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] - The company operates as a single operating and reportable segment, with the CEO as the CODM assessing performance at the consolidated level[30] Note 3. Investment Securities and Fair Value Measurements 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] Note 4. Accrued Employee Expenses 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 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] Note 6. Commitments and Contingencies 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] - Estimated liability for insurance claims was $4.7 million as of June 30, 2025, up from $3.9 million at December 31, 2024[46] - 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] Note 7. Share Repurchase Program 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] - 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] - 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] Note 8. Stock-Based Compensation 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] Note 9. Income Taxes 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] - A valuation allowance against deferred tax assets was released at December 31, 2024, due to sufficient positive evidence of future realization[57] Note 10. Revenue and Other Information 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 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] - 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] 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] Key Components of Results of Operations 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][65][66] - 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] - 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][72] Results of Operations This section analyzes the company's financial performance across various income statement line items Revenue 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] - 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] Cost of Revenue (Exclusive of Depreciation and Amortization) 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] - 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] Sales and Marketing 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] - Sales and marketing expense is expected to remain relatively flat as a percentage of revenue for the year ending December 31, 2025[80] Research and Product Development 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] - Research and product development expenses are expected to remain relatively flat as a percentage of revenue for the year ending December 31, 2025[82] General and Administrative 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] - General and administrative expenses are expected to remain relatively flat as a percentage of revenue for the year ending December 31, 2025[85] Depreciation and Amortization 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] - Depreciation and amortization expenses are expected to remain relatively flat as a percentage of revenue for the year ending December 31, 2025[87] Interest Income, Net 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] Provision for income taxes 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] - 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] Liquidity and Capital Resources 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] - Existing liquidity is believed to be sufficient to meet working capital and capital expenditure requirements for at least the next twelve months[92] - Future capital requirements depend on market acceptance, customer growth, new product introductions, and strategic investments, potentially requiring additional equity or debt financing[93][94] Cash Flows 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 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] Investing Activities 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][100] - 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] Financing Activities 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][102] - Increase primarily due to repurchases of Class A common stock[102] Critical Accounting Policies and Estimates 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] Item 3. Quantitative and Qualitative Disclosures about Market Risk 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] - 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] Item 4. Controls and Procedures 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] - No material changes in internal control over financial reporting occurred during the period covered by this Quarterly Report[108] PART II. OTHER INFORMATION This part includes disclosures on legal proceedings, risk factors, equity sales, and other significant corporate information Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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][113][114] - 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][116] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] Item 5. Other Information 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 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] - 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][122] - 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] Appointment of Principal Accounting Officer 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] - Mr. Rigler joined AppFolio in March 2025 as Vice President of Accounting, with prior finance leadership roles at Salesforce, Inc[129] - 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] Item 6. Exhibits 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] SIGNATURES This section contains the official certifications and signatures for the submitted Quarterly Report Report Signatures 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]