AppFolio Inc Class A Aktie

Good day, and thank you for standing by. Welcome to the AppFolio, Inc. Second Quarter 2026 Financial Results Conference Call. Please be advised that today's conference is being recorded, and a replay will be available on AppFolio's Investor Relations website.

I would now like to hand the conference over to Lori Barker, Investor Relations.

Thank you. Good afternoon, everyone. I'm Lori Barker, Investor Relations for AppFolio, and I'd like to thank you for joining us today as we report AppFolio's Second Quarter 2026 financial results. With me on the call today are Shane Trigg, AppFolio's Chairman and CEO; and Tim Eaton, AppFolio's CFO. This call is simultaneously being webcast on the Investor Relations section of our website at appfolioinc.com. Additionally, an audio replay of the call and a transcript of the prepared comments will be posted to the website.

Before we get started, I would like to remind everyone of AppFolio's safe harbor policy. Comments made during this conference call and webcast contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties. Any statement that refers to expectations, projections or other characterizations of future events, including financial projections, future market conditions, business performance or future product enhancements or development is a forward-looking statement. AppFolio's actual future results could differ materially from those expressed in such forward-looking statements for any reason, including those listed in our SEC filings.

AppFolio assumes no obligation to update any such forward-looking statements, except as required by law. For greater detail about risks and uncertainties, please see our SEC filings, including our Form 10-K for the fiscal year ended December 31, 2025, which was filed with the SEC on February 5, 2026. In addition, this call contains non-GAAP financial measures. Reconciliations of these non-GAAP financial measures with the most directly comparable GAAP measures are included in our second quarter earnings release posted on the Investor Relations section of our website.

With that, I turn the call over to Shane Trigg. Shane, please go ahead.

Thanks, Lori, and welcome to everyone joining us today. AppFolio delivered a strong second quarter. Revenue reached $281 million, a 19% year-over-year increase. For the first time, we've crossed $1 billion in revenue on a trailing 12-month basis. Non-GAAP operating income was 27.1% of revenue and GAAP operating income was 18.8% of revenue. Units on platform grew to 9.6 million.

This is an exciting time for our business and our industry. I want to start where it matters most, with the operators running and growing their businesses on AppFolio. We spent time at NAA Apartmentalize this quarter, the largest multifamily gathering of the year, and the signal coming out of New Orleans was clear. There's universal interest in AI. Every vendor on the floor was promising something new, but the conversation that kept repeating at the Executive Forum, in the hallways wasn't about adding more tools. It was about the cost of complexity, the accumulating weight of systems that don't talk to each other, workflows that require human translation and AI that executes tasks without delivering performance outcomes.

To drive greater impact across their real estate operations, property managers are prioritizing technology consolidation. In fact, our recent AppFolio Property Management Benchmark survey reveals that 45% are actively planning to streamline their software solutions. It's a story we hear consistently from customers who've made the switch to AppFolio. Case in point, RST & Associates reduced from 6 disconnected systems, Advanced Management Company from 9, Northpoint Asset Management from 14. The pattern is clear.

But consolidation isn't the end game. It's simply removing blockers to what customers actually want, real performance. The gap between those who have it and those who don't is widening. Property managers in the top quartile are more than twice as profitable as the rest of the industry, according to performance benchmark data from ProfitCoach, a business coaching firm. Meanwhile, AppFolio's Performance Ecosystem Report shows the average property management leader still spends 2/3 of their time on reactive routine operational work. That's the performance gap. It's real, it's growing, and it's exactly the problem AppFolio is solving for our customers.

Real performance requires a platform that combines an AI-native architecture with interconnected systems of record, action and growth, a platform that stores the data, does the work, creates the value, unifies the experience, drives the economics and powers the future of real estate. That's our vision in real estate performance management, or as we call it, RPM, is the organizing discipline for how the top operators are winning.

Our customer, PURE HomeRiver, is what RPM looks like at scale. Formed through the merger of PURE Property Management and HomeRiver Group, they now operate in 35 states. On AppFolio since 2020, upgraded to Plus in 2022 and executing a successful M&A strategy ever since. This quarter, they renewed their commitment to AppFolio, [ establishing ] us as their single platform of choice to support the consolidation of their current 40,000-unit portfolio and their anticipated growth to 60,000 units.

As their Co-Founder and CEO, Joseph Polverari, put it, "we've been dedicated to unifying operations and standardizing processes to create simplified resident, owner and management experiences that deliver results. In building the technology stack to support that scale, AppFolio was the only clear option for the phase we're in. One source of truth clarifies the path to performance across every market we're in today and in the future." That's the confidence of an operator who's experienced what our platform can do. It reflects the work we do every day across 3 strategic pillars, starting with differentiate to win.

Our performance platform is our differentiator and our advantage. At the center of our system of action is Realm-X Flows, the orchestration layer that automates the work and governs how it gets done. We've expanded the breadth of Flows significantly this quarter, 5x the triggers with over 1,000 conditional options to route and filter workflows. Among customers who have adopted Flows, runs have grown triple digits year-over-year across lead nurture, rental application, move-in, delinquency and renewal.

When Flows routes work to a Realm-X Performer, it hands off to an agent designed and deployed by AppFolio, purpose-built for the major domains of property management. Leasing Performer is now involved in roughly half of all completed showings for customers who've deployed it. Our voice capability is designed to ensure fewer leads slip through the cracks, capturing more after-hours demand and improving inquiry-to-showing conversion. Maintenance Performer responds to resident inquiries in seconds. Now residents receive a consistent, timely response to every request, including those that come in after hours. Resident Messenger Performer is handling renewal communications and resident questions throughout the rental journey. Building on this success, we announced our newest agent, Accounting Performer, at Apartmentalize. It will accelerate the manual close cycle by streamlining bill entry, financial close processes and budgeting.

Every agent action, whether it runs through a Performer or a certified partner or a third-party model, operates within the permissions and guardrails defined within AppFolio. The operators' policies, their business context, their governance, all of it travels with every workflow. That is the architecture, and we've extended it in 2 directions. Through AppFolio Stack, Realm-X connects to a certified network of partners and their agents. The Realm-X Claude Connector goes further, enabling true agent-to-agent communication with Claude. The ecosystem can grow, the governance never changes. Brandon Moret, COO of 3,600-unit customer, Atlas Management, shared with us, "I tried to connect APIs to Claude, but it ended up spending hours recreating permissions and business context outside of AppFolio. The Realm-X Connector eliminates that. The controls and business logic we already have in AppFolio apply out of the box, no exports, no workarounds."

In our system of growth, we're creating value at one of the moments that matters most, move-in. It starts with getting the right residents in the door. FolioScreen Trusted Renter is making leasing decisions faster and more confident. Customers report they're catching 69% more fraudulent applications compared to their previous solution and reaching a leasing decision 5.7 days faster. That's time back for the operator and better protection for the asset, enhanced with new AI-powered document fraud detection through our partnership with Snappt. Once the resident is selected, Resident Onboarding sets the tone for the entire journey, starting with Concierge, white glove utility setup that removes friction for residents from day 1.

For operators who want to go deeper, Resident Onboarding Lift, co-created with Second Nature, a partnership we announced last year is gaining strong traction. It transforms move-in from a checklist of manual tasks into a streamlined, transparent digital experience. Renters insurance, group rate Internet and other essential services activated in one seamless flow, turning a moment that used to be administrative into value-generating experience for the resident and the operator.

Consider Stratton Vantage, a Phoenix-based operator managing 1,600 units. Since implementing Resident Onboarding Lift earlier this year, 100% of their leases have moved through the platform. Residents are actively selecting services that make their home work better for them. That same moment creates a new revenue stream where none existed before, and Stratton's leasing team reports recapturing nearly 20 hours a month, redirecting that capacity from coordinating onboarding logistics to higher-value work. As their designated broker, Chris Goodman, put it, "We're doing this to help the owners, help our processes and create a better experience for residents."

Our second pillar is delivering performance efficiently and the impact of RPM is showing up in how customers choose us, stay with us and grow with us. Many in real estate are attaching bolt-on AI products built for tasks. You get faster tasks. We built the machine around performance itself and the more our customers adopt, the better real estate works for their residents, their owners, their investors. That's showing up in our results. Premium tier adoption has expanded from approximately 1 in 4 units to nearly 1 in 3. Customers are going deeper into the platform, adopting our interconnected systems of record action and growth. The results are measurable.

7,500-unit customer Yale Management Services in Los Angeles upgraded to our MAX tier, pairing leasing CRM and income and ID verification with the Realm-X Lead Nurturing Flow. In 6 months, they've achieved a 1.9% point lift in their occupancy rate. Bluestone manages 3,000 residential units across the Pacific Northwest. They're running both Leasing Performer and Maintenance Performer, and the results show what the bundle delivers. On leasing, Performer has handled more than 10,000 leads since deployment with 55% coming in after hours and an average response time in under 9 seconds. At initial rollout, Bluestone saw a 30%-plus lift in lease applications. On maintenance, 2,500 work orders have been logged since December 2025, 49% of them after hours, and Performer is deflecting more than 1/4 of them through AI-led self-help, resolving the issue without a technician ever getting involved.

Deeper adoption is strengthening our position as the preferred platform in real estate. For the fourth consecutive quarter, AppFolio has been named the overall leader on the G2 Grid, recognition driven entirely by our customers' own experience.

Our third and final pillar is great people and culture, and numbers tell you where you are, but people tell you why you win. One of our most enduring values is that listening to customers is in our DNA. During times like this for the industry, when performance pressure is high and the pace of change is accelerating, this value has never been more important. We are customer-obsessed. We engage with customers to listen, learn and take action because we win when our customers win.

This quarter, we brought our team to New Orleans to spend time with customers in that part of the country during Apartmentalize. We visited 1st Lake Properties, a customer since 2025 with 11,000 units on MAX, and had the kind of conversation that reminds you what it means to be a true partner in a real estate business performing at its best. Cliff Ledet, Chief Financial Officer, told us, "we truly feel that we have a partner that considers themselves a vital part of our success, consistently demonstrating the same high level of support and commitment since we began. It is an exceptionally talented group of people who are committed to listening to, valuing and working alongside us to achieve our goals." This kind of relationship is the model for everything we're building.

AppFolio is an AI-native vertical technology company leading the real estate industry toward exceptional performance. As the industry's performance gap widens, the operators who fully leverage our platform are pulling ahead, delivering unparalleled value to their residents, owners and investors. This is RPM in practice.

For the real estate operators who are in search of performance, FUTURE, our annual industry event, September 28 through October 1, in San Diego, will be the most significant demonstration yet of where RPM is heading. We're expanding our education program and opening it to all customers with half the sessions dedicated to workshops and labs built to accelerate platform adoption and drive real outcomes.

With that, I'll turn it over to Tim to share more about AppFolio's Q2 financial results.

Thank you, Shane. We delivered a strong second quarter with continued revenue growth, margin expansion, healthy new business acquisition and durable customer retention. Our performance platform continues to convert customer value into results, and this is increasingly visible across our financials.

In the second quarter, we delivered revenue of $281 million, growing 19% year-over-year compared to $236 million in Q2 of 2025. Subscription services revenue grew 14% year-over-year to $60 million compared to $52.5 million in the second quarter of 2025. This growth was driven by winning new customers, growth in units under management and customers continuing to upgrade to our premium tiers. Nearly 1 in 3 units are now on a premium tier, reflecting the value customers find in Plus and MAX, including Realm-X Flows, our AI-powered workflow automation engine.

Value-added services revenue grew 22% year-over-year to $219 million, led by our FolioGuard risk mitigation services, FolioScreen offerings and online payments, alongside continued growth in units under management. Newer offerings are also contributing a growing share of value-added services revenue, including Resident Onboarding Lift, move-in services through LiveEasy and Realm-X Performers, our agentic product offerings for leasing, maintenance and resident messaging.

We ended the quarter managing approximately 9.6 million units, an 8% increase from 8.9 million units a year ago. Customers grew to 22,751, up 6% from 21,403. New customer wins and new unit additions remained strong. Customer and unit retention continued to be healthy and consistent with historical averages. This is our go-to-market model at work. We bring new units onto the platform at attractive entry pricing under multiyear agreements, then grow revenue over time as customers adopt and rely on value-added services to operate their businesses.

Turning to margin. In the second quarter, GAAP operating income, which includes stock-based compensation expense, grew 31% year-over-year to $53 million or 18.8% of revenue, compared to $41 million or 17.2% of revenue a year ago. Non-GAAP operating income grew 24% to $76 million or 27.1% of revenue, compared to $62 million or 26.2% of revenue in 2025.

Continuing with non-GAAP measures. Cost of revenue, exclusive of depreciation and amortization, was 36% of revenue, up from 35% a year ago. Operating efficiencies were offset by our payments product mix and by incremental data center capacity to support rising customer usage of our AI capabilities. Sales and marketing was 14% of revenue, consistent with the second quarter of 2025 as we continue to add sales capacity and fund go-to-market initiatives across new unit acquisition, premium tier upgrades and value-added services adoption. Sequentially, sales and marketing as a percentage of revenue rose modestly, reflecting our usual second quarter presence at the NAA Apartmentalize industry conference.

Research and development declined to 15% of revenue from 16% in the prior year. Our use of AI tools and systems continues to increase the velocity of our innovation and the productivity of our engineering teams, particularly across the resident experience and our AI product capabilities. G&A expense was 7% of revenue, which was consistent with the prior-year quarter. We exited the quarter with 1,732 employees, an increase of 3% from the second quarter of 2025, reflecting our ability to scale revenue while thoughtfully managing employee growth.

We generated $88 million in operating cash flow during the quarter and ended the period with $222 million in cash, cash equivalents and current investment securities. Our capital allocation approach remains unchanged. We prioritize investing in the business and our share repurchase program remains opportunistic. Our healthy balance sheet continues to provide the flexibility to execute on our mission to build the platform where real estate comes to do business.

Now turning to our 2026 outlook. We are raising our full year revenue guidance to a range of $1.117 billion to $1.127 billion, lifting the midpoint growth rate to 18.0%, fueled by premium tier adoption, growth in new business units and increasing adoption of our products and services, including agentic AI performers and resident services. Our outlook assumes a more moderate pace of unit expansion among existing customers, while new customer acquisition and retention remain healthy.

We continue to expect 2026 subscription services and value-added services revenue seasonality to be broadly consistent with 2025. Other revenue can vary throughout the year. And as a reminder, 2025 included onetime revenue from a Stack partnership in the fourth quarter.

We are also raising our guidance for non-GAAP operating margin to a range of 26.5% to 28.0% compared to 24.7% in 2025. We expect cost of revenue, exclusive of depreciation and amortization, to be relatively flat as a percentage of revenue compared to 2025. While we continue to hire selectively, including in sales, we expect operating expenses as a percentage of revenue to decline modestly as we scale and leverage AI to drive efficiency across our internal operations. We anticipate diluted weighted average shares outstanding of approximately 36 million for the full year.

In closing, this quarter, we crossed $1 billion in trailing 12-month revenue for the first time, continuing to acquire, grow and retain customers while deepening adoption across our platform. Our continued investment in AI and the resident experience is expanding the value customers receive from our platform, and we remain focused on durable revenue growth, margin expansion and disciplined capital allocation as we power the future of real estate.

Thanks to all of you for your support and interest in AppFolio. Operator, this concludes today's call.

Ladies and gentlemen, this concludes today's AppFolio Second Quarter Conference Call. Thank you for participating, and you may now disconnect. Everyone, have a great day.

Good afternoon, thank you for standing by, and welcome to AppFolio, Inc.'s First Quarter 2026 Financial Results Conference Call. Please be advised today's conference is being recorded, and a replay will be available on AppFolio's Investor Relations website. I would now like to hand the conference over to Lori Barker, Investor Relations.

Thank you, operator. Good afternoon, everyone. I'm Lori Barker, Investor Relations for AppFolio, and I'd like to thank you for joining us today as we report AppFolio's First Quarter 2026 financial results. With me on the call today are Shane Trigg, AppFolio's President and CEO; and Tim Eaton, AppFolio's CFO. This call is simultaneously being webcast on the Investor Relations section of our website at appfolioinc.com. Additionally, an audio replay of the call and a transcript of the prepared comments will be posted to the website.

Before we get started, I would like to remind everyone of AppFolio's safe harbor policy. Comments made during this conference call and webcast contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties. Any statement that refers to expectations, projections or other characterizations of future events, including financial projections, future market conditions business performance or future product enhancements or development is a forward-looking statement. AppFolio's actual future results could differ materially from those expressed in such forward-looking statements for any reason, including those listed on our SEC filings.

AppFolio assumes no obligation to update any such forward-looking statements, except as required by law. For greater detail about risks and uncertainties, please see our SEC filings, including our Form 10-K for the fiscal year ended December 31, 2025, which was filed with the SEC on February 5, 2026. In addition, this call includes non-GAAP financial measures. Reconciliation of these non-GAAP financial measures and the most directly comparable GAAP measures are included in our first quarter earnings release posted on the Investor Relations section of our website. With that, I'll turn the call over to Shane Trigg. Shane, please go ahead.

Thanks, Lori, and welcome to everyone joining us today. AppFolio is off to a strong start in 2026. First quarter revenue reached $262 million, a 20% year-over-year increase and up from the 16% year-over-year increase we delivered in Q1 2025. Non-GAAP operating income grew 36% and was 27.3% of revenue and GAAP operating income increased 50% and was 19.4% of revenue. We had the best first quarter in company history for residential new business unit acquisition and units on platform grew to $9.5 million, in line with our expectations and typical seasonality. This is an exciting time for our business and our industry. AI is powerful, and we're putting it to work across every dimension of our business, accelerating performance for our customers while driving greater efficiency across our own operations.

At our annual future conference last year, we introduced real estate performance management, what we call RPM, a new way of thinking about value creation in real estate. RPM represents a fundamental shift from reactive task-oriented property management to a holistic practice of delivering value across the entire real estate ecosystem. Residents that love where they live, investors that see consistent strong returns, property management businesses that grow, serving communities that thrive. Achieving that requires a performance platform that provides the harness for intelligent AI orchestration and real estate with an AI native architecture of 3 interconnected systems, a system of record, a system of action and a system of growth, all accessible through one unified experience.

There's a unique advantage in operating a mission-critical platform in a vertical market sitting at the center of how our customers operate their business. Compliance is embedded in how our platform works, not layered on after the fact in the domain knowledge we've encoded across residential real estate is sharpened by tens of thousands of customers. Our Realm-X performers are fully operational AI agents built directly into the platform, taking ownership of entire workflows and doing the work with and for our customers. And by reimagining the resident experience with the services renters demand, we turn AppFolio from a cost center into a growth driver, one whose value deepens with every customer we serve.

The RPM discipline we've introduced and the performance platform we've built are redefining what it means to win in real estate. It's gratifying to see the market embracing RPM and our customers turning it into daily practice.

Dan Rubenstein puts it well. He's the CEO of Hampton Management Associates, a 3,000-unit Bay Area property management company that this quarter signed a 3-year renewal on our [ MAX ] plan. I quote, "AppFolio is attacking the friction in our business by consolidating our tech stack into a single platform. By integrating Realm-X performers to automate core workflows, we've transitioned our team for manual administrative tasks to high-value resident engagement. Partnering with AppFolio allows us to spend less time on system maintenance and compliance and reallocate resources towards scaling. It provides one source of truth where everything is simplified so we can stop reinventing the wheel and get back to the business of bettering our properties."

Dan's experience reflects the type of customer outcomes we pursue through the pillars of our company strategy. Our first strategic pillar is differentiate to win. Starting with our system of action. Our AI strategy is producing measurable commercial outcomes at scale. More than 99% of our nearly 23,000 customers are now using some form of our AI-powered Realm suite. AI actions are up 7x year-over-year and [ performer ] adoption has grown almost 500% quarter-over-quarter. The Business Intelligence Group has recognized this momentum, naming AppFolio a 2026 Artificial Intelligence Excellence Award winner in the Agentic AI category. Maintenance performer is a good example since it tackles a workflow that's universal and property management. Resident issues don't stop at 05:00 p.m. and neither does AppFolio.

Over half of all work orders are submitted after hours and Realm-X maintenance Performer is there to respond to residents in an average of 6 seconds, triaging and troubleshooting the issue in automatically creating a work order when needed. This quarter, we enhanced the maintenance performer with new vendor follow-up capabilities. It now proactively contact vendors, monitors open work orders, confirms completions and logs every interaction automatically.

Turning to our system of record. AppFolio stack is deepening what customers can do directly within AppFolio while continuously expanding the categories it covers, most recently adding cloud communications through Simple VoIP. We've surpassed 5 million units connected on stack, creating a powerful network whose value grows with every connection. The depth of these integrations is what sets them apart through our partnership with Avid Exchange, Plus and Max customers can now manage their entire accounts payable life cycle, bill payment, real-time status tracking, reconciliation and fraud protection directly within AppFolio. This isn't just a data handoff between systems. It's the full workflow inside our platform.

In our system of growth, we start with one conviction. The resident is at the center of the real estate ecosystem. When they thrive so did everyone in the industry and the data is clear on what that means for business performance. Our national study of more than 3,000 renters confirms that a modern resident experience is a strong driver of satisfaction. The research showed satisfied residents are 72% more likely to renew and 34% less likely to plan a move directly impacting NOI and property performance. But we're measuring something deeper than satisfaction, the impact on the daily lives of renters, residents on our platform with access to resident services score 14% higher on the [indiscernible] ladder for like satisfaction, the highest leverage moment to deliver that value and that move in. It sets the tone for the entire resident journey and as we're offering easy access to the right services becomes a differentiator for property managers.

Resident on-boarding lift transformed that moment. Rather than a checklist of manual tasks, Move-in becomes a streamlined, transparent digital experience, covering renters insurance, utility setup and other essential services. The result is a 95% attach rate at Move-in compared to 64% without it and more renters with insurance coverage that protects their personal property. Our recent addition of group rate Internet to resident on-boarding lift gives residents convenient affordable connectivity from the moment they move in. In the same rental research I mentioned a moment ago, 97% of group ran Internet users says save them money and improve their financial well-being.

Brad Randall, the President of Welsh Randall, a nearly 6,000 units AppFolio customer headquartered in Ogden, Utah explains it this way, and I quote, "Residents complete the entire movement on their phone. It walks them through each step clearly, so they understand exactly what they're signing up for and why. The result is faster lease execution, fewer questions and residents who feel confident and set up for success from day 1."

Our second strategic pillar is deliver performance efficiently. Let's start with how we're delivering for our customers. As the industry shifts towards RPM, ambitious operators are choosing AppFolio to drive increased performance. Mandy Management, a New Haven, Connecticut-based operator managing more than 3,000 units is one of our newest customers. They selected AppFolio to consolidate their disparate systems into 1 unified platform. By replacing clunky interfaces and manual accounting with integrated AI workflows and real-time reporting, they're streamlining everything from maintenance coordination to resident communications to accelerate performance.

New customer momentum is one measure of our success. Equally important is the retention and growth we're driving within our own customer base. Since 2017, West Des Moines, Iowa-based Newberry Living has grown its portfolio to 2,300 units on AppFolio. They continue to consolidate new acquisitions under our platform, driven by our high-performance AI tools. Rich overhaul technology implementation coordinator at Newberry Living explains and I quote, "We evaluated a specialized AI leasing solution alongside Realm-X leasing performer and chose AppFolio. What won us over was how much AppFolio already understood about how we operate. Other solutions required us to bring all that context to them. With AppFolio, it was already there. Since deploying Leasing Performer, our inquiry to completed showing conversion rate has increased 20%, and Leasing Performer is now driving 57% of all completed showings, freeing our on-site team to stay focused on closing high-intent tours."

We're successfully attaching AI products when customers sign, expand or renew with us, reflecting the growing value they see in our platform and continue to drive growth for AppFolio. That value is rooted in how AppFolio is built, a unified platform that tightly connects the system of record and the system of action provides the harness for intelligent AI orchestration. Our AI agents operate directly on governed real-time data and transactional workflows, reducing latency, avoiding connector fragility and improving accuracy and security. AppFolio's AI data architecture gives agentic capabilities native access to the underlying data model and execution layer, enabling more reliable automation, better orchestration and faster results. The same discipline we bring to our customers' performance we apply to our own. AI native engineering is changing how we build. We're compressing the time from concept to deployment, enabling our teams to design, code, test and refine products with greater speed and precision. That means more value in the hands of our customers faster.

This shift is freeing our engineers to pursue the work that compounds long-term platform value, including market and customer opportunities that otherwise may have taken us longer to address. Our growing efficiency is reflected in our financial performance as we reduced R&D as a percentage of revenue year-over-year, which Tim will speak to shortly.

Our third strategic pillar is great people and culture. I'm consistently inspired by our team's ability to innovate at an exceptional pace and make a real difference for our customers. It's their dedication that makes our vision to power the future of real estate a reality. I'm pleased to share that AppFolio has been recertified as a Great Place to Work for 2026. That recognition is a reflection of the people at the heart of this company. AppFolio aims to exemplify our values, live the AppFolian way and deeply care about our customers. On that note, I'm delighted to announce that Kyle Triplett has been promoted to Chief Product Officer. Many of you know Kyle from his leadership across our product organization, where he's been instrumental in delivering the AppFolio performance platform and our Realm-X AI capabilities.

In this expanded role, Kyle will continue to lead our product strategy and design, advancing AppFolio's innovation leadership and ensuring our platform continues to set the standard for our industry. The RPM discipline we've introduced and their performance platform we have built are turning property managers into performance managers. And when they win, everyone in the real estate ecosystem does as well. With that, I will hand it over to Tim to share more about AppFolio's Q1 financial results.

Thank you, Shane. I am pleased with our first quarter results and strong start to 2026, which demonstrate how our performance platform continues to deliver outcomes for our customers, and that customer value is increasingly visible in our financial results. In the first quarter, we delivered revenue of $262 million, growing 20% year-over-year compared to $218 million in Q1 2025. Subscription services revenue previously called core revenue grew 18% year-over-year to $58 million compared to $49.5 million in Q1 2025. This growth was driven by winning new customers, growth in total units under management and an increasing number of customers upgrading to our Plus and MAX premium tiers. This tier upgrade trend reflects the growing value customers are finding in Realm-X flows, our AI-powered workflow automation engine currently available in premium tiers, our expanding stack partner ecosystem and mixed product, mixed portfolio capabilities, such as student and affordable housing. First quarter revenue from value-added services grew 22% year-over-year to $201 million, driven by increased adoption of our Folio Guard risk mitigation services, Folio screen offerings and online payments as well as growth in units under management.

Resident onboarding lift and Realm-X performers, comprising our leasing, maintenance and resident messenger AI agents are also increasing their contribution to value-added services revenue. We continue to be pleased with our acquisition and retention of customers and units.

At the end of the quarter, we managed approximately 9.5 million units compared to 8.8 million units a year ago, representing an 8% increase. Customers grew to 22,520 from 21,105, a growth rate of 7%. Customer and unit retention continues to be strong and in line with historical averages. In summary, first quarter revenue of $262 million, growing 20% year-over-year reflects our continued strength in winning new business and driving adoption of our products and services.

Turning to margin. In the first quarter, GAAP operating income, which includes stock-based compensation expense, grew 50% year-over-year to $51 million and 19.4% of revenue compared to $34 million or 15.5% of revenue last year. Non-GAAP operating income grew 35% to $72 million or 27.3% of revenue compared to $53 million or 24.3% of revenue in 2025. Continuing with non-GAAP measures, cost of revenue exclusive of depreciation and amortization was flat year-over-year at 36% of revenue. Efficiencies in our operations were offset by our payments product mix and additional data center spend to support our customers' growing usage of our AI product capabilities.

As a percent of revenue, in the first quarter, sales and marketing was consistent with the first quarter of 2025 at 13% as we continue to invest in additional sales capacity and go-to-market initiatives to drive new unit acquisition, premium care upgrades and value-added services adoption. R&D spending declined as a percentage of revenue to 16% from 17% in the prior year. The use of AI tools and systems is increasing the velocity of our innovation and the productivity of our engineering teams, particularly in areas such as the resident experience and AI product capabilities.

G&A expense declined to 7% from 8% as a percentage of revenue, reflecting the benefits of scale and continued operational efficiencies. We entered the quarter with 1,721 employees, an increase of 4% from the first quarter of 2025, primarily reflecting growth in sales capacity as we continue to invest to win new business, drive premium tier upgrades and increased adoption of value-added services such as resident on-boarding lift and performers.

In the first quarter, we deployed $125 million to repurchase 702,500 shares. Our opportunistic share repurchase strategy is one component of how we are driving long-term shareholder value. In 2025 and 2026 to date, we have repurchased nearly 1.4 million shares and have another $125 million remaining of our existing share repurchase program.

Our balance sheet remains healthy, providing financial flexibility as we continue on our mission to build the platform where real estate comes to do business.

Now turning to our 2026 financial outlook. We are raising our guidance for annual revenue to a range of $1.110 billion to $1.125 billion, for a full year midpoint growth rate of 17.5%, fueled by adoption of our premium care offerings, growth in new business units and increasing adoption of our products and services including agentic AI performers and new resident services.

We continue to anticipate 2026 revenue seasonality to be mostly consistent with 2025. We are also raising our guidance for non-GAAP operating margin and expect to deliver between 26% and 28% compared to 2025 of 24.7%. Cost of revenue exclusive of depreciation and amortization is expected to be relatively flat as a percentage of revenue compared to 2025. While we expect to continue hiring in areas, including sales, operating expenses as a percent of revenue are projected to decline modestly as we scale and leverage AI to drive efficiency across our internal operations.

Diluted weighted average shares outstanding is now anticipated to be approximately $36 million for the full year. To close, Q1 reflects continued long-term shareholder value creation through revenue growth, margin expansion and disciplined capital allocation. Together, these priorities are designed to grow operating cash flow over time, manage solution and drive durable customer performance. We are pleased with our results and remain focused on executing on our vision to power the future of real estate. Thanks to all of you for your support and interest in AppFolio. Operator, this concludes today's call.

Thank you. Ladies and gentlemen, that concludes today's conference call. You may now disconnect.

Good afternoon, and thank you for standing by, and welcome to AppFolio Inc's Fourth Quarter and Full Year 2025 Financial Results Conference Call. Please be advised today's conference is being recorded, and a replay will be available on AppFolio's Investor Relations website. I would now like to hand the conference over to Lori Barker, Investor Relations.

Thank you. Good afternoon, everyone. I'm Lori Barker, Investor Relations for AppFolio, and I'd like to thank you for joining us today as we report AppFolio's Fourth Quarter and Full Year 2025 financial results.

With me on the call today are Shane Trigg, AppFolio's President and CEO; and Tim Eaton, AppFolio's CFO. This call is simultaneously being webcast on the Investor Relations section of our website at appfolioinc.com. Before we get started, I would like to remind everyone of AppFolio's safe harbor policy. Comments made during this conference call and webcast contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties.

Any statement that refers to expectations, projections or other characterizations of future events, including financial projections, future market conditions, business performance or future product enhancements or development is a forward-looking statement. AppFolio's actual future results could differ materially from those expressed in such forward-looking statements for any reason, including those listed in our SEC filings. AppFolio assumes no obligation to update any such forward-looking statements, except as required by law. For greater detail about risks and uncertainties, please see our SEC filings, including our Form 10-K for the fiscal year ended December 31, 2024, which was filed with the SEC on February 6, 2025.

In addition, this call includes non-GAAP financial measures. Reconciliation of these non-GAAP financial measures with the most directly comparable GAAP measures are included in our fourth quarter earnings release posted on the Investor Relations section of our website.

With that, I will turn the call over to Shane Trigg Shane. Please go ahead.

Thanks, Lori, and welcome to everyone joining us today. Our fourth quarter caps off a year of AI-powered innovation and accelerating unit growth at AppFolio. Fourth quarter revenue reached $248 million a 22% year-over-year increase, while non-GAAP operating margin was 24.9%.

For the full year, revenue was $951 million, representing 20% year-over-year growth and non-GAAP operating margin was 24.7%. Our focus on new business grew our units on platform to $9.4 million. Our strong financial performance earned us recognition on Forbes America's most successful mid-cap companies and Time Magazine's America's growth leaders. While these accolades are never the primary goal they validate our strategy and the momentum we have as a business.

As we look ahead, our new property management benchmark report suggests professionals are entering 2026 with confidence. While 81% of managers feel positive and 77% expect to increase unit counts up from 65% a year ago, this optimism is tempered by a persistent performance gap, rising operating costs and pressure on occupancy rates continue to challenge the bottom line.

Operators are turning to technology but half of AI users in the industry report they cannot rely on the AI features embedded in their core property management systems. By contrast, 98% of AppFolio's customers are already actively using 1 or more AI capabilities included in our performance platform. A drive to unlock better performance is shaping how operators approach technology. 45% of survey respondents say they plan to consolidate their software solutions, underscoring the value of a unified platform that reduces fragmentation and delivers a cohesive experience.

AppFolio is uniquely positioned to lead this transition. Our AI native performance platform reimagines the traditional PMS by unifying the systems of record, action and growth. By embedding agentic AI directly into daily operations, we enable our customers to evolve from property managers to performance managers. To maximize this opportunity, we organize our efforts around 3 strategic durable pillars, starting with differentiate to win. This pillar defines how we leverage our unique value to secure our advantage and more importantly, the advantage of our customers.

Last quarter at Future, our flagship industry event, we introduced our first 3 Realm-X Performers. With performers, we've moved beyond traditional automation to agentic goal-driven AI that transforms the performance of our customers' business. Demand for our agentic AI capabilities has translated into rapid adoption across the platform with the transition from smart maintenance to Realm-X maintenance performer largely complete and leasing performers seeing accelerated adoption that outpaces our previous generation of leasing tools.

Because these tools are built directly into the workflows they rely on, customers can rapidly realize performance gains. We continue to introduce new workflows through Realm-X Flows that allow customers to codify and automate more aspects of their business such as rent recovery. As we expand the capabilities of AppFolio Stack, we're bringing partners directly into the user experience, allowing Realm-X Flows to trigger actions within integrations, such as our new rent recovery partner, Genesis.

By supporting these integrations, our system of action becomes a single pane of glass where customers can manage complex operations and partner integrations in one place, ensuring they never have to leave AppFolio to get the experience and value they expect. An example of this orchestration in practice is AppFolio Customer Advanced Management Company, which is reshaping their workflows and achieving exceptional outcomes across 12,000 multifamily units throughout Southern California. Since switching to AppFolio in 2023, they've adopted many of our AI native features from Realm-X Messages and Flows to FolioGuard Smart Ensure and FolioScreen Trusted Renter and are currently in the process of implementing our leasing performer across their entire portfolio.

According to Danielle Holloway McCarthy, President, "Before we were relying on 9 separate systems to manage our properties, which made it impossible to deliver a truly seamless resident experience. AppFolio's AI-native platform changed all of that by consolidating our data and automating our core workflows, we freed up our teams to focus instead on creating meaningful connections with our residents. With a unified system, we're not just improving productivity, we're building an environment where everyone can thrive."

This focus on thriving through technology leads directly into our second strategic pillar, deliver performance efficiently. We continue to win in the market, expanding the value we deliver to our existing customers while effectively capturing new market share. In fact, in the second half of 2025 alone, we added over 500,000 units onto our platform. Adoption of our premium tiers, Plus and Max has exceeded 25%, which speaks to our growing success with both SMB and upmarket customers.

At the same time, we're extending the power of AppFolio through our system of growth, helping property managers grow and protect their business while giving their residents and investors access to services within one unified experience. With Resident Onboarding Lift, co-created with Second Nature, we've delivered a seamless move-in experience that activates resident services and drives new revenue opportunities.

Our newest service within Resident Onboarding Lift is group rate Internet, allowing property managers to offer their residents fully managed high-speed Internet at an attractive rate. Resident Onboarding Lift and our other products and services connect back to one goal, delivering measurable performance to our customers. We recently asked new customers who switched to AppFolio about their experience. 96% said switching to AppFolio has improved their overall business performance. 94% said AppFolio has improved their resident satisfaction.

Outcomes like these directly contribute to strengthening our position as the preferred platform in real estate. AppFolio has been named the overall leader on the G2 Grid, recognition based on the feedback of our customers and their firsthand experiences with our platform. We make sure customers can grow their businesses alongside AppFolio because we win when our customers win.

Our third strategic pillar is great people and culture. Our vision is to power the future of real estate, and our people are the catalyst that makes this possible. Earlier this month, we presented AppFolio's strategic priorities to our employees at AppFolio Kickoff 2026 and acknowledge the start of our 20th year in business. During the event, we had a chance to hear from AppFolio customers about the impact our technology has on their businesses and lives. One of those customers, Joe Rempson, President of Charlotte-based T.R. Lawing Realty, managing nearly 3,000 units on Plus had this to say. "We could not do what we do without AppFolio. The reliable platform with its support, innovativeness and ability to make our lives easier truly allows us to do our jobs, be more professional, productive and transparent and provide the 5-star customer service our owners and residents expect."

Joe's experience is a powerful reminder of why we do what we do. At the end of the day, the innovation we deliver is in service of customers like him, and it's the dedication of our great people and culture that brings our deep customer partnerships to life. 2026 marks another defining moment for AppFolio. I joined in 2020, we set a goal to reach $1 billion in revenue. This year, we're poised to hit that milestone. It's a testament to what's possible when we stay focused on our customers, deliver industry-leading innovation and maintain operational discipline. With the right vision, strategy and team in place, we'll continue to inspire customers to choose and grow with us.

I'll now turn the call over to Tim for more detail on AppFolio's financial results.

Thank you, Shane. We ended 2025 on a high note, rounding out a successful year marked by strong revenue and unit growth. We are well positioned to continue delivering customer performance through our investments in areas such as AI and the resident experience. I'm pleased to report in the fourth quarter, we delivered revenue of $248 million, growing 22% year-over-year. Full year revenue was $951 million, 20% growth year-over-year.

Core revenue, which we are renaming to subscription services revenue going forward was $56 million in the fourth quarter, a 17% year-over-year increase, driven by winning new customers, growth in total units under management and more customers choosing our Plus and Max premium tiers.

At the end of the quarter, we managed approximately 9.4 million units, from 22,096 customers compared to 8.7 million units from 20,784 customers a year ago. This represents an 8% increase in units and a 6% increase in customers. For the full year, subscription services revenue was $211 million, representing 17% growth year-over-year.

Fourth quarter revenue from value-added services grew 20% year-over-year to $185 million. This increase reflects greater use and adoption of our FolioGuard risk mitigation services, Folio screen offerings and online payments as well as growth in units under management. Resident Onboarding Lift through our second nature partnership and Live Easy lives are also beginning to contribute to value-added services.

Full year value-added services revenue was $722 million, representing 19% growth year-over-year. In the fourth quarter, non-GAAP operating margin was 24.9% compared to 20.2% last year. Full year non-GAAP operating margin was 24.7% compared to 25.2% last year. This full year decline was primarily due to the performance levels we attained under our 2025 corporate incentive plan, which resulted in an additional expense of $15 million or 1.6% of revenue. Excluding the impact of this over-attainment, full year non-GAAP operating margin was 26.3% of revenue.

Cost of revenue, exclusive of depreciation and amortization in the fourth quarter was 36% of revenue compared to 37% last year. For the full year, positive revenue increased from 35% to 36%, driven primarily by payments mix, additional data center spend to support our customers' growing usage of our AI product capabilities and the additional expense from the 2025 bonus plan over attainment.

As a percent of revenue in the fourth quarter, combined sales and marketing, R&D and G&A expense was 38% compared to 41% last year. For the full year, scale and operational efficiencies offset the impact of the bonus plan over attainment and operating expenses as a percent of revenue were 38% comparable to 2024. We exited the quarter with 1,702 employees, an increase of 4% from the fourth quarter of 2024. This reflects growth in most functional areas as we continue to invest in innovation and sales capacity.

Now turning to our 2026 financial outlook. Our 2026 guidance for annual revenue is $1.1 billion to $1.12 billion for a full year midpoint growth rate of 17%, fueled by adoption of our premium tier offerings growth in new business units and increasing adoption of our products and services, including AI-native performers and new resident services. We anticipate 2026 revenue seasonality to be mostly consistent with 2025.

We expect to deliver non-GAAP operating margin between 25.5% and 27.5%. Cost of revenue, exclusive of depreciation and amortization is expected to be relatively flat as a percentage of revenue compared to 2025. Diluted weighted average shares outstanding is anticipated to be between $36 million and $37 million for the full year. I am proud of our 2025 results made possible by the relentless focus on innovation and execution by our team.

We are acquiring, growing and retaining customers, and our investments in AI and the resident experience are translating into meaningful performance outcomes for our customers. We are well positioned for success in 2026 as we continue to deliver on our mission of building the platform where real estate comes to do business. Thanks to all of you for your support and interest in AppFolio. Operator, this concludes today's call.

And thank you for participating in today's conference. You may now disconnect.

Hello, everyone. Welcome to AppFolio's 2025 Investor Meeting. We are thrilled to be holding this event from our corporate headquarters here in today, sunny, Santa Barbara, California. And it's great to see so many of you here in person and as well as streaming online. I'm Bill Schroeder, Vice President of Finance at AppFolio, and I'll be your host today. Today, we'll begin with Shane Trigg, our President and CEO, kicking us off with AppFolio's vision and strategy. Kyle Triplett, our Senior Vice President of Product, will then talk about how we are differentiating to win. Lisa Horner, our Chief Marketing Officer, will discuss our go-to-market strategy, then we'll take a short break. After the break, Stacy Holden, our VP, Industry Principal, will host the AppFolio customer panel, who doesn't love a good AppFolio customer panel. We'll conclude with a financial overview by Tim Eaton, our CFO.

And for today's meeting, we'll ask you to save your questions for the Q&A portion of the program. At that time, we'll take questions both in person and from those streaming. We'll conclude the program around Noon Pacific. At that time, for in-person attendees, we'll head outside for lunch, weather cooperated for us, which is great news. And we'll say goodbye to those streaming today's event. This presentation contains forward-looking statements that are based on management's beliefs and assumptions, which are formed from currently available information.

Forward-looking statements include any statement that refers to possible or assumed strategy, trend analysis, future product developments, future market conditions and size and other characterizations of future events. We assume no obligation to update any such forward-looking statements. For greater detail about risks and uncertainties, please see our filings with the SEC, including our Form 10-K for the year ended December 31, 2024, and the most recent quarterly report on Form 10-Q, which you can find on our Investor Relations website. This presentation also includes a discussion of non-GAAP operating margin. A description and reconciliation of non-GAAP financial measures to AppFolio's financial results as determined in accordance with GAAP are included in the appendix to this presentation. Before we hear from our first speaker, Shane, enjoy the short video.

[Presentation]

Please welcome Shane Trigg, AppFolio President and CEO.

Hello, everybody. All right. Thank you, Bill. It's great to see all of you in person here. Thank you so much for coming in our beautiful office here in Santa Barbara. As you know, it's been raining cats and dogs. So the sun came out for all of you. So happy -- happy that happened. I also want to welcome everyone on joining us, all the investors joining us via live stream. So thank you for being here today. This is my second Investor Day as CEO of AppFolio, and it's an honor and a privilege to be here with you today. You will find that we've made tremendous progress since our last Investor Day in 2023. And we've done that by focusing on our customers, by delivering industry-leading innovation and being disciplined operators. Today, we're going to share the AppFolio story. We're going to give you insights into our business, our vision and strategy and how we're creating value for our customers. You will also get to hear from some of those customers. So we're excited for you to get to know them a little bit and hear their story and how they're experiencing AppFolio.

Now everything in our strategy really focuses on some very clear outcomes. It's really about growing units, revenue and margin by advancing the foundations of the AppFolio performance platform. We have a lot to talk about today, so let's get started. Now in 2026, it's hard to believe, but AppFolio will be 20 years old, having been founded in 2006. In 2015, we went public. And in 2023, we declared our sole focus on real estate, recasting the vision and mission for the company. Through that focus, we are on the precipice of crossing $1 billion in revenue, putting AppFolio on a very exclusive list of public technology companies ever to cross that milestone.

Our durable leadership principles of growing happy -- of creating happy and growing customers, delivering industry-leading innovation and delivering exceptional service, balancing growth and profitability and investing in great people and culture have positioned us for long-term sustainable growth. As we enter our 20th year, it feels like in many respects, we are just getting started. That sentiment is due to our deep conviction in our vision and strategy, the significant opportunity ahead as well as the trajectory changing transformation we've achieved over the last 3 years. Now I became CEO in Q1 of 2023, and it was pretty evident that we were going to have to quickly change our behaviors to create a better future for our customers. I told our investor community that we would keep it simple, clear and disciplined. And to the credit of all AppFolians, our teams and people, we've been able to do that, and we've been able to transform our financial performance.

Look at the difference in our business over the past 3 years. Year ending 2022, we finished at $472 million in revenue. And now in 2025, we're guiding to the midpoint at $948 million in revenue, doubling our revenue over that period of time. Our revenue per employee has gone from $264,000 to $532,000. Our non-GAAP operating margin back then was negative 1% and now we're guiding at the midpoint at 24%. Our operating cash flow has increased from $25 million to $177 million year-to-date, and our operating cash flow per share has gone from $0.72 to $4.87 year-to-date. Now while transforming our financial performance, we made a commitment to become the undisputed innovation leader in our industry. And in many ways, this is a visual road map of our strategic evolution from opening up our platform with AppFolio Stack to creating premium tiers like Plus and Max to delivering Realm, our AI suite of products to reimagining the resident experience with Folio space, we've been intentional with every decision by focusing on delivering exceptional customer value so we can capture that value.

Turning innovation into customer value is creating tremendous success for our customers. And make no mistake, we are winning because our customers are winning. And it shows in our results. In 2022, since then, we've added over 3,300 new customers, over 2 million units under management on our platform, and those 2025 numbers are through 3 quarters, so we look to build upon that. ARPU has grown from $66 to $103. And within our base, the units on premium tiers have gone from 10% to 25%, which speaks to our continued success in SMB, but really our growing success with customers upmarket. In Realm, our AI suite of products, our AI-powered solutions are being utilized now by 96% of our customers compared to 40% just 3 years ago. Now the market has responded as well. Customers of all sizes are switching to AppFolio and growing their business with us as their trusted partner.

While continuing to be the market leader with SMB businesses, one of the biggest differences in our company compared to 3 years ago is the success we've experienced with upmarket customers. Our ongoing commitment to delivering industry-leading innovation and exceptional service is driving our customers to adopt our products and services. AppFolio has become the competitive advantage for ambitious property management businesses. Now this momentum has resulted in AppFolio receiving a lot of external recognition for our innovation, our customer impact and our culture. In 2025, we were named by Fortune to the FUTURE 50, which highlights companies with the greatest long-term growth potential. We were also named the overall leader on the G2 Grid for property management software and voted by Fortune as one of the best workplaces in technology entirely received from the feedback of our employees.

This recognition reinforces our values that great people make a great company and innovation powers success. Now speaking of our values. From our early days, our values have always been the foundation of who we are and how we approach opportunities and challenges. Our actions are always grounded in the context of our values and have served as a catalyst to our transformation and our conviction in the significant opportunity ahead. Now beyond our values, we do our best to model the behaviors we expect. We believe how we experience each other is how our customers and the industry will experience AppFolio. We call these leadership characteristics the AppFolian Way. The AppFolian Way encourages us to paddle as one, be customer-obsessed, raise the bar, set the pace and deliver results. The AppFolian Way guides us in how we show up for our teams, how we show up for our customers and of course, how we show up for our shareholders.

Now AppFolio is led by an outstanding leadership team who exemplify our values and the AppFolian Way. They drive our focus on customers, our industry-leading innovation and the discipline in how we operate and make decisions. I'm very excited for you to get to know some of these leaders throughout our time together today. Now let's talk about our future and where we're headed. Just as there's been a transformation for AppFolio, the real estate industry is facing transformational change as well. Property managers are facing big challenges, battling external pressures, a growing list of technology providers and point solutions and a surge of AI tools, creating an overreliance on disjointed experiences and task-based outcomes, where businesses are struggling to move beyond task efficiency and profitability is slipping. In many ways, the industry has equated efficiency with performance, centralizing back-office tasks, layering on tools, doing outsourcing.

But when efficiency is the end game, teams get narrowly focused on completing tasks and processes faster and not thinking bigger about how they can create value. This task-based approach is creating a performance gap in our industry. Even with record investments in the PropTech ecosystem, nearly 60% of operators don't feel like they're fully utilizing the systems they have. So despite having more tools, the business impact remains very limited. Research says that 75% of property managers cite achieving operational efficiency as their #1 top challenge. Followed by that, their #2 top challenge is translating that efficiency into maximizing revenue and margin performance. Yet in the same research, only 17% of property managers report winning consistently. So why is this? It's because platforms were built to manage tasks, not to deliver real performance outcomes. It's time to redefine what winning looks like in this industry. Property managers serve an ecosystem of customers, investors, residents, vendors, owners.

Success is centered on a holistic experience, driving real performance outcomes where everyone in their ecosystem thrives. Traditional legacy property management software has let the industry down. And now with bolt-on AI and this growing list of point solutions and services, there is significant competition to independently own the system of record, the system of action and the system of growth, creating challenges for property managers with their limited resources to stitch together these fragmented experiences. A performance platform is required to close this performance gap, a platform that seamlessly and fully integrates the system of record, the system of action and the system of growth because true performance can only be realized by adopting all proceeding systems. This is the future we're building here at AppFolio. We call it real estate performance management.

This AI native modern platform puts property managers at the forefront of what is possible, not focused on task efficiency, but focused on delivering real performance outcomes. In this new paradigm, we are empowering property managers to become performance managers. With the AppFolio performance platform, we seamlessly integrate our system of record, our system of action and system of growth where the sum of these interconnected systems deliver unparalleled performance, closing the performance gap our industry is facing. Now 3 years ago, we declared a new vision for AppFolio. That vision is to power the future of real estate. We deeply, deeply believe in this vision. Our mission is to build the platform where real estate comes to do business, and we achieve this mission and deliver on it by building the AppFolio performance platform. Our path from platform to performance goes through our core customer, the property manager.

If the property manager is our core customer, then the other industry segments are their customers. The property manager is the only industry segment that directly interacts with all other industry segments, creating our highest point of leverage to reach investors, residents and vendors, making the property manager our fastest path to value. Property managers who deliver exceptional investor, resident and vendor experiences will reinforce our most important metric, units under management, creating a virtuous cycle of business, where industry segments independently grow revenue and margin while reinforcing customer acquisition and unit expansion. The AppFolio platform is purpose-built to make the property manager the competitive advantage. And at our scale, we're in a position to deliver that value at a magnitude unlike any other. Now an important kernel of our vision is to own the control points through a unified experience.

This means property managers and their customers, investors, residents, vendors never have to leave AppFolio to get the value they need, whether we build it or deliver it through a partner. By going through the property manager, the systems are the control points. With our system of record, that's where we store the data. With our system of action, we do the work with them. These are our hygienic capabilities with our performance -- performers that we just announced. Our system of growth is where we create the value and unify the experience in the moments that matter. By creating that value, we can share that value, which means we can drive the economics. We can unlock performance and create that virtuous cycle, reinforcing customer acquisition and unit expansion on our platform, while independently defending against point solutions, trying to get in and penetrate those critical value streams in those moments that matter. Now this is our vision of where we play and how we win.

Our platform powers our core customer, the property manager, which powers industry segments, their customers, owning control points through a system of record, a system of action and a system of growth, creating value by unifying the experiences in the moments that matter, driving the economics, turning property managers into performance managers, becoming the platform where real estate comes to do business, powering the future of real estate. Simply put, we build the platform. We store the data. We do the work with them. We create the value. We unify the experience. We drive the economics. We power the future. Now we have an enormous opportunity in front of us. And our path to capture that potential is within our reach. Today, we have over 21,000 customers and over 9 million units under management.

The majority of those customers and units on our platform are coming from property managers and owner operators. With these customers and all future customers and all units on our platform, we extend our reach to 644,000 home service providers, 17 million investors with rentals, 110 million residents in rentals and 5 million real estate transactions, resulting in significant opportunity for AppFolio to capture value, giving AppFolio a resilient and sustainable future for growth, creating an experience that profoundly improves the lives of our customers and the communities we serve for years and years to come. Our goal is to unlock performance not just for our customers, but also for our employees and of course, all of our shareholders through delivering differentiated industry-leading innovation.

And through the sum of our interconnected systems, the system of record where we store the data, the system of action where we do the work with them and the system of growth by creating value and unifying the experience in the moments that matter, we drive the economics and deliver real performance outcomes, closing the gap and creating a future of winning for our customers. To deliver on this future, we organize our efforts around 3 strategic durable pillars. The first is differentiate to win.

This defines the unique value we're creating for our customers and how we secure our competitive advantage. The second is to deliver performance efficiently. This ensures we're scaling with discipline and rigor to make sure that we can deliver in service of our customers. And the third and probably the most important is great people and culture. This ensures that we have the skills, capabilities and people who can inspire this future. With that, I appreciate your time today, and I'm going to hand it over to Kyle Triplett, our Senior Vice President of Product, to walk us through our strategic pillar of differentiate to win. Kyle come up.

Good morning, everybody. Well, I get to have the pleasure of talking to you about the AppFolio Performance platform. Grateful that I get to do that. We unveiled this just a few weeks back at our FUTURE conference. Anybody attend FUTURE by chance? A couple of you. Well, we're very excited about this and so are our customers. As we think about the foundation for how our customers improve their performance, -- the AppFolio performance platform is what they are using to be able to record system of record to drive the system of action and the system of growth. Each of these systems represent a distinct capability and a distinct revenue stream. We've built all of this on AI native architecture. That means that every workflow, every data point and every customer interaction operates on one unified platform, not just a collection of disconnected tools. So today, I get to walk you through each of these different systems, and we'll get to see some software.

So hopefully, everybody is excited to see that as well. We'll get to do some demos. Our system of record stores and maintains all of the critical operational data for our customers. It delivers consistency, accuracy and accessibility across every AppFolio workflow. So teams are able to operate from one reliable source of truth. This enables everything that follows: intelligent automation, unified experience and performance visibility. Our strategy starts with the capabilities that earn us the right to win. We have to earn being the system of record for our customers. They may not differentiate us on their own, but they are essential to storing the data that powers everything else. In accounting, we're extending our capabilities with flexible entity modeling and intelligent automation, aligning AI with how customers want to run their financial operations. With mixed portfolios, we're expanding our ability to support various portfolio types with our advancements in student and affordable housing.

We want customers to be able to run their entire complex portfolio all within AppFolio. In permissions, we're introducing granular, flexible controls and smarter role management to ensure that we can add additional safety and security. And in reporting, we're creating more customizable visualization-ready reports that move from static compliance and reactive reporting into actionable insight. Each of these advancements reinforces our position as the system of record for our customers. Let's talk a little bit about unified data. The heart of every successful platform is data. For property managers, data is everything. And when it's scattered across systems, the results are conflicting answers, slower decisions and greater risk. Our system of record holds every dimension of the customers' business, their properties, their stakeholders, residents, owners, accounting, leasing, maintenance so that every action is grounded in reliable, consistent data. The unified data foundation enables smarter automation and more connected experiences across AppFolio's Ecosystem.

AppFolio Stack integrates directly into the system of record. You heard Shane mentioned, we released this a few years back and became an open ecosystem. And this allows customers to be able to connect their external data sources right into that same trusted environment. This is our customer space to connect their data to the outside world. And today, we have over 4 million units connected to Stack. We have 84 partners across app and solution partners and 8 product categories. Stack creates a powerful network effect that strengthens the platform with every new integration that we bring in. Stack is not just an add-on. It's how we scale connectivity and drive stickiness with our customers. As we look to expand the capabilities of Stack, we are bringing partners directly into the AppFolio experience is something I'm incredibly excited about. Realm-X Flows can now trigger actions with Stack apps.

So a partner can kick off a workflow in AppFolio, work alongside and you're paralyzing the 2 technologies to work alongside each other with event streaming and everything pulling back into one experience, which extends our system of action further and supports deeper integrations with the partners. Storing data is just the beginning. Once customers have reliable data, the next step is helping them to do the work. We built the foundation, the trusted sources of truth. Now let's look at how we turn that into real measurable work and performance outcomes. So on to the system of action. This is our execution layer. It's where AppFolio moves from storing the data to doing the work with our customers. And whether that work is done by a human user or by a Realm-X performer, which is our AI agents, this layer turns information into results. Our advantage lies in codifying daily operations so that customers depend on AppFolio to help them run their business. With AppFolio powering the work itself, we deepen our moat, we expand engagement, and we can directly drive customer performance. Anyone heard about Folio Realm before?

Yes.

Great. Realm is our suite of AI products that are embedded throughout the platform. 96% of customers already engage with our AI tools because they're built with the workflows that they already rely on. Our AI architecture combines traditional ML, generative AI and Agentic capabilities, and it's backed by years of investment in data, context and talent. This is not AI just for AI's sake. It's purpose-built to make every customer interaction faster, smarter and more profitable. When we take a look at our Realm-X suite of products, these are our generative AI capabilities. Customers are not just adopting new tools. They're changing the way that they run their business.

The Realm-X Assistant is a copilot experience. Think of this as riding with the customer along their journey in the application. They can send in text-to-data and text-to-action queries, which means they're using natural language to ask questions about their database, get back responses that clearly show where the answer came from and text-to-action, which is asking the system to do something on their behalf. We see customers who are using the assistant saving over 10 hours each week, which is an incredible time savings. Realm-X messages unifies communications across channels. Think of this as a unified inbox, e-mails, text messages, all coming into one spot where AppFolio has context and can help generate a response for the customer. Anyone a grammerly user, similar tool, a couple of nods.

Customers can actually adjust the response to be short, long, friendly, professional, gives them the ability to really do their job quickly but still tailor it to their business. And we see folks who are taking these messages and saving 26 seconds per message, which, again, really big when you're spending all day doing communication back and forth. And then Realm-X Flows, our workflow engine, which helps customers to codify and automate their business through triggers and actions. We've seen over 15 million actions automated in 2025. You can think of an action as a task that a human would have otherwise had to do. So a ton of adoption and really exciting to see the results of folks interacting with these products. These are real productivity gains. They help expand the margins of our customers, and they reinforce why AppFolio is the performance platform for the industry.

At FUTURE, we introduced Realm-X Performers, and it's our move into true Agentic AI. Performers handle routine tasks. They can adapt to change and they can optimize for property managers' outcomes. We've launched the leasing and maintenance performers with our resident Messenger performer currently being piloted with select customers. And now we get to have some fun with demos. So today, I get to show you how performers transition everyday operations into automated measurable performance. Our leasing performer is tightly coupled with Realm-X Flows and built into our leasing CRM. A critical part of deploying successful Agentic capabilities is the human-to-agent interaction. We're powering human users.

What you'll see here is the performer interacting with prospects, demonstrating the user interface and handing off seamlessly to human staff when needed. So going to kick it off. We navigated to the leasing CRM and went ahead and clicked on a prospect conversation with Jane, texting about a 2-bedroom and asking which utilities are covered. The performer uses a centralized knowledge hub to respond instantly and accurately. And when Jane asks about rent and availability, the performer generates a combined response and includes a scheduling link that's tied to the leasing agent's calendar.

Jane books a virtual tour and the performer follows up automatically with tour details and qualification steps. Prospect mentions they look good, but my credit score isn't great and the performer has instruction to hand this back to the leasing staff for a personal follow-up. And we navigate back into the CRM, what you're going to see is updated notes so that the human staff knows that help is now needed.

And in addition to this, we go ahead and queue it up in our CRM queue to also indicate help needed for the leasing agent when they get back into their computer to see what they need to be doing. That's the power of Agentic AI in a human-centered workflow. It's automation that works with people. So you just saw text conversation. Now let's go ahead and look at voice because prospects and residents engage across many channels, and we have to make sure that we can support all of those for our customers.

[Presentation]

How about that, pretty awesome, -- after the call, the audio is transcribed and it's stored directly into the CRM so that every interaction, voice, text, even image feeds our system of record, giving property managers full context for every conversation. And in this case, the team even learns that they can expect a 57-pound [indiscernible] to be showing up to the move -- next up, we're going to move over to the Realm-X maintenance performer. This AI agent interacts directly with residents to create work orders to diagnose issues and to dispatch maintenance technicians. What makes this especially powerful is that it is multimodal AI. It understands both language and images. The performer can interpret a resident's written message or analyze and uploaded photo to identify the issue automatically. It's a great example of how we blend intelligence and execution all in the performance platform. Let's take a look at our demo.

We're starting in the resident portal where a resident will be submitting a maintenance request. The performer asks for a short description of the photo, a short description or a photo of the problem. And the resident is going to go ahead and upload an image of a leaking faucet. Using image recognition, the performer identifies the faucet leak and begins to guide the residents through confirming the details. The performer gets the details from the resident and moves towards understanding how a technician would access the unit. So now the resident can actually type in natural language right here in the message box. In the meantime, the performer checks the maintenance team schedule and begins to offer up appointment options for the resident to select from. The resident chooses the time and the work order is then automatically created and scheduled.

Now as we navigate back into AppFolio, the property manager sees the new work order with the image, the diagnostic details and a confirmed appointment already logged. That's multimodal Agentic AI, taking what used to be a multistep manual process and bringing it into a single streamlined experience for both the resident and the property manager. We talked about our system of record, talked about our system of action. Now it's time to move into the system of growth, which is how we turn performance into value across the ecosystem. It's the part of the performance platform that monetizes the experiences that we've unified, creating new revenue channels and outcomes for every stakeholder.

This is where growth for both AppFolio and our customers is unlocked. And when we do this right, everyone has an opportunity to win. Property managers grow efficiency and revenue. Residents enjoy better experiences and results and investors see increased renewal rates and returns. That's how we create a truly aligned sustainable growth model. A core bet in our system of growth is resident. By unifying the experience between property managers and residents, we drive satisfaction, streamline operations and open up new revenue opportunities. The resident relationship with the PM is the control point. If we deliver the resident journey end-to-end, property managers don't need an alternative. AppFolio becomes the definitive destination for resident management.

Through FolioSpace, our resident mobile application, we've built, partnered and acquired to deliver one modern, seamless resident experience that connects every touch point from looking for a home and leasing through paying your rent and living. One of the highest impact moments in the resident life cycle is the move-in. 3 out of 4 residents report challenges with the process and yet residents who are satisfied are 76% more likely to be satisfied with their property manager overall. We have millions of move-ins happening on AppFolio each year. It's a major opportunity to build loyalty and revenue.

Two things are key here. First, we're capturing the resident relationship early, which allows us to be part of that top-of-funnel moment. Second, ensuring that the move-in completes on time optimizes for both service and revenue outcomes. This is where our partnerships and our acquisitions come into play. With second nature, we help property managers attract high-value services through resident benefits packages. Coming in 2026, with LiveEasy, our resident concierge simplifies move-ins by setting up utilities and packaging key services like Internet, all in the AppFolio experience.

At our future conference, we launched FolioSpace resident onboarding, and it's already changing how residents move in. What you'll see here is how we streamline the entire process while embedding opportunities for attached services. When start with the demo, we see 4 steps starting with sign your lease. They receive an invite to begin the onboarding process with the lease signing. The resident is guided through each step with move-in charges up next. They review their move-in charges and they're directed into AppFolio payments to go ahead and make that first payments. It could be their security deposit, their first month's rent. Next up, they're going to be confirming renters insurance, and they can either upload an existing policy or select one of AppFolio's provided coverage options. Go ahead and navigate through.

And in this case, the resident is going to go ahead and select the popular plan, Guard Plus. They then again directed through to AppFolio Payments to go ahead and pay for the insurance. Finally, they're going to set up utilities. And this is adding account details and confirming an activation date. Here, we're going to show just electric. Once that's done, the onboarding process completes with all the services confirmed and ready for move-in. Through resident benefits packages and LiveEasy Concierge, we have an opportunity to attach additional value-added services during this process, creating new revenue opportunities that can be shared with our customers while still enhancing the resident experience. At FUTURE, we also released resident onboarding lift for property managers who want to extend the resident experience even further. Co-created with Second Nature, it delivers value-added services like credit building, rewards, identity protection, and this is what the idea of everyone wins looks like.

Residents get convenience, they get savings and quality of life improvements for services that they want and need. Property managers boost retention, they earn ancillary revenue and they can reduce maintenance costs. And investors benefit from improved NOI and longer-term asset performance. This is the system of growth in action, creating economic lift across the ecosystem. We also want to showcase our newest performer, the resident Messenger performer, now in pilot with select customers. It's the bridge between our system of action and our system of growth. This performer handles routine resident communications, automates decisions based on policies that are in AppFolio and routes escalations intelligently to property managers. It also can proactively engage residents to offer assistance, drive renewals or attach services. Now that we've seen how value and engagement extend across the stakeholders in real estate, let's look at how we turn this growth for AppFolio and our customers.

Value-added services are where our platform and customers come together to create scalable growth. These offerings extend AppFolio beyond core software, helping property managers grow, protect and optimize their business. Through tightly integrated high-value services, we unlock revenue across every part of the property manager's journey. You'll notice that performers now subsume some of our earlier AI solutions like Smart Maintenance and Lisa under one unified AI framework over here on action to work. In the near term, adoption comes from A la carte Value+ offerings. But in the long term, Realm-X Flows and Performers will become the backbone of our platform. This is how we scale revenue and value together, performance that grows with every customer. Now everything we've shown here today connects back to one goal, delivering measurable performance for our customers.

Customers adopting the AppFolio performance platform are already seeing tangible results. A great example of this comes from customers who are adopting Realm-X Flows to codify and automate their business in AppFolio. These customers are reporting real gains, reduced vacancy time, higher renewal rates and meaningful improvements to net operating income. That evidence reinforces the larger story. The unified AppFolio experience is driving measurable, repeatable performance across property managers, residents and investors. We win when our customers win. To share more about our customers and how our go-to-market strategy helps us to efficiently deliver real performance, I'll hand it over to Lisa Horner, our Chief Marketing Officer.

Thank you, Kyle. Thank you. Am I live? Can you hear me?

Hello, everyone. Welcome to all of you to our campus and to those of you online. Thanks for being here today. I'm excited to represent our entire go-to-market teams from AppFolio. And as you heard from Shane, the second pillar in our company's strategy is to deliver performance efficiently. So today, I will review our go-to-market strategy and how we execute it to create efficient growth for AppFolio.

So a great and trusted brand is not just a nice to have. It creates operational leverage for our company. Our brand strategy is built on promises we can keep, relentless proof from customers and 0 daylight between the words we use and the experience our industry has with AppFolio.

So like our products and services, our brand is a differentiator for AppFolio, creating productivity across all audiences that we serve. So there are 5 major stages of our funnel and our customers' journey with AppFolio, acquire, adopt, grow, retain and advocate. From the first engagement with our brand to lifelong advocacy, our go-to-market teams have architected a flywheel of durable, efficient growth for AppFolio and our customers.

So in the first stage of our funnel, acquire, our marketing and sales teams are focused on new customer acquisition. Segmented go-to-market teams run common playbooks against aligned goals within a unified data and technology stack, powering efficient, scalable customer acquisition for AppFolio. In alignment with our strategy to move upmarket, acquisition upmarket sales capacity has grown 40% since 2023.

We are aligned on where we have the highest fit in the prospect universe as well, coupled with engagement and intent data that helps us predict propensity to buy. So by prioritizing accounts by tier and automating investments and activity to our most ideal customer profiles, we create productivity for our sales teams.

So our sales teams actually spend their time building relationships and converting new customers versus qualifying out low-it pipeline. So as we increase productivity, 2025 year-to-date sales and marketing expense as a percent of revenue is 13%.

Additionally, we partnered to engage all key stakeholders in target account buying groups. We have seen that cross-functional alignment within prospect accounts not only accelerates winning the deal, it also decreases time to value for all new users getting value from AppFolio as they onboard.

The second stage in our funnel is adoption. This is where go-to-market teams partner to ensure our customers are getting maximum value from our products and services. So early adoption on our platform is a very big priority for us. We have invested in product-led onboarding to decrease the time it takes customers from contract to realizing value from AppFolio.

Our AI native agentic platform reduces customer effort and accelerates their outcomes, driving faster onboarding, broader usage and increased adoption, thereby delivering performance for both customers and AppFolio. So our stack marketplace extends the value of AppFolio with deep integrations. Our customers use partner tools in platform, boosting adoption. The third stage of our funnel is growth.

And so in this stage, go-to-market teams are focused on growing units under management, value-added services and premium offering tiers within our customer base. So customer growth teams use revenue potential as a foundational element of our segmentation strategy.

Like our acquisition teams, marketing, sales and services are commonly structured and gold, working hand-in-hand to execute well-defined playbooks. Much of the same unified data and technology that powers efficient and scalable customer acquisition also powers growth.

So we get productivity and efficiency by applying common product, AI and people-led motions to both acquisition and growth journey stages. So as we increase the pace of innovation, we have also increased our growth sales capacity by 50% since 2023. Our goal is to ensure customers achieve measurable performance from our platform. Driving customer outcomes underpins our efficient growth as a company.

So the fourth stage in our funnel is to retain our customers, of course. AppFolio's predictable growth requires our marketing and services teams to create customer satisfaction and success.

Therefore, retention. And we believe that every service interaction is important to retaining our customers. We consider high-quality service a means to both margin and growth. AppFolio customers access augmented assistance within our platform. In fact, in 2025, year-to-date, 59% of all support interactions are augmented and handled by AI.

So as AppFolio customers use more agentic and AI collaboration within our system of action, we see increases in performance that translate to long-term relationships with our customers. So like you heard from Kyle, the AppFolio Performance platform enables measurable results.

Realm-X Flows users report 20% higher resident retention. So when our customers actually retain more of their customers, they stay with AppFolio. So the final stage of our journey is advocacy. So our brand is only as great as the promises we keep to our customers, which is why we focus on empowering our successful customers to become our biggest advocates.

In this time where markets like ours are filled with the promises of AI, real stories of AppFolio customers and their success cut through that noise and create credibility for our brand. We will continue to align AppFolio value with customer value, delivering efficient growth because of the trust that we have built in our market. Our go-to-market teams bring AppFolio's performance platform to an industry that really needs us.

So through differentiated brand and customer experiences, we deliver predictable, efficient performance, not only for AppFolio, but for all stakeholders in real estate. Thank you for your time today. We will now take a 10-minute break. For those of you in the room here, we will have refreshments right outside the door. We will resume at 10:10 in about 10 minutes for those of you online. We'll get back started at 10:10. Thank you.

[Break]

Can I see everyone's notebooks for the that will be taking place at the end of today? Welcome. I'm seeing you all for the first time. My name is Stacy Holden. I am Vice President, Industry Principal here at AppFolio. And I get the pleasure to make sure that everyone at AppFolio is customer obsessed.

We want to make sure that we're listening to our customers. It's been our DNA since day 1, and it has gotten us to where we are today. And with that, I could not be more honored in having these 4 lovely individuals here with us to be able to go through some questions.

You'll be able to ask them some questions at the end and get to know a little bit about their experience with AppFolio today. So enough of me -- oh, look, I get a click or 2 -- I'm going to let each of you introduce yourselves, and I'm going to start over here with Rob, tell the audience a little bit about you, your company and as you're going into 2026, what's top of mind for you?

Yes. So Rob Gale, I'm President of Dream Live Prosper Communities, and we're part of DLP Capital. We have $5.3 billion assets under management. We've been using AppFolio for investment management and obviously, the operational software. So we use for both. And we've been since like 2018, but we got on a little steroids once I came over. So came over last November. I've managed before 35,000 units and took the company public in 2011. So I've used every software there is out there. So you'll hear why I really like AppFolio later.

Thank you, Rob. Tony?

I'm Tony Juliano. I'm the CEO of Atlas Real Estate. We're a vertically integrated owner operator of single-family and build-to-rent as well as a third-party property manager, and we operate in about 15 states, about $2.5 billion assets under management and been with AppFolio since 2015.

I think that's right. Yes. Look, that's what the slide said.

That's one of the things on the slide apparently.

What -- Rob, I'm going to go back to you. What's top of mind for '26?

For '26, our top of mind is really just diving into making sure that customer experience. So what we focus on is we're building thriving communities to transform lives at DLP Capital and Dream Live Prosper Communities. So our focus is more of how can a software give our teams time back to give that experience.

And so this is what we're excited about. So we have a lot of stack partners coming in and a lot of additional with the Realm-Xs we'll talk about later.

And for you, sir?

Yes. I think our emphasis or kind of rallying cry in '26 is high-performing teams.

And I think one way we want to accomplish that is through simplification. So one of the things we're very focused on is maybe different in anything we're doing outside of AppFolio, we're trying to figure out how to do in AppFolio. And they've been an amazing partner in helping make that happen.

Josh, introduce yourself, sir.

Yes. I'm Josh Winch, President of Focus Property Management. We're based out of Wisconsin. We manage over 6,000 units. We started in 2019. We started right away with AppFolio. It's been a great partner for us in our growth. So we started with 250 units and only 4 employees, and now we have over 6,000 and over 100 employees.

So AppFolio has been a great partner in that rapid growth. It's allowed us to see where we're winning, where we're not and how we continue to elevate our business.

And top of mind for you for '26?

Very similar to what Rob said. I think it's about resident experience for us. How do we use the reports, the data to make our resident experience better every day. So through performers, Realm-X, things we'll get into here in a few minutes, that's allowed us to see where we're having success, where we could spend more time and allow our customers, our residents to have a better experience.

And last but not least, not only a great name, but spelled correctly, and we did not color coordinate really, we didn't. Stacy?

Thank you. Stacy Winship, I am the EVP of Operations at Fairgrove Property Management based here in Southern California. Prior life started out in large institutional multifamily and then 2011, 2012 moved over into institutional single-family and was part of that space with Waypoint Homes, later went on to the founding employee at Mynd Management. took a little break into BTR for a little bit and then a prior colleague from Waypoint gave me the call and had tapped me into running operations at Fairgrove about 2 years ago now.

And so trying to scale the business to about 30,000 units. We're currently in about 9,000 units over the next 5 years. And this is my first kind of -- past 2 years in joining Fairgrove. It was the first time I've ever used AppFolio and have learned a ton over the last couple of years by being part of their advisory board.

Thank you so much. Top of mind.

Yes. Honestly, Southern California has experienced such great market conditions for the last several years that my 2026 initiatives are fully baked around the entire process from notice to vacate through move-ins. So not only just looking at processes during that piece, but looking at new technology that we can implement in order to improve those processes.

Awesome. Now we've talked a little bit both you and Josh, I'm going to stick with you on this next set of questions around growth and expansion and the usage of AppFolio in your units.

So Stacy, I want to talk about Fairgrove a little bit. You started with AppFolio at 900, and that was in 2018. Now you're at 9,000. Can you talk about that journey of growth? And where did AppFolio as your tech partner help you along the way?

So I can speak to the last 2 years, which has been about 25%, 30% of that growth and tell you stories that I've heard about before Stacy. And essentially, Marco Vartanian, who's our Founder and CEO of Fairgrove, purchased a company in 2019 that was around 900 units.

So have rebranded to Fairgrove over that period of time and grown about 50% through acquisition and 50% through organic onboarding. And the drive there has truly just been Marco's passion. We did this together at Waypoint Homes. We both joined in 2011 and took that to about 17,000 scattered site single-family homes before he transitioned to Invitation Homes and took that to where it's at today until 2019.

I then left with the co-founders of that company and went and developed Mynd and grew that for 4 years. So I think our passion for growth has kind of like led that. And also just that knowledge, you know it can get done. And what we learned during that time is scalability is based on not just people and process, but the real backbone of it is technology. And that partnership with AppFolio, like I said, it's the first time I've used AppFolio in my career was at Fairgrove and learning that they are building that platform with this AI background because this is something that we were talking about in 2016 at prior companies and particularly around the Realm-X Flows. So being on the Customer Advisory Board allowed me to see the vision early on and become a little bit more aware of the progress that was being made.

But I think like the biggest thing is that they have built something that's a lot more flexible for customers because we all have different businesses. right? 100% third-party property management. We don't own any of our properties. So you can imagine with 1,000 different clients, they want their properties managed differently from a single-family home to a 250-unit building. It's a different experience.

And what I found is AppFolio has been able to scale those product types with us with both on-site usage as well as centralized service usage. So it's been great.

Yes, third-party management is not easy.

I wasn't going to do it again when this opportunity came in.

I used to tell the teams that it's like playing handball, racket ball, pickleball and squash and tennis, all in the same day. It's very similar, but really different depending on what you're doing. So the scalability, I know, especially for third party is really important.

Josh, your growth has been a little bit different, but also very rapid from -- you already mentioned to the crowd from 200 units in 2019 or 225 to 6,000 now. Tell us about how AppFolio has enabled that growth story for you.

Yes. For us, we're the opposite. We are 100% owner -- one owner, I should say, so no third-party management. And so for us, when we started the company in 2019, we started with 3 core principles. We wanted people to have jobs they loved. We wanted our residents to love where they lived, and we wanted to give back to the community in which we manage.

So throughout that growth period, AppFolio has helped us a lot of ways. But I think 2 things in particular. First is data. There's a lot of data within AppFolio that we can use and extrapolate to say, who's helping us?

Who's helping our business perform better today? Who isn't? What are areas of opportunity? So along that growth, we could put better processes in play to allow us to reposition properties, add value and ultimately, like I said, provide the residents a better experience, right?

And the second thing is workflows. Workflows has been huge for us. Since that's rolled out, we use it in various areas of our company, but one in particular that I want to mention is our legal team. By using workflows, we were able to increase our profitability, decrease our overhead and increase our results. That's kind of the triple threat of workflows.

And the cool part about it is it allows our teams to work on the process instead of in the process, freeing them up to take on higher-level responsibilities. So AppFolio has allowed us to be able to scale, create more profitability and grow our team's knowledge.

It has been great to watch focus and how you guys have grown. I want to switch gears a little bit and talk about delivering performance. And Tony, I want to start with you. Can you talk about your experience with Second Nature regarding that strategic partnership and how that has enabled you to get basically a win-win-win, speaking of triples between the owners, operators and resident experiences with something like Second Nature.

Yes. We were, I think, an early adopter of Second Nature as a resident benefit package. And there were a few things that were really important to us. One, it had to actually be a benefit to the resident. So some of the packages that are out there are a great benefit to the property manager. They don't really add much value for the resident.

What we found with Second Nature is they really are benefiting the resident through things like credit reporting. They are responsible for maintaining the systems in their home.

So the filter delivery. When you kind of combine everything that they get, they're getting about a 60% discount to what they pay for all of that if they had to do it themselves. So that's the win to the resident.

The win to the property manager is that we see some revenue benefit from that, so that ancillary revenue is meaningful to us when revenue on just property management fees themselves is really compressing. And then the win to the property owner is the better maintenance of that home.

And we've now got data that really supports that on our single-family portfolio, more exciting is the integration with AppFolio. So for a long time, they were kind of running separate and we were having to kind of fix where things broke and it wasn't fully integrated. We're doing our own auditing. Now that, that partnership has been formed, it's just a simpler, more seamless process.

And now we're layering in additional services like Internet delivered to the home, pest control and some other things that are really big. And really, the driver with Second Nature is that we see a greater than 15% increase in renewal rates when we're using Second Nature. And think about what an impact that is, not just on the savings we get from not having to turn the unit, but think about average vacancy of whatever your number is, 30 to 33 days of vacancy that you're having to absorb marketing costs, leasing costs.

So that renewal is kind of the, I think, we would all say renewals are king right now. We want to keep everybody in the unit. We want them to have an amazing resident experience. Everybody said resident experience already and Second Nature helps us accomplish that. So we're really excited about it.

I'm just going to do a quick follow-up. What kind of feedback do you get from the residents about having this experience kind of for lack of a better phrase, all in one?

Yes. I think the expectation now is zero effort, right? Has anybody ordered anything on Amazon while you've been here today, to be honest.

You don't have to raise your hands.

You don't have to raise your hand, but some of you have already done it, right? And the expectation is 0 effort. I'm going to go in the app. I'm going to click a button and when I get home tonight, it's going to be waiting for me. So this idea that my filters get delivered, my credit reporting just happens, these resource -- or even think about the Internet expansion that they've done and the fact that there's more than I don't know what their count is, but a lot of doors in that system, they can drive pricing we can't drive, and that's driving part of that resident experience, too.

So just the ease kind of the zero effort, I don't want to mess with it mentality and Second Nature makes that happen.

Zero effort is good. This has not been zero effort, Rob. So Rob and I sat at the NMHC Annual Meeting last January, so 10 months ago now. And you said you wanted to go fast. And I said, okay, let's go. And you said you wanted everything within AppFolio. And you just mentioned that you were growing on steroids. So since you and I have gotten together, talk a little bit about that journey and what that has done for DLP and its business goals.

No. We are an owner manager. So we own all of our assets, but the biggest thing for me as well as compliance, checks and boarder. Again, I ran a publicly traded company for over 13 years. So the one thing I told, Stacy, I need it to work from the time it's a lead all the way to move out. I don't like move-outs, but you need to have to make sure it works all the way through.

And so we sat in January and I said, okay, and then we went through and it's all about the workflow. And my -- what I always -- I tell my AppFolians it just has to work and it does. So making sure that the ease of the workflows is one thing, but everything is connected into one system. So again, you have a system of record, which is key.

And then you have everything I can pull from documents, things that I would need is all to the system. So for me, I have to audit all the way down to the lease itself, and I have to audit down to the PO. And having it for the expense side. So it's very important that we want to make sure everything flows, there's no breaks because again, we have a public part of ours on the investment side.

But as well as it's important that our financials are true and everything like that. But it really makes it great for my accounting team, which is amazing. But as well as that we don't have any fear of what we're reporting. But then guess what, it's even better for our associates on site.

So that's what's the unique thing about AppFolio is that our teams on site can bring that -- have those same workflows where they're not diving into some other system to post something to do something else. Everything is within the same system. So guess what, everything is very workflow efficient for the employees on site. But the other win is same with the residents. And we'll get into the maintenance workflow, as Stacy knows, I think I did 7 stack partners and probably 6 Realm-Xs in less than -- it was probably 4 or 5 months.

And -- but again, the ease of rolling those out is because it's all within the same system. And so -- and then our teams on site, it was no disruption. I didn't lose leasing in the summer season, which is our busy season. We actually -- it's one of our highest NOI growth this year, and everybody is like what? Yes. So our performance, it came down to the results as well. But -- so the residents is easy. Obviously, the associates on site, it's easy. And then my back office accounting in Pennsylvania, they love it as well.

And that's important. Being a former controller, happy accounting people is a happy life. Is that the right way to put it? I think it's a good way to put it. All right. So you've done a lot. I'm going to stick with you for a while. Well, the impact, I think, is really important not only on the staff, but the residents and change management can be hard.

And so I want to transition and talk about, in particular, the maintenance performer. You are part of the beta group. And that's -- this is a new technology to everyone. So can you talk about that experience and especially with maintenance techs, which I'm going to make a generalization, are not normally the most tech excited about having new things and how does that work?

It was amazing, but I'll start off as that in the industry now, I consider our face of our communities is our maintenance because, guess what, so true. Everyone is renting online, they're signing their lease online. They might come and pick up their keys. That's basically you get Second Nature hooking up all their utilities and everything that they would want.

So there is no -- there is that connection to the office on some -- but majority of it is when they have a work order and they have an issue within their apartment. So that customer experience, we consider our maintenance or face of our communities. So when our maintenance have the maintenance ticket that comes in and having this workflow is very efficient, but we also added layers to it -- so they -- for follow-up for the residents and things like that.

So all of our maintenance teams, they have a picture of themselves on called a hide their card. And basically, they say, hey, they wrote in a little note and they leave it there. But with this workflow, we're able to add where they take a picture of what they said, "Hey, I fixed your garbage disposal today," and they'll look for what we call it one other thing, I recap your kitchen or did something else to go and next your degree. So they leave this on this note, and that's a picture of themselves and saying, hey, this is -- who is in their apartment. But within the workflow with -- we added this in staces like what.

So it flows back. So it's in the documentation of what was left, what was done in their apartment and then the communication back to the resident is great. So they -- we used to -- I was kidding about when we're sitting in the room that we had to call the residents and say, how was your work order and follow up.

And now it's all done within this workflow with the maintenance. So it's just again, your residents are satisfied, but then your maintenance, the easy of the taking of the picture of what the issues were and when someone is putting in the ticket, how the residents are putting the ticket, saying they saw where the leak was, where it was and be able to document it very seamless.

So it makes our teams very more efficient. So my head of maintenance is like how fast can we roll this out? So we did beta, obviously, because we're the beta. So we have the entire portfolio by the end of December on this, which is exciting.

I'm curious, what was your -- do you find any different feedback from your residents around that maintenance experience?

Yes. So again, you can have the surveys linked and then we are able to -- with -- you can look up Dream Live Prosper average, Google ratings are 4.8. So we really, again, focus on that building thriving communities to transform lives and then a resident experience.

So having that is huge, but we can have surveys attached where it goes directly to a Google review. There's some other -- just -- so it's another error in our quiver, I like to call it, is that just making that resident experience even better, and they can give us true feedback of what's going on.

Again, the only time they're really interacting nowadays is when they have something go wrong in their apartment. And how quickly you can respond and how quickly you can communicate back is key. So there's not anything else like it out there.

Now Stacy, I'm going to put you on spot. This wasn't in the planned questions. I know. No, but you were also part of the beta program for the maintenance performer. Did you -- was it a similar experience? Was there things that were different? I'm curious.

Yes. So with those 9,000 units, we decided to beta test this. As a growing company, one of the biggest things, obviously, is labor expense. We're a third-party manager. So profitability is based on a huge component of labor. And so we turned it on initially on about 500 units.

And within like I want to say, like 2 weeks, my VP of Maintenance was like, what else can I turn it on. And now we're at about 2,400, 2,500 units that the beta has turned on. And the feedback has been, I believe, from him, I've asked him before, I left yesterday, and it's -- I believe that it's that I'm going to help us grow with the team that we have because it's adding about 50% more efficiency to the intake because of the instant responses back and forth.

So the techs are not having to call before they go and be like, tell me more about your problem so that I become -- come to the property prepared. We are scattered site. So they're having to go to Home Depot before and during when they go. And this gives them a lot more visibility because of the pictures that are included during intake, a lot more description, but also takes that communication off of our maintenance coordinators. So they can work on like scheduling because we are a scattered site. We are scheduling based on geography and timing.

And so they work on the higher-level tasks and then the performer is actually doing a lot of the communication and kind of intake of all of the items. So it's one of the things when I say next year, we're looking at the entire process is also like how do we use this for turns and leasing and -- we are beta testing it on leasing right now, too.

Well, it's -- I think for the users, too, a lot of it is trust. There's a stigma sometimes around anything that's AI generated that, well, is it really doing what it's supposed to be doing? Is it a triage.

And so my assumption is based on the triage and everything it's doing and what your maintenance leaders are talking about is that, that trust is there that it will do the job it should so they can do theirs better.

His comment was, I think it's doing intake better than the maintenance coordinator.

I'll take it. So I want to stick with workflows, but I want to go to Realm-X flows in a little bit different of a spin. And Tony, you were and Atlas were one of the earlier companies that just started with Realm-X flows, and you had an amazing story around renewals. Can you share that with this group? And then what happened next as far as change management when it came to instigating the other flows you're using today?

Yes. So I think did we beta Realm-X renewals?

You did.

It could be in a beta too.

It's very fun.

Just say please.

Yes. So no, it's been fantastic. So when we rolled out the Realm-X workflows around renewals, really, it's this -- we've been like saying we've got to automate these processes. One thing to build a great process and then you spend all your time on process adherence. And when you automate the process, you don't have to worry about process adherence anymore.

So getting in front of the resident earlier, getting in front of the resident very consistently with those reminders through automation has helped us raise on our owned and operated portfolio, we're above 70% renewal rate.

Everybody measures that a little differently. We measure actual renewal rate based on the entire portfolio. We don't exempt anything. So when you compare us to the publicly traded REITs, it looks a little bit different. They're a little trickier with their numbers than we are. So right?

I won't talk about that. I was in the past.

So it's just -- everybody has a price denominator, right? So the fact that we've been able to push those renewal rates up above 70% across our huge. And the biggest differentiator is now when we look at the property manager, there isn't like this big difference between, okay, Renee in Las Vegas runs this renewal rate and Jesse in Phoenix runs kind of down here.

We've seen that even out because of the consistency that Realm-X creates for us. And going back to renewals, if you just do the math on an increase in renewal, if we -- when we looked at a 4% increase in our renewal rate, it equals out to just under 100 basis points of NOI, which that's very meaningful when you own and operate a portfolio.

Now can you tell us -- was it Renee? -- was she the one in Vegas? Can you tell the story of the contest?

Well, yes, so we ran a contest on renewals, and Renee always won the contest, right? And then we put Realm-X workflows in place and Renee was not very happy. So that's the end of the story. Renee is like, wait a second, I'm always the winner, and it's like, no, actually, now you have some competition, right? Because what Renee was so good at was every morning, she had her process. She sent out her 90-day and her 60-day and her 30-day and her 15-day, and she was very disciplined around that. Now everyone had the same discipline because of the Realm-X workflows.

And she didn't win the contest that yet.

She did not, Realm-X did.

Yes, that was not good. And what have you implemented at flows since then?

Yes. I think the next most impactful was the collections workflows. So we really do believe that your engagement with the resident makes a massive difference in all of your performance metrics. But again, you're relying on the variability of the individual human being that's trying to execute that task.

So we try to stay very engaged with our resident, form relationship with the resident, and that should drive better outcomes. But automating collections, those quick reminders, hey, your rents due in days; hey, your rents due today. Hey, we see you haven't paid your rent. Hey, we really love for you to pay your rent, right? Those kind of interactions are now all automated and our collection rate within 60 days of delinquency has shot up by about 30%.

And that's very, very meaningful. Once you're past the 60 days, it's much harder to collect. So we're doing it both on current residents and residents who've moved out. and we're able to return more of that revenue back to the owner.

And then we, as a management company, earn income off of that management income. So it's very, very meaningful the way that we've been able to automate those things. And we've been able to actually grow the portfolio sizes of our teams.

So there's kind of -- in property management, particularly third party, there's kind of this myth that if you get above x number of doors per person, the whole thing just falls apart. It hasn't been a myth. It's kind of been true. And we've been able to push beyond that number because of these automations, which that just makes us more efficient and more profitable.

Well, that's a great segue to Josh. And you -- your business model, you run it a little bit differently. And can you explain how Realm-X flows enables that business model and how it engages with the residents today?

Yes, absolutely. So we use Realm-X in a lot of areas, just like Tony alluded to. There's so many mundane things that our team was having to spend time on, whether that's delinquency follow-up, leasing, just simple communication with residents you can automate that you're doing every single day.

But the cool part about that is it removes all that from the workload of that team member. So you free up that team member to think creatively. We're a very experience-related company.

So I'm thinking, okay, what do we do at this time? So we've implemented community events where we have all of our communities come together, right? So we'll do like a cookout or we're doing a big turkey giveaway, getting our residents out of their homes, getting them connected in this world of AI technology, which is great.

We want to still figure out how do we bring everyone together, increasing our renewal rates, right? Making people want to live there because of their maintenance technician, making people want to live there because of their friend, Bob, who lives 2 doors down. By taking away workload, we increase the responsibility of our team, which makes them feel more challenged, which makes them develop, which makes them take on more responsibilities.

And hopefully, like I said earlier, giving back more to that community so that the community feels valued so that we drive up renewals because renewals are king, as Tony said. So for us, it's just how do we do more of that? When we think about 2026, we want to continue to invest in our communities. We spend millions of dollars each year on making our communities look great.

And it's freed up our leasing agents or our sales team to be able to spend more time on what the focus difference is instead of, is this upper lower? Does it have laundry? Do I have a garage? What's nearby? Like that's slowing down the leasing agent so much, but it's also draining for that leasing agent because most people in sales are very eccentric outgoing and what do they not want to do? -- repetitive tasks. So it also allows them to be great at what they're naturally gifted at, which has helped drive up our occupancy rates, which has helped increase our team's dynamics in terms of knowing, hey, I don't have to do that stuff anymore.

AppFolio has allowed me to focus on what I truly love to do, which is selling, which is telling people why they should rent from focus, why it's different from renting from anyone else. I mean we do things like we stripe our lawns, we edge our lawns. We have sense in our common areas. We have a barefoot trash rule we have.

Instead of telling them upper lower, they can focus on those things, which I think really engages the resident, gets them excited and gets them in the door to allow us to prove ourselves.

Well, it's not only that, but it's -- I don't think -- tell me if I'm wrong, that you're not hiring staff based on their e-mail response rate. You're hiring them because they're good with the community, and being able to lift that technology or lift that task away and give them the ability to focus on the -- I love the bare foot to the trash, by the way.

Can that be done in a single-family home like mine because that'd be great. But I think that's amazing because that must increase employment engagement as well.

100%, yes, our retention rates are below 30% for the last 3 years. And in our industry, that's very strong.

Actually, really good.

So I think it's just giving people business ownership. I talk a lot about this, right? Like you should show up to work every day knowing what success looks like in your job. And if you can't answer that question without your boss telling you, then I don't think you're very aligned with our principles or our values of our company.

So a quick story. For example, we hire maintenance technicians that have 0 skill on how to fix anything. People are like, you're nuts, why would you do that? If they have the right values, we can teach them those skills, whether it's HVAC, plumbing, electrical, whatever the case may be.

What I can't teach you is how to move with speed, how to provide an unparalleled experience, how to uphold our standards. But AppFolio allows us to do that because we know where we're spending our money. We can look at percentage in-house versus out of house in our GL accounts and say, "Hey, we're spending a lot on plumbing." So we need to spend more time skilling our team up in that category.

And by doing that, it allows us to then be able to develop that team member so they can do more, and we have less vendor usage, which obviously helps drive up our profitability.

Change management isn't always rainbows and lolly pops. Stacy, you and I know. We've been at companies where we've had teams that have 3, 4 generations in the same team. And also just what does change management even look like because as we'll talk about accounting, controller wants to know what their third Thursday at 11:00 a.m. is going to be like every single month, right? There's routine.

Talk to me about the change management when Realm-X flows was implemented and how that sort of transformed the mindset of some of your employees at Fairgrove.

Yes. So a little background. upon joining the company, I had been with some pretty tech-forward companies in the past and went in like, okay, let's go and like people process tech, let's -- I just was told, hey, it's going to be process and tech, right?

Let's do it. Let's grow. And first things first was I inherited a team that, one, in California, we have a rule where you have to have an on-site manager at anything that's 16 units and above.

Our average building is about 20 units. And so I have a very large part-time staff in addition to a staff that of our portfolio managers, regional managers that are -- haven't been as exposed to technology as some.

And so it was a little bit of -- there was a tech deficit for sure, but also like -- they just didn't want to use any new tech. They were scared. And so went through this piece when we upgraded to Max maybe 18 months ago of how am I going to get them to adopt to Realm-X flows, which I knew was going to be game changing.

And the conversations that I had with our technical account manager was where we've seen success is in the small -- like small little things rolling out first where you're taking something off their plate and they don't even know it. And then you get to market that to them, hey, we've done this. We had rolled out OKRs for the first time that year.

Delinquency was at top of mind. And so I picked that flow, the delinquency workflow. And we just started doing the communications that Tony was talking about. And last night, I went back to our OKR dashboards to find out like the results, I don't remember from a year ago. And even to myself, I'm surprised because I know there was a huge win in this, but we started in November.

And by February, we had decreased by 50%, a little over that. And we picked a couple of portfolio managers who are a little bit more tech-enabled and willing to test this. And then because we were producing the monthly results at our all-hands meetings, it was being advertised that now they were doing nothing new that all of a sudden winning.

And so instantly after first month, I got half of the company being like, can you roll me into that. Within 4 months, I actually started testing the lead nurturing flow. And then because of that instant adoption and the win on delinquency, I had our most tech-averse, change-averse regional manager immediately say, yes, when I offered up to enroll him into the lead nurturing flow because his leasing team was having a challenge.

He's, yes, just roll it can't do any other damage just do it. To now, 12 months later, one of our change coalition, we talk about change management. So we have a policy on change management, and we put together change coalition. And then later is a regional leasing manager and she came to me. She's like, so I've been investigating this new flow.

And they are actually now coming to me at flows that I -- we haven't talked about and wanting to implement them as part of their change management in their SOP processes. So it's kind of night and day difference, but having the ability to be super flexible in those flows and only turn on certain pieces first really allowed us to kind of get that adoption and kind of that win from them.

And then now it's like there's just instant buying where everybody is like, okay, yes, I just do it or they're finding it themselves, which is even better.

I love to see -- because I've been in this industry forever, I love to see the change in that mindset because it changes the mindset in performance, performance of the asset, performance of the human, performance of the resident and how embracing these things that have been harder in the past changes the business profile altogether. So thank you.

No, no. And just to say like AppFolio also has really great pieces of video content. And so at our regional manager offsite a few months ago, I knew performers was coming out from conversations with the team. And I just put a couple of videos that were shared with me to the team of this is coming.

And then even before I've implemented, they're like, so when is that coming? Like -- and so like that they are now seeing what's coming out and reaching out to me, so when are you going to like put that performer on leasing? Or when is it going to do a little bit more?

So it's just that partnership with you guys. It's been great because it's really been difficult for our team to adopt new technology in the past. And over the past 12 months, I've seen a night and day shift.

That's awesome. And speaking of partners, I have one last question for each one of you. Why do you continue to have AppFolio as your long-term partner? And I'll start with Rob, and we'll go all the way down.

Yes. So again, we measure and have data for everything. So one of the most -- the biggest reason is, obviously, I started in November and get the adoption and get everybody on the same purpose. So what was unique is we do an eNPS score. So it's not your employees that if they're happy is if they're fully engaged into your purpose, your mission, your vision and all the things that we are able to do and roll out with AppFolio was all so they can be part of that.

They understood that it was part of that mission and vision. So like for a world-class organization for eNPS scores, I'll give you some other scores first. So Greystar is like at a 14 and goes to a negative 100 to a positive 100. And you've got, I think, asset living is a negative 10. So these are large management companies that aren't very -- a little different from others.

So us, we're -- as a world class is over 70, we're 72. And us measuring that in June after we've rolled this out, are -- again, that's why AppFolio works. Our employees are engaged into our mission and vision of building thriving communities to transform lives, and they have the time to do that.

They're not sitting there doing the mundane tasks and they can focus on it. So that's the huge -- it's just a massive difference in what we're doing.

Our score was -- our score is 73...

Good try.

[indiscernible] what was the denominator there. I think for us, just knowing that -- sorry if I'm glitching. Can you guys hear me right? I think just knowing how aligned we are and we deal with a lot of vendors in our business. This is a partnership for us.

So we have gotten new experience, just tremendous leadership, tremendous engagement from AppFolio. When we run into a need, we manage institutional capital for large LPs. We have reporting requirements. We just have a lot of things we have to adhere to.

When we call AppFolio and we say, "Hey, we need your help with this, they help." And I think that's just a massive differentiator that we feel like we're being listened to or heard and even thoughtfulness around -- we had an interaction the other day where we said, "Hey, we need this." And the response to AppFolio was, I can see why you need that.

But have you thought about these other things underneath that are probably causing you to need that. And like that level of engagement with our business and with our team is so meaningful for us. So just a belief that we share the right values that they're engaged in our success makes it really easy. I think the other piece for us is knowing that AI is native to the process -- native in the software, it's native. We're using AI across our organization, but knowing that it lives within AppFolio is very meaningful to us, and we can see in the future what that's going to mean long term.

Josh?

I think all of us can say this, it feels like we're a partner, not a customer. And I would say that's probably the biggest win in working with AppFolio. We've had it since inception. But speaking with other property management companies, the support we receive in comparison to what they receive, it's almost laughable. [Technical Difficulty] are incredible. Any time I like [Technical Difficulty] works for you. And they're always readily available to understand how it impacts our business because we operate much differently.

So hey, this might be a good product for you guys to try. Or yes, it's not quite there, but I think it's going to be there, and this is what we see coming. They kind of give us the behind the scenes look so we understand don't make a huge process change because this could improve the process 6 months from now.

That's very helpful. I think the biggest thing is we feel valued, we feel heard. And I always say, say this all the time. I understand everything can't change tomorrow, right? But I just want to know what's coming so that I can understand how to best prepare my team and business for it. And I think AppFolio does a really great job of that.

All right. Stacy, wrap us up because there are some questions.

I was surprised they asked me to be here, to be honest, because I haven't always been a promoter, right? Like I came in almost 2 years ago, never having used AppFolio and assuming that it wasn't going to work for a scaling company. And they invited me into the Customer Advisory Board to learn more. And not only that to expose me to like what was up and coming.

And one of the things that I'm hold them accountable for is the time line because like we want to grow fast. And they delivered on a time line that I was really excited about in the first year. So we actually, within about 4 or 5 months, I actually signed another 2-year contract with the goal of learning more in that 2 years.

And during this past 2 years has been game-changing in that I went from maybe a detractor to a promoter of the business for 3 reasons. I'm going to say I went out in the field the first 3 months that I was at Fairgrove and all I got was positive feedback about the user interface from an on-site management team, our maintenance techs super user-friendly for those entry-level folks.

Second, I got to know the people, and I have never experienced a partnership in software like this and I've been in the business for 30 years. And so not just on the business side of things in the sense of these are the things that you can do to improve your business or wait for this.

But during that kind of first year, we went through a lot of growth and change and Shane made the time to sit with me for over an hour one day and talk about how he's handled change management with people in the past and really like work through business problems, not just technology problems.

And that's what you -- when you say partnership, that's what we're talking about is that people partnership that is like makes them sticky. That is the piece like technology is great. They've delivered on the product. I can see the future. You tied into your conference there. You see the future.

But I think that the other piece is just like the people on our account are amazing. The relationships with the product team, they come to -- were in my office for 8 or 9 hours last week, right, like telling us what's coming up next year based on what our initiatives are for next year.

So I think that there's a lot of like great things, but most of all, just like this partnership is something I haven't experienced before with a software vendor.

Thank you so much. Do we have time for questions, Lori? Do we need to move on?

So we're going to open up to questions. Lori's got the microphone. We're also taking questions online.

Great. And will you say your name and affiliation before the question.

Jason Celino from KeyBanc Capital Markets. I think it's Tony who's using Second Nature. Just curious how many of your residents, whatever the term is, are utilizing Second Nature today and how that's expanded? I imagine you only have an opportunity to sell Second Nature when the unit turns. Or is that something that you can do intralease?

And then for the other panelists, if Second Nature is something that you'd be interested in implementing in the next 12 months?

So we'll start with the timing, we'll start with Tony really quick, and then you can just raise your hand.

Our adoption rate -- our adoption rate across our own portfolio is 100%. So we require Second Nature as part of the lease signing process. And then our adoption rate on the third-party portfolio is in the mid-40s and grows -- I think we started at 0 and at renewal is when we're offering that up to residents.

And for the most part, they're taking advantage of it. Did that answer your question?

Yes. We're rolling it out in first quarter. So we're doubling in size by the end of the second quarter. So it's just a process. We want to get it in before we double in size.

Stephen Sheldon from William Blair. Maybe as we think about -- you guys all kind of have large and growing portfolios. So I guess, are you using AppFolio as the core property management system across your whole portfolio?

Are you using competing vendors as the core system anywhere else? And as you kind of grow and expand your portfolios, would the plan be to pull those units into AppFolio? Just maybe talk about how top-down your tech strategy is and how you might expand with AppFolio over time?

Do you want to go with that one?

So we're exclusive. So again, we're only going to use AppFolio. We don't use any -- again, we're owner manager. So we want everything to be consistent at every -- we have scattered sites. We have multifamily 300 units, I have high rises. So it's just, again, for trainings and things like that, but the use and you're doing your policy procedures, everything is the same.

We also exclusively in AppFolio as system of record and increasingly as kind of system of action. So the stack partnerships are really meaningful to us. And we utilize the stack partnerships, but our intention is that we do everything within AppFolio that we can. And that really goes to the property manager and the resident experience is simpler when we can use one system.

So we got to go. As always, the customers, we take the most time. Can we give these guys a round of a plus, please? You guys can head out that way. And then I -- it is my job to introduce to you our CFO, Tim Eaton, who I think is going to go over what everybody has been waiting for, this entire time.

Thank you so much for listening to our customers today. We are customer obsessed and the partnership with all of these companies are strong. Thank you so much. Have a great day.

On that, I have 2 clickers. I'll give you yours back. Good morning, everyone. Please give it up for our customers again, we're so grateful that they came to see us here in Santa Barbara, and we welcome all of you to Santa Barbara.

For folks who are here in person and those who are joining us online, thank you for your interest in AppFolio. We're thrilled to have you here and to share a little bit more about what we're thinking about. So you've heard a lot today.

My goal is to translate the things that you've heard into our financials. After that, Shane, Kyle and Lisa will join me up here for some Q&A. So with that, let's jump in. To orient our discussion today, I'd like to start by sharing AppFolio's financial priorities and how we will deliver shareholder value in the years to come.

First, revenue growth, specifically by driving unit growth through new business and customer expansion with high customer retention, accelerating premium tier and value-added services adoption and scaling our resident industry segment.

Next, margin expansion. We will prioritize profitable revenue growth. We are not pursuing growth at all costs. As we grow, we are focused on unit types, value-added services and industry segments that are profitable, drive both our top and bottom lines and reinforce customer acquisition and unit expansion.

We focus on continued operational discipline across our entire P&L, including sales and marketing, R&D and G&A. We will continue to drive operational efficiencies and scale profitably. We will invest in high ROI opportunities.

There may be circumstances that warrant increased investment to deliver strong ROI over time. We seek out these investments and are willing to invest when the ROI is attractive.

Third is capital allocation. We will prioritize organic growth while thoughtfully considering inorganic opportunities that are aligned to our mission of building the platform where real estate comes to do business. We will maintain financial flexibility with an appropriate level of liquidity in order to opportunistically invest. And we will execute opportunistic share repurchases at attractive prices to drive long-term shareholder value and manage dilution. All of these priorities collectively drive an important financial outcome, growing operating cash flow per share.

We believe operating cash flow per share reflects the underlying economic engine of our business, making it a clear indicator of long-term shareholder value creation. This outcome encompasses our focus on driving units, revenue and margin into a single metric that measures the value we are creating for shareholders. First, let's talk about revenue growth. Our midpoint guidance for revenue in 2025 is $948 million, double what it was in 2022, growing at an average rate of 26% since 2022.

This revenue growth is driven by the strategy that Lisa discussed during the go-to-market section. First, acquire new customers, make it easy for customers to adopt product features and workflows; help our customers grow, retain our customers and turn our customers into advocates. I hope you got a taste of that during the customer panel today.

Now let's double-click into the drivers of our unit and ARPU growth. Units are the most important driver of revenue growth at AppFolio and increasing units is our #1 priority.

A few things to note. We are focused on residential units. In 2023, we deprioritized building for pure-play community associations to focus on residential units because residential units generally have a higher attach rate of value-added services and higher ARPU than community associations. You can see the residential units are driving our overall unit growth, while CA has slowed.

We still have a material number of community association units, and we'll continue to win CA through mixed portfolio customers who have both CA and residential units, but we are not focused on pure-play community associations. Our residential unit growth is balanced across market segments. We have historically focused on SMB, and we continue to perform well in this segment.

We are also increasingly adding upmarket customers with larger unit portfolios. As we grow, we want to ensure we don't sacrifice the low end of the market in our pursuit of larger customers. As Kyle discussed, we are focused on building features that can be utilized across market segments, but will allow us to increasingly win upmarket. Broader macroeconomic conditions may impact organic unit expansion, but we have a resilient business that can excel in a variety of environments.

The past 3 years, organic customer unit expansion has been low compared to historical levels. We've seen some modest improvements in organic expansion from our existing customer base the past few quarters, but our units are growing primarily because we continue to land new customers. We are a resilient business, and we can win in a variety of macroeconomic conditions.

Now let's turn to ARPU. Since 2022, our average revenue per unit has grown from $66 to $103. We continue to grow ARPU faster than units, driven primarily by value-added services, which are growing at an average rate of 21% per year since 2022. We are also seeing property managers upgrade to Plus and Max, the premium tiers of our product.

We expect our ARPU to grow as we continue to add value-added services, scale our resident industry segment offerings and customers upgrade to premium tiers. Speaking of premium tiers, customers continue to adopt our Plus and Max tiers. Today, approximately 1 in 4 units are on a premium tier compared to 1 in 10 in 2022. That is a 40% average growth rate since 2022 of our premium tier units. Our tiers allow us to group our product offerings based on size, scale and complexity of customers. So as our customers grow, we can grow with them. Premium tiers are typically adopted by our larger and often more sophisticated customers that desire more flexibility in how they operate their businesses.

Our premium tiers also provide flexibility in how we price and package new product offerings, giving us the ability to embed functionality within our product tier or sell it a la carte. We are seeing ARPU growth across our entire customer base with our average customer growing ARPU at 11% year-over-year to $103. This average is the same as our lowest 20% of customers who are also growing ARPU at 11% year-over-year to around $40.

These are often customers with portfolios that are highly concentrated with community association units and have a lower attach rate of value-added services. We are seeing stronger growth across our top 20% of customers whose ARPU has increased 17% year-over-year to $160.

These are customers who are often early adopters of new value-added services and premium tiers. As we innovate and release new products, we will continue raising this range. We still have room to expand our ARPU through our premium tiers, scaling our resident industry segment offerings, AI performers adoption and increasing the attach rate of our existing value-added services.

The AppFolio performance platform will provide us a variety of ways to increase ARPU through various value-added services within the system of record, system of action and system of growth. When analyzing the opportunities from our existing value-added services, AI performers, premium tiers, new resident initiatives and other industry segment expansion, we believe the long-term ARPU potential is significant.

This will take time to realize, and it won't happen overnight, but we know the opportunity is large, and we are well positioned for continued ARPU growth. Now let's discuss margin expansion. Let's take a moment to reflect on our progress since 2022. In 2022, we had a negative 1% operating margin.

In 2023, our operating margin improved to 12%. And in 2024, we improved to 25%. In 2025, our projected midpoint is 24%. Our operating margin percentage has declined slightly year-over-year due to reasons we discussed during our last earnings call.

This is primarily driven by the acquisition of Liveasy in Q4 2024, payments mix and expected corporate incentive plan attainment. While the percentage has declined, our projected operating margin dollars are expected to increase to $227 million or up 14% year-over-year. This progress is not the result of a single decision or initiative. It's a collection of disciplined decision-making over time.

This improvement has made us healthier, given us financial flexibility and allows us the ability to invest in high ROI initiatives. Now looking to our cost of revenue. As a percentage of revenue, our cost of revenue has improved from 40% of revenue in 2022 to 35.7% of revenue year-to-date in 2025. Our cost of revenue is driven by a variety of offsetting factors.

Headwinds include product revenue mix, specifically around various payment types, corporate incentive plan attainment and increased data center spend to support our customers' growing usage of our AI product capabilities. Tailwinds include cost of revenue operational efficiencies, such as embracing AI for customer support, business process outsourcing and early scaling of new product revenue. We continue to balance these headwinds and tailwinds to identify and implement efficiencies to improve our cost of revenue, but these efficiencies often take time to realize.

Now looking at our operating expenses. Our operating expenses as a percentage of revenue have improved from 60.5% of revenue in 2022 to 39.6% of revenue year-to-date in 2025. We've seen this efficiency across all areas of the business, sales and marketing, R&D and G&A and is the result of continued operational discipline from rightsizing our workforce to driving efficiencies in how we work to utilizing AI and business process outsourcing, we are more nimble, agile and productive in how we approach our work.

We continue to invest, but we prioritize the highest ROI opportunities that drive both the top and bottom lines. You see the efficiency of our workforce when you look at our revenue per headcount. In 2022, we ended the year with 1,785 employees and an average revenue per headcount of $264,000.

In 2023, we rightsized our workforce and have been disciplined in our growth since then, focusing our hiring on key roles that drive innovation, revenue and meaningful customer impact.

At the end of Q3 2025, our headcount was 1,703, lower than the end of 2022 and revenue per headcount was $532,000, double what it was in 2022. As we look forward, we will continue investing in roles that drive innovation and revenue, but we expect headcount growth to be modest. Now let's talk about capital allocation. Here are our capital allocation priorities.

Our first priority is organic revenue growth. This is investing in the product capabilities you heard about from Kyle and the go-to-market initiatives you heard from Lisa. Investments in organic revenue growth allow us to continue to grow units and monetize those units effectively. Our capital structure allows us to fund ROI-generating initiatives while continuing to generate healthy operating cash flow. Our second priority is inorganic growth.

This includes M&A such as Liveasy and minority investments such as Second Nature. Our M&A strategy is centered on accelerating our product priorities, owning critical moments that matter for our customers and entering new industry segments. We thoughtfully consider opportunities that are aligned to our mission of becoming the platform where real estate comes to do business.

Our third priority is returning capital to shareholders through share repurchases. In 2025, we repurchased approximately 689,000 shares year-to-date and have approximately $250 million remaining of our existing repurchase authorization. We will continue to opportunistically repurchase shares in order to manage dilution and drive long-term shareholder value.

Revenue growth, margin expansion and capital allocation all work together to drive an important financial outcome, growing operating cash flow per share. We believe operating cash flow per share directly reflects the underlying economic engine of our business and we have seen notable improvements since 2022.

In 2022, we generated $25 million in operating cash flow or approximately $0.72 per share. In 2024, we generated $188 million in operating cash flow or $5.12 per share, more than 7x the cash flow generated in 2022.

Through 3 quarters of 2025, we've generated $177 million of operating cash flow or $4.87 per share, and we still have 1 quarter remaining to add to that total. Now I've heard many of you ask about our long-term operating plan. We aren't ready to share numbers or time lines.

But as we consider the future, operating cash flow per share is a metric that will help guide our priorities and decision-making. Now to bring it all together, our strategy is simple. We are focused on differentiating to win within the market. We do this by delivering the AppFolio performance platform, which includes the system of record, system of action and system of growth.

When we do this, we win more customers, grow units and monetize those units by delivering exceptional customer value. Next, we deliver performance efficiently. By scaling our operations, focusing on margin expansion and prioritizing our highest ROI opportunities, we will grow revenue faster than our expenses and improve our operating cash flow. And last, but certainly not least, our great people and culture are the foundation for our success. These strategic pillars drive us towards delivering our vision of powering the future of real estate.

Thank you, everyone. I'll now pass the microphone back to Bill, and we will move on to Q&A with the executive team.

Great job. I'm going to say a few words as we get settled. Can everyone hear me? Great. It's really not you all that I'm worried about, it's folks on streaming.

So thanks, Tim. We're now going to move on to what is secretly my favorite part of the program, which is Q&A. I talk to many of you quite a bit. So I'm happy to be joined up here with Lisa, Shane, Tim and Kyle. Just really quickly in terms of how this is going to work, we're going to take questions from the room. We're also going to take questions from those streaming.

Lori is going to help facilitate in-room questions. Carolina is going to help with the streaming queue, okay? The mic matters. So wait for the mic to speak. That's how folks streaming can hear you. We ask one question at a time just for the interest of time so that folks have a chance to ask.

We will make rounds again for any follow-up questions or additional questions that you might have. And we'll see how this goes. So we'll get it started. I'm going to be up here with the team. I will maybe ask clarifying questions based on your questions. I'm not going to repeat. So just for efficiency's sake, so please speak into the mic. So we'll get things started. Lori?

Sorry, I guess this is the trivials of sitting in the front. So I guess keeping to my question earlier, Second Nature. So it sounds like that's just one arrow in your quiver of growth -- ARPU growth opportunities. It doesn't sound like it's the sole focus. So I know it's small today, but how should we think that layers in or grows over the near term, call it, 1 to 3 years?

I guess I still have this one. Jason, thank you for the question. We do believe it's one of, call it, multiple arrows within our quiver in terms of adding value to customers. As we think about the resident opportunity specifically, you heard the resident journey that Kyle outlined.

If you think about the resident experience, they're looking for apartments, they find one, they want to schedule a showing. They might use a Realm-X performer to schedule that showing. They go through, they want to apply. They began a security deposit. They ran a background check. They move in with resident onboarding.

Then they move in and they live within the unit and they talk to maintenance performers and have those other types of interactions. When we think about Second Nature and more holistically, the whole resident journey, there are opportunities to add value at every point in that journey.

And so when we think about what the opportunity is, is we want to help make sure that, that entire journey lives within AppFolio. You heard that in the customer panel, how much customers value having that within one platform. And so we're not going to provide any specific numbers, but we know that the opportunity is large, and we're excited to add value at every point in that journey within the AppFolio platform.

And that's really what it means. When we talk about creating value, unifying the experience in the moments that matter throughout the entire journey of the resident, that's one version of the value. And so unifying that experience where we create that value means our customers never have to leave AppFolio to get value in those moments that matter, and that's where the opportunity is.

Alex from JPMorgan. Tim, I was wondering if you could talk about long-term guidance. In the past, you used to provide free cash flow outlook. Now that you've mentioned free cash flow per share is an important metric, are you going to return to free cash flow guidance going forward?

Yes. So we're evaluating our approach right now for 2026. So we're not sharing any 2026 guidance recommendations for today. And we'll discuss that more in January. But it is an important metric for us. It's something that we're thinking about and something that we're analyzing decisions kind of through that lens. So we'll have more to share in January, but it is an important thing that we're thinking about a lot.

And a quick follow-up on one of the slides that I'm missing from today's presentation about share of tenants. How much are they in total revenues, tenant fees or tenant payments?

So I believe our last -- the last -- can you clarify your question? Is it specifically around resident payments?

I have a slide where you had split of revenues between tenant contributions versus property manager contributions. Can you update us on that?

Yes. So we don't have any specific updates to that specific metric. But as we go, it's in the early days of resident revenue, as we discussed, and we anticipate that, that share will increase over time. We don't have any updates to that ratio to share today.

Hello. Thank you for the time. As some of you already know by now, I'm from Brazil. And there, we now have what we call Pix, which is a government-supported payment system that's very low cost and very efficient and everyone uses -- and it has really changed the mindset in the country.

People, the citizens, they don't expect to pay fees for any kind of payments anymore because it's really affordable, free and works. So my question is, if that comes to happen here in the U.S. like -- and people -- the renters, they start not accepting fees for payments anymore.

So I cannot pay a fee for -- to pay with card for ACH. That's a big part of your business model. How do you adapt to that? What's the risk that you see that happening? And how do you adapt your business model in case that happens over the next 5, 10 years?

Yes. Thanks for the question, and thanks for visiting us from Brazil. Welcome to Santa Barbara. First and foremost, across our payment stream, there are a number of ways where residents won't be charged for payments. So if you're a Max customer, ACH is included, that certainly is one way to do that.

We have a number of property managers that have a buyout option to be able to do that, to offer that as well. I think if you kind of step back and look at our vision, what we're really doing across the property manager and the various industry segments, whether it's investor, vendors, residents, someday potentially brokers, we're creating lots of different pools of value where we not only can grow, but we can also absorb changes in the model while we still continue to grow.

And so that's the whole idea where we are no longer kind of dependent on any one revenue stream to continue to grow and have long-term sustainable success for AppFolio.

Great. And our next question will come from the virtual audience.

And the question comes from Ryan Tomasello at KBW. Upmarket unit growth looks like it has slowed a bit this year.

How much of that do you attribute to the macro? And how comfortable are you in the company's ability to unlock more unit growth upmarket going forward? How are upmarket win rates trending?

I can jump in on that one. So this year has been an exceptional year for new business unit acquisition for AppFolio. We are very proud of the ability to land new customers and our results in that area. We do look at the macro. We discussed that kind of during the presentation, and we see that typically play out in terms of net expansion or organic expansion of our existing customer base.

But we're very pleased with our progress in terms of landing larger customers and increasingly moving upmarket. We don't share our specific win rates in terms of upmarket, but we're very pleased about our progress in that area.

I can just add on the product side that the investments that we are making are meant to serve our playground across both SMB and upmarket. We believe the performance platform is very well suited to drive return on investment for operators, and we see that as one of the biggest reasons why they're going to purchase software or purchase AppFolio in the future.

So that includes all the different systems that we're aligning around system of record, system of action and system of growth to turn AppFolio not just into a cost center, but a revenue driver for large customers as well.

Stephen Sheldon, William Blair. So thanks for doing this. I guess, first off, I don't think I said that yet, but I wanted to ask about -- we had a lot of customers up here talking about the utility they're getting the efficiency gains. I guess from your perspective, how do you think about being able to capture some of that as AppFolio? I don't think you guys would typically push pricing. You've got a lot of new solutions you can sell. I guess, how do you think about pushing the monetization and the ARPU within this? And is pricing something that you might start to push a little bit more than you have, at least historically?

Yes. From a pricing perspective, I think in the past, and this is more than 3 years ago, we used to do kind of annual price increases. And what we learned, one of our top values is listening to our customers is in our DNA. And what we learned is that was really problematic for our customers. And so we've really changed that, and we've aligned kind of an annual increase or a term increase aligned with their agreements, so they have predictable expense going forward, and they can plan for that.

I think for us, it's really about units on platform. We've highlighted how important that is for us. And then ultimately, how do we create happy and growing customers with very high retention. We know and we've kind of stated this, we're very focused on aligning the value we deliver with the value that we capture. And so we'll always be very thoughtful about the different value pools that we're creating and customer value we're delivering. And we know that we have opportunity to capture that. And there will be times from a competitive perspective or to find more unit growth that we may make different decisions. We may include it in a premium tier. We may look at that and say, "Hey, that's a value-added service. Let's take advantage of that. And we'll do that thoughtfully over time by really listening to our customers and making sure that we're driving the right outcomes, which is, hey, we want to be a customer for life of AppFolio. We want to expand our units on platform and ultimately bring our residents and investors and their whole ecosystem on to have a great experience.

Got it. That's helpful. Maybe just a quick follow-up for Tim on gross margins. There's a lot of competing factors there that I think you highlighted. I get that you guys aren't giving long-term kind of margin targets. But just how are you thinking about the trajectory of gross margins as we think about the next few years with all of those puts and takes between payments mix, between higher AI data center costs. Just any context on how we should be thinking about gross margin trends?

Yes. Well, I think you said it. It's -- we have a lot of different factors that are kind of offsetting. So you have some headwinds and you have some tailwinds, and we're constantly looking at how we balance that. So we don't have any specifics in terms of a specific target that we're trying to achieve within a certain number of years. But we're always looking to identify ways to improve that gross margin and really centered around that customer experience as well. So as we think about AI efficiencies or business process outsourcing and everything else, we want to be very thoughtful that the things we're doing don't compromise that customer experience, and we can still create advocates from our customers so they can help us continue that flywheel of new unit acquisition.

And we have one more from the virtual space. And this is from Jeffrey Nathan, Rockefeller. Can you talk about how much you can drive penetration in Core, Plus and Max? What are some ways of thinking about longer-term penetration opportunity for the Max tier?

Kyle, you want to take this one?

Yes, I can take this one. So we think a lot about product-led growth as opportunities to get people to begin adopting the tools that are available in the Max tier. Some of the big drivers there are leasing CRM, pricing tools, and we see a lot of data access tools as well. So as customers get into Plus, we find opportunities to be able to really have them codify their business, use Realm-X Flows. And as we think about Max and the trajectory moving forward, we have opportunities to really level those tools up to be able to extend further, go beyond just flexibility into customization. And we're thinking deeply about how do we work hand-in-hand with customers, not only on the tools that they need within our upper tier, but also the change management that's required for them to really be successful in adopting all of these different software functions that we're bringing to market. So it's a combination of really guiding them within the product, it's showcasing the return on investment, and it's working hand-in-hand with our customers on the change management to upgrade tiers.

I would also say when you think about the upmarket sales capacity increase that we talked about earlier, as we bring on new units onto the platform and increase upmarket unit acquisition, we'll see an increase in Max tier adoption as well.

I mean to risk piling on here, to answering that question, one of the exciting things we see within premium tiers as well is that customers who sign up for premium tiers often attach other value-added services too. So it's not just about the tier adoption. It's about the total economic value of that deal and of that particular customer. And so this is to what Shane talked about earlier, we think holistically about the deals in terms of what they would be signing up for, not just core revenue and value-added services separately, but holistically, what are the customers signing up for in context of their entire portfolio.

I think you heard Stacy Winship from Fairgrove talk about this. When she came in 2 years ago, she hadn't had experience with AppFolio. And she had thought, hey, is AppFolio really a platform for a company our size and growing? And we've made a tremendous amount of effort to make sure that our platform scales with our customers, so they never outgrow us. But a part of that is creating these premium tiers. So wherever you are in the journey, we can match the size, scale and complexity of those customers. And as they grow, we can grow with them. And Fairgrove is a testament of that, and you heard Stacy say that.

J.R. Herrera, Piper Sandler. Thank you so much for putting this all together for us. I'd say you've done an impressive job on the ARPU side over the years, and there's no shortage of ways for you to sustain that going forward. But the unit growth is the tide that lifts all the boats, right? And that's showing signs of acceleration while existing expansion remains largely muted. So maybe frame how much upside could come from a resurgence there on the existing expansion side? What could potentially spark that? And what are you doing from your perspective to drive a better 2026?

Yes. I would say our guiding principle on this is we focus on the things that we can control. So we can't control the macroeconomic environment, but we can control the value that we're delivering for customers, and we can control new business unit acquisition and going out and landing new customers and aligning our go-to-market initiatives and our product capabilities to do that. So that's our focus. I mean our dream scenario is to have new business unit acquisition fire on all cylinders and that expansion improve as well. But we're going to focus on what we can control, which is new business unit acquisition.

Add to that on the list of things we can control seamless onboarding, making sure that when customers are ready to add to their portfolio, we're able to do that in a way that gets them value immediately. And we think that that's a major way as we move forward and folks are looking to kind of expand their portfolios. I'd also call out our bets in mix portfolio to make sure that we can support all the different property types that investors may be wanting to go out and to purchase so that as customers continue to grow, they can do all of it all within AppFolio.

Sorry, me again. The 50% sales capacity increase over 2 years, I thought that was pretty interesting given headcount has been pretty flat and your sales and marketing expense has been only up 30% over that period as well. So I guess where are you getting the extra capacity from capacity is heads in quota? So is it mainly come from quota? And then how do you feel about sales capacity going forward? Like is that something that you're focused on for future years?

Well, I think it's both things, right, both quota-carrying headcount and capacity within the current headcount. We talked a lot about sales productivity. And when you think about being in vertical SaaS as well as like the differentiation and innovation that we're bringing to market, this high engagement of both the buyer's network and the buyer group, coupled with our insights from data around propensity to buy and this very high fit customer, I think we're seeing increased capacity and productivity in our execution, so both.

Great. Our next question comes from the virtual audience. Zachary Olson, and he says, thanks for the time today. When can we expect a medium- to long-term growth and margin guide? What are you waiting for and looking to see in the business before committing to financial targets?

So we are working on setting our targets internally and our budget for 2026 right now. And we'll share our thinking for 2026 when we meet in January -- for our earnings call in January. So we are very much long-term thinkers, and we want to invest for the long term. We want to invest in durable revenue growth and sustainable operating margins. And so we're constantly thinking about that. But the next time we'll talk about guidance will be in January and our 2026 outlook.

Clark Wright with D.A. Davidson. I appreciate the commentary around the upmarket opportunity. One of the key themes I've kind of heard throughout the day is this term of differentiation. How do you prioritize your investment strategy to differentiate against the legacy solutions? And how do you win bigger from the start?

So we talk a bit about our playground and how we think about driving value across all customers. We want to make sure that when we're going to go out and do something that we're solving a real customer problem. And so one thing I'd point to is we have a history here of a mentality called market validation built in the DNA of AppFolio. So we think very deeply and are customer obsessed with what is the thing that we're investing in. And then after we identify that customer problem, we think about the solution. So whatever levers we're going to pull, buy, build, partner, these are all in our quiver to be able to make sure that we're solving real customer problems. At the end of the day, we pride ourselves on innovating at speed and making sure that we are driving ahead to be able to create value across the entire customer base. So whether that's an SMB customer who may have slightly different needs than a large customer, we're thinking deeply about how the performance platform and the systems really drive outcomes for every part of our customer base.

So I wanted to ask about the Agentic AI solutions. I guess what does early demand there look like? How do you think -- how applicable could these be across the unit base? And maybe, yes, just what are you thinking from a monetization opportunity with these? I mean it seems like it's a huge opportunity. You've obviously seen with a lot of the AI advancements you guys have made, some very -- customers were talking very positively about the gains that they're seeing from it. So yes, how -- with Agentic AI, how broadly do you think it could be applicable across the base?

We think it can be widely applicable and coming out of future. So a few weeks ago, announced our Realm-X Performers. Now we've had Realm-X experiences live in tiers for over a year now. But from the performance perspective, we've seen interest from both SMB and upmarket. So we're excited about the fact that customers across the spectrum are seeing the value. And ultimately, we think that there's opportunity for all customers to be able to drive automation in their business.

From a packaging perspective, right now, we charge a la carte through [ v-plus ] services as we went through in the slides. We can think about how we package that differently over the course of time. But when you take a step back and you think about the P&L of the customer, you've had AppFolio really on a technology line item historically, we're really opening the possibilities to getting more into the world of staffing. And so we think that's an exciting opportunity across the entire customer base.

I'll also add, I mean, we have AI capabilities within different tiers and different levels of those AI capabilities depending on the tier that you're on. So based on our structure with the premium tier strategy and the ability to charge a la carte, we have a lot of flexibility about how we monetize that going forward. So right now, it's the combination of those 2. It's within the tiers and then charging a la carte for the performers. But we have some flexibility as we roll these out going forward in terms of how we think about that.

Great. And we have time for just a couple more questions. Anybody else?

Chris Phelps. What is the hardest thing that you guys are working on at the company right now within each department or function that you work in?

Shane, do you want to start with this one?

I will. So I guess I'm on top of all the departments at some point -- I think our hardest thing is it's not a matter of trying to find opportunities. It's a matter of -- we have more than enough opportunity. It's a matter of prioritizing what we're going to focus on. And so you get to our size and scale, that's certainly a blessing. But it's also -- you run the risk of peanut butter spreading your focus a little too much and then you start to deliver an underwhelming customer experience. And so our ability to continue to say these are the most important things, and we're going to resource those things to win so we can do that better than anybody else. And there are a lot of things we have to say no, not now or someday in the future, but we need to stay where we are. So I think for us, the biggest thing is how do we continue to stay disciplined and focused so the things we are resourcing, we're actually better than everybody else to do that.

I was going to say the same thing from an R&D perspective. It's about saying no, which is just as important, if not more important than saying yes.

I think there was one more here.

I can add another one actually, if -- sorry. But I also think we are going to our customers, and we're saying, hey, we need to deliver real performance, and we are going to store your data and do the work with you and unify the experience and create a ton of value in those moments that matter to really drive the economics and great outcomes. Well, hey, look, every enterprise right now is going through this new world of AI and the impact that, that might have and how do you grow capacity and drive productivity. And so we have lots of examples that we've shared today about how we're doing that. We're gaining capacity and productivity, but we really need to continue to model the behavior that we expect because at the end of the day, whether you're a real estate company, a technology company, you're an investment bank, whatever it is, we all need to be adopting new ways of working so we can deliver better outcomes to whoever our customers are. And that certainly is something that we always think a lot about and how do we do that and how do we -- how fast do we do it and be really smart without breaking anything that we're delivering for our customers and their experience.

Mic is going in and out a little bit. Okay. Can we click to the last slide? I don't have a clicker. Thanks, Lisa. Can you click back one?

Now get to the appendix. We're going to review those in detail. Now, what I'd like to do now is basically go with gratitude. It's been really amazing having everybody here in person as well as having those join us on the live stream. So thank you all for that, for your interest, investment support in the AppFolio business. We will have the opportunity to -- you can have the opportunity to interact with management a bit more over lunch. We'll have a representation across the table. So another moment to potentially learn a little bit more about one of us or the AppFolio business.

I also want to give a shout out to the AppFolio team that has worked so hard to make this event possible. Our presenters, our customers, also a number of folks on the marketing and events team. So Stephanie, Daniel, Susie, Ryan, Helene, Matti, Lori and Carolina from Blueshirt, of course. And also a special shout out to our workplace experience and IT teams for getting this space set up for this meeting. This is our first meeting in this room, and it's impressive and everything worked incredibly well. So thank you to all that were involved in making this meeting happen.

For those online, this will kind of be our goodbye. So this concludes our meeting for today. And for those of you here in person, we're going to work our way outside for lunch. So I'll see -- I'll see you there. So thanks, everybody. Thank you, everyone.

On one more announcement. The slides will be up online shortly.

Good afternoon. Thank you for standing by, and welcome to AppFolio's Third Quarter 2025 Financial Results Conference Call. Please be advised that today's conference is being recorded, and a replay will be available on AppFolio's Investor Relations website.

I would now like to hand the conference over to Lori Barker, Investor Relations. You may begin.

Good afternoon, everyone. I'm Lori Barker, Investor Relations for AppFolio. And I'd like to thank you for joining us today as we report AppFolio's third quarter 2025 financial results. With me on the call today are Shane Trigg, AppFolio's President and CEO; and Tim Eaton, AppFolio's CFO. This call is simultaneously being webcast on the Investor Relations section of our website at appfolioinc.com.

Before we get started, I would like to remind everyone of AppFolio's safe harbor policy. Comments made during this conference call and webcast contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties. Any statement that refers to expectations, projections or other characterizations of future events, including financial projections, future market conditions, business performance or future product enhancements or development is a forward-looking statement. AppFolio's actual future results could differ materially from those expressed in such forward-looking statements for any reason, including those listed in our SEC filings.

AppFolio assumes no obligation to update any such forward-looking statements, except as required by law. For greater detail about risks and uncertainties, please see our SEC filings, including our Form 10-K for the fiscal year ended December 31, 2024, which was filed with the SEC on February 6, 2025. In addition, this call includes non-GAAP financial measures. Reconciliations of these non-GAAP financial measures with the most directly comparable GAAP measures are included in our third quarter earnings release posted on the Investor Relations section of our website.

With that, I'll turn the call over to Shane Trigg. Shane, please go ahead.

Thanks, Lori, and welcome to everyone joining us today. In the third quarter, revenue was $249 million, growing 21% year-over-year and non-GAAP operating margin was 23.5%. We continue to grow new business, and our unit count is now 9.1 million. These results reflect that we're winning in the market, and it's an incredibly exciting time at AppFolio.

Earlier this month, we welcomed 2,200 AppFolio customers, prospects, partners and employees to future, our flagship industry event. There, we introduced our bold vision for the industry, real estate performance management and shared the product strategy for achieving it, demonstrating strong progress toward our mission to be the platform where real estate comes to do business. Property management is facing big challenges, battling external market pressures, a surge of new AI tools and an overreliance on disjointed task-based operations. This environment has created a performance gap where businesses are struggling to move beyond task efficiency.

New research by the National Apartment Association in partnership with AppFolio shows that property management businesses devote 42% of their time to routine work and another 24% to reactive tasks, totaling 2/3 of their time spent simply keeping things running. By contrast, only 16% of the week is focused on strategic or performance-driven work like long-term planning and team development and 17% on stakeholder engagement. This efficiency focus, coupled with fragmented technology and the flurry of bolt-on AI tools is widening the performance gap.

Real estate performance management is the answer, shifting from reactive to proactive to achieve real performance and creating a value ecosystem where everyone thrives. Property managers, residents, investors, owners and vendors. AppFolio's performance platform is designed to meet this moment. It's built on top of an AI-native architecture, meaning AI is at the core, not an add-on and is made up of 3 interconnected systems.

First, a system of record, the source of truth for data, stakeholders and operations. Next, a system of action using agentic AI to automate and quickly complete repetitive tasks with context and optimal results. Finally, a system of growth, finding and unlocking new revenue streams by giving residents and investors access to services within one unified experience for the moments that matter. The sum of these systems uniquely enables us to drive productivity, amplify human strengths and transform performance for everyone in our ecosystem by positioning property managers as the competitive advantage in driving the core economics of the business, we create powerful network effects and redefine what winning looks like.

AppFolio customer, Wolfgang Croskey, President of Bay Area-based Croskey Real Estate and Co-Founder of Crane, a popular community for property management professionals shared this, "The shift from property manager to performance manager is the future of this business. Owners are demanding strategic asset performance, which requires us to move beyond fragmented tools and adopt smarter, unified platforms."

We believe continued strategic execution is the key to unlocking market leadership and sustained value creation. The first pillar of our strategy is differentiate to win. The future of innovation isn't just about creating better tools for work. It's about creating systems that do the work with you. Realm-X Performers is the latest innovation in our Realm-X embedded AI suite, our system of action. With Performers, we're moving beyond traditional automation to agentic, goal-driven AI, transforming the performance of our customers' business. Performers are designed to handle both routine and exception tasks, adapt to changing situations and optimize for business goals set by property managers.

Initial offerings include the Realm-X Leasing Performer, Maintenance Performer and Resident Messenger Performer, which automate lead to lease, maintenance triage and resident communications, respectively. Customers fully adopting Realm-X are seeing tangible outcomes. Vacancies are being filled more than 5 days faster. Renewal rates are increasing by 20% and net operating income is almost 3% higher and an average of 10 hours per week are saved on completing tasks.

Our most successful customers are moving fast in adopting early, an example being St. Augustine, Florida-based Dream, Live Prosper communities managing over 9,000 units. Says Rob Gayle, President, "AI does not work if you have it separated. It has to be in one workflow or in one software that flows all the way through, and that's what sets AppFolio apart. No one else can do that."

AppFolio's system of action ensures that all of DLP's capabilities work together seamlessly, including Realm-X Messages, Assistant, Flows and the newest addition, Maintenance Performer. While Realm-X boosts productivity for their team, it's also crucial for ensuring residents remain a priority, helping DLP to track interactions, automate reminders and give residents the maintenance support they need.

Another way we're differentiating to win is through our system of record. In today's data-driven landscape, a single trusted system of record powers faster, smarter and more confident decisions. We're expanding the options for customers to configure AppFolio to mirror their business structure through accounting configurations and more granular permissions, providing the clean, actionable data that fuels AI and automation. We're also enabling customers with complex mixed portfolios to manage all aspects of their business in AppFolio from automated student leasing workflows and roommate pairing to enhance compliance and affordable housing for HUD and LIHTC properties.

And our Stack marketplace makes it easier than ever for partners to seamlessly plug into our platform. One of our newest Stack partners is Procore. A growing number of our customers run vertically integrated businesses that include real estate development and construction. And this partnership means they can manage their entire operation on AppFolio by automatically syncing project financials with Procore.

Ultimately, the strength of our innovation helps our customers win, solidifying AppFolio's leadership in the market. Our second strategic pillar is deliver performance efficiently. Our system of growth is creating value for everyone in our customers' ecosystem. Through FolioSpace, AppFolio's next-generation resident experience, we continue to identify and capitalize on moments that matter for our customers. One of these high-leverage moments is resident onboarding. 3/4 of residents report challenges during move-in and a positive experience at this stage correlates to a 76% increase in overall satisfaction with their property manager. This is not just an operational necessity, it's a critical moment for trust building and value delivery.

Our customers process millions of move-ins a year, making the magnitude of this opportunity immense. That's why we fully reimagine the resident onboarding experience, transforming one of the most stressful parts of the resident journey into a simplified guided workflow for crucial tasks like lease signing, payment, insurance and utility setup. This provides both residents and property managers a clear streamlined path, resulting in faster move-ins and a reduction in follow-up calls, giving teams time back to focus on building community.

To take that experience even further, we've launched Resident Onboarding Lift, co-created by AppFolio and Second Nature. Onboarding Lift focuses on meeting residents' needs at the time they need it most by delivering highly desired value-added services such as credit building, pest control and discounted group rate Internet. This creates a win-win that elevates the resident experience while being a differentiator for property managers.

According to Tommy Perfect, Founder and CEO of 900-unit San Diego-based uplift property management, "Onboarding Lift is an amazing addition to the leasing experience. We now have the ability to give residents choices in the leasing process to meet their needs while still achieving our necessary property management compliance. This takes customer experience to the next level."

Our third strategic pillar is great people and culture, and I'm incredibly proud of our team and our strong performance year-to-date towards achieving our goals. Our team was recently recognized on 2 prestigious Fortune lists, the Future 50, highlighting our potential for long-term growth and innovation and Best Workplaces in Technology, which affirms our company value that great people make a great company.

For us, the ultimate mark of success is helping our customers win. We were thrilled to be voted Vendor of the Year by the 350-plus franchisees of AppFolio Customer Real Property Management. Says Jeff Pepperdine, President, "We are proud to collaborate with a company whose value is recognized by the people using it every day. This demonstrates the impact AppFolio's innovative solutions have on our franchisees, continued business success and growth." The foundation of our great people and culture is built on serving our customers. This award reflects that our success is deeply aligned with our customer success. We are incredibly grateful to the RPM team for this recognition.

I'm looking forward to sharing more information and seeing many of you in person or virtually during our November 18 investor meeting.

With that, I'm delighted to welcome for the first time as CFO, Tim Eaton, who will discuss our financial performance during the third quarter.

Thank you, Shane. I'm deeply proud to be part of an organization that values continuous innovation, close customer partnerships and building trust every day. I'm honored to fully embrace the CFO role, and I'm excited to help lead our teams as we build the platform where real estate comes to do business.

I'm pleased to report in the third quarter, we delivered revenue of $249 million, growing 21% year-over-year. Core solutions revenue was $54 million in the third quarter, a 17% year-over-year increase, driven by winning new customers, growth in total units under management and more customers choosing our Plus and Max premium tiers. At the end of the quarter, we managed approximately 9.1 million units from 21,759 customers compared to 8.5 million units from 20,403 customers a year ago. This represents a 7% increase in ending active units -- excuse me, in ending units and a 7% increase in customers. Our growth in units under management illustrates our continued success in the market.

Third quarter revenue from value-added services grew 22% year-over-year to $192 million. This increase reflects greater use and adoption of our risk mitigation services, new screening offerings and online payments and usage of credit and debit cards for rent payments as well as growth in units under management. Additionally, LiveEasy and our Second Nature partnership are beginning to contribute to value-added services.

In the third quarter, non-GAAP operating margin was 23.5% compared to 28.7% last year. In Q3, we accrued an additional year-to-date expense of approximately $13 million or 5.5% of Q3 revenue as a result of the performance levels we now expect to attain under our annual corporate bonus plan. This Q3 incremental expense was driven by strong new business unit acquisition and revenue growth and the accrual covers the last 3 quarters. Excluding the impact of this overattainment, operating margin was approximately 29% of revenue.

Cost of revenue, exclusive of depreciation and amortization in the third quarter was 36% of revenue compared to 34% last year. This increase was the result of increasing adoption of credit cards, additional data center spend to support our customers' growing usage of our AI product capabilities and the additional expense from expected bonus plan overattainment. As a percent of revenue, in the third quarter, combined sales and marketing, R&D and G&A expense was 39% compared to 35% last year. We exited the quarter with 1,703 employees, which is an increase of 10% from the third quarter of 2024. This reflects growth in most functional areas as we continue to invest in innovation and sales capacity and the addition of the LiveEasy business in late 2024.

Now turning to guidance. Our 2025 guidance for annual revenue is increasing to $945 million to $950 million for a full year midpoint growth rate of 19%, fueled by Plus and Max tier adoption, growth in customers and new business units and increasing adoption of our products and services. We expect to deliver non-GAAP operating margin between 23.5% and 24.5%. Diluted weighted average shares outstanding, incorporating the shares we repurchased earlier in the year is now anticipated to be approximately $36 million for the full year compared to $37 million in 2024.

Cost of revenue, exclusive of depreciation and amortization is expected to be higher as a percentage of revenue compared to the prior years as the benefit from operational efficiencies will be offset by product mix, the additional expense from expected bonus plan overattainment and increasing data center spend from usage of our AI product capabilities. Operating margin as a percent of revenue is projected to be lower than last year with revenue mix impacting cost of revenues, growth in sales capacity, increased spending to support usage of our new resident and AI capabilities and additional expense from expected bonus plan overattainment. It is too early to guide for 2026, but we continue to prioritize delivering efficiencies as we scale.

In summary, I'm proud of our strong third quarter performance, and I look forward to seeing some of you virtually or in Santa Barbara at our upcoming November 18 investor meeting, where we will dive deeper into the foundations of our growth and how our recent innovations in AI and the resident experience are driving our momentum.

Thanks to all of you for your support and interest in AppFolio. Operator, this concludes today's call.