APPFOLIO INC
For the period ended Sep 30, 2026. Filed Oct 22, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2026 · Filed Oct 22, 2026
APPF$230.74-1.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-06-30; filed 2026-07-23.
0001433195-26-000058
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-10-22.
0001433195-26-000064
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 83 previous paragraphs and 87 current paragraphs.
56 unchanged; 21 reworded; 9 added; 6 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 10 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
Current report
•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.
Current report
•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.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
Interest income for the three and nine months ended September 30, 2026 remained relatively flat, compared to the same periods in 2025.
Removed paragraphs (6)
Previous report
•GAAP operating income grew 31% to $53 million, or 18.8% of revenue, compared to $41 million, or 17.2% of revenue in Q2 2025.
Previous report
•Non-GAAP operating income grew 24% to $76 million, or 27.1% of revenue, compared to $62 million, or 26.2% of revenue in Q2 2025.
Previous report
Our payment services experienced increased usage during the comparative periods as residents and property managers transacted more business online.
Previous report
Research and product development expense increased for the three and six months ended June 30, 2026, compared to the same periods in the prior year. The increase was primarily due to a $3.5 million and $8.4 million increase in personnel-related costs, including stock-based and performance-based compensation, net of capitalized software development costs driven by headcount growth, for the respective three and six-month periods.
Previous report
General and administrative expense increased for the three and six months ended June 30, 2026, compared to the same periods in the prior year. The increase for the three and six months ended June 30, 2026, was primarily due to a $2.4 million and $3.7 million increase in software and professional fees, for the respective three and six-month periods.
Previous report
Interest income for the three and six months ended June 30, 2026 decreased, compared to the same periods in the prior year, primarily due to the sale of available-for-sale investment securities and lower interest rates.
Reworded paragraphs (21)
Previous wording
Financial Highlights for the Second Quarter of 2026
Current wording
Financial Highlights for the Third Quarter of 2026
Previous wording
•Revenue grew 19% year-over-year to $281 million.
Current wording
•Revenue grew 19% year-over-year to $296 million.
Previous wording
•Total units under management grew 8% year-over-year to 9.6 million.
Current wording
•Total units under management grew 8% year-over-year to 9.8 million.
Previous wording
•Net cash provided by operating activities was $88 million, or 31.2% of revenue, compared to $53 million, or 22.3% of revenue in Q2 2025.
Current wording
•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.
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 9.6 million and 8.9 million property management units under management as of June 30, 2026 and 2025, 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 9.8 million and 9.1 million property management units under management as of September 30, 2026 and 2025, respectively.
Previous wording
As of June 30, 2026 and 2025, we had 22,751 and 21,403 property management customers, respectively.
Current wording
As of September 30, 2026 and 2025, we had 23,121 and 21,759 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, 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 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, 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.
Previous wording
The increase in revenue for the three and six months ended June 30, 2026, compared to the same periods 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 months ended June 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.
Current wording
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.
Previous wording
Cost of revenue (exclusive of depreciation and amortization) increased for the three and six months ended June 30, 2026, compared to the same periods in the prior year. The increase was primarily driven by higher third-party service provider costs of $15.6 million and $30.2 million, respectively, due to increased adoption and usage of our Value Added Services for the respective three and six-month periods.
Current wording
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.
Previous wording
Sales and marketing expense increased for the three and six months ended June 30, 2026, compared to the same periods in the prior year. The increase was primarily due to a $5.2 million and $9.7 million increase in personnel-related costs, including stock-based and performance-based compensation, to support growth in the business, for the respective three and six-month periods.
Current wording
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.
Previous wording
We expect research and product development 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.
Current wording
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.
Previous wording
Depreciation and amortization expense for the three and six months ended June 30, 2026 decreased, compared to the same periods in the prior year as various assets have reached the end of their useful life.
Current wording
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.
Previous wording
We expect depreciation and amortization 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.
Current wording
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.
Previous wording
For the three and six months ended June 30, 2026, we recorded income tax expense of $12.9 million and $23.5 million, representing an effective tax rate of 23.7% and 21.9%, respectively. Our effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to state income taxes and non-deductible officers' compensation partially offset by tax benefits from research and development tax credits. For the three and six months ended June 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.
Current wording
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.
Previous wording
The increase in our effective tax rate for the three and six months ended June 30, 2026, as compared to the same periods in 2025, is primarily driven by higher pre-tax income and a decrease in excess tax benefits from stock-based compensation.
Current wording
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.
Previous wording
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 June 30, 2026, we had $221.7 million in cash, cash equivalents, and investment securities. We have financed our operations primarily through cash generated from operations.
Current wording
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.
Previous wording
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 six months ended June 30, 2026, and as of June 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 6, Commitments and Contingencies, of our Condensed Consolidated Financial Statements.
Current wording
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.
Previous wording
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. As of June 30, 2026, the amount remaining available for repurchases under the 2025 Stock Repurchase Program was $125.0 million. For more information regarding our share repurchases, refer to Note 7, Share Repurchase Program, of our Condensed Consolidated Financial Statements of this Quarterly Report.
Current wording
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.
Previous wording
The net increase in cash provided by operating activities for the six months ended June 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.
Current wording
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.
Previous wording
The net increase in cash provided by investing activities for the six months ended June 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.
Current wording
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.
Previous wording
The net decrease in cash used in financing activities for the six months ended June 30, 2026, compared to the same period in the prior year, was primarily due to lower repurchases of our Class A common stock.
Current wording
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.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
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.