APPFOLIO INC
For the period ended Mar 31, 2026. Filed Apr 23, 2026.
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.
Mar 31, 2026 · Filed Apr 23, 2026
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 2025-09-30; filed 2025-10-30.
0001433195-25-000142
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-04-23.
0001433195-26-000023
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 67 previous paragraphs and 84 current paragraphs.
41 unchanged; 22 reworded; 21 added; 3 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 9 previous and 10 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 (21)
Current report
Financial Highlights for the First Quarter of 2026
Current report
•Revenue grew 20% year-over-year to $262.2 million.
Current report
•Total property management units under management grew 8% year-over-year to 9.5 million.
Current report
•GAAP operating income was $50.7 million, or 19.4% of revenue, compared to GAAP operating income of $33.8 million, or 15.5% of revenue in Q1 2025.
Current report
•Non-GAAP operating income was $71.5 million, or 27.3% of revenue, compared to non-GAAP operating income of $53.0 million, or 24.3% of revenue in Q1 2025.
Current report
•Net cash provided by operating activities was $34.3 million, or 13.1% of revenue, compared to $38.5 million, or 17.7% of revenue in Q1 2025.
Current report
•Repurchased 703 thousand shares of the Company's Class A common stock for $125 million.
Current report
Key Business Metric
Current report
Other revenue includes fees from one-time services related to the implementation of our software solutions and other recurring or one-time fees related to our customers who are not otherwise using our Subscription Services. This includes legacy customers of businesses we have acquired where the customers haven't migrated to our Subscription Services. The fees for implementation and data migration services are billed upon signing our core subscription contract and are recognized as revenue in the period the service is rendered. Other services are billed when the services rendered are completed and delivered to the customer or billed in advance and deferred over the subscription period.
Current report
General and administrative expense stayed relatively flat for the three months ended March 31, 2026, compared to the same period in the prior year.
Current report
Depreciation and amortization expense for the three months ended March 31, 2026 decreased, compared to the same period in the prior year as various assets have reached the end of their useful life.
Current report
Non-GAAP Financial Measures
Current report
To supplement our Condensed Consolidated Financial Statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States ("GAAP"), this Annual Report contains information regarding our non-GAAP income from operations ("Non-GAAP Operating Income") and non-GAAP operating margin ("Non-GAAP Operating Margin"), each of which constitutes a non-GAAP financial measure. We use these non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
Current report
•Non-GAAP Operating Income excludes certain non-cash or non-recurring items, including stock-based compensation expense, amortization of stock-based compensation capitalized in software development costs, and amortization of purchased intangibles, as described below. Non-GAAP Operating Margin is calculated as Non-GAAP Operating Income as a percentage of revenue.
Current report
We use each of these non-GAAP financial measures internally to assess and compare operating results across reporting periods, for internal budgeting and forecasting purposes, and to evaluate our financial performance. We believe these non-GAAP financial measures also provide useful supplemental information to investors and facilitate the analysis of our operating results and comparison of operating results across reporting periods.
Current report
In particular, we believe these non-GAAP financial measures are useful to investors and others in assessing our operating performance due to the following factors:
Current report
•Stock-based compensation expense and amortization of stock-based compensation capitalized in software development costs. We utilize stock-based compensation to attract and retain employees. It is principally aimed at aligning their interests with those of our stockholders while ensuring long-term retention, rather than to address operational performance for any particular period. As a result, stock-based compensation expenses vary for reasons that are generally unrelated to financial and operational performance in any particular period.
Current report
•Amortization of purchased intangibles. We view amortization of purchased intangible assets as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are evaluated for impairment regularly, amortization of the cost of purchased intangibles is an expense that is not typically affected by operations during any particular period.
Current report
Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies may calculate non-GAAP financial results differently. In addition, there are limitations in using non-GAAP financial measures because non-GAAP financial measures are not prepared in accordance with GAAP and can exclude expenses that may have a material impact on our reported financial results. As such, non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. A reconciliation of income from operations, the most comparable GAAP measure, to Non-GAAP operating income and operating margin, is provided in the table below. We encourage investors to review the reconciliation of these historical non-GAAP financial measures to their most directly comparable GAAP financial measures.
Current report
Reconciliation from GAAP to Non-GAAP Results
Current report
(in thousands except percentages)
Removed paragraphs (3)
Previous report
General and administrative expense increased for the three and nine months ended September 30, 2025, compared to the same periods in the prior year. The increase was primarily due to a $7.4 million and $13.4 million increase in personnel-related costs, including stock-based and performance-based compensation, driven by headcount growth, for the respective three and nine-month periods.
Previous report
Depreciation and amortization expense for the three and nine months ended September 30, 2025 increased, compared to the same periods in the prior year, primarily due to amortization of the intangible assets recognized from the acquisition of Move EZ, Inc. in the fourth quarter of 2024.
Previous report
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law. Included in this legislation are provisions that allow for the immediate expensing of domestic United States research and development expenses, immediate expensing of certain capital expenditures, and other changes to the U.S. taxation of profits derived from foreign operations. We believe the impact of the relevant OBBBA provisions to our income tax expense is not material and are currently expect a favorable impact to our cash flows. We will continue to monitor and assess the impact of OBBBA on our Condensed Consolidated Financial Statements.
Reworded paragraphs (22)
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 9.1 million and 8.5 million property management units under management as of September 30, 2025 and 2024, 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 9.5 million and 8.8 million property management units under management as of March 31, 2026 and 2025, respectively.
Previous wording
Our core solutions and certain of our Value Added Services are offered on a subscription basis. The subscription fees for our core solutions vary by property type and are designed to scale with the size of our customers’ businesses. We recognize revenue for subscription-based services on a straight-line basis over the contract term beginning on the date that our service is made available. We generally invoice monthly or, to a lesser extent, annually in advance of a subscription period.
Current wording
Our Subscription Services and certain of our Value Added Services are offered on a subscription basis. The subscription fees for our services vary by property type and are designed to scale with the size of our customers’ businesses. We recognize revenue for subscription-based services on a straight-line basis over the contract term beginning on the date that our service is made available. We generally invoice monthly or, to a lesser extent, annually in advance of a subscription period.
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 also generate revenue from the legacy customers of businesses we acquire that provide standalone services outside of our platform. Revenue derived from these services is recorded in Other revenue. As of September 30, 2025 and 2024, we had 21,759 and 20,403 property management customers, respectively.
Current wording
As of March 31, 2026 and 2025, we had 22,520 and 21,105 property management customers, respectively.
Previous wording
Sales and Marketing. Sales and marketing expense consists of personnel-related costs for our employees focused on sales and marketing (including salaries, sales commissions, cash bonuses, benefits, and stock-based compensation), costs associated with sales and marketing activities, and allocated shared and other costs. Marketing activities include advertising, online lead generation, lead nurturing, customer and industry events, and the creation of industry-related content and collateral.
Current wording
Sales and Marketing. Sales and marketing expense consists of personnel-related costs for our employees focused on sales and marketing (including salaries, sales commissions, cash bonuses, benefits, and stock-based compensation), costs associated with sales and marketing activities, and allocated shared and other costs. Marketing activities include advertising, online lead generation, lead nurturing, customer and industry events, and the creation of industry-related content and collateral. We focus our sales and marketing efforts on generating awareness of our software solutions, creating sales leads, establishing and promoting our brands, and cultivating an educated community of successful and vocal customers.
Previous wording
The increase in revenue for the three and nine months ended September 30, 2025, compared to the same periods 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, 2025, we also experienced growth of 7% in the number of property management units under management compared to the same period 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 months ended March 31, 2026, 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 months ended March 31, 2026, we also experienced growth of 8% in the number of property management units under management compared to the same period in the prior year, which drove growth in users of our Subscription Services and Value Added Services.
Previous wording
Cost of revenue (exclusive of depreciation and amortization) increased for the three and nine months ended September 30, 2025, compared to the same periods in the prior year. The increase was primarily driven by higher third-party service provider costs of $15.4 million and $41.3 million, respectively, due to increased adoption and usage of our Value Added Services, combined with a $3.4 million and $4.6 million increase in personnel-related costs, including stock-based and performance-based compensation, to support growth in the business, for the respective three and nine-month periods.
Current wording
Cost of revenue (exclusive of depreciation and amortization) increased for the three months ended March 31, 2026, compared to the same period in the prior year. The increase was primarily driven by higher third-party service provider costs of $14.6 million due to increased adoption and usage of our Value Added Services for the respective three-month periods.
Previous wording
Sales and marketing expense increased for the three and nine months ended September 30, 2025, compared to the same periods in the prior year. The increase was primarily due to a $8.1 million and $17.4 million increase in personnel-related costs, including stock-based and performance-based compensation, to support growth in the business, combined with a $1.1 million and $3.8 million increase in advertising and promotion expense due to increased targeted go-to-market investment, for the respective three and nine-month periods.
Current wording
Sales and marketing expense increased for the three months ended March 31, 2026, compared to the same period in the prior year. The increase was primarily due to a $4.5 million increase in personnel-related costs, including stock-based and performance-based compensation, to support growth in the business, combined with a $1.1 million increase in advertising and promotion expense due to increased targeted go-to-market investment, for the respective three-month periods.
Previous wording
We expect sales and marketing expense for the year ending December 31, 2025 to slightly increase as a percentage of revenue compared to the year ended December 31, 2024.
Current wording
We expect sales and marketing expense for the year ending December 31, 2026 to stay relatively flat as a percentage of revenue compared to the year ended December 31, 2025.
Previous wording
Research and product development expense increased for the three and nine months ended September 30, 2025, compared to the same periods in the prior year. The increase was primarily due to a $11.1 million and $20.3 million increase in personnel-related costs, including stock-based and performance-based compensation, net of capitalized software development costs driven by headcount growth, for the respective three and nine-month periods.
Current wording
Research and product development expense increased for the three months ended March 31, 2026, compared to the same period in the prior year. The increase was primarily due to a $4.8 million increase in personnel-related costs, including stock-based and performance-based compensation, net of capitalized software development costs driven by headcount growth, for the respective three-month periods.
Previous wording
Interest income for the three and nine months ended September 30, 2025 decreased, compared to the same periods in the prior year, primarily due to the sale of available-for-sale investment securities and lower interest rates.
Current wording
Interest income for the three months ended March 31, 2026 decreased, compared to the same period in the prior year, primarily due to the sale of available-for-sale investment securities and lower interest rates.
Previous wording
For the three and nine months ended September 30, 2025, we recorded income tax expense of $3.1 million and $14.5 million, representing an effective tax rate of 8.4% and 12.5%, respectively. Our effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to excess tax benefits from stock-based compensation and research & development tax credits, partially offset by state income taxes and non-deductible officers' compensation. For the three and nine months ended September 30, 2024, our effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to changes in valuation allowance against deferred tax assets and excess tax benefits from stock-based compensation.
Current wording
For the three months ended March 31, 2026, we recorded income tax expense of $10.7 million, representing an effective tax rate of 20.1%. Our effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to research & development tax credits, partially offset by state income taxes and non-deductible officers' compensation. For the three months ended March 31, 2025, our effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to excess tax benefits from stock-based compensation and research & development tax credits, partially offset by state income taxes and non-deductible officers' compensation.
Previous wording
The decrease in our effective tax rate for the three months ended September 30, 2025, as compared to the same period in 2024, is primarily due to a valuation allowance released at December 31, 2024 and an increase in tax benefits from stock-based compensation and research & development tax credits. The decrease in our effective tax rate for the nine months ended September 30, 2025, as compared to the same period in 2024, is primarily attributable to changes in valuation allowance and increase in tax benefits from research & development tax credits partially offset by a decrease in excess tax benefits from stock-based compensation.
Current wording
The increase in our effective tax rate for the three months ended March 31, 2026, as compared to the same period in 2025, is primarily driven by higher pre-tax income and a decrease in excess tax benefits from stock-based compensation.
Previous wording
Our principal sources of liquidity continue to be cash, cash equivalents, and investment securities, as well as cash flows generated from our operations. As of September 30, 2025, we had $200.1 million in cash, cash equivalents, and investment securities. We have financed our operations primarily through cash generated from operations.
Current wording
Our principal sources of liquidity continue to be cash, cash equivalents, and investment securities, as well as cash flows generated from our operations. As of March 31, 2026, we had $151.7 million in cash, cash equivalents, and investment securities. We have financed our operations primarily through cash generated from operations.
Previous wording
In addition, to optimize our capital structure, on September 30, 2025, we entered into the Credit Facility which provides for a $150.0 million senior secured revolving credit facility, including sublimits of $25.0 million for letters of credit and $25.0 million for swingline loans, and is scheduled to mature on September 30, 2030. As of September 30, 2025, we had no outstanding borrowings under the Credit Facility, and were in compliance with the covenants under the Credit Facility. For more information regarding the Credit Facility, refer to "Credit Facility" in Note 5, Commitments and Contingencies, of our Condensed Consolidated Financial Statements.
Current wording
In addition, to optimize our capital structure, on September 30, 2025, we entered into the Credit Facility which provides for a $150.0 million senior secured revolving credit facility, including sublimits of $25.0 million for letters of credit and $25.0 million for swingline loans, and is scheduled to mature on September 30, 2030. We did not draw on the Credit Facility during the first quarter of 2026, and as of March 31, 2026, we had no outstanding borrowings under the Credit Facility and were in compliance with the covenants under the Credit Facility. For more information regarding the Credit Facility, refer to "Credit Facility" in Note 6, Commitments and Contingencies, of our Condensed Consolidated Financial Statements.
Previous wording
Our future capital requirements depend on many factors, including continued market acceptance of our software solutions; changes in the number of our customers and adoption and utilization of our Value Added Services by new and existing customers; the timing and extent of the introduction of new core functionality, products and Value Added Services; and the timing and extent of our investments across our organization.
Current wording
Our future capital requirements depend on many factors, including continued market acceptance of our software solutions; changes in the number of our customers and adoption and utilization of our Value Added Services by new and existing customers; the timing and extent of the introduction of new core functionality, products and Value Added Services; and the timing and extent of our investments across our organization, including acquisitions of businesses and technologies.
Previous wording
During the first quarter of 2025, we substantially exhausted the shares remaining available for purchase under the 2019 Stock Repurchase Program. On April 23, 2025, our Board authorized the repurchase of up to $300.0 million of shares of our Class A common stock from time to time pursuant to the 2025 Stock Repurchase Program. For more information regarding our repurchases under the 2019 Stock Repurchase Program and the 2025 Stock Repurchase Program, refer to Note 6, Share Repurchase Program, of our Condensed Consolidated Financial Statements of this Quarterly Report.
Current wording
During the first quarter of 2026, we repurchased 702,502 shares of our Class A common stock under the 2025 Stock Repurchase Program at an average purchase price of $177.95 per share, inclusive of broker commissions, for an aggregate repurchase price of $125.0 million, which was recorded as a reduction to stockholders' equity. As of March 31, 2026, the amount remaining available for repurchases under the 2025 Stock Repurchase Program was $125.0 million. For more information regarding our share repurchases, refer to Note 7, Share Repurchase Program, of our Condensed Consolidated Financial Statements of this Quarterly Report.
Previous wording
Our primary source of operating cash inflows is cash collected from our customers in connection with their use of our core solutions and Value Added Services. Our primary uses of cash from operating activities are for personnel-related expenditures and third-party costs incurred to support the delivery of our software solutions.
Current wording
Our primary source of operating cash inflows is cash collected from our customers in connection with their use of our Subscription Services and Value Added Services. Our primary uses of cash from operating activities are for personnel-related expenditures and third-party costs incurred to support the delivery of our software solutions.
Previous wording
The net increase in cash provided by operating activities for the nine months ended September 30, 2025, compared to the same period in the prior year, was primarily due to higher cash collections from customers relative to the increase in operating expenditures.
Current wording
The net increase in cash provided by operating activities for the three months ended March 31, 2026, compared to the same period in the prior year, was primarily due to higher cash collections from customers relative to the increase in operating expenditures.
Previous wording
Cash provided by (used in) investing activities is generally composed of the cash paid in purchases of investment securities, maturities and sales of investment securities, purchases of property and equipment, business acquisition, net of cash acquired, and additions to capitalized software development.
Current wording
Cash provided by investing activities is generally composed of the cash paid in purchases of investment securities, maturities and sales of investment securities, purchases of property and equipment, business acquisition, net of cash acquired, and additions to capitalized software development.
Previous wording
The net increase in cash provided by (used in) investing activities for the nine months ended September 30, 2025, compared to the same period in the prior year, was primarily due to higher sales and maturities of investment securities, and lower purchases of available-for-sale investment securities, which was partially offset by cash paid for purchasing our strategic investment in Second Nature. For additional information, see Note 3. Investment Securities and Fair Value Measurements, of our Condensed Consolidated Financial Statements.
Current wording
The net increase in cash provided by investing activities for the three months ended March 31, 2026, compared to the same period in the prior year, was primarily due to higher sales and maturities of investment securities, and lower purchases of available-for-sale investment securities. For additional information, see Note 4. Investment Securities and Fair Value Measurements, of our Condensed Consolidated Financial Statements.
Previous wording
The net increase in cash used in financing activities for the nine months ended September 30, 2025, compared to the same period in the prior year, was primarily due to repurchases of our Class A common stock.
Current wording
The net increase in cash used in financing activities for the three months ended March 31, 2026, compared to the same period in the prior year, was primarily due to repurchases of our Class A common stock.
Previous 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, except the critical accounting policies and estimates for Strategic Investments, which are disclosed in Note 2, Summary of Significant Accounting Policies of our Condensed Consolidated Financial Statements.
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.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
We focus our sales and marketing efforts on generating awareness of our software solutions, creating sales leads, establishing and promoting our brands, and cultivating an educated community of successful and vocal customers.