APPFOLIO INC

Previous wording

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 8.3 million and 7.5 million property management units under management as of March 31, 2024 and 2023, respectively.

Current wording

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 8.4 million and 7.7 million property management units under management as of June 30, 2024 and 2023, respectively.

Previous wording

In addition, we charge our customers for assistance onboarding onto our core solutions and for certain other non-recurring services. We generally invoice for these other services in advance of the services being completed and recognize revenue in the period the service is rendered. We generate revenue from the legacy customers of previously acquired businesses by providing services outside of our property management core solution platform. Revenue derived from these services is recorded in Other revenue. As of March 31, 2024 and 2023, we had 19,941 and 18,834 property management customers, respectively.

Current wording

In addition, we charge our customers for assistance onboarding onto our core solutions and for certain other non-recurring services. We generally invoice for these other services in advance of the services being completed and recognize revenue in the period the service is rendered. We generate revenue from the legacy customers of previously acquired businesses by providing services outside of our property management core solution platform. Revenue derived from these services is recorded in Other revenue. As of June 30, 2024 and 2023, we had 20,167 and 19,145 property management customers, respectively.

Previous wording

General and Administrative. General and administrative expense consists of personnel-related costs for employees in our executive, finance, information technology, human resources, legal, compliance, corporate development and administrative organizations (including salaries, performance-based compensation, 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 modifications, and allocated shared and other costs.

Current wording

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, performance-based compensation, 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 modifications, and allocated shared and other costs.

Previous wording

(Benefit from) provision for income taxes.(Benefit from) provision for income taxes consists of federal and state income taxes in the United States.

Current wording

Provision for income taxes. Provision for income taxes consists of federal and state income taxes in the United States.

Previous wording

The increase in revenue for the three months ended March 31, 2024, compared to the same period in the prior year, was primarily attributable to an increase in the usage of our payments, tenant screening, and risk mitigation services. During the three month period ended March 31, 2024, we also experienced growth of 11% 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 and usage-based services.

Current wording

The increase in revenue for the three and six months ended June 30, 2024, compared to the same period in the prior year, was primarily attributable to an increase in the usage of our payments, tenant screening, and risk mitigation services. During the three and six month periods ended June 30, 2024, we also experienced growth of 9% 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 and usage-based services.

Previous wording

Cost of revenue (exclusive of depreciation and amortization) for the three months ended March 31, 2024 increased primarily due to increases in expenditures to third-party service providers related to the delivery of our Value Added Services of $8.6 million compared to the same period in the prior year. This increase was directly associated with increased adoption and utilization of our Value Added Services during the period.

Current wording

Cost of revenue (exclusive of depreciation and amortization) for the three and six months ended June 30, 2024 increased primarily due to increases in expenditures to third-party service providers related to the delivery of our Value Added Services of $11.6 million and $20.1 million, respectively, compared to the same period in the prior year. This increase was associated with increased adoption and utilization of our Value Added Services during the period and partially offset by the lower headcount resulting from improved efficiency.

Previous wording

We expect cost of revenue (exclusive of depreciation and amortization) for the year ending December 31, 2024, to decrease as a percentage of revenue compared to the year ended December 31, 2023, primarily due to increased revenue from eCheck fee and product mix, and we continue to leverage headcount efficiencies.

Current wording

We expect cost of revenue (exclusive of depreciation and amortization) for the year ending December 31, 2024, to decrease as a percentage of revenue compared to the year ended December 31, 2023, primarily due to increased revenue from eCheck transaction fees, product mix, and continued leverage from headcount efficiencies.

Previous wording

Sales and marketing expense decreased for the three months ended March 31, 2024 compared to the same period in the prior year, primarily due to a $3.5 million decrease in personnel-related costs, including stock-based and performance-based compensation, driven by the lower headcount resulting from our improved efficiency . In addition, advertising costs decreased by $0.6 million for the three months ended March 31, 2024 compared to the same period in the prior year due to timing of promotional activities.

Current wording

Sales and marketing expense for the three months ended June 30, 2024 stayed flat compared to the same period in the prior year. Sales and marketing expense for the six months ended June 30, 2024 decreased primarily due to $3.5 million decrease in personnel-related costs, including stock-based and performance-based compensation, driven by the lower headcount resulting from our improved efficiency.

Previous wording

General and administrative expense for the three months ended March 31, 2024 decreased compared to the same period in the prior year primarily due to a $13.9 million decrease in personnel-related costs, including stock-based and performance-based compensation, which was partially offset by a $3.4 million increase in allocated shared and other costs, The decrease in personnel-related costs was primarily due to severance costs associated with our former Chief Executive Officer's separation in the first quarter of 2023. The increase in allocated shared and other costs was primarily due to a gain on lease modification of $2.4 million in the first quarter of 2023.

Current wording

General and administrative expense for the six months ended June 30, 2024 decreased compared to the same period in the prior year primarily due to a $15.3 million decrease in personnel-related costs, including stock-based and performance-based compensation. The decrease in personnel-related costs was primarily due to severance costs associated with our former Chief Executive Officer's separation in the first quarter of 2023. The decrease was partially offset by $4.3 million gain on lease modifications recognized in the six months ended June 30, 2023, and an increase in allocated shared and other costs of $1.9 million, driven by expenses to support our growth.

Previous wording

Depreciation and amortization expense for the three months ended March 31, 2024 decreased, compared to the same period in the prior year, primarily due to decreased amortization expense associated with capitalized software development and intangible balances.

Current wording

Depreciation and amortization expense for the three and six months ended June 30, 2024 decreased, compared to the same period in the prior year, primarily due to decreased amortization expense associated with capitalized software development and intangible balances.

Previous wording

Interest income for the three months ended March 31, 2024 increased, compared to the same period in the prior year, primarily due to higher interest rates.

Current wording

Interest income for the three and six months ended June 30, 2024 increased, compared to the same period in the prior year, primarily due to higher interest rates and purchases of available-for-sale investment securities.

Previous wording

Our effective tax rate for the three months ended March 31, 2024 differs from the U.S. federal statutory rate of 21% primarily due to excess tax benefits from stock-based compensation, partially offset by a change in valuation allowance against deferred tax assets, state income taxes and non-deductible officers' compensation. Our effective tax rate for the three months ended March 31, 2023 differs from the U.S. federal statutory rate of 21% primarily due to a change in valuation allowance against deferred tax assets, non-deductible officers' compensation and state income taxes, partially offset by tax benefits from research and development tax credits.

Current wording

For the three months ended June 30, 2024, our effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to a change in valuation allowance against deferred tax assets, state income taxes and non-deductible officers' compensation partially offset by excess tax benefits from stock-based compensation. For the six months ended June 30, 2024, our effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to excess tax benefits from stock-based compensation. Our effective tax rate for the three and six months ended June 30, 2023 differs from the U.S. federal statutory rate of 21% primarily due to a change in valuation allowance against deferred tax assets, non-deductible officers' compensation and state income taxes, partially offset by tax benefits from research and development tax credits.

Previous wording

The increase in our effective tax rate for the three months ended March 31, 2024, as compared to the same period in the prior year, was primarily due to the significant increase in our pre-tax income, partially offset by the increase in excess tax benefits from stock-based compensation.

Current wording

Our effective tax rate for the three and six months ended June 30, 2024, as compared to the same period in 2023, is significantly different as a result of the increase in our pre-tax income in the current year.

Previous wording

Our principal sources of liquidity continue to be cash, cash equivalents, and investment securities totaling $243.5 million, as well as cash flows generated from our operations. We have financed our operations primarily through cash generated from operations. 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.

Current wording

Our principal sources of liquidity continue to be cash, cash equivalents, and investment securities totaling $281.3 million, as well as cash flows generated from our operations. We have financed our operations primarily through cash generated from operations. 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.

Previous wording

The net increase in cash provided by operating activities for the three months ended March 31, 2024, compared to the same period in the prior year, was primarily due to an increase in cash collections from customers.

Current wording

The net increase in cash provided by operating activities for the six months ended June 30, 2024, compared to the same period in the prior year, was primarily due to an increase in cash collections from customers.

Previous wording

The net increase in cash used in investing activities for the three months ended March 31, 2024, compared to the same period in the prior year, was primarily due to higher purchases of available-for-sale investment securities.

Current wording

The net increase in cash used in investing activities for the six months ended June 30, 2024, compared to the same period in the prior year, was primarily due to higher purchases of available-for-sale investment securities.

Previous wording

The net increase in cash used in financing activities for the three months ended March 31, 2024, compared to the same period in the prior year, was primarily due to an increase in net share settlements for employee tax withholdings associated with the vesting of equity awards.

Current wording

The net increase in cash used in financing activities for the six months ended June 30, 2024, compared to the same period in the prior year, was primarily due to an increase in net share settlements for employee tax withholdings associated with the vesting of equity awards.