APPFOLIO INC [APPF] Filings

10-Q 1 appf-20220630.htm 10-Q appf-20220630

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022.

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________.

Commission File Number 001-37468

AppFolio, Inc.

(Exact name of registrant as specified in its charter)

Delaware

26-0359894

(State of incorporation or organization)

(I.R.S. Employer Identification No.)

70 Castilian Drive

93117

Santa Barbara,

California

(Address of principal executive offices)

(Zip Code)

(805) 364-6093

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Class A common stock, $0.0001 par value	APPF	NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 21, 2022, the number of shares of the registrant’s Class A common stock outstanding was 20,174,583 and the number of shares of the registrant’s Class B common stock outstanding was 14,826,432.

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TABLE OF CONTENTS


						Page No.
Forward-Looking Statements						1
Part I. Financial Information						2
Item 1. Condensed Consolidated Financial Statements (Unaudited)						2
Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021						3
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2022 and 2021						4
Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months Ended June 30, 2022 and 2021						5
Condensed Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended June 30, 2022 and 2021						6
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021						8
Notes to Condensed Consolidated Unaudited Financial Statements						10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						19
Item 3. Qualitative and Quantitative Disclosure about Market Risk						25
Item 4. Controls and Procedures						25
Part II. Other Information						26
Item 1. Legal Proceedings						26
Item 1A. Risk Factors						26
Item 5. Other Information						26
Item 6. Exhibits						27
Signatures

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2022 (this "Quarterly Report"), contains forward-looking statements within the meaning of federal securities laws, which statements involve substantial risks and uncertainties. The forward-looking statements made in this Quarterly Report are based primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, operating results, and prospects and relate only to events as of the date on which the statements are made. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “might,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report and "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (our "Annual Report"), as well as in the other reports we file with the Securities and Exchange Commission (the "SEC"). You should read this Quarterly Report, and the other documents we file with the SEC, with the understanding that our actual future results may be materially different from the results expressed or implied by these forward-looking statements. As such, you should not rely upon forward-looking statements as predictions of future events. Examples of forward-looking statements include, among others, statements made regarding changes in the competitive environment, responding to customer needs, research and product development plans, future products and services, growth in the size of our business and number of customers, strategic plans and objectives, business forecasts and plans, our future or assumed financial condition, results of operations and liquidity, trends affecting our business and industry, capital needs and financing plans, capital resource allocation plans, share repurchase plans, and commitments and contingencies, including with respect to the outcome of legal proceedings or regulatory matters. Any forward-looking statement made by us in this Quarterly Report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report to reflect events or circumstances after the date of this Quarterly Report or to reflect new information or the occurrence of unanticipated events, except as required by law.

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PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

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APPFOLIO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except par values)


	June 30, 2022		December 31, 2021
Assets
Current assets
Cash and cash equivalents	$	42,626	$	57,847
Investment securities—current	75,425		64,600
Accounts receivable, net	16,175		12,595
Prepaid expenses and other current assets	22,157		23,553
Total current assets	156,383		158,595
Investment securities—noncurrent	49,909		61,076
Property and equipment, net	28,270		30,479
Operating lease right-of-use assets	29,228		41,710
Capitalized software development costs, net	37,496		41,212
Goodwill	56,147		56,147
Intangible assets, net	9,408		11,711

Other long-term assets	8,587		7,087
Total assets	$	375,428	$	408,017
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	1,338	$	1,704
Accrued employee expenses—current	26,757		30,065
Accrued expenses	15,807		13,284
Deferred revenue	3,075		2,512

Other current liabilities	7,742		5,077

Total current liabilities	54,719		52,642


Operating lease liabilities	54,044		55,733



Other liabilities	1,674		2,261
Total liabilities	110,437		110,636
Commitments and contingencies (Note 7)
Stockholders’ equity:

Class A common stock	2		2
Class B common stock	2		2
Additional paid-in capital	185,542		171,930
Accumulated other comprehensive loss	(1,939)		(194)
Treasury stock	(25,756)		(25,756)
Retained earnings	107,140		151,397
Total stockholders’ equity	264,991		297,381
Total liabilities and stockholders’ equity	$	375,428	$	408,017

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

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APPFOLIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenue	$	117,450	$	89,040	$	222,746	$	167,961
Costs and operating expenses:
Cost of revenue (exclusive of depreciation and amortization)(1)	47,430		32,819		90,777		66,117
Sales and marketing(1)	26,995		17,714		51,914		33,893
Research and product development(1)	26,687		15,506		51,007		29,889
General and administrative(1)	37,947		14,206		56,911		27,567
Depreciation and amortization	8,321		7,649		16,736		15,018
Total costs and operating expenses	147,380		87,894		267,345		172,484
(Loss) income from operations	(29,930)		1,146		(44,599)		(4,523)
Other income, net	45		496		35		1,058
Interest income	151		55		258		108
(Loss) income before provision for (benefit from) income taxes	(29,734)		1,697		(44,306)		(3,357)
Provision for (benefit from) income taxes	236		(324)		(49)		(5,857)
Net (loss) income	$	(29,970)	$	2,021	$	(44,257)	$	2,500

Net (loss) income per common share:
Basic	$	(0.86)	$	0.06	$	(1.27)	$	0.07
Diluted	$	(0.86)	$	0.06	$	(1.27)	$	0.07
Weighted average common shares outstanding:
Basic	34,927		34,548		34,881		34,479
Diluted	34,927		35,674		34,881		35,697

(1) Includes stock-based compensation expense as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Stock-based compensation expense included in costs and operating expenses:
Cost of revenue (exclusive of depreciation and amortization)	$	726	$	463	$	1,084	$	934
Sales and marketing	2,013		447		3,473		849
Research and product development	4,024		1,214		6,830		2,071
General and administrative	3,198		1,090		5,992		2,136
Total stock-based compensation expense	$	9,961	$	3,214	$	17,379	$	5,990

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

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APPFOLIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(UNAUDITED)

(in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net (loss) income	$	(29,970)	$	2,021	$	(44,257)	$	2,500
Other comprehensive loss:
Changes in unrealized losses on investment securities	(400)		(48)		(1,745)		(66)
Comprehensive (loss) income	$	(30,370)	$	1,973	$	(46,002)	$	2,434

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

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APPFOLIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(UNAUDITED)

(in thousands)


									Accumulated
							Additional		Other
	Common Stock			Common Stock			Paid-in		Comprehensive		Treasury		Retained
	Class A			Class B			Capital		Loss		Stock		Earnings		Total
	Shares	Amount		Shares	Amount
Balance at December 31, 2021	19,417	$	2	15,408	$	2	$	171,930	$	(194)	$	(25,756)	$	151,397	$	297,381
Exercise of stock options	17	—		—	—		100		—		—		—		100
Stock-based compensation	—	—		—	—		7,967		—		—		—		7,967
Vesting of restricted stock units, net of shares withheld for taxes	17	—		—	—		(1,073)		—		—		—		(1,073)
Conversion of Class B common stock to Class A common stock	572	—		(572)	—		—		—		—		—		—
Other comprehensive loss	—	—		—	—		—		(1,345)		—		—		(1,345)
Net loss	—	—		—	—		—		—		—		(14,287)		(14,287)
Balance at March 31, 2022	20,023	$	2	14,836	$	2	$	178,924	$	(1,539)	$	(25,756)	$	137,110	$	288,743
Exercise of stock options	41	—		27	—		503		—		—		—		503
Stock-based compensation	—	—		—	—		10,639		—		—		—		10,639
Vesting of restricted stock units, net of shares withheld for taxes	66	—		—	—		(4,524)		—		—		—		(4,524)
Conversion of Class B common stock to Class A common stock	37	—		(37)	—		—		—		—		—		—
Issuance of restricted stock awards	6	—		—	—		—		—		—		—		—
Other comprehensive loss	—	—		—	—		—		(400)		—		—		(400)

Net loss	—	—		—	—		—		—		—		(29,970)		(29,970)
Balance June 30, 2022	20,173	$	2	14,826	$	2	$	185,542	$	(1,939)	$	(25,756)	$	107,140	$	264,991

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									Accumulated
							Additional		Other
	Common Stock			Common Stock			Paid-in		Comprehensive		Treasury		Retained
	Class A			Class B			Capital		Income (Loss)		Stock		Earnings		Total
	Shares	Amount		Shares	Amount
Balance at December 31, 2020	18,729	$	2	15,659	$	2	$	161,247	$	56	$	(25,756)	$	150,369	$	285,920
Exercise of stock options	23	—		—	—		100		—		—		—		100
Stock-based compensation	—	—		—	—		3,295		—		—		—		3,295
Vesting of restricted stock units, net of shares withheld for taxes	42	—		—	—		(3,992)		—		—		—		(3,992)
Conversion of Class B common stock to Class A common stock	108	—		(108)	—		—		—		—		—		—

Other comprehensive loss	—	—		—	—		—		(18)		—		—		(18)
Net income	—	—		—	—		—		—		—		479		479
Balance at March 31, 2021	18,902	$	2	15,551	$	2	$	160,650	$	38	$	(25,756)	$	150,848	$	285,784
Exercise of stock options	13	—		84	—		545		—		—		—		545
Stock-based compensation	—	—		—	—		3,873		—		—		—		3,873
Vesting of restricted stock units, net of shares withheld for taxes	56	—		—	—		(4,908)		—		—		—		(4,908)
Conversion of Class B common stock to Class A common stock	14	—		(14)	—		—		—		—		—		—
Issuance of restricted stock awards	4	—		—	—		—		—		—		—		—
Other comprehensive loss	—	—		—	—		—		(48)		—		—		(48)
Net income	—	—		—	—		—		—		—		2,021		2,021
Balance at June 30, 2021	18,989	$	2	15,621	$	2	$	160,160	$	(10)	$	(25,756)	$	152,869	$	287,267

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

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APPFOLIO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)

	Six Months Ended June 30,
	2022		2021
Cash from operating activities
Net (loss) income	$	(44,257)	$	2,500
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	15,637		14,190
Amortization of operating lease right-of-use assets	1,809		1,399
Impairment	19,792		—
Deferred income taxes	(1,550)		(6,086)
Stock-based compensation, including as amortized	18,478		6,818

Other	6		(579)

Changes in operating assets and liabilities:
Accounts receivable	(2,924)		(4,007)
Prepaid expenses and other current assets	(2,652)		(2,171)
Other assets	(1,308)		(982)
Accounts payable	17		1,301
Accrued employee expenses—current	(3,217)		7,638
Accrued expenses	3,182		(3,047)
Deferred revenue	(94)		33



Operating lease liabilities	(1,311)		1,685
Other liabilities	1,673		(8,031)
Net cash provided by operating activities	3,281		10,661
Cash from investing activities
Purchases of available-for-sale investments	(44,900)		(148,293)
Proceeds from sales of available-for-sale investments	—		42,198
Proceeds from maturities of available-for-sale investments	43,498		26,750
Purchases of property and equipment	(5,099)		(2,804)
Capitalization of software development costs	(7,193)		(11,911)




Net cash used in investing activities	(13,694)		(94,060)
Cash from financing activities
Proceeds from stock option exercises	603		646


Tax withholding for net share settlement	(5,597)		(8,900)






Net cash used in financing activities	(4,994)		(8,254)
Net decrease in cash, cash equivalents and restricted cash	(15,407)		(91,653)
Cash, cash equivalents and restricted cash
Beginning of period	58,283		140,699
End of period	$	42,876	$	49,046







Noncash investing and financing activities
Purchases of property and equipment included in accounts payable and accrued expenses	$	484	$	822
Capitalization of software development costs included in accrued expenses and accrued employee expenses	205		1,361
Stock-based compensation capitalized for software development	1,226		1,178

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


	June 30,
	2022		2021
Cash and cash equivalents	$	42,626	$	48,610
Restricted cash included in other assets	250		436
Total cash, cash equivalents and restricted cash	$	42,876	$	49,046

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

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APPFOLIO, INC.

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

1. Nature of Business

AppFolio, Inc. ("we," "us" or "our") is a leading provider of cloud business management solutions for the real estate industry. Our solutions enable our customers to digitally transform their businesses, automate and streamline critical business operations and deliver a better customer experience. We were founded in 2006 with the vision of revolutionizing vertical industry businesses by providing great software and services. Our mission is even more relevant today, when digital transformation is effectively a requirement for business success in the modern world, and the way we work and live requires powerful software solutions to enable a more seamless experience.

2. Summary of Significant Accounting Policies

Basis of Presentation and Significant Accounting Policies

The accompanying unaudited Condensed Consolidated Financial Statements were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these Condensed Consolidated Financial Statements should be read in conjunction with our audited consolidated financial statements and the related notes included in our Annual Report, which was filed with the SEC on February 28, 2022. The year-end condensed balance sheet was derived from our audited consolidated financial statements. Our unaudited interim Condensed Consolidated Financial Statements include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair statement of our Condensed Consolidated Financial Statements. The operating results for the six months ended June 30, 2022 are not necessarily indicative of the results expected for the full year ending December 31, 2022.

Reclassification

We reclassified certain amounts in our Condensed Consolidated Balance Sheets and Condensed 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.

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, capitalized software development costs, period of benefit associated with deferred costs, incremental borrowing rate used to measure operating lease liabilities, the recoverability of goodwill and long-lived assets, income taxes, useful lives associated with property and equipment and intangible assets, contingencies, assumptions underlying performance-based compensation (whether cash or stock-based), and assumptions underlying stock-based compensation. Actual results could differ from those estimates and any such differences may have a material impact on our Condensed Consolidated Financial Statements.

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Net (Loss) Income per Common Share

Net (loss) income per common share was the same for shares of our Class A and Class B common stock because they are entitled to the same liquidation and dividend rights and are therefore combined in the table below. The following table presents a reconciliation of the weighted average number of shares of our Class A and Class B common stock used to compute net (loss) income per common share (in thousands):


	Three Months Ended June 30,		Six Months Ended June 30,
	2022	2021	2022	2021
Weighted average common shares outstanding	34,931	34,553	34,885	34,484
Less: Weighted average unvested restricted shares subject to repurchase	4	5	4	5
Weighted average common shares outstanding; basic	34,927	34,548	34,881	34,479






Plus: Weighted average options, restricted stock units and restricted shares used to compute diluted net income per common share	—	1,126	—	1,218
Weighted average common shares outstanding; diluted	34,927	35,674	34,881	35,697

For the three and six months ended June 30, 2022 and 2021, an aggregate of 197,000 and 120,000 shares, respectively, underlying performance-based restricted stock units ("PSUs") were not included in the computations of diluted and anti-dilutive shares as they are considered contingently issuable upon satisfaction of pre-defined performance measures and their respective performance measures have not been met. Restricted stock units ("RSUs") with an anti-dilutive effect were excluded from the calculation of weighted average number of shares used to compute diluted net income per common share and they were not material for the three and six months ended June 30, 2021. Because we reported a net loss for the three and six months ended June 30, 2022, all potentially dilutive common shares are anti-dilutive for that period and have been excluded from the calculation of net loss per share.

Recent Accounting Pronouncements Not Yet Adopted

In October 2021, the FASB issued 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 expect to adopt ASU 2021-08 on January 1, 2023.

3. Investment Securities and Fair Value Measurements

Investment Securities

Investment securities classified as available-for-sale consisted of the following as of June 30, 2022 and December 31, 2021 (in thousands):


	June 30, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Corporate bonds	$	19,464	$	—	$	(60)	$	19,404
Agency securities	19,752		—		(443)		19,309

Treasury securities	88,126		—		(1,505)		86,621
Total available-for-sale investment securities	$	127,342	$	—	$	(2,008)	$	125,334


	December 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Corporate bonds	$	29,080	$	—	$	(11)	$	29,069
Agency securities	19,753		—		(27)		19,726

Treasury securities	77,108		2		(229)		76,881
Total available-for-sale investment securities	$	125,941	$	2	$	(267)	$	125,676

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As of June 30, 2022, the decline in fair value below amortized cost basis was not considered other than temporary as it is more likely than not we will hold the securities until maturity or recovery of the cost basis. No allowance for credit losses for available-for-sale investment securities was recorded as of June 30, 2022 or December 31, 2021.

The fair values of available-for-sale investment securities, by remaining contractual maturity, are as follows (in thousands):


	June 30, 2022				December 31, 2021
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	75,878	$	75,425	$	64,627	$	64,600
Due after one year through three years	51,464		49,909		61,314		61,076
Total available-for-sale investment securities	$	127,342	$	125,334	$	125,941	$	125,676

During the six months ended June 30, 2022 and 2021, we had sales and maturities (which include calls) of investment securities, as follows (in thousands):


	Six Months Ended June 30, 2022
	Gross Realized Gains		Gross Realized Losses		Gross Proceeds from Sales		Gross Proceeds from Maturities
Corporate bonds	$	—	$	—	$	—	$	23,998


Treasury securities	—		—		—		19,500
Total	$	—	$	—	$	—	$	43,498


	Six Months Ended June 30, 2021
	Gross Realized Gains		Gross Realized Losses		Gross Proceeds from Sales		Gross Proceeds from Maturities

Agency securities	$	—	$	—	$	—	$	5,250

Treasury securities	6		—		42,198		21,500
Total	$	6	$	—	$	42,198	$	26,750

Fair Value Measurements

Recurring Fair Value Measurements

The following tables present our financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 by level within the fair value hierarchy (in thousands):


	June 30, 2022
	Level 1		Level 2		Total Fair Value
Cash equivalents:
Money market funds	$	4,784	$	—	$	4,784


Available-for-sale investment securities:
Corporate bonds	—		19,404		19,404
Agency securities	—		19,309		19,309

Treasury securities	86,621		—		86,621
Total	$	91,405	$	38,713	$	130,118

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	December 31, 2021
	Level 1		Level 2		Total Fair Value
Cash equivalents:
Money market funds	$	6,105	$	—	$	6,105

Available-for-sale investment securities:
Corporate bonds	—		29,069		29,069
Agency securities	—		19,726		19,726

Treasury securities	76,881		—		76,881
Total	$	82,986	$	48,795	$	131,781

The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate their fair value because of the short maturity of these items.

Fair value for our Level 1 investment securities is based on market prices for identical assets. Our Level 2 securities were priced by a pricing vendor. The pricing vendor utilizes the most recent observable market information in pricing these securities or, if specific prices are not available for these securities, other observable inputs like market transactions involving comparable securities are used.

4. Capitalized Software Development Costs, net

Capitalized software development costs were as follows (in thousands):


	June 30, 2022		December 31, 2021
Capitalized software development costs, gross	$	121,981	$	115,377
Less: Accumulated amortization	(84,485)		(74,165)
Capitalized software development costs, net	$	37,496	$	41,212

Capitalized software development costs were $4.2 million and $7.0 million for the three months ended June 30, 2022 and 2021, respectively, and $8.3 million and $14.1 million for the six months ended June 30, 2022 and 2021, respectively. Amortization expense with respect to capitalized software development costs totaled $6.0 million and $5.3 million for the three months ended June 30, 2022 and 2021, respectively, and $12.0 million and $10.3 million for the six months ended June 30, 2022 and 2021, respectively. During the three and six months ended June 30, 2022, we disposed of $0.9 million and $1.7 million, respectively, of fully amortized capitalized software development costs.

Future amortization expense with respect to capitalized software development costs is estimated as follows (in thousands):


Years Ending December 31,
2022	$	11,216
2023	16,400
2024	8,276
2025	1,604
Total amortization expense	$	37,496

Table of Contents

5. Intangible Assets, net

Intangible assets consisted of the following (in thousands, except years):


	June 30, 2022
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Weighted Average Useful Life in Years
Customer relationships	$	2,840	$	(2,234)	$	606	5.0
Database	8,330		(3,036)		5,294		10.0
Technology	6,539		(5,823)		716		4.0
Trademarks and trade names	1,890		(1,325)		565		5.0
Partner relationships	680		(680)		—		3.0
Non-compete agreements	7,400		(5,184)		2,216		5.0
Domain names	90		(79)		11		5.0
Patents	252		(252)		—		5.0

Total intangible assets, net	$	28,021	$	(18,613)	$	9,408	6.3


	December 31, 2021
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Weighted Average Useful Life in Years
Customer relationships	$	2,840	$	(2,006)	$	834	5.0
Database	8,330		(2,620)		5,710		10.0
Technology	6,539		(5,107)		1,432		4.0
Trademarks and trade names	1,890		(1,128)		762		5.0
Partner relationships	680		(680)		—		3.0
Non-compete agreements	7,400		(4,444)		2,956		5.0
Domain names	90		(75)		15		5.0
Patents	252		(250)		2		5.0

Total intangible assets, net	$	28,021

APPFOLIO INC [APPF] Filings
10-Q	[2022-07-29]
10-Q	[2022-05-09]
10-K	[2022-02-28]
10-Q	[2021-11-08]
10-Q	[2021-08-09]
10-Q	[2021-05-10]
10-K	[2021-03-01]
10-Q	[2020-11-09]
10-Q	[2020-08-03]
10-Q	[2020-05-04]
10-K	[2020-03-02]
10-Q	[2019-10-28]
10-Q	[2019-07-29]
10-Q	[2019-05-02]
10-K	[2019-02-28]
10-Q	[2018-10-29]
10-Q	[2018-07-30]
10-Q	[2018-04-30]
10-K	[2018-02-26]
10-Q	[2017-11-06]
10-Q	[2017-08-07]
10-Q	[2017-05-05]
10-K	[2017-02-27]
10-Q	[2016-11-07]
10-Q	[2016-08-08]
10-Q	[2016-05-09]
10-K	[2016-02-29]
10-Q	[2015-11-09]
10-Q	[2015-08-06]
S-1	[2015-05-18]