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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): October 29, 2018

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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company x
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x





Item 2.02. Results of Operations and Financial Condition.
On October 29, 2018, AppFolio, Inc. (the “Company”) issued a press release announcing its financial results for its third fiscal quarter ended September 30, 2018. 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
 









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 October 29, 2018.




Exhibit



Exhibit 99.1
https://cdn.kscope.io/33a9fe2b60323a7a9d7e283b159d34dc-appfolioinclogograytranspare.jpg

News Release


AppFolio, Inc. Announces Third Quarter 2018 Financial Results

SANTA BARBARA, Calif., October 29, 2018 (GLOBE NEWSWIRE) -- AppFolio, Inc. (NASDAQ: APPF) ("AppFolio" or the "Company"), a leading provider of cloud-based business software solutions, today announced its financial results for the quarter ended September 30, 2018 and has updated its financial guidance for fiscal year 2018.

AppFolio's operating results for the third quarter of 2018 are summarized in the tables accompanying this press release. The Company nevertheless urges investors to review its Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission (the "SEC") on February 26, 2018, as well as its more detailed third quarter 2018 results that will be included in the Company's Quarterly Report on Form 10-Q, which will be filed with the SEC on October 29, 2018. These periodic report filings, together with other documents the Company files with the SEC from time to time, will be accessible on AppFolio's website, http://ir.appfolioinc.com. The limited information that follows in this press release is not adequate for making an informed investment judgment.

Financial Outlook
Based on information available as of October 29, 2018, AppFolio has updated its financial guidance for fiscal year 2018 as follows:

•
Full year revenue is expected to be in the range of $187 million to $188 million.
•
Diluted weighted average shares outstanding are expected to be approximately 36 million for the full year.


Conference Call Information
As previously announced, the Company will host a conference call today, October 29, 2018 at 1:30 p.m. Pacific Time, 4:30 p.m. Eastern Time, to discuss its financial results. Investors are invited to submit questions to management via the Investor Q&A form located on the Investor Overview section of AppFolio's website.

A live webcast of the call will be available at http://ir.appfolioinc.com, and it may also be accessed by dialing 866-393-4306 (Domestic), or 734-385-2616 (International). The conference ID is 1199261. A replay will be available at 855-859-2056 (Domestic) and 404-537-3406 (International) until the end of day November 1, 2018, and an archived webcast will be available for 12 months on the Company's website.

About AppFolio, Inc.
AppFolio's mission is to revolutionize vertical industry businesses by providing great software and service. Our cloud-based solutions serve customers in the real estate and legal markets. Today our products include property management software (AppFolio Property Manager) and legal practice management software (MyCase). AppFolio was founded in 2006 and is headquartered in Santa Barbara, CA.  Learn more at www.appfolioinc.com.

Investor Relations Contact: ir@appfolio.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 the Company's future or assumed revenue and fully diluted weighted-average outstanding shares.

Forward-looking statements represent AppFolio'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 the Company's 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 the Company's actual results to materially differ from those expressed or implied by these forward-looking statements are described in the section entitled “Risk Factors” in AppFolio's Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on February 26, 2018, as well as in the Company's other filings with the SEC. You should read this press release with the understanding that the Company's 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 Global Market, AppFolio assumes 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.
 







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

 
 
September 30,
2018
 
December 31,
2017
Assets
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
13,745

 
$
16,109

Investment securities—current
 
31,823

 
29,800

Accounts receivable, net
 
5,489

 
3,387

Prepaid expenses and other current assets
 
10,916

 
4,546

Total current assets
 
61,973

 
53,842

Investment securities—noncurrent
 
19,861

 
22,401

Property and equipment, net
 
6,699

 
6,696

Capitalized software, net
 
19,172

 
17,609

Goodwill
 
15,548

 
6,737

Intangible assets, net
 
6,179

 
1,725

Other assets
 
6,757

 
1,238

Total assets
 
$
136,189

 
$
110,248

Liabilities and Stockholders’ Equity
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
$
1,108

 
$
610

Accrued employee expenses
 
7,493

 
10,710

Accrued expenses
 
7,715

 
4,289

Deferred revenue
 
3,172

 
7,080

Other current liabilities
 
1,296

 
1,223

Total current liabilities
 
20,784

 
23,912

Other liabilities
 
7,042

 
1,257

Total liabilities
 
27,826

 
25,169

Stockholders’ equity:
 
 
 
 
Preferred stock, $0.0001 par value, 25,000 authorized and no shares issued and outstanding as of September 30, 2018 and December 31, 2017
 
—

 
—

Class A common stock, $0.0001 par value, 250,000 shares authorized as of September 30, 2018 and December 31, 2017; 15,984 and 14,879 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively;
 
2

 
1

Class B common stock, $0.0001 par value, 50,000 shares authorized as of September 30, 2018 and December 31, 2017; 18,250 and 19,102 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively;
 
2

 
3

Additional paid-in capital
 
155,556

 
152,531

Accumulated other comprehensive loss
 
(232
)
 
(209
)
Accumulated deficit
 
(46,965
)
 
(67,247
)
Total stockholders’ equity
 
108,363

 
85,079

Total liabilities and stockholders’ equity
 
$
136,189

 
$
110,248






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


 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
Revenue
$
50,126

 
$
37,903

 
$
139,706

 
$
105,906

Costs and operating expenses:
 
 
 
 
 
 
 
Cost of revenue (exclusive of depreciation and amortization)
19,282

 
14,053

 
53,624

 
40,747

Sales and marketing
8,681

 
7,257

 
23,711

 
21,556

Research and product development
6,440

 
4,367

 
17,523

 
11,998

General and administrative
6,541

 
5,405

 
17,105

 
15,310

Depreciation and amortization
3,705

 
3,237

 
10,784

 
9,347

Total costs and operating expenses
44,649

 
34,319

 
122,747

 
98,958

Income from operations
5,477

 
3,584

 
16,959

 
6,948

Other income (expense), net
1

 
(5
)
 
(20
)
 
(93
)
Interest income, net
229

 
155

 
631

 
377

Income before provision for income taxes
5,707

 
3,734

 
17,570

 
7,232

Provision for income taxes
183

 
52

 
252

 
93

Net income
$
5,524

 
$
3,682

 
$
17,318

 
$
7,139

 
 
 
 
 
 
 
 
Net income per common share:
 
 
 
 
 
 
 
Basic
0.16

 
0.11

 
0.51

 
0.21

Diluted
0.16

 
0.10

 
0.49

 
0.20

Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
34,219

 
33,905

 
34,154

 
33,817

Diluted
35,610

 
35,205

 
35,524

 
35,091



Stock-Based Compensation Expense
(in thousands)
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
Costs and operating expenses:
 
 
 
 
 
 
 
 
Cost of revenue (exclusive of depreciation and amortization)
 
$
282

 
$
189

 
$
752

 
$
527

Sales and marketing
 
270

 
186

 
708

 
516

Research and product development
 
218

 
173

 
730

 
471

General and administrative
 
994

 
1,040

 
2,229

 
2,790

Total stock-based compensation expense
$
1,764

 
$
1,588

 
$
4,419

 
$
4,304






CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
 
 
 
 
 
 
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
Cash from operating activities
 
 
 
 
 
 
 
Net income
$
5,524

 
$
3,682

 
$
17,318

 
$
7,139

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
3,705

 
3,237

 
10,784

 
9,347

Purchased investment premium, net of amortization
5

 
82

 
99

 
(22
)
Amortization of deferred financing costs
16

 
16

 
48

 
48

Amortization of deferred costs
547

 
—

 
1,312

 
—

(Income) loss on disposal of property and equipment
(2
)
 
5

 
18

 
94

Stock-based compensation
1,764

 
1,588

 
4,419

 
4,304

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
703

 
813

 
(1,465
)
 
(908
)
Prepaid expenses and other current assets
(4,655
)
 
(644
)
 
(5,214
)
 
(856
)
Other assets
(3,176
)
 
(3
)
 
(5,003
)
 
(54
)
Accounts payable
(362
)
 
688

 
477

 
369

Accrued employee expenses
(1,185
)
 
270

 
(3,225
)
 
846

Accrued expenses
1,964

 
919

 
3,397

 
1,713

Deferred revenue
(958
)
 
(529
)
 
(4,247
)
 
(130
)
Other liabilities
5,657

 
(434
)
 
5,883

 
(334
)
Net cash provided by operating activities
9,547

 
9,690

 
24,601

 
21,556

Cash from investing activities
 
 
 
 
 
 
 
Purchases of property and equipment
(1,160
)
 
(843
)
 
(1,740
)
 
(1,680
)
Additions to capitalized software
(3,492
)
 
(2,814
)
 
(8,997
)
 
(8,085
)
Purchases of investment securities
(7,952
)
 
(2,000
)
 
(28,784
)
 
(17,597
)
Sales of investment securities
696

 
15

 
701

 
15

Maturities of investment securities
12,882

 
3,485

 
28,477

 
10,974

Cash paid in business acquisition
(14,441
)
 
—

 
(14,441
)
 
—

Purchases of intangible assets
—

 
—

 
—

 
(1
)
Net cash used in investing activities
(13,467
)
 
(2,157
)
 
(24,784
)
 
(16,374
)
Cash from financing activities
 
 
 
 
 
 
 
Proceeds from stock option exercises
55

 
122

 
713

 
508

Tax withholding for net share settlement
(400
)
 
(263
)
 
(2,894
)
 
(1,608
)
Proceeds from issuance of debt
30

 
29

 
93

 
88

Principal payments on debt
(30
)
 
(29
)
 
(93
)
 
(88
)
Net cash used in financing activities
(345
)
 
(141
)
 
(2,181
)
 
(1,100
)
Net (decrease) increase in cash and cash equivalents
(4,265
)
 
7,392

 
(2,364
)
 
4,082

Cash, cash equivalents and restricted cash
 
 
 
 
 
 
 
Beginning of period
18,438

 
7,816

 
16,537

 
11,126

End of period
$
14,173

 
$
15,208

 
$
14,173

 
$
15,208


    







The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the total of the same such amounts shown above (in thousands):
 
September 30,
 
2018
 
2017
Cash and cash equivalents
$
13,745

 
$
14,781

Restricted cash included in other assets
428

 
427

Total cash, cash equivalents and restricted cash
$
14,173

 
$
15,208