appn-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended March 31, 2024


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

For the transition period from to

Commission File Number: 001-38098

APPIAN CORPORATION

(Exact Name of Registrant as Specified in its Charter)


Delaware						54-1956084
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

7950 Jones Branch Drive McLean, VA						22102
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code: (703) 442-8844

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


Title of each class	Trading symbol	Name of each exchange on which registered
Class A Common Stock	APPN	The Nasdaq Stock Market LLC

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Small reporting company

☐

Emerging growth company

☐

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

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

As of April 29, 2024, there were 41,044,704 shares of the registrant’s Class A common stock and 31,196,796 shares of the registrant’s Class B common stock, each with a par value of $0.0001 per share, outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Consolidated Balance Sheets as of March 31, 2024 and December 31, 202 3	3
	Consolidated Statements of Operations for the three months ended March 31, 2024 and March 31, 2023	4
	Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2024 and March 31, 2023	5
	Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2024 and March 31, 2023	6
	Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and March 31, 2023	7
	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	44

	Signatures	46

PART I—FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

APPIAN CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value and share data)


	As of
	March 31, 2024		December 31, 2023
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	170,108	$	149,351
Short-term investments and marketable securities	—		9,653
Accounts receivable, net of allowances of $2,265 and $2,606, respectively	129,317		171,561
Deferred commissions, current	34,367		34,261
Prepaid expenses and other current assets	56,088		49,529
Total current assets	389,880		414,355
Property and equipment, net of accumulated depreciation of $26,904 and $25,141, respectively	42,558		42,682

Goodwill	26,518		27,106
Intangible assets, net of accumulated amortization of $4,432 and $4,152, respectively	3,434		3,889
Right-of-use assets for operating leases	39,074		39,975
Deferred commissions, net of current portion	58,090		59,764
Deferred tax assets	3,833		3,453
Other assets	31,971		36,279
Total assets	$	595,358	$	627,503
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities
Accounts payable	$	9,882	$	6,174
Accrued expenses	12,252		11,046
Accrued compensation and related benefits	28,981		38,003
Deferred revenue	220,943		235,992
Debt	7,098		66,368
Operating lease liabilities	12,219		11,698
Other current liabilities	2,555		1,891
Total current liabilities	293,930		371,172
Long-term debt	248,025		140,221
Non-current operating lease liabilities	57,357		59,067
Deferred revenue, non-current	5,216		4,700
Deferred tax liabilities	2		2
Other non-current liabilities	493		—
Total liabilities	605,023		575,162
Stockholders’ (deficit) equity
Class A common stock—par value $0.0001; 500,000,000 shares authorized as of March 31, 2024 and December 31, 2023 and 42,359,967 and 42,169,970 shares issued as of March 31, 2024 and December 31, 2023, respectively	4		4
Class B common stock—par value $0.0001; 100,000,000 shares authorized as of March 31, 2024 and December 31, 2023 and 31,196,796 and 31,196,796 shares issued as of March 31, 2024 and December 31, 2023, respectively	3		3
Additional paid-in capital	603,870		595,781
Accumulated other comprehensive loss	(10,708)		(23,555)
Accumulated deficit	(552,815)		(519,892)
Treasury stock at cost, 1,320,531 shares as of March 31, 2024	(50,019)		—
Total stockholders’ (deficit) equity	(9,665)		52,341
Total liabilities and stockholders’ (deficit) equity	$	595,358	$	627,503

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

APPIAN CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share data)


	Three Months Ended March 31,
	2024		2023
Revenue
Subscriptions	$	117,694	$	98,957
Professional services	32,141		36,278
Total revenue	149,835		135,235
Cost of revenue
Subscriptions	12,270		10,448
Professional services	25,727		25,645
Total cost of revenue	37,997		36,093
Gross profit	111,838		99,142
Operating expenses
Sales and marketing	58,156		63,090
Research and development	39,771		41,624
General and administrative	33,446		29,694
Total operating expenses	131,373		134,408
Operating loss	(19,535)		(35,266)
Other non-operating expense
Other expense (income), net	8,207		(2,690)
Interest expense	5,646		3,118
Total other non-operating expense	13,853		428
Loss before income taxes	(33,388)		(35,694)
Income tax (benefit) expense	(465)		1,135
Net loss	$	(32,923)	$	(36,829)
Net loss per share:
Basic and diluted	$	(0.45)	$	(0.51)
Weighted average common shares outstanding:
Basic and diluted	73,300		72,869

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

APPIAN CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited, in thousands)


	Three Months Ended March 31,
	2024		2023
Net loss	$	(32,923)	$	(36,829)
Comprehensive loss, net of income taxes
Foreign currency translation adjustments	12,843		(746)
Unrealized gains on available-for-sale securities	4		46
Total other comprehensive loss, net of income taxes	$	(20,076)	$	(37,529)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

APPIAN CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT) EQUITY

(unaudited, in thousands, except share data)


				Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Treasury Stock		Total Stockholders' Equity (Deficit)
	Common Stock
	Shares	Amount
Balance, December 31, 2023	73,366,766	$	7	$	595,781	$	(23,555)	$	(519,892)	$	—	$	52,341
Net loss	—	—		—		—		(32,923)		—		(32,923)
Issuance of common stock to directors	4,974	—		—		—		—		—		—
Vesting of restricted stock units	141,563	—		(2,862)		—		—		—		(2,862)
Exercise of stock options	43,460	—		345		—		—		—		345
Repurchase of common stock	(1,320,531)	—		—		—		—		(50,019)		(50,019)
Stock-based compensation expense	—	—		10,606		—		—		—		10,606
Other comprehensive income	—	—		—		12,847		—		—		12,847
Balance, March 31, 2024	72,236,232	$	7	$	603,870	$	(10,708)	$	(552,815)	$	(50,019)	$	(9,665)


				Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Common Stock
	Shares	Amount
Balance, December 31, 2022	72,817,887	$	7	$	561,390	$	(7,246)	$	(408,451)	$	145,700
Net loss	—	—		—		—		(36,829)		(36,829)
Issuance of common stock to directors	6,713	—		—		—		—		—
Vesting of restricted stock units	111,296	—		(2,959)		—		—		(2,959)
Exercise of stock options	19,483	—		131		—		—		131
Stock-based compensation expense	—	—		11,056		—		—		11,056
Other comprehensive income	—	—		—		(700)		—		(700)
Balance, March 31, 2023	72,955,379	$	7	$	569,618	$	(7,946)	$	(445,280)	$	116,399

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

APPIAN CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Three Months Ended March 31,
	2024		2023
Cash flows from operating activities
Net loss	$	(32,923)	$	(36,829)
Adjustments to reconcile net loss to net cash provided by (used by) operating activities
Stock-based compensation	10,606		11,056
Depreciation expense and amortization of intangible assets	2,361		2,342
Bad debt expense	(135)		120
Amortization of debt issuance costs	140		70


(Benefit) provision for deferred income taxes	(450)		357
Foreign currency transaction losses, net	11,806		—
Changes in assets and liabilities
Accounts receivable	40,061		17,609
Prepaid expenses and other assets	(2,245)		(8,803)
Deferred commissions	1,569		(314)
Accounts payable and accrued expenses	5,187		(1,878)
Accrued compensation and related benefits	(8,703)		(9,369)
Other current and non-current liabilities	1,944		1,582
Deferred revenue	(10,120)		(2,177)
Operating lease assets and liabilities	(232)		969
Net cash provided by (used by) operating activities	18,866		(25,265)
Cash flows from investing activities
Proceeds from maturities of investments	9,657		16,289
Payments for investments	—		(24,184)
Purchases of property and equipment	(2,198)		(4,421)
Net cash provided by (used by) investing activities	7,459		(12,316)
Cash flows from financing activities
Proceeds from borrowings	50,000		92,000
Payments for debt issuance costs	(463)		(278)
Debt repayments	(1,250)		(750)
Repurchase of common stock	(50,019)		—
Payments for employee taxes related to the net share settlement of equity awards	(2,862)		(2,959)
Proceeds from exercise of common stock options	345		131
Net cash (used by) provided by financing activities	(4,249)		88,144
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash	(1,319)		15
Net increase in cash, cash equivalents, and restricted cash	20,757		50,578
Cash, cash equivalents, and restricted cash at beginning of period	149,351		150,381
Cash, cash equivalents, and restricted cash at end of period	$	170,108	$	200,959

Supplemental disclosure of cash flow information
Cash paid for interest	$	5,325	$	1,233
Cash paid for income taxes	$	751	$	284
Supplemental disclosure of non-cash investing and financing activities
Accrued capital expenditures	$	484	$	2,233

The accompanying notes are an integral part of these unaudited consolidated financial statements.

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Organization and Description of Business

Appian Corporation (together with its subsidiaries, “Appian,” the “Company,” “we,” or “our”) is a software company that automates business processes. The Appian AI Process Platform includes everything you need to design, automate, and optimize even the most complex processes, from start to finish. The world's most innovative organizations trust Appian to improve their workflows, unify data, and optimize operations—resulting in better growth and superior customer experiences.

We are headquartered in McLean, Virginia and operate both in the U.S. and internationally, including Australia, Canada, France, Germany, India, Italy, Japan, Mexico, the Netherlands, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

2. Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and footnotes include the accounts of Appian and its wholly-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for interim financial reporting. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations, financial position, changes in stockholders’ equity, and cash flows. All intercompany accounts and transactions have been eliminated in consolidation.

The results of operations for the current period are not necessarily indicative of the results for the full year or the results for any future periods. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on February 15, 2024.

Use of Estimates

The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect the amounts reported in these condensed consolidated financial statements and accompanying notes. Although we believe the estimates we use are reasonable, due to the inherent uncertainty involved in making these estimates, actual results reported in future periods could differ from those estimates.

Significant estimates embedded in the condensed consolidated financial statements include, but are not limited to, revenue recognition, income taxes and the related valuation allowance established against deferred tax assets, the amortization period of deferred commissions, the amortization period of the cost to obtain the judgment preservation insurance (as discussed in Note 12), and stock-based compensation.

Revenue Recognition

Refer to Note 3 for a detailed discussion on specific revenue recognition principles related to our major revenue streams.

Concentration of Credit and Customer Risk

Our financial instruments exposed to concentration of credit and customer risk consist primarily of cash, cash equivalents, accounts receivable, and our short- and long-term investments. Deposits held with banks may exceed the amount of insurance provided on such deposits; however, we believe the financial institutions holding our cash deposits are financially sound and, accordingly, minimal credit risk exists with respect to these balances.

With regard to our customers, credit evaluation and account monitoring procedures are used to minimize the risk of loss. Revenue generated from government agencies represented 21.7% and 20.5% of our revenue for the three months ended March 31, 2024 and 2023, respectively, of which the top three U.S. federal government agencies generated 4.5% and 4.2% of our revenue for the three months ended March 31, 2024 and 2023, respectively. Additionally, 37.2% and 33.4% of our revenue during the three months ended March 31, 2024 and 2023, respectively, was generated from international customers. No single end-customer accounted for more than 10% of our total revenue in the three months ended March 31, 2024 or 2023. As of March 31, 2024, we had one customer whose balance comprised 12% of total accounts receivable.

Cash, Cash Equivalents, and Restricted Cash

We consider all highly liquid investments with original maturities of three months or less, as well as overnight repurchase agreements, to be cash equivalents. Restricted cash consisted of cash designated to settle an escrow liability stemming from a holdback agreement related to our acquisition of Lana Labs GmbH. We paid the remaining amount owed on August 11, 2023.

The following table presents a reconciliation of cash, cash equivalents, and restricted cash as presented in the consolidated statements of cash flows (in thousands):


	As of
	March 31, 2024		December 31, 2023		March 31, 2023		December 31, 2022
Cash and cash equivalents	$	170,108	$	149,351	$	198,679	$	148,132
Restricted cash, current	—		—		2,280		2,249

Total cash, cash equivalents, and restricted cash	$	170,108	$	149,351	$	200,959	$	150,381

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are stated at realizable value, net of an allowance for doubtful accounts. The allowance for doubtful accounts is based on our assessment of the collectability of accounts and incorporates an estimation of expected lifetime credit losses on our receivables. We regularly review the composition of the accounts receivable aging, historical bad debts, changes in payment patterns, customer creditworthiness, and current economic trends. If the financial condition of our customers were to deteriorate, resulting in their inability to make required payments, additional provisions for doubtful accounts would be required and would increase bad debt expense. The allowance for doubtful accounts totaled $2.3 million and $2.6 million as of March 31, 2024 and December 31, 2023, respectively.

Deferred Commissions

We capitalize costs of obtaining a contract with a customer, which consist of sales commissions paid to our sales team, and the associated incremental payroll taxes. These costs are recorded as deferred commissions in the consolidated balance sheets. Costs to obtain a contract for a new customer or upsell an existing customer are amortized over an estimated economic life of five years as sales commissions on initial sales are not commensurate with sales commissions on contract renewals. Commissions paid relating to contract renewals are deferred and amortized over the related renewal period. We determine the estimated economic life based on both qualitative and quantitative factors such as expected renewals, product life cycles, contractual terms, and customer attrition. We periodically review the carrying amount of deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the estimated economic life. Costs to obtain a contract for professional services arrangements are expensed as incurred as the contractual period of our professional services arrangements are one year or less.

Amortization associated with deferred commissions is recorded to sales and marketing expense in our consolidated statements of operations. Total commission expense was $11.4 million and $11.0 million for the three months ended March 31, 2024 and 2023, respectively.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Significant additions or improvements extending the useful life of an asset are capitalized, while repairs and maintenance costs which do not significantly improve the related assets or extend their useful lives are charged to expense as incurred. The estimated useful lives of our property and equipment are generally 3 years for computer software, computer hardware, and internally developed software, 5 years for equipment, and 10 years years for office furniture and fixtures. Leasehold improvements have an estimated useful life of the shorter of the useful life of the assets or the lease term.

Severance Costs

In the past, we have incurred severance costs related to involuntary reductions in our workforce designed to right-size our employee base and improve operations. For involuntary termination benefits not provided under the terms of ongoing arrangements, we record severance costs once the terms of the arrangement have been established and communicated to employees. Costs related to benefits provided in accordance with mutually understood and ongoing agreements are recognized when an obligation has been incurred, it is probable the benefits will be paid, and the amount to be paid can be reasonably estimated. We did not incur any such severance costs during the three months ended March 31, 2024, while severance costs related to actions totaled $4.2 million for the three months ended March 31, 2023.

Treasury Stock

We account for treasury stock under the cost method. When treasury stock is reissued at a price higher than its cost, the difference is recorded as a component of additional paid-in-capital (“APIC”) in our consolidated balance sheets. When treasury stock is reissued at a price lower than its cost, the difference is recorded as a component of APIC to the extent there are previously recorded gains to offset the losses. If there are no treasury stock gains in APIC, the losses upon reissuance of treasury stock are recorded as an increase to accumulated deficit.

Recent Accounting Pronouncements

Adopted

We have not adopted any new accounting guidance in 2024 that has had a material impact on our condensed consolidated financial statements or disclosures.

Not Yet Adopted

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvement to Reportable Segment Disclosures (ASU 2023-07), which enhances the disclosure requirements for operating segments in our annual and interim consolidated financial statements. The new guidance is effective for us beginning with our annual reporting for fiscal year 2024 and for interim period reporting beginning in fiscal year 2025 and will be applied on a retrospective basis. Early adoption is permitted. The new ASU requires public companies to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Additionally, it requires public companies to disclose the title and position of the Chief Operating Decision Maker (“CODM”). The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. This guidance also applies to public entities that have only one segment. This ASU will only impact our disclosures with no impacts to our results of operations, cash flows, and financial condition.

In December 2023, the FASB issued ASU 2023-09, Income Tax (Topic 740): Improvement to Income Tax Disclosures (ASU 2023-09), which requires public companies to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. The new guidance will be effective for our annual reporting for fiscal year 2025 on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. This ASU will only impact our disclosures with no impacts to our results of operations, cash flows, and financial condition.

In March 2024, the SEC issued its final climate disclosure rule, which requires the disclosure of material Scope 1 and Scope 2 greenhouse gas emissions and other climate-related topics in annual reports if they are reasonably likely to have a material impact on the Company’s business. For large accelerated filers, disclosure requirements will begin phasing in for fiscal years beginning on or after January 1, 2025. Subsequent to issuance, the rules became the subject of litigation, and the SEC has issued a stay to allow the legal process to proceed. We are currently evaluating the impact these rules will have on our financial statements and related disclosures and will monitor the litigation progress for possible impacts on the disclosure requirements under the rules.

3. Revenue

Revenue Recognition

We generate subscriptions revenue primarily through the sale of cloud subscriptions bundled with maintenance and support and hosting services as well as term license subscriptions bundled with maintenance and support. We generate professional services revenue from fees for our consulting services, including application development and deployment assistance as well as training related to our platform.

The following table summarizes revenue recorded during the three months ended March 31, 2024 and 2023 (in thousands):


	Three Months Ended March 31,
	2024		2023
Cloud subscriptions	$	86,603	$	69,692
Term license subscriptions	23,771		23,151
Maintenance and support	7,320		6,114
Total subscriptions	117,694		98,957
Professional services	32,141

SEC Form 10-Q filed by Appian Corporation