ITEM 1A. RISK FACTORS
Investing in our securities involves risks. You should consider carefully the risks described below, together with all of the other information included in this Annual Report, as well as in our other filings with the SEC, in evaluating our business and/or an investment in our Class A common stock. If any of the following risks actually occur, our business, financial condition, operating results, cash flows and prospects could be materially and adversely affected. In that case, the trading price of our Class A common stock may decline and you might lose all or part of your investment. The risks described below are not the only risks we face. Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business, financial condition, operating results, cash flows, and prospects.
Risks Related to Our Products and Services
If we are found to be in violation of the legal requirements applicable to our products and services, our business and operating results may be adversely affected.
Our business activities are subject to various federal, state and local laws and regulations. In addition, certain of our services, such as our tenant screening and risk mitigation services, are highly regulated or intended to be used in connection with other highly regulated activities. Unfavorable laws, regulations, and administrative or judicial decisions interpreting or applying laws and regulations could subject us to litigation or governmental investigation and increase our cost of doing business, any of which may adversely affect our operating results. Further, the evolution and expansion of our products and services may subject us to additional regulatory risks and requirements. For example, as our electronic payments services business evolves, we may become directly subject to laws governing money transmission and anti-money laundering. Regulatory requirements vary throughout the markets in which we operate, and have increased over time as the scope and complexity of our products and services have expanded. Moreover, federal and state legislatures and regulatory agencies have indicated they are focused on protecting tenants. This focus may result in the introduction of new laws and regulations that are directly applicable to our business. There is no guarantee that we will not be subject to fines, criminal and civil lawsuits or other regulatory enforcement actions in one or more jurisdictions or be required to adjust business practices to accommodate regulatory requirements.
New and evolving regulatory requirements may also impact our customers and their ability or willingness to utilize our products and services. For instance, we consistently monitor regulatory activity by the Federal Trade Commission (the "FTC"), by the Consumer Financial Protection Bureau ("CFPB"), and by various state regulatory bodies applicable to tenant screening. New or uncertain regulatory requirements may impact our ability to offer or our customers' ability and willingness to utilize certain of our services, which may impact our operating results.
We periodically undergo examinations, audits, and investigations by regulatory authorities related to our services, including those related to the affairs of insurance companies and agencies and electronic payment services providers. Such examining, auditing, and investigating regulatory authorities are generally vested with relatively broad discretion to grant, renew and revoke licenses and approvals, to implement and interpret rules and regulations, levy fines and penalties, and bring enforcement actions. While we have implemented various programs, processes and controls focused on compliance with applicable laws and regulations throughout our business, there is no guarantee that we will not be subject to fines, penalties or other regulatory actions in one or more jurisdictions, or be required to adjust our business practices to accommodate future regulatory requirements. In the event that we are found to be in violation of our legal or regulatory requirements, we may be subject to monetary fines or penalties, -and-desist orders, mandatory product changes, or other liabilities that could have an effect on our business (including to our reputation) and operating results.
We face risks in our electronic payment services business that could adversely affect our business and/or results of operations.
Our electronic payment services business facilitates the processing of inbound and outbound payments for our customers. These payments are settled through our sponsoring clearing bank, licensed money transmitters, card payment processors and other third-party electronic payment services providers that we contract with from time to time. With respect to these service providers, we have significantly less control over the systems and processes than if we were to maintain and operate those systems and processes ourselves. In some cases, functions necessary to our business are performed on proprietary third-party systems and software to which we have no access. We also generally do not have long-term contracts with these service providers. Moreover, we rely on a limited number of third-party electronic payment services providers and, in some instances, do not have a backup provider in place for a specific service. Accordingly, the failure of these service providers to renew their contracts with us or to fulfill their contractual obligations and perform satisfactorily could result in significant disruptions to our operations and adversely affect our operating results.
We are, and will continue to be, subject to risks arising from or related to the settlement of payment transactions, including with respect to prefunding and chargeback requests as well as human or processing errors. Users are ultimately responsible for fulfilling their obligations to fund transactions; however, in instances where there are returns or chargebacks, we
attempt to collect these funds from our customers. If we are unable to collect such amounts from our customers, we bear the risk of loss for the amount of the return or chargeback. While we have not experienced material losses resulting from payment returns or chargebacks in the past, there can be no assurance that we will not experience significant losses in the future. Any increase in returns or chargebacks that we are not able to recover from our customers may adversely affect our business, financial condition and results of operations. In addition, if transactions or settlement reconciliations are not performed timely or are inaccurate due to human or processing errors, we could experience significant financial loss that could have an adverse effect on our business, financial condition, and operating results.
Our electronic payment services business also exposes us to risk in connection with theft, fraud and other malicious activity by our employees, our third-party service providers’ employees, or third-parties who improperly gain access to our systems, our customers’ systems, or our third-party providers' systems. In the event of such activity, we may incur liability to compensate our customers, our customers' stakeholders, or third-party electronic payment service providers for losses incurred. In the past, third-party bad actors have gained improper access to our systems, our customers’ systems, and our third-party providers' systems, and we experienced financial loss as a result. While we continually seek to improve the measures we take to secure our systems and payments infrastructure, it is not possible to entirely eliminate the risk of intentional . If third-party actors again access to any of these systems, or our employees or third-party service providers’ employees our payment systems for purposes, we could experience material financial that may affect our operating results.
Changes to payment card networks or bank fees, rules, or practices could harm our business.
We do not directly access the payment card networks, such as Visa and MasterCard, that enable our acceptance of credit cards and debit cards, including some types of prepaid cards. Accordingly, we must rely on banks or other card payment processors to process transactions and pay fees for their services. From time to time, payment card networks have increased, and may increase in the future, the interchange fees and assessments that they charge for each transaction which accesses their networks. Our card payment processors may have the right to pass any increases in interchange fees and assessments on to us and increase their own fees for processing. Any changes in interchange fees and assessments could increase our operating costs and reduce our operating income. In the past, federal regulators have required Visa and MasterCard to reduce interchange fees. Any material change in credit or debit card interchange rates, including changes in interchange fee limitations, could significantly reduce our Value Added Services revenue and have an adverse effect on our business and operating results.
Our card payment processors require us to comply with payment card network operating rules, including special operating rules for electronic payment service providers to merchants. We have agreed to reimburse our processors for any fees or fines they are assessed by payment card networks as a result of any rule violations by us or our merchants. The payment card networks set and interpret the card operating rules. From time to time, the networks have alleged that various aspects of our business model violate these operating rules. In the past, all such allegations have been resolved favorably. If, however, such allegations are not resolved favorably in the future, they may result in material fines and penalties or require changes in our business practices that may be costly. In addition, the payment card networks could adopt new operating rules or interpret or re-interpret existing rules that we or our processors might find or even to follow, or to implement. As a result, we could our ability to give customers and their residents the option of using payment cards to fund their payments. If we are to accept payment cards or are meaningfully limited in our ability to do so, our business and operating results would be affected.
We face risks in our tenant screening services business that could adversely affect our business and/or operating results.
Our tenant screening services business is subject to a number of complex laws that are subject to varying interpretations, including the FCRA, the Fair Housing Act, and related federal and state regulations. The FCRA continues to be the subject of multiple class-based litigation proceedings, as well as numerous regulatory inquiries and enforcement actions. In addition, entities such as the FTC and the CFPB have the authority to promulgate rules and regulations that may impact our customers and our business and have made various public statements that tenant screening is an area of focus for such agencies. While we believe that our tenant screening services comply with relevant laws and regulations, we have been, and may in the future be, accused of not complying with such laws and regulations, and have been, and may in the future be, found to be in violation of them. In addition, we have been, and expect in the future to be, subject to routine regulatory inquiries, enforcement actions, class-based litigation and/or indemnity demands.
As previously disclosed, in January 2021, we entered into a settlement agreement with the FTC to resolve allegations that we failed to comply with certain sections of the FCRA. In connection with the settlement, we paid a fine and agreed to ongoing compliance and reporting obligations. Our failure to comply with these obligations could result in material additional penalties or other actions by the FTC or other agencies, including enjoining our ability to provide tenant screening services.
Our potential liability in any enforcement action, class action lawsuit, or significant single plaintiff lawsuit could have a material impact on our business, especially given that certain applicable laws and regulations provide for fines or penalties on a per occurrence basis and we participate in a large number of tenant screening transactions. The existence of any such proceeding, whether meritorious or not, may adversely affect our ability to attract customers, result in the loss of existing customers, harm our reputation and cause us to incur defense costs or other expenses.
Our resident-focused offerings, such as Resident Onboarding and Resident Onboarding Lift, subject us and our customers to increased regulatory scrutiny and legal requirements.
While our primary customers are property management companies, we offer (either directly or indirectly via third-party partnerships) various resident-focused products and services that are utilized by residents, including resident concierge services and resident benefit packages. These offerings subject us to additional regulatory risks and evolving legal requirements, particularly regarding fee transparency and disclosure. Federal and state regulatory agencies, including the FTC and the CFPB, have increasingly focused on the rental housing industry, specifically regarding the clarity of fees associated with residential tenancies. If our products are deemed to lack adequate transparency or disclosure, or if the mandatory nature of certain services is found to violate consumer protection laws, we or our customers could be subject to litigation or governmental investigation.
Furthermore, regulatory requirements vary throughout the markets in which we operate, and new or updated state and local landlord-tenant laws may regulate the types of fees and services that property managers can require residents to purchase. Unfavorable administrative or judicial decisions interpreting these laws could impact our customers' ability or willingness to utilize these services, which may adversely impact our operating results. Our resident-focused concierge services also rely on third-party service providers to fulfill specific functionality, such as utility connections, internet connections, or moving services. We have significantly less control over the systems and processes of these providers, and any failure by these third parties to perform satisfactorily or to protect resident data could result in significant disruption to our operations, reputational harm, or potential liability. Because these services are ultimately utilized by residents, we may face an increased risk of class-based litigation or regulatory inquiries arising from resident disputes over service delivery, billing or alleged of consumer protection laws. There is no guarantee that we will not be required to adjust our business practices to accommodate future regulatory requirements, or that these offerings will not result in material financial .
We could face antitrust challenges, which could harm our business and operating results.
Algorithmic pricing tools in our industry have been subject to antitrust challenges in the form of criminal and civil investigations, regulatory enforcement actions, and private class actions. Although we believe our services are compliant with antitrust laws, we may face similar challenges, which regardless of merit, could cause us to incur significant expenses, distract management, damage our reputation, and result in substantial fines, damages, and/or settlement costs, all of which could adversely affect our business and operating results.
Errors, defects or other disruptions in our products, or the products of our third-party service providers upon which certain of our products are dependent, could harm our reputation, cause us to lose customers, and result in significant expenditures to correct the problem.
Our customers use our products to manage critical aspects of their businesses. Any errors, defects or other disruptions in our products, or the products of our third-party service providers upon which certain of our products are dependent, may result in loss of or damage to our customers’ data and disruption to our customers’ businesses, which could harm our reputation and subject us to potential liability. Such product problems could be caused by a variety of factors, including infrastructure changes, power or network outages, fire, flood or other natural disasters, human or software errors, viruses, security breaches, fraud or other malicious activity, spikes in customer usage or distributed of service attacks. In addition, we provide continuous updates to our products and these updates may contain , or other when first introduced. In the past, we have discovered , , or other in our updates after they have been released, and similar may arise in the future. Real or perceived , , or other in our products or the products of our third-party service providers upon which certain of our products are dependent, could result in publicity, reputational , of customers, in market acceptance of our products and services, of competitive position, withholding or of payment to us, by customers for sustained by them and potential or regulatory action. In any such event, we may be required to expend additional resources to correct the or we may choose to expend additional resources to take corrective action even when not required. The costs incurred in any material , or other could be substantial. In addition, we may not carry insurance sufficient to offset any that may result from arising from such , or other .
If we are unable to deliver effective customer service, it could harm our relationships with our existing customers and adversely affect our ability to attract new customers and our operating results.
Our business depends, in part, on our ability to satisfy our customers by providing a consistently high level of onboarding services and ongoing customer service. Once our services are deployed, our customers depend on our customer service organization to resolve technical issues relating to their use of the services. Increased demand for our support services may increase our costs without corresponding revenue, which could adversely affect our operating results. Further, our sales process is highly dependent on the ease of use of our products and services, our reputation and positive recommendations from our existing customers. Any failure to maintain high-quality and responsive customer service, or a market perception that we do not maintain high-quality and responsive customer service, could harm our reputation, cause us to lose customers and adversely impact our ability to sell our products and services to prospective customers.
If our property management customers stop requiring insurance coverage for their units, our operating results could be harmed.
Some of our property management customers require their renters to maintain certain insurance coverage requirements. Through wholly owned and licensed subsidiaries, we make renters insurance policies available to these renters and, if our customers so elect, add uncovered units to a qualifying liability to landlord insurance policy via a licensed insurance broker. If our property management customers stop requiring renters to maintain insurance coverage because of regulatory or competitive pressures, demand for our insurance-related risk mitigation products may decline and our revenues and operating results could be adversely affected.
If we fail to maintain relationships with third-party service providers that enable certain functionality within our products and services or provide our customers with specialized technology and services, our business and operating results may be harmed.
Certain functionality of our services is provided, supported or enhanced by third-party service providers, including without limitation functions related to CRM, cloud computing, texting, emailing, electronic payments, tenant screening, and insurance related offerings. Our customers are also able to integrate specialized, third-party technology and services through AppFolio Stack™. If our third-party service providers cease providing their products or making them available through AppFolio Stack™, our products and services and the demand for them could be adversely impacted and our business and operating results could be harmed. In addition, our competitors may be more successful than us in building cost-effective relationships with third parties that enhance their products and services, allow them to provide more competitive pricing, or offer other benefits to their customers. Acquisitions of our third-party service providers by our competitors or others could result in a decrease in the number of current and potential strategic partners willing to establish or maintain relationships with us, and could increase the price at which products or services are available to us. If we are in establishing or maintaining our relationships with third-party service providers, our ability to compete in the marketplace or to grow our customer base and revenue could be , which could impact our operating results.
The development and incorporation of AI in our services may result in reputational harm or liability, which could adversely affect our business and operating results.
We employ machine learning and AI technologies, including generative and agentic AI, in our product and service offerings. Research into, and continued development of, such technologies remains ongoing. As AI represents a rapidly evolving field, it inherently carries a spectrum of risks typical of emerging technologies. We anticipate the enactment of new laws and regulations pertaining to AI use, potentially placing us under increased regulatory oversight, escalating litigation risks, and augmenting our existing obligations regarding confidentiality and privacy. Such developments could negatively impact our business operations. Moreover, AI technologies introduce heightened cybersecurity risks and ethical considerations, potentially affecting our reputation and operational performance. Threat actors are increasingly using AI to develop sophisticated cyberattacks, including deepfakes and social engineering. Should we introduce products or services that generate content that is misleading, inaccurate, biased, harmful or controversial due to perceived or actual societal impact, we may face potential harm to our brand and reputation, competitive , and legal liabilities. AI algorithms and training methodologies may be , or . AI development or deployment practices by us or others could result in that the acceptance of AI solutions or cause to individuals or society. Further, the legal landscape regarding intellectual property rights in AI technologies remains unsettled in the United States, both in legislation and judicial precedent. Consequently, our use of AI technologies and features might lead to of or of third-party intellectual property rights. This risk is intensified by the current trend of entities swiftly seeking patents and other intellectual property protections in AI to a competitive edge. Additionally, generative and agentic AI has the capacity to yield or results, promote discriminatory outcomes, or perpetuate biases, which risks are by the speed and scale of adoption and utilization of AI across our customer base. our efforts to implement measures and develop our AI tools in a manner that accuracy, security and fairness, these issues may arise due to the direct interaction of users with generative and agentic AI models and the inherent and power of these
technologies. Litigation or government regulation related to the use of AI may also adversely impact our ability to develop and offer AI-based products, as well as increase the cost and complexity of doing so. Failure to properly remediate AI use or ethical issues may undermine public confidence in AI. Such outcomes could result in reputational damage and adverse effects on our operational results.
If we are unable to ensure that our products and services keep pace with other technology, we may become less competitive and our operating results may be harmed.
To remain competitive, we must continue to develop new product offerings, applications, features, and enhancements to our products. Maintaining adequate resources to meet the demands of our customers and the market is essential. If we are unable to develop our products and services, including through the development of emerging technologies, such as AI, we may miss market opportunities and our products may become less attractive to users. Our competitors may have or expend a greater amount of resources on improvement of technology, and our failure to maintain adequate development programs or compete effectively could adversely affect our business.
If we are unable to ensure that our products and services interoperate with other technology, we may become less competitive and our operating results may be harmed.
We depend on the interoperability of our platform with web browsers, and in the case of our mobile applications, operating systems that we do not control. Any changes in such web browsers or systems that degrade the functionality of our products and services or give preferential treatment to competitive services could adversely affect the adoption and use of our offerings. In addition, to deliver high quality products and services, we will need to continuously enhance and modify our functionality to keep pace with technical, contractual, and other changes in Internet-related hardware, mobile operating systems such as iOS and Android, browsers, communication, network and database technologies. We may not be successful in developing enhancements and modifications that operate effectively with these devices, operating systems, web browsers or other technologies or in bringing them to market in a timely manner. Furthermore, uncertainties regarding the timing or nature of new network platforms or technologies, and modifications to existing platforms or technologies, could increase our research and product development expenses. In the event that it is difficult for our customers to access and use our products and services, our offerings may become less competitive, and our operating results could be affected.
We rely upon third-party service providers to host our platform and any disruption of such third-party services would impact our operations and our business could be adversely impacted.
Third-party service providers provide the cloud computing infrastructure we use to host our platform. Any significant disruption of, limitation of our access to or other interference with our use of such third-party services would negatively impact our platform and operations and our business could be harmed. External factors impacting our third-party service providers could affect the availability or speed of our services. If our customers are unable to access our platform or encounter difficulties in doing so, we may lose customers, which could harm our business and results of operations.
Risks Related to Cybersecurity and Data Privacy
Security vulnerabilities in our products, human error, or a breach of our security controls could result in the loss, theft, misuse, unauthorized disclosure, or unauthorized access to customer or employee data, or other confidential or sensitive information, which could harm our customer and/or employee relationships, competitiveness and reputation, and expose us to litigation, fines, or penalties.
Our business involves the storage, processing and transmission of sensitive and proprietary data and personal information collected by or on behalf of our customers, the personal information of our employees, customers, and prospective customers and our proprietary financial, operational and strategic information. Cyber attacks, malicious internet-based activity, online and offline fraud, and other similar activities may threaten the confidentiality, integrity, and availability of our information technology systems, or those of the third parties upon which we rely, along with the proprietary, confidential, and sensitive data stored in or processed by such systems. As our business grows, the number of individuals using our products, as well as the amount of information we collect, store, process, and transmit is increasing, and our brands are becoming more widely recognized, which makes us a greater target for malicious activity. We have incurred, and expect to continue to incur, significant expenses in connection with our efforts to keep our systems, products and networks protected and up to date. However, there can be no assurance that the security measures we employ will prevent malicious or unauthorized access to our systems or information. Furthermore, no security program can entirely eliminate the risk of human , such as an employee's or contractor’s to follow one or more security protocols, which has previously occurred and we expect will occur again our efforts to train our employees and contractors on cybersecurity issues and enforce our security protocols. Additionally, with many of our employees continuing to work remotely, we face an increased risk of attempted security and . Therefore, our significant efforts to keep our systems, products and networks protected and up to date, we may be to anticipate new modes for cyber attacks, detect security or react to them in a timely
manner, or implement adequate preventive measures, any of which may expose us to a risk of loss, harm to our reputation, litigation, fines, penalties, and potential liability.
Computer malware, ransomware, viruses, social engineering (deepfakes, phishing, smishing and vishing attacks), denial of service or other attacks, employee theft or misuse, and increasingly sophisticated network attacks have become more prevalent in our industry, particularly against cloud service providers. The sophistication of these malicious attacks has also increased, and it appears that cyber crimes and cyber criminal networks, some of which may be state-supported, have substantial resources and may target U.S. enterprises or our customers and their use of our products. Furthermore, the risk of state-supported and geopolitical-related cyber attacks may increase in connection with ongoing global geopolitical tensions. In the past, we have had to take corrective action against cyber attackers to protect our cloud environment. If our security measures are, or are believed to have been breached or otherwise to have failed as a result of third-party action, employee error, malfeasance or otherwise, our reputation could be , our business may , and we could incur significant liability.
In addition, some of our third-party service providers also collect, store, process, and transmit our sensitive information and our customers’ data on our behalf. These service providers have experienced cybersecurity incidents in the past involving such information and data, and we expect they will continue to be subject to threats of cyber attacks and other malicious internet-based activities in the future. Our contracts with these third parties may not provide us with adequate remedies in the event of such an incident, which could also expose us to risk of loss, litigation, fines, penalties, and potential liability as well as reputational damage.
If our security measures, or the security measures of our third-party service providers, are breached as a result of wrongdoing or malicious activity on the part of our employees, our third-party service providers' employees, our customers’ employees, or any third party, or as a result of any human error or neglect, product defect or otherwise, and this results in the loss, theft, misuse, unauthorized disclosure, or unauthorized access to personal data or other sensitive information, we could incur liability to our customers, employees, and to individuals or organizations whose information was being stored by us or our customers, as well as be subject to fines, penalties, or actions from payment processing networks or by governmental bodies. If we experience a widespread security breach, our insurance coverage may not offset liabilities actually incurred and insurance may not continue to be available to us on reasonable terms, or at all. In addition, security could result in reputational , affect our ability to attract new customers and cause existing customers to reduce or the use of our products and services. Furthermore, the perception by our current or potential customers that our products could be to or that our security measures are , even in the of a particular or , could reduce market acceptance of our products and services and cause us to customers.
Privacy laws and regulations could impose additional costs and reduce demand for our services.
We collect, store, process, and transmit personal information relating to our employees, customers, prospective customers, and other individuals. Our customers use our platform to store and transmit a significant amount of personal information relating to their customers, vendors, employees and other industry participants. Federal and state government bodies and agencies have adopted, and are increasingly adopting, laws and regulations regarding the collection, storage, use, processing, security and transmission of personal information. For example, the California Consumer Privacy Act ("CCPA") requires certain privacy related disclosures and provides California consumers rights with respect to their personal information, including the right to request deletion of their personal information, receive the personal information on record for them, know what categories of personal information generally are maintained about them, and opt-out of certain sales and sharing of personal information for certain advertising purposes. The CCPA also granted a new state agency, the California Privacy Protection Agency, powers to adopt and enforce regulations interpreting the CCPA. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of personal information. This private right of action may increase the likelihood of, and risks associated with, data breach .
In addition to California, we are currently subject to comprehensive privacy laws across multiple states, and in 2026, will be subject to new comprehensive privacy laws in Indiana, Kentucky, and Rhode Island. These new and existing privacy laws and regulations impose increasingly complex operational requirements and will likely increase the cost of compliance to support the delivery our services. We have incurred, and may in the future incur, substantial costs and expenses related to an increased exposure to regulatory enforcement and/or litigation. Despite our efforts, we cannot guarantee that we will be able to maintain full compliance with constantly evolving, and sometimes conflicting, data privacy laws in the jurisdictions in which we operate. If our privacy or data security measures fail to comply with current or future laws and regulations, we may be subject to claims, legal proceedings or other actions by individuals or governmental authorities based on privacy or data protection regulations and our privacy commitments to customers or others.
Privacy advocates and industry groups may also propose various self-regulatory standards that may legally or contractually apply to our business. As new laws, regulations and industry standards take effect and we offer new services, we will need to understand and comply with various new requirements, which may impede our plans for growth or result in significant additional costs. These laws, regulations and industry standards have had, and will likely continue to have, negative effects on our business, including by increasing our costs and operating expenses, and/or delaying or impeding our deployment of new or existing core functionality or Value Added Services. Failure to comply with these laws, regulations and industry standards could result in negative publicity, subject us to fines or penalties, expose us to litigation, or result in demands that we modify or cease existing business practices. Furthermore, privacy may cause residents, vendors, employees and other industry participants to resist providing the personal information necessary to allow our customers to use our applications effectively, which could reduce overall demand for our services. Any of these outcomes could affect our business and operating results.
Risks Related to Attracting and Retaining Talent
We depend on highly skilled personnel and, if we are unable to retain or hire additional qualified personnel or if we lose key members of our management team, we may not be able to achieve our strategic objectives and our business may be harmed.
Our success and future growth depend, in part, upon the continued services of our executive officers and other key employees. To execute our growth plan and achieve our strategic objectives, we must continue to retain and hire highly qualified and motivated personnel across our organization. In particular, to continue to enhance our products and services, add new and innovative core functionality and/or Value Added Services, as well as develop new products, it will be critical for us to maintain and, over time, grow the current skill set and abilities of our research and product development organization. Further, for us to achieve broader market acceptance of our products and services, grow our customer base, and pursue new markets consistent with our strategic plan, we will need to maintain and, over time, grow the current skill set and abilities of all of our employees, including but not limited to those in our research and product development, sales, marketing, and customer service and support organizations. Competition for personnel is intense within our industry and there continues to be upward pressure on the compensation paid, particularly with respect to personnel with backgrounds in AI and cybersecurity. Retaining, identifying, recruiting, and training qualified personnel is and requires a significant investment of time and resources.
Many of the companies with which we compete for personnel have greater name recognition and financial resources and may also employ a different compensation philosophy. As a result, we may experience greater challenges retaining and hiring skilled personnel than our competitors. In addition, existing and prospective employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity awards declines, we are unable to offer equity awards in competitive amounts, or the price of our Class A common stock experiences volatility, this may adversely affect our ability to retain and recruit highly skilled employees. If we are unable to retain and attract the personnel necessary to execute our growth plan, we may be unable to achieve our strategic objectives and our operating results may suffer. In addition, from time-to-time there may be changes in our management team that may be to our business.
Our corporate culture has contributed to our success and, if we cannot continue to preserve this culture, we could lose the passion, creativity, teamwork, focus and innovation fostered by our culture.
We believe that our corporate culture has been and will continue to be a key contributor to our success. If we do not continue to preserve our corporate culture or maintain our core values as we grow and evolve, we may be unable to foster the passion, creativity, teamwork, focus and innovation we believe we need to support our growth. Any failure to preserve our culture could also negatively affect our ability to recruit and retain personnel and to effectively focus on and pursue our strategic objectives. As we grow, we may find it difficult to maintain our corporate culture.
Risks Related to Our Industry
All of our revenues are presently generated by sales to customers in the real estate industry, and factors that adversely affect that industry, or our customers within it, could also adversely affect us.
We expect that our real estate industry customers will continue to account for a significant portion, or all, of our revenues for the foreseeable future. Demand for our products and services could be affected by factors that are unique to and adversely affect the real estate industry and our customers within it. If the real estate industry declines, our customers may decide not to renew their subscriptions or they may cease using our Value Added Services to reduce costs to remain competitive. Higher interest rates may make it difficult or impossible for our customers to obtain financing and increase their cost of capital, which could negatively impact the demand for our products and services, increase customer attrition, and impact our operating results. In addition, we could lose real estate customers as a result of acquisitions or consolidations, bankruptcies or other financial difficulties facing our real estate customers, new or enhanced legal or regulatory regimes that impact the real estate industry, or conditions or trends specific to the real estate industry, such as the economic factors that impact the rental market and rental occupancy rates.
Our estimates of market opportunity are subject to significant uncertainty.
We determine the level of our investment in various aspects of our business, in part, based on our market opportunity estimates. Market opportunity estimates are subject to significant uncertainty, especially in a volatile economic environment, and are based on assumptions, including our internal analysis and industry experience. Assessing markets for cloud-based business management solutions in the real estate industry is particularly difficult due to a number of factors, including limited available information and rapid evolution of the industry and markets therein. If we do not accurately estimate our opportunities, we may fail to realize a return on our investment in various aspects of our business, which could lead to a failure to gain market share and negatively impact our long-term growth prospects.
Risks Related to Growing Our Business
Our inability to effectively maintain and enhance our brands could adversely affect our ability to attract new customers and negatively affect our business and operating results.
Maintaining and enhancing our brands is critical to achieving widespread awareness and acceptance of our products and services as well as maintaining and expanding our customer base, which is a key component of our strategy. We expect the importance of brand recognition will increase as competition for our products and services increases. If we do not continue to build awareness of our brands, we will be at a competitive disadvantage compared to companies whose brands are, or become, more recognizable than ours. Maintaining and enhancing our brands requires us to make substantial investments, and these investments may not result in commensurate increases in our revenue. In addition, new and existing technologies, industry trends, and laws that restrict online advertising or that affect our ability to customize and target advertising may require us to significantly increase our marketing costs to generate and capture demand and maintain our brand awareness, level of sales, and operating results. Moreover, our efforts to maintain and enhance our brands could be impacted by negative publicity or reputational harm from events, such as lawsuits, customer or third-party-service provider , or cybersecurity . If we to maintain and our brands, or if we make investments that are not offset by increased revenue, our operating results could be affected.
If we fail to manage our growth effectively, our costs and operating expenses may increase without corresponding increases in revenue, which would adversely affect our operating results.
We have experienced, and anticipate that we will continue to experience, significant growth in the size, complexity, and diversity of our business. This growth has placed, and we expect that it will continue to place, a significant strain on our administrative, operational, financial and accounting resources. Our future success depends, in part, on our ability to manage this growth effectively. For example, to grow our customer base and facilitate the continuous launch and refinement of our products and services, we invest significantly in our sales, marketing, research and product development organizations, as well as software and systems to support the efficient operation of such organizations. There is no guarantee that these or similar investments to support our growth will be successful. If we are unable to manage our growth successfully and efficiently, it could result in increased costs and operating expenses without corresponding increases in revenue, which would adversely affect our operating results.
If we do not accurately predict and respond promptly to rapidly evolving technological developments and customer needs, the demand for our products and our business and operating results may be harmed.
Customer demands are constantly changing in response to new technology and other market factors. To compete effectively, we must identify and innovate in the right technologies, accurately predict our customers’ evolving needs, and continually improve our own technology platform. If we fail to execute against any of the foregoing, our business, financial condition and operating results may be harmed. In addition, the widespread adoption of quickly evolving disruptive technology
products, such as generative and agentic AI, may significantly impact the real estate industry, even if such products are not specifically designed to apply directly to the real estate industry. While we have introduced new generative and agentic AI products and are focused on enhancing the AI capabilities of our products and services and incorporating AI across existing products and services, there can be no assurance that our new or enhanced products and AI innovations will be successful, adopted or monetizable, or that we will innovate effectively to keep pace with the rapid evolution of AI across our offerings. The adoption of such new technologies could significantly reduce the number or demand of our customers, thereby reducing our revenue, which could adversely impact our business, financial condition and operating results.
We participate in an intensely competitive market and our business could be harmed if we do not compete effectively.
The market for cloud-based business management solutions has relatively low barriers to entry and is global, highly competitive and continually evolving in response to a number of factors, including changes in technology, operational requirements, and laws and regulations. We compete with both other real estate industry cloud-based solution providers and providers of broad cloud-based solutions across multiple industries. We also face competition from numerous cloud-based solution providers that focus almost exclusively on one or more point solutions. Our competitors include established vendors, as well as newer entrants in the market. Our established competitors may have greater name recognition, longer operating histories, and significantly greater resources, which may allow them to respond more quickly and effectively to new or changing opportunities or challenges, technologies, operational requirements and industry standards. Our competitors who are new entrants to the market, and generally smaller, may have more nimble operations due to having fewer products and less overhead and may be willing to take legal and operational risks, which may allow them to launch products and meet customer demand more quickly and efficiently. Regardless of size, our current and potential competitors may develop, market and sell new technologies with comparable functionality to our products and services, which could cause us to customers, the rate of growth of new customers and/or cause us to decrease our prices to remain competitive. If we are to differentiate ourselves from our competitors and drive value for our customers or otherwise compete effectively any of these competitive , our business, financial condition and results of operations could be .
Further, we expect to face more competition as AI continues to advance and be integrated into the markets in which we compete. Our competitors or other third parties may incorporate AI into their offerings more successfully and efficiently, and achieve greater and faster adoption, which could impair our ability to compete effectively and adversely affect our business and financial results. Other companies may obtain proprietary rights that would prevent, limit or interfere with our ability to make, use or sell our AI offerings.
In addition, we have introduced, and expect to continue to introduce, variations to our pricing model that are intended to provide broader usage and better align the cost of our services to the value they provide our customers. Although we believe that these pricing changes will increase customer adoption and revenue, it is possible that they will not and may make our services less appealing, cause adoption friction, or that we could experience competitive pressure to adjust our pricing, which could negatively impact our business, revenue, and operating results.
If we are unable to successfully expand sales of our products and services to new markets, our business, financial condition, and operating results may suffer.
Our growth strategy requires expanding sales of our products and services to new markets within the real estate space. These new markets include larger and mixed-use customers. Acceptance of our current and future products and services in new markets will depend on numerous factors, including our ability to provide more sophisticated functionality and features, the pricing of our products and services relative to competitors, perceptions about the security, privacy and availability of our offerings relative to competitive products and services, and the time-to-market of updates and enhancements to our offerings. There is no guarantee we will be successful in achieving all or any of the foregoing. Additionally, sales to new markets will involve risks that are not present, or are present to a lesser extent, in sales to the markets we currently serve. Such risks may include new regulatory regimes, longer sale cycles, increased chance of litigation with customers, increased risk and impact of reputational harm, and increased competition. We may not be able to sufficiently mitigate such risks, which would impact our ability to successfully expand our business. If we are to expand sales of our products and services to new markets, our revenue may increase at a rate than we expect and may even , which could affect our business, financial condition and operating results.
Our business depends substantially on existing customers renewing their subscriptions with us and expanding their use of our Value Added Services, and a decline in either could adversely affect our operating results.
For us to maintain or increase our revenue and improve our operating results, it is important that our existing customers continue to use our Subscription Services, as well as continue to use and increase their adoption and utilization of our Value Added Services. Our customers may not renew their subscriptions with us, continue to expand their adoption and utilization of our Value Added Services, or use our Value Added Services at all for a variety of reasons, including macroeconomic pressures on the real estate market, competitive displacement, customer satisfaction or service, or reputational harm. If our existing customers do not renew their subscriptions and increase their adoption and utilization of our existing or newly developed Value Added Services, our revenue may increase at a slower rate than we expect and may even decline, which could adversely affect our financial condition and operating results. A reduction in the number of our existing customers, even if offset by an increase in new customers, could reduce our revenue and operating margins.
We manage our business to achieve long-term growth, which may not be consistent with the short-term expectations of some investors.
We make product decisions and pursue opportunities that are consistent with our strategic objective to achieve long-term growth. These decisions and opportunities may not be consistent with the short-term expectations of some investors, and may cause significant fluctuations in our results of operations and our stock price from period to period. In addition, notwithstanding our intention to make strategic decisions and pursue opportunities that positively impact long-term value, the decisions we make and opportunities we pursue may not produce the long-term benefits we expect, which could materially affect our business, financial condition and results of operation.
Our acquisition of other companies or technologies may subject us to risks.
We have acquired, and may in the future acquire, other companies (such as our acquisition of Move EZ, Inc. in 2024) or technologies to complement or expand our products and services, optimize our technical capabilities, enhance our ability to compete, or otherwise advance our strategic objectives. We have limited experience and success in acquiring other businesses and we may not be able to effectively integrate acquired assets, technologies, personnel and operations or achieve the anticipated synergies or other benefits from the acquisition due to the inherent risks associated with acquisitions. If an acquisition fails to meet our expectations in terms of its contribution to our overall business strategy or results of operations, or if the costs of acquiring or integrating the acquired business exceed our estimates, our business, results of operations, strategic objectives, and financial condition may suffer. An acquisition may also divert the attention of management and disrupt our ongoing business operations.
In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets. We are required to test goodwill and any other intangible assets with an indefinite life for possible impairment on an annual basis, or more frequently, when circumstances indicate that impairment may have occurred. We are also required to evaluate amortizable intangible assets and fixed assets for impairment if there are indicators of a possible impairment. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our results of operations based on this impairment assessment process, which could adversely affect our results of operations.
We are subject to risks associated with our strategic investments, including partial or complete loss of invested capital. Changes in the fair value of our strategic investments could negatively impact our business, financial condition and results of operations.
Our strategic investments consist of non-marketable equity investments in privately-held companies in which we do not have a controlling interest or significant influence. We make these investments to further our strategic objectives and support key business initiatives. However, these investments are inherently risky, and there can be no assurance that we will achieve the anticipated benefits of these investments or realize a return on them, or be able to dispose of them on favorable terms or at all. Consequently, we could lose all or part of our invested capital.
We record these strategic investments as long-term investments in our Consolidated Balance Sheets. We have elected to apply the measurement alternative for equity investments in privately-held companies that do not have readily determinable fair values, measuring them at cost, less any impairment, plus or minus adjustments resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. An impairment loss is recorded when an event or circumstance indicates a decline in value has occurred.
In determining the estimated fair value of these strategic investments, we use the most recent and available data. Valuations of privately held securities are inherently complex due to the lack of readily available market data and require the use of judgment. The determination of whether an orderly transaction is for an identical or similar investment requires use of significant judgment. In our evaluation, we consider factors such as differences in the rights and preferences of the investments and the extent to which those differences would affect the fair values of those investments. Our impairment analysis encompasses an assessment of both qualitative and quantitative factors, including the investee’s financial metrics, market
acceptance of the investee’s product or technology, general market conditions and liquidity considerations. We record all fair value adjustments of these strategic investments through our Consolidated Statement of Operations. As a result, we may experience additional volatility to our statement of operations due to the valuation and timing of observable price changes or impairments of our strategic investments.
Changes in the fair value of these strategic investments or partial or complete loss of our invested capital could be material to our financial statements and negatively impact our business, financial condition and results of operations.
Risks Related to Intellectual Property Matters
Failure to protect our intellectual property rights, including our code, proprietary technology and brands, could impair our competitive position and harm our business.
We currently rely on patent, trademark, copyright and trade secret laws, trade secret protection, and confidentiality, invention assignment, license and other agreements with our employees, customers, third-party service providers and others to protect our intellectual property rights, which are important to our future success. In addition, we utilize third-party platforms to host our code for version control and collaboration and rely on the security features made available by such platforms to prevent unauthorized access to our code. Our success and ability to compete depend, in part, on our ability to continue to protect our intellectual property, including our code, proprietary technology and brands. Despite our efforts, protecting our intellectual property rights and preventing infringement and unauthorized use of our intellectual property are inherently uncertain. If we are unable to adequately protect our intellectual property rights or the security controls made available by our code hosting partners are compromised and our code is accessed, which has previously occurred and could occur again in the future, our competitors could use the intellectual property we have developed to their own products and services, which could our business. In addition, third parties may independently develop technologies or products that compete with ours, and we may be to prevent such competition. We cannot be certain that our means of protecting our intellectual property rights will be adequate or that our competitors will not independently develop similar technologies or products. To monitor and protect our intellectual property rights, we may be required to expend significant resources. brought to protect and enforce our intellectual property rights could be , time-consuming and to management, and result in the or of portions of our intellectual property or require us to pay royalties. Our to secure, protect and enforce our intellectual property rights could affect our business, financial condition and operating results.
We may be sued by third parties for alleged infringement of their intellectual property rights, which could cause us to incur significant expenses and require us to pay substantial damages.
Our success depends, in part, on us refraining from infringing upon the intellectual property rights of others. Our competitors, as well as a number of other entities and individuals, may legally own or claim to own intellectual property relating to our technology or products and services, including without limitation technology we develop and build internally and/or acquire. From time to time, our competitors or other third parties may claim that we are infringing upon their intellectual property rights. Any claims or litigation, regardless of merit, could cause us to incur significant expenses, distract management, and, if successfully asserted against us, could require that we pay substantial damages, settlement costs or ongoing royalty payments, require that we comply with unfavorable license and other terms, or prevent us from offering our products and services in their current form, including due to the of commercially reasonable licensing terms.
Our products and services contain open source and third-party software, which may pose risks to our proprietary source code and/or introduce security vulnerabilities, and could have an adverse impact on our business and operating results.
We use, and expect to continue to use, open source software in our products and services. The terms of many open source licenses to which we are subject have not been interpreted by United States or foreign courts, and there is a risk that these open source licenses could be construed in a manner that imposes unanticipated conditions, restrictions or costs on our ability to provide or distribute our products and services. Additionally, we may from time to time face claims from third parties alleging ownership of, or demanding release of, the open source software or of derivative works that we developed using such software, which could include our proprietary source code, or otherwise seeking to enforce the terms of the applicable open source license in a manner that would harm our business or competitive position. These claims could result in litigation, which could be costly for us to defend, and require us to make our source code freely available, purchase a costly license or cease offering the functionality unless and until we can re-engineer them to avoid . This re-engineering process could require significant additional research and product development resources, and we may not be to complete it or in a timely manner. Use of certain open source software can also lead to risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of software. We also use, and expect to continue to use, third-party commercial software in our products and services. Third-party commercial software and open source software are developed outside of our direct control and may introduce security that may be to anticipate or mitigate. Further, there is no guarantee that third-party software developers or open source software providers will continue to maintain and update their software that we use. Should development of in-use third-party
software or open source software cease, significant engineering effort may be required to create an in-house solution. These risks could be difficult to eliminate or manage and have an adverse impact on our business and operating results.
Risks Related to Our Financial Results
As our business grows, we expect our revenue growth rate to decline over the long term.
You should not rely on our prior revenue growth as an indication of our future revenue growth. While we have experienced significant revenue growth in prior periods, we expect our revenue growth rate to decline over the long term due to increasing competition, a decrease in the growth rate of our overall market, the maturation of our business, and other reasons.
We expect to make substantial investments across our organization to grow our business, which may impact profitability.
To implement our business and growth strategy, we have made and will continue to make substantial investments across our organization and, as a result, our expenses may increase significantly impacting profitability. For example, we intend to continue to make substantial investments in, among other things: our research and product development organization to both enhance the ease of use and functionality of and develop new products and services; our sales and marketing organization, including expansion of our sales and marketing programs, to increase the size of our customer base and increase adoption and utilization of new and existing Value Added Services by our new and existing customers; and maintaining and expanding our technology infrastructure and operational support to promote the security and availability of our products and services. Even if we are successful in growing our customer base and increasing revenue from new and existing customers, we may not be able to generate additional revenue in an amount that is sufficient to keep pace with our expenses.
Our quarterly results may fluctuate significantly and period-to-period comparisons of our results may not be meaningful.
Our quarterly results, including the levels of our revenue, costs, operating expenses, and operating margins, may fluctuate significantly in the future, and period-to-period comparisons of our results may not be meaningful. The other risks discussed in this "Risk Factors" section may contribute to the variability of our quarterly results. Additionally, we typically experience seasonality in our Value Added Services revenue due to seasonally higher leasing activities in the second quarter, which results in a sequential increase in revenue in the first, second, and third quarters and a sequential decline in revenue in the fourth quarter. Accordingly, the results of any one quarter should not be relied upon as an indication of our future performance. See Item 7, " Management's Discussion and Analysis of Financial Condition and Results of Operations " for additional details regarding the seasonality of our revenue.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
Under Section 382 of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income and taxes may be limited. In general, an “ownership change” occurs if there is a cumulative change in our ownership by “5% shareholders” that exceeds 50% over a rolling three-year period. Similar rules may apply under state tax laws. It is possible that our existing net operating loss and/or credit carryforwards may be subject to limitations arising from ownership changes. There is also a risk that due to legislative changes, such as suspensions on the use of net operating loss carryforwards, or other unforeseen reasons, our existing net operating loss carryforwards could expire or otherwise be unavailable to offset future income tax liabilities.
Risks Related to Indebtedness
Our revolving Credit Facility contains covenants which may limit our operational flexibility and otherwise adversely affect our financial condition and/or results of operations, and provides the lender with a first-priority security interest in substantially all of our and our subsidiary guarantors’ personal property.
On September 30, 2025, we entered into a credit agreement, by and among AppFolio, Inc., certain of our subsidiaries as guarantors, the lender(s) party thereto, and PNC Bank, National Association, in its capacity as Administrative Agent, Swingline Loan Lender and Issuing Lender (the "Credit Facility") which provides for a $150 million senior secured revolving credit facility, including sublimits of $25 million for letters of credit and $25 million for swingline loans.
The Credit Facility contains a number of covenants that restrict our and our subsidiaries’ ability to, among other things, incur indebtedness and liens, make investments, pay dividends or distributions or repurchase equity interests, merge, consolidate or otherwise dispose of assets, enter into transactions with affiliates, and prepay, redeem, purchase, or otherwise retire junior indebtedness, all subject to certain exceptions . We are also required to maintain a Consolidated Net Leverage Ratio (as defined in the Credit Facility) not greater than a specified level. These covenants could limit our operational flexibility and ability to exploit business opportunities.
A failure by us to comply with the covenants or payment requirements, or the occurrence of other events specified in the Credit Facility, could result in an event of default under the Credit Facility, which would give the lender(s) the right to
terminate the commitments to provide loans and extensions of credit and to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable. In addition, the lender would have the right to proceed against the collateral in which we granted a security interest to the lender, which consists of substantially all of our and our subsidiary guarantors’ personal property.
Risks Related to Our Common Stock
The market price of our Class A common stock may be volatile or decline regardless of our operating performance, which could result in substantial losses for our stockholders.
The market price of our Class A common stock has been, and may continue to be volatile. Fluctuations in the price of our Class A common stock could cause our stockholders to lose all or part of their investments. The market price of our Class A common stock could be subject to fluctuations in response to many of the risks discussed in the "Risk Factors" section in this Annual Report and other factors beyond our control, including without limitation:
• actual or anticipated fluctuations in our financial condition or results of operations;
• changes in the estimates of our operating results;
• changes in recommendations by securities analysts or the failure of securities analysts to maintain coverage of us;
• announcements of new products, services, technologies, or pricing;
• fluctuations in our valuation or the valuation of similarly situated companies;
• changes to our management team;
• trading activity by insiders or the market’s perception that insiders intend to sell their shares;
• actual or perceived privacy or data security breaches or other similar incidents;
• the trading volume of our Class A common stock, including sales upon exercise of outstanding options or vesting of equity awards; and
• the overall performance of the equity markets as well as general economic and market conditions.
Such factors could cause the market price of our Class A common stock to decline or make it more difficult for you to sell your Class A common stock at a time and price that you deem appropriate.
In addition, the stock market for technology companies has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may seriously affect the market price of our Class A common stock, regardless of our actual operating performance.
The dual class structure of our common stock concentrates voting control with a limited number of stockholders, including certain of our directors and principal stockholders, effectively limiting other stockholders' ability to influence corporate matters.
Our Class B common stock has ten votes per share, and our Class A common stock has one vote per share. As of December 31, 2025, the holders of the outstanding shares of our Class B common stock, including certain of our directors and principal stockholders, collectively held approximately 83% of the combined voting power of our outstanding capital stock. Because of the 10-to-1 voting ratio between our Class B common stock and Class A common stock, the holders of our Class B common stock collectively control a majority of the combined voting power of our outstanding capital stock and therefore control the election of a majority of our directors and thereby have the power to control our affairs and policies, including the appointment of management and strategic decisions, as well as matters that are submitted to a vote by the holders of our common stock. The interests of the holders of our Class B common stock may be inconsistent with or adverse to those of the holders of our Class A common stock. This concentrated control may also have the effect of delaying, deterring or preventing a change-in-control transaction, depriving our stockholders of an opportunity to receive a premium for their capital stock or affecting the market price of our Class A common stock. In addition, transfers by holders of our Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions. The conversion of our Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of the holders of our Class B common stock who retain their shares over the long term.
We cannot predict the impact that our capital structure may have on our stock price.
Several shareholder advisory firms are opposed to the use of multiple class structures such as ours. As a result, shareholder advisory firms may publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure. Any actions or publications by shareholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of our Class A common stock. In addition, certain institutional investors and investment funds may be prohibited from investing in, or reluctant or unwilling to invest in entities with multiple class structures due to a lack of ability to meaningfully influence corporate affairs and policies through voting. Such prohibitions, reluctance and unwillingness may make our Class A common stock less attractive to investors and, as a result, the market price of our Class A common stock could be adversely affected.
We do not expect to pay any dividends in the foreseeable future.
We have never declared or paid, and we do not anticipate declaring or paying, any cash dividends to holders of our Class A common stock in the foreseeable future. Consequently, investors may need to rely on sales of our Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.
Anti-takeover provisions in our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
Our Amended and Restated Certificate of Incorporation (our "Certificate") and our Amended and Restated Bylaws (our "Bylaws") contain provisions that could have the effect of rendering more difficult hostile takeovers, change-in-control transactions or changes in our Board of Directors or management. Among other things, these provisions authorize the issuance of preferred stock with powers, preferences and rights that may be senior to our common stock, provide for a staggered three-class Board of Directors, prohibit our stockholders from filling vacancies on our Board of Directors or calling special stockholder meetings, require the affirmative vote of (1) at least 66 2/3% of the combined voting power of our outstanding capital stock to approve certain amendments to our Certificate, (2) at least 80% of the combined voting power of our outstanding capital stock to approve amendments by our stockholders to our Bylaws, and (3) at least a majority of the outstanding shares of our Class B common stock voting as a separate class prior to consummating a change-in-control transaction. As a Delaware corporation, we are also subject to the provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which may delay, deter or prevent a change-in-control transaction. Section 203 imposes certain restrictions on mergers, business combinations and other transactions between us and holders of 15% or more of our common stock. Any provision of Delaware law, our Certificate or our Bylaws that has the effect of rendering more , , or a change-in-control transaction could limit the for our stockholders to receive a premium for their shares and affect the price that some investors are willing to pay for our Class A common stock.
Share repurchases could increase the volatility of the trading price of our Class A common stock and diminish our cash reserves, and we cannot guarantee that our share repurchase program will enhance long-term stockholder value.
On April 23, 2025, our Board of Directors authorized the repurchase of up to $300.0 million of our Class A common stock from time to time in open market purchases or privately negotiated transactions (the "2025 Stock Repurchase Program"). The 2025 Stock Repurchase Program does not obligate us to repurchase any minimum dollar amount or number of shares, has no expiration date, and can be modified, terminated or suspended at any time. Repurchases of shares of our Class A common stock could affect the trading price of our Class A common stock and could increase volatility of securities. Similarly, the future announcement of the modification, termination, or suspension of the 2025 Stock Repurchase Program, or our decision not to utilize the full authorized repurchase amount under the 2025 Stock Repurchase Program, could result in a decrease in the trading price of our Class A common stock. In addition, the 2025 Stock Repurchase Program could have the impact of reducing our cash reserves, which may impact our ability to finance our growth, fund working capital, strategic acquisitions or business opportunities, and other general corporate purposes and execute our strategic plan. Although the 2025 Stock Repurchase Program is intended to enhance long-term stockholder value, there can be no assurance that it will do so because the trading price of our Class A common stock may below the levels at which we repurchased our shares and short-term stock price fluctuations could reduce the effectiveness of the 2025 Stock Repurchase Program.
Risks Related to Macroeconomic Conditions
Global and regional economic conditions could harm our business.
Adverse global and regional economic conditions, including, but not limited to, recessionary or inflationary pressures, tightening in the credit markets, extreme volatility or distress in the financial markets, supply chain issues, fluctuations in rental occupancy rates, reduced consumer confidence or economic activity, government fiscal and tax policies, geopolitical events, and other negative financial news or macroeconomic developments could have an adverse impact on the demand for our products and services or cause us to experience increased costs that could negatively affect our operating results.
Laws and regulations are continuously evolving and unfavorable changes could adversely affect our operating results, subject us to litigation or governmental investigation, or otherwise harm our business.
In addition to laws and regulations directly applicable to our products and services, we are subject to general business laws and regulations. Unfavorable laws, regulations and administrative or judicial decisions interpreting or applying laws and regulations applicable to our business could subject us to litigation or governmental investigation and increase our cost of doing business, any of which may adversely affect our operating results. In addition, the application of federal, state and local tax laws to services provided electronically is continuously evolving. New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted or amended at any time (possibly with retroactive effect), and be applied solely or disproportionately to services provided over the Internet. These enactments or amendments could adversely affect our sales activity due to the inherent cost increase such taxes would represent and ultimately result in a negative impact on our operating results. Existing tax laws, statutes, rules, regulations or ordinances could also be interpreted, modified or applied adversely to us (possibly with retroactive effect), which could require us or our customers to pay additional tax amounts, as well as require us or our customers to pay or , as well as interest on past amounts. If we are in collecting such taxes due from our customers, we could be held liable for such costs, thereby impacting our operating results.
Audits and reviews by tax authorities may prove costly and a distraction to management.
Our tax filings are subject to reviews and audits in various jurisdictions and the positions or assumptions we take may be challenged. Although we believe our tax positions are reasonable, it is possible that tax authorities may disagree with certain positions we have taken and an adverse outcome of such a review or audit could result in additional tax, interest and penalties, which could have a negative effect on our financial condition and operating results. In addition, defending our tax positions may be costly and a distraction to management, which may affect our operating results.
Natural disasters, health epidemics, or other catastrophic events may cause damage or disruption to our operations, commerce and the global economy, and have a negative effect on our business and operations.
Our business operations are subject to interruption by natural disasters, flooding, fire, power shortages, health epidemics, terrorism, political unrest, telecommunications failure, vandalism, cyber-attacks, geopolitical instability, war, the effects of climate change (such as drought, wildfires, hurricanes, and increased storm severity) and other events beyond our control. Although we maintain crisis management and disaster response plans, such events could make it difficult or impossible for us to deliver our services to our customers, decrease demand for our services, and cause us to incur substantial expense. Our insurance may not be sufficient to cover losses or additional expenses that we may sustain. The majority of our research and development activities, offices, information technology systems, and other business operations are located near major seismic in California. Customer data could be , significant recovery time could be required to resume operations and our financial condition and operating results could be affected in the event of a major natural or event. In addition, the impacts of climate change on the global economy and our industry are rapidly evolving. We may be subject to increased regulations, reporting requirements, standards or expectations regarding the environmental impacts of our business.
