AppFolio Q3 2026 revenue rises 19% to $296M
APPF reported $161.4 million in non-cancelable remaining performance obligations, with approximately 41.4% expected to be recognized over the following 12 months.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Form Type
10-Q
AppFolio, Inc. (APPF) reported third-quarter 2026 revenue of $295.7 million, up 19% from $249.4 million, and net income of $46.0 million versus $33.6 million. Diluted earnings were $1.29 per share versus $0.93; GAAP operating income was $57.4 million versus $35.0 million. Increased use of payments, tenant screening, risk mitigation and resident services contributed to revenue growth; units under management rose 8% to 9.8 million.
For the nine months ended September 30, 2026, operating cash flow was $218.7 million versus $177.1 million. Cash, cash equivalents and investment securities totaled $307.3 million at quarter-end. AppFolio had no borrowings under its $150.0 million revolving credit facility and was in covenant compliance. It repurchased $4.2 million of Class A shares during the quarter, with $120.8 million remaining under its $300.0 million program.
CFO Tim Eaton terminated a prior Rule 10b5-1 trading arrangement and adopted a new one on September 11, 2026, providing for sales from December 11, 2026 through December 31, 2027 of up to 818 Class A shares plus an indeterminate number of shares received in connection with vesting certain RSUs and PSUs. The latter amount depends on vesting and shares withheld for tax obligations.
3 points · 0 major0 major · 0 points
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointQ3 revenue grew 19% to $295.7 million.
- Moderate pointQ3 GAAP operating income grew 64% to $57.4 million.
- Moderate pointNine-month operating cash flow rose to $218.7 million from $177.1 million.
Negative
- None.
Filing Explained
Adopted on
Key Figures
Third-quarter revenue: $295.7 million
Third-quarter net income: $46.0 million
Diluted net income per share: $1.29 per share
+5 more
8 metrics
Third-quarter revenue
$295.7 million
Three months ended September 30, 2026; $249.4 million in 2025
Third-quarter net income
$46.0 million
Three months ended September 30, 2026; $33.6 million in 2025
Diluted net income per share
$1.29 per share
Three months ended September 30, 2026; $0.93 per share in 2025
GAAP operating income
$57.4 million
Three months ended September 30, 2026; $35.0 million in 2025
Property management units under management
9.8 million units
As of September 30, 2026; 8% growth from 9.1 million in 2025
Net cash provided by operating activities
$218.7 million
Nine months ended September 30, 2026; $177.1 million in 2025
Cash, cash equivalents, and investment securities
$307.3 million
As of September 30, 2026
Non-cancelable remaining performance obligations
$161.4 million
As of September 30, 2026; approximately 41.4% expected to be recognized over the following 12 months
Key Terms
remaining performance obligations, Rule 10b5-1 trading arrangement, Non-GAAP Operating Income, Consolidated Net Leverage Ratio, +1 more
5 terms
remaining performance obligations financial
"transaction price allocated to remaining performance obligations"
Remaining performance obligations are the work a company still needs to complete for its customers, like finishing a service or delivering a product. It’s important because it shows how much future income the company has coming in from current agreements, giving a clearer picture of its ongoing business.
Rule 10b5-1 trading arrangement regulatory
"adopted a Rule 10b5-1 trading arrangement"
Non-GAAP Operating Income financial
"Non-GAAP Operating Income excludes certain non-cash or non-recurring items"
Non-GAAP operating income is a measure of a company's profit from its core business activities, calculated by excluding certain expenses or income that are not part of regular operations. It provides a clearer picture of how well the business is performing by focusing on ongoing operations, helping investors compare companies more consistently and make better-informed decisions.
Consolidated Net Leverage Ratio financial
"financial covenant requiring maintenance of a Consolidated Net Leverage Ratio"
The consolidated net leverage ratio measures how much debt a company carries compared with the cash it generates from core operations, calculated by taking total borrowings minus cash and dividing by annual operating profit. Like comparing a household’s mortgage balance to its yearly income, it tells investors how many years of operating profit would be needed to pay off net debt and thus gauges financial risk, flexibility to invest, and capacity to weather downturns.
quota share financial
"assume a 100% quota share of the liability to landlord insurance policies"
A quota share is a proportional reinsurance arrangement in which an insurer cedes a fixed percentage of its policies, premiums and claims to another insurer so both parties take the same slice of revenue and losses. For investors, quota share deals change how much risk and income remain on a company’s balance sheet, which can smooth earnings, free up capital for growth, and alter profit margins—like handing someone a steady slice of every pie you bake.
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What were APPF's third-quarter 2026 results?
APPF's third-quarter revenue was $295.7 million, up 19% from $249.4 million in the third quarter of 2025. Net income was $46.0 million, compared with $33.6 million, and diluted earnings were $1.29 per share versus $0.93.
How many units did APPF manage at the end of the third quarter?
APPF had 9.8 million property management units under management as of September 30, 2026, compared with 9.1 million a year earlier, an 8% year-over-year increase. The company defines this measure as active or committed units under management at period-end.
What were APPF's remaining performance obligations?
APPF reported $161.4 million in non-cancelable remaining performance obligations as of September 30, 2026. The company expected to recognize approximately 41.4% over the following 12 months, with the balance recognized thereafter.
How much remains in APPF's share repurchase program?
APPF had $120.8 million available under its $300.0 million 2025 Stock Repurchase Program as of September 30, 2026. During the third quarter, it repurchased 23,945 Class A shares for an aggregate repurchase price of $4.2 million.
What does Tim Eaton's new APPF trading arrangement cover?
Tim Eaton adopted the arrangement on September 11, 2026, for sales between December 11, 2026 and December 31, 2027. It covers up to 818 Class A shares and an indeterminate number received in connection with vesting certain RSUs and PSUs; the actual amount depends on vesting and shares withheld for tax obligations.
AI-generated analysis. How Rhea-AI works. Not financial advice.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
For the quarterly period ended September 30, 2026 .
For the transition period from ________ to ________.
Commission File Number 001-37468
(Exact name of registrant as specified in its charter)
| (State of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
| | ||||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||
(805 ) 364-6093
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
☒ | Accelerated filer | ☐ | |||||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | |||||||||||||||
| Emerging growth company | |||||||||||||||||
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of October 15, 2026, the number of shares of the registrant’s Class A common stock outstanding was 24,126,151 and the number of shares of the registrant’s Class B common stock outstanding was 11,329,625 .
TABLE OF CONTENTS
| Page No. | ||||||||
Forward-Looking Statements | 1 | |||||||
Part I. Financial Information | 2 | |||||||
Item 1. Condensed Consolidated Financial Statements (Unaudited) | 2 | |||||||
Condensed Consolidated Balance Sheets as of September 30, 2026 and December 31, 2025 | 2 | |||||||
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2026 and 2025 | 3 | |||||||
Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2026 and 2025 | 4 | |||||||
Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2026 and 2025 | 5 | |||||||
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2026 and 2025 | 7 | |||||||
Notes to Condensed Consolidated Unaudited Financial Statements | 8 | |||||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 18 | |||||||
Item 3. Quantitative and Qualitative Disclosures about Market Risk | 25 | |||||||
Item 4. Controls and Procedures | 26 | |||||||
Part II. Other Information | 26 | |||||||
Item 1. Legal Proceedings | 26 | |||||||
Item 1A. Risk Factors | 26 | |||||||
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 26 | |||||||
Item 5. Other Information | 27 | |||||||
Item 6. Exhibits | 28 | |||||||
Signatures | ||||||||
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2026 (this "Quarterly Report"), contains forward-looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995 (the “PSLRA”), which statements involve substantial risks and uncertainties. The forward-looking statements made in this Quarterly Report are intended to qualify for the protection of the safe harbor provided by the PSLRA and are based primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, operating results, cash flows and/or prospects. Forward-looking statements include all statements that are not statements of historical fact. Forward-looking statements can also be identified by words such as “may,” “will,” “should,” “might,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” “future,” or “continue,” or the negative of these words or other similar terms or expressions. Examples of forward-looking statements include, among others, statements regarding changes in the competitive environment, responding to customer needs, research and product development plans, including with respect to artificial intelligence, future products and services, growth in the size of our business and number of customers, strategic plans and objectives, the benefits or performance of our strategic investments, business forecasts and plans, our future or assumed financial condition, results of operations and liquidity, trends affecting our business and industry, capital needs and financing plans, capital resource allocation plans, share repurchase plans, and commitments and contingencies, including with respect to the outcome of legal proceedings or regulatory matters. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors, including those risks, uncertainties and other factors described in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report and "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (our "Annual Report"), as well as in the other reports we file with the Securities and Exchange Commission (the "SEC"). You should read this Quarterly Report, and the other documents we file with the SEC, with the understanding that our actual future results may be materially different from the results expressed or implied by these forward-looking statements. As such, you should not rely upon forward-looking statements as predictions of future events. Any forward-looking statement made by us in this Quarterly Report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report to reflect events or circumstances after the date of this Quarterly Report or to reflect new information or the occurrence of unanticipated events, except as required by law.
1
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
APPFOLIO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands)
| September 30, 2026 | December 31, 2025 | |||||||||||||
| Assets | ||||||||||||||
| Current assets | ||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
| Investment securities—current | ||||||||||||||
| Accounts receivable, net | ||||||||||||||
| Prepaid expenses and other current assets | ||||||||||||||
| Total current assets | ||||||||||||||
| Property and equipment, net | ||||||||||||||
| Operating lease right-of-use assets | ||||||||||||||
| Capitalized software development costs, net | ||||||||||||||
| Goodwill | ||||||||||||||
| Intangible assets, net | ||||||||||||||
| Deferred income taxes | ||||||||||||||
| Long-term investments | ||||||||||||||
| Other long-term assets | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||
| Current liabilities | ||||||||||||||
| Accounts payable | $ | $ | ||||||||||||
| Accrued employee expenses | ||||||||||||||
| Accrued expenses | ||||||||||||||
| Other current liabilities | ||||||||||||||
| Total current liabilities | ||||||||||||||
| Operating lease liabilities | ||||||||||||||
| Other liabilities | ||||||||||||||
| Total liabilities | ||||||||||||||
| Commitments and contingencies (Note 7) | ||||||||||||||
| Stockholders’ equity: | ||||||||||||||
| Class A common stock | ||||||||||||||
| Class B common stock | ||||||||||||||
| Additional paid-in capital | ||||||||||||||
| Accumulated other comprehensive (loss) income | ( | |||||||||||||
| Treasury stock | ( | ( | ||||||||||||
| Retained earnings | ||||||||||||||
| Total stockholders’ equity | ||||||||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||||||||
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
2
APPFOLIO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share amounts)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
| Costs and operating expenses: | |||||||||||||||||||||||
Cost of revenue (exclusive of depreciation and amortization)(1) | |||||||||||||||||||||||
Sales and marketing(1) | |||||||||||||||||||||||
Research and product development(1) | |||||||||||||||||||||||
General and administrative(1) | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Total costs and operating expenses | |||||||||||||||||||||||
| Income from operations | |||||||||||||||||||||||
| Other (loss) income, net | ( | ( | |||||||||||||||||||||
| Interest income, net | |||||||||||||||||||||||
| Income before provision for income taxes | |||||||||||||||||||||||
| Provision for income taxes | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Net income per common share: | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
(1) Includes stock-based compensation expense as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Stock-based compensation expense included in costs and operating expenses: | |||||||||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization) | $ | $ | $ | $ | |||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| Research and product development | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | |||||||||||||||||||
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
3
APPFOLIO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(in thousands)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive loss: | |||||||||||||||||||||||
| Changes in unrealized losses on investment securities, net of tax | ( | ( | ( | ( | |||||||||||||||||||
| Comprehensive income | $ | $ | $ | $ | |||||||||||||||||||
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
4
APPFOLIO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(in thousands)
| Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Additional | Other | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Common Stock | Paid-in | Comprehensive | Treasury | Retained | ||||||||||||||||||||||||||||||||||||||||||||||||
| Class A | Class B | Capital | Income (Loss) | Stock | Earnings | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options and issuance of common stock under the Employee Stock Purchase Plan | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units, net of shares withheld for taxes | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Class B common stock to Class A common stock | — | ( | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | ( | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Net Income | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2026 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units, net of shares withheld for taxes | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Net Income | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options and issuance of common stock under the Employee Stock Purchase Plan | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units, net of shares withheld for taxes | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Class B common stock to Class A common stock | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | ( | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Net Income | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2026 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
5
| Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Common Stock | Paid-in | Comprehensive | Treasury | Retained | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class A | Class B | Capital | Income (Loss) | Stock | Earnings | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units, net of shares withheld for taxes | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Class B common stock to Class A common stock | — | ( | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | ( | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Income | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units, net of shares withheld for taxes | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | ( | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Income | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options and issuance of common stock under the Employee Stock Purchase Plan | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units, net of shares withheld for taxes | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Class B common stock to Class A common stock | ( | ( | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Income | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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APPFOLIO, INC. | |||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
(UNAUDITED) | |||||||||||
(in thousands) | |||||||||||
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Cash from operating activities | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Amortization of operating lease right-of-use assets | |||||||||||
Amortization of costs capitalized to obtain revenue contracts | |||||||||||
| Gain on lease termination and modification | ( | ||||||||||
Deferred income taxes | |||||||||||
| Stock-based compensation, including as amortized | |||||||||||
| Other | ( | ( | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | ( | ( | |||||||||
Prepaid expenses and other assets | ( | ( | |||||||||
| Accounts payable | |||||||||||
| Operating lease liabilities | ( | ( | |||||||||
| Accrued expenses and other liabilities | |||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash from investing activities | |||||||||||
| Purchases of available-for-sale investments | ( | ( | |||||||||
| Proceeds from sales of available-for-sale investments | |||||||||||
| Proceeds from maturities of available-for-sale investments | |||||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Proceeds from sale of property and equipment | |||||||||||
| Capitalization of software development costs | ( | ( | |||||||||
Purchases of long-term investments | ( | ( | |||||||||
| Cash paid in business acquisition, net of cash acquired | ( | ||||||||||
| Net cash provided by investing activities | |||||||||||
| Cash from financing activities | |||||||||||
Proceeds from stock option exercises and the issuance of common stock under the Employee Stock Purchase Plan | |||||||||||
| Tax withholding for net share settlement | ( | ( | |||||||||
Purchase of common stock | ( | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Net increase in cash, cash equivalents and restricted cash | |||||||||||
| Cash, cash equivalents and restricted cash | |||||||||||
| Beginning of period | |||||||||||
| End of period | $ | $ | |||||||||
| Cash, cash equivalents and restricted cash at end of period: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Restricted cash included in prepaid expenses and other current assets | |||||||||||
| Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows | $ | $ | |||||||||
| Supplemental disclosure of cash flow information | |||||||||||
| Cash paid for amounts included in the measurement of lease liabilities included in operating cash flows | $ | $ | |||||||||
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
7
APPFOLIO, INC.
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
1. Nature of Business
AppFolio, Inc. ("we," "us" or "our") is a technology leader powering the future of the real estate industry. We provide a cloud-based platform on which our customers operate their businesses. Our services enable our customers to connect communities, increase operational efficiency, deliver exceptional customer experiences, and improve financial and operational performance.
2. Summary of Significant Accounting Policies
Basis of Presentation and Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue, expenses, other income, and provision for income taxes during the reporting period. Assets and liabilities which are subject to judgment and use of estimates include the fair value of financial instruments, the fair value of privately-held strategic investments, useful lives of property and equipment and intangible assets, capitalized software development costs, incremental borrowing rate applied in lease accounting, the period of benefit associated with deferred costs, stock-based compensation, income taxes, and contingencies. Actual results could differ from those estimates and any such differences may have a material impact on our Consolidated Financial Statements.
Segment Information
Our chief operating decision maker ("CODM"), the Chief Executive Officer, allocates resources and assesses financial performance based upon discrete financial information at the consolidated level. There are no segment managers who are held accountable by our CODM, or anyone else, for operations, operating results and planning for levels or components below the consolidated unit level. Accordingly, we have determined that we operate as a single operating and reportable segment.
Our CODM uses consolidated net income (loss) as the sole measure of segment profit or loss. Significant segment expenses include cost of revenue (excluding depreciation and amortization), sales and marketing, research and product development, general and administrative expenses, and depreciation and amortization. For expenses incurred during the three and nine months ended September 30, 2026 and 2025, refer to our Condensed Consolidated Statements of Operations. Stock-based compensation expense is also recognized as a significant segment expense. Details regarding this expense for the nine months ended September 30, 2026 and 2025 are included in the parenthetical note to the respective Condensed Consolidated Statements of Operations.
Recent Accounting Pronouncements Adopted
In July 2025, the Financial Accounting Standards Board ("FASB") issued ASU 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets, which amends ASC 326-20 to provide a practical expedient (for all entities) and an accounting policy election (for all entities, other than public business entities, that elect the practical expedient) related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606. The guidance will be applied on a prospective basis and is effective for calendar year-end public business entities in the 2026 annual period and its interim periods, with early adoption permitted. We adopted the standard from January 1, 2026 prospectively. The adoption of the standard did not have a material impact on our financial statements.
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Recent Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expense. The new standard requires additional disclosures about specific types of expenses included in the expense captions presented on the face of income statements as well as disclosures about selling expenses. The guidance applies prospectively with the option to apply the standard retrospectively and is effective for calendar year-end public business entities in the 2027 annual period and in 2028 for interim periods with early adoption permitted. We are currently evaluating the impact of ASU 2024-03 on our Consolidated Financial Statements.
In September 2025, the FASB issued ASU 2025-06, Targeted Improvements to the Accounting for Internal-Use Software, to modernize the accounting guidance for the costs to develop software for internal use. The new guidance amends the existing standard that refers to various stages of a software development project to align better with current software development methods, such as agile programming. The new guidance will be effective for calendar year-end public business entities in the 2028 annual period. The guidance can be applied on a fully prospective basis, a modified basis for in-process projects, or a full retrospective basis. We are currently evaluating the impact of this ASU on our Consolidated Financial Statements.
3. Revenue and Deferred Costs
The following table presents our revenue categories for the three and nine months ended September 30, 2026 and 2025 (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Subscription Services | $ | $ | $ | $ | ||||||||||||||||||||||
| Value Added Services | ||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||||||||||||
Our revenue is generated primarily from customers in the United States.
Deferred Costs
Deferred costs were $24.3 million and $22.8 million as of September 30, 2026 and December 31, 2025, respectively, of which $12.6 million and $11.2 million, respectively, are included in Prepaid expenses and other current assets and $11.7 million and $11.6 million, respectively, are included in Other long-term assets in the accompanying Condensed Consolidated Balance Sheets. Amortization expense for deferred costs was $3.4 million, and $2.8 million for the three months ended September 30, 2026 and 2025, respectively, and $9.9 million and $8.2 million for the nine months ended September 30, 2026 and 2025, respectively. For the nine months ended September 30, 2026 and 2025, no
Remaining Performance Obligations
Transaction price allocated to remaining performance obligations (“RPO”) represents contracted revenue that has not been recognized, which includes deferred revenue and non-cancelable amounts that will be invoiced and recognized as revenue in future periods. RPO does not include revenue related to performance obligations that are part of a contract with an original expected duration of one year or less or related to usage-based Value Added Services that are billed in arrears.
As of September 30, 2026, the total non-cancelable RPO under our contracts with customers was $161.4 million, and we expect to recognize revenue on approximately 41.4 % of these RPO over the following 12 months, with the balance to be recognized thereafter. During the nine months ended September 30, 2026, we recognized revenue of $26.7 million, that was included in the RPO at the beginning of the period presented.
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4. Investment Securities and Fair Value Measurements
Investment Securities
Investment securities classified as available-for-sale consisted of the following as of September 30, 2026 and December 31, 2025 (in thousands):
| September 30, 2026 | |||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||||||
| U.S. government and agency securities | ( | ||||||||||||||||||||||
| Total available-for-sale investment securities | $ | $ | $ | ( | $ | ||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||||||
| U.S. government and agency securities | |||||||||||||||||||||||
| Total available-for-sale investment securities | $ | $ | $ | $ | |||||||||||||||||||
As of September 30, 2026, for available-for-sale debt securities in an unrealized loss position, the Company evaluated whether any portion of the decline in fair value below amortized cost was due to credit losses. Based on this evaluation, and considering that it is more likely than not that the Company will hold the securities until maturity or recovery of the cost basis, no
The fair values of available-for-sale investment securities, by remaining contractual maturity, are as follows (in thousands):
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Amortized Cost | Estimated Fair Value | Amortized Cost | Estimated Fair Value | ||||||||||||||||||||
| Due in one year or less | $ | $ | $ | $ | |||||||||||||||||||
| Total available-for-sale investment securities | $ | $ | $ | $ | |||||||||||||||||||
During the nine months ended September 30, 2026 and 2025, we had sales and maturities of investment securities, as follows (in thousands):
| Nine Months Ended September 30, 2026 | |||||||||||||||||||||||
| Gross Realized Gains | Gross Realized Losses | Gross Proceeds from Sales | Gross Proceeds from Maturities | ||||||||||||||||||||
| U.S. government and agency securities | $ | $ | ( | $ | $ | ||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ||||||||||||||||||
| Nine Months Ended September 30, 2025 | |||||||||||||||||||||||
| Gross Realized Gains | Gross Realized Losses | Gross Proceeds from Sales | Gross Proceeds from Maturities | ||||||||||||||||||||
| U.S. government and agency securities | ( | ||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ||||||||||||||||||
The tables above do not include our strategic investments of non-marketable equity investments in privately-held companies, which are recorded in long-term investments in our Condensed Consolidated Balance Sheets. These strategic investments consist of the following as of September 30, 2026 and December 31, 2025 (in thousands):
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| September 30, 2026 | December 31, 2025 | |||||||||||||
Second Nature | $ | $ | ||||||||||||
Others | ||||||||||||||
Total long-term investments | $ | $ | ||||||||||||
In April 2026, we purchased a minority, non-controlling equity interest in a private company, for $10.0 million, paid with cash on hand.
The cumulative amount of upward adjustments recognized on our strategic investments of non-marketable equity investments was $0.6 million as of September 30, 2026. The entire amount was recognized during the first quarter of 2026 as a result of an observable price change for one privately held technology company. There were no cumulative downward adjustments as of September 30, 2026.
There were no
Fair Value Measurements
Recurring Fair Value Measurements
The following tables present our financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2026 and December 31, 2025 by level within the fair value hierarchy (in thousands):
| September 30, 2026 | |||||||||||||||||||||||
| Level 1 | Level 2 | Total Fair Value | |||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | $ | $ | ||||||||||||||||||||
| U.S. government and agency securities | |||||||||||||||||||||||
| Available-for-sale investment securities: | |||||||||||||||||||||||
| U.S. government and agency securities | |||||||||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Level 1 | Level 2 | Total Fair Value | |||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | $ | $ | ||||||||||||||||||||
| Available-for-sale investment securities: | |||||||||||||||||||||||
| U.S. government and agency securities | |||||||||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||||||||
The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate their fair value because of the short maturity of these items.
Fair value for our Level 1 investment securities is based on market prices for identical assets. Our Level 2 securities were priced by a pricing vendor. The pricing vendor utilizes the most recent observable market information in pricing these securities or, if specific prices are not available for these securities, other observable inputs like market transactions involving comparable securities are used.
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Strategic Investments Measured and Recorded at Fair Value on a Non-Recurring Basis
Strategic investments primarily include equity investments in privately-held companies, which do not have a readily determinable fair value. Strategic investments are classified as Level 3 in the fair value hierarchy, as their nonrecurring fair value measurements may include observable and unobservable inputs. As of September 30, 2026 and December 31, 2025, the balance of strategic investments was $87.7 million and $77.0 million, respectively. We recognized a net unrealized gain of $0.6 million in connection with our investment in a privately held technology company in Other (loss) income, net in our Condensed Consolidated Statements of Operations for the nine months ended September 30, 2026. We did not recognize any net unrealized gain or loss for our strategic investments for the nine months ended September 30, 2025.
5. Leases
Operating leases for our corporate offices have remaining lease terms ranging from ten months to 6.3 years, some of which include options to extend the leases for up to ten years . These options to extend have not been recognized as part of our operating lease right-of-use assets and lease liabilities as it is not reasonably certain that we will exercise these options. Our lease agreements do not contain any residual value guarantees or material restrictive covenants. Certain leases contain provisions for property-related costs that are variable in nature for which we are responsible, including common area maintenance, which are expensed as incurred.
The components of lease expense recognized in the Condensed Consolidated Statements of Operations were as follows (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Operating lease cost | $ | $ | $ | $ | |||||||||||||||||||
| Variable lease cost | |||||||||||||||||||||||
| Total lease cost | $ | $ | $ | $ | |||||||||||||||||||
Lease-related assets and liabilities were as follows (in thousands):
| September 30, 2026 | December 31, 2025 | ||||||||||
| Assets | |||||||||||
| Operating lease right-of-use assets | $ | $ | |||||||||
| Liabilities | |||||||||||
| Other current liabilities | $ | $ | |||||||||
| Operating lease liabilities | |||||||||||
| Total lease liabilities | $ | $ | |||||||||
In July 2026, we entered into a lease termination agreement to terminate one of our office spaces in Santa Barbara (the "Santa Barbara 50 Termination"). In connection with the Santa Barbara 50 Termination, we paid a termination fee of $3.9 million. As a result, we derecognized the related operating lease right-of-use asset and lease liability. We recognized a gain on lease termination of $1.5
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Future minimum lease payments under non-cancellable leases as of September 30, 2026 were as follows (in thousands):
| Years ending December 31, | |||||
| 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| Thereafter | |||||
| Total future minimum lease payments | |||||
| Less: imputed interest | ( | ||||
| Total | $ | ||||
6. Other Balance Sheet Components
Prepaid expenses and other current assets
Prepaid expenses and other current assets consisted of the following (in thousands):
| September 30, 2026 | December 31, 2025 | |||||||||||||
Income tax receivable(1) | $ | $ | ||||||||||||
| Prepaid expenses | ||||||||||||||
Deferred commissions(2) | ||||||||||||||
Deposits for insurance services(3) | ||||||||||||||
| Other | ||||||||||||||
| Total Prepaid expenses and other current assets | $ | $ | ||||||||||||
(1)For additional information on income tax, refer to Note 10, Income Taxes.
(2)For additional information on deferred commissions, refer to Deferred Costs in Note 3, Revenue and Deferred Costs.
(3)For additional information on deposits held with a third party related to requirements to maintain collateral for insurance services, refer to "Legal Liability to Landlord Insurance" in Note 7, Commitments and Contingencies.
Accrued Employee Expenses
Accrued employee expenses consisted of the following (in thousands):
| September 30, 2026 | December 31, 2025 | |||||||||||||
Accrued bonuses(1) | $ | $ | ||||||||||||
| Accrued payroll and other | ||||||||||||||
| Total accrued employee expenses | $ | $ | ||||||||||||
(1)Accrued bonuses decreased significantly as of September 30, 2026, due to the payment of 2025 annual bonuses in the first quarter of 2026.
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Other Current Liabilities
Other current liabilities consisted of the following (in thousands):
| September 30, 2026 | December 31, 2025 | |||||||||||||
Unearned premium liabilities(1) | $ | $ | ||||||||||||
Insurance reserves(2) | ||||||||||||||
| Operating lease liabilities-current | ||||||||||||||
| Other | ||||||||||||||
| Total other current liabilities | $ | $ | ||||||||||||
(1)Unearned premium liabilities are the refundable portion of commissions received in connection with the sale of renters insurance policies to residents through AppFolio Insurance Services, Inc., our wholly owned subsidiary. In the event a resident cancels their renters insurance policy prior to the end of such policy, we may be required to refund a pro rata portion of the commission paid on such policy.
(2)For additional information on insurance reserves, refer to "Legal Liability to Landlord Insurance" in Note 7, Commitments and Contingencies.
7. Commitments and Contingencies
Legal Liability to Landlord Insurance
We have a wholly owned subsidiary, Terra Mar Insurance Company, Inc., which was established in connection with reinsuring liability to landlord insurance policies offered to our customers by our third-party service provider. We assume a 100 % quota share of the liability to landlord insurance policies placed with our customers by our third-party service provider. We accrue for reported claims, and include an estimate of losses incurred but not reported by our property manager customers, in cost of revenue because we bear the risk related to all such claims. Our estimated liability for reported claims and incurred but not reported claims as of September 30, 2026 and December 31, 2025 was $8.3 million and $6.6 million, respectively, and is included in Other current liabilities on our Condensed Consolidated Balance Sheets.
Included in Prepaid expenses and other current assets as of September 30, 2026 and December 31, 2025 are $4.7 million and $7.8 million, respectively, of deposits held with a third party related to requirements to maintain collateral for this insurance service.
Commitments
In January 2026, we entered into an agreement with vendors for certain cloud computing services. We are committed to spend a minimum of at least $219.3 million through 2031, of which $36.2 million is short-term. We may pay more than the minimum purchase commitment to our cloud-computing vendors based on usage.
Credit Facility
On September 30, 2025, we entered into a credit agreement by and among AppFolio, Inc., certain of our subsidiaries as guarantors, the lender(s) party thereto, and PNC Bank, National Association, in its capacity as Administrative Agent, Swingline Loan Lender and Issuing Lender (the “Credit Facility”).
The Credit Facility provides for a $150.0 million senior secured revolving credit facility, including sublimits of $25.0 million for letters of credit and $25.0 million for swingline loans, and is scheduled to mature on September 30, 2030. We may, subject to customary conditions and consent of the applicable lenders, increase the revolving commitment or incur term loans thereunder (capped at amounts specified in the Credit Facility) or extend the maturity date of the Credit Facility.
Borrowings under the Credit Facility bear interest at variable rates based, at our option, on Term Secured Overnight Financing Rate Data ("SOFR"), Daily Simple SOFR, or a Base Rate, plus an applicable margin (ranging from 125.0 to 200.0 basis points in the case of Term SOFR and Daily Simple SOFR and 25.0 to 100.0 basis points in the case of the Base Rate) determined by our Consolidated Net Leverage Ratio, all as defined in the Credit Facility. We also pay a quarterly commitment fee (ranging from 15.0 to 30.0 basis points depending on our Consolidated Net Leverage Ratio) on unused amounts, as well as customary letter of credit and agency fees.
The obligations under the Credit Facility are guaranteed by certain of our subsidiaries and secured by a first-priority security interest in substantially all of our and our guarantors' personal property, subject to customary exclusions and exceptions. The Credit Facility includes customary representations, warranties, and affirmative and negative covenants, including a financial covenant requiring maintenance of a Consolidated Net Leverage Ratio. The negative covenants include,
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among other things, restrictions on our and our subsidiaries' ability to incur indebtedness and liens, make investments, pay dividends or distributions or repurchase equity interests, merge, consolidate or otherwise dispose of assets, enter into transactions with affiliates, and prepay, redeem, purchase or otherwise retire junior indebtedness, all subject to certain exceptions.
As of September 30, 2026, there were no outstanding borrowings under the Credit Facility, and we were in compliance with the covenants under the Credit Facility.
Legal Proceedings
From time to time, we are involved in various investigative inquiries, legal proceedings and disputes arising from or related to matters incident to the ordinary course of our business activities, including actions with respect to intellectual property, employment, labor, regulatory and contractual matters. Although the ultimate outcome of such investigative inquiries, legal proceedings and other disputes cannot be predicted with certainty, we do not believe that any such pending investigative inquiries, legal proceedings and other disputes, if determined adversely to us, would, individually or taken together, have a material adverse effect on our business, operating results, financial condition or cash flows.
Indemnification
In the ordinary course of business, we may provide indemnification of varying scope and terms to customers, business partners, investors, directors, officers, and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of any applicable agreements, intellectual property infringement claims made by third parties, and other liabilities relating to or arising from our services or our acts or omissions. These indemnification provisions may survive termination of the underlying agreement and the maximum potential amount of future payments we could be required to make under these indemnification provisions may not be subject to maximum loss clauses and is indeterminable. We have not incurred any costs as a result of such indemnification obligations and have not recorded any liabilities related to such obligations in the Condensed Consolidated Financial Statements.
8. Share Repurchase Program
On February 20, 2019, our Board of Directors (our "Board") authorized a $100.0 million share repurchase program (the "2019 Stock Repurchase Program") relating to our outstanding shares of Class A common stock. Under the 2019 Stock Repurchase Program, we were authorized to repurchase shares of our Class A common stock from time to time in open market purchases or privately negotiated transactions. The 2019 Stock Repurchase Program did not obligate us to repurchase any minimum dollar amount or number of shares, did not have an expiration date, and it could have been modified, suspended or terminated at any time and for any reason.
During the first quarter of 2025, we repurchased 445,311 shares of our Class A common stock through open market repurchases under the 2019 Stock Repurchase Program at an average purchase price of $215.05 per share, inclusive of broker commissions, for an aggregate repurchase price of $95.8 million which was recorded as a reduction to stockholders' equity. As a result of such repurchases, we substantially exhausted the remaining shares available for purchase under the 2019 Stock Repurchase Program, and it terminated.
On April 23, 2025, our Board authorized a $300.0 million share repurchase program (the "2025 Stock Repurchase Program") relating to our outstanding shares of Class A common stock. Under the 2025 Stock Repurchase Program, we are authorized to repurchase shares of our Class A common stock from time to time in open market purchases or privately negotiated transactions. The 2025 Stock Repurchase Program does not obligate us to repurchase any minimum dollar amount or number of shares, has no expiration date, and can be modified, suspended or terminated at any time and for any reason. The timing and actual number of shares repurchased will depend on a variety of factors, including price, corporate and legal requirements, market conditions and other factors. During the second quarter of 2025, we repurchased 243,987 shares of our Class A common stock through open market repurchases under the 2025 Stock Repurchase Program at an average purchase price of $204.77 per share, inclusive of broker commissions, for an aggregate repurchase price of $50.0 million which was recorded as a reduction to stockholders' equity. We did not
During the first quarter of 2026, we repurchased 702,502 shares of our Class A common stock through open market repurchases under the 2025 Stock Repurchase Program at an average purchase price of $177.95 per share, inclusive of broker commissions, for an aggregate repurchase price of $125.0 million, which was recorded as a reduction to stockholders' equity. We did not repurchase any shares of our Class A common stock under the 2025 Stock Repurchase Program during the second quarter of 2026.
During the third quarter of 2026, we repurchased 23,945 shares of our Class A common stock through open market repurchases under the 2025 Stock Repurchase Program at an average purchase price of $174.58 per share, inclusive of broker
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commissions, for an aggregate repurchase price of $4.2 million, which was recorded as a reduction to stockholders' equity. As of September 30, 2026, the amount remaining available for repurchases under the 2025 Stock Repurchase Program was $120.8 million.
9. Stock-Based Compensation
Restricted Stock Units
A summary of activity in connection with our restricted stock units ("RSUs") for the nine months ended September 30, 2026, is as follows (number of shares in thousands):
| Number of Shares | Weighted Average Grant Date Fair Value per Share | |||||||||||||
| Unvested as of December 31, 2025 | $ | |||||||||||||
| Granted | ||||||||||||||
| Vested | ( | |||||||||||||
| Forfeited | ( | |||||||||||||
| Unvested as of September 30, 2026 | $ | |||||||||||||
Unvested RSUs as of September 30, 2026 were composed of 0.7 million RSUs with only service conditions and 0.1 million performance share units ("PSUs") with both service conditions and performance conditions. RSUs granted with only service conditions generally vest over a four-year period, assuming continued employment through the applicable vesting date. The number of PSUs granted, as included in the above table, assumes achievement of the performance metrics at 100 % of the performance target. The unvested PSUs as of September 30, 2026, are subject to vesting based on the achievement of pre-established performance metrics for the year ending December 31, 2026 and will vest over a three-year period, assuming continued employment through each applicable vesting date. The actual number of shares to be granted at the end of the performance period will range from 0 % to 150 % of the target number of shares depending on achievement relative to the performance metrics over the applicable period; however, performance-based compensation expense is included in calculating achievement of the performance metrics, resulting in an effective maximum payout of approximately 135 % of target.
We recognized stock-based compensation expense for the RSUs and PSUs of $20.2 million and $20.5 million for the three months ended September 30, 2026 and 2025, respectively and $57.9 million and $54.4 million for the nine months ended September 30, 2026 and 2025, respectively. As of September 30, 2026, the total estimated remaining stock-based compensation expense for the aforementioned RSUs and PSUs was $132.4 million, which is expected to be recognized over a weighted average period of 2.4 years.
10. Income Taxes
We calculate our provision for income taxes on a quarterly basis by applying an estimated annual effective tax rate to income (loss) from operations and by calculating the tax effect of discrete items recognized during the quarter.
For the three and nine months ended September 30, 2026, we recorded income tax expense of $13.6 million and $37.2 million, representing an effective tax rate of 22.9 % and 22.2 %, respectively. Our effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to excess tax benefits from stock-based compensation and research and development tax credits, partially offset by state income taxes and non-deductible officers' compensation. For the three and nine months ended September 30, 2025, our effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to excess tax benefits from stock-based compensation and research and development tax credits, partially offset by state income taxes and non-deductible officers' compensation.
We assess our ability to realize our deferred tax assets on a quarterly basis and we establish a valuation allowance if it is more-likely-than-not that some portion of deferred tax assets will not be realized. We weigh all available positive and negative evidence, including our earnings history and results of recent operations, scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies. During the three months ended September 30, 2026, we assessed all available evidence and determined that there was sufficient positive evidence to overcome the negative evidence, including our past and current financial results, growth demonstrated in our top-line performance, as well as projected profitability. Accordingly, we determined it is more likely than not that the deferred tax assets will be realized and no valuation allowance was recorded at September 30, 2026.
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There were no material changes to our unrecognized tax benefits during the three and nine months ended September 30, 2026, and we do not expect to have any significant changes to unrecognized tax benefits through the remainder of the year.
11. Net Income Per Share
Net income per common share was the same for shares of our Class A and Class B common stock because they are entitled to the same liquidation and dividend rights and are therefore combined in the table below. The following table sets forth the computation of basic and diluted net income per common share (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
Basic net income per share: | |||||||||||||||||||||||
| Numerator | |||||||||||||||||||||||
Net income attributable to common stockholders | $ | $ | $ | $ | |||||||||||||||||||
| Denominator | |||||||||||||||||||||||
| Weighted average common shares outstanding; basic | |||||||||||||||||||||||
Net income per common share; basic | $ | $ | $ | $ | |||||||||||||||||||
Diluted net income per share: | |||||||||||||||||||||||
| Numerator | |||||||||||||||||||||||
Net income attributable to common stockholders | $ | $ | $ | $ | |||||||||||||||||||
| Denominator | |||||||||||||||||||||||
| Weighted average common shares outstanding; basic | |||||||||||||||||||||||
| Add: Weighted average dilutive options outstanding | |||||||||||||||||||||||
Add: Weighted average dilutive restricted stock units outstanding | |||||||||||||||||||||||
| Weighted average common shares outstanding; diluted | |||||||||||||||||||||||
Net income per common share; diluted | $ | $ | $ | $ | |||||||||||||||||||
Potentially dilutive securities that are not included in the calculation of diluted net income per share because doing so would be antidilutive are as follows (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
Restricted stock units | |||||||||||||||||||||||
| Total potentially dilutive securities | |||||||||||||||||||||||
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition, results of operations and liquidity should be read together with our Condensed Consolidated Financial Statements and the related notes included elsewhere in this Quarterly Report and in our Annual Report.
Overview
We are a technology leader powering the future of the real estate industry. We provide a cloud-based platform on which our customers operate their businesses. We help our customers navigate an increasingly interconnected and growing network of stakeholders in their business ecosystems, including property managers, property investors, potential residents, residents, and vendors. We also provide key functionality related to critical transactions across the real estate lifecycle, including screening potential residents, sending and receiving payments, and providing insurance-related risk mitigation services. Our services enable our customers to connect communities, increase operational efficiency, deliver exceptional customer experiences, and improve financial and operational performance.
Financial Highlights for the Third Quarter of 2026
•Revenue grew 19% year-over-year to $296 million.
•Total units under management grew 8% year-over-year to 9.8 million.
•GAAP operating income grew 64% to $57 million, or 19.4% of revenue, compared to $35 million, or 14.1% of revenue in Q3 2025.
•Non-GAAP operating income grew 38% to $81 million, or 27.3% of revenue, compared to $59 million, or 23.5% of revenue in Q3 2025.
•Net cash provided by operating activities was $97 million, or 32.7% of revenue, compared to $86 million, or 34.5% of revenue in Q3 2025.
Key Business Metric
Property management units under management. We believe that our ability to increase our number of property management units under management is an indicator of our market penetration, growth, and potential future business opportunities. We define property management units under management as active or committed units under management at the period end date. We had 9.8 million and 9.1 million property management units under management as of September 30, 2026 and 2025, respectively.
Key Components of Results of Operations
Revenue
Our Subscription Services and certain of our Value Added Services are offered on a subscription basis. The subscription fees for our services vary by property type and are designed to scale with the size of our customers’ businesses. We recognize revenue for subscription-based services on a straight-line basis over the contract term beginning on the date that our service is made available. We generally invoice monthly or, to a lesser extent, annually in advance of a subscription period.
We also offer certain Value Added Services, which are not covered by our subscription fees, on a per-use basis. Usage-based fees are charged either as a percentage of the transaction amount (e.g., for certain of our electronic payment services) or on a flat fee per transaction basis generally with no minimum usage commitments (e.g., for our tenant screening and risk mitigation services). We recognize revenue for usage-based services in the period the service is rendered. Our payments services fees are recorded gross of any interchange and payment processing related fees. We generally invoice our usage-based services on a monthly basis or collect the fee at the time of service. A significant majority of our Value Added Services revenue comes from the use of our electronic payment services, tenant screening services, and risk mitigation services.
Other revenue includes fees from one-time services related to the implementation of our software solutions and other recurring or one-time fees related to our customers who are not otherwise using our Subscription Services. This includes legacy customers of businesses we have acquired where the customers haven't migrated to our Subscription Services. The fees for implementation and data migration services are billed upon signing our core subscription contract and are recognized as revenue in the period the service is rendered. Other services are billed when the services rendered are completed and delivered to the customer or billed in advance and deferred over the subscription period.
As of September 30, 2026 and 2025, we had 23,121 and 21,759 property management customers, respectively.
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Costs and Operating Expenses
Cost of Revenue (Exclusive of Depreciation and Amortization). Many of our Value Added Services are facilitated by third-party service providers. Cost of revenue paid to these third-party service providers includes, without limitation, the cost of electronic interchange and payment processing-related services to support our payments services, the cost of credit reporting services for our tenant screening services, and various costs associated with our risk mitigation service providers. These third-party costs vary both in amount and as a percentage of revenue for each Value Added Service offering. Cost of revenue also includes personnel-related costs for our employees focused on customer service and the support of our operations (including salaries, cash bonuses, benefits, and stock-based compensation), platform infrastructure costs (such as data center operations and hosting-related costs), and allocated shared and other costs. Cost of revenue excludes depreciation of property and equipment, amortization of capitalized software development costs and amortization of intangible assets.
Sales and Marketing. Sales and marketing expense consists of personnel-related costs for our employees focused on sales and marketing (including salaries, sales commissions, cash bonuses, benefits, and stock-based compensation), costs associated with sales and marketing activities, and allocated shared and other costs. Marketing activities include advertising, online lead generation, lead nurturing, customer and industry events, and the creation of industry-related content and collateral. We focus our sales and marketing efforts on generating awareness of our software solutions, creating sales leads, establishing and promoting our brands, and cultivating an educated community of successful and vocal customers.
Research and Product Development. Research and product development expense consists of personnel-related costs for our employees focused on research and product development (including salaries, cash bonuses, benefits, and stock-based compensation), fees for third-party development resources, and allocated shared and other costs. Our research and product development efforts are focused on expanding functionality and the ease of use of our existing software solutions by adding new core functionality, Value Added Services and other improvements, as well as developing new products and services. We capitalize our software development costs that meet the criteria for capitalization. Amortization of capitalized software development costs is included in depreciation and amortization expense.
General and Administrative. General and administrative expense consists of personnel-related costs for employees in our executive, finance, information technology, human resources, legal, compliance, and administrative organizations (including salaries, cash bonuses, benefits, and stock-based compensation). In addition, general and administrative expense includes fees for third-party professional services (including audit, legal, compliance, and tax services), regulatory fees, other corporate expenses, impairment of long-lived assets, gains on lease termination and modification and allocated shared and other costs.
Depreciation and Amortization. Depreciation and amortization expense includes depreciation of property and equipment, amortization of capitalized software development costs, and amortization of intangible assets. We depreciate or amortize property and equipment, software development costs, and intangible assets over their expected useful lives on a straight-line basis, which approximates the pattern in which the economic benefits of the assets are consumed.
Interest Income, Net. Interest income, net includes interest earned on investment securities, amortization and accretion of the premium and discounts paid from the purchase of investment securities, and interest earned on cash deposited in our bank accounts.
Provision for income taxes. Provision for income taxes consists of federal and state income taxes in the United States.
Results of Operations
Revenue
| Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | |||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Amount | % | 2026 | 2025 | Amount | % | |||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Subscription Services | $ | 61,525 | $ | 53,752 | $ | 7,773 | 14 | % | $ | 179,547 | $ | 155,738 | $ | 23,809 | 15 | % | ||||||||||||||||||||||||||||||||||
| Value Added Services | 231,948 | 192,092 | 39,856 | 21 | % | 652,778 | 536,943 | 115,835 | 22 | % | ||||||||||||||||||||||||||||||||||||||||
| Other | 2,218 | 3,509 | (1,291) | (37) | % | 6,704 | 9,949 | (3,245) | (33) | % | ||||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | 295,691 | $ | 249,353 | $ | 46,338 | 19 | % | $ | 839,029 | $ | 702,630 | $ | 136,399 | 19 | % | ||||||||||||||||||||||||||||||||||
The increase in revenue for the three and nine months ended September 30, 2026, compared to the same periods in 2025, was primarily attributable to an increase in the usage of our payments, tenant screening, risk mitigation services and resident services. During the three and nine months ended September 30, 2026, we also experienced growth of 8% in the number of property management units under management compared to the same periods in the prior year, which drove growth in users of our Subscription Services and Value Added Services.
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We expect total revenue for the year ending December 31, 2026 to increase compared to the year ended December 31, 2025 as we continue to add new customers and property management units under management, along with increased adoption and usage of our Value Added Services.
Cost of Revenue (Exclusive of Depreciation and Amortization)
| Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | |||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Amount | % | 2026 | 2025 | Amount | % | |||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization) | $ | 105,580 | $ | 91,476 | $ | 14,104 | 15 | % | $ | 303,150 | $ | 254,801 | $ | 48,349 | 19 | % | ||||||||||||||||||||||||||||||||||
| Percentage of revenue | 35.7 | % | 36.7 | % | 36.1 | % | 36.3 | % | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation, included above | $ | 1,315 | $ | 1,241 | $ | 74 | 6 | % | $ | 3,649 | $ | 3,947 | $ | (298) | (8) | % | ||||||||||||||||||||||||||||||||||
| Percentage of revenue | 0.4 | % | 0.5 | % | 0.4 | % | 0.6 | % | ||||||||||||||||||||||||||||||||||||||||||
Cost of revenue (exclusive of depreciation and amortization) increased for the three and nine months ended September 30, 2026, compared to the same periods in 2025. For both periods, the increase was primarily driven by higher third-party service provider costs of $13.4 million and $43.6 million, respectively, due to increased adoption and usage of our Value Added Services. For the nine-month period, the increase was further driven by a $2.3 million increase in personnel-related costs, including stock-based and performance-based compensation, to support growth in the business.
We expect cost of revenue (exclusive of depreciation and amortization) for the year ending December 31, 2026, to stay relatively flat as a percentage of revenue compared to the year ended December 31, 2025.
Sales and Marketing
| Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | |||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Amount | % | 2026 | 2025 | Amount | % | |||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Sales and marketing | $ | 48,623 | $ | 35,912 | $ | 12,711 | 35 | % | $ | 130,068 | $ | 103,745 | $ | 26,323 | 25 | % | ||||||||||||||||||||||||||||||||||
| Percentage of revenue | 16.4 | % | 14.4 | % | 15.5 | % | 14.8 | % | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation, included above | $ | 3,586 | $ | 3,443 | $ | 143 | 4 | % | $ | 10,559 | $ | 9,336 | $ | 1,223 | 13 | % | ||||||||||||||||||||||||||||||||||
| Percentage of revenue | 1.2 | % | 1.4 | % | 1.3 | % | 1.3 | % | ||||||||||||||||||||||||||||||||||||||||||
Sales and marketing expense increased for the three and nine months ended September 30, 2026, compared to the same periods in 2025. The increase was primarily due to a $7.6 million and $9.7 million increase in events, advertising and promotion expense due to increased targeted go-to-market investments, combined with a $2.5 million and $12.2 million increase in personnel-related costs, including stock-based and performance-based compensation, to support growth in the business, for the respective three and nine-month periods.
We expect sales and marketing expense for the year ending December 31, 2026 to stay relatively flat as a percentage of revenue compared to the year ended December 31, 2025.
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Research and Product Development
| Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | |||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Amount | % | 2026 | 2025 | Amount | % | |||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Research and product development | $ | 53,128 | $ | 54,037 | $ | (909) | (2) | % | $ | 153,754 | $ | 144,469 | $ | 9,285 | 6 | % | ||||||||||||||||||||||||||||||||||
| Percentage of revenue | 18.0 | % | 21.7 | % | 18.3 | % | 20.6 | % | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation, included above | $ | 8,839 | $ | 9,076 | $ | (237) | (3) | % | $ | 25,639 | $ | 24,182 | $ | 1,457 | 6 | % | ||||||||||||||||||||||||||||||||||
| Percentage of revenue | 3.0 | % | 3.6 | % | 3.1 | % | 3.4 | % | ||||||||||||||||||||||||||||||||||||||||||
Research and product development expense remained relatively flat for the three months ended September 30, 2026, and increased for the nine months ended September 30, 2026, compared to the same periods in 2025.
For the three-month period, research and product development expense was relatively consistent, as a $3.9 million decrease in personnel-related costs, including stock-based and performance-based compensation, net of capitalized software development costs driven by lower headcount, was partially offset by increases of $1.8 million in software costs and $1.1 million in purchased services.
For the nine-month period, the increase was primarily driven by a $4.4 million increase in personnel-related costs, including stock-based and performance-based compensation, net of capitalized software development costs to support headcount growth. The nine-month increase was further driven by higher software costs of $3.1 million and purchased services of $2.3 million.
We expect research and product development expenses for the year ending December 31, 2026 to decrease as a percentage of revenue compared to the year ended December 31, 2025, as we continue to improve our efficiency by using AI tools and systems.
General and Administrative
| Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | |||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Amount | % | 2026 | 2025 | Amount | % | |||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative | $ | 25,953 | $ | 27,446 | $ | (1,493) | (5) | % | $ | 75,920 | $ | 72,733 | $ | 3,187 | 4 | % | ||||||||||||||||||||||||||||||||||
| Percentage of revenue | 8.8 | % | 11.0 | % | 9.0 | % | 10.4 | % | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation, included above | $ | 6,860 | $ | 7,033 | $ | (173) | (2) | % | $ | 19,213 | $ | 17,998 | $ | 1,215 | 7 | % | ||||||||||||||||||||||||||||||||||
| Percentage of revenue | 2.3 | % | 2.8 | % | 2.3 | % | 2.6 | % | ||||||||||||||||||||||||||||||||||||||||||
General and administrative expense decreased for the three months ended September 30, 2026, and increased for the nine months ended September 30, 2026, compared to the same periods in 2025.
For the three-month period, the general and administrative expense decreased primarily due to a $2.9 million decrease in personnel-related costs, including stock-based and performance-based compensation and a $1.5 million gain recognized on lease termination, largely offset by a $2.6 million increase in professional fees.
For the nine-month period, the increase was primarily driven by an $8.2 million increase in software and professional fees, partially offset by a $1.9 million decrease in personnel-related costs, including stock-based and performance-based compensation and a $1.5 million gain recognized on lease termination.
We expect general and administrative expenses for the year ending December 31, 2026 to stay relatively flat as a percentage of revenue compared to the year ended December 31, 2025.
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Depreciation and Amortization
| Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | |||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Amount | % | 2026 | 2025 | Amount | % | |||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | $ | 4,996 | $ | 5,436 | $ | (440) | (8) | % | $ | 15,001 | $ | 17,541 | $ | (2,540) | (14) | % | ||||||||||||||||||||||||||||||||||
| Percentage of revenue | 1.7 | % | 2.2 | % | 1.8 | % | 2.5 | % | ||||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization expense for the three and nine months ended September 30, 2026 decreased, compared to the same periods in 2025 as various assets have reached the end of their useful life.
We expect depreciation and amortization expenses for the year ending December 31, 2026 to decrease as a percentage of revenue compared to the year ended December 31, 2025, as various assets have reached the end of their useful life.
Interest Income, Net
| Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Amount | % | 2026 | 2025 | Amount | % | ||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest income, net | $ | 2,204 | $ | 1,690 | $ | 514 | 30 | % | $ | 5,423 | $ | 6,109 | $ | (686) | (11) | % | |||||||||||||||||||||||||||||||
| Percentage of revenue | 0.7 | % | 0.7 | % | 0.6 | % | 0.9 | % | |||||||||||||||||||||||||||||||||||||||
Interest income for the three and nine months ended September 30, 2026 remained relatively flat, compared to the same periods in 2025.
Provision for income taxes
| Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | |||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Amount | % | 2026 | 2025 | Amount | % | |||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Income before provision for income taxes | $ | 59,614 | $ | 36,732 | $ | 22,882 | 62 | % | $ | 167,126 | $ | 115,491 | $ | 51,635 | 45% | |||||||||||||||||||||||||||||||||||
| Provision for income taxes | $ | 13,636 | $ | 3,086 | $ | 10,550 | 342 | % | $ | 37,180 | $ | 14,482 | $ | 22,698 | 157% | |||||||||||||||||||||||||||||||||||
| Effective tax rate | 22.9 | % | 8.4 | % | 22.2 | % | 12.5 | % | ||||||||||||||||||||||||||||||||||||||||||
For the three and nine months ended September 30, 2026, we recorded income tax expense of $13.6 million and $37.2 million, representing an effective tax rate of 22.9% and 22.2%, respectively. Our effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to excess tax benefits from stock-based compensation and research and development tax credits, partially offset by state income taxes and non-deductible officers' compensation. For the three and nine months ended September 30, 2025, our effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to excess tax benefits from stock-based compensation and research and development tax credits, partially offset by state income taxes and non-deductible officers' compensation.
The increase in our effective tax rate for the three and nine months ended September 30, 2026, as compared to the same periods in 2025, was primarily driven by an increase in non-deductible officers' compensation and a decrease in excess tax benefits from stock-based compensation and research and development tax credits.
Liquidity and Capital Resources
Our principal sources of liquidity continue to be cash, cash equivalents, and investment securities, as well as cash flows generated from our operations. As of September 30, 2026, we had $307.3 million in cash, cash equivalents, and investment securities. We have financed our operations primarily through cash generated from operations.
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In addition, to optimize our capital structure, on September 30, 2025, we entered into the Credit Facility which provides for a $150.0 million senior secured revolving credit facility, including sublimits of $25.0 million for letters of credit and $25.0 million for swingline loans, and is scheduled to mature on September 30, 2030. We did not draw on the Credit Facility during the nine months ended September 30, 2026, and as of September 30, 2026, we had no outstanding borrowings under the Credit Facility and were in compliance with the covenants under the Credit Facility. For more information regarding the Credit Facility, refer to "Credit Facility" in Note 7, Commitments and Contingencies, of our Condensed Consolidated Financial Statements.
We believe that our existing cash and cash equivalents, investment securities, and cash generated from operating activities will be sufficient to meet our working capital and capital expenditure requirements for at least the next twelve months. The available borrowing capacity under the Credit Facility provides us additional liquidity and financial flexibility.
Capital Requirements
Our future capital requirements depend on many factors, including continued market acceptance of our software solutions; changes in the number of our customers and adoption and utilization of our Value Added Services by new and existing customers; the timing and extent of the introduction of new core functionality, products and Value Added Services; and the timing and extent of our investments across our organization, including acquisitions of businesses and technologies.
We have in the past entered into, and may in the future enter into, arrangements to acquire or invest in new technologies or markets. We may, as a result of those arrangements or the general expansion of our business, be required to seek additional equity or debt financing, which may not be available on terms favorable to us or at all, impacting our ability to compete successfully, which would harm our business, results of operations, and financial condition.
During the first quarter of 2026, we repurchased 702,502 shares of our Class A common stock under the 2025 Stock Repurchase Program at an average purchase price of $177.95 per share, inclusive of broker commissions, for an aggregate repurchase price of $125.0 million, which was recorded as a reduction to stockholders' equity. We did not repurchase any shares of Class A common stock under the 2025 Stock Repurchase Program during the second quarter of 2026.
During the third quarter of 2026, we repurchased 23,945 shares of our Class A common stock through open market repurchases under the 2025 Stock Repurchase Program at an average purchase price of $174.58 per share, inclusive of broker commissions, for an aggregate repurchase price of $4.2 million, which was recorded as a reduction to stockholders' equity. As of September 30, 2026, the amount remaining available for repurchases under the 2025 Stock Repurchase Program was $120.8 million. For more information regarding our share repurchases, refer to Note 8, Share Repurchase Program, of our Condensed Consolidated Financial Statements of this Quarterly Report.
Cash Flows
The following table summarizes our cash flows for the periods indicated (in thousands):
| Nine Months Ended September 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Net cash provided by operating activities | $ | 218,668 | $ | 177,115 | ||||||||||
| Net cash provided by investing activities | 81,715 | 32,546 | ||||||||||||
| Net cash used in financing activities | (148,814) | (176,072) | ||||||||||||
| Net increase in cash, cash equivalents and restricted cash | $ | 151,569 | $ | 33,589 | ||||||||||
Operating Activities
Our primary source of operating cash inflows is cash collected from our customers in connection with their use of our Subscription Services and Value Added Services. Our primary uses of cash from operating activities are for personnel-related expenditures and third-party costs incurred to support the delivery of our software solutions.
The net increase in cash provided by operating activities for the nine months ended September 30, 2026, compared to the same period in the prior year, was primarily due to higher cash collections from customers relative to the increase in operating expenditures.
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Investing Activities
Cash provided by investing activities is generally composed of the cash paid in purchases of investment securities, maturities and sales of investment securities, purchases of property and equipment, purchases of long-term investments, business acquisition, net of cash acquired, and additions to capitalized software development.
The net increase in cash provided by investing activities for the nine months ended September 30, 2026, compared to the same period in the prior year, was primarily due to lower purchases of long-term investments in 2026. For additional information, see Note 4. Investment Securities and Fair Value Measurements, of our Condensed Consolidated Financial Statements.
Financing Activities
Cash used in financing activities is generally composed of net share settlements for employee tax withholdings associated with the vesting of equity awards and repurchases of our Class A common stock offset by proceeds from the exercise of stock options and issuance of common stock under the Employee Stock Purchase Plan.
The net decrease in cash used in financing activities for the nine months ended September 30, 2026, compared to the same period in the prior year, was primarily due to lower repurchases of our Class A common stock.
Non-GAAP Financial Measures
To supplement our Condensed Consolidated Financial Statements, which are prepared and presented in accordance with GAAP, this Quarterly Report contains information regarding our Non-GAAP Operating Income and Non-GAAP Operating Margin, each of which constitutes a non-GAAP financial measure. We use these non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
•Non-GAAP Operating Income excludes certain non-cash or non-recurring items, including stock-based compensation expense, amortization of stock-based compensation capitalized in software development costs, and amortization of purchased intangibles, as described below. Non-GAAP Operating Margin is calculated as Non-GAAP Operating Income as a percentage of revenue.
We use each of these non-GAAP financial measures internally to assess and compare operating results across reporting periods, for internal budgeting and forecasting purposes, and to evaluate our financial performance. We believe these non-GAAP financial measures also provide useful supplemental information to investors and facilitate the analysis of our operating results and comparison of operating results across reporting periods.
In particular, we believe these non-GAAP financial measures are useful to investors and others in assessing our operating performance due to the following factors:
•Stock-based compensation expense and amortization of stock-based compensation capitalized in software development costs. We utilize stock-based compensation to attract and retain employees. It is principally aimed at aligning their interests with those of our stockholders while ensuring long-term retention, rather than to address operational performance for any particular period. As a result, stock-based compensation expenses vary for reasons that are generally unrelated to financial and operational performance in any particular period.
•Amortization of purchased intangibles. We view amortization of purchased intangible assets as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are evaluated for impairment regularly, amortization of the cost of purchased intangibles is an expense that is not typically affected by operations during any particular period.
Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies may calculate non-GAAP financial results differently. In addition, there are limitations in using non-GAAP financial measures because non-GAAP financial measures are not prepared in accordance with GAAP and can exclude expenses that may have a material impact on our reported financial results. As such, non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. A reconciliation of income from operations, the most comparable GAAP measure, to Non-GAAP Operating Income and operating margin, the most comparable GAAP measure, to Non-GAAP Operating Margin, is provided in the table below. We encourage investors to review the reconciliation of these historical non-GAAP financial measures to their most directly comparable GAAP financial measures.
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Reconciliation from GAAP to Non-GAAP Results
(in thousands except percentages)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||
| Income from operations: | |||||||||||||||||||||||||||||
| GAAP income from operations | $ | 57,411 | $ | 35,046 | $ | 161,136 | $ | 109,341 | |||||||||||||||||||||
| Stock-based compensation expense | 20,600 | 20,793 | 59,060 | 55,463 | |||||||||||||||||||||||||
| Amortization of stock-based compensation capitalized in software development costs | 153 | 241 | 634 | 723 | |||||||||||||||||||||||||
| Amortization of purchased intangibles | 2,558 | 2,558 | 7,673 | 7,673 | |||||||||||||||||||||||||
| Non-GAAP income from operations | $ | 80,722 | $ | 58,638 | $ | 228,503 | $ | 173,200 | |||||||||||||||||||||
| Operating margin: | |||||||||||||||||||||||||||||
| GAAP operating margin | 19.4 | % | 14.1 | % | 19.2 | % | 15.6 | % | |||||||||||||||||||||
| Stock-based compensation expense as a percentage of revenue | 7.0 | 8.3 | 7.0 | 7.9 | |||||||||||||||||||||||||
| Amortization of stock-based compensation capitalized in software development costs as a percentage of revenue | — | 0.1 | 0.1 | 0.1 | |||||||||||||||||||||||||
| Amortization of purchased intangibles as a percentage of revenue | 0.9 | 1.0 | 0.9 | 1.1 | |||||||||||||||||||||||||
| Non-GAAP operating margin | 27.3 | % | 23.5 | % | 27.2 | % | 24.7 | % | |||||||||||||||||||||
Critical Accounting Policies and Estimates
Our Condensed Consolidated Financial Statements and the related notes are prepared in accordance with GAAP. The preparation of our Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting period.
There have been no material changes to our critical accounting policies and estimates described in our Annual Report that have had a material impact on our Condensed Consolidated Financial Statements and related notes.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
Investment Securities
As of September 30, 2026, we had $48.7 million of investment securities consisting of United States government and agency securities. The primary objective of investing in securities is to support our liquidity and capital needs. We did not purchase these investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.
Our investment securities are exposed to market risk due to interest rate fluctuations. While fluctuations in interest rates do not impact our interest income from our investment securities as all of these securities have fixed interest rates, changes in interest rates may impact the fair value of the investment securities. Since our investment securities are held as available for sale, all changes in fair value impact our other comprehensive income unless an investment security is considered impaired in which case changes in fair value are reported in other expense. Due to the relatively short-term nature of our investment portfolio, a hypothetical 100 basis point change in interest rates would not have a material effect on the fair value of our portfolio for the periods presented.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the supervision and participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were designed at the reasonable assurance level and were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For information regarding legal proceedings, refer to Note 7, Commitments and Contingencies of our Condensed Consolidated Financial Statements.
Item 1A. Risk Factors
An investment in our Class A common stock involves risks. Before making an investment decision, you should carefully consider all of the information in this Quarterly Report, including in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Condensed Consolidated Financial Statements and related notes. In addition, you should carefully consider the risks and uncertainties described in the section entitled “Risk Factors” in our Annual Report, which was filed with the SEC on February 5, 2026. If any of the identified risks are realized, our business, financial condition, operating results, cash flows and prospects could be materially and adversely affected. In that case, the trading price of our Class A common stock may decline. In addition, other risks of which we are currently unaware, or which we do not currently view as material, could have a material adverse effect on our business, financial condition, operating results, cash flows and prospects. As of the date of this Quarterly Report, there have been no material changes to the risk factors previously disclosed under the section entitled "Risk Factors" in Part I, Item 1A of our Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(c) The table below summarizes our repurchases of our Class A common stock during the three months ended September 30, 2026.
| Period | Total Number of Shares Repurchased(1) | Average Price Paid Per Share(2) | Total Number of Shares Purchased as Part of the Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||||||||||||
| (in thousands) | (in thousands) | (in millions) | ||||||||||||||||||||||||
| July 1, 2026 to July 31, 2026 | 14 | $ | 172.44 | 14 | $ | 122.5 | ||||||||||||||||||||
| August 1, 2026 to August 31, 2026 | 10 | $ | 177.81 | 10 | $ | 120.8 | ||||||||||||||||||||
| September 1, 2026 to September 30, 2026 | — | $ | — | — | $ | 120.8 | ||||||||||||||||||||
| Total | 24 | $ | 174.58 | 24 | ||||||||||||||||||||||
(1) On April 23, 2025, our Board authorized the repurchase of up to $300.0 million of shares of our Class A common stock pursuant to the 2025 Stock Repurchase Program. The 2025 Stock Repurchase Program has no expiration date and can be modified, suspended, or terminated at any time and for any reason. For more information regarding the 2025 Stock Repurchase Program, refer to Note 8, Share Repurchase Program, of our Condensed Consolidated Financial Statements and Part I, Item 2,
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"Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" of this Quarterly Report.
(2) Average price paid per share inclusive of broker commissions.
Item 5. Other Information
(a) On October 21, 2026, our Board adopted the AppFolio Corporate Bonus Plan (the “Bonus Plan”), an annual, performance-based cash incentive compensation plan, which will govern the terms of the annual cash performance bonus element of our executive compensation program beginning in 2027. All of our regular, salaried and hourly employees who do not participate in a sales commission plan, including our executive officers, are eligible to participate in the Bonus Plan. With respect to our executive officers, under the Bonus Plan, our Board (or the Compensation Committee of the Board) will establish, for each fiscal year, the target bonus amount for each executive officer, the performance metrics and targets required to be achieved for payment of a bonus and any other material terms and conditions. The bonus that each executive officer will receive (if any) will be based upon whether and to what extent the performance metrics have been achieved as determined by the Board (or the Compensation Committee). Any payment will be made in cash no later than the last day of March in the following fiscal year.
The foregoing summary of the material terms of the Bonus Plan is qualified in its entirety by reference to the Bonus Plan, a copy of which is filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q and incorporated herein by reference.
(c) On September 9, 2026 , Tim Eaton , our Chief Financial Officer , terminated his previously reported Rule 10b5-1 trading arrangement, which he adopted on March 13, 2026. This trading arrangement provided for the sale between June 15, 2026 and November 22, 2027, of (i) up to 2,211 shares of our Class A common stock, and (ii) an indeterminate number of shares of our Class A common stock received by Mr. Eaton in connection with the vesting in between May 10, 2026 and November 10, 2027 of certain RSUs and PSUs held by Mr. Eaton. The actual number of shares of Class A common stock sold depended on the vesting of the RSUs and PSUs and the number of shares withheld to satisfy tax withholding obligations. This trading arrangement was entered into and terminated during an open trading window and was intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act.
On September 11, 2026 , Mr. Eaton adopted a Rule 10b5-1 trading arrangement providing for the sale between December 11, 2026 and December 31, 2027 of (i) up to 818 shares of our Class A common stock and (ii) an indeterminate number of shares of our Class A common stock received by Mr. Eaton in connection with the vesting between May 10, 2026 and November 10, 2027 of certain RSUs and PSUs held by Mr. Eaton. The actual number of shares of Class A common stock sold will depend on the vesting of the RSUs and PSUs and the number of shares withheld to satisfy tax withholding obligations. This trading arrangement was entered into during an open trading window and is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act.
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Item 6. Exhibits
| Exhibit Number | Description of Document | ||||||||||
| 10.1 | AppFolio Corporate Bonus Plan | ||||||||||
| 31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended | ||||||||||
| 31.2 | Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended | ||||||||||
| 32.1* | Certifications of Chief Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||||||||
| 101.INS | Inline XBRL Instance Document | ||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | ||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | ||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | ||||||||||
| * | The certifications attached as Exhibit 32.1 accompany this Quarterly Report pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the registrant for purposes of Section 18 of the Exchange Act, and are not to be incorporated by reference into any of the registrant’s filings under the Securities Act or the Exchange Act, whether made before or after the date of this Quarterly Report, irrespective of any general incorporation language contained in any such filing. | ||||||||||
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Table of Contents
SIGNATURES
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 thereunto duly authorized.
| AppFolio, Inc. | ||||||||||||||
| Date: | October 22, 2026 | By: | /s/ Shane Trigg | |||||||||||
| Shane Trigg | ||||||||||||||
| Chief Executive Officer | ||||||||||||||
| (Principal Executive Officer) | ||||||||||||||
| Date: | October 22, 2026 | By: | /s/ Tim Eaton | |||||||||||
| Tim Eaton | ||||||||||||||
Chief Financial Officer | ||||||||||||||
(Principal Financial Officer) | ||||||||||||||