Appian Corporation — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparison with Q1 2023. Appian provides software for business-process automation through its AI Process Platform.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Total revenue | $149.8 million | $135.2 million; up 10.8% |
| Subscriptions revenue | $117.7 million | $99.0 million; up 18.9% |
| Cloud subscriptions revenue | $86.6 million | $69.7 million; up 24.3% |
| Professional services revenue | $32.1 million | $36.3 million; down 11.4% |
| Gross profit / margin | $111.8 million / 74.6% | $99.1 million / 73.3% |
| Operating loss | $19.5 million | $35.3 million |
| Net loss / diluted loss per share | $32.9 million / $0.45 | $36.8 million / $0.51 |
| Adjusted EBITDA (non-GAAP) | $(1.3) million | $(15.8) million |
| Cash from operating activities | $18.9 million provided | $25.3 million used |
- Subscription gross margin was 89.6%, versus 89.4%; professional services gross margin fell to 20.0% from 29.3%. Total gross margin improved as revenue shifted toward subscriptions.
- Operating expenses were $131.4 million, down from $134.4 million. Lower sales and marketing and R&D costs were partly offset by higher G&A, including $4.5 million of judgment-preservation-insurance amortization.
- Other expense, net was $8.2 million, compared with $2.7 million of income, primarily reflecting foreign-exchange losses. Interest expense rose to $5.6 million from $3.1 million.
- Cash and cash equivalents were $170.1 million at quarter-end, versus $149.4 million at year-end 2023; working capital was $96.0 million. Appian held no short- or long-term investments at March 31.
- Total debt, net of issuance costs, was $255.1 million: $62.0 million drawn on the revolver and $194.6 million in term-loan borrowings before issuance costs. Appian reported covenant compliance; $11.8 million of letters of credit were outstanding.
- Accounts receivable declined to $129.3 million from $171.6 million; deferred revenue was $226.2 million, versus $240.7 million at year-end. Remaining performance obligations were $468.3 million, with $296.3 million expected to be recognized over the next 12 months.
Material changes and management commentary
- Revenue growth was led by cloud subscriptions. Management attributed $12.9 million of subscription growth to expansion, renewal pricing, and additional subscriptions from existing customers, and $5.9 million to new customers.
- Revenue from international customers increased to 37.2% of total revenue from 33.4%; government customers contributed 21.7%, versus 20.5%.
- Cloud subscriptions revenue retention was 120%, compared with 115% a year earlier.
- Management expects subscriptions to comprise a growing share of revenue as partner delivery expands; it expects professional-services revenue as a share of total revenue to decline. The filing gives no specific company-wide revenue or earnings guidance. Management expects 2024 professional-services gross margin to be slightly lower than in 2023 and anticipates higher G&A, partly due to insurance amortization and IT investment.
- Management believes cash, operating cash flows, and available credit will cover working-capital and capital-expenditure needs for at least the next 12 months. It expects to continue investing in sales and marketing, R&D, international operations, and customer support.
Risks, contingencies, and unusual items
- Pegasystems litigation: Appian has a $2.036 billion judgment, $23.6 million in attorney fees, and post-judgment interest, but the appeal remains unresolved. Payment is not due until appeals are exhausted; collection is not assured. Appian has not recorded the award. A judgment-preservation policy provides up to $500 million of coverage and cost $57.3 million; $4.5 million was amortized in Q1.
- Repurchase: Under a program authorized for up to $50 million, Appian repurchased 1.3 million shares for $50.0 million in March at an average $37.86 per share.
- Commitments: A non-cancellable AWS agreement includes $131 million of minimum purchases over five years, including $28 million in each of years three through five. Q1 AWS spending was $10.3 million.
- Market exposure: A one-percentage-point increase in interest rates would raise annual interest expense by approximately $2.5 million. Management estimates a 10% currency-rate move would affect revenue by approximately 3% and operating loss by approximately 4%; it has not hedged foreign-currency transactions. Inflation may pressure costs and margins.
- Appian reported no material change in the risk factors from its 2023 Form 10-K. Disclosure controls were assessed as effective at a reasonable-assurance level.
Important facts for investors to verify
- Progress and outcome of the Pegasystems appeal, insurance coverage terms, and any eventual judgment collection.
- Whether cloud-subscription growth and 120% retention persist, and whether professional-services margin stabilizes as partner usage expands.
- Cash generation relative to ongoing losses, debt service, the share repurchase, and AWS minimum commitments.
- Effects of foreign-exchange movements and floating-rate debt on future results.
- Timing and magnitude of insurance amortization and other costs excluded from non-GAAP measures.