Appian(APPN) - 2025 Q1 - Quarterly Report

PART I PART I. FINANCIAL INFORMATION This section presents Appian's unaudited condensed consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2025 Financial Statements This section presents Appian's unaudited condensed consolidated financial statements for the quarter ended March 31, 2025, highlighting a significant reduction in net loss and an 11.1% increase in total revenue Consolidated Balance Sheets As of March 31, 2025, Appian reported total assets of $592.9 million, a decrease from $621.0 million at year-end 2024, with cash and cash equivalents increasing to $135.0 million Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $134,982 | $118,552 | | Total current assets | $411,902 | $435,543 | | Total assets | $592,899 | $621,039 | | Liabilities and Stockholders' Deficit | | | | Deferred revenue, current | $258,582 | $281,760 | | Total current liabilities | $330,382 | $354,756 | | Total liabilities | $624,644 | $653,679 | | Total stockholders' deficit | $(31,745) | $(32,640) | Consolidated Statements of Operations For the three months ended March 31, 2025, Appian's total revenue grew 11.1% year-over-year to $166.4 million, significantly narrowing its operating loss to $(0.8) million Quarterly Statement of Operations (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Subscriptions Revenue | $134,352 | $117,694 | | Total Revenue | $166,426 | $149,835 | | Gross Profit | $127,508 | $111,838 | | Operating Loss | $(834) | $(19,535) | | Net Loss | $(1,177) | $(32,923) | | Net Loss Per Share (Basic & Diluted) | $(0.02) | $(0.45) | Consolidated Statements of Cash Flows For the first quarter of 2025, net cash provided by operating activities significantly increased to $45.0 million, with cash and cash equivalents at period-end reaching $135.0 million Quarterly Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $44,966 | $18,866 | | Net cash (used by) provided by investing activities | $(24,077) | $7,459 | | Net cash used by financing activities | $(5,509) | $(4,249) | | Net increase in cash and cash equivalents | $16,430 | $20,757 | | Cash and cash equivalents at end of period | $134,982 | $170,108 | Notes to Condensed Consolidated Financial Statements This section provides detailed accounting policies and disclosures, including revenue recognition, debt, and the status of the Pegasystems litigation Revenue Breakdown (in thousands) | Revenue Source | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Cloud subscriptions | $99,826 | $86,603 | | Term license subscriptions | $26,914 | $23,771 | | Total subscriptions | $134,352 | $117,694 | | Professional services | $32,074 | $32,141 | | Total revenue | $166,426 | $149,835 | - As of March 31, 2025, the company had an aggregate of $519.1 million in transaction price allocated to unsatisfied performance obligations, with $331.9 million expected to be recognized as revenue over the next 12 months[57] - The Supreme Court of Virginia granted Appian's petition to hear its appeal regarding the $2.036 billion judgment against Pegasystems, which was previously reversed by a lower court[86] - The company has a non-cancellable cloud hosting arrangement with AWS with minimum annual spending requirements of $44.0 million from November 2024 to October 2029[82] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting revenue growth, cost changes, and significant improvements in operating loss and adjusted EBITDA for Q1 2025 Overview and Strategy Appian positions itself as 'The Process Company,' leveraging AI-integrated software to enhance business processes and grow through strategic partnerships - Appian's platform unifies capabilities like Process Orchestration, Data Fabric, Process Intelligence, and Artificial Intelligence to enable enterprise transformation[105][109] - The company intends to increasingly rely on strategic partners for professional services, which is expected to cause professional services revenue as a percentage of total revenue to decline over time[110] Key Metrics The company monitors key metrics, including cloud subscriptions revenue, which grew 15.3% to $99.8 million, and the cloud subscriptions revenue retention rate, which was 112% Cloud Subscriptions Revenue (in thousands) | Period | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Three Months Ended March 31 | $99,826 | $86,603 | 15.3% | Cloud Subscriptions Revenue Retention Rate | As of March 31, | 2025 | 2024 | | :--- | :--- | :--- | | Rate | 112% | 120% | Results of Operations Comparison (Q1 2025 vs Q1 2024) Comparing Q1 2025 to Q1 2024, total revenue increased by 11.1% to $166.4 million, driven by subscriptions revenue growth and a 3.6% decrease in operating expenses - Total revenue increased by $16.6 million (11.1%), with subscriptions revenue up $16.7 million, driven by both new and existing customers[144] - Sales and marketing expense decreased by $3.6 million (6.2%), mainly due to a 24% reduction in headcount from March 2024 to March 2025[148] - General and administrative expense increased by $0.8 million (2.5%), driven by higher IT spending and professional fees, partially offset by lower insurance and personnel costs[150] - Other income was $5.7 million, a significant shift from an $8.2 million expense in the prior year, primarily due to foreign exchange gains versus prior-year losses[151] Non-GAAP Financial Measures Appian uses non-GAAP measures, reporting a non-GAAP operating income of $14.3 million and adjusted EBITDA of $16.8 million for Q1 2025, a strong improvement year-over-year Reconciliation of GAAP Net Loss to Adjusted EBITDA (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | GAAP net loss | $(1,177) | $(32,923) | | Adjustments (Other income, Interest, Taxes, D&A, etc.) | $17,936 | $17,747 | | Stock-based compensation expense | $10,039 | $10,606 | | Litigation Expense & JPI Amortization | $4,796 | $5,246 | | Adjusted EBITDA | $16,759 | $(1,322) | Liquidity and Capital Resources As of March 31, 2025, Appian had $135.0 million in cash and cash equivalents, with sufficient liquidity to support operations for at least the next twelve months - The company believes existing cash, investments, and cash flows from operations will be sufficient to support working capital and capital expenditures for at least the next 12 months[163] - In Q1 2024, the company repurchased 1.3 million shares for approximately $50.0 million under its share repurchase program[91][170] - Net cash from operating activities increased to $45.0 million in Q1 2025 from $18.9 million in Q1 2024, driven by strong cash collections and cost management[175] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from interest rates, inflation, and foreign currency exchange rates, with potential impacts on interest expense and total revenue - A hypothetical 1% increase in interest rates on the company's $248.0 million debt would increase annual interest expense by about $2.5 million[182] - A 10% adverse change in foreign currency exchange rates during Q1 2025 would have negatively impacted total revenue by approximately $6.0 million[184] - The company does not currently engage in hedging for foreign currency transactions but may do so in the future[185] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective at the reasonable assurance level[188] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[189] PART II PART II. OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity security sales, and exhibits Legal Proceedings This section refers to Note 12 of the financial statements for information regarding the ongoing litigation with Pegasystems, noting no other material adverse legal proceedings - For details on legal proceedings, the report refers to Note 12, which discusses the Pegasystems litigation[192] Risk Factors The company states that there have been no material changes from the risk factors previously described in its Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes from the risk factors described in the company's 2024 Annual Report on Form 10-K[194] Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's purchases of its own equity securities, with 17,259 shares purchased in Q1 2025 under the ESPP Issuer Purchases of Equity Securities (Q1 2025) | Month | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2025 | 5,232 | $34.85 | | February 2025 | 5,678 | $35.18 | | March 2025 | 6,349 | $31.24 | | Total | 17,259 | $33.63 | Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer, and XBRL data files - The exhibits include CEO and CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906, as well as Inline XBRL documents[201]