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8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): November 9, 2015

AppFolio, Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation)

001-37468
26-0359894
(Commission File Number)
(IRS Employer Identification Number)

50 Castilian Drive
Goleta, CA 93117
(Address of principal executive offices)

Registrant’s telephone number, including area code: (805) 364-6093

N/A
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 




Item 2.02. Results of Operations and Financial Condition.

On November 9, 2015, AppFolio, Inc. (the “Company”) issued a press release announcing its financial results for its third fiscal quarter ended September 30, 2015. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information contained in this Item 2.02, including the press release attached as Exhibit 99.1 hereto, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that Section. Such information shall not be deemed to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing, except as otherwise expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits:

Exhibit
Number
 

Description
99.1
 
Press release issued on November 9, 2015.

 



SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
AppFolio, Inc.
 
 
 
 
 
Date: November 9, 2015
By:
/s/ Ida Kane
 
 
Name: Ida Kane
 
 
Title: Chief Financial Officer
 
 




EXHIBIT INDEX

Exhibit
Number
 

Description
99.1
 
Press release issued on November 9, 2015.


Exhibit



Exhibit 99.1

News Release


AppFolio, Inc. Announces Third Quarter 2015
Financial Results

SANTA BARBARA, Calif., November 9, 2015 (GLOBE NEWSWIRE) -- AppFolio, Inc. (NASDAQ: APPF), a leading provider of cloud-based business software solutions, today announced results for the third quarter ended September 30, 2015.

Third Quarter 2015 Highlights
•
Revenue was $20.3 million, an increase of 56% period-over-period
•
GAAP net loss was $4.8 million or a net loss of $0.14 per share and Non-GAAP net loss was $4.5 million, or a net loss of $0.13 per share
•
Increased property manager customers 42% year-over-year to 7,561 and 2.0 million units under management
•
Increased law firm customers 74% year-over-year to 5,566

“We are pleased with our continued strong performance, which we believe is a direct result of our focus on customer success,” commented Brian Donahoo, President and CEO of AppFolio. “To that end, we hosted over 700 property management customers at our Third Annual Customer Conference for three days of industry education seminars, networking events, and hands-on product demonstration and feedback sessions with AppFolio experts. We also announced the release of an innovative Common Area Maintenance (CAM) feature built for our commercial customers, as well as the upcoming launch of two new Value+ service offerings for our property management customers, which will enhance our platform, further highlight our commitment to helping our customers achieve success and expand our market opportunity.”

Revenue for the third quarter was $20.3 million, an increase of 56% period-over-period. GAAP net loss for the quarter was $4.8 million, or a net loss of $0.14 per share.

Non-GAAP net loss for the quarter was $4.5 million, or a net loss of $0.13 per share, based on a weighted average share count of 33.3 million shares outstanding. Non-GAAP net loss and non-GAAP net loss per share for the quarter exclude approximately $0.3 million in share-based compensation related expenses.

During the third quarter, we raised an additional $10.4 million in net proceeds in connection with the exercise in full by our underwriters of their option to purchase additional shares of our common stock in our initial public offering. As a result, the aggregate net proceeds from the initial public offering were approximately $75.4




million. In addition, we repaid in full $10.2 million in outstanding indebtedness. We closed the third quarter with $63.6 million in cash and cash equivalents and investment securities.

Financial Outlook
Based on information available as of November 9, 2015, we are updating our outlook for full year 2015 as indicated below.
•
Full year revenue is expected to be in the range of $74.6 million to $75.1 million.

•
Weighted average common shares outstanding are expected to be approximately 33.5 million in the fourth quarter and 21.5 million for the full fiscal year.

Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with U.S. Generally Accepted Accounting Principles, or GAAP, we provide investors with certain Non-GAAP financial measures, including Non-GAAP net loss and Non-GAAP net loss per share, which are financial measures that have not been prepared in accordance with GAAP. Non-GAAP net loss and non-GAAP net loss per share are defined as net loss and net loss per share, respectively, attributable to common stockholders before stock-based compensation expense.

We use these Non-GAAP financial measures internally in analyzing our financial results and believe they are useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance. The principal limitations of these Non-GAAP financial measures is that they exclude expenses that are required by GAAP to be recorded in our financial statements. These financial measures are not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. In addition, these financial measures may be different from Non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes. A reconciliation of the Non-GAAP financial measures to the most direct comparable GAAP measure has been provided in the financial statement tables included below in this press release.

We urge investors to review these reconciliations and not to rely on any single financial measure to evaluate our business.

Conference Call Information
As previously announced, we will host a conference call today, November 9, 2015, to discuss our third quarter financial results at 2:00 p.m. Pacific Time, 5:00 p.m. Eastern Time. A live webcast of the conference call will be available at http://ir.appfolioinc.com. The conference call can also be accessed by dialing 855-539-0896 (Domestic), or 412-455-6028 (International). The conference ID is 60355983. A replay will be available at 855-859-2056 (Domestic) and 404-537-3406 (International) until the end of day November 13, 2015. An archived webcast of this conference call will be available for 12 months on our website listed above.

About AppFolio, Inc.
AppFolio provides comprehensive, easy-to-use, cloud-based business software solutions for small and medium-sized businesses in various vertical markets. Our products include cloud-based property management software (AppFolio Property Manager) and cloud-based legal practice management software (MyCase). The Company was founded in 2006 and is headquartered in Santa Barbara, CA. Learn more at www.appfolioinc.com.





Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements are subject to considerable risks and uncertainties. Forward-looking statements include all statements that are not statements of historical fact contained in this press release, and can be identified by words such as “anticipates,” “believes,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “could,” “will,” “would,” or similar expressions and the negatives of those expressions. In particular, forward-looking statements contained in this press release relate to our future or assumed revenues and weighted-average outstanding shares, as well as the future expansion of our Value+ services.

Forward-looking statements represent our management’s current beliefs and assumptions based on information currently available. Forward-looking statements involve numerous known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Some of the risks and uncertainties that may cause our actual results to materially differ from those expressed or implied by these forward-looking statements are described in the section entitled “Risk Factors” in the Form 10-Q for the fiscal quarter ended June 30, 2015, which we filed with the Securities and Exchange Commission (the "SEC") on August 6, 2015, as well as in our other filings with the SEC. You should read this press release with the understanding that our actual future results may be materially different from the results expressed or implied by these forward looking statements.

Except as required by applicable law or the rules of the NASDAQ Stock Market, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.



Investor Relations Contact:
Erica Abrams, ir@appfolio.com, 805-364-6093





CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except par values)

 
 
September 30,
2015
 
December 31,
2014
Assets
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
11,758

 
$
5,412

Investment securities—current
 
28,151

 
—

Accounts receivable, net
 
2,238

 
1,191

Prepaid expenses and other current assets
 
2,571

 
1,204

Total current assets
 
44,718

 
7,807

Investment securities—noncurrent
 
23,704

 
—

Property and equipment, net
 
4,115

 
2,623

Capitalized software, net
 
8,916

 
5,509

Goodwill
 
6,737

 
4,998

Intangible assets, net
 
4,922

 
3,615

Other assets
 
1,079

 
882

Total assets
 
$
94,191

 
$
25,434

Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit)
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
$
2,403

 
$
2,088

Accrued employee expenses
 
6,519

 
3,150

Accrued expenses
 
3,303

 
1,721

Deferred revenue
 
4,442

 
3,772

Other current liabilities
 
572

 
2,797

Total current liabilities
 
17,239

 
13,528

Deferred revenue
 
—

 
8

Other liabilities
 
626

 
199

Total liabilities
 
17,865

 
13,735

Commitments and contingencies
 
 
 
 
Convertible preferred stock, Series A, B, B-1, B-2 and B-3, $0.0001 par value
 
—

 
63,166

Stockholders’ equity (deficit):
 
 
 
 
Preferred stock, $0.0001 par value
 
—

 
—

Class A common stock, $0.0001 par value
 
1

 
—

Class B common stock, $0.0001 par value
 
3

 
1

Additional paid-in capital
 
141,115

 
1,546

Accumulated other comprehensive loss
 
(1
)
 
—

Accumulated deficit
 
(64,792
)
 
(53,014
)
Total stockholders’ equity (deficit)
 
76,326

 
(51,467
)
Total liabilities, convertible preferred stock and stockholders’ equity (deficit)
 
$
94,191

 
$
25,434


 






CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share amounts)

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2015
 
2014
 
2015
 
2014
Revenue
$
20,305

 
$
13,024

 
$
54,578

 
$
34,452

Costs and operating expenses:
 
 
 
 
 
 
 
Cost of revenue (exclusive of depreciation and amortization)
9,264

 
5,979

 
24,438

 
16,112

Sales and marketing
7,028

 
4,312

 
18,976

 
11,519

Research and product development
2,797

 
1,838

 
6,960

 
4,559

General and administrative
3,888

 
1,180

 
10,987

 
3,564

Depreciation and amortization
1,638

 
988

 
4,252

 
2,691

Total costs and operating expenses
24,615

 
14,297

 
65,613

 
38,445

Loss from operations
(4,310
)
 
(1,273
)
 
(11,035
)
 
(3,993
)
Other expense, net
(1
)
 
(6
)
 
(8
)
 
(103
)
Interest (expense) income, net
(426
)
 
11

 
(701
)
 
48

Loss before provision for income taxes
(4,737
)
 
(1,268
)
 
(11,744
)
 
(4,048
)
Provision for income taxes
23

 
—

 
34

 
—

Net loss
$
(4,760
)
 
$
(1,268
)
 
$
(11,778
)
 
$
(4,048
)
Net loss per share, basic and diluted
$
(0.14
)
 
$
(0.14
)
 
$
(0.68
)
 
$
(0.46
)
Weighted average common shares outstanding, basic and diluted
33,314

 
8,807

 
17,274

 
8,724




Stock-Based Compensation Expense
(in thousands)
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2015
 
2014
 
2015
 
2014
Costs and operating expenses:
 
 
 
 
 
 
 
Cost of revenue (exclusive of depreciation and amortization)
 
$
35

 
$
17

 
$
86

 
$
49

Sales and marketing
 
33

 
12

 
84

 
32

Research and product development
 
10

 
3

 
22

 
17

General and administrative
 
200

 
26

 
431

 
60

Total stock-based compensation expense
$
278

 
$
58

 
$
623

 
$
158







CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Cash from operating activities
 
 
 
 
 
 
 
Net loss
$
(4,760
)
 
$
(1,268
)
 
$
(11,778
)
 
$
(4,048
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
1,638

 
988

 
4,252

 
2,691

Purchased investment premium, net of amortization
(380
)
 
—

 
(380
)
 
—

Amortization of deferred financing costs
410

 
—

 
441

 
—

Loss on disposal of property and equipment
(6
)
 
6

 
7

 
66

Payment of accrued interest expense
(223
)
 
—

 
—

 
—

Stock-based compensation
278

 
58

 
623

 
158

Change in fair value of contingent consideration
—

 
(60
)
 
—

 
(56
)
Loss on equity-method investment
—

 
—

 
—

 
19

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
286

 
61

 
(936
)
 
(588
)
Prepaid expenses and other current assets
(737
)
 
(91
)
 
(1,345
)
 
(548
)
Other assets
(37
)
 
(8
)
 
(120
)
 
4

Accounts payable
(716
)
 
252

 
167

 
1,033

Accrued employee expenses
2,046

 
900

 
3,110

 
1,054

Accrued expenses
674

 
331

 
1,234

 
653

Deferred revenue
187

 
62

 
662

 
575

Other liabilities
373

 
(24
)
 
289

 
270

Net cash (used in) provided by operating activities
(967
)
 
1,207

 
(3,774
)
 
1,283

Cash from investing activities
 
 
 
 
 
 
 
Purchases of property and equipment
(724
)
 
(387
)
 
(2,234
)
 
(1,634
)
Additions to capitalized software
(2,218
)
 
(1,217
)
 
(5,373
)
 
(3,253
)
Purchases of investment securities
(60,426
)
 
—

 
(60,426
)
 
—

Sales of investment securities
4,000

 
—

 
4,000

 
—

Maturities of investment securities
4,950

 
—

 
4,950

 
—

Cash paid in business acquisition, net of cash acquired
—

 
—

 
(4,039
)
 
—

Purchases of intangible assets
(5
)
 
(12
)
 
(16
)
 
(18
)
Net cash used in investing activities
(54,423
)
 
(1,616
)
 
(63,138
)
 
(4,905
)




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Cash from financing activities
 
 
 
 
 
 
 
Proceeds from stock option exercises
10

 
11

 
328

 
155

Proceeds from issuance of restricted stock
—

 
—

 
141

 
—

Proceeds from issuance of options
—

 
—

 
208

 
—

Principal payments under capital lease obligations
(7
)
 
(6
)
 
(22
)
 
(20
)
Proceeds from initial public offering, net of underwriting discounts
10,378

 
—

 
79,570

 
—

Payments of initial public offering costs
(3,192
)
 
—

 
(3,999
)
 
—

Payment of contingent consideration
—

 
—

 
(2,429
)
 
—

Proceeds from issuance of debt
—

 
—

 
10,000

 
—

Principal payments on debt
(9,958
)
 
—

 
(10,000
)
 
—

Payment of debt issuance costs
(7
)
 
—

 
(539
)
 
—

Net cash (used by) provided by financing activities
(2,776
)
 
5

 
73,258

 
135

Net cash (decrease) increase in cash and cash equivalents
(58,166
)
 
(404
)
 
6,346

 
(3,487
)
Cash and cash equivalents
 
 
 
 
 
 
 
Beginning of period
69,924

 
8,186

 
5,412

 
11,269

End of period
$
11,758

 
$
7,782

 
$
11,758

 
$
7,782





Reconciliation of GAAP Measures to Non-GAAP Measures
(in thousands, except per share data)
 
Three Months Ended
September 30, 2015
 
 
GAAP net loss
$
(4,760
)
Stock-based compensation expense
278

Non-GAAP net loss
$
(4,482
)
Non-GAAP net loss per share, basic and diluted
$
(0.13
)
Weighted average common shares outstanding, basic and diluted
33,314