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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): November 7, 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 November 7, 2016, AppFolio, Inc. (the “Company”) issued a press release announcing its financial results for its first fiscal quarter ended September 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 November 7, 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 November 7, 2016.




Exhibit



Exhibit 99.1
https://cdn.kscope.io/08534a066b5fce4f7c5531ae5fee0bab-appfolioimagea13.jpg

News Release


AppFolio, Inc. Announces Third Quarter Financial Results

SANTA BARBARA, Calif., November 7, 2016 (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, 2016.

Third Quarter 2016 Highlights

•
Third quarter revenue was $28.2 million, an increase of 39% period-over-period.
•
Third quarter GAAP net loss was $1.1 million, or a net loss of $0.03 per share; Non-GAAP net income was $0.2 million, or $0.00 per share.
•
Increased property manager customers 27% year-over-year to 9,612; increased units under management 26% year-over-year to 2.5 million.
•
Increased law firm customers 40% year-over-year to 7,799.

The Company generated approximately $2.3 million in cash from operating activities and reported $2.7 million in Non-GAAP Adjusted EBITDA for the third quarter of 2016. At September 30, 2016, the Company had $49.6 million in cash and cash equivalents and investment securities.

“We are pleased with our results in the quarter, achieving strong revenue, increasing units under management and continuing to realize operating leverage," commented Brian Donahoo, President and CEO of AppFolio.  "During the quarter we hosted over 700 property manager customers at our Fourth Annual Customer Conference for three days of industry education, networking events, and hands-on product demonstrations and feedback sessions with AppFolio experts. We also announced two new product offerings for our Property Managers customers, including Collections and Revenue Management, which will enhance our platform and further highlight our commitment to helping our customers successfully manage and grow their businesses and expand our market opportunity.” 

Financial Outlook

Based on information available as of November 7, 2016, we are updating our outlook for full year 2016 as indicated below.
•
Full year revenue is expected to be in the range of $104.0 million to $105.0 million.

•
Weighted average common shares outstanding are expected to be approximately 33.6 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 GAAP 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, November 7, 2016, 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 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)

 
 
September 30,
2016
 
December 31,
2015
Assets
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
7,603

 
$
12,063

Investment securities—current
 
10,018

 
10,235

Accounts receivable, net
 
2,707

 
2,048

Prepaid expenses and other current assets
 
3,964

 
3,160

Total current assets
 
24,292

 
27,506

Investment securities—noncurrent
 
31,930

 
34,417

Property and equipment, net
 
6,867

 
6,107

Capitalized software, net
 
14,434

 
10,022

Goodwill
 
6,737

 
6,737

Intangible assets, net
 
3,457

 
4,516

Other assets
 
1,293

 
1,176

Total assets
 
$
89,010

 
$
90,481

Liabilities and Stockholders’ Equity
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
$
574

 
$
2,369

Accrued employee expenses
 
4,957

 
5,159

Accrued expenses
 
4,259

 
3,340

Deferred revenue
 
6,627

 
4,953

Other current liabilities
 
1,377

 
1,084

Total current liabilities
 
17,794

 
16,905

Other liabilities
 
1,747

 
879

Total liabilities
 
19,541

 
17,784

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

 
—

Class A common stock, $0.0001 par value, 250,000 shares authorized as of September 30, 2016 and December 31, 2015; 11,523 and 9,005 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively;
 
1

 
1

Class B common stock, $0.0001 par value, 50,000 shares authorized as of September 30, 2016 and December 31, 2015; 22,170 and 24,541 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively;
 
3

 
3

Additional paid-in capital
 
145,015

 
141,528

Accumulated other comprehensive income (loss)
 
124

 
(153
)
Accumulated deficit
 
(75,674
)
 
(68,682
)
Total stockholders’ equity
 
69,469

 
72,697

Total liabilities and stockholders’ equity
 
$
89,010

 
$
90,481






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


 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Revenue
$
28,162

 
$
20,305

 
$
77,576

 
$
54,578

Costs and operating expenses:
 
 
 
 
 
 
 
Cost of revenue (exclusive of depreciation and amortization)
11,645

 
9,264

 
33,387

 
24,438

Sales and marketing
6,979

 
7,028

 
22,097

 
18,976

Research and product development
3,464

 
2,797

 
9,531

 
6,960

General and administrative
4,642

 
3,888

 
12,580

 
10,987

Depreciation and amortization
2,636

 
1,638

 
7,112

 
4,252

Total costs and operating expenses
29,366

 
24,615

 
84,707

 
65,613

Loss from operations
(1,204
)
 
(4,310
)
 
(7,131
)
 
(11,035
)
Other expense, net
(12
)
 
(1
)
 
(34
)
 
(8
)
Interest income (expense), net
102

 
(426
)
 
221

 
(701
)
Loss before provision for income taxes
(1,114
)
 
(4,737
)
 
(6,944
)
 
(11,744
)
Provision for income taxes
11

 
23

 
48

 
34

Net loss
$
(1,125
)
 
$
(4,760
)
 
$
(6,992
)
 
$
(11,778
)
Net loss per share, basic and diluted
(0.03
)
 
(0.14
)
 
(0.21
)
 
(0.68
)
Weighted average common shares outstanding, basic and diluted
33,600

 
33,314

 
33,529

 
17,274



Supplemental Revenue Information

The following table presents our revenue categories for the quarter ended September 30, 2016 and 2015 (in thousands):
 
 
Three Months Ended
September 30,
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
Core solutions
 
$
11,302

 
$
8,330

 
$
31,637

 
$
23,161

Value+ services
 
15,684

 
10,783

 
42,338

 
27,895

Other
 
1,176

 
1,192

 
3,601

 
3,522

Total revenues
 
$
28,162

 
$
20,305

 
$
77,576

 
$
54,578






CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
 
 
 
 
 
 
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Cash from operating activities
 
 
 
 
 
 
 
Net loss
$
(1,125
)
 
$
(4,760
)
 
$
(6,992
)
 
$
(11,778
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
2,636

 
1,638

 
7,112

 
4,252

Purchased investment premium, net of amortization
90

 
(380
)
 
185

 
(380
)
Amortization of deferred financing costs
16

 
410

 
48

 
441

Loss on disposal of property and equipment
1

 
(6
)
 
33

 
7

Noncash interest expense
—

 
(223
)
 
—

 
—

Stock-based compensation
1,289

 
278

 
2,844

 
623

Lease abandonment
101

 
—

 
161

 
—

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
337

 
286

 
(659
)
 
(936
)
Prepaid expenses and other current assets
(157
)
 
(737
)
 
(804
)
 
(1,345
)
Other assets
(71
)
 
(37
)
 
(163
)
 
(120
)
Accounts payable
(538
)
 
(716
)
 
(1,109
)
 
167

Accrued employee expenses
(1,050
)
 
2,046

 
(144
)
 
3,110

Accrued expenses
603

 
674

 
1,354

 
1,234

Deferred revenue
526

 
187

 
1,674

 
662

Other liabilities
(312
)
 
373

 
1,183

 
289

Net cash provided by (used in) operating activities
2,346

 
(967
)
 
4,723

 
(3,774
)
Cash from investing activities
 
 
 
 
 
 
 
Purchases of property and equipment
(399
)
 
(724
)
 
(3,560
)
 
(2,234
)
Additions to capitalized software
(3,395
)
 
(2,218
)
 
(8,554
)
 
(5,373
)
Purchases of investment securities
(7,649
)
 
(60,426
)
 
(24,334
)
 
(60,426
)
Sales of investment securities
—

 
—

 
10,016

 
—

Maturities of investment securities
5,724

 
8,950

 
17,112

 
8,950

Cash paid in business acquisition, net of cash acquired
—

 
—

 
—

 
(4,039
)
Purchases of intangible assets
(2
)
 
(5
)
 
(2
)
 
(16
)
Net cash used in investing activities
(5,721
)
 
(54,423
)
 
(9,322
)
 
(63,138
)
Cash from financing activities
 
 
 
 
 
 
 
Proceeds from stock option exercises
107

 
10

 
260

 
328

Proceeds from issuance of restricted stock
—

 
—

 
—

 
141

Proceeds from issuance of options
—

 
—

 
—

 
208

Tax withholding for net share settlement
(85
)
 
—

 
(85
)
 
—

Principal payments under capital lease obligations
(9
)
 
(7
)
 
(24
)
 
(22
)
Proceeds from the initial public offering, net of underwriting discounts and commissions
—

 
10,378

 
—

 
79,570

Payments of initial public offering costs
—

 
(3,192
)
 
—

 
(3,999
)




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
 
 
 
 
 
 
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Payment of contingent consideration
—

 
—

 
—

 
(2,429
)
Proceeds from issuance of debt
30

 
—

 
87

 
10,000

Principal payments on debt
(28
)
 
(9,958
)
 
(99
)
 
(10,000
)
Payment of debt issuance costs
—

 
(7
)
 
—

 
(539
)
Net cash provided by (used in) financing activities
15

 
(2,776
)
 
139

 
73,258

Net (decrease) increase in cash and cash equivalents
(3,360
)
 
(58,166
)
 
(4,460
)
 
6,346

Cash and cash equivalents
 
 
 
 
 
 
 
Beginning of period
10,963

 
69,924

 
12,063

 
5,412

End of period
$
7,603

 
$
11,758

 
$
7,603

 
$
11,758



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

 
$
35

 
$
321

 
$
86

Sales and marketing
 
124

 
33

 
296

 
84

Research and product development
 
109

 
10

 
264

 
22

General and administrative
 
918

 
200

 
1,963

 
431

Total stock-based compensation expense
 
$
1,289

 
$
278

 
$
2,844

 
$
623







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

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Net loss
$
(1,125
)
 
$
(4,760
)
 
$
(6,992
)
 
$
(11,778
)
Stock-based compensation expense
1,289

 
278

 
2,844

 
623

Non-GAAP net income (loss)
$
164

 
$
(4,482
)
 
$
(4,148
)
 
$
(11,155
)
Non-GAAP net income (loss) per share, basic
$
—

 
$
(0.13
)
 
$
(0.12
)
 
$
(0.65
)
Weighted average common shares outstanding, basic
33,600

 
33,314

 
33,529

 
17,274


 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Net loss
$
(1,125
)
 
$
(4,760
)
 
$
(6,992
)
 
$
(11,778
)
Depreciation and amortization
2,636

 
1,638

 
7,112

 
4,252

Stock-based compensation expense
1,289

 
278

 
2,844

 
623

Provision for income taxes
11

 
23

 
48

 
34

Other expense, net
12

 
1

 
34

 
8

 Interest (income) expense, net
(102
)
 
426

 
(221
)
 
701

Non-GAAP Adjusted EBITDA
$
2,721

 
$
(2,394
)
 
$
2,825

 
$
(6,160
)

The following table presents our customers and units under management at the end of each quarter for the last seven quarters:
 
2016
 
2015
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
Property manager customers
9,612

 
9,275

 
8,816

 
8,218

 
7,561

 
7,016

 
6,491

Property manager units under management (in millions)
2.53

 
2.41

 
2.30

 
2.15

 
2.01

 
1.92

 
1.81

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Legal customers
7,799

 
7,349

 
6,834

 
6,145

 
5,566

 
4,891

 
4,253