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AppFolio, Inc. Announces Second Quarter 2018 Financial Results

July 30, 2018

SANTA BARBARA, Calif., July 30, 2018 (GLOBE NEWSWIRE) -- AppFolio, Inc. (NASDAQ:APPF) (“AppFolio” or the “Company”), a leading provider of cloud-based business software solutions, today announced its financial results for the quarter ended June 30, 2018 and has updated its financial guidance for fiscal year 2018.

AppFolio’s operating results for the second quarter 2018 are summarized in the tables accompanying this press release. The Company nevertheless urges investors to review its Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2018, as well as its more detailed second quarter 2018 results that will be included in the Company’s Quarterly Report on Form 10-Q, which will be filed with the SEC on July 30, 2018. These periodic report filings, together with other documents the Company files with the SEC from time to time, will be accessible on AppFolio’s website, http://ir.appfolioinc.com. The limited information that follows in this press release is not adequate for making an informed investment judgment.

Financial Outlook

Based on information available as of July 30, 2018, AppFolio has updated its financial guidance for fiscal year 2018 as follows:

-- Full year revenue is expected to be in the range of $183 million to $185 million. -- Diluted weighted average shares outstanding are expected to be approximately 36 million for the full year.

Conference Call Information

As previously announced, the Company will host a conference call today, July 30, 2018 at 1:30 p.m. Pacific Time, 4:30 p.m. Eastern Time, to discuss its financial results. Investors are invited to submit questions to management via the Investor Q&A form located on the Investor Overview section of AppFolio’s website.

A live webcast of the call will be available at http://ir.appfolioinc.com, and it may also be accessed by dialing 866-393-4306 (Domestic), or 734-385-2616 (International). The conference ID is 1199261. A replay will be available at 855-859-2056 (Domestic) and 404-537-3406 (International) until the end of day August 2, 2018, and an archived webcast will be available for 12 months on the Company’s website.

About AppFolio, Inc.

AppFolio’s mission is to revolutionize vertical industry businesses by providing great software and service. Our cloud-based solutions serve over 20,000 customers in the real estate and legal markets. Today our products include property management software (AppFolio Property Manager) and legal practice management software (MyCase). AppFolio was founded in 2006 and is headquartered in Santa Barbara, CA. Learn more at www.appfolioinc.com.

Investor Relations Contact: ir@appfolio.com

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements are subject to considerable risks and uncertainties. Forward-looking statements include all statements that are not statements of historical fact contained in this press release, and can be identified by words such as “anticipates,” “believes,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “could,” “will,” “would,” or similar expressions and the negatives of those expressions. In particular, forward-looking statements contained in this press release relate to the Company’s future or assumed revenues and weighted-average outstanding shares.

Forward-looking statements represent AppFolio’s current beliefs and assumptions based on information currently available. Forward-looking statements involve numerous known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Some of the risks and uncertainties that may cause the Company’s actual results to materially differ from those expressed or implied by these forward-looking statements are described in the section entitled “Risk Factors” in AppFolio’s Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on February 26, 2018, as well as in the Company’s other filings with the SEC. You should read this press release with the understanding that the Company’s actual future results may be materially different from the results expressed or implied by these forward looking statements.

Except as required by applicable law or the rules of the NASDAQ Global Market, AppFolio assumes no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands, except par values) June 30, December 2018 31, 2017 ----------- ----------- Assets Current assets Cash and cash equivalents $ 18,010 $ 16,109 Investment securities—current 34,710 29,800 Accounts receivable, net 5,554 3,387 Prepaid expenses and other current assets 6,253 4,546 --------- - --------- - Total current assets 64,527 53,842 Investment securities—noncurrent 22,550 22,401 Property and equipment, net 6,528 6,696 Capitalized software, net 18,392 17,609 Goodwill 6,737 6,737 Intangible assets, net 1,140 1,725 Other assets 4,084 1,238 --------- - --------- - Total assets $ 123,958 $ 110,248 - ------- - - ------- - Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 1,840 $ 610 Accrued employee expenses 8,772 10,710 Accrued expenses 5,759 4,289 Deferred revenue 3,791 7,080 Other current liabilities 1,751 1,223 --------- - --------- - Total current liabilities 21,913 23,912 Other liabilities 1,067 1,257 --------- - --------- - Total liabilities 22,980 25,169 --------- - --------- - Stockholders’ equity: Preferred stock, $0.0001 par value, 25,000 authorized and no shares issued and — — outstanding as of June 30, 2018 and December 31, 2017 Class A common stock, $0.0001 par value, 250,000 shares authorized as of June 30, 2018 and December 31, 2017; 15,638 and 14,879 shares issued and outstanding as of 2 1 June 30, 2018 and December 31, 2017, respectively; Class B common stock, $0.0001 par value, 50,000 shares authorized as of June 30, 2018 and December 31, 2017; 18,577 and 19,102 shares issued and outstanding as of June 30, 2 3 2018 and December 31, 2017, respectively; Additional paid-in capital 153,752 152,531 Accumulated other comprehensive loss (289 ) (209 ) Accumulated deficit (52,489 ) (67,247 ) Total stockholders’ equity 100,978 85,079 Total liabilities and stockholders’ equity $ 123,958 $ 110,248 - ------- - - ------- -

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share amounts) Three Months Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 ---------- ---------- ---------- ---------- Revenue $ 47,240 $ 35,877 $ 89,580 $ 68,003 Costs and operating expenses: Cost of revenue (exclusive of depreciation and amortization) 17,729 13,701 34,342 26,694 Sales and marketing 7,625 7,192 15,030 14,299 Research and product development 5,750 4,002 11,083 7,631 General and administrative 5,248 5,101 10,564 9,905 Depreciation and amortization 3,579 3,114 7,079 6,110 -------- - -------- - -------- - Total costs and operating expenses 39,931 33,110 78,098 64,639 -------- - -------- - -------- - -------- - Income from operations 7,309 2,767 11,482 3,364 Other expense, net (18 ) (60 ) (21 ) (88 ) Interest income, net 226 120 402 222 -------- - -------- - -------- - -------- - Income before provision for income taxes 7,517 2,827 11,863 3,498 Provision for income taxes 43 30 69 41 -------- - -------- - -------- - Net income $ 7,474 $ 2,797 $ 11,794 $ 3,457 - ------ - - ------ - - ------ - - ------ - Net income per common share: Basic 0.22 0.08 0.35 0.10 Diluted 0.21 0.08 0.33 0.10 Weighted average common shares outstanding: Basic 34,173 33,838 34,122 33,772 Diluted 35,408 34,928 35,361 34,879

Stock-Based Compensation Expense (in thousands) Three Months Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 -------- -------- -------- -------- Costs and operating expenses: Cost of revenue (exclusive of depreciation and amortization) $ 250 $ 209 $ 470 $ 338 Sales and marketing 228 210 438 330 Research and product development 287 182 512 298 General and administrative 572 1,018 1,235 1,750 ------- ------- ------- ------- Total stock-based compensation expense $ 1,337 $ 1,619 $ 2,655 $ 2,716 - ----- - ----- - ----- - -----

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) Three Months Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 ---------- --------- ---------- --------- Cash from operating activities Net income $ 7,474 $ 2,797 $ 11,794 $ 3,457 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,579 3,114 7,079 6,110 Purchased investment premium, net of amortization 32 (90 ) 94 (104 ) Amortization of deferred financing costs 16 16 32 32 Loss on disposal of property and equipment 19 61 20 89 Stock-based compensation 1,337 1,619 2,655 2,716 Changes in operating assets and liabilities: Accounts receivable (1,020 ) (418 ) (2,168 ) (1,721 ) Prepaid expenses and other current assets (1,000 ) (614 ) (559 ) (212 ) Other assets (296 ) (56 ) (1,062 ) (51 ) Accounts payable 424 (300 ) 839 (319 ) Accrued employee expenses 1,802 2,238 (2,040 ) 576 Accrued expenses 822 321 1,433 794 Deferred revenue (1,955 ) (660 ) (3,289 ) 399 Other liabilities 478 31 226 100 -------- - ------- - Net cash provided by operating activities 11,712 8,059 15,054 11,866 -------- - ------- - -------- - ------- - Cash from investing activities Purchases of property and equipment (317 ) (445 ) (580 ) (837 ) Additions to capitalized software (2,569 ) (2,280 ) (5,505 ) (5,271 ) Purchases of investment securities (5,259 ) (9,060 ) (20,832 ) (15,597 ) Sales of investment securities — — 5 — Maturities of investment securities 7,299 3,044 15,595 7,489 Purchases of intangible assets — (1 ) — (1 ) Net cash used in investing activities (846 ) (8,742 ) (11,317 ) (14,217 ) -------- - ------- - -------- - ------- - Cash from financing activities Proceeds from stock option exercises 188 241 658 386 Tax withholding for net share settlement (1,593 ) (138 ) (2,494 ) (1,345 ) Proceeds from issuance of debt 31 30 63 59 Principal payments on debt (31 ) (30 ) (63 ) (59 ) Net cash (used in) provided by financing activities (1,405 ) 103 (1,836 ) (959 ) -------- - ------- - -------- - ------- - Net increase (decrease) in cash, cash equivalents and restricted 9,461 (580 ) 1,901 (3,310 ) cash Cash, cash equivalents and restricted cash Beginning of period 8,977 8,396 16,537 11,126 End of period $ 18,438 $ 7,816 $ 18,438 $ 7,816 - ------ - - ----- - - ------ - - ----- -

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

Three Months Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 --------- -------- --------- -------- Cash and cash equivalents $ 18,010 $ 7,389 $ 18,010 $ 7,389 Restricted cash included in other assets 428 427 428 427 Total cash, cash equivalents and restricted cash $ 18,438 $ 7,816 $ 18,438 $ 7,816 - ------ - ----- - ------ - -----

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