APPFOLIO INC
For the period ended Sep 30, 2024. Filed Oct 25, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 25, 2024
APPF$230.74-1.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-07-26.
0001433195-24-000106
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-25.
0001433195-24-000127
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 66 previous paragraphs and 66 current paragraphs.
41 unchanged; 19 reworded; 6 added; 6 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 9 previous and 9 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
For the three and nine months ended September 30, 2024, the cost of revenue (exclusive of depreciation and amortization) increased, primarily due to higher expenditures related to third-party service providers for delivering our Value Added Services, which increased by $10.4 million and $30.6 million, respectively, compared to the same period in the prior year. The increases in expenditures related to third-party service providers were (1) driven by greater adoption and utilization of our Value Added Services and (2) partially offset by decreases of $2.5 million and $2.8 million for the three and nine months ended September 30, 2024, respectively, in personnel-related costs, including stock-based and performance-based compensation. The decreases included $2.4 million in severance and related personnel costs we incurred from the workforce reduction in the third quarter of 2023.
Current report
Sales and marketing expense for the three and nine months ended September 30, 2024 decreased, compared to the same period in the prior year, primarily due to reductions of $3.7 million and $7.2 million, respectively, in personnel-related costs, including stock-based and performance-based compensation. The reductions were driven by reduced headcount and $3.8 million in severance and related personnel costs we incurred from the workforce reduction in the third quarter of 2023.
Current report
Research and product development expense decreased slightly for the three months ended September 30, 2024, compared to the same period in the prior year, primarily due to a $1.5M reduction in personnel-related costs, including stock-based and performance-based compensation. This included $3.4 million in severance and related personnel costs we incurred from the workforce reduction in the third quarter of 2023.
Current report
Research and product development expense increased for the nine months ended September 30, 2024, compared to the same period in the prior year, primarily due to a $3.2 million increase in allocated shared and other costs, driven by higher technology costs. This increase in allocated shared and other costs was partially offset by a $1.6 million reduction in personnel-related costs, including stock-based and performance-based compensation. This reduction included $3.4 million in severance and related personnel costs we incurred from the workforce reduction in the third quarter of 2023.
Current report
General and administrative expense decreased for the three months ended September 30, 2024, compared to the same period in the prior year, primarily due to a $3.4 million reduction in personnel-related costs, including stock-based and performance-based compensation. The reduction included $2.5 million in severance and related personnel costs we incurred from the workforce reduction in the third quarter of 2023.
Current report
Provision for (benefit from) Income Taxes
Removed paragraphs (6)
Previous report
Cost of revenue (exclusive of depreciation and amortization) for the three and six months ended June 30, 2024 increased primarily due to increases in expenditures to third-party service providers related to the delivery of our Value Added Services of $11.6 million and $20.1 million, respectively, compared to the same period in the prior year. This increase was associated with increased adoption and utilization of our Value Added Services during the period and partially offset by the lower headcount resulting from improved efficiency.
Previous report
Sales and marketing expense for the three months ended June 30, 2024 stayed flat compared to the same period in the prior year. Sales and marketing expense for the six months ended June 30, 2024 decreased primarily due to $3.5 million decrease in personnel-related costs, including stock-based and performance-based compensation, driven by the lower headcount resulting from our improved efficiency.
Previous report
The increase in stock-based compensation for the three months ended June 30, 2024 was primarily due to the reversal of expense for unvested equity awards as a result of changes in our leadership team in the second quarter of 2023.
Previous report
Research and product development expense for the three and six months ended June 30, 2024 increased compared to the same period in the prior year, primarily due to an increase in allocated shared and other costs, of $1.6 million and $2.6 million, respectively, driven by expenses supporting our growth.
Previous report
General and administrative expense for the three months ended June 30, 2024 increased compared to the same period in the prior year primarily due to a gain on lease modification of $1.9 million recognized in the three months ended June 30, 2023, that did not recur in 2024.
Previous report
Provision for Income Taxes
Reworded paragraphs (19)
Previous wording
The following discussion and analysis of our financial condition and results of operations should be read together with our Condensed Consolidated Financial Statements and the related notes included elsewhere in this Quarterly Report and in our Annual Report.
Current wording
The following discussion and analysis of our financial condition, results of operations and liquidity should be read together with our Condensed Consolidated Financial Statements and the related notes included elsewhere in this Quarterly Report and in our Annual Report.
Previous wording
Property management units under management. We believe that our ability to increase our number of property management units under management is an indicator of our market penetration, growth, and potential future business opportunities. We define property management units under management as active or committed units under management at the period end date. We had 8.4 million and 7.7 million property management units under management as of June 30, 2024 and 2023, respectively.
Current wording
Property management units under management. We believe that our ability to increase our number of property management units under management is an indicator of our market penetration, growth, and potential future business opportunities. We define property management units under management as active or committed units under management at the period end date. We had 8.5 million and 7.8 million property management units under management as of September 30, 2024 and 2023, respectively.
Previous wording
In addition, we charge our customers for assistance onboarding onto our core solutions and for certain other non-recurring services. We generally invoice for these other services in advance of the services being completed and recognize revenue in the period the service is rendered. We generate revenue from the legacy customers of previously acquired businesses by providing services outside of our property management core solution platform. Revenue derived from these services is recorded in Other revenue. As of June 30, 2024 and 2023, we had 20,167 and 19,145 property management customers, respectively.
Current wording
In addition, we charge our customers for assistance onboarding onto our core solutions and for certain other non-recurring services. We generally invoice for these other services in advance of the services being completed and recognize revenue in the period the service is rendered. We generate revenue from the legacy customers of previously acquired businesses by providing services outside of our property management core solution platform. Revenue derived from these services is recorded in Other revenue. As of September 30, 2024 and 2023, we had 20,403 and 19,418 property management customers, respectively.
Previous wording
Cost of Revenue (Exclusive of Depreciation and Amortization). Many of our Value Added Services are facilitated by third-party service providers. Cost of revenue paid to these third-party service providers includes the cost of electronic interchange and payment processing-related services to support our payments services, the cost of credit reporting services for our tenant screening services, and various costs associated with our risk mitigation service providers. These third-party costs vary both in amount and as a percent of revenue for each Value Added Service offering. Cost of revenue also consists of personnel-related costs for our employees focused on customer service and the support of our operations (including salaries, performance-based compensation, benefits, and stock-based compensation), platform infrastructure costs (such as data center operations and hosting-related costs), and allocated shared and other costs. Cost of revenue excludes depreciation of property and equipment, amortization of capitalized software development costs and amortization of intangible assets.
Current wording
Cost of Revenue (Exclusive of Depreciation and Amortization). Many of our Value Added Services are facilitated by third-party service providers. Cost of revenue paid to these third-party service providers includes the cost of electronic interchange and payment processing-related services to support our payments services, the cost of credit reporting services for our tenant screening services, and various costs associated with our risk mitigation service providers. These third-party costs vary both in amount and as a percent of revenue for each Value Added Service offering. Cost of revenue also includes personnel-related costs for our employees focused on customer service and the support of our operations (including salaries, performance-based compensation, benefits, and stock-based compensation), platform infrastructure costs (such as data center operations and hosting-related costs), and allocated shared and other costs. Cost of revenue excludes depreciation of property and equipment, amortization of capitalized software development costs and amortization of intangible assets.
Previous wording
Provision for income taxes. Provision for income taxes consists of federal and state income taxes in the United States.
Current wording
Provision for (benefit from) income taxes. Provision for (benefit from) income taxes consists of federal and state income taxes in the United States.
Previous wording
The increase in revenue for the three and six months ended June 30, 2024, compared to the same period in the prior year, was primarily attributable to an increase in the usage of our payments, tenant screening, and risk mitigation services. During the three and six month periods ended June 30, 2024, we also experienced growth of 9% in the number of property management units under management compared to the same periods in the prior year, which drove growth in users of our subscription and usage-based services.
Current wording
The increase in revenue for the three and nine months ended September 30, 2024, compared to the same period in the prior year, was primarily attributable to an increase in the usage of our payments, tenant screening, and risk mitigation services. During the three and nine- month periods ended September 30, 2024, we also experienced growth of 9% in the number of property management units under management compared to the same periods in the prior year, which drove growth in users of our subscription and usage-based services.
Previous wording
Our payment services experienced increased usage during the comparative periods as residents, property managers, and owners transacted more business online.
Current wording
Our payment services experienced increased usage during the comparative periods as residents and property managers transacted more business online.
Previous wording
General and administrative expense for the six months ended June 30, 2024 decreased compared to the same period in the prior year primarily due to a $15.3 million decrease in personnel-related costs, including stock-based and performance-based compensation. The decrease in personnel-related costs was primarily due to severance costs associated with our former Chief Executive Officer's separation in the first quarter of 2023. The decrease was partially offset by $4.3 million gain on lease modifications recognized in the six months ended June 30, 2023, and an increase in allocated shared and other costs of $1.9 million, driven by expenses to support our growth.
Current wording
General and administrative expense decreased for the nine months ended September 30, 2024, compared to the same period in the prior year, primarily due to a $18.8 million reduction in personnel-related costs, including stock-based and performance-based compensation. which was partially offset by a $6.9 million increase in allocated shared and other costs, The decrease in personnel-related costs was primarily due to severance costs associated with our former Chief Executive Officer's separation in the first quarter of 2023 and the severance related costs we incurred from the workforce reduction in the third quarter of 2023. The increase in allocated shared and other costs was primarily due to a $4.3 million decrease in gains related to lease modifications recognized in the nine months ended September 30, 2023, and an increase in allocated shared and other costs of $2.6 million, driven by expenses to support our growth.
Previous wording
Depreciation and amortization expense for the three and six months ended June 30, 2024 decreased, compared to the same period in the prior year, primarily due to decreased amortization expense associated with capitalized software development and intangible balances.
Current wording
Depreciation and amortization expense for the three and nine months ended September 30, 2024 decreased, compared to the same period in the prior year, primarily due to decreased amortization expense associated with capitalized software development and intangible balances.
Previous wording
We expect depreciation and amortization expenses for the year ending December 31, 2024 to decrease as a percentage of revenue compared to the year ended December 31, 2023 due to a decrease in amortization of accumulated capitalized software development balances.
Current wording
We expect depreciation and amortization expenses for the year ending December 31, 2024 to decrease as a percentage of revenue compared to the year ended December 31, 2023 due to a decrease in amortization of accumulated capitalized software development costs and intangible assets balances.
Previous wording
Interest income for the three and six months ended June 30, 2024 increased, compared to the same period in the prior year, primarily due to higher interest rates and purchases of available-for-sale investment securities.
Current wording
Interest income for the three and nine months ended September 30, 2024 increased, compared to the same period in the prior year, primarily due to higher interest rates and purchases of available-for-sale investment securities.
Previous wording
For the three months ended June 30, 2024, our effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to a change in valuation allowance against deferred tax assets, state income taxes and non-deductible officers' compensation partially offset by excess tax benefits from stock-based compensation. For the six months ended June 30, 2024, our effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to excess tax benefits from stock-based compensation. Our effective tax rate for the three and six months ended June 30, 2023 differs from the U.S. federal statutory rate of 21% primarily due to a change in valuation allowance against deferred tax assets, non-deductible officers' compensation and state income taxes, partially offset by tax benefits from research and development tax credits.
Current wording
For the three months ended September 30, 2024, our effective tax rate differed from the U.S. federal statutory rate of 21% primarily due to a change in valuation allowance against deferred tax assets, state income taxes and non-deductible officers' compensation partially offset by excess tax benefits from stock-based compensation. For the nine months ended September 30, 2024, our effective tax rate differed from the U.S. federal statutory rate of 21% primarily due to excess tax benefits from stock-based compensation. Our effective tax rates for the three and nine months ended September 30, 2023 differed from the U.S. federal statutory rate of 21% primarily due to the change in valuation allowance against deferred tax assets, non-deductible officers' compensation and state income taxes, partially offset by tax benefits from stock-based compensation research and development tax credits.
Previous wording
Our effective tax rate for the three and six months ended June 30, 2024, as compared to the same period in 2023, is significantly different as a result of the increase in our pre-tax income in the current year.
Current wording
Our effective tax rates for the three and nine months ended September 30, 2024, as compared to the same periods in 2023, are significantly different primarily due to the substantial increase in our pre-tax income in the current year and changes in discrete tax benefits year over year.
Previous wording
Our principal sources of liquidity continue to be cash, cash equivalents, and investment securities totaling $281.3 million, as well as cash flows generated from our operations. We have financed our operations primarily through cash generated from operations. We believe that our existing cash and cash equivalents, investment securities, and cash generated from operating activities will be sufficient to meet our working capital and capital expenditure requirements for at least the next twelve months.
Current wording
Our principal sources of liquidity continue to be cash, cash equivalents, and investment securities totaling $331.4 million, as well as cash flows generated from our operations. We have financed our operations primarily through cash generated from operations. We believe that our existing cash and cash equivalents, investment securities, and cash generated from operating activities will be sufficient to meet our working capital and capital expenditure requirements for at least the next twelve months.
Previous wording
The net increase in cash provided by operating activities for the six months ended June 30, 2024, compared to the same period in the prior year, was primarily due to an increase in cash collections from customers.
Current wording
The net increase in cash provided by operating activities for the nine months ended September 30, 2024, compared to the same period in the prior year, was primarily due to an increase in cash collections from customers.
Previous wording
Cash (used in) provided by investing activities is generally composed of purchases of investment securities, maturities of investment securities, purchases of property and equipment, and additions to capitalized software development.
Current wording
Cash used in investing activities is generally composed of purchases of investment securities, maturities of investment securities, purchases of property and equipment, and additions to capitalized software development.
Previous wording
The net increase in cash used in investing activities for the six months ended June 30, 2024, compared to the same period in the prior year, was primarily due to higher purchases of available-for-sale investment securities.
Current wording
The net increase in cash used in investing activities for the nine months ended September 30, 2024, compared to the same period in the prior year, was primarily due to higher purchases of available-for-sale investment securities.
Previous wording
The net increase in cash used in financing activities for the six months ended June 30, 2024, compared to the same period in the prior year, was primarily due to an increase in net share settlements for employee tax withholdings associated with the vesting of equity awards.
Current wording
The net increase in cash used in financing activities for the nine months ended September 30, 2024, compared to the same period in the prior year, was primarily due to an increase in net share settlements for employee tax withholdings associated with the vesting of equity awards.
Previous wording
There have been no changes to our critical accounting policies and estimates described in our Annual Report that have had a material impact on our Condensed Consolidated Financial Statements and related notes.
Current wording
There have been no material changes to our critical accounting policies and estimates described in our Annual Report that have had a material impact on our Condensed Consolidated Financial Statements and related notes.