Appian Corporation — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing; standalone fourth-quarter results are not clearly provided. Appian sells a low-code platform combining workflow, automation, and process mining, with subscription and professional services revenue.
Financial performance
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Total revenue | $369.3 million | $304.6 million | +21.2% |
| Subscriptions revenue | $263.7 million | $198.7 million | +32.7% |
| Cloud subscription revenue | $179.4 million | $129.2 million | +39% |
| Professional services revenue | $105.5 million | $105.9 million | -0.3% |
| Gross margin | 71.8% | 70.9% | +0.9 percentage points |
| Operating loss | $(83.9) million | $(37.9) million | Loss widened |
| Net loss | $(88.6) million | $(33.5) million | Loss widened |
| Cash used in operating activities | $(53.9) million | $(7.6) million | Cash use increased |
Subscriptions rose to 71.4% of revenue from 65.2%. Subscription gross margin was 89.6% (89.5% in 2020); professional services gross margin fell to 27.3% from 35.8%, partly reflecting higher personnel costs and unusually favorable prior-year remote-services economics. Adjusted EBITDA, a non-GAAP measure, was a loss of $37.9 million, versus a loss of $16.8 million.
Liquidity, debt, and cash flow
- At year-end, cash and cash equivalents were $100.8 million, short-term investments and marketable securities were $55.2 million, and long-term investments were $12.0 million. Working capital was $121.8 million.
- Appian had no borrowings under its $20 million revolving credit facility; $11.2 million of letters of credit were outstanding. The facility maturity was extended to November 2025, and the company reported compliance with its covenants.
- Operating cash use increased substantially year over year. The company cited the larger net loss and growth-related working-capital uses, including higher accounts receivable and deferred commissions; deferred revenue provided a partial offset.
- Management stated existing cash, investments, anticipated operating cash flows, and available credit should fund working capital and capital expenditures for at least 12 months.
Material changes and notable items
- Revenue growth was led by subscriptions, including a $50.2 million increase in cloud subscriptions. Existing-customer expansion contributed $48.1 million of subscription growth; new customers contributed $16.6 million.
- Operating expenses increased across sales and marketing, research and development, and general and administrative functions as Appian expanded its workforce and invested in growth. General and administrative costs also reflected higher legal fees and accelerated CEO stock-based compensation expense.
- Backlog, described as non-cancellable future subscription amounts, was $285.5 million at year-end versus $206.2 million a year earlier; approximately 34% was not expected to be recognized in 2022. The filing cautions that backlog may not reliably predict future revenue.
- In August 2021, Appian acquired process-mining software developer Lana Labs for approximately $30.7 million net of cash acquired and debt. Post-acquisition revenue through year-end was $0.3 million, with a pretax loss of $2.6 million.
- In January 2022, the CEO exercised the 2019 stock option grant, generating $23.8 million of cash proceeds for the company.
Outlook, risks, and contingencies
- No specific numerical revenue or earnings guidance is provided in the supplied filing text. Management expects operating expenses to continue rising in absolute dollars and subscriptions to become a larger share of revenue over time.
- Management said COVID-19 had not meaningfully affected FY2021 financial results, but warned that reduced demand or longer sales cycles could affect 2022 and later periods; the ultimate impact was not estimable.
- Key risks include continued losses and cash use, reliance on a single platform, competition, lengthy and variable sales cycles, customer renewals and expansion, dependence on AWS for cloud hosting, security and privacy incidents, and concentration in government and regulated industries. U.S. federal government agencies generated 19.6% of FY2021 revenue.
- Appian’s AWS agreement includes minimum purchase commitments totaling $131 million over five years. Operating lease commitments totaled approximately $92.9 million in undiscounted payments.
- Appian’s Virginia trade-secret and related litigation against Pegasystems was proceeding toward trial; the company said the outcome and any recovery were uncertain. A separate Massachusetts action includes Pegasystems’ claims and Appian counterclaims, with potential damages exposure for either party that the company could not assess.
- The CFO notified Appian of plans to retire after transitioning responsibilities; a successor was being identified. Appian’s dual-class structure gives Class B shares ten votes per share, and the CEO and affiliates held approximately 77% of voting power at year-end.
Most important facts for investors to verify
- Whether subscription and cloud growth can continue while operating losses and cash use improve.
- Trends in customer retention, expansion, and new-customer additions; the reported average cloud renewal rate over the prior three fiscal years was 98%, while FY2021 cloud revenue retention was 116%.
- Professional services margin recovery and the effect of partner-delivered implementations on revenue mix and profitability.
- Progress integrating Lana Labs and the financial and operational impact of its acquisition.
- Developments and possible outcomes in the Pegasystems litigation, including any eventual damages or costs.
- Execution against AWS commitments, liquidity needs, and credit-facility covenants; the facility includes a minimum adjusted EBITDA covenant.
- Leadership transition and the implications of concentrated voting control.
Audit and controls: The auditor issued unqualified opinions on the financial statements and internal control over financial reporting. Appian excluded Lana Labs from its 2021 internal-control assessment because of the acquisition timing; Lana Labs represented 6% of year-end assets and 0.1% of FY2021 revenue.