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Appian Announces Third Quarter 2023 Financial Results

November 2, 2023 at 4:02 PM EDT
Third quarter cloud subscription revenue increased 27% year-over-year to $77.2 million

MCLEAN, Va., Nov. 02, 2023 (GLOBE NEWSWIRE) -- Appian (Nasdaq: APPN) today announced financial results for the third quarter ended September 30, 2023.

“Our private data-centric approach to AI is getting strong support from buyers,” said Matt Calkins, CEO & Founder.

Third Quarter 2023 Financial Highlights:

  • Revenue: Cloud subscription revenue was $77.2 million, up 27% compared to the third quarter of 2022. Total subscriptions revenue, which includes sales of our cloud subscriptions, on-premises term license subscriptions, and maintenance and support, increased 20% year-over-year to $103.8 million. Professional services revenue was $33.3 million, an increase of 6% compared to the third quarter of 2022. Total revenue was $137.1 million, up 16% compared to the third quarter of 2022. Cloud subscription revenue retention rate was 117% as of September 30, 2023.
  • Operating loss and non-GAAP operating loss: GAAP operating loss was $(15.2) million, compared to $(37.8) million for the third quarter of 2022. Non-GAAP operating loss was $(7.7) million, compared to $(24.6) million for the third quarter of 2022.
  • Net loss and non-GAAP net loss: GAAP net loss was $(22.3) million, compared to $(44.0) million for the third quarter of 2022. GAAP net loss per share was $(0.30) for the third quarter of 2023, compared to $(0.61) for the third quarter of 2022. Non-GAAP net loss was $(14.7) million, compared to $(30.9) million for the third quarter of 2022. Non-GAAP net loss per share was $(0.20), compared to the $(0.43) net loss per share for the third quarter of 2022. GAAP and non-GAAP net loss for the third quarter of 2023 included $4.3 million, or $(0.06) per share, of foreign currency exchange losses. GAAP and non-GAAP net loss for the third quarter of 2022 included $6.1 million, or $(0.08) per share, of foreign currency exchange losses. We do not forecast foreign exchange rate movements.
  • Adjusted EBITDA: Adjusted EBITDA loss was $(5.3) million, compared to adjusted EBITDA loss of $(22.9) million for the third quarter of 2022.
  • Balance sheet and cash flows: As of September 30, 2023, Appian had total cash, cash equivalents, and investments of $169.5 million. Net cash used by operating activities was $(65.0) million for the three months ended September 30, 2023, compared to $(43.7) million of net cash used by operating activities for the same period in 2022.


A reconciliation of GAAP to non-GAAP financial measures has been provided in the tables following the financial statements in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”

Recent Business Highlights:


Financial Outlook:

As of November 2, 2023, guidance for 2023 is as follows:

  • Fourth Quarter 2023 Guidance:

    • Cloud subscription revenue is expected to be between $78.6 million and $79.6 million, representing year-over-year growth of 19% to 21%.

    • Total revenue is expected to be between $138.0 million and $143.0 million, representing a year-over-year increase of 10% to 14%.

    • Adjusted EBITDA loss is expected to be between $(16.1) million and $(12.1) million.

    • Non-GAAP net loss per share is expected to be between $(0.29) and $(0.24), assuming weighted average common shares outstanding of 73.3 million.

  • Full Year 2023 Guidance:

    • Cloud subscription revenue is expected to be between $300.0 million and $301.0 million, representing year-over-year growth of 27%.

    • Total revenue is expected to be between $538.0 million and $543.0 million, representing a year-over-year increase of 15% to 16%.

    • Adjusted EBITDA loss is expected to be between $(62.0) million and $(58.0) million.

    • Non-GAAP net loss per share is expected to be between $(1.13) and $(1.07), assuming weighted average common shares outstanding of 73.1 million.


Conference Call Details:

Appian will host a conference call today, November 2, 2023, at 4:30 p.m. ET to discuss Appian's financial results for the third quarter ended September 30, 2023 and business outlook.

To access the call, navigate to the following link(1). Once registered, participants can dial in using their phone with a dial in and PIN, or they can choose the Call Me option for instant dial to their phone. The live webcast of the conference call can also be accessed on the Investor Relations page of our website at http://investors.appian.com.

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1 https://edge.media-server.com/mmc/p/48skn964/


About Appian

Appian 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. For more information, visit www.appian.com. [Nasdaq: APPN]

Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with GAAP, Appian provides investors with certain non-GAAP financial performance measures. Appian uses these non-GAAP financial performance measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Appian’s management believes these non-GAAP financial measures provide meaningful supplemental information regarding Appian’s performance by excluding certain expenses that may not be indicative of our recurring core business operating results. Appian believes both management and investors benefit from referring to these non-GAAP financial measures in assessing Appian’s performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to historical performance as well as comparisons to competitors’ operating results. Appian believes these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to measures used by management in its financial and operational decision-making and (2) they are used by Appian’s institutional investors and the analyst community to help them analyze the health of Appian’s business.

The non-GAAP financial performance measures include non-GAAP net loss, non-GAAP net loss per share, and non-GAAP operating loss. These non-GAAP financial performance measures exclude the effect of stock-based compensation expense, certain litigation-related expenses consisting of legal and other professional fees associated with the Pegasystems cases (net of insurance reimbursements), amortization of the judgement preservation insurance (“JPI”) policy, and severance costs related to involuntary reductions in our workforce. While some of these items may be recurring in nature and should not be disregarded in evaluation of our earnings performance, it is useful to exclude such items when analyzing current results and trends compared to other periods as these items can vary significantly from period to period depending on specific underlying transactions or events that may occur. Therefore, while we may incur or recognize these types of expenses in the future, we believe removing these items for purposes of calculating the non-GAAP financial measures provides investors with a more focused presentation of our ongoing operating performance.

Appian also discusses adjusted EBITDA, a non-GAAP financial performance measure it believes offers a useful view of the overall operation of its businesses. The company defines adjusted EBITDA as net loss before (1) other (income) expenses, net, (2) interest expense, (3) income tax expense (benefit), (4) depreciation expense and amortization of intangible assets, (5) stock-based compensation expense, (6) litigation expenses (net of insurance reimbursements) directly associated with the Pegasystems cases, (7) JPI amortization, and (8) severance costs. The most directly comparable GAAP financial measure to adjusted EBITDA is net loss. Users should consider the limitations of using adjusted EBITDA, including the fact this measure does not provide a complete measure of our operating performance. Adjusted EBITDA is not intended to purport to be an alternate to net loss as a measure of operating performance or to cash flows from operating activities as a measure of liquidity.

The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as a substitute for, or superior to the financial information prepared and presented in accordance with GAAP, and Appian’s non-GAAP measures may be different from non-GAAP measures used by other companies. For more information on these non-GAAP financial measures, see the reconciliation of these non-GAAP financial measures to their nearest comparable GAAP measures at the end of this press release. Appian provides guidance ranges for non-GAAP net loss per share and adjusted EBITDA; however, we are not able to reconcile these amounts to their comparable GAAP financial measures without unreasonable efforts because certain information necessary to calculate such measures on a GAAP basis is unavailable, subject to high variability, dependent on future events outside of our control, and cannot be predicted. In addition, Appian believes such reconciliations could imply a degree of precision that might be confusing or misleading to investors. The actual effect of the reconciling items that Appian may exclude from these non-GAAP expense numbers, when determined, may be significant to the calculation of the comparable GAAP measures.

Forward-Looking Statements

This press release includes forward-looking statements. All statements contained in this press release other than statements of historical facts, including statements regarding Appian’s future financial and business performance for the fourth quarter and full year 2023, future investment by Appian in its go-to-market initiatives, increased demand for the Appian AI-Powered Process platform, market opportunity and plans and objectives for future operations, including Appian’s ability to drive continued subscriptions revenue and total revenue growth, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “will,” “plan,” and similar expressions are intended to identify forward-looking statements. Appian has based these forward-looking statements on its current expectations and projections about future events and financial trends that Appian believes may affect its financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks and uncertainties, including the risks and uncertainties associated with Appian’s ability to grow its business and manage its growth, Appian’s ability to sustain its revenue growth rate, continued market acceptance of Appian’s AI-Powered Process platform and adoption of low-code solutions to drive digital transformation, the fluctuation of Appian’s operating results due to the length and variability of its sales cycle, competition in the markets in which Appian operates, risks and uncertainties associated with the composition and concentration of Appian’s customer base and their demand for its platform and satisfaction with the services provided by Appian, the potential fluctuation of Appian’s future quarterly results of operations, Appian’s ability to shift its revenue towards subscriptions and away from professional services, Appian’s ability to operate in compliance with applicable laws and regulations, Appian’s strategic relationships with third parties and use of third-party licensed software and its platform’s compatibility with third-party applications, the timing of Appian’s recognition of subscriptions revenue which may delay the effect of near term changes in sales on its operating results, Appian’s ability to meet its financial covenants under its Credit Agreement, and the additional risks and uncertainties set forth in the “Risk Factors” section of Appian’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission on February 16, 2023 and other reports that Appian has filed with the Securities and Exchange Commission. Moreover, Appian operates in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for Appian’s management to predict all risks nor can Appian assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements Appian may make. In light of these risks, uncertainties, and assumptions, Appian cannot guarantee future results, levels of activity, performance, achievements, or events and circumstances reflected in the forward-looking statements will occur. Appian is under no duty to update any of these forward-looking statements after the date of this press release to conform these statements to actual results or revised expectations, except as required by law.

Investor Contact
Srinivas Anantha, CFA
703-442-8844
investors@appian.com

Media Contact
Ben Farrell
703-442-1067
ben.farrell@appian.com 

 
 
APPIAN CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and share data)
 
  As of
  September 30, 2023   December 31, 2022
  (unaudited)    
Assets      
Current assets      
Cash and cash equivalents $         130,761     $         148,132  
Short-term investments and marketable securities           38,726               47,863  
Accounts receivable, net of allowance of $2,268 and $2,125, respectively           133,548               165,964  
Deferred commissions, current           31,107               30,196  
Prepaid expenses and other current assets           51,230               28,093  
Restricted cash, current           —               2,249  
Total current assets           385,372               422,497  
Property and equipment, net of accumulated depreciation of $22,972 and $18,864, respectively           42,444               41,855  
Goodwill           25,991               26,349  
Intangible assets, net of accumulated amortization of $3,618 and $2,715, respectively           4,092               5,251  
Right-of-use assets for operating leases           40,501               37,248  
Deferred commissions, net of current portion           54,932               55,788  
Deferred tax assets           2,688               1,940  
Other assets           41,018               3,286  
Total assets $         597,038     $         594,214  
Liabilities and Stockholders’ Equity      
Current liabilities      
Accounts payable $         5,956     $         7,997  
Accrued expenses           11,275               12,227  
Accrued compensation and related benefits           33,866               40,718  
Deferred revenue           194,602               194,768  
Debt           65,431               2,740  
Operating lease liabilities           11,003               8,681  
Other current liabilities           1,119               3,121  
Total current liabilities           323,252               270,252  
Long-term debt           142,016               115,379  
Non-current operating lease liabilities           60,339               57,225  
Deferred revenue           3,243               5,556  
Deferred tax liabilities           87               102  
Total liabilities           528,937               448,514  
Stockholders’ equity      
Class A common stock—par value $0.0001; 500,000,000 shares authorized and 41,726,634 shares issued and outstanding as of September 30, 2023; 500,000,000 shares authorized and 41,320,091 shares issued and outstanding as of December 31, 2022           4               4  
Class B common stock—par value $0.0001; 100,000,000 shares authorized and 31,497,396 shares issued and outstanding as of September 30, 2023; 100,000,000 shares authorized and 31,497,796 shares issued and outstanding as of December 31, 2022           3               3  
Additional paid-in capital           588,029               561,390  
Accumulated other comprehensive loss           (10,049 )             (7,246 )
Accumulated deficit           (509,886 )             (408,451 )
Total stockholders’ equity           68,101               145,700  
Total liabilities and stockholders’ equity $         597,038     $         594,214  


 
APPIAN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
 
  Three Months Ended September 30,   Nine Months Ended September 30,
    2023       2022       2023       2022  
  (unaudited)
Revenue              
Subscriptions $         103,803     $         86,520     $         296,554     $         246,908  
Professional services           33,291               31,356               103,490               95,297  
Total revenue           137,094               117,876               400,044               342,205  
Cost of revenue              
Subscriptions           11,265               9,313               32,492               26,065  
Professional services           24,804               24,447               76,515               72,011  
Total cost of revenue           36,069               33,760               109,007               98,076  
Gross profit           101,025               84,116               291,037               244,129  
Operating expenses              
Sales and marketing           55,667               54,912               181,338               157,104  
Research and development           37,135               37,623               118,502               101,401  
General and administrative           23,440               29,357               82,342               90,014  
Total operating expenses           116,242               121,892               382,182               348,519  
Operating loss           (15,217 )             (37,776 )             (91,145 )             (104,390 )
Other non-operating expense              
Other expense (income), net           1,939               5,876               (4,637 )             12,815  
Interest expense           4,917               89               12,790               222  
Total other non-operating expense           6,856               5,965               8,153               13,037  
Loss before income taxes           (22,073 )             (43,741 )             (99,298 )             (117,427 )
Income tax expense (benefit)           178               255               2,137               (924 )
Net loss $         (22,251 )   $         (43,996 )   $         (101,435 )   $         (116,503 )
Net loss per share:              
Basic and diluted $         (0.30 )   $         (0.61 )   $         (1.39 )   $         (1.61 )
Weighted average common shares outstanding:              
Basic and diluted           73,178               72,503               73,032               72,372  


 
APPIAN CORPORATION
STOCK-BASED COMPENSATION EXPENSE
(in thousands)
 
  Three Months Ended September 30,   Nine Months Ended September 30,
    2023       2022       2023       2022  
  (unaudited)
Cost of revenue              
Subscriptions $         211     $         284     $         713     $         712  
Professional services           1,535               1,401               4,598               3,788  
Operating expenses              
Sales and marketing           3,245               2,667               8,462               6,721  
Research and development           2,930               3,454               9,466               8,831  
General and administrative           3,090               3,530               9,976               7,375  
Total stock-based compensation expense $         11,011     $         11,336     $         33,215     $         27,427  


 
APPIAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
  Nine Months Ended September 30,
    2023       2022  
Cash flows from operating activities      
Net loss $         (101,435 )   $         (116,503 )
Adjustments to reconcile net loss to net cash used by operating activities      
Stock-based compensation           33,215               27,427  
Depreciation expense and amortization of intangible assets           7,046               5,332  
Bad debt expense           690               561  
Amortization of debt issuance costs           342               —  
Deferred income taxes           (808 )             (1,549 )
Changes in assets and liabilities      
Accounts receivable           30,665               (9,114 )
Prepaid expenses and other assets           (61,555 )             (6,723 )
Deferred commissions           (56 )             (5,715 )
Accounts payable and accrued expenses           (657 )             (3,654 )
Accrued compensation and related benefits           (6,671 )             1,634  
Other current and non-current liabilities           (2,026 )             (383 )
Deferred revenue           (3,186 )             15,414  
Operating lease assets and liabilities           2,238               (685 )
Net cash used by operating activities           (102,198 )             (93,958 )
Cash flows from investing activities      
Purchases of investments           (53,443 )             (31,214 )
Proceeds from investments           62,590               57,417  
Purchases of property and equipment           (8,278 )             (5,861 )
Net cash provided by investing activities           869               20,342  
Cash flows from financing activities      
Proceeds from borrowings           92,000               —  
Debt repayments           (2,625 )             —  
Payments for debt issuance costs           (411 )             —  
Payments for employee taxes related to the net share settlement of equity awards           (7,240 )             —  
Proceeds from exercise of common stock options           664               25,205  
Net cash provided by financing activities           82,388               25,205  
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash           (679 )             (1,694 )
Net decrease in cash, cash equivalents, and restricted cash           (19,620 )             (50,105 )
Cash, cash equivalents, and restricted cash at beginning of period           150,381               103,960  
Cash, cash equivalents, and restricted cash at end of period $         130,761     $         53,855  
       
Supplemental disclosure of cash flow information      
Cash paid for interest $         11,960     $         243  
Cash paid for income taxes $         2,944     $         749  
Supplemental disclosure of non-cash investing and financing activities      
Accrued capital expenditures $         27     $         317  


 
APPIAN CORPORATION
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES
(unaudited, in thousands, except per share data)
 
  GAAP Measure   Stock-Based Compensation   Litigation Expenses   JPI Amortization   Severance Costs   Non-GAAP Measure
Three Months Ended September 30, 2023
Subscriptions cost of revenue $         11,265     $         (211 )   $         —     $         —     $         —     $         11,054  
Professional services cost of revenue           24,804               (1,535 )             —               —               —               23,269  
Total cost of revenue           36,069               (1,746 )             —               —               —               34,323  
Total operating expense           116,242               (9,265 )             4,961               (1,485 )             —               110,453  
Operating loss           (15,217 )             11,011               (4,961 )             1,485               —               (7,682 )
Income tax impact of above items           178               88               —               —               —               266  
Net loss           (22,251 )             11,099               (4,961 )             1,485               —               (14,628 )
Net loss per share, basic and diluted $         (0.30 )   $         0.15     $         (0.07 )   $         0.02     $         —     $         (0.20 )
                       
Nine Months Ended September 30, 2023
Subscriptions cost of revenue $         32,492     $         (713 )   $         —     $         —     $         (30 )   $         31,749  
Professional services cost of revenue           76,515               (4,598 )             —               —               (158 )             71,759  
Total cost of revenue           109,007               (5,311 )             —               —               (188 )             103,508  
Total operating expense           382,182               (27,904 )             2,772               (1,485 )             (6,111 )             349,454  
Operating loss           (91,145 )             33,215               (2,772 )             1,485               6,299               (52,918 )
Income tax impact of above items           2,137               731               —               —               139               3,007  
Net loss           (101,435 )             33,946               (2,772 )             1,485               6,438               (62,338 )
Net loss per share, basic and diluted $         (1.39 )   $         0.46     $         (0.04 )   $         0.02     $         0.09     $         (0.86 )


  GAAP Measure   Stock-Based Compensation   Litigation Expenses   Non-GAAP Measure
Three Months Ended September 30, 2022
Subscriptions cost of revenue $         9,313     $         (284 )   $         —     $         9,029  
Professional services cost of revenue           24,447               (1,401 )             —               23,046  
Total cost of revenue           33,760               (1,685 )             —               32,075  
Total operating expense           121,892               (9,651 )             (1,810 )             110,431  
Operating loss           (37,776 )             11,336               1,810               (24,630 )
Net loss           (43,996 )             11,336               1,810               (30,850 )
Net loss per share, basic and diluted $         (0.61 )   $         0.16     $         0.02     $         (0.43 )
               
Nine Months Ended September 30, 2022
Subscriptions cost of revenue $         26,065     $         (712 )   $         —     $         25,353  
Professional services cost of revenue           72,011               (3,788 )             —               68,223  
Total cost of revenue           98,076               (4,500 )             —               93,576  
Total operating expense           348,519               (22,927 )             (20,432 )             305,160  
Operating loss           (104,390 )             27,427               20,432               (56,531 )
Net loss           (116,503 )             27,427               20,432               (68,644 )
Net loss per share, basic and diluted $         (1.61 )   $         0.38     $         0.28     $         (0.95 )


  Three Months Ended September 30,   Nine Months Ended September 30,
    2023       2022       2023       2022  
Reconciliation of adjusted EBITDA:              
GAAP net loss $         (22,251 )   $         (43,996 )   $         (101,435 )   $         (116,503 )
Other expense (income), net           1,939               5,876               (4,637 )             12,815  
Interest expense           4,917               89               12,790               222  
Income tax expense (benefit)           178               255               2,137               (924 )
Depreciation and amortization of intangibles           2,340               1,759               7,046               5,332  
Stock-based compensation expense           11,011               11,336               33,215               27,427  
Litigation expenses           (4,961 )             1,810               (2,772 )             20,432  
JPI amortization           1,485               —               1,485               —  
Severance costs           —               —               6,299               —  
Adjusted EBITDA $         (5,342 )   $         (22,871 )   $         (45,872 )   $         (51,199 )



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Source: Appian Corporation