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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): August 8, 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
Santa Barbara, 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 August 8, 2016, AppFolio, Inc. (the “Company”) issued a press release announcing its financial results for its second fiscal quarter ended June 30, 2016. 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 August 8, 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 August 8, 2016.


Exhibit



Exhibit 99.1

News Release


AppFolio, Inc. Announces Second Quarter Financial Results

SANTA BARBARA, Calif., August 8, 2016 (GLOBE NEWSWIRE) -- AppFolio, Inc. (NASDAQ: APPF), a leading provider of cloud-based business software solutions, today announced results for the second quarter ended June 30, 2016.

Second Quarter 2016 Highlights

•
Second quarter revenue was $26.2 million, an increase of 42% period-over-period.
•
Second quarter GAAP net loss was $2.3 million, or a net loss of $0.07 per share; Non-GAAP net loss was $1.2 million, or a net loss of $0.03 per share.
•
Increased property manager customers 32% year-over-year to 9,275; increased units under management 26% year-over-year to 2.4 million.
•
Increased law firm customers 50% year-over-year to 7,349.

The Company generated approximately $3.1 million in cash from operating activities and reported $1.1 million in positive Non-GAAP Adjusted EBITDA for the second quarter of 2016. At June 30, 2016, the Company had $51.2 million in cash and cash equivalents and investment securities.

“We executed well on our strategic initiatives in the quarter and made important progress toward realizing operating leverage in our business." commented Brian Donahoo, President and CEO of AppFolio.  "The market for our SMB software continues to expand, as property management and legal customers seek solutions to help them automate, modernize and grow in today's digital world. AppFolio's technology and customer focus remains a competitive differentiator, and the impact of our word of mouth marketing from happy customers continues to be a powerful tool for our long-term success.” 

Financial Outlook

Based on information available as of August 8, 2016, we are updating our outlook for full year 2016 as indicated below.
•
Full year revenue is expected to be in the range of $103.0 million to $105.0 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, Non-GAAP net loss per share, and Non-GAAP Adjusted EBITDA 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. Non-GAAP Adjusted EBTIDA is defined as net loss before depreciation and amortization, stock-based compensation expense, provision for income taxes, other income (expense), net, and interest income (expense), net.

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, August 8, 2016, to discuss our second 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 844-239-5286 (Domestic), or 513-268-0783 (International). The conference ID is 54075354. A replay will be available at 855-859-2056 (Domestic) and 404-537-3406 (International) until the end of day August 12, 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 and success.

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 our Annual Report on Form 10-




K for the year ended December 31, 2015, which we filed with the Securities and Exchange Commission (the "SEC") on February 29, 2016, 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)

 
 
June 30,
2016
 
December 31,
2015
Assets
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
10,963

 
$
12,063

Investment securities—current
 
11,234

 
10,235

Accounts receivable, net
 
3,045

 
2,048

Prepaid expenses and other current assets
 
3,807

 
3,160

Total current assets
 
29,049

 
27,506

Investment securities—noncurrent
 
28,977

 
34,417

Property and equipment, net
 
7,143

 
6,107

Capitalized software, net
 
12,804

 
10,022

Goodwill
 
6,737

 
6,737

Intangible assets, net
 
3,808

 
4,516

Other assets
 
1,236

 
1,176

Total assets
 
$
89,754

 
$
90,481

Liabilities and Stockholders’ Equity
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
$
1,090

 
$
2,369

Accrued employee expenses
 
6,235

 
5,159

Accrued expenses
 
3,751

 
3,340

Deferred revenue
 
6,101

 
4,953

Other current liabilities
 
1,631

 
1,084

Total current liabilities
 
18,808

 
16,905

Other liabilities
 
1,865

 
879

Total liabilities
 
20,673

 
17,784

Stockholders’ equity:
 
 
 
 
Preferred stock, $0.0001 par value, 25,000 authorized and no shares issued and outstanding as of June 30, 2016 and December 31, 2015
 
—

 
—

Class A common stock, $0.0001 par value, 250,000 shares authorized as of June 30, 2016 and December 31, 2015; 11,018 and 9,005 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively;
 
1

 
1

Class B common stock, $0.0001 par value, 50,000 shares authorized as of June 30, 2016 and December 31, 2015; 22,625 and 24,541 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively;
 
3

 
3

Additional paid-in capital
 
143,406

 
141,528

Accumulated other comprehensive income (loss)
 
220

 
(153
)
Accumulated deficit
 
(74,549
)
 
(68,682
)
Total stockholders’ equity
 
69,081

 
72,697

Total liabilities and stockholders’ equity
 
$
89,754

 
$
90,481






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


 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
Revenue
$
26,203

 
$
18,425

 
$
49,414

 
$
34,273

Costs and operating expenses:
 
 
 
 
 
 
 
Cost of revenue (exclusive of depreciation and amortization)
11,212

 
8,109

 
21,742

 
15,174

Sales and marketing
7,567

 
6,239

 
15,118

 
11,948

Research and product development
3,024

 
2,154

 
6,067

 
4,163

General and administrative
4,389

 
3,707

 
7,938

 
7,099

Depreciation and amortization
2,359

 
1,431

 
4,476

 
2,614

Total costs and operating expenses
28,551

 
21,640

 
55,341

 
40,998

Loss from operations
(2,348
)
 
(3,215
)
 
(5,927
)
 
(6,725
)
Other income (expense), net
2

 
(5
)
 
(22
)
 
(7
)
Interest income (expense), net
95

 
(243
)
 
119

 
(275
)
Loss before provision for income taxes
(2,251
)
 
(3,463
)
 
(5,830
)
 
(7,007
)
Provision for (benefit from) income taxes
13

 
(63
)
 
37

 
11

Net loss
$
(2,264
)
 
$
(3,400
)
 
$
(5,867
)
 
$
(7,018
)
Net loss per share, basic and diluted
(0.07
)
 
(0.36
)
 
(0.18
)
 
(0.77
)
Weighted average common shares outstanding, basic and diluted
33,523

 
9,328

 
33,493

 
9,122



Supplemental Revenue Information

The following table presents our revenue categories for the quarter ended June 30, 2016 and 2015 (in thousands):
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2016
 
2015
 
2016
 
2015
Core solutions
 
$
10,572

 
$
7,697

 
$
20,335

 
$
14,831

Value+ services
 
14,399

 
9,408

 
26,653

 
17,112

Other
 
1,232

 
1,320

 
2,426

 
2,330

Total revenues
 
$
26,203

 
$
18,425

 
$
49,414

 
$
34,273






CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
 
 
 
 
 
 
 
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
Cash from operating activities
 
 
 
 
 
 
 
Net loss
$
(2,264
)
 
$
(3,400
)
 
$
(5,867
)
 
$
(7,018
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
2,359

 
1,431

 
4,476

 
2,614

Purchased investment premium, net of amortization
(50
)
 
—

 
95

 
—

Amortization of deferred financing costs
16

 
26

 
32

 
31

Loss on disposal of property and equipment
3

 
6

 
32

 
13

Noncash interest expense
—

 
223

 
—

 
223

Stock-based compensation
1,092

 
212

 
1,555

 
345

Lease abandonment
(31
)
 
—

 
60

 
—

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
(402
)
 
(557
)
 
(996
)
 
(1,222
)
Prepaid expenses and other current assets
634

 
(82
)
 
(647
)
 
(608
)
Other assets
18

 
(39
)
 
(92
)
 
(83
)
Accounts payable
82

 
674

 
(571
)
 
883

Accrued employee expenses
812

 
163

 
906

 
1,064

Accrued expenses
(236
)
 
(240
)
 
751

 
560

Deferred revenue
443

 
20

 
1,148

 
475

Other liabilities
637

 
(33
)
 
1,495

 
(84
)
Net cash provided by (used in) operating activities
3,113

 
(1,596
)
 
2,377

 
(2,807
)
Cash from investing activities
 
 
 
 
 
 
 
Purchases of property and equipment
(1,270
)
 
(789
)
 
(3,161
)
 
(1,510
)
Additions to capitalized software
(2,980
)
 
(1,924
)
 
(5,159
)
 
(3,155
)
Purchases of investment securities
(7,300
)
 
—

 
(16,685
)
 
—

Sales and calls of investment securities
8,069

 
—

 
19,074

 
—

Maturities of investment securities
—

 
—

 
2,330

 
—

Cash paid in business acquisition, net of cash acquired
—

 
(4,039
)
 
—

 
(4,039
)
Purchases of intangible assets
—

 
(6
)
 
—

 
(11
)
Net cash used in investing activities
(3,481
)
 
(6,758
)
 
(3,601
)
 
(8,715
)
Cash from financing activities
 
 
 
 
 
 
 
Proceeds from stock option exercises
73

 
250

 
153

 
318

Proceeds from issuance of restricted stock
—

 
—

 
—

 
141

Proceeds from issuance of options
—

 
208

 
—

 
208

Principal payments under capital lease obligations
(8
)
 
(9
)
 
(15
)
 
(15
)
Proceeds from the initial public offering, net of underwriting discounts and commissions
—

 
69,192

 
—

 
69,192

Payments of initial public offering costs
—

 
(807
)
 
—

 
(807
)
Payment of contingent consideration
—

 
(2,429
)
 
—

 
(2,429
)




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
 
 
 
 
 
 
 
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
Proceeds from issuance of debt
28

 
—

 
57

 
10,000

Principal payments on debt
(30
)
 
(42
)
 
(71
)
 
(42
)
Payment of debt issuance costs
—

 
(119
)
 
—

 
(532
)
Net cash provided by financing activities
63

 
66,244

 
124

 
76,034

Net cash (decrease) increase in cash and cash equivalents
(305
)
 
57,890

 
(1,100
)
 
64,512

Cash and cash equivalents
 
 
 
 
 
 
 
Beginning of period
11,268

 
12,034

 
12,063

 
5,412

End of period
$
10,963

 
$
69,924

 
$
10,963

 
$
69,924



Stock-Based Compensation Expense
(in thousands)
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2016
 
2015
 
2016
 
2015
Costs and operating expenses:
 
 
 
 
 
 
 
 
Cost of revenue (exclusive of depreciation and amortization)
 
$
138

 
$
27

 
$
183

 
$
51

Sales and marketing
 
130

 
28

 
172

 
51

Research and product development
 
104

 
7

 
155

 
12

General and administrative
 
720

 
150

 
1,045

 
231

Total stock-based compensation expense
 
$
1,092

 
$
212

 
$
1,555

 
$
345







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

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
Net loss
$
(2,264
)
 
$
(3,400
)
 
$
(5,867
)
 
$
(7,018
)
Stock-based compensation expense
1,092

 
212

 
1,555

 
345

Non-GAAP net loss
$
(1,172
)
 
$
(3,188
)
 
$
(4,312
)
 
$
(6,673
)
Non-GAAP net loss per share, basic and diluted
$
(0.03
)
 
$
(0.34
)
 
$
(0.13
)
 
$
(0.73
)
Weighted average common shares outstanding, basic and diluted
33,523

 
9,328

 
33,493

 
9,122


 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
Net loss
$
(2,264
)
 
$
(3,400
)
 
$
(5,867
)
 
$
(7,018
)
Depreciation and amortization
2,359

 
1,431

 
4,476

 
2,614

Stock-based compensation expense
1,092

 
212

 
1,555

 
345

Provision (benefit) for income taxes
13

 
(63
)
 
37

 
11

Other (income) expense, net
(2
)
 
5

 
22

 
7

 Interest (income) expense, net
(95
)
 
243

 
(119
)
 
275

Non-GAAP Adjusted EBITDA
$
1,103

 
$
(1,572
)
 
$
104

 
$
(3,766
)

The following table presents our customers and units under management at the end of each quarter for the last six quarters:
 
2016
 
2015
 
June 30.
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
Property manager customers
9,275

 
8,816

 
8,218

 
7,561

 
7,016

 
6,491

Property manager units under management (in millions)
2.41

 
2.30

 
2.15

 
2.01

 
1.92

 
1.81

 
 
 
 
 
 
 
 
 
 
 
 
Legal customers
7,349

 
6,834

 
6,145

 
5,566

 
4,891

 
4,253