What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2024-02-01 compared with 2023-02-09 · 78 added, 79 removed, 93 unchanged (63% of the section changed)

2 unchanged sentences

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.

Our solutions are designed to enable our property manager customers to digitally transform their businesses, address critical 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 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 vendors, and provide key functionality related to critical transactions across the real estate lifecycle, including screening potential tenants, sending and receiving payments and providing insurance-related risk mitigation services.

AppFolio’s intuitive interface, streamlined workflows, and artificial intelligence ("AI") powered automation services make 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, which is designed for use across multiple devices and operating systems, is (i) a system of record to centralize and automate essential business processes, (ii) a system of engagement to enhance business interactions between our customers and their network of stakeholders, and (iii) 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.

Our solutions are offered as a service, and are hosted using a public cloud service provider.

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.

1 unchanged sentence

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 and their stakeholders 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 in our customers' business ecosystems.

AppFolio Property Manager

AppFolio Property Manager provides the platform upon which property managers can run their business operations.

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, 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 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.

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 provides a cloud-based platform on which our customers operate their businesses, leveraging process automation and optimized workflows.

The platform is enhanced with AppFolio Realm, a suite of AI-powered tools that assist with Leasing, Maintenance and Accounting and that includes generative AI to answer questions, perform tasks and automate common workflows.

The platform also includes AppFolio Stack, our partner ecosystem that allows customers to connect our platform with specialized technology and services offered by third parties.

The platform is frequently updated to provide new innovations and respond to market trends and customer needs.

AppFolio Property Manager Core

AppFolio Property Manager Core provides the basic functionality required to operate a property management business.

Centered on accounting, AppFolio Property Manager Core serves as our customers’ system of record.

All critical transactions are completed and recorded in the system, giving our customers access to the data they need.

It also serves as their system of engagement as they interact with key stakeholders in their business ecosystem, 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 day-to-day interactions, such as residents paying rent through the AppFolio Property Manager mobile app, are instantly reflected in the system of record.

AppFolio Property Manager Core is best suited for small property management companies that need a system that is comprehensive yet easy to use.

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 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:

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.

AppFolio Property Manager Plus includes the functionality of AppFolio Property Manager Core and adds an expanded set of functionalities designed to meet the needs of more complex, growing property management businesses.

This includes support for affordable housing management, student housing management, more complex accounting needs, deeper leasing insights, bulk actions to support larger scale operations, role-based permissions to allow managing a larger team, Stack integrations to extend our platform's functionality, and enhanced customer support.

AppFolio Property Manager Max

AppFolio Property Manager Max includes the functionality of AppFolio Property Manager Plus and adds functionality designed to meet the needs of even larger property management businesses.

This includes an end-to-end leasing funnel with built-in Customer Relationship Management ("CRM") functionality, increased customization with user-defined fields, full access to the customer database through an application programming interface, and dedicated customer success management.

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 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.

AppFolio Property Manager offers Value Added Services that supplement our core services and are often mission-critical for enhancing, automating and streamlining business-critical processes and workflows.

We strive for a seamless experience for our customers that increases their efficiency while not sacrificing ease of use, 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.

1 unchanged sentence

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 stakeholders, including applicants, residents and property owners.

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

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

1 unchanged sentence

and periodic dues from those living in community associations.

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.

Property managers can also electronically send funds to various stakeholders, including property owners, vendors, and even 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.

• Risk Mitigation.

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.

FolioGuard Smart Ensure is a software tool that 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 provided by AppFolio Insurance Services, Inc., a wholly-owned subsidiary of AppFolio, 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.

1 unchanged sentence

Our Growth Strategy

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.

Our growth strategy involves providing valuable business management solutions to new and existing customers in the real estate industry.

Our goal is to leverage our growing footprint to expand our share of the property management industry segment.

Key components of our near and extended term growth strategy include:

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.

We place significant emphasis on customer experience to differentiate our solutions 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.

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, and thus the number of units managed on our platform, with continued investments in the development of increasingly valuable business management solutions across not only the existing property types we currently serve but new ones as well, innovative sales and marketing programs, including evolving real estate industry thought leadership and education, and the referral power of satisfied customers.

To continue to attract larger customers, we may increase our utilization of partnerships and integrations with select third parties to deliver key functionality.

Expand Adoption and Use by Existing Customers.

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.

In addition, as our customers grow, we expect they will continue to use our solutions to manage their larger businesses.

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.

Differentiate to Win.

We will strive to continue to create a differentiated product experience that solves customer needs and creates new revenue streams for AppFolio.

Advanced technologies, such as Realm and its generative AI capabilities, are designed to unlock increased productivity and efficiency gains for customers.

Continued innovation in onboarding tools, processes, and workflows are designed to remove barriers for customers to switch to AppFolio, while accelerating use and adoption.

Through new, complementary products and services, our goal is to extend value throughout the property technology ecosystem, for both property managers and residents.

Unlock Upmarket Customers.

We will continue to focus on attracting larger operators with complex and diversified property portfolios, who derive value from managing their entire portfolio on a single platform.

Through our AppFolio Stack marketplace, we extend the value of our platform by integrating with external partners who offer a diversified suite of everyday services.

Elevate the Customer.

We believe our growing customer base needs differentiated service experiences that are easy, and accessible.

We will focus the efforts of our customer-facing teams on driving use and adoption of our products and services, helping customers to achieve success on our platform.

We will gain leverage in our service experience through self-service and automation, as well as through our solution partners who will enable us to quickly expand the AppFolio service offering.

Additionally, we will empower our customers and their networks of stakeholders through the continued development and adoption of Value Added Services in such areas as payments, screening, and risk mitigation .

Scale the Business.

We strive to operate with high efficiency across our organization.

We will continue our efforts to efficiently and effectively scale our capabilities, processes, and systems to adapt and grow with our business, and continually align the value of our offerings to the size, scale, and complexity of our customers, while upholding a rigorous standard of privacy, protection, compliance, and ethics.

Great People and Culture.

Our goal is to empower AppFolio employees to deliver exceptional value for customers and shareholders through continuous innovation, excellence, and meaningful work.

We will continue to streamline our people processes, programs, and systems to fuel high performance.

We believe fostering a connected and inclusive workplace is fundamental to AppFolio’s success.

Our Customers

1 unchanged sentence

As of December 31, 2023, we had 19,737 property management customers.

No individual customer represented 10% or more of our total revenue for fiscal 2022.

Customer Service

We believe our success is tied to long-term customer relationships, not a one-time sale.

Our team is structured to deliver ongoing service;

Our team is structured to deliver continuous service;

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

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.

We utilize a tiered engagement model to align the value we deliver with the value we capture from our customers, including add-on offerings such as tailored training and certification programs.

Onboarding consists of a dedicated team that works to ensure that customers are prepared to run their businesses on our platform.

11 unchanged sentences

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.

Our computing platform and cloud infrastructure are primarily powered by Amazon Web Services 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.

12 unchanged sentences

We believe our competitors primarily fall into the following categories:

• On-premise or cloud-based real estate business management service providers that serve companies of all sizes in our markets;

• On-premise or cloud-based vertical real estate business management service providers that serve companies of all sizes in our markets;

• On-premise or cloud-based horizontal business management service providers that offer broad solutions across multiple industries.

We also experience competition from numerous cloud-based solutions providers that focus almost exclusively on one or more point solutions in the real estate industry or in other industries.

Continued consolidation among cloud-based solution providers could significantly increase competition.

We also experience competition from numerous cloud-based solution providers that focus almost exclusively on one or more point solutions in the real estate industry or in other industries.

Continued consolidation among cloud-based point solution providers could significantly increase competition.

Some of our competitors may have greater financial, technical and other resources, greater name recognition and larger sales and marketing budgets;

5 unchanged sentences

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.

We also limit access to certain confidential information or trade secret information, including our source code, to those who have a need for such access.

Despite our precautions, it may be possible for unauthorized third parties to copy our products and use information that we regard as proprietary to create products and services that compete with ours.

Human Capital

We believe our people are at the heart of our success.

Our employees’ dedication to and passion for creating and delivering transformative solutions provides us with a competitive advantage and creates long-lasting relationships with our customers.

We believe our efforts in creating and maintaining strong connections — with our customers, partners, and team members — differentiates AppFolio as a great place to work.

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

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:

• Simpler Is Better

• Great, Innovative Products Are Key To A Great Business

We believe our people are at the heart of our success and our customers' success.

We drive our success by investing in our people, and cultivating an exceptional work destination where they want to be and stay.

Our company culture, driven by the following six core values, fuels our purpose and results:

• Great people make a great company.

• Listening to customers is in our DNA.

• Small, Focused Teams Keep Us Agile

• We Do The Right Thing;

• Innovation powers success.

• Simpler is better.

• Do the right thing;

it’s good for business.

• Build trust every day.

As of December 31, 2023, we had 1,504 employees.

We routinely engage temporary employees and consultants.

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.

3 unchanged sentences

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 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.

We have key partnerships with universities and professional organizations and provide ongoing education to our hiring teams that are focused on closing the diversity gap and growing our team.

Through employee-led resource groups, we strive to cultivate an environment where individual uniqueness is valued, fostering a sense of belonging.

Our commitment to transparency, open communication, and regular listening forums ensures that every employee's voice is not only heard but actively contributes to our inclusive culture.

When we conducted a voluntary survey of our workforce in 2023, of those who elected to share, approximately 57% identified as men, 42% identified as women, and 1% identified as outside of the gender binary.

Additionally, approximately

63% identified as White, 14% identified as Asian, 11% identified as Hispanic or Latino, 7% identified as two or more races, 4% identified as Black, and less than 1% identified as American Indian, Alaska Native, Native Hawaiian or Pacific Islander.

Employee Development.

1 unchanged sentence

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.

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

Societal Impact.

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 create a culture of impact by striving to be a force for good for our customers, communities, and each other.

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

1 unchanged sentence

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.

We believe in a culture of environmental stewardship and strive to create environmentally friendly workplaces.

We maintain sustainability requirements that all contractors who work in or around our buildings are required to follow.

Examples of these requirements include recycling of all demolished or removed materials whenever possible, installation of energy efficient HVAC units, low power LED lighting and fixtures, and native, drought resistant landscaping.

Compensation and Benefits.

We build a culture of high performance that recognizes and rewards those who deliver meaningful results.

Our compensation and benefits programs support the wellness of our employees and their families so they feel they can live their best lives both at work and at home.

5 unchanged sentences

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

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.

Our office locations are intentional spaces where we fuel innovation, collaboration, and celebrate successes together .

We have also embraced a 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

1 unchanged sentence

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