What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-06 compared with 2024-02-01 · 205 added, 148 removed, 703 unchanged (33% of the section changed)

37 unchanged sentences

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Acquisition of Move EZ, Inc.– Valuation of Customer Relationships and Developed Technology

As described in Notes 2 and 7 to the consolidated financial statements, on October 22,2024, the Company completed the acquisition of Move EZ, Inc.

(Move EZ) for total cash purchase consideration of $78.5 million.

Of the acquired intangible assets, $39.0 million of customer relationships and $9.8 million of developed technology were recorded.

Management determined the fair value of customer relationships and developed technology utilizing a replacement cost approach.

Determining the fair value of these intangible assets requires management to make significant judgments and estimates, including the selection of valuation methodologies and assumptions.

The significant assumptions used to value customer relationships and developed technology include the profit margin and rate of return.

The principal considerations for our determination that performing procedures relating to the valuation of customer relationships and developed technology acquired in the acquisition of Move EZ is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the customer relationships and developed technology acquired;

(ii) a high degree of auditor judgment and effort in performing procedures and evaluating management’s significant assumptions related to the profit margin and rate of return;

and (iii) the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the customer relationships and developed technology acquired.

These procedures also included, among others (i) reading the purchase agreement;

(ii) testing management’s process for developing the fair value estimate of the customer relationships and developed technology acquired;

(iii) evaluating the appropriateness of the replacement cost approach used by management;

(iv) testing the completeness and accuracy of underlying data used in the replacement cost approach;

and (v) evaluating the reasonableness of the significant assumptions used by management related to the profit margin and rate of return.

Evaluating management’s assumptions related to profit margin and rate of return for customer relationships and developed technology involved considering (i) the current and past performance of the Move EZ, Inc business;

(ii) the consistency with external market and industry data;

and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating the (i) appropriateness of the replacement cost approach and (ii) the reasonableness of the profit margin and rate of return assumptions used by management.

Revenue Recognition

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Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the revenue recognition process.

These procedures included testing the effectiveness of controls relating

to the revenue recognition process.

These procedures also included, among others (i) evaluating revenue transactions by either (a) testing the issuance and settlement of invoices and credit memos, tracing transactions not settled to a detailed listing of accounts receivable, and testing the completeness and accuracy of data provided by management or (b) testing, on a sample basis, revenue transactions by obtaining and inspecting source documents, such as executed contracts, invoices, and cash receipts and (ii) confirming, on a sample basis, outstanding customer invoice balances as of year-end and, and for confirmations not returned, obtaining and inspecting source documents, such as executed contracts, invoices, and subsequent cash receipts.

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Total current assets 335,402 272,357

Investment securities—noncurrent — 25,161

Property and equipment, net 24,483 28,362

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Intangible assets, net 49,057 2,357

Deferred income taxes 76,910 —

Other long-term assets 11,515 8,906

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Operating lease liabilities 37,476 41,114

Deferred tax liabilities — 697

Other liabilities 6,632 —

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Additional paid-in capital 254,821 236,985

Accumulated other comprehensive loss 99 ( 1,684 )

Accumulated other comprehensive Income (loss) 173 99

Treasury stock, at cost, 419 shares of Class A common stock as of December 31, 2024 and December 31, 2023

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Income (loss) before provision for income taxes 150,322 7,997 ( 66,717 )

Provision for income taxes 5,295 1,402 706

(Benefit from) provision for income taxes ( 53,746 ) 5,295 1,402

Net income (loss) $ 204,068 $ 2,702 $ ( 68,119 )

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Other comprehensive loss — — — — — ( 1,490 ) — — ( 1,490 )

Net Income — — — — — — — 1,028 1,028

Net loss — — — — — — — ( 68,119 ) ( 68,119 )

Balance at December 31, 2022 20,569 2 14,746 2 209,704 ( 1,684 ) ( 25,756 ) 83,278 265,546

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Issuance of restricted stock awards 6 — — — — — — — —

Other comprehensive loss — — — — — ( 1,490 ) — — ( 1,490 )

Net loss — — — — — — — ( 68,119 ) ( 68,119 )

Other comprehensive income — — — — — 1,783 — — 1,783

Net income — — — — — — — 2,702 2,702

Balance at December 31,2023 21,749 $ 2 14,116 $ 2 $ 236,985 $ 99 $ ( 25,756 ) $ 85,980 $ 297,312

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Conversion of Class B common stock to Class A common stock 953 — ( 953 ) — — — — — —

Issuance of restricted stock awards 6 — — — — — — — —

Other comprehensive income — — — — — 74 — — 74

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Gain on lease modification — ( 4,281 ) —

Deferred income taxes ( 76,937 ) ( 490 ) ( 993 )

Stock-based compensation, including as amortized 62,081 54,852 43,234

Gain on sale of business — — ( 4,156 )

Gain on sale of equity-method investment and recovery of note receivable — ( 40 ) ( 12,767 )

Other ( 8,220 ) ( 3,108 ) 135

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Proceeds from sale of business, net of cash divested — — 5,124

Proceeds from sale of equity-method investment 629 40 12,520

Proceeds from equity-method investment — 629 40

Cash paid in business acquisition, net of cash acquired ( 77,421 ) — —

Net cash used in investing activities ( 151,761 ) ( 55,582 ) ( 6,466 )

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Net cash used in financing activities ( 43,403 ) ( 25,961 ) ( 6,163 )

Net (decrease) increase in cash and cash equivalents ( 21,260 ) 12,736 ( 82,416 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 7,005 ) ( 21,260 ) 12,736

Cash, cash equivalents and restricted cash

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End of period $ 42,754 $ 49,759 $ 71,019

APPFOLIO, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Year Ended December 31,

2023 2022 2021

Cash, cash equivalents and restricted cash at end of period:

Cash and cash equivalents $ 42,504 $ 49,509 $ 70,769

Restricted cash included in prepaid expenses and other current assets 250 250 250

Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows $ 42,754 $ 49,759 $ 71,019

Supplemental disclosure of cash flow information

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Cash paid for amounts included in the measurement of lease liabilities included in operating cash flows $ 5,828 $ 4,732 $ 3,933

Right-of-use assets obtained in exchange for operating lease liabilities $ — $ — $ 11,945

The following table presents a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets to the total of the same such amounts shown above (in thousands):

2023 2022 2021

Cash and cash equivalents $ 49,509 $ 70,769 $ 57,847

Restricted cash included in other long-term assets

Total cash, cash equivalents and restricted cash $ 49,759 $ 71,019 $ 58,283

The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.

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AppFolio, Inc.

("we," "us" or "our") 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 requires powerful software solutions.

("we," "us" or "our") is a technology leader powering the future of the real estate industry.

We provide a cloud-based platform on which our customers operate their businesses.

Our services enable our customers to connect communities, increase operational efficiency, deliver exceptional customer experiences, and improve financial and operational performance.

Summary of Significant Accounting Policies

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Reclassification

We reclassified certain amounts in our Consolidated Statements of Cash Flows within the cash flows from operating activities section in the prior year to conform to the current year's presentation.

We reclassified certain amounts in our Consolidated Balance Sheet and Consolidated Statements of Cash Flows within the cash flows from operating activities section in the prior year.

We made those changes to conform to the current year's presentation.

Principles of Consolidation

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All intercompany balances and transactions have been eliminated in consolidation.

We accounted for our investment in SecureDocs, Inc.

(“SecureDocs”) under the equity method of accounting as we had the ability to exert significant influence, but did not control and were not the primary beneficiary of the entity.

Our investment in SecureDocs was not material and any income (loss) activity was not material individually or in the aggregate to our Consolidated Financial Statements for any period presented.

In December 2021, we sold our interest in SecureDocs.

Refer to Note 4, Investment Securities and Fair Value Measurements for additional information.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue, expenses, other income, and provision for income taxes during the reporting period.

Assets and liabilities which are subject to judgment and use of estimates include the fair value of financial instruments, useful lives of property and equipment and intangible assets, capitalized software development costs, incremental borrowing rate applied in lease accounting, impairment of goodwill and long-lived assets, period of benefit associated with deferred costs, stock-based compensation, income taxes, and contingencies.

Assets and liabilities which are subject to judgment and use of estimates include the fair value of assets and liabilities assumed in business combinations, the fair value of financial instruments, useful lives of property and equipment and intangible assets, capitalized software development costs, incremental borrowing rate applied in lease accounting, impairment of goodwill and long-lived assets, the period of benefit associated with deferred costs, stock-based compensation, income taxes, and contingencies.

Actual results could differ from those estimates and any such differences may have a material impact on our Consolidated Financial Statements.

Segment Information

Our chief operating decision maker reviews financial information presented on an aggregated and consolidated basis, together with revenue information for our core solutions, Value Added Services, and other service offerings, principally to make decisions about how to allocate resources and to measure our performance.

Accordingly, we have determined that we have one reportable and operating segment.

Our chief operating decision maker ("CODM"), the Chief Executive Officer, allocates resources and assesses financial performance based upon discrete financial information at the consolidated level.

There are no segment managers who are held accountable by our CODM, or anyone else, for operations, operating results and planning for levels or components below the consolidated unit level.

Accordingly, we have determined that we operate as a single operating and reportable segment.

Our CODM uses consolidated net income (loss) as the sole measure of segment profit or loss.

Significant segment expenses include cost of revenue (excluding depreciation and amortization), sales and marketing, research and product development, general and administrative expenses, and depreciation and amortization.

For expenses incurred during the years ended December 31, 2024, 2023, and 2022, refer to our Consolidated Statements of Operations.

Stock-based compensation expense is also recognized as a significant segment expense.

Details regarding this expense for the years ended December 31, 2024, 2023, and 2022 was included in the parenthetical note to the respective Consolidated Statements of Operations.

Concentrations of Credit Risk

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As of December 31, 2024, (i) no individual customer exceeded 10% of our total revenues in any of the periods presented, and (ii) 25 % of our accounts receivable balance was attributable to amounts due from a risk mitigation provider.

For purposes of assessing concentration of credit risk and significant customers, a group of residents that are receiving services from a third party that controls and transfers the specified services are regarded as one single customer.

purposes of assessing concentration of credit risk and significant customers, a group of residents that are receiving services from a third party that controls and transfers the specified services are regarded as one single customer.

Business Combinations

The results of a business acquired in a business combination are included in our Consolidated Financial Statements from the date of acquisition.

We allocate the purchase price to the identifiable assets and liabilities of the acquired business at their acquisition date fair values.

The excess of the purchase price over the amount allocated to the identifiable assets and liabilities, if any, is recorded as goodwill.

Determining the fair value of assets acquired and liabilities assumed requires management to make significant judgments and estimates, including the selection of valuation methodologies and assumptions.

Critical estimates used in valuing certain intangible assets include, but are not limited to, development costs, the time required to recreate the assets and profit margin a market participant would receive, and rate of return.

These estimates are based on information obtained from the management of the acquired companies, our assessment of the information, and historical experience.

Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

During the measurement period of up to one year from the acquisition date, we may record adjustments to the preliminary fair value of the assets acquired and liabilities assumed with a corresponding offset to goodwill for these business combinations.

Acquisition-related transaction costs are not included as a component of consideration transferred, but are accounted for as an operating expense in the period in which the costs are incurred.

Fair Value Measurements

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Investment Securities

Our investment securities currently consist of United States government agency securities and treasury securities.

Our investment securities currently consist of United States government and agency securities.

We classify investment securities as available-for-sale at the time of purchase and reevaluate such classification at each balance sheet date.

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Capitalized Software Development Costs

Software development costs consist of certain payroll and stock compensation costs incurred to develop functionality of our internal-use software solutions.

Software development costs consist of certain payroll and stock-based compensation costs incurred to develop functionality of our internal-use software solutions.

We capitalize certain software development costs for new offerings as well as significant upgrades and enhancements to our existing software solutions.

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No impairment losses were recorded for goodwill during the years ended December 31, 2024, 2023 and 2022.

Intangible assets primarily consist of acquired database, domain names and patents, which are recorded at cost, less accumulated amortization.

Intangible assets primarily consist of customer relationships, developed technology, acquired database, domain names and patents, which are recorded at cost, less accumulated amortization.

We determine the appropriate useful life of our intangible assets by performing an analysis of expected cash flows of the acquired assets.

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Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.

We recognize revenue in proportion to the amount that we have the right to invoice for certain core solutions and Value Added Services revenue, as that amount corresponds directly with our performance completed to date.

We recognize revenue in proportion to the amount that we have the right to invoice for certain core solutions and Value Added Services, as that amount corresponds directly with our performance completed to date.

Refer to Note 16, Revenue and Other Information for the disaggregated breakdown of revenue between Core solutions, Value Added Services and Other revenue.

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We recognize revenue for usage-based services in the period the service is rendered.

Our electronic payments services fees are recorded gross of the interchange and payment processing related fees.

We generally invoice our customers for usage-based services on a monthly basis for services rendered in the preceding month.

Our electronic payments services fees are recorded gross of interchange and payment processing related fees.

We generally invoice our customers for usage-based services on a monthly basis or collect the fee at the time of service.

We also have certain Value Added Services which are charged on a subscription basis.

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We recognize revenue for subscription-based services over time on a straight-line basis over the contract term beginning on the date that our service is made available to the customer.

Some subscription or usage-based Value Added Services, such as fees for electronic payment services, are paid by either our customers or clients of our customers at the time the services are rendered.

Some subscription or usage-based Value Added Services, such as fees for electronic payment services, are paid by either our customers or our customers' stakeholders at the time the services are rendered.

We work with third-party partners to provide certain of our Value Added Services.

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We determined the period of benefit by taking into consideration our customer contract term, the useful life of our internal-use software, average customer life, and other factors.

Amortization expense for the deferred costs is included within sales and marketing expense in the accompanying Consolidated Statements of Operations.

Amortization expense for deferred costs is included within sales and marketing expense in the accompanying Consolidated Statements of Operations.

Deferred costs were $ 16.8 million and $ 15.9 million as of December 31, 2024 and 2023, respectively, of which $ 9.9 million and $ 8.7 million, respectively, are included in Prepaid expenses and other current assets and $ 6.9 million and $ 7.2 million, respectively, are included in Other long-term assets in the accompanying Consolidated Balance Sheets.

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Many of our Value Added Services are facilitated by third-party service providers.

Cost of revenue paid to these third-party service providers includes the cost of electronic interchange and payment processing-related services to support our payments services, the cost of credit reporting services for our tenant screening services, and various costs associated with our risk mitigation service providers.

Cost of revenue paid to these third-party service providers includes, without limitation, the cost of electronic interchange and payment processing-related services to support our payments services, the cost of credit reporting services for our tenant screening services, and various costs associated with our risk mitigation service providers.

These third-party costs vary both in amount and as a percent of revenue for each Value Added Service offering.

Cost of revenue also consists of personnel-related costs for our employees focused on customer service and the support of our operations (including salaries, performance-based compensation, benefits, and stock-based compensation), platform infrastructure costs (such as data center operations and hosting-related costs), and allocated shared and other costs.

Cost of revenue also consists of personnel-related costs for our employees focused on customer service and the support of our operations (including salaries, cash bonuses, benefits, and stock-based compensation), platform infrastructure costs (such as data center operations and hosting-related costs), and allocated shared and other costs.

Cost of revenue excludes depreciation of property and equipment, amortization of capitalized software development costs and amortization of intangible assets.

Sales and Marketing

Sales and marketing expense consists of personnel-related costs for our employees focused on sales and marketing (including salaries, sales commissions, performance-based compensation, benefits, and stock-based compensation), costs associated with sales and marketing activities, and allocated shared and other costs.

Sales and marketing expense consists of personnel-related costs for our employees focused on sales and marketing (including salaries, sales commissions, cash bonuses, benefits, and stock-based compensation), costs associated with sales and marketing activities, and allocated shared and other costs.

Marketing activities include advertising, online lead generation, lead nurturing, customer and industry events, and the creation of industry-related content and collateral.

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Research and Product Development

Research and product development expense consists of personnel-related costs for our employees focused on research and product development (including salaries, performance-based compensation, benefits, and stock-based compensation), fees for third-party development resources, and allocated shared and other costs.

Research and product development expense consists of personnel-related costs for our employees focused on research and product development (including salaries, cash bonuses, benefits, and stock-based compensation), fees for third-party development resources, and allocated shared and other costs.

Our research and product development efforts are focused on expanding functionality and the ease of use of our existing software solutions by adding new core functionality, Value Added Services and other improvements, as well as developing new products and services.

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General and Administrative

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

In addition, general and administrative expense includes fees for third-party professional services (including audit, legal, compliance, and tax services), transaction costs related to sales of subsidiary businesses, regulatory fines and penalties, other corporate expenses, impairment of long-lived assets, and allocated shared costs.

General and administrative expense consists of personnel-related costs for employees in our executive, finance, information technology, human resources, legal, compliance, and administrative organizations (including salaries, cash bonuses, benefits, and stock-based compensation).

In addition, general and administrative expense includes fees for third-party professional services (including audit, legal, compliance, and tax services), transaction costs related to business combination, sales of subsidiary businesses, regulatory fines and penalties, other corporate expenses, impairment of long-lived assets, and allocated shared costs.

Depreciation and Amortization

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We estimate a forfeiture rate to calculate our stock-based compensation expense for our stock-based awards.

We recognize deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities.

We recognize deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities.

Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the Consolidated Statements of Operations in the period that includes the enactment date.

A valuation allowance is recorded when it is more

likely than not that some of the deferred tax assets will not be realized.

In evaluating the need for a valuation allowance, we consider the weighting of all available positive and negative evidence, which includes, among other things, the nature, frequency and severity of current and cumulative taxable income or losses, future projections of profitability, and the duration of statutory carryforward periods.

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the Consolidated

Statements of Operations in the period that includes the enactment date.

A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized.

In evaluating the need for a valuation allowance at each reporting period, we consider the weighting of all available positive and negative evidence, which includes, among other things, the nature, frequency and severity of current and cumulative taxable income or losses, future projections of profitability, timing of the future reversal of existing temporary differences and the duration of statutory carryforward periods.

Net Income (Loss) per Common Share

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Basic net income (loss) per share:

Net income (loss) $ 204,068 $ 2,702 $ ( 68,119 )

undistributed earnings to participating securities 12 — —

Net income (loss) attributable to common stockholders

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Recent Accounting Pronouncements Adopted

In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2021-08, " Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ," which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, " Revenue from Contracts with Customers ," as if the acquirer had originated the contracts.

ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, with early adoption permitted.

We adopted ASU 2021-08 on January 1, 2023.

Adoption did not have a material impact on our Consolidated Financial Statements.

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

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ASU 2023-07 is effective for calendar year-end public business entities in the 2024 annual period and in 2025 for interim periods.

Early adoption is permitted.

We expect to adopt ASU 2023-07 for 2024 annual period and 2025 interim periods, retrospectively.

We are currently evaluating the impact of this ASU on our Consolidated Financial Statements.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures , which requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid.

We adopted ASU 2023-07 for the 2024 annual period on a retrospective basis.

This adopted ASU results in us including the additional required disclosures.

Refer to Segment Information in this note for more information.

Recent Accounting Pronouncements Not Yet Adopted

In December 2023, FASB issued ASU 2023-09, Improvements to Income Tax Disclosures , which requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes are paid.

The amendment in the ASU is intended to enhance the transparency and decision usefulness of income tax disclosures.

The guidance will be applied on a prospective basis with the option to apply the standard retrospectively and is effective for calendar year-end public business entities in the 2025 annual period and in 2026 for interim periods with early adoption permitted.

We plan to adopt the standard in our fiscal year 2025 annual financial statements, and we expect the adoption of the standard will impact certain of our income tax disclosures.

In November 2024, FASB issued ASU 2024-03, Disaggregation of Income Statement Expense.

The new standard requires additional disclosures about specific types of expenses included in the expense captions presented on the face of income statements as well as disclosures about selling expenses.

The guidance applies prospectively with the option to apply the standard retrospectively and is effective for calendar year-end public business entities in the 2027 annual period and in 2028 for interim periods with early adoption permitted.

We are currently evaluating the impact of this ASU on our Consolidated Financial Statements.

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Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

Corporate bonds $ 17,497 $ 2 $ ( 112 ) $ 17,387

government and agency securities 162,062 193 ( 59 ) 162,196

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Due in one year or less $ 235,509 $ 235,745 $ 162,062 $ 162,196

Due after one year through three years — — 25,787 25,161

Total available-for-sale investment securities $ 235,509 $ 235,745 $ 162,062 $ 162,196

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Gross Realized Gains Gross Realized Losses Gross Proceeds from Sales Gross Proceeds from Maturities

Corporate bonds $ 3 $ — $ 1,013 $ 16,497

government and agency securities 4 ( 1 ) 9,984 240,035

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$ 3 $ — $ 1,013 $ 152,382

In December 2021, we sold all of our interest in SecureDocs.

A gain of $ 12.8 million was recognized within Other income, net in our Consolidated Statements of Operations, a portion of which relates to the recovery of a $ 2.0 million note receivable which had been previously reserved.

The tables above do not include our non-marketable equity securities of $ 2.0 million, which are recorded in Other long term assets in the Consolidated Balance Sheet as of December 31, 2024.

Fair Value Measurements

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Money market funds $ 37,100 $ — $ 37,100

Treasury securities 1,287 — 1,287

Available-for-sale investment securities:

Corporate bonds — 17,387 17,387

government and agency securities — 162,196 162,196

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Years Ending December 31,

2024 $ 12,659

Total amortization expense $ 15,429

Business Combination

Acquisition of Move EZ, Inc.

On October 22, 2024, we acquired all of the outstanding shares of Move EZ, Inc., d/b/a LiveEasy (“LiveEasy”) for a total cash purchase consideration of $ 78.5 million.

LiveEasy is a concierge platform providing moving and home services throughout the resident onboarding process.

As of December 31, 2024, $ 0.8 million of the purchase consideration remains outstanding and is expected to be settled in 2025.

The transaction was accounted for using the acquisition method, and as a result, assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date.

The following table summarizes the final purchase price allocation (in thousands) as well as the estimated useful lives of the acquired intangible assets over which they are amortized on a straight-line basis, as this approximates the pattern in which economic benefits are consumed:

Estimated Fair Value Estimated Useful Life (in years)

Cash and cash equivalents 272

Identified intangible assets:

Customer relationships 39,000 5

Developed technology 9,800 5

Goodwill 40,350

Deferred tax liabilities ( 8,874 )

Other net tangible liabilities ( 2,047 )

Net assets acquired $ 78,501

Customer relationships represent the fair value of the underlying contracts and related relationships with LiveEasy's customers and service providers.

Developed technology represents the fair value of the technologies that pertain to a customer-

facing concierge platform that provides moving and home services.

We used a replacement cost method to determine the fair value of both intangible assets.

The assumptions used are development costs, the time required to recreate the assets and profit margin a market participant would receive, and rate of return.

The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill, which is not deductible for tax purposes.

Goodwill is primarily attributed to the assembled workforce of LiveEasy and anticipated operational synergies.

We incurred a total of $ 0.7 million in transaction costs related to the acquisition and expensed all transaction costs incurred during the period in which such service was received in General and Administrative in the Consolidated Statement of Operations.

The results of the acquired operations were included in our consolidated financial statements from the date of acquisition, October 22, 2024.

For the period from October 22, 2024 through December 31, 2024, LiveEasy contributed an immaterial amount of revenue and loss before taxes.

Pro forma revenue and earnings amounts on a combined basis have not been presented as the historical financial results are immaterial.

The pro forma amortization expense adjustment from acquired intangible assets would be $ 8.1 million, and $ 9.8 million for the years ended December 31, 2024 and 2023, respectively.

Goodwill and Intangible Assets, Net

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Life in Years

Customer relationships 39,000 ( 1,300 ) 37,700 5.0

Developed technology 9,800 ( 327 ) 9,473 5.0

Database 4,710 ( 2,826 ) 1,884 10.0

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Life in Years

Customer relationships $ 1,670 $ ( 1,448 ) $ 222 5.0

Database 4,710 ( 2,355 ) 2,355 10.0

Technology 6,539 ( 6,539 ) — 4.0

Trademarks and trade names 1,520 ( 1,211 ) 309 5.0

Partner relationships 680 ( 680 ) — 3.0

Non-compete agreements 7,340 ( 5,872 ) 1,468 5.0

Domain names 90 ( 88 ) 2 5.0

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Years Ending December 31,

2025 $ 10,231

Total $ 49,057

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Goodwill at December 31, 2022 $ 56,060

Goodwill attributed to WegoWise Transaction ( 87 )

Goodwill at December 31, 2023 56,060

Acquisition of LiveEasy

Goodwill at December 31, 2024 $ 96,410

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Total accrued employee expenses $ 30,157 $ 35,567

During the year ended December 31, 2023, we expensed and paid $ 14.9 million of severance related to separation costs associated with our former Chief Executive Officer's Transition and Separation Agreement, dated March 1, 2023 ("Separation Agreement").

In the third quarter of 2023, we accrued $ 10.3 million of severance and related personnel costs associated with our workforce reduction, which has been substantially paid out in cash during the year ended December 31, 2023.

The remaining balance is expected to be paid in 2024.

In the third quarter of 2023, we accrued $ 10.3 million of severance and related personnel costs associated with our workforce reduction.

Refer to Note 17, Workforce Reduction for additional information.

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Other Current Liabilities consisted of the following (in thousands):

Unearned premium liabilities $ 5,455 $ 2,605

Insurance reserves 3,908 4,174

Operating lease liabilities-current 4,273 3,626

Other 3,535 2,871

Others 2,451 930

Total other current liabilities $ 16,087 $ 11,335

For additional information, refer to Note 11, Commitments and Contingencies and Note 10, Leases.

Operating leases for our corporate offices have remaining lease terms ranging from five months to ten years , some of which include options to extend the leases for up to ten years .

These options to extend have not been recognized as part of our operating lease right-of-use assets and lease liabilities as it is not reasonably certain that we will exercise these options.

Unearned premium liabilities are the refundable portion of commissions received in connection with the sale of renters insurance policies to residents through AppFolio Insurance Services, Inc., our wholly owned subsidiary.

In the event a resident cancels their renters insurance policy prior to the end of such policy, we may be required to refund a pro rata portion of the commission paid on such policy.

For additional information for insurance reserves and operating lease liabilities, refer to Note 12, Commitments and Contingencies and Note 11, Leases , respectively .

Operating leases for our corporate offices have remaining lease terms ranging from 2.6 years to 8.1 years, some of which include options to extend the leases for up to ten years .

These options to extend have not been recognized as part of our operating lease ROU assets and lease liabilities as it is not reasonably certain that we will exercise these options.

Our lease agreements do not contain any residual value guarantees or material restrictive covenants.

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Weighted-average discount rate 5.1 % 5.1 %

During the year ended December 31, 2022, we decided to exit and make available for sublease certain leased office spaces.

As a result, we reassessed our asset groupings and evaluated the recoverability of our right-of-use and other lease related assets, and determined that the carrying value of the respective asset groups was not fully recoverable.

During the year ended December 31, 2022, we decided to exit and make available for sublease certain of our leased office spaces.

As a result, we reassessed our asset groupings and evaluated the recoverability of our ROU and other lease related assets, and determined that the carrying value of the respective asset groups was not fully recoverable.

We utilized discounted cash flow models to estimate the fair value of the asset groups taking into consideration the time period it will take to obtain a sublessee, the applicable discount rates and the anticipated sublease income and calculated the corresponding impairment loss.

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In January 2023, we entered into an amendment to the lease agreement for our San Diego facility (the "San Diego Lease").

We remeasured the lease liability and recorded a reduction to the lease liability and right-of-use asset using the discount rate at the modification date, which resulted in a gain of $ 2.4 million in the Consolidated Statements of Operations.

We remeasured the lease liability and recorded a reduction to the lease liability and ROU asset using the discount rate at the modification date, which resulted in a gain of $ 2.4 million in the Consolidated Statements of Operations.

In June 2023, we entered into a second amendment to reduce the rentable square footage and our future rental payment obligations under the San Diego Lease pursuant to which we made a one-time payment of $ 2.9 million.

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In July 2023, we entered into an agreement to sublet one of our office spaces in Santa Barbara through December 31, 2031 (the "Santa Barbara 90 Sublease").

The total rental commitment over the term of the Santa Barbara 90 Sublease is

$ 6.1 million.

We performed impairment testing in accordance with ASC 360, and no impairment related to the right-of-use assets was recorded for the year ended December 31, 2023.

The total rental commitment over the term of the Santa Barbara 90 Sublease is $ 6.1 million.

We performed impairment testing in accordance with ASC 360, and no impairment related to the ROU assets was recorded for the year ended December 31, 2023.

Future minimum lease payments under non-cancellable leases as of December 31, 2024 were as follows (in thousands):

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Liability to Landlord Insurance

We have a wholly owned subsidiary, Terra Mar Insurance Company, Inc., which was established in connection with reinsuring liability to landlord insurance policies offered to our customers by our third-party service provider.

We assume a 100 % quota share of the liability to landlord insurance policies placed with our customers by our third-party service provider.

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D-101-CV-2022-02100), naming us as a defendant and alleging certain violations of the New Mexico Unfair Practices Act and negligent misrepresentation in connection with our tenant screening service (the “Murphy Litigation”).

In late November 2023, the parties agreed to settle the Murphy Litigation and plan to file a notice of settlement with the court.

In late November 2023, the parties agreed to settle the Murphy Litigation.

We did not admit any wrongdoing in connection with the settlement of the Murphy Litigation.

We have assessed the potential liabilities related to this matter and have determined that it is probable a loss will be incurred;

however, we expect that this loss will be covered by existing insurance policies.

The settlement agreement required us to pay $ 7.0 million, which was covered in full under our existing insurance policies.

As of December 31, 2023, we recorded a liability of $ 7.0 million within Accrued Expenses and a corresponding receivable amount within Prepaid expenses and other current assets.

In April, 2024, the parties filed a stipulation of settlement with the court dismissing all claims against AppFolio with prejudice.

As the settlement was paid in March 2024, there is no remaining liability or receivable as of December 31, 2024

In addition to the foregoing, from time to time, we are involved in various other investigative inquiries, legal proceedings and disputes arising from or related to matters incident to the ordinary course of our business activities, including actions with respect to intellectual property, employment, labor, regulatory and contractual matters.

Although the results of such investigative inquiries, legal proceedings and other disputes cannot be predicted with certainty, we believe that we are not currently a party to any matters which, if determined adversely to us, would, individually or taken together, have a material adverse effect on our business, operating results, financial condition or cash flows.

However, regardless of the merit of any matters raised or the ultimate outcome, investigative inquiries, legal proceedings and other disputes may generally have an adverse impact on us as a result of defense and settlement costs, diversion of management resources, and other factors.

Although the ultimate outcome of such investigative inquiries, legal proceedings and other disputes cannot be predicted with certainty, we do not believe that any such investigative inquires, legal proceedings and other disputes, if determined adversely to us, would, individually or taken together, have a material adverse effect on our business, operating results, financial condition or cash flows.

Indemnification

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Amended and Restated Certificate of Incorporation

Upon the effectiveness of our Amended and Restated Certificate of Incorporation on June 25, 2015, we are authorized to issue 250,000,000 shares of Class A common stock, 50,000,000 shares of Class B common stock and 25,000,000 shares of undesignated preferred stock, each with a par value of $ 0.0001 per share.

Under our Amended and Restated Certificate of Incorporation, we are authorized to issue 250,000,000 shares of Class A common stock, 50,000,000 shares of Class B common stock and 25,000,000 shares of undesignated preferred stock, each with a par value of $ 0.0001 per share.

Class A Common Stock and Class B Common Stock

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The holder of each share of Class A common stock is entitled to one vote, while the holder of each share of Class B common stock is entitled to ten votes.

Each share of our Class B common stock is convertible at any time at the option of the holder into one share of our Class A common stock and generally convert into shares of our Class A common stock upon transfer.

Each share of our Class B common stock is convertible at any time at the option of the holder into one share of our Class A common stock and generally converts into a share of our Class A common stock upon transfer.

Class A common stock and Class B common stock are collectively referred to as common stock throughout the notes to these financial statements, unless otherwise noted.

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Under the Share Repurchase Program, share repurchases may be made from time to time, as directed by a committee consisting of three directors, in open market purchases or in privately negotiated transactions at a repurchase price that the members of the committee unanimously believe is below intrinsic value conservatively determined.

The Share Repurchase Program does not obligate us to repurchase any specific dollar amount or number of shares, there is no expiration date for the Share Repurchase Program, which may be modified, suspended or terminated at any time and for any reason.

The Share Repurchase Program does not obligate us to repurchase any specific dollar amount or number of shares, and there is no expiration date for the Share Repurchase Program, which may be modified, suspended or terminated at any time and for any reason.

We have not made any repurchases under the Share Repurchase Program during the years ended December 31, 2024, 2023 and 2022.

Stock-Based Compensation

We currently have two stock incentive plans, our 2007 Stock Incentive Plan (the "2007 Plan") and the 2015 Stock Incentive Plan (the "2015 Plan").

The 2007 Plan expired on February 14, 2017, however it will continue to govern outstanding awards granted under the 2007 Plan.

Under the 2015 Plan, 2,000,000 shares of our Class A common stock were reserved and available for grant and issuance.

On January 1 of each subsequent calendar year, the number of shares available for grant and issuance under the 2015 Plan increase by the lesser of (i) the number of shares of our Class A common stock subject to awards granted under the 2015 Plan during the preceding calendar year and (ii) such lesser number of shares of our Class A common stock determined by our Board of Directors.

We currently have two stock incentive plans:

the 2015 Stock Incentive Plan (the "2015 Plan") and, the 2025 Omnibus Incentive Plan (the "2025 Plan").

At our annual meeting of stockholders held on June 14, 2024 (the “2024 Annual Meeting”), our stockholders approved the 2025 Plan.

We did not grant any awards under the 2025 Plan in 2024.

On January 1, 2025, the 2025 Plan superseded and replaced the 2015 Plan and no further awards will be granted under the 2015 Plan, but the 2015 Plan will continue to govern outstanding awards granted under the 2015 Plan.

Under the 2015 Plan, 2,000,000 shares of our Class A common stock were initially reserved and available for grant and issuance.

On January 1 of each subsequent calendar year during the term of the 2015 Plan, the number of shares available for grant and issuance under the 2015 Plan increased by the lesser of (i) the number of shares of our Class A common stock subject to awards granted under the 2015 Plan during the preceding calendar year and (ii) such lesser number of shares of our Class A common stock determined by our Board of Directors.

The number of shares of our Class A common stock is also subject to adjustment in the event of a recapitalization, stock split, reclassification, stock dividend or other change in our capitalization.

The 2015 Plan authorizes the award of stock options, stock appreciation rights, RSAs, RSUs, performance awards and stock bonuses.

The 2015 Plan provides for the grant of awards to our employees, directors, consultants and independent contractors, subject to certain exceptions.

RSUs, PSUs, and RSAs have been issued during 2023 pursuant to the 2015 Plan.

RSUs and PSUs represent the right on the part of the holder to receive shares of our Class A common stock at a specified date in the future or the achievement of performance conditions at the discretion of our compensation committee, subject to forfeiture of that right due to termination of employment.

If an RSU or PSU has not been forfeited, then, on the specified date, we will deliver to the holder of the RSU or PSU shares of our Class A common stock.

The 2015 Plan authorized the award of stock options, stock appreciation rights, restricted stock, restricted stock units ("RSUs"), performance awards (including performance stock units ("PSUs")) and stock bonuses to our employees, directors, consultants and independent contractors, subject to certain exceptions.

We granted RSUs and PSUs during 2024 pursuant to the 2015 Plan.

RSUs and PSUs represent the right on the part of the holder to receive shares of our Class A common stock at a specified date in the future and/or upon the achievement of performance conditions at the discretion of our compensation committee, subject to forfeiture of that right due to termination of employment.

Our 2025 Employee Stock Purchase Plan (the “ESPP”) authorizes the issuance of shares of our Class A common stock pursuant to purchase rights granted to our employees.

The purchase price for shares purchased under the 2025 ESPP with respect to any offering period is an amount equal to 85 % of the fair market value of a share of our Class A Common Stock on the applicable purchase date (i.e., the last trading day of the applicable offering period).

Offering periods are six months long

and begin on February 16 and August 16 of each year.

The first offering period under the ESPP will begin on Monday, February 17, 2025.

1,250,000 shares of Class A Common Stock are authorized for issuance under the ESPP, subject to adjustment in accordance with the terms of the ESPP.

In addition, commencing on January 31, 2026 and on each January 31st thereafter during the term of the ESPP, the number of shares of Class A Common Stock authorized for issuance under the ESPP will be increased by the lesser of (i) the number of shares of Class A Common Stock issued or transferred pursuant to rights granted under the ESPP during the preceding calendar year, (ii) such lesser number of shares of Class A Common Stock as determined by our compensation committee, or (iii) 1,250,000 shares of Class A Common Stock.

Stock Options

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Options exercised ( 251 ) 15.62

Options cancelled/forfeited ( 1 ) 3.28

Options outstanding as of December 31, 2024 129 $ 121.50 7.6

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Our stock-based compensation expense for stock options were not material for the periods presented.

During the year ended December 31, 2023, we granted our Chief Executive Officer 120,000 stock options of our Class A common stock.

These stock options vest based on service conditions with one-third vesting at the end of each of the years ending December 31, 2025, 2026 and 2027.

During the year ended December 31, 2023, we granted our Chief Executive Officer options to purchase 120,000 shares of our Class A common stock.

These stock options vest based on service conditions with one-third vesting at the end of each of the years ending December 31, 2025, 2026 and 2027 (assuming continued employment through the applicable vesting date).

No stock options were granted during the years ended December 31, 2024 or 2022.

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The total intrinsic value of options exercised in 2024, 2023 and 2022 was $ 52.2 million, $ 36.4 million, and $ 31.1 million, respectively.

This intrinsic value represents the difference between the fair value of our common stock on the date of exercise and the exercise price of each option.

Based on the fair value of our common stock as of December 31, 2023, the total intrinsic value of all outstanding options, exercisable options, and options vested and expected to vest was $ 46.4 million.

This intrinsic value represents the difference between the fair value of our Class A common stock on the date of exercise and the exercise price of each option.

Based on the fair value of our Class A common stock as of December 31, 2024, the total intrinsic value of all outstanding options, exercisable options, and options vested and expected to vest was $ 16.2 million.

Restricted Stock Units

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Unvested RSUs as of December 31, 2024 were composed of 0.7 million RSUs with only service conditions and 0.1 million PSUs with both service conditions and performance conditions.

RSUs granted with only service conditions generally vest over a four-year period.

RSUs granted with only service conditions generally vest over a four-year period, assuming continued employment through the applicable vesting date.

The number of PSUs granted, as included in the above table, assumes achievement of the performance metric at 100 % of the performance target.

Of the unvested PSUs as of December 31, 2023, 0.1 million are subject to vesting based on the achievement of pre-established performance metrics for the year ending December 31, 2023 and will vest over a three year period, assuming continued employment throughout the performance period.

The unvested PSUs as of December 31, 2024, are subject to vesting based on the achievement of pre-established performance metrics for the year ending December 31, 2024 and will vest over a three year period, assuming continued employment through each applicable vesting date.

The actual number of shares to be issued at the end of the performance period will range from 0 % to 170 % of the target number of shares depending on achievement relative to the performance metric over the applicable period.

We recognized stock-based compensation expense for the RSUs and PSUs of $ 59.2 million, $ 51.0 million and $ 43.3 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Excluded from stock-based compensation expense is capitalized software development costs of $ 0.9 million, $ 3.0 million, and $ 2.7 million for the years ended December 31, 2023, 2022 and 2021, respectively.

As of December 31, 2024, the total estimated remaining stock-based compensation expense for the aforementioned RSUs and PSUs was $ 96.2 million, which is expected to be recognized over a weighted average period of 2.1 years.

The total fair value of RSUs and PSUs vested during the years ended December 31, 2024, 2023 and 2022 was approximately $ 111.8 million, $ 82.2 million and $ 27.5 million, respectively.

Restricted Stock Awards

A summary of activity in connection with our RSAs for the year ended December 31, 2023 is as follows (number of shares in thousands):

Number of Shares Weighted- Average Grant Date Fair Value per Share

Unvested as of December 31, 2022 6 $ 96.33

Granted 6 150.06

Vested ( 6 ) 96.33

Unvested as of December 31, 2023 6 $ 150.06

We have the right to repurchase any unvested RSAs subject to certain conditions.

Restricted stock awards vest over a one-year period.

Our stock-based compensation expense for RSAs was not material for the periods presented.

As of December 31, 2023, the total estimated remaining stock-based compensation expense for unvested restricted stock awards with a repurchase right was $ 0.3 million, which is expected to be recognized over a weighted average period of 0.5 years.

Set forth below is a reconciliation of the components that caused our provision for income taxes to differ from amounts computed by applying the United States federal statutory rate:

Set forth below is a reconciliation of the components that caused our (benefit from) provision for income taxes to differ from amounts computed by applying the United States federal statutory rate:

Year Ended December 31,

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Stock-based compensation expense ( 13 ) ( 108 ) 7

Research and development tax credits ( 93 ) 5 ( 205 )

Federal research and development tax credits ( 10 ) ( 93 ) 5

Non-deductible officers' compensation 5 79 ( 6 )

Other permanent differences — ( 4 ) ( 1 )

Provision for income taxes 66 % ( 2 ) % 41 %

The provision for income tax consists of the following (in thousands):

(Benefit from) provision for income taxes ( 36 ) % 66 % ( 2 ) %

The (benefit from) provision for income tax consists of the following (in thousands):

Year Ended December 31,

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State and local 6,280 2,299 686

Foreign 30 — —

Total current 32,762 5,784 1,999

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Total deferred ( 86,508 ) ( 489 ) ( 597 )

Total income tax provision $ 5,295 $ 1,402 $ 706

Total (benefit from) provision for income taxes $ ( 53,746 ) $ 5,295 $ 1,402

The components of deferred tax assets (liabilities) were as follows (in thousands):

Deferred income tax assets:

Net operating loss carryforwards $ 9,201 $ 6,502

Research and development tax credits 24,326 19,513

Capitalized research and software costs 66,090 33,958

Lease liability 11,914 14,260

Net operating loss carryforwards 6,502 5,802

Stock-based compensation 413 2,894

Lease liability 11,139 11,914

Other 1,495 3,384

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Deferred tax liabilities:

Lease asset ( 5,135 ) ( 6,249 )

Property and equipment $ ( 3,351 ) $ ( 4,189 )

Capitalized commissions ( 4,237 ) ( 4,217 )

Intangible assets ( 15,387 ) ( 2,921 )

Capitalized commissions ( 4,463 ) ( 4,237 )

State taxes ( 7,749 ) —

Lease asset ( 4,695 ) ( 5,135 )

Other ( 109 ) —

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Total net deferred tax liabilities $ 76,910 $ ( 697 )

As of December 31, 2023, we had state net operating loss carryforwards $ 75.1 million.

The state net operating losses will begin to expire in 2028.

As of December 31, 2024, the decrease in our valuation allowance of $ 62.4 million is comprised of decrease in our federal and state valuation allowance of $ 31.1 million and $ 31.3 million respectively.

In evaluating the need for a valuation allowance at each reporting period, we consider the weighting of all available positive and negative evidence, which includes, among other things, the nature, frequency and severity of current and cumulative taxable income or losses, future projections of profitability, timing of the future reversal of existing temporary differences, and the duration of statutory carryforward periods.

In assessing all available evidence, we determined that there was sufficient positive evidence to overcome the negative evidence, including our past and current financial results, growth demonstrated in our top-line performance, as well as projected profitability.

Accordingly, we determined it is more likely than not that the deferred tax assets will be realized and we released our valuation allowance at December 31, 2024.

As of December 31, 2024, we had federal and state net operating loss carryforwards $ 14.4 million and $ 85.1 million, respectively.

The federal net operating loss carryovers do not expire and state net operating losses will begin to expire in 2025.

As of December 31, 2024, we also had federal and state research and development credit carryforwards of $ 0.9 million and $ 31.4 million, respectively.

The federal credit carryforwards will begin to expire in 2043,

while the state credit carryforwards apply indefinitely.

The federal credit carryforwards will begin to expire in 2044, while the state credit carryforwards

apply indefinitely.

Utilization of our net operating loss and credit carryforwards may be subject to annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions.

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Increase in valuation allowance

— 18,604 26,559

Decrease in valuation allowance ( 62,380 ) — —

Valuation allowance, at end of year $ — $ 62,380 $ 43,776

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Unrecognized tax benefit beginning of year $ 12,315 $ 9,455 $ 7,816

Increases-tax positions in prior year 1,203 — —

Increases-tax positions in current year 3,732 2,860 1,639

Statute of limitation expiration $ ( 2,315 ) $ — $ —

Unrecognized tax benefit end of year $ 14,935 $ 12,315 $ 9,455

The unrecognized tax benefits are recorded as a reduction to the deferred tax assets and liabilities.

As of December 31, 2023 and 2022, we had no accrued interest and penalties related to uncertain income tax positions.

As of December 31, 2024, we recorded gross uncertain tax benefits of $ 14.9 million a majority of which would impact our effective tax rate, if recognized.

We accrued interest and penalties related to our uncertain income tax positions in our income tax expense and accrued no interest and penalties for the year ended December 31, 2024 and 2023.

We do not anticipate that the amount of unrecognized tax benefits will significantly increase or decrease within the next twelve months.

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federal jurisdiction and various state and local jurisdictions.

While the applicable statute of limitations are generally open for three to four years for the jurisdictions we file in, we remain subject to income tax examinations for all years due to the usage of carryforward attributes, such as net operating losses and research and development credits.

While the applicable statute of limitations are generally open for three to four years for the jurisdictions we file in, we remain subject to income tax examinations for years ended after December 31, 2019 for federal taxes and all years for most state jurisdictions due to the usage of carryforward attributes, such as net operating losses and research and development credits.

As of December 31, 2024, we have not been notified for audit by the Internal Revenue Service or any significant state jurisdiction.

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Workforce Reduction

During the year ended December 31, 2023, we implemented a plan to reduce our workforce by 149 employees in order to scale the business more efficiently.

During the year ended December 31, 2023, we implemented a plan to reduce our workforce by 149 employees in order to scale our business more efficiently.

Impacted employees were notified in August 2023.

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Balance as of December 31, 2023 $ 853

The remaining balance is expected to be paid in 2024.

Cash Payments ( 853 )

Balance as of December 31, 2024 $ —

Retirement Plans

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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 8. Financial Statements and Supplementary Data