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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): February 22, 2016

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 February 22, 2016, AppFolio, Inc. (the “Company”) issued a press release announcing its financial results for its fourth fiscal quarter and year ended December 31, 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 February 22, 2016.

 



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.
 
 
 
 
 
 
By: /s/ Ida Kane
 
 
Name: Ida Kane
 
 
Title: Chief Financial Officer
 
 




EXHIBIT INDEX

Exhibit
Number
 

Description
99.1
 
Press release issued on February 22, 2016.


Exhibit



Exhibit 99.1

News Release


AppFolio, Inc. Announces Fourth Quarter and Full Year 2015
Financial Results

SANTA BARBARA, Calif., February 22, 2016 (GLOBE NEWSWIRE) -- AppFolio, Inc. (NASDAQ: APPF), a leading provider of cloud-based business software solutions, today announced results for the fourth quarter and full year ended December 31, 2015.

Fourth Quarter and Full Year 2015 Highlights

•
Fourth quarter revenue was $20.4 million, an increase of 54% period-over-period.

•
2015 revenue was $75.0 million, an increase of 57% compared to 2014.
•
Fourth quarter GAAP net loss was $3.9 million, or a net loss of $0.12 per share; Non-GAAP net loss was $3.5 million, or a net loss of $0.10 per share.
•
2015 GAAP net loss was $15.7 million, or a net loss of $0.73 per share; Non-GAAP net loss was $14.7 million, or a net loss of $0.69 per share.
•
Increased property manager customers 40% year-over-year to 8,218; increased units under management 28% year-over-year to 2.15 million.
•
Increased law firm customers 68% year-over-year to 6,145.

“The fourth quarter wrapped up a strong 2015 for AppFolio," commented Brian Donahoo, President and CEO of AppFolio.  "During the year, we continued to focus on keeping customers happy, winning new customers, adding new products and services to support our customers’ business needs and keeping up a rapid pace of software innovation and development. We believe that our achievements in 2015 strengthened our foundation, and better position AppFolio for long-term sustainable growth.” 





Financial Outlook

Based on information available as of February 22, 2016, we are providing our outlook for full year 2016 as indicated below.
•
Full year revenue is expected to be in the range of $100.0 million to $104.0 million.

•
Weighted average common shares outstanding are expected to be approximately 33.7 million for the full 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 limitation 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, February 22, 2016, to discuss our fourth quarter and full year 2015 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 35780476. A replay will be available at 855-859-2056 (Domestic) and 404-537-3406 (International) until the end of day February 26, 2016. 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 our future growth opportunities.

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 quarter ended September 30, 2015, which we filed with the Securities and Exchange Commission (the "SEC") on November 9, 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)

 
 
 
December 31,
 
 
2015
 
2014
Assets
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
12,063

 
$
5,412

Investment securities—current
 
10,235

 
—

Accounts receivable, net
 
2,048

 
1,191

Prepaid expenses and other current assets
 
3,160

 
1,204

Total current assets
 
27,506

 
7,807

Investment securities—noncurrent
 
34,417

 
—

Property and equipment, net
 
6,107

 
2,623

Capitalized software, net
 
10,022

 
5,509

Goodwill
 
6,737

 
4,998

Intangible assets, net
 
4,516

 
3,615

Other assets
 
1,176

 
882

Total assets
 
$
90,481

 
$
25,434

Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit)
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
$
2,369

 
$
2,088

Accrued employee expenses
 
5,159

 
3,150

Accrued expenses
 
3,340

 
1,721

Deferred revenue
 
4,953

 
3,772

Other current liabilities
 
1,084

 
2,797

Total current liabilities
 
16,905

 
13,528

Deferred revenue
 
—

 
8

Other liabilities
 
879

 
199

Total liabilities
 
17,784

 
13,735

Convertible preferred stock, Series A, B, B-1, B-2 and B-3, $0.0001 par value, 68,027 shares authorized, issued and outstanding as of December 31, 2014. Liquidation preference of $62,020 as of December 31, 2014.
 
—

 
63,166

Stockholders’ equity (deficit):
 
 
 
 
Preferred stock, $0.0001 par value, 25,000 authorized and no shares issued and outstanding as of December 31, 2015
 
—

 
—

Class A common stock, $0.0001 par value, 250,000 shares authorized as of December 31, 2015; 9,005 shares issued and outstanding as of December 31, 2015
 
1

 
—

Class B common stock, $0.0001 par value, 50,000 shares authorized as of December 31, 2015; 24,541 and 9,042 shares issued and outstanding as of December 31, 2015 and December 31, 2014, respectively;
 
3

 
1

Additional paid-in capital
 
141,528

 
1,546

Accumulated other comprehensive loss
 
(153
)
 
—

Accumulated deficit
 
(68,682
)
 
(53,014
)
Total stockholders’ equity (deficit)
 
72,697

 
(51,467
)
Total liabilities, convertible preferred stock and stockholders’ equity (deficit)
 
$
90,481

 
$
25,434






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

 
Three Months Ended
December 31,
 
Twelve Months Ended
December 31,
 
2015
 
2014
 
2015
 
2014
Revenue
$
20,399

 
$
13,219

 
$
74,977

 
$
47,671

Costs and operating expenses:
 
 
 
 
 
 
 
Cost of revenue (exclusive of depreciation and amortization)
9,465

 
6,443

 
33,903

 
22,555

Sales and marketing
7,100

 
5,357

 
26,076

 
16,876

Research and product development
2,594

 
1,946

 
9,554

 
6,505

General and administrative
3,356

 
2,925

 
14,343

 
6,489

Depreciation and amortization
1,852

 
1,114

 
6,104

 
3,805

Total costs and operating expenses
24,367

 
17,785

 
89,980

 
56,230

Loss from operations
(3,968
)
 
(4,566
)
 
(15,003
)
 
(8,559
)
Other expense, net
13

 
(18
)
 
5

 
(121
)
Interest (expense) income, net
106

 
11

 
(595
)
 
59

Loss before provision for income taxes
(3,849
)
 
(4,573
)
 
(15,593
)
 
(8,621
)
Provision for income taxes
41

 
—

 
75

 
—

Net loss
$
(3,890
)
 
$
(4,573
)
 
$
(15,668
)
 
$
(8,621
)
Net loss per share, basic and diluted
$
(0.12
)
 
$
(0.52
)
 
$
(0.73
)
 
$
(0.98
)
Weighted average common shares outstanding, basic and diluted
33,407

 
8,853

 
21,336

 
8,757




Stock-Based Compensation Expense
(in thousands)
 
 
Three Months Ended
December 31,
 
Twelve Months Ended
December 31,
 
 
2015
 
2014
 
2015
 
2014
Costs and operating expenses:
 
 
 
 
 
 
 
 
Cost of revenue (exclusive of depreciation and amortization)
 
$
38

 
$
19

 
$
124

 
$
68

Sales and marketing
 
31

 
16

 
115

 
48

Research and product development
 
19

 
2

 
41

 
19

General and administrative
 
296

 
698

 
727

 
757

Total stock-based compensation expense
 
$
384

 
$
735

 
$
1,007

 
$
892







CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
 
 
 
 
 
 
 
 
 
Three Months Ended
December 31,
 
Twelve Months Ended
December 31,
 
2015
 
2014
 
2015
 
2014
Cash from operating activities
 
 
 
 
 
 
 
Net loss
$
(3,890
)
 
$
(4,573
)
 
$
(15,668
)
 
$
(8,621
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
1,852

 
1,114

 
6,104

 
3,805

Purchased investment premium, net of amortization
(485
)
 
—

 
(865
)
 
—

Amortization of deferred financing costs
15

 
—

 
456

 
—

Loss on disposal of property, equipment and intangibles
60

 
50

 
67

 
116

Stock-based compensation
384

 
734

 
1,007

 
892

Change in fair value of contingent consideration
—

 
82

 
—

 
26

Loss on equity-method investment
—

 
—

 
—

 
19

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
190

 
187

 
(746
)
 
(401
)
Prepaid expenses and other current assets
(548
)
 
(1
)
 
(1,893
)
 
(549
)
Other assets
64

 
(9
)
 
(56
)
 
(5
)
Accounts payable
(606
)
 
798

 
(439
)
 
1,831

Accrued employee expenses
(1,223
)
 
34

 
1,887

 
1,088

Accrued expenses
(99
)
 
358

 
1,135

 
1,011

Deferred revenue
511

 
262

 
1,173

 
837

Other liabilities
705

 
156

 
994

 
426

Net cash (used in) provided by operating activities
(3,070
)
 
(808
)
 
(6,844
)
 
475

Cash from investing activities
 
 
 
 
 
 
 
Purchases of property and equipment
(1,460
)
 
(244
)
 
(3,694
)
 
(1,878
)
Additions to capitalized software
(2,304
)
 
(1,314
)
 
(7,677
)
 
(4,567
)
Purchases of investment securities
(13,750
)
 
—

 
(74,176
)
 
—

Sales of investment securities
6,977

 
—

 
10,977

 
—

Maturities of investment securities
14,309

 
—

 
19,259

 
—

Cash paid in business acquisition, net of cash acquired
—

 
—

 
(4,039
)
 
—

Purchases of intangible assets
(1
)
 
(13
)
 
(17
)
 
(31
)
Net cash provided by (used in) investing activities
3,771

 
(1,571
)
 
(59,367
)
 
(6,476
)
 
 
 
 
 
 
 
 




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
 
 
 
 
 
 
 
 
 
Three Months Ended
December 31,
 
Twelve Months Ended
December 31,
 
2015
 
2014
 
2015
 
2014
Cash from financing activities
 
 
 
 
 
 
 
Proceeds from stock option exercises
29

 
13

 
357

 
168

Proceeds from issuance of restricted stock
—

 
—

 
141

 
—

Proceeds from issuance of options
—

 
—

 
208

 
—

Principal payments under capital lease obligations
(5
)
 
(4
)
 
(27
)
 
(24
)
Proceeds from initial public offering, net of underwriting discounts
—

 
—

 
79,570

 
—

Payments of initial public offering costs
(214
)
 
—

 
(4,213
)
 
—

Payment of contingent consideration
—

 
—

 
(2,429
)
 
—

Proceeds from issuance of debt
253

 
—

 
10,253

 
—

Principal payments on debt
(241
)
 
—

 
(10,241
)
 
—

Payment of debt issuance costs
(218
)
 
—

 
(757
)
 
—

Net cash (used in) provided by financing activities
(396
)
 
9

 
72,862

 
144

Net increase (decrease) in cash and cash equivalents
305

 
(2,370
)
 
6,651

 
(5,857
)
Cash and cash equivalents
 
 
 
 
 
 
 
Beginning of period
11,758

 
7,782

 
5,412

 
11,269

End of period
$
12,063

 
$
5,412

 
$
12,063

 
$
5,412









Reconciliation of GAAP Measures to Non-GAAP Measures
(in thousands, except per share data)

 
Three Months Ended
December 31,
 
Twelve Months Ended
December 31,
 
2015
 
2014
 
2015
 
2014
GAAP net loss
$
(3,890
)
 
$
(4,573
)
 
$
(15,668
)
 
$
(8,621
)
Stock-based compensation expense
384

 
735

 
1,007

 
892

Non-GAAP net loss
$
(3,506
)
 
$
(3,838
)
 
$
(14,661
)
 
$
(7,729
)
Non-GAAP net loss per share, basic and diluted
$
(0.10
)
 
$
(0.43
)
 
$
(0.69
)
 
$
(0.88
)
Weighted average common shares outstanding, basic and diluted
33,407

 
8,853

 
21,336

 
8,757



Supplemental Information

The following table presents our revenue categories for the quarter and full year ended December 31, 2015 and 2014 (in thousands):
 
 
Three Months Ended
December 31,
 
Twelve Months Ended
December 31,
 
 
2015
 
2014
 
2015
 
2014
Core solutions
 
$
8,958

 
$
6,408

 
$
32,119

 
$
22,406

Value+ services
 
10,103

 
5,944

 
37,998

 
22,525

Other
 
1,338

 
867

 
4,860

 
2,740

Total revenues
 
$
20,399

 
$
13,219

 
$
74,977

 
$
47,671


The following table presents our customers and units under management at the end of each quarter during the full year ended December 31, 2015 and 2014:
 
2015
 
2014
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
Property manager customers
8,218

 
7,561

 
7,016

 
6,491

 
5,885

 
5,331

 
4,911

 
4,471

Property manager units under management (in millions)
2.15

 
2.01

 
1.92

 
1.81

 
1.68

 
1.53

 
1.43

 
1.32

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Legal customers
6,145

 
5,566

 
4,891

 
4,253

 
3,658

 
3,203

 
2,701

 
2,218