APPFOLIO INC

On February 10, 2023, a lawsuit was filed in the First Judicial District Court of New Mexico, Murphy, et al. v. AppFolio, Inc., et al. (No. D-101-CV-2022-02100), naming us as a defendant and alleging certain violations of the New Mexico Unfair Practices Act and negligent misrepresentation in connection with our tenant screening service (the “Murphy Litigation”). In late November 2023, the parties agreed to settle the Murphy Litigation and plan to file a notice of settlement with the court. AppFolio did not admit any wrongdoing in connection with the settlement of the Murphy Litigation.

The Company has assessed the potential liabilities related to this matter and has determined that it is probable a loss will be incurred. As of December 31, 2023, the Company has recorded a liability of $7.0 million in Accrued Expenses related to the potential loss in connection with the Murphy Litigation. The Company expects that this loss will be covered by existing insurance policies.

In addition to the foregoing, from time to time, we are involved in various other investigative inquiries, legal proceedings and disputes arising from or related to matters incident to the ordinary course of our business activities, including actions with respect to intellectual property, employment, labor, regulatory and contractual matters. Although the results of such investigative inquiries, legal proceedings and other disputes cannot be predicted with certainty, we believe that we are not currently a party to any matters which, if determined adversely to us, would, individually or taken together, have a material adverse effect on our business, operating results, financial condition or cash flows. However, regardless of the merit of any matters raised or the ultimate outcome, investigative inquiries, legal proceedings and other disputes may generally have an adverse impact on us as a result of defense and settlement costs, diversion of management resources, and other factors.

For additional information regarding legal proceedings, refer to Note 11, Commitments and Contingencies of our Consolidated Financial Statements.