APPN - Appian Announces Third Quarter 2023 Financial Results

November, 02 2023 04:02 PM Appian Corporation

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 los s: 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.

_______________________________
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
)

Company Name:	Appian Corporation
Stock Symbol:	APPN
Market:	NASDAQ
Website:	appian.com

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