McLean, VA – November 3, 2022 – Appian (Nasdaq: APPN) today announced financial results for the third quarter ended September 30, 2022.
“In Q3, total revenue exceeded guidance. On a constant currency basis, both cloud subscription revenue and total revenue grew more than 30% year-over-year. Adjusted EBITDA loss was higher due to pull forward hiring and a sharp drop in attrition. We have a plan to reduce losses to 10% of revenue by the second half of 2023.”
Revenue: Cloud subscription revenue was $60.6 million, up 30% compared to the third quarter of 2021. Total subscriptions revenue increased 29% year-over-year to $86.5 million. Professional services revenue was $31.4 million, an increase of 25% compared to the third quarter of 2021. Total revenue was $117.9 million, up 28% compared to the third quarter of 2021. Cloud subscription revenue retention rate was 115% as of September 30, 2022.
Operating loss and non-GAAP operating loss: GAAP operating loss was $(37.8) million, compared to $(22.9) million for the third quarter of 2021. Non-GAAP operating loss was $(24.6) million, compared to $(13.5) million for the third quarter of 2021.
Net loss and non-GAAP net loss: GAAP net loss was $(44.0) million, compared to $(25.4) million for the third quarter of 2021. GAAP net loss per share was $(0.61) for the third quarter of 2022, compared to $(0.36) for the third quarter of 2021. Non-GAAP net loss was $(30.9) million, compared to $(15.9) million for the third quarter of 2021. Non-GAAP net loss per share was $(0.43), compared to the $(0.22) net loss per share for the third quarter of 2021. GAAP and non-GAAP net loss for the third quarter of 2022 included $6.1 million, or $(0.08) per share, of foreign currency exchange losses. GAAP and non-GAAP net loss for the third quarter of 2021 included $2.3 million, or $(0.03) per share, of foreign currency exchange losses. We do not forecast foreign exchange rate movements.
Adjusted EBITDA: Adjusted EBITDA loss was $(22.9) million, compared to adjusted EBITDA loss of $(12.0) million for the third quarter of 2021.
Balance sheet and cash flows: As of September 30, 2022, Appian had total unencumbered cash and investments of $92.7 million. Net cash used in operating activities was $(43.7) million for the three months ended September 30, 2022 compared to $(25.1) million of net cash used in operating activities for the same period in 2021.
A reconciliation of GAAP to non-GAAP financial measures has been provided in the tables following the financial statements in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”
On November 3, 2022, Appian closed on a new credit facility, further strengthening its financial position and supporting growth initiatives.
Received loan proceeds of $98.7 million (net of closing fees) in connection with a five-year term loan, with another $50 million available from a revolving credit facility.
As of November 3, 2022, guidance for 2022 is as follows:
Fourth Quarter 2022 Guidance:
Cloud subscription revenue is expected to be between $63.5 million and $64.5 million, representing year-over-year growth of 24% to 26%.
Total revenue is expected to be between $121.5 million and $123.5 million, representing a year-over-year increase of 16% to 18%.
Adjusted EBITDA loss is expected to be between $(24.0) million and $(29.0) million.
Non-GAAP net loss per share is expected to be between $(0.36) and $(0.42), assuming weighted average common shares outstanding of 72.7 million.
Cloud subscription revenue is expected to be between $235.0 million and $236.0 million, representing year-over-year growth of 31% to 32%.
Total revenue is expected to be between $461.0 million and $466.0 million, representing a year-over-year increase of 25% to 26%.
Adjusted EBITDA loss is expected to be between $(75.0) million and $(80.0) million.
Non-GAAP net loss per share is expected to be between $(1.30) and $(1.36), assuming weighted average common shares outstanding of 72.5 million.
Appian will host a conference call today, November 3, 2022, at 4:30 p.m. ET to discuss Appian's financial results for the third quarter ended September 30, 2022 and business outlook.
The live webcast of the conference call can be accessed on the Investor Relations page of Appian’s website at http://investors.appian.com. To access the call, please dial (800) 715-9871 in the U.S. or (646) 307-1963 internationally (Conference ID: 7718213). Following the call, an archived webcast will be available at the same location on the Investor Relations page. A telephone replay will be available for one week at (800) 770-2030 in the U.S. or (609) 800-9909 internationally with recording access code 7718213.
To supplement its consolidated financial statements, which are prepared and presented in accordance with GAAP, Appian provides investors with certain non-GAAP financial performance measures. Appian uses these non-GAAP financial performance measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Appian’s management believes these non-GAAP financial measures provide meaningful supplemental information regarding Appian’s performance by excluding certain expenses that may not be indicative of its recurring core business operating results. Appian believes both management and investors benefit from referring to these non-GAAP financial measures in assessing Appian’s performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to historical performance as well as comparisons to competitors’ operating results. Appian believes these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to measures used by management in its financial and operational decision-making and (2) they are used by Appian’s institutional investors and the analyst community to help them analyze the health of Appian’s business.
The non-GAAP financial performance measures include non-GAAP net loss, non-GAAP net loss per share, and non-GAAP operating loss. These non-GAAP financial performance measures exclude the effect of stock-based compensation expense and certain litigation-related expenses consisting of legal and other professional fees which are not indicative of our core operating performance and are not part of our normal course of business. While these items may be recurring in nature and should not be disregarded in evaluation of our earnings performance, it is useful to exclude such items when analyzing current results and trends compared to other periods as these items can vary significantly from period to period depending on specific underlying transactions or events that may occur. Therefore, while we may incur or recognize these types of expenses in the future, the company believes removing these items for purposes of calculating the non-GAAP financial measures provides investors with a more focused presentation of our ongoing operating performance.
Appian also discusses adjusted EBITDA, a non-GAAP financial performance measure it believes offers a useful view of the overall operation of its businesses. The company defines adjusted EBITDA as net loss before (1) Other expenses, net, (2) interest expense, (3) income tax expense (benefit), (4) depreciation and amortization, (5) stock-based compensation expense, and (6) litigation expenses. The most directly comparable GAAP financial measure to Adjusted EBITDA is net loss. Users should consider the limitations of using adjusted EBITDA, including the fact this measure does not provide a complete measure of our operating performance. Adjusted EBITDA is not intended to purport to be an alternate to net loss as a measure of operating performance or to cash flows from operating activities as a measure of liquidity.
The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as a substitute for, or superior to the financial information prepared and presented in accordance with GAAP, and Appian’s non-GAAP measures may be different from non-GAAP measures used by other companies. For more information on these non-GAAP financial measures, see the reconciliation of these non-GAAP financial measures to their nearest comparable GAAP measures at the end of this press release. Appian provides guidance ranges for non-GAAP net loss per share and adjusted EBITDA; however, we are not able to reconcile these amounts to their comparable GAAP financial measures without unreasonable efforts because certain information necessary to calculate such measures on a GAAP basis is unavailable, subject to high variability, dependent on future events outside of our control, and cannot be predicted. In addition, Appian believes such reconciliations could imply a degree of precision that might be confusing or misleading to investors. The actual effect of the reconciling items that Appian may exclude from these non-GAAP expense numbers, when determined, may be significant to the calculation of the comparable GAAP measures.
This press release includes forward-looking statements. All statements contained in this press release other than statements of historical facts, including statements regarding Appian’s future financial and business performance for the fourth quarter and full year 2022, future investment by Appian in its go-to-market initiatives, increased demand for the Appian platform, market opportunity and plans and objectives for future operations, including Appian’s ability to drive continued subscriptions revenue and total revenue growth, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “will,” and similar expressions are intended to identify forward-looking statements. Appian has based these forward-looking statements on its current expectations and projections about future events and financial trends that Appian believes may affect its financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks and uncertainties, including the risks and uncertainties associated with Appian’s ability to grow its business and manage its growth, Appian’s ability to sustain its revenue growth rate, continued market acceptance of Appian’s platform and adoption of low-code solutions to drive digital transformation, the fluctuation of Appian’s operating results due to the length and variability of its sales cycle, competition in the markets in which Appian operates, risks and uncertainties associated with the composition and concentration of Appian’s customer base and their demand for its platform and satisfaction with the services provided by Appian, the potential fluctuation of Appian’s future quarterly results of operations, Appian’s ability to shift its revenue towards subscriptions and away from professional services, Appian’s ability to operate in compliance with applicable laws and regulations, Appian’s strategic relationships with third parties and use of third-party licensed software and its platform’s compatibility with third-party applications, the timing of Appian’s recognition of subscriptions revenue which may delay the effect of near term changes in sales on its operating results, and the additional risks and uncertainties set forth in the “Risk Factors” section of Appian’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission on February 17, 2022 and other reports that Appian has filed with the Securities and Exchange Commission. Moreover, Appian operates in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for Appian’s management to predict all risks, nor can Appian assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements Appian may make. In light of these risks, uncertainties, and assumptions, Appian cannot guarantee future results, levels of activity, performance, achievements, or events and circumstances reflected in the forward-looking statements will occur. Appian is under no duty to update any of these forward-looking statements after the date of this press release to conform these statements to actual results or revised expectations, except as required by law.
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