Appian(APPN) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements This section presents Q1 2024 unaudited condensed consolidated financial statements, showing increased revenue, reduced net loss, and a stockholders' deficit Consolidated Balance Sheets As of March 31, 2024, total assets decreased to $595.4 million, liabilities increased, resulting in a $9.7 million stockholders' deficit Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2024 (unaudited) | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $595,358 | $627,503 | | Cash and cash equivalents | $170,108 | $149,351 | | Accounts receivable, net | $129,317 | $171,561 | | Total Liabilities | $605,023 | $575,162 | | Deferred revenue | $226,159 | $240,692 | | Total debt | $255,123 | $206,589 | | Total Stockholders' (Deficit) Equity | ($9,665) | $52,341 | Consolidated Statements of Operations Q1 2024 total revenue increased 11% to $149.8 million, narrowing operating loss to $19.5 million and net loss to $32.9 million Q1 2024 Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total Revenue | $149,835 | $135,235 | | Subscriptions Revenue | $117,694 | $98,957 | | Professional Services Revenue | $32,141 | $36,278 | | Gross Profit | $111,838 | $99,142 | | Operating Loss | ($19,535) | ($35,266) | | Net Loss | ($32,923) | ($36,829) | | Net Loss Per Share (Basic & Diluted) | ($0.45) | ($0.51) | Consolidated Statements of Cash Flows Q1 2024 net cash from operations turned positive to $18.9 million, with $4.2 million used in financing due to a $50.0 million share repurchase Q1 2024 Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by (used by) operating activities | $18,866 | ($25,265) | | Net cash provided by (used by) investing activities | $7,459 | ($12,316) | | Net cash (used by) provided by financing activities | ($4,249) | $88,144 | | Net increase in cash, cash equivalents, and restricted cash | $20,757 | $50,578 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, cloud subscriptions at $86.6 million, Pegasystems litigation, a $57.3 million JPI policy, and a $50.0 million share repurchase - Revenue from government agencies represented 21.7% of total revenue for Q1 2024, while international customers accounted for 37.2%[31] Revenue by Type (in thousands) | Revenue Type | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Cloud subscriptions | $86,603 | $69,692 | | Term license subscriptions | $23,771 | $23,151 | | Maintenance and support | $7,320 | $6,114 | | Total subscriptions | $117,694 | $98,957 | | Professional services | $32,141 | $36,278 | | Total revenue | $149,835 | $135,235 | - The company has a $2.036 billion judgment against Pegasystems, which will not be recorded until all contingencies are resolved and collection occurs[97][98] - In September 2023, the company purchased a Judgment Preservation Insurance (JPI) policy for $57.3 million, providing up to $500.0 million of coverage for the Pegasystems judgment, amortized over an estimated three-year appeals process[99][100] - In March 2024, the company completed a $50.0 million share repurchase program, buying back 1.3 million shares at an average price of $37.86[103] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 performance, noting 10.8% total revenue increase, 18.9% subscription growth, 120% cloud revenue retention, and improved operating cash flow Key Metrics Key metrics show strong growth, with cloud subscriptions revenue up 24.3% to $86.6 million and retention rate improving to 120% Cloud Subscriptions Revenue (in thousands) | Period | Revenue | % Change YoY | | :--- | :--- | :--- | | Three Months Ended March 31, 2024 | $86,603 | 24.3% | | Three Months Ended March 31, 2023 | $69,692 | | Cloud Subscriptions Revenue Retention Rate | As of | Rate | | :--- | :--- | | March 31, 2024 | 120% | | March 31, 2023 | 115% | Results of Operations Q1 2024 total revenue grew 10.8% to $149.8 million, gross margin improved to 74.6%, and operating loss reduced to $19.5 million - The increase in subscriptions revenue was driven by a $16.9 million increase in cloud subscription revenue, with $5.9 million from new customers and $12.9 million from existing customers[150] - Sales and marketing expense decreased by $4.9 million (7.8%) due to a 7.3% reduction in headcount and lower severance costs[154] - General and administrative expense increased by $3.8 million (12.6%), primarily due to $4.5 million in amortization expense for the judgment preservation insurance policy[156] - Other expense was $8.2 million, a significant shift from other income of $2.7 million in the prior year, primarily due to $11.5 million in foreign exchange losses[158][159] Liquidity and Capital Resources As of March 31, 2024, Appian held $170.1 million in cash, generated $18.9 million from operations, and believes resources are sufficient for the next twelve months Liquidity Position (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $170,108 | $149,351 | | Working capital | $95,950 | $43,183 | - The company has non-cancellable cloud hosting commitments with AWS requiring $28.0 million in minimum spending for each of the next three years[181] - Net cash from operating activities improved by $44.1 million year-over-year, driven by stronger collections and lower operating expenses[183][184] - Net cash used in financing activities was $4.2 million, compared to $88.1 million provided in the prior year, mainly due to a $50.0 million share repurchase and lower debt proceeds[185] Quantitative and Qualitative Disclosures About Market Risk Primary market risks include interest rates and foreign currency, with a 1% rate increase impacting annual interest expense by $2.5 million and a 10% currency change affecting revenue by 3% and operating loss by 4% - A hypothetical 1 percentage point increase in interest rates would increase annual interest expense by approximately $2.5 million[190] - A 10% change in foreign currency exchange rates would have impacted Q1 2024 total revenue by approximately 3% and operating loss by approximately 4%[192] Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting - The CEO and CFO concluded that as of March 31, 2024, the company's disclosure controls and procedures were effective at the reasonable assurance level[196] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[197] PART II. OTHER INFORMATION Legal Proceedings This section refers to Note 12 for Pegasystems litigation details, stating no other legal proceedings are expected to materially adversely affect the business - For information regarding legal proceedings, the report refers to Note 12 – Commitments, Contingencies, and Other Matters in the financial statements[200] Risk Factors No material changes to risk factors have occurred since those disclosed in the company's 2023 Annual Report on Form 10-K - There have been no material changes from the risk factors described in the company's 2023 Annual Report on Form 10-K[202] Issuer Purchases of Equity Securities This section details the company's equity security purchases, including a $50.0 million share repurchase in March 2024 of 1.3 million shares - In February 2024, the Board of Directors authorized a share repurchase program of up to $50.0 million[205] - In March 2024, the company completed the program, repurchasing 1.3 million shares at an average price of $37.86 for a total cost of $50.0 million[205] Other Items (Defaults, Mine Safety, Other Information) The company reported no defaults on senior securities, no mine safety disclosures, and no other information under Item 5 - The company reported 'Not applicable' for Defaults Upon Senior Securities and Mine Safety Disclosures, and 'None' for Other Information[205] Exhibits This section lists exhibits filed with the Form 10-Q, including Credit Agreement amendments, officer certifications, and XBRL data - Key exhibits filed include amendments to the Credit Agreement, officer certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906, and XBRL instance documents[207][208]