Core Insights - Appian announced enhancements to its AI process automation platform, focusing on faster insights, greater scalability, and more secure AI access [1][3][10] Group 1: AI Enhancements - The latest release includes AI-powered semantic smart search that delivers results based on user intent rather than just keywords, improving query support and intelligent actions [4] - All Appian AI features are now available for self-managed and FedRAMP environments, ensuring secure access for all customers, including those in the public sector [5][10] Group 2: Data Fabric and Performance - Appian's data fabric now features automatic scaling to support high throughput query workloads, optimizing performance without manual intervention [7] - New asynchronous interface loading enhances application responsiveness by loading slower data in the background, improving user interaction with complex applications [8] Group 3: Reporting and Insights - The latest enhancements to Process HQ allow users to embed reports and dashboards directly into Appian Sites, facilitating easier sharing of insights [9] - Configurable drilldown reports enable users to explore enterprise data from multiple perspectives, providing deeper insights with a single click [9] Group 4: Strategic Focus - Appian emphasizes the integration of AI into core business processes, aiming to improve operational efficiency and customer service while maintaining governance and accountability [10][11]

Group 1 - Investors are losing interest and patience in small and mid-cap stocks despite some delivering strong results in a shaky macroeconomy [1] - The Q2 earnings season is highlighting this trend among investors [1] - The article references the author's extensive experience in technology and startup sectors, indicating a knowledgeable perspective on current industry themes [1]

Summary of Appian's Conference Call Company Overview - **Company**: Appian - **Industry**: Software, specifically focused on process automation and optimization - **Core Offering**: A platform that allows customers to design, automate, and optimize complex mission-critical processes across organizations [3][4] Key Points and Arguments - **Customer Use Cases**: - Appian is utilized by a major asset manager for customer onboarding and management, consolidating fragmented processes into a single application [4] - A large financial institution uses Appian for monitoring corporate customer communications for regulatory compliance [4] - Medical device companies leverage Appian for the lifecycle management of equipment from order to installation [5] - A U.S. city employs Appian for a digitized budgeting process, reducing response times by over 50% [6] - **AI Integration**: - AI enhances automation and process improvement, presenting significant incremental opportunities for Appian [9] - The company is seeing a steady increase in AI demand, with 50% of new customers opting for advanced pricing tiers that include AI features [21][25] - **Pricing Model**: - Appian employs various pricing models, primarily per seat and per app, with flexibility to adapt to customer needs [10] - The company has been successfully raising prices, reflecting the value delivered to customers, especially in the context of AI [11] - **Recent Financial Performance**: - In Q2, cloud subscription revenue grew by 21% (18% on a constant currency basis), with total revenue growth at 17% [16][17] - EBITDA margin reached 5%, exceeding guidance, attributed to strong new business and strategic focus on the enterprise segment [18][19] - **Go-to-Market Strategy**: - Appian has shifted focus to the enterprise segment, resulting in larger deal sizes and improved execution [19][23] - The company emphasizes clear communication of value to customers and has instituted a more disciplined sales process [24] - **Federal Sector Insights**: - Appian's federal business has outpaced overall growth, with expectations for continued success as the government modernizes and eliminates legacy systems [39][42] - The company anticipates more direct engagement with government entities, enhancing opportunities for software revenue [44] - **Competitive Landscape**: - Appian competes with both tech conglomerates and pure-play automation companies, maintaining steady win rates against larger competitors [47][48] - The company’s strengths include breadth of offering and quick time to value, which are critical in complex automation scenarios [50] - **Operational Efficiency and Margin Expansion**: - Appian has improved profitability, achieving close to 20 percentage points of EBITDA margin expansion over two years by eliminating low productivity areas [57] - Future focus areas include enhancing go-to-market efficiencies, R&D productivity, and leveraging AI for internal processes [60][61] Additional Important Insights - **Sales Cycle and Budgeting**: - Sales cycles remain long but stable, with no significant changes observed [54] - AI funding is not detracting from operational budgets, indicating a healthy environment for investment in new technologies [55] - **Partnership Ecosystem**: - Appian is deepening its partnership program, focusing on partners willing to invest in mutual success, which is expected to enhance market presence [51][52] This summary encapsulates the key insights from Appian's conference call, highlighting the company's strategic direction, financial performance, and market positioning.

Core Viewpoint - Appian Capital Advisory Limited has decided to withdraw its proposed senior secured loan and royalty financing facility with Pacific Lime and Cement Limited for the Central Lime Project in Papua New Guinea due to PLC's inability to secure a key offtake agreement [1][2][3] Group 1: Company Actions - Appian's withdrawal is a response to PLC's failure to meet a critical condition precedent outlined in the financing agreement from April 2024, specifically the securing of an offtake agreement before making its Final Investment Decision [2] - The decision not to draw from the senior facility further influenced Appian's conclusion that advancing the deal was not in the best interests of its investors [3] Group 2: Company Background - Appian Capital Advisory Limited specializes in long-term value-focused private capital funds that invest in metals, mining, and adjacent industries [1][4] - The company has a global presence with a team of 88 experienced investment professionals and oversees approximately 5,000 employees across various regions including South America, North America, Australia, and Africa [5][6]

Core Insights - Appian (APPN) reported revenue of $170.64 million for the quarter ended June 2025, marking a year-over-year increase of 16.5% and exceeding the Zacks Consensus Estimate by 6.15% [1] - The company achieved an EPS of $0, a significant improvement from -$0.26 a year ago, resulting in a 100% surprise compared to the consensus estimate of -$0.13 [1] Financial Performance Metrics - Subscriptions gross margin was reported at 87.1%, slightly below the average estimate of 88.5% [4] - Professional services gross margin stood at 29.5%, surpassing the average estimate of 27.5% [4] - Revenue from professional services reached $37.98 million, exceeding the average estimate of $34.25 million, reflecting a year-over-year change of 13.5% [4] - Subscription revenue was reported at $132.66 million, above the average estimate of $126.5 million, with a year-over-year increase of 17.4% [4] Stock Performance - Over the past month, Appian's shares have returned -13.7%, contrasting with the Zacks S&P 500 composite's increase of 1.2% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) Presents Appian's unaudited condensed consolidated financial statements and notes for periods ended June 30, 2025 and 2024 [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Details Appian's unaudited condensed consolidated financial statements, including balance sheets, operations, comprehensive loss, equity changes, cash flows, and explanatory notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Summarizes Appian's consolidated balance sheets as of June 30, 2025, and December 31, 2024 Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Total assets | $590,748 | $621,039 | | Total liabilities | $644,489 | $653,679 | | Total stockholders' deficit | $(53,741) | $(32,640) | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Presents Appian's consolidated statements of operations for the three and six months ended June 30, 2025 and 2024 Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $170,640 | $146,450 | $337,066 | $296,285 | | Subscriptions revenue | $132,657 | $112,974 | $267,009 | $230,668 | | Professional services revenue | $37,983 | $33,476 | $70,057 | $65,617 | | Gross profit | $126,719 | $107,037 | $254,227 | $218,875 | | Operating loss | $(10,984) | $(39,194) | $(11,818) | $(58,729) | | Net loss | $(312) | $(43,592) | $(1,489) | $(76,515) | | Basic and diluted net loss per share | $(0.00) | $(0.60) | $(0.02) | $(1.05) | [Consolidated Statements of Comprehensive Loss](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) Details Appian's consolidated statements of comprehensive loss for the three and six months ended June 30, 2025 and 2024 Consolidated Statements of Comprehensive Loss Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(312) | $(43,592) | $(1,489) | $(76,515) | | Foreign currency translation adjustments | $(19,641) | $(1,097) | $(23,357) | $11,746 | | Unrealized loss on available-for-sale securities | $(41) | $(7) | $(58) | $(3) | | Other comprehensive loss, net of income taxes | $(19,994) | $(44,696) | $(24,904) | $(64,772) | [Consolidated Statements of Changes in Stockholders' Deficit](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Deficit) Outlines changes in Appian's stockholders' deficit for the six months ended June 30, 2025 and 2024 Changes in Stockholders' Deficit (Six Months Ended June 30, 2025, in thousands) | Metric | Balance, December 31, 2024 | Net Loss | Stock-based Compensation Expense | Repurchase of Common Stock | Other Comprehensive Loss | Balance, June 30, 2025 | | :-------------------------------- | :------------------------- | :------- | :------------------------------- | :------------------------- | :----------------------- | :--------------------- | | Total Stockholders' Deficit | $(32,640) | $(1,489) | $17,767 | $(10,000) | $(23,415) | $(53,741) | Changes in Stockholders' Deficit (Six Months Ended June 30, 2024, in thousands) | Metric | Balance, December 31, 2023 | Net Loss | Stock-based Compensation Expense | Repurchase of Common Stock | Other Comprehensive Income (Loss) | Balance, June 30, 2024 | | :-------------------------------- | :------------------------- | :------- | :------------------------------- | :------------------------- | :-------------------------------- | :--------------------- | | Total Stockholders' Equity (Deficit) | $52,341 | $(76,515) | $20,506 | $(50,019) | $11,743 | $(45,658) | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Presents Appian's consolidated statements of cash flows for the six months ended June 30, 2025 and 2024 Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Net cash provided by operating activities | $43,026 | $1,251 | | Net cash used by investing activities | $(33,093) | $(21,629) | | Net cash used by financing activities | $(18,965) | $(6,695) | | Net decrease in cash and cash equivalents | $(6,345) | $(28,564) | | Cash and cash equivalents at end of period | $112,207 | $120,787 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed notes explaining Appian's accounting policies and specific financial statement items [1. Organization and Description of Business](index=10&type=section&id=1.%20Organization%20and%20Description%20of%20Business) Appian Corporation, "The Process Company," provides a software platform to help organizations improve processes and gain a strategic edge - Appian Corporation is known as **"The Process Company,"** offering a software platform designed to optimize business processes, reduce costs, and improve customer experiences[24](index=24&type=chunk) - The company operates internationally, with a presence in **16 countries** including Australia, Canada, France, Germany, India, Italy, Japan, Mexico, the Netherlands, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom[25](index=25&type=chunk) [2. Accounting Policies](index=10&type=section&id=2.%20Accounting%20Policies) Outlines Appian's accounting policies, including revenue recognition, credit risk, deferred commissions, and recent pronouncements - Revenue from government agencies constituted **34.1% of total revenue** for the three months ended June 30, 2025, with U.S. federal government agencies accounting for **25.9%**, an increase from 31.4% and 22.6% respectively in the prior year period[32](index=32&type=chunk) - International customers generated **38.4% of total revenue** for the three months ended June 30, 2025, consistent with 38.2% in the prior year[32](index=32&type=chunk) - Deferred commissions for new or upsell subscriptions are amortized over an estimated economic life of **five years**, while renewal commissions are amortized over the renewal period[36](index=36&type=chunk) Deferred Commissions Expense (in thousands) | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Three Months Ended June 30, | $12,800 | $11,500 | | Six Months Ended June 30, | $25,000 | $22,900 | - The company is evaluating the impact of ASU 2024-03, which requires more detailed disclosures of certain income statement expenses, effective for annual reporting in fiscal year 2027[42](index=42&type=chunk) [3. Revenue](index=14&type=section&id=3.%20Revenue) Appian generates revenue from cloud subscriptions, term license subscriptions, maintenance and support, and professional services, recognized over time or at a point in time Revenue Breakdown (in thousands) | Revenue Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cloud subscriptions | $106,915 | $88,428 | $206,741 | $175,031 | | Term license subscriptions | $17,703 | $17,227 | $44,617 | $40,998 | | Maintenance and support | $8,039 | $7,319 | $15,651 | $14,639 | | Total subscriptions | $132,657 | $112,974 | $267,009 | $230,668 | | Professional services | $37,983 | $33,476 | $70,057 | $65,617 | | Total revenue | $170,640 | $146,450 | $337,066 | $296,285 | Contract Balances (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Total contract assets | $10,587 | $13,576 | | Total contract liabilities (Deferred revenue) | $275,715 | $287,237 | - As of June 30, 2025, the aggregate transaction price allocated to unsatisfied performance obligations was **$553.2 million**, with **$349.7 million** expected to be recognized as revenue over the next 12 months[60](index=60&type=chunk) [4. Leases](index=17&type=section&id=4.%20Leases) Appian's lease portfolio consists of operating leases for corporate offices, with no impairment charges recorded in the current period Lease Expense (in thousands) | Lease Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $2,615 | $2,410 | $5,008 | $4,821 | | Short-term lease cost | $282 | $433 | $532 | $765 | | Variable lease cost | $1,244 | $1,335 | $2,616 | $2,648 | | Total | $4,141 | $4,178 | $8,156 | $8,234 | - No lease impairment charges were recorded for the three and six months ended June 30, 2025, contrasting with **$5.5 million** in non-cash lease impairment charges recorded in the three months ended June 30, 2024, related to reducing leased office space[65](index=65&type=chunk)[66](index=66&type=chunk) Future Minimum Lease Commitments (in thousands) | Year | Operating Leases | | :-------------------------------- | :--------------- | | 2025 (excluding six months ended June 30, 2025) | $6,820 | | 2026 | $13,829 | | 2027 | $14,015 | | 2028 | $12,881 | | 2029 | $12,411 | | Thereafter | $22,908 | | Total lease payments | $82,864 | [5. Goodwill and Intangible Assets](index=19&type=section&id=5.%20Goodwill%20and%20Intangible%20Assets) Goodwill increased due to foreign currency adjustments, while net intangible assets decreased with projected amortization through 2029 Goodwill and Intangible Assets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Goodwill | $28,763 | $25,555 | | Intangible assets, net | $1,882 | $2,240 | Projected Annual Amortization Expense for Intangible Assets (in thousands) | Year | Projected Amortization | | :-------------------------------- | :--------------------- | | 2025 (excluding six months ended June 30, 2025) | $639 | | 2026 | $822 | | 2027 | $101 | | 2028 | $101 | | 2029 | $101 | | Thereafter | $118 | | Total projected amortization expense | $1,882 | [6. Property and Equipment, net](index=20&type=section&id=6.%20Property%20and%20Equipment,%20net) Property and equipment, net, decreased as of June 30, 2025, with depreciation expense totaling $4.4 million for the six months Property and Equipment, Net (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Property and equipment, net | $34,799 | $37,109 | | Accumulated depreciation | $(36,719) | $(32,142) | - Depreciation expense totaled **$4.4 million** for the six months ended June 30, 2025, compared to $4.2 million for the same period in 2024[71](index=71&type=chunk) [7. Accrued Expenses](index=21&type=section&id=7.%20Accrued%20Expenses) Total accrued expenses increased due to higher hosting, contract labor, and legal costs as of June 30, 2025 Accrued Expenses (in thousands) | Accrued Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Hosting costs | $4,460 | $3,047 | | Contract labor costs | $1,717 | $1,043 | | Legal costs | $994 | $289 | | Total | $14,547 | $11,388 | [8. Debt](index=21&type=section&id=8.%20Debt) Appian's total debt, net of issuance costs, was $245.625 million as of June 30, 2025, with compliance to all credit agreement covenants Outstanding Debt Balances (in thousands) | Debt Component | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Borrowings under revolving credit facility | $62,000 | $62,000 | | Secured term loan facility | $184,563 | $189,563 | | Total debt, net of debt issuance costs | $245,625 | $250,424 | - As of June 30, 2025, Appian was in compliance with all covenants of its Credit Agreement and had **$62.0 million** outstanding under its **$100.0 million** revolving credit facility[77](index=77&type=chunk) [9. Income Taxes](index=22&type=section&id=9.%20Income%20Taxes) Appian's effective tax rates were significantly higher due to a near pre-tax break-even position, with no material impact from new legislation Actual Effective Tax Rates | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Three Months Ended June 30, | 124.7% | 0.4% | | Six Months Ended June 30, | 280.5% | 0.8% | - Net unrecognized tax benefits totaled **$7.8 million** as of June 30, 2025, which would not impact the effective tax rate due to a valuation allowance[79](index=79&type=chunk) - The recently signed One Big Beautiful Bill Act (OBBBA) is not anticipated to materially impact the current year effective income tax rate[81](index=81&type=chunk) [10. Stock-Based Compensation](index=23&type=section&id=10.%20Stock-Based%20Compensation) Stock-based compensation expense for the six months ended June 30, 2025, was $20.732 million, with significant unrecognized costs for unvested awards Total Stock-Based Compensation Expense (in thousands) | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Three Months Ended June 30, | $10,693 | $9,900 | | Six Months Ended June 30, | $20,732 | $20,506 | - Total unrecognized compensation cost related to unvested stock options (2022 CEO option grant) was **$3.4 million**, to be recognized over **0.8 years**[84](index=84&type=chunk) - Total unrecognized compensation cost related to unvested RSUs was approximately **$36.7 million**, to be recognized over **1.7 years**[84](index=84&type=chunk) - A new 2025 annual bonus program allows employees to receive bonuses in RSUs, contributing **$2.9 million** to stock-based compensation expense for the six months ended June 30, 2025[85](index=85&type=chunk) [11. Basic and Diluted Loss per Share](index=23&type=section&id=11.%20Basic%20and%20Diluted%20Loss%20per%20Share) Basic and diluted net loss per share were $(0.00) and $(0.02) for the three and six months ended June 30, 2025, respectively Basic and Diluted Net Loss Per Share | Period | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :-------------------------------- | :------------------------------- | :----------------------------- | | Basic and diluted net loss per share | $(0.00) | $(0.02) | Antidilutive Securities Excluded from Diluted EPS | Security Type | June 30, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :------------ | | Stock options | 1,005,696 | 2,530,468 | | Non-vested restricted stock units | 1,401,959 | 1,189,539 | [12. Commitments, Contingencies, and Other Matters](index=24&type=section&id=12.%20Commitments,%20Contingencies,%20and%20Other%20Matters) Appian has a $44.0 million annual cloud hosting commitment, ongoing Pegasystems litigation, and a $10.0 million share repurchase program - Appian has a non-cancellable cloud hosting arrangement with Amazon Web Services (AWS) with minimum annual spending requirements of **$44.0 million** from November 2024 to October 2029[89](index=89&type=chunk)[191](index=191&type=chunk) - The Supreme Court of Virginia granted Appian's petition to hear its appeal in the Pegasystems litigation, seeking to reinstate the **$2.036 billion judgment**[92](index=92&type=chunk) - A Judgment Preservation Insurance (JPI) policy, with a total cost of **$57.3 million**, provides up to **$500.0 million** of coverage related to the Pegasystems judgment[93](index=93&type=chunk) JPI Amortization Expense (in thousands) | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Three Months Ended June 30, | $3,100 | $4,500 | | Six Months Ended June 30, | $6,200 | $9,000 | - In May 2025, the Board authorized a **$10.0 million share repurchase program**, under which **0.3 million shares** were repurchased in June 2025 at an average price of **$31.91**[96](index=96&type=chunk)[189](index=189&type=chunk) [13. Segment and Geographic Information](index=25&type=section&id=13.%20Segment%20and%20Geographic%20Information) Appian operates as a single segment, with international revenue representing 38.4% and 37.3% of total revenue for the three and six months ended June 30, 2025 - Appian has one operating and one reportable segment, focused on its consolidated business of process design, automation, and optimization[98](index=98&type=chunk) Revenue by Geography (in thousands) | Geography | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Domestic | $105,193 | $90,534 | $211,386 | $184,647 | | International | $65,447 | $55,916 | $125,680 | $111,638 | | Total | $170,640 | $146,450 | $337,066 | $296,285 | Long-Lived Assets by Geography (in thousands) | Geography | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | United States | $52,400 | $55,900 | | Internationally | $15,300 | $14,600 | [14. Investments and Fair Value Measurements](index=26&type=section&id=14.%20Investments%20and%20Fair%20Value%20Measurements) Appian's investment portfolio, primarily debt, totaled $184.753 million as of June 30, 2025, generating $3.6 million in interest income Investment Portfolio (Fair Value, in thousands) | Investment Type | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Cash | $108,020 | $106,338 | | Money market fund | $4,187 | $12,214 | | U.S. Treasury bonds | $43,928 | $24,402 | | Commercial paper | $7,993 | $2,977 | | Corporate bonds | $20,625 | $13,929 | | Total investments | $184,753 | $159,860 | - Interest income from investments totaled **$3.6 million** for the six months ended June 30, 2025, consistent with the prior year[106](index=106&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Discusses Appian's financial condition and results, including its business model, key performance factors, revenue, costs, and liquidity [Overview](index=28&type=section&id=Overview) Appian offers a unified software platform integrating various AI and process automation capabilities to transform business processes - Appian's platform unifies data fabric, robotic process automation (RPA), intelligent document processing (IDP), generative AI, AI agents, low-code design, APIs, business rules, and process intelligence capabilities[111](index=111&type=chunk) - The company highlights six key benefits of its "AI in process" approach: ease of deployment, structured goals, data integration, safety mechanisms, measurable performance, and enterprise-grade scalability[115](index=115&type=chunk) - Revenue from government agencies accounted for **34.1% of total revenue** for the three months ended June 30, 2025 (up from 31.4% in 2024), and international customers contributed **38.4%** (consistent with 2024)[117](index=117&type=chunk)[118](index=118&type=chunk) - Appian maintains a strong cloud subscriptions gross renewal rate, averaging **99%** over the last three completed fiscal years[120](index=120&type=chunk) [Key Factors Affecting Our Performance](index=30&type=section&id=Key%20Factors%20Affecting%20Our%20Performance) Performance is driven by market adoption, customer base growth through sales and partnerships, and increased penetration within existing customers - Revenue growth is primarily driven by the market adoption and penetration of Appian's platform, which enables digital transformation for organizations[121](index=121&type=chunk) - The company is aggressively investing in its sales team and strategic partnerships (e.g., Accenture, Deloitte) to expand its customer base, particularly within key industry verticals like financial services and government[122](index=122&type=chunk)[123](index=123&type=chunk) - Appian employs a **"land and expand" strategy** to generate additional revenue from existing customers by adding new users or application licenses, as customers often start with a single application and expand to dozens[124](index=124&type=chunk) - Ongoing investments are planned for platform and infrastructure enhancement, R&D, sales and marketing expansion, international operations, and potential strategic acquisitions to support long-term growth[125](index=125&type=chunk) [Key Metrics](index=31&type=section&id=Key%20Metrics) Appian monitors cloud subscriptions revenue and retention rate, with cloud subscriptions revenue increasing by 20.9% and 18.1% for the respective periods Cloud Subscriptions Revenue (in thousands) | Period | 2025 | 2024 | % Change | | :-------------------------------- | :----- | :----- | :------- | | Three Months Ended June 30, | $106,915 | $88,428 | 20.9% | | Six Months Ended June 30, | $206,741 | $175,031 | 18.1% | Cloud Subscriptions Revenue Retention Rate | As of June 30, | 2025 | 2024 | | :-------------------------------- | :--- | :--- | | Cloud subscriptions revenue retention rate | 111% | 118% | [Key Components of Results of Operations](index=32&type=section&id=Key%20Components%20of%20Results%20of%20Operations) This section details Appian's revenue, cost of revenue, gross profit, and operating expenses, outlining influencing factors and expected trends - Subscriptions revenue includes cloud subscriptions (bundled with maintenance, support, and hosting) and term license subscriptions (bundled with maintenance and support)[132](index=132&type=chunk) - Cost of subscriptions revenue primarily consists of fees to third-party hosting providers, personnel costs for operations and support, and amortization of acquired technology[134](index=134&type=chunk) - Gross profit and gross margin are influenced by the mix of cloud vs. term licenses, subscriptions vs. professional services revenue, pricing, hosting costs, and professional services expansion[136](index=136&type=chunk)[137](index=137&type=chunk) - Operating expenses (sales & marketing, R&D, G&A) are expected to increase in absolute dollars, but at a more measured rate than in prior years, driven by personnel costs and investments in product enhancement and business growth[140](index=140&type=chunk)[141](index=141&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) Appian's net loss and operating loss significantly improved, with total revenue increasing by 17% and 14% for the three and six months ended June 30, 2025 Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $170,640 | $146,450 | $337,066 | $296,285 | | Gross profit | $126,719 | $107,037 | $254,227 | $218,875 | | Operating loss | $(10,984) | $(39,194) | $(11,818) | $(58,729) | | Net loss | $(312) | $(43,592) | $(1,489) | $(76,515) | Revenue Growth (YoY) | Revenue Type | Q2 2025 vs Q2 2024 | YTD 2025 vs YTD 2024 | | :-------------------------------- | :----------------- | :----------------- | | Total revenue | +16.5% | +13.8% | | Subscriptions revenue | +17.4% | +15.8% | | Professional services revenue | +13.5% | +6.8% | - Sales and marketing expense decreased by **$6.1 million (-9%)** in Q2 2025 and **$9.7 million (-7.8%)** YTD 2025, primarily due to a **25% reduction** in sales and marketing headcount[154](index=154&type=chunk)[165](index=165&type=chunk) - General and administrative expense decreased by **$3.3 million (-8%)** in Q2 2025 and **$2.5 million (-3.4%)** YTD 2025, largely due to a **$5.0 million decrease in rent expense** (no lease impairment charges in 2025 vs. $5.5 million in 2024) and lower JPI amortization[157](index=157&type=chunk)[167](index=167&type=chunk) - Other income, net, significantly improved, showing **$17.6 million in income** for Q2 2025 (vs. $1.5 million in Q2 2024) and **$23.3 million in income** for YTD 2025 (vs. $6.7 million expense in YTD 2024), primarily driven by foreign exchange gains[158](index=158&type=chunk)[169](index=169&type=chunk) [Non-GAAP Financial Measures](index=42&type=section&id=Non-GAAP%20Financial%20Measures) Appian provides non-GAAP measures like adjusted EBITDA to clarify core operations by excluding specific non-recurring or non-cash items - Non-GAAP financial measures exclude stock-based compensation, unrealized foreign exchange rate gains and losses, certain non-ordinary litigation-related expenses, amortization of the judgment preservation insurance policy, severance costs, and lease impairment and lease-related charges[174](index=174&type=chunk) Adjusted EBITDA (in thousands) | Period | 2025 | 2024 | | :-------------------------------- | :----- | :------- | | Three Months Ended June 30, | $8,130 | $(10,493) | | Six Months Ended June 30, | $24,889 | $(11,815) | [Liquidity and Capital Resources](index=46&type=section&id=Liquidity%20and%20Capital%20Resources) Appian's liquidity is supported by cash, investments, operating cash flows, and credit facilities, with operating cash flow significantly increasing Selected Liquidity and Capital Resources (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Cash and cash equivalents | $112,207 | $118,552 | | Short-term investments and marketable securities | $72,546 | $41,308 | | Working capital | $64,320 | $80,787 | - Appian expects its existing cash, investments, positive cash flows from operations, and available borrowings to be sufficient for working capital and capital expenditure requirements for at least the next twelve months[182](index=182&type=chunk) - Net cash provided by operating activities increased significantly to **$43.0 million** for the six months ended June 30, 2025, compared to $1.3 million in the prior year, due to increased cash collections and cost management[193](index=193&type=chunk) - Net cash used by investing activities increased to **$33.1 million** for the six months ended June 30, 2025, primarily due to a **$30.9 million increase** in purchases of short-term investments[194](index=194&type=chunk) - Net cash used by financing activities increased to **$19.0 million** for the six months ended June 30, 2025, mainly due to a **$50.0 million decrease** in proceeds from borrowings, partially offset by lower share repurchases[194](index=194&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Appian faces market risks from interest rate, inflation, and foreign currency fluctuations, with potential impacts on interest expense and operating loss - A hypothetical **one percentage point increase in interest rates** would increase Appian's annual interest expense by approximately **$2.4 million**[199](index=199&type=chunk) - The company is exposed to inflation risk in personnel, third-party services, and overhead costs, which could adversely affect gross profit margin if not offset by price increases or productivity[200](index=200&type=chunk) - A **10% change in foreign currency exchange rates** for the six months ended June 30, 2025, would have impacted total revenue by approximately **$12 million** and operating loss by approximately **$5 million**[201](index=201&type=chunk) [Item 4. Controls and Procedures](index=50&type=section&id=Item%204.%20Controls%20and%20Procedures) Appian's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting - Appian's disclosure controls and procedures were evaluated and deemed **effective at the reasonable assurance level** as of June 30, 2025[205](index=205&type=chunk) - No material changes in internal control over financial reporting occurred during the period covered by this Quarterly Report on Form 10-Q[206](index=206&type=chunk) - Management acknowledges the inherent limitations of any control system, which can only provide reasonable, not absolute, assurance against errors or fraud[207](index=207&type=chunk) [PART II. OTHER INFORMATION](index=52&type=section&id=PART%20II.%20OTHER%20INFORMATION) Covers Appian's legal proceedings, risk factors, equity security sales, and other miscellaneous information [Item 1. Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) Refers to Note 12 for details on legal proceedings, including the Pegasystems litigation, with no other material adverse effects anticipated - Information regarding legal proceedings, including the Pegasystems litigation, is detailed in **Note 12** to the consolidated financial statements[209](index=209&type=chunk) - No other legal proceedings are currently anticipated to have a material adverse effect on Appian's business, operating results, financial condition, or cash flows[210](index=210&type=chunk) [Item 1A. Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) Directs readers to the Annual Report on Form 10-K for a comprehensive discussion of risk factors, with no material changes reported - Investors should consider the risk factors described in Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2024[211](index=211&type=chunk) - There have been no material changes from the risk factors described in the aforementioned Annual Report[211](index=211&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=52&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports on issuer purchases of equity securities under the Employee Stock Purchase Plan, totaling 19,964 shares in Q2 2025 Issuer Purchases of Equity Securities (Employee Stock Purchase Plan) | Period | Total Shares Purchased | Average Price Paid Per Share | | :-------------------------------- | :--------------------- | :--------------------------- | | April 1 to April 30, 2025 | 6,469 | $29.37 | | May 1 to May 31, 2025 | 7,023 | $31.68 | | June 1 to June 30, 2025 | 6,472 | $31.94 | | Total (Q2 2025) | 19,964 | $31.02 | [Item 3. Defaults Upon Senior Securities](index=53&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to Appian Corporation for the reported period [Item 4. Mine Safety Disclosures](index=53&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Appian Corporation for the reported period [Item 5. Other Information](index=53&type=section&id=Item%205.%20Other%20Information) There is no other information to report under this item [Item 6. Exhibits](index=54&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed as part of the Form 10-Q, including corporate documents, agreements, and certifications - Exhibits include the Amended and Restated Certificate of Incorporation, Bylaws, Offer Letter and Employment Agreement for Srdjan Tanjga, Sixth Amendment to Credit Agreement, Certifications of Principal Executive and Financial Officers, and XBRL Instance Document[218](index=218&type=chunk)[219](index=219&type=chunk) [SIGNATURES](index=56&type=section&id=SIGNATURES) The report was signed on August 7, 2025, by the Chief Executive Officer and Chief Financial Officer - The report was signed on **August 7, 2025**, by Matthew Calkins, Chief Executive Officer and Chairman of the Board, and Srdjan Tanjga, Chief Financial Officer[223](index=223&type=chunk)

Financial Data and Key Metrics Changes - Appian's cloud subscriptions revenue grew 21% to $106.9 million, while subscriptions revenue increased 17% to $132.7 million, and total revenue rose 17% to $170.6 million [5][21][24] - Adjusted EBITDA was $8.1 million, significantly better than the guidance of a loss between $5 million and $2 million, and compared to a loss of $10.5 million in the previous year [24][25] - Net income was $300,000 or breakeven per diluted share, compared to a net loss of $18.2 million or $0.25 per share for the previous year [25] Business Line Data and Key Metrics Changes - Professional services revenue was $38 million, up 13% year-over-year, while subscription revenue represented 78% of total revenue, compared to 77% in the previous year [21][24] - The cloud subscription revenue retention rate was 111%, down from 118% a year ago [21] Market Data and Key Metrics Changes - International operations contributed 38% of total revenue, unchanged from the previous year [21] - The U.S. public sector outperformed the global business in cloud revenue, new bookings, and software pipeline [11] Company Strategy and Development Direction - Appian's upmarket strategy is yielding results, with a focus on high-value transactions and leveraging AI to enhance its platform [6][7] - The company is optimistic about the modernization of legacy applications, driven by AI, which is expected to create significant market opportunities [13][14][18] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the federal business, noting a shift towards direct engagement with software providers [13][64] - The company anticipates continued growth in cloud subscription revenue and total revenue for the full year 2025, with adjusted EBITDA expected to range between $49 million and $55 million [26] Other Important Information - David Crozier was appointed as the new Chief Marketing Officer, bringing extensive experience in enterprise software and AI [20] - The company is transitioning to a consumption-based pricing model, moving away from user-based pricing [67][69] Q&A Session Summary Question: App modernization journey and vendor contributions - Management acknowledged that app modernization is complex and emphasized their leadership in the market, with AI playing a crucial role in both extraction and instantiation processes [29][30] Question: NRR rate and its implications - Management explained that the NRR rate's decline to 111% is due to past downsells and highlighted the strength in acquiring new customers [34][36] Question: Competitive advantages against AI and other vendors - Management detailed that Appian's built-in functionalities and robust platform provide advantages that AI alone cannot replicate, emphasizing the importance of a comprehensive application environment [40][41][42] Question: Federal pipeline dynamics and AI's role - Management noted a positive shift in government purchasing behavior, with increased interest in efficiency and direct engagement with Appian [64][65] Question: Guidance changes and FX impact - Management clarified that the guidance increase is primarily due to fundamental business strength rather than changes in guidance philosophy or FX rates [60][61] Question: New sales leaders and go-to-market strategy - Management indicated that new hires are aligned with ongoing transformation efforts to enhance discipline and best practices across the organization [72] Question: Efficiency improvements and AI's impact - Management highlighted ongoing efforts to improve sales productivity and the potential for AI to drive further efficiencies across various functions [49][80]

Financial Data and Key Metrics Changes - In Q2 2025, Appian's cloud subscriptions revenue grew 21% to $106.9 million, total subscriptions revenue increased 17% to $132.7 million, and total revenue rose 17% to $170.6 million [5][24] - Adjusted EBITDA was $8.1 million, a significant improvement from a loss of $10.5 million in the previous year [24] - The cloud subscription revenue retention rate was 111%, down from 118% a year ago [24] Business Line Data and Key Metrics Changes - Professional services revenue was $38 million, up 13% compared to the previous year [24] - Subscription revenue represented 78% of total revenue, compared to 77% in the year-ago period [24] Market Data and Key Metrics Changes - International operations contributed 38% of total revenue, unchanged from the previous year [24] - The company noted strong performance in the U.S. public sector, with federal business outpacing global business in cloud revenue and new bookings [11] Company Strategy and Development Direction - Appian's upmarket strategy is proving effective, with a focus on high-value transactions [6] - The company is leveraging AI to enhance its platform, allowing for higher pricing and new industry opportunities [7][8] - Appian is positioned to capitalize on the modernization of legacy applications, which is expected to grow significantly as AI reduces costs [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the federal business, validating their expectations with strong results [13] - The company anticipates continued growth driven by AI and modernization trends, with a focus on efficiency and customer satisfaction [22][66] Other Important Information - A new Chief Marketing Officer, David Crozier, has joined the company, bringing extensive experience in enterprise software and AI [20] - The company is shifting towards a consumption-based pricing model while maintaining flexibility in its pricing strategies [68] Q&A Session Summary Question: Status of app modernization journey and vendor reliance - Management indicated that app modernization is complex and will require both services and software solutions, with confidence in their leadership position in this market [29][30] Question: Explanation of the NRR decline - The decline to 111% was attributed to previous downsells and a higher percentage of new business coming from new customers, indicating strength in acquiring new logos [32][33] Question: Competitive advantages against AI and other vendors - Appian's platform offers built-in functionality that AI cannot replicate, such as security and scalability, providing a durable competitive advantage [40][41] Question: Impact of AI on customer conversations and pipeline - AI has significantly enhanced the value proposition, changing customer perceptions and driving pipeline growth [56][58] Question: Guidance changes and FX impact - The increase in guidance is primarily due to fundamental business strength rather than changes in guidance philosophy or FX rates [60][61] Question: Federal pipeline dynamics and AI's role - The federal market is shifting towards direct relationships with software providers, which is favorable for Appian, and AI is expected to enhance efficiency in government operations [65][66] Question: New sales leaders' impact on go-to-market strategy - New leadership appointments are aimed at enhancing alignment and best practices across the organization, continuing the ongoing transformation [73] Question: Details on expense shifts affecting EBITDA - The outperformance in EBITDA was due to the tactical movement of marketing and consulting expenses to the second half of the year [75]

Company Performance - Appian reported break-even quarterly earnings per share, surpassing the Zacks Consensus Estimate of a loss of $0.13, and improved from a loss of $0.26 per share a year ago, resulting in an earnings surprise of +100.00% [1] - The company posted revenues of $170.64 million for the quarter ended June 2025, exceeding the Zacks Consensus Estimate by 6.15%, and compared to year-ago revenues of $146.45 million [2] - Over the last four quarters, Appian has consistently surpassed consensus EPS and revenue estimates [2] Stock Performance and Outlook - Appian shares have declined approximately 18.3% since the beginning of the year, contrasting with the S&P 500's gain of 7.9% [3] - The future performance of Appian's stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [4][6] - The current consensus EPS estimate for the upcoming quarter is $0.05 on revenues of $168.99 million, and for the current fiscal year, it is $0.22 on revenues of $678.76 million [7] Industry Context - The Internet - Software industry, to which Appian belongs, is currently ranked in the top 28% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Appian's stock performance [5]

Q2 2025 Financial Highlights - Cloud subscriptions revenue reached $1069 million, a 21% year-over-year increase[10] - Total revenue was $1706 million, up 17% year-over-year[10] - Subscriptions revenue totaled $1327 million, reflecting a 17% year-over-year growth[10] - Adjusted EBITDA for Q2 2025 was $81 million[7] Margins - Subscriptions gross margin was 87%[10] - Professional services gross margin was 33%[10] - Overall gross margin was 75%[10] Revenue Retention - Cloud subscriptions revenue retention rate stood at 111% as of June 30, 2025[8,33] Guidance - Q3 2025 cloud subscriptions revenue is projected to be between $1090 million and $1110 million, representing a 16%-18% year-over-year growth[34] - Full year 2025 cloud subscriptions revenue is expected to range from $4290 million to $4330 million, indicating a 17%-18% year-over-year increase[34] - Full year 2025 total revenue is forecasted to be between $6950 million and $7030 million, a 13%-14% year-over-year increase[34]