What changed in this filing

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Item 1. Business

2023-02-09 compared with 2022-02-28 · 52 added, 67 removed, 120 unchanged (50% of the section changed)

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and its consolidated subsidiaries.

AppFolio is a leading provider of cloud business management solutions for the real estate industry.

Our solutions enable our customers to digitally transform their businesses, automate and streamline critical business operations and deliver a better customer experience.

We were founded in 2006 with the vision to revolutionize vertical industry businesses by providing great software and services.

Our mission is even more relevant today, as digital transformation is effectively a requirement for business success in the modern world, and the way we work and live today requires powerful software solutions.

AppFolio solutions are designed to meet that need in the real estate industry, and assist an increasingly interconnected and growing ecosystem of users, including property managers, property owners, real estate investment managers, rental prospects, residents, and service providers, with critical transactions across the real estate lifecycle, including screening potential tenants, sending and receiving payments and even providing insurance-related risk mitigation services.

AppFolio’s intuitive interface, coupled with streamlined and automated workflows, make it easier for our customers to eliminate redundant and manual processes so they can deliver a great experience for their users while improving financial and operational performance.

Our platform and mobile-optimized solutions are designed for use across multiple devices and operating systems, and to be a system of record to centralize and automate these essential business processes, a system of engagement to enhance business interactions between our customers and their business ecosystems, and a system of intelligence to leverage data to predict and optimize business workflows in order to enable exceptional customer experiences and increase efficiency across our customers' businesses.

Founded in 2006, AppFolio is a leading provider of cloud business management solutions for the real estate industry.

Our solutions are designed to enable our property manager customers to digitally transform their businesses, address critical business operations and deliver a better customer experience.

Digital transformation is effectively a requirement for business success in the modern world, and the way we work and live today requires powerful software solutions.

AppFolio solutions are designed to meet that need in the real estate industry.

We help our customers navigate an increasingly interconnected and growing network of stakeholders in their business ecosystems, including property owners, real estate investment managers, rental prospects, residents, and service providers, and provide key functionality related to critical transactions across the real estate lifecycle, including screening potential tenants, sending and receiving payments and even providing insurance-related risk mitigation services.

AppFolio’s intuitive interface, coupled with streamlined and automated workflows, makes it easier for our customers to eliminate redundant and manual processes so they can deliver a great experience for their network of stakeholders while improving financial and operational performance.

Our platform and mobile-optimized solutions are designed for use across multiple devices and operating systems, and to be (a) a system of record to centralize and automate essential business processes, (b) a system of engagement to enhance business interactions between our customers and their network of stakeholders, and (c) a system of intelligence to leverage data to predict and optimize business workflows in order to enable exceptional customer experiences and increase efficiency across their businesses.

Our solutions are offered as a service, and are hosted using a modern cloud-based architecture.

We rely on strategic 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 empowers a focus on customer satisfaction that leads to long-term retention and, ultimately, to our long-term success.

Our commitment to building innovative products, delivering exceptional customer experiences, and nurturing our company culture has led AppFolio to be listed as a 2020 and 2021 Fortune 100 Fastest Growing Company.

We rely on strategic partners and third-party service providers to deliver certain aspects of our solutions, and strive to provide a seamlessly integrated experience for our customers and their stakeholders.

We believe our customer-centric culture drives a focus on customer satisfaction that leads to long-term retention and, ultimately, to our long-term success.

Our Core Solutions

AppFolio’s platform addresses important aspects of workflows common to property management and is frequently updated in response to market trends and customer needs.

Further, we believe that partnering and integrating with curated third party solutions to enable important functionality for our customers while maintaining an elevated customer experience will benefit our customer base over time.

Core functionality of our services addresses key operational issues, including accounting, business analytics and management, marketing and leasing functionality, maintenance and operational efficiency, as well as communications with key stakeholders.

Further, we believe that partnering and integrating with curated third party solutions to enable important functionality for our customers and their stakeholders while maintaining an elevated customer experience will benefit our customer base over time.

AppFolio Property Manager

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Property management companies choose AppFolio Property Manager to leverage the benefits of process automation, an easy-to-use interface, and the optimization of common workflows.

Customers include third-party property managers and owner-operators, who typically manage single- and multi-family residential properties, and others who manage community association, and commercial properties.

Customers include third-party property managers and owner-operators, who typically manage single- and multi-family residential properties, including single family homes, multi-family apartments, mobile homes, affordable housing, student housing, senior housing, and others who manage community association and commercial properties.

AppFolio Property Manager serves as our customers’ system of record with accounting functionality at the core.

All critical transactions are completed and recorded in the system and give our customers access to the data they need to run their business.

AppFolio Property Manager is also the system of engagement that customers use to interact with the residents living at their properties, the owners and investors owning those properties, and vendors providing products and services to the properties.

AppFolio Property Manager is also the system of engagement that customers use to interact with key stakeholders in their business ecosystems, including residents living at their properties, owners and investors owning those properties, and vendors providing products and services to the properties.

Both aspects of the system are inherently interconnected so that the day-to-day interactions, such as residents paying rent through the AppFolio Property Manager mobile app, are instantly reflected in the system of record.

For our customers, AppFolio Property Manager's mobile capabilities enable their teams to be productive regardless of their location, responding to leasing inquiries, addressing work orders, or completing inspections on the go.

AppFolio Property Manager's mobile capabilities enable our customers' teams to be productive regardless of their location, responding to leasing inquiries, addressing work orders, or completing inspections on the go.

Due to their distributed nature, this is especially relevant for our property management customers with a significant portion of single-family or small multi-family properties.

AppFolio Property Manager Plus

We continue to serve customers with larger and more complex portfolios with AppFolio Property Manager Plus, recognizing the evolving needs these customers have for deeper business insights, automation, and more advanced customer experiences.

These customers typically have a more diverse mix of property types, a wider geographical dispersion of their properties, and the larger teams necessary to manage those types of portfolios.

AppFolio Property Manager Plus is designed to solve these challenges in multiple ways:

through customizable workflows that allow customers to digitize their existing processes;

by providing performance insights;

through intelligent revenue management;

through integrations with a set of carefully selected partners;

and through dedicated strategic account managers that help customers realize the full benefit of our solution.

customizable workflows allow customers to digitize their existing processes;

performance insights help drive efficiency;

intelligent revenue management helps maximize real estate asset potential;

integrations with a growing list of technology partners open new and diverse technologies and experiences;

dedicated strategic account managers help customers realize the full benefit of our platform and solutions.

Value Added Services

AppFolio Property Manager’s optional but often mission-critical Value Added Services are designed to enhance, automate and streamline business-critical processes and workflows.

These services build on functionality and workflows in our solutions and generally fall into the categories of marketing and leasing, electronic payment services, business optimization, and risk mitigation (e.g., insurance-related services).

Although many of our Value Added Services are enabled by third-party partners, we strive for a seamless experience for our customers that increases their efficiency while not sacrificing ease of use of AppFolio Property Manager and AppFolio Property Manager Plus.

These 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 (e.g., insurance-related services).

We strive for a seamless experience for our customers that increases their efficiency while not sacrificing ease of use of AppFolio Property Manager and AppFolio Property Manager Plus, whether services are offered by AppFolio or by a third-party partner.

Utilization and adoption of our Value Added 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 empower our customers and users with a wide variety of Value Added Services, primarily:

• Electronic Payment Services.

We empower our customers and their network of stakeholders with a wide variety of Value Added Services, primarily:

Our electronic payment services allow property managers to streamline their receivables and payables through a variety of online payment options.

Customers can collect funds through our secure online portal, our mobile application and/or via electronic cash payments from various users, including applicants, residents and property owners.

Customers can collect funds through our secure online portal, our mobile application and/or via electronic cash payments from various stakeholders, including applicants, residents and property owners.

Types of funds that may be collected include rental application fees, security deposits, rent payments, and other tenant charges;

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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.

• Tenant Screening Services.

Customers can also electronically send funds to various stakeholders, including distributions to property owners, payments to service providers, and even payment to their own management company.

Our tenant screening services include background screening, credit checks, income verification, and a streamlined rental history verification process for use in connection with the rental application process.

Through partnerships and wholly-owned subsidiaries, we make available certain risk mitigation services.

Our liability to landlord insurance product allows our property management customers to enforce insurance coverage requirements within their leases by tracking coverage of their units and adding uncovered units to a qualifying liability to landlord insurance policy via a licensed insurance broker, while renters insurance protects the personal belongings of renters, as well as the property itself, from certain unexpected damages.

Through our FolioGuard™ brand, we offer risk mitigation products for residents and property managers.

FolioGuard Smart Ensure, our liability to landlord insurance product, allows property management customers to enforce insurance coverage requirements within their leases by tracking coverage of their units and adding uncovered units to a qualifying liability to landlord insurance policy via a licensed insurance broker.

FolioGuard Renters Insurance protects the personal belongings of renters, as well as the property itself, from certain unexpected damages.

We experience some seasonality in our Value Added Services revenue.

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Our Growth Strategy

Our growth strategy in the near term is to provide increasingly valuable business management solutions to new and existing customers in the real estate industry.

We are leveraging this growing footprint to expand both within the property management market as well as into adjacent markets.

We define adjacent markets as markets that have both real estate and non-real estate characteristics.

Our growth strategy is to provide increasingly valuable business management solutions to new and existing customers in the real estate industry.

We are leveraging our growing footprint to expand within the property management market.

Key components of our near and extended term 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.

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 and integrate with curated third parties to deliver key functionality to serve the needs of our customers and their business ecosystems, all while maintaining a superior customer experience.

Keep Our Existing Customers and Users Happy.

Keep Our Existing Customers Happy.

We believe customer success is essential to our long-term success, and we strive to have loyal and engaged long-term customer relationships.

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We have made, and will continue to make, significant investments in our solutions that expand functionality and enhance or add new capabilities to meet the current and evolving needs of our customers.

We intend to continue using our market validation techniques and close relationships with our customers as a key source of feedback to inform and direct our product strategy.

We expect our satisfied customers will expand their adoption and usage of our Value Added Services to adapt our platform to their specific operational requirements.

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To facilitate the continued use of our solutions by larger customers, we may increase our utilization of partnerships and integrations with select third parties to deliver key functionality while maintaining an elevated customer experience.

Enter New Adjacent Markets.

We expect to continue to evaluate and expand into adjacent markets (as defined above) based on our market validation strategy and targeted customer feedback in a manner consistent with our strategic plan.

While we are continuously developing our real estate industry solutions within a given market, we believe we can apply certain relevant product features and key learnings from that market to find synergies and new opportunities as we extend our solutions into successive adjacent markets.

An example of our adjacent market expansion effort is AppFolio Investment Management, which we released in April 2019 and is designed to enable real estate investment management organizations to better manage investor relationships by increasing transparency and streamlining certain business processes.

By leveraging our knowledge and expertise in the real estate industry to grow AppFolio Investment Management, we may eventually develop investment management solutions for markets in other industries.

Our Customers

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this includes ongoing live and on-demand training, a library of resources, and personalized account management.

We regularly measure NPS and solicit customer feedback in a variety of ways in an effort to continue to better serve our customers.

We regularly measure our Net Promoter Score and solicit customer feedback in a variety of ways in an effort to continue to better serve our customers.

Our solutions are designed to be easy to use and manage, and we offer training and support at no extra charge.

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Our products 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.

We take great care to keep our 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 Services’ Elastic Compute Cloud (EC2) platform.

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We monitor our production infrastructure to ensure high performance and availability, and our architecture allows our operators significant flexibility in achieving these goals.

In particular, we 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.

Sensitive customer data, including passwords, Social Security, and tax identification numbers, is encrypted during transmission, and before being written to disk.

In particular, we have fine-grained control over the specific server and region on which each customer's data resides, and can move such data between different geographic regions in order to avoid service disruption or to increase service performance.

All sensitive data in our systems, including passwords, Social Security numbers, 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 products 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.

Supervisors can distribute work to 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.

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This has led to recognition that demonstrates our valued company culture and workplace:

Fortune recognized AppFolio as a Great Place to Work for Women in 2021, and the annual Glassdoor Employees’ Choice Awards listed AppFolio as one of the Best Places to Work in 2022.

In 2022, Fortune recognized AppFolio as one of the Best Workplaces in Technology, and the Glassdoor Employees’ Choice Awards listed AppFolio as one of the Best Places to Work.

Our company culture, driven by the following six core values, fuels our dedication and passion:

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We routinely engage temporary employees and consultants.

None of our employees are represented by a labor union or covered by a collective bargaining agreement.

Approximately 3% of our workforce is represented by a union, the Communications Workers of America.

While it is our firm belief that a direct relationship between employee and employer is best, we recognize the decision made by these employees.

We consider our relationships with our employees and consultants to be strong.

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Diversity is core to our values and, we believe, necessary to drive innovation and collective growth.

Our commitment to these imperatives starts at the leadership level and cascades to our talented employees, who we look to lead and foster various initiatives.

AppFolio’s employee-led resource groups create an environment where everyone is valued for their uniqueness, while also feeling part of the larger whole.

Our commitment to diversity, equity and inclusion starts at the leadership level and cascades to our talented employees.

AppFolio’s employee-led resource groups aim to create an environment where everyone is valued for their uniqueness, while also feeling part of the larger whole.

We work hard to make sure our employees’ voices are heard, from our practice of small, focused teams to setting annual company initiatives together as an organization.

When we surveyed our workforce in 2021, of those who elected to share, 45.1% identified as women, 54.1% as men, and 0.8% as nonbinary.

When we conducted a voluntary survey of our workforce in 2022, of those who elected to share, approximately 54% identified as men, 45% identified as women, and less than 1% identified as nonbinary.

Additionally approximately 65% identified as White, 12% identified as Asian, 11% identified as Hispanic or Latino, 5% identified as Black or African American, less than 1% identified as American Indian or Alaska Native, less than 1% identified as Native Hawaiian or Other Pacific Islander, and 6% identified as two or more races.

Our recruiting practices focus on attracting and hiring employees with diverse backgrounds, experiences, and approaches at all levels of the company.

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We invest significant resources to develop the talent needed to remain at the forefront of innovation and make us an employer of choice.

Employees throughout our organization have access to training and learning programs which include programs for distinct audiences.

Employees throughout our organization have access to tailored training and learning programs designed both for our entire employee base as well as for distinct employee audiences.

Our annual engagement survey provides a platform for employees to provide anonymous feedback directly to their managers and our executives.

Based on results from our 2021 engagement survey, the overall engagement of employees is greater than the technology industry average.

Societal Impact.

Connecting and contributing to our communities is a long-standing tradition and important activity for our employees.

Our team members are passionate about many causes and we encourage them to participate in these causes by providing eight hours of volunteer time off annually.

In addition, throughout the year, we come together as a company to engage in community service through “AppFolio Gives Back,” where we donate time and funds to several charities that are selected by our employee-led Give Back Committee with AppFolio matching donations.

We believe in making an impactful contribution to the causes and communities that are meaningful to our employees in the context of the real estate industry.

We encourage employee volunteerism through our employee-led Give Back Committee and company-wide benefit of eight hours of paid volunteer time off annually.

Our corporate philanthropy program “AppFolio Gives Back” supports housing affordability, an ongoing challenge in the real estate industry, through a combination of employee fundraising, team volunteering, and a corporate matching gift program.

Environmental Stewardship.

We believe in a culture of environmental stewardship, and through our employee-led “Green Team” we strive to have a positive impact on our environment both in the workplace and at home by educating employees on environmental issues and encouraging action.

Compensation and Benefits.

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Our competitive compensation packages may include base salary, commission or annual performance-based bonuses, and stock-based compensation.

We also offer family-forming benefits, paid parental leave, paid sabbaticals, paid leave to care for family members, and access to fertility networks and discounts on fertility care.

We also offer paid parental leave, paid sabbaticals, paid leave to care for family members, and access to fertility networks and discounts on fertility care.

We review our programs periodically to ensure they remain competitive.

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We regularly solicit feedback to assess the well-being and needs of our employees and offer resources focused on mental health and physical wellness.

Specific to the COVID-19 pandemic, we have also taken measures to support the health and safety of our employees and their families.

We continue to provide a monthly stipend to our employees in an effort to help ensure each team member has a comfortable and functional work-from-home environment and we have added training and toolkits focused on helping employees be successful in a remote work environment.

We have enhanced internal lifestyle programs, such as virtual group fitness classes, and increased supplemental time off to create additional space for employees to reset and recharge.

In July 2021, we began transitioning our employees back to the workplace on a voluntary basis.

When the environment allows us to safely do so, we expect to move forward with a hybrid work model, where a majority of our employees work out of one of our offices several days a week.

We continue to evolve and upgrade our physical locations to ensure safe and healthy workspaces for our team members.

We have embraced Together@AppFolio, our hybrid work model, where many of our employees work out of one of our offices several days a week and others work remotely.

Available Information

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business