Item 1. Business
ITEM 1. BUSINESS
Unless otherwise stated in this Annual Report, references to "AppFolio," "we," "us," and "our" refer to AppFolio, Inc. and its consolidated subsidiaries.
Overview
AppFolio provides innovative software, services and data analytics to the real estate industry. Our industry-specific, cloud-based solutions are used primarily by property managers, and also by numerous other constituencies in the property management business ecosystem. These other constituencies include property owners, rental prospects, tenants and service providers, whom we refer to collectively as "users". Although specific functionality varies by product, our core solutions are designed to enable our customers to digitally transform their businesses, address critical business operations and enable exceptional customer service. In addition to our core solutions, we offer an array of optional, but often business-critical, Value+ services that are designed to enhance, automate and streamline processes and workflows that are essential to our customers' businesses. Our Value+ services are generally available on an as-needed basis and enable our customers to adapt our offerings to their specific operational requirements.
Our solutions and services are designed to be a system of record to automate essential business processes, a system of engagement to enhance business interactions between our customers and their business ecosystems and a system of intelligence designed to leverage data to predict and optimize business workflows in order to enable exceptional customer experiences and increase efficiency across our customers' businesses. Our mobile-optimized software solutions are designed for use across multiple devices and operating systems. Our software solutions are offered as a service, are hosted using a modern cloud-based architecture, and in part, use artificial intelligence technologies. This architecture leads to rich data sets that have a consistent schema across our customer and user base and enables us to deploy data-powered products and services for our customers and users.
For the years ended December 31, 2020, 2019 and 2018, our revenue was $310.1 million, $256.0 million and $190.1 million, respectively, of which $284.7 million, $231.1 million and $172.4 million, respectively, were derived from our software services and data analytics offered to the real estate vertical. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report, within the section entitled "Quarterly Results of Operations" for additional details regarding seasonality of revenue.
During certain periods covered by this Annual Report, we also provided software solutions and services to the legal vertical. As previously disclosed, we completed our divestiture of MyCase, Inc. on September 30, 2020. For additional details, see Note 1, Nature of Business and Note 3, Divestitures and Business Combinations of our Consolidated Financial Statements in this Annual Report.
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The Challenges We Address
We believe that many companies face a common set of challenges that divert limited time and resources away from serving their customers and growing their businesses. Significant administrative burdens from inefficient manual processes and the use of disparate technologies or loosely integrated solutions only exacerbate those challenges. This is particularly evident in businesses that involve unique workflows, relationships among multiple users, significant data inputs and management, and compliance or regulatory requirements. Our platform is designed to provide our customers an intuitive, reliable and integrated solution that brings innovative technology and services to their specific workflows, meets their key operational requirements and enables delivery of exceptional customer experiences. We rely on partners and third party service providers to deliver certain aspects of our solutions, and we strive to provide a seamlessly integrated experience for our customers. We believe our customer-centric culture fosters a focus on customer satisfaction which leads to long-term customer retention and our long-term success. We believe our solutions and services offer customers the ability to capitalize on the power of fully integrated business management software to interact with their business ecosystems, and to mine the data and insights gleaned from these relationships, which is integral to our customers' ability to grow their businesses and compete effectively.
Growth Strategy
Our growth strategy is to provide increasingly valuable industry-specific business management software, services and data analytics to new and existing customers and their business ecosystems. We believe our customer-centric culture and market validation techniques that direct our product strategy are key to our success. Key components of our growth strategy include:
Maintain Product and Technology Leadership . We have made, and will continue to make, significant investments in research and new product development to expand our platform capabilities as we deem appropriate in our target markets. We intend to continue using our market validation techniques and close relationships with our customers and users as a key source of feedback to inform and direct our product strategy. We may also choose to acquire rather than build certain technology capabilities, or to partner with third parties to deliver key functionality to serve the needs of our customers and their business ecosystems.
Keep Our Existing Customers and Users Happy. We believe customer success is essential to our long-term success. We place significant emphasis on customer service, which we believe leads to long-term customer relationships, to differentiate our software, services and data analytics from competing products. This emphasis will continue to be a critical component of our growth strategy in the future. We believe that maintaining our focus on customer success will lead to new product innovation, the referral of new customers from existing satisfied customers, and greater adoption and utilization of our solutions and services.
Acquire New Customers. We believe new customer acquisition is essential to our long-term success. We expect to continue to grow our base of customers with our investments in the development of increasingly valuable business management capabilities for our target markets, sales and marketing programs, including evolving industry thought leadership and education, and the referral power of satisfied customers.
Expand Adoption and Use By Existing Customers. We have made, and will continue to make, significant investments in our solutions and services that expand functionality and enhance or add new capabilities to meet the current and evolving needs of our customers. We expect our satisfied customers will expand their usage of our Value+ services to adapt our platform to their specific operational requirements. In addition, as our customers grow, we expect they will continue to use our solutions and services to manage their larger businesses.
Enter New Adjacent Markets. We expect to continue to evaluate and expand into adjacent markets based on our market validation strategy and targeted customer feedback in a manner consistent with our strategic plan. We believe that, while we are continuously developing our solutions and services within one market, we can apply certain relevant product enhancements and key learnings from that market as we extend our solutions and services into successive adjacent markets.
Expand into New Verticals. We expect to continue to review potential opportunities to expand into additional vertical markets in a manner consistent with our strategic plan. We believe our expansion into and success from adjacent markets may present opportunities to enter new verticals. Any new vertical must also fit within our overall business strategy, including our management team's assessment of available alternatives, such as the number and size of potential adjacent market opportunities, and the relative risk and return of these opportunities.
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The growth strategy that our management and board of directors have developed reflects our customer-centric and long-term growth view of our business, rather than the realization of short-term financial or business metrics, or short-term value. If opportunities arise that might cause us to sacrifice our performance with respect to short-term financial or business metrics, but that we believe are in the best interests of our stockholders in the long term, we will take those opportunities. The technology surrounding our business management solutions and services is constantly evolving, and our growth strategy is thus subject to a variety of risks and uncertainties. Please refer to Item 1A., "Risk Factors", for a more complete discussion of these and other risk-related issues.
Human Capital
We believe our people are at the heart of our success and our customers’ success. We endeavor to not only attract and retain talented employees, but also to provide a challenging and rewarding environment to motivate and develop our valuable human capital. We look to our talented employees to lead and foster various initiatives that support our company culture including those related to diversity, equity and inclusion. In addition, we rely heavily on our talented team to execute our growth plans and achieve our long-term strategic objectives.
We believe that our company culture, driven by a dedication to the following six core values, provides us with a competitive advantage:
• Simpler Is Better
• Great, Innovative Products Are Key To A Great Business
• Great People Make A Great Company
• Listening To Customers Is In Our DNA
• Small, Focused Teams Keep Us Agile
• We Do The Right Thing; It’s Good For Business
At December 31, 2020, we had 1,335 full-time employees and also routinely engage temporary employees and consultants. We consider our relationship with our employees and consultants to be strong. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We must continue to attract and retain highly qualified and motivated personnel across our organization to execute our growth plan and achieve our strategic objectives. If we fail to do so, our business and operating results may suffer. Please refer to Item 1A., "Risk Factors", for a more complete discussion of these and other related risks.
Compensation and Benefits
We provide competitive compensation and benefits for our employees. Our compensation packages may include base salary, commission or annual performance-based bonuses, and stock-based compensation. We also offer general employee medical, dental, and vision insurance, health savings and flexible spending accounts, mental health resources, paid time off, paid family leave, life and disability insurance, and 401(k) plan matching contributions. These programs and our overall compensation packages seek to attract and retain talented employees.
Health, Safety and Wellness
We take the health and welfare of our employees very seriously, and have encouraged safe practices designed to stem the infection and spread of COVID-19 within our workforce and beyond and to maintain the mental health and well-being of our employees. Beginning in March 2020, in an effort to protect our employees and comply with applicable government orders, we restricted non-essential employee travel and transitioned our employees to a remote work environment. We currently expect the majority of our employees will continue working remotely at least through the second quarter of 2021. We are committed to our employees returning to the workplace in the long-term, and have recently constructed a new office space in Santa Barbara, California, extended the lease for our office in Richardson, Texas and are seeking new office space to lease in San Diego, California to accommodate our employees' return to the workplace in the future.
Workplace Awards
By attracting and retaining a team of people who are inspired by these values, focusing on building an outstanding culture, and offering opportunities for professional and personal growth, AppFolio has been recognized as a 2020 Best Place to Work and Highest Rated Company for Work-Life Balance During COVID-19 by Glassdoor, a 2020 Best Workplace for Women by Fortune, and a 2020 Best Workplace for Parents by Great Place to Work.
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Property Management Market
In 2008, we introduced AppFolio Property Manager ("APM"), a property management solution designed to address the unique operational and business requirements of property management companies and their business ecosystems. Recognizing that our customers and their business ecosystems would benefit from additional business critical services, we launched a series of Value+ services beginning in 2009. Our Value+ services are tailored to the specific workflows of property management businesses and generally fall into the categories of marketing and leasing, electronic payment services, business optimization and risk mitigation. In 2018, we introduced AppFolio Property Manager PLUS, ("APM PLUS"), a tier of APM designed for larger businesses with more complex needs. APM PLUS builds upon the functionality of APM and additionally offers data analytics, configurable workflows, and revenue management and optimization functionality for our customers.
APM and APM PLUS serve our property management customers, including third-party property managers and owner operators, who typically manage single- and multi-family residential, and others who manage community association, and commercial properties. Our solutions and services also serve other constituencies in the property management market, including property owners, rental prospects, tenants and service providers.
Our Property Management Solutions
AppFolio Property Manager - Core Solutions
Core functionality addresses key operational issues, including accounting and business analytics and management, marketing and leasing functionality, and communications with key stakeholders. APM PLUS builds upon the functionality of APM and additionally offers data analytics, configurable workflows, and revenue management and optimization functionality for our larger and more complex property management customers.
AppFolio Property Manager - Value+ Services
Our Value+ services build on functionality and workflows in our core solutions and generally fall into the categories of marketing and leasing, electronic payment services, business optimization and risk mitigation. Although many of our Value+ services are enabled by third party partners, we prioritize a seamless experience for our customers and users which increases their efficiency and ease of use of APM and APM PLUS. Utilization and adoption of our Value+ services is typically higher for residential properties than community association or commercial properties because of the unique and complex needs of the residential rental lifecycle. We have generally organized our Value+ services below in the manner in which they are experienced throughout the rental lifecycle.
We deliver and maintain professionally designed and architected Websites that showcase our customers’ businesses. Our websites are fully integrated with our property manager functionality, including vacancy postings, electronic payment services, owner portals, tenant portals and maintenance requests. Property managers can track and analyze site traffic and lead generation by evaluating completed guest cards from rental prospects who visit the websites in connection with posted vacancies. Features include search engine optimized content, integrations with leading 3D tour providers, professional photography sourcing, and logo creation.
Our Premium Leads functionality allow customers to upgrade property listings to premium status and syndicate them to dozens of pay-to-list websites, including featured placement on many sites. Customers also receive advance call tracking and pay only for the verified leads they receive through the Value+ service.
Our Artificial Intelligence Leasing Assistant works 24/7 as part of a customers' leasing team to provide tailored text message or email responses to rental prospects in real-time, and leverages integrated reporting to track leasing performance with accurate data to drive increased occupancy rates and operational efficiency.
Our Tenant Screening Services include background screening, credit checks, and income verification for use in connection with the rental application process. In addition to obtaining an applicant's credit history, property managers have the option of leveraging an automated nationwide eviction and criminal records search, as well as accessing and/or contributing to rental payments history data, to better identify qualified tenants and reduce risk.
Our accounting features include Electronic Payment Services that allow property managers to streamline their payables and receivables through a variety of online payment options. Customers can collect funds through a secure online portal, mobile application and via electronic cash payments from various users, including: rental application fees, security deposits, rent payments and other tenant charges; contributions from property owners; and periodic dues from those living in community associations. Customers can also electronically send funds to various users, including: distributions to property owners; payments to service providers; and payment to their own management company. Customers can also use our automated accounts payable solution to automate their accounts payable and expense recording process with smart bill entry, powered in part by artificial intelligence technology.
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Through partnerships and wholly-owned subsidiaries, we make available two insurance options, Liability to Landlord Insurance and Renters Insurance , that can be tailored to help property managers protect their properties and meet renters’ needs. Property managers can instantly enroll residents in liability to landlord insurance, which offers owners and investors increased protection against tenant-caused damage. Renters have the option of purchasing renters insurance through an online portal to protect their personal belongings, as well as the property itself, from certain unexpected damages.
With our Utility Management functionality, our customers are able to automate utility bill processing and resident billing, and manage utility-related operating and capital expenditures.
Our Maintenance Contact Center functionality is built into our customers maintenance workflow and is staffed 24/7/365 by trained agents, each acting as an extension of our property management customers’ teams to resolve or route incoming maintenance requests. Contact center agents are able to enter non-emergency work orders directly into APM’s property maintenance software for a property manager’s approval, and to dispatch vendors immediately in case of an emergency.
With our Tenant Debt Collections functionality, our customers can electronically send past due tenant debt from their APM database to a national fully-licensed third party debt collection agency to attempt to recover uncollected revenue. This Value+ service also includes reporting unpaid balances to three major credit bureaus.
With our Mailing Services functionality, our customers with community association units can streamline the mailing of required home owner association documentation.
Investment Management Market
In April 2019, we launched AppFolio Investment Management, which is designed to enable real estate investment managers to better manage their investor relationships by increasing transparency and streamlining certain business processes.
AppFolio Investment Management - Core Solutions
AppFolio Investment Management is a cloud-based software solution for real estate investment managers of various sizes that provides innovative tools and services designed to streamline their real estate investment management businesses. Core functionality addresses key operational issues, including management of investor relationships by increasing transparency and streamlining communications with key stakeholders.
AppFolio Investment Management - Value+ Solutions
We deliver and maintain professionally designed and architected Websites tailored to fit our customers’ businesses. Investment managers can track and analyze site traffic and lead generation. Features include search engine optimized content and logo creation.
Regulatory Environment
Our software, services, and data analytics are subject to certain legal, regulatory and other requirements. These laws are complex and evolving. Various U.S. federal and state laws govern many of our business activities, including, without limitation, the processing of payments, tenant screening, the sale and solicitation of insurance, and handling of consumer information. Despite our significant efforts to comply with all applicable requirements, there can be no guarantee that our efforts will be sufficient or that existing laws, rules or other requirements will not be interpreted, revised, augmented or rewritten in a way that adversely affects our regulated business activities, which comprise a significant majority of our overall business. Please refer to Item 1A., "Risk Factors", for a more complete discussion of these and other risk-related issues.
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Our Customers
We believe our customer-centric culture fosters a focus on customer satisfaction which leads to long-term customer retention and our long-term success. We define customers as those paying for a subscription to our core solutions. Our solutions and services are primarily used by our customers, and also by numerous other constituencies in the business ecosystems we serve. In the property management market, these other constituencies include property owners, rental prospects, tenants, and service providers. We generate a portion of our revenue from these users.
As of December 31, 2020, we had 15,724 property management customers. No individual customer represented 10% or more of our total revenue for fiscal 2020.
Sales and Marketing
We leverage a modern and scalable marketing approach along with marketing automation technology to attract and engage prospects, build brand recognition and our reputation as an industry leader. We participate in and drive industry thought leadership and education with both online and offline activities, and we use a variety of inbound and outbound marketing techniques to promote our business software solutions, services and data analytics.
Our business development team acts in partnership with our marketing and sales teams to reach potential customers, generate sales opportunities and accelerate the time from evaluation to close. Our sales representatives assist prospective customers as they evaluate our software solutions. Our interactive sales methodology allows our sales team to quickly build relationships, assess our customers’ business challenges, and demonstrate the benefits of our core functionality and, where applicable, Value+ services. Throughout the customer relationship, we continue to promote adoption and usage of our Value+ services by customers and users through a variety of channels, including email, webinars, training, sales outreach and from within our software solution via in-app messaging. As we serve larger and more complex real estate customers, we have invested in additional headcount to manage and grow these customer relationships over time.
Customer Service
We believe our success is tied to long-term customer relationships, not a one-time sale. We pride ourselves on being customer-centric and strive to educate our customers on the solutions and services capabilities they can use to improve business efficiency and productivity. Our solutions are designed to be easy to use and manage, and we offer training and support at no extra charge.
Our dedicated onboarding team works to ensure that customers are prepared to run their businesses on our platform and provide a seamless onboarding experience. As a result of our assistance with data migration matters, we are able to provide valuable insights into data integrity and work with our customers to help resolve any issues in their underlying business processes. We also assist our customers with the configuration of our software solutions for particular property types or investment structures as appropriate. We share insights on best practices for the markets we serve and dedicate resources to guide our customers through the adoption and utilization of our Value+ services.
Technology and Operations
Our software solutions are powered by a highly scalable computing platform, and are designed with a strong focus on data security and availability. We use Ruby-on-Rails as our primary web application framework, and we take great care to keep this application framework and the rest of our software stack current in order to mitigate known security vulnerabilities. Our computing platform and cloud infrastructure are primarily powered by Amazon Web Service’ Elastic Compute Cloud (EC2) platform. In order to ensure that data is not lost and that customer requests can be satisfied, production assets are securely replicated and regularly backed up to multiple geographic regions.
Our operators monitor our production infrastructure to ensure high performance and availability, and our architecture allows our operators significant flexibility in achieving these goals. In particular, our operators have fine-grained control over the specific server and region on which each customer's data resides, and can move customer data between different geographic regions in order to avoid service disruption or to increase service performance.
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Sensitive customer data, including passwords, Social Security, and tax identification numbers, is encrypted during transmission, and before being written to disk. We regularly evaluate our product and infrastructure security, including through third-party penetration testing. In addition, our software solutions allow our customers to define roles that provide different levels of access to users, allowing them to view and modify specific items depending on their role. Supervisors can distribute work to on-site staff in a secure and controlled environment, while leadership retains visibility across the entire system. Some sensitive customer actions require secondary verification via two-factor authentication, and any customer can enable two-factor authentication for logging into their account. Notwithstanding the foregoing, there can be no assurance that the significant data security measures we employ will prevent malicious or unauthorized access to our systems and information. Please refer to Item 1A., "Risk Factors", for a more complete discussion of these and other risk-related issues.
Research and Product Development
We rely heavily on input from our customers and prospective customers in developing products that meet their needs and in anticipating developments in their businesses. Our product management team leads our research and market validation efforts and provides guidance to management and our engineering team based on our collective domain expertise and in-depth knowledge and understanding of our customers. As a result, our product management team engages regularly with customers, partners, and other industry participants, as well as our customer service and sales and marketing organizations. Our product team manages our development projects generally and serves to align separate functions within the company with a single strategic vision.
We entrust product design, development and testing to our engineering and product teams, who coordinate closely to launch new capabilities and services. Our engineers work in small teams generally aligned with specific customer segments or product capabilities to foster agility and continued innovation in responding to the evolving needs of our customers. We leverage a collaborative, team-based and test-driven approach to engineering in order to release new capabilities frequently. We believe that it is easier for our customers to adjust to continuous updates to our platform, which incrementally change and improve their user experience, than it is to adapt to infrequent, but more drastic upgrades. The software industry in general is characterized by rapid technological advances, changing industry standards, evolving customer requirements and intense competition, and we cannot be certain that our research and product development strategies will be successful in every market we seek to serve. Please refer to Item 1A., "Risk Factors", for a more complete discussion of these and other risk-related issues.
Competition
The overall market for business management software is global, highly competitive and continually evolving to respond to changes in technology, operational requirements, and ever-changing laws and regulations. We believe our competitors primarily fall into the following categories:
• On-premise or cloud-based vertical market business management software providers that serve companies of all sizes in our markets; and
• On-premise or cloud-based horizontal business management software providers that offer broad solutions across multiple verticals.
We also experience competition from numerous cloud-based solutions providers that focus almost exclusively on one or more point solutions. For example, in the real estate vertical, we compete with payment solutions providers, listing services, tenant screening applications and specialists in lease forms. Continued consolidation among cloud-based solution providers could significantly increase competition.
We believe the principal competitive factors include the following:
• breadth and depth of functionality in software solutions and applications;
• brand awareness and reputation;
• ease of deployment and use of software solutions and applications;
• level of customer satisfaction;
• data security and availability;
• nature and extent of mobile interface;
• size of customer base and level of user adoption and usage;
• total cost of ownership;
• ability to innovate and respond to customer needs rapidly;
• domain expertise; and
• ability to leverage a common technology platform and business strategy.
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We believe that we compete favorably on the factors described above. However, some of our competitors may have greater financial, technical and other resources, greater name recognition and larger sales and marketing budgets; therefore, we may not always compare favorably with respect to some or all of the foregoing factors.
Intellectual Property
We rely on a combination of patents, copyrights, trademarks, trade secrets, confidentiality procedures and contractual restrictions to establish and protect our proprietary rights in our core solutions and Value+ services. We hold eleven United States patents that directly relate to our technology and expire between 2026 and 2033. We also maintain one issued United States patent that relates directly to web-based legal workflow software, which was exclusively licensed to MyCase, Inc. in connection with our divestiture from the legal vertical in September 2020. For additional details regarding our divestiture, see Note 1, Nature of Business and Note 3, Divestitures and Acquisitions of our Consolidated Financial Statements in this Annual Report. We may pursue additional patent protection to the extent we believe it would be beneficial and cost effective.
We have registered “AppFolio” and certain other marks as trademarks in the United States and several other jurisdictions. We have also acquired certain marks and filed trademark applications and renewals in the United States and certain other jurisdictions, and will pursue additional trademark registrations to the extent we believe it would be beneficial and cost effective. We are the registered holder of a variety of domestic and international domain names that include “appfolioinc.com,” “appfolio.com,” “appfolioinvestmentmanagement.com” and similar variations. We also license software from third parties for use in our solutions, including open source software and other software available on standard commercial terms.
We control access to our proprietary technology by entering into confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements with third parties. Despite our precautions, it may be possible for unauthorized third parties to copy our software solutions and use information that we regard as proprietary to create products and services that compete with ours.
Trends and Uncertainties Related to the COVID-19 Pandemic
The COVID-19 pandemic has created and may continue to create significant uncertainty and volatility in a wide variety of industries and markets, including the global real estate market, and has prompted many federal, state, local, and foreign governments to implement various lock-down measures in an attempt to contain the spread and mitigate the impact of the disease. The initial implementation of such lock-down measures, and their re-introduction in response to a nation-wide resurgence of COVID-19 cases in late-2020, resulted in business closures, work stoppages, slowdowns and delays, work-from-home policies, travel restrictions and the cancellation or postponement of events.
Despite recent approval and initial distribution of vaccines, both the pandemic and the containment and mitigation measures have had and are likely to continue to have an adverse impact on the global and U.S. economies, the severity and duration of which are uncertain. It is likely that government stabilization efforts will only partially mitigate the consequences to the economy. As such, both the pandemic and containment and mitigation measures may adversely affect our business, operations and financial condition by, among other things, reducing demand for our core solutions and/or Value+ services, impairing the productivity of our workforce, and reducing our access to capital. The extent to which the COVID-19 pandemic will impact our business, financial conditions, and results of operations in the future is highly uncertain and will be affected by a number of factors. These include the duration and extent of the pandemic, the duration and extent of imposed or recommended containment and mitigation measures, the extent, duration, and effective execution of government stabilization and recovery efforts, including those from the successful distribution of effective vaccines.
Beginning in March 2020, in an effort to protect our employees and comply with applicable government orders, we restricted non-essential employee travel and transitioned our employees to a remote work environment. We currently expect the majority of our employees will continue working remotely at least through the second quarter of 2021. Our workforce has continued to effectively develop and support our product and service offerings notwithstanding the current environment. We take the health and welfare of our people very seriously, and have encouraged safe practices designed to stem the infection and spread of COVID-19 within our workforce and beyond and to maintain the mental health and well-being of our employees. However, if the COVID-19 pandemic requires remote working conditions for a prolonged period of time, it could have an adverse impact on the productivity of our employees, which would harm our business and impede our ability to achieve our strategic plan. For example, certain of our employees with younger children have been required to respond to ongoing school closures and adapt to a distance learning environment, and may be required to continue to do so for the foreseeable future. Further, we have a limited history of remote work and the long-term impact on, and the resulting types of continuing investments necessary for, our employee base is uncertain.
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Moreover, the COVID-19 pandemic may have long-term effects on the nature of the office environment and remote working. This may present operational and workplace culture challenges that may adversely affect our business. However, we are committed to our employees returning to the workplace in the long-term, and have recently constructed a new office space in Santa Barbara, California, extended the lease for our office in Richardson, Texas and are seeking new office space to lease in San Diego, California to accommodate our employees' return to the workplace in the future.
We began fiscal year 2020 with healthy demand for our products and services, many of which are designed to enable our customers to manage their businesses virtually. During the twelve months ended December 31, 2020, we experienced some variability in demand for certain Value+ services after lock-down measures were implemented. We expect demand variability for our products and services could continue as a result of the COVID-19 pandemic, although it is presently unclear whether the cumulative impacts will be positive or negative. For example, the economic downturn resulting from the COVID-19 pandemic caused an increase in residential rental defaults and deferrals. Together with eviction moratoriums in some jurisdictions, this adversely affected the rental income of certain customers. Although the impact has not been material to date, a prolonged downturn in economic conditions could have a material adverse effect on our customers and demand for our services.
We continue to actively communicate with and listen to our customers to best ensure that we are responding to their needs in the current environment with innovative solutions that will not only be beneficial now but also over the long-term as well. However, our ability to interact with customers has been impacted by the current environment. We believe that our inability to meet in-person with current or prospective customers, as well as the cancellation or postponement of Company-sponsored events or third-party events at which our products are featured, may have a negative impact on our business.
We continue to monitor developments related to COVID-19 and remain flexible in our response to the challenges presented by the pandemic. To mitigate the adverse impact COVID-19 may have on our business and operations, we have implemented a number of measures to protect the health and safety of our employees, as well as to strengthen our financial position. These efforts include eliminating, reducing, or deferring non-essential expenditures, as well as complying with local and state government recommendations to protect our workforce.
The impact of the COVID-19 pandemic may also exacerbate other risks discussed in this Annual Report. Refer to Item 1A. "Risk Factors" in this Annual Report for a complete description of the material risks that we currently face.
Corporate Information
We were formed in 2006 as a Delaware limited liability company and converted to a Delaware corporation in 2007. Our principal executive offices are located at 50 Castilian Drive, Santa Barbara, California 93117, and our telephone number is (805) 364-6093. Our corporate website is www.appfolioinc.com. The information contained on or accessed through our website does not constitute part of, and is not incorporated by reference into this Annual Report. References to our website address in this Annual Report are inactive textual references only.
“AppFolio,” the AppFolio logo, , and other trademarks and trade names of AppFolio appearing in this Annual Report are our property. All other trademarks or trade names appearing in this report are the property of their respective owners. Solely for convenience, the trademarks and trade names in this report are referred to without the ® and ™ symbols. We do not intend our use or display of the trademarks, trade names or service marks of other parties to imply a relationship with, or endorsement or sponsorship of us, by such other parties.
Available Information
We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, as well as amendments to those reports pursuant to Sections 13(a) and 15(d) of the Exchange Act. We also file proxy statements and information statements pursuant to Section 14 of the Exchange Act. The SEC maintains a website at www.sec.gov that contains the reports, proxy and information statements, and other information that we file with or furnish to the SEC electronically. Copies of the reports, proxy statements and other information may also be obtained, free of charge, electronically through our corporate website, at www.appfolioinc.com, as soon as reasonably practical after we file such material with, or furnish it to, the SEC.
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