UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-38098
APPIAN CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware
54-1956084
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
7950 Jones Branch Drive
McLean, VA
22102
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (703) 442-8844
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol
Name of each exchange on which registered
Class A Common Stock
APPN
The Nasdaq Global Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of June 30, 2024, the aggregate market value of the registrant’s voting Class A common stock and Class B common stock held by
non-affiliates of the registrant was $909.8 million and $63.8 million, respectively, based on a closing price of $30.86 per share of the
registrant’s Class A common stock as reported on the Nasdaq Global Market on June 30, 2024. For purposes of this computation, all officers,
directors, and 10% beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed to be an
admission that such officers, directors, or 10% beneficial owners are, in fact, affiliates of the registrant.
As of February 17, 2025, there were 42,957,026 shares of our Class A common stock and 31,088,085 shares of our Class B common
stock, each with a par value of $0.0001 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement for its 2025 Annual Meeting of Stockholders to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Annual Report on
Form 10-K are incorporated by reference in Part III, Items 10-14 of this Annual Report on Form 10-K.
TABLE OF CONTENTS
Page
PART I.
Item 1.
Business
4
Item 1A.
Risk Factors
13
Item 1B.
Unresolved Staff Comments
40
Item 1C.
Cybersecurity
40
Item 2.
Properties
40
Item 3.
Legal Proceedings
41
Item 4.
Mine Safety Disclosures
41
PART II.
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
42
Item 6.
[Reserved]
44
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
45
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
63
Item 8.
Financial Statements and Supplementary Data
65
Item 9.
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
102
Item 9A.
Controls and Procedures
102
Item 9B.
Other Information
103
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
103
PART III.
Item 10.
Directors, Executive Officers and Corporate Governance
104
Item 11.
Executive Compensation
104
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
104
Item 13.
Certain Relationships and Related Transactions and Director Independence
104
Item 14.
Principal Accountant Fees and Services
104
PART IV.
Item 15.
Exhibits and Financial Statement Schedules
105
Item 16.
Form 10-K Summary
109
Signatures
110
3
PART I
Item 1. Business.
Overview
Appian Corporation (together with its subsidiaries, “Appian,” “the Company,” “we,” or “our”) is The Process Company. We deliver a
software platform that helps organizations run better processes that reduce costs, improve customer experiences, and gain a strategic edge.
Committed to client success, we serve many of the world’s largest companies across industries.
We believe processes define each organization. Processes are how they operate, deliver value, and interact with their customers. Nothing
is more transformative for an organization than improving their processes. Appian has both the platform and the expertise to enable
enterprise transformation.
The Appian Platform
Appian is a leading platform for process orchestration, automation, and intelligence. Our unified platform provides everything an
organization needs to design, automate, and optimize critical processes. It enables continuous adaptation, allowing organizations to thrive in
changing environments.
Core Capabilities
Appian provides capabilities to tackle any process challenge. Appian tightly integrates data fabric; robotic process automation, or RPA;
intelligent document processing, or IDP; generative artificial intelligence, or generative AI; artificial intelligence agents, or AI agents; low-
code design; application programming interfaces, or APIs; business rules; and process intelligence capabilities in a single platform. These
capabilities are unified and scalable, meeting enterprise demands and easy to change as requirements evolve.
•
Process Orchestration: The Appian platform coordinates tasks between AI, automation, and humans to ensure processes run
efficiently and intelligently. RPA enables customers to build bots with low-code to automate repetitive manual tasks. Appian AI
agents extract data, process documents, and initiate processes at scale. API integration easily connects systems with low-code
design tools and hundreds of prebuilt connections.
•
Data Fabric: Appian’s data fabric is an integrated data layer that unifies data across systems without requiring companies to migrate
their data. Appian empowers users to explore data in real-time, build reports, and get AI-powered insights for smarter decision-
making. Our patented data fabric technology supports both analytical and transactional workloads, which allows users to build
applications that create and update enterprise data. It also includes row-level security rules to enforce access controls at every level.
Our data fabric functionality powers and secures our AI offering.
•
Process Intelligence: Process intelligence allows users to gain deep insights into process performance through Appian’s Process HQ.
It also preps data for process mining with just a few clicks, even across multiple sources. Companies can use AI to monitor
processes, identify issues, and get intelligent recommendations for optimization.
•
Artificial Intelligence: We believe the key to unlocking AI’s full potential is embedding it inside a business process. Process is where
business happens. It’s where companies make decisions, save and spend money, serve customers, and scale business operations.
When AI operates within processes, it gains purpose, governance, and accountability—all essential to delivering value from AI.
Appian can embed AI into every process, which gives AI the context and actions it needs to accelerate outcomes for the enterprise.
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Appian delivers six key benefits with our “AI in process” approach:
1.
Process makes AI easy. Deploying AI in isolated projects is complex and costly. By embedding AI within a process, enterprises
can easily access valuable AI capabilities when and where they need them.
2.
Process gives AI structure. AI is only as useful as the structure surrounding it. A process gives AI defined goals in a structured
flow of work. AI can work alongside humans and automation tools, escalating issues so humans always maintain oversight and
control.
3.
Process gives AI data. AI is nothing without data. But most enterprises struggle to feed AI complete data from across systems,
while still ensuring privacy and maintaining access privileges. By integrating AI into processes, enterprises ensure AI receives
quality, real-time data from all systems. Organizations can enforce privacy controls to prevent unauthorized access and optimize
data governance to comply with regulations (such as GDPR, HIPAA, etc.).
4.
Process makes AI safe. AI is powerful, but no one wants to give AI free reign over their enterprises. Processes provide crucial
safety mechanisms, including human approval steps for high-risk actions and escalation paths to ensure AI errors don’t cause
harm. Additionally, activity logs make auditing and compliance simple for organizations with strict regulatory requirements.
5.
Process makes AI measurable. For many enterprises, AI is a black box, which can’t be measured for impact. Appian processes
track every AI action, allowing organizations to measure performance, identify bottlenecks, and optimize outcomes.
6.
Process makes AI enterprise-grade. A process provides the necessary infrastructure to scale AI use. The right tooling puts AI to
work with security certifications, enterprise scalability, and other capabilities such as process orchestration, automation, and
intelligence. Processes take AI from a collection of disconnected pilots to an enterprise-wide capability.
Appian’s unified approach delivers all the capabilities leading organizations need to orchestrate their business processes in one
place. It empowers enterprises to transform their processes and improve business outcomes.
Committed to Customer Success
At Appian, we do more than deliver a platform; we are invested in our customers’ success. Our Customer Success team partners with
enterprises every step of the way. From strategic guidance to hands-on support, we strive to ensure their process transformation delivers
measurable, lasting value. The world’s most innovative organizations trust Appian to solve their critical process challenges, achieve
operational excellence, and drive sustainable growth. With Appian, we believe businesses are equipped to thrive in a world where process is
everything.
Go-to-Market Strategy
Our go-to-market strategy consists of both direct sales and sales through strategic partners. We sell our software almost exclusively as
subscriptions. We grow our revenue by adding new customers, increasing the product usage of existing customers, and expanding product
usage across new business processes and applications. Our strategic partners work with organizations undergoing digital transformation
projects, and when they recognize an opportunity for our platform, they often introduce us to potential customers.
Many of our customers begin by building a single application and grow to create dozens of applications on our platform, which implicitly
increases their return on investment. Generally, the development of new applications results in the expansion of our product usage within an
organization and a corresponding increase in our revenue due to subscription fees. Every additional application an organization creates on
our platform increases the value of our platform for that organization because it further integrates people, processes, and data and facilitates
knowledge sharing. Applications built on our platform may be used only on our platform and only while customers have active subscriptions,
creating a substantial incentive for customers to avoid the difficulties and costs
5
associated with moving to a different software platform. At the same time, our industry-leading Customer Success team helps customers
build and deploy applications on our platform to achieve their digital transformation goals more quickly.
Our Growth Strategy
Key elements of our growth strategy include:
•
Expand our customer base. We continue to grow our customer base in various industries, including financial services, government,
life sciences, insurance, manufacturing, energy, healthcare, telecommunications, and transportation. We believe the market for our
platform is still in its early stages, and we have a significant opportunity to add additional large enterprise and government
customers globally. We also have a strong ecosystem of strategic partners that help identify new customer opportunities for us.
•
Grow revenue from key industry verticals. While our platform is industry-agnostic, we continue to make investments to enhance the
expertise of our sales and marketing organization within our key industry verticals of financial services, government, life sciences,
and insurance. In 2024, we generated over 77% of our subscriptions revenue from customers in these verticals. We believe focusing
on the digital transformation needs of organizations within these industry verticals helps drive adoption of our platform.
•
Continue to innovate and enhance our platform. We continue to invest in research and development to strengthen our platform and
expand the number of features available to our customers. We offer multiple upgrades each year that allow our customers to benefit
from ongoing innovation. As we continue to increase the functionality of our platform and further reduce the amount of developer
skill required to quickly deliver value for our customers, we believe we have the potential to expand the use of our platform.
•
Offer industry solutions to accelerate customer usage. Our platform enables our customers to build applications quickly. We, along
with our partners, offer pre-built solutions in certain of our key industries such as financial services, government, and insurance to
give our customers an even faster start. Every Appian solution is built on our platform and designed to be standardized,
upgradeable, and compatible with each other.
•
Expand our international footprint. Our platform is designed to be natively multilingual to facilitate collaboration and address
challenges in multinational organizations. Appian Cloud meets the data residency requirements of our global customers by operating
in 16 countries across 36 regions and 114 availability zones. In 2024, 37% of our total revenue was generated from customers
outside of the United States. We believe we have a significant opportunity to continue to grow our international footprint. We are
investing in new geographies through direct and indirect sales channels, professional services and customer support, and
implementation partners.
•
Leverage our partner base. We have a number of strategic partnerships with companies, including Accenture, Capgemini, Deloitte,
EY, KPMG, PwC, and TCS. These partners work with organizations undergoing digital transformation projects. When they recognize
an opportunity for our platform, they introduce us to potential customers. Additionally, they often go to market with their own pre-
built solutions using our platform, delivering software license revenue to Appian. We intend to further leverage our base of partners
to provide broader customer coverage and solution delivery capabilities.
Human Capital Resources and Management
Employees, Culture, and Labor Relations
Our distinct culture of innovation is an important contributor to our success as a company. We promote an inclusive environment where
our employees can contribute their unique perspectives to help create transformative solutions for our customers. Our culture was
purposefully cultivated by our four founders, who are still heavily involved in operating our business, including recruiting, interviewing, and
educating new employees at Appian. Led by Matt Calkins, Founder and Chief Executive Officer, we have grown our business organically by
employing a unified team to maximize the cohesion and simplicity of our platform and our company.
6
As of December 31, 2024, we had a total global workforce of 2,033 employees, 1,339 of which were based in the United States. None of
our U.S. employees are covered by collective bargaining agreements. We believe our employee relations are good, and we have not
experienced any work stoppages. Additionally, we are subject to, and comply with, local labor law requirements in all countries in which we
operate.
Excellence and Intensity
We have two foundational values, the most important qualities that an Appian person must have: Excellence and Intensity. Every hiring
decision, every promotion, and every public commendation is based on these values. Excellence means we have high standards, and we live
up to them. Everything Appian does is done well. Intensity means we’re all-in. We’re ambitious. We bring our full self to work and our full
commitment. We care about the outcome. We take the results of our work personally. We assert ourselves. We hold people to account, even
if it’s uncomfortable, because we take pride in our team’s work. Raising the bar is part of being a leader at Appian.
Belonging
We respect all people. We believe diverse ideas and an inclusive environment are paramount to our continued success. We also believe
our individual experiences and knowledge enable us to learn from one another and discover creative solutions. We sponsor a number of
affinity groups, initiated by employees, that aim to build stronger internal and external networks and partnerships, create a positive lasting
impact through social and educational outreach, and create development opportunities for future leaders.
Talent Acquisition and Development
We have a robust talent acquisition program to attract, recruit, and retain new talent. We utilize an extensive campus recruiting program,
provide an employee referral program, and offer opportunities for internal transfers, as well as competitive compensation and benefits
programs. We also provide resources to help our employees grow in their current roles and build new skills, including access to Appian
University, a system that houses Appian's in-house learning and development solutions.
Sales and Marketing
Our sales and marketing teams work together closely to market and sell our software platform and services. We sell to enterprises across
a range of industries, including government, financial services, insurance, and life sciences. Our sales organization includes enterprise
account executives, solution consultants, and customer success representatives and is supported by a robust partner ecosystem of global
systems integrators, technology partners, and resellers. We are dedicated to the success of Appian customers, investing in robust post-sales
customer success initiatives to ensure adoption, satisfaction, and expanded use over time.
To drive awareness and adoption of our platform, we execute a comprehensive marketing strategy that includes digital marketing,
customer advocacy programs, industry analyst and press relations, thought leadership initiatives, digital events, industry conferences,
tradeshows, and regional events. Our flagship annual event, Appian World, brings together customers, partners, and industry leaders to
showcase innovations, share best practices, and highlight the business impact of Appian. Additionally, we engage with our developer
community through our Appian Community as well as hackathons, user groups, and technical education programs designed to accelerate
application development and foster platform expertise.
Facilities
As of December 31, 2024, we lease our headquarters office in McLean, Virginia, and we also have five leased offices in cities outside the
United States. In addition to our leased offices, we occupied nine flexible workspaces. Our use of flexible workspaces is dependent upon our
current business needs. We believe our facilities are adequate to meet our ongoing needs, including substantial rights to expand within
certain properties we lease. If
7
we require additional space in the future, we believe we will be able to obtain additional facilities on commercially reasonable terms.
Seasonality
We have historically experienced seasonality in terms of when we enter into agreements with customers. See “Seasonality - Management
Discussion and Analysis Financial Condition and Results of Operations” for a discussion of the seasonality of our business.
Our Customers
Our customers operate in various industries, including financial services, government, life sciences, insurance, manufacturing, energy,
healthcare, telecommunications, and transportation. As of December 31, 2024, we had over 1,000 customers. Generally, our sales team
targets its efforts to organizations with over 2,000 employees and $2 billion in annual revenue. The number of customers paying us in excess
of $1 million of annual recurring revenue has grown from 110 at the end of 2023 to 126 at the end of 2024. No single end
customer accounted for more than 10% of our total revenue in 2024, 2023, or 2022.
Our Competition
Our main competitors fall into four categories: (1) providers of custom software solutions that address, or are developed to address,
some of the use cases that applications developed on our platform target; (2) providers of low-code development platforms; (3) providers of
one or more automation technologies, including business process management, case management, process mining, and robotic process
automation; and (4) potential customers using their own internal technology departments to develop, build, and modify their own
proprietary systems.
As our market grows, we expect it will attract more highly specialized vendors as well as larger vendors that may continue to acquire or
bundle their products more effectively. The principal competitive factors in our market include:
•
Platform features, reliability, performance, and effectiveness;
•
Ease of use and speed;
•
Data Fabric;
•
AI;
•
Platform extensibility and ability to integrate with other technology infrastructures;
•
Deployment flexibility;
•
Robustness of professional services and customer support;
•
Price and total cost of ownership;
•
Strength of platform security and adherence to industry standards and certifications;
•
Strength of sales and marketing efforts; and
•
Brand awareness and reputation.
We believe we generally compete favorably with our peer group with respect to the features, security, and performance of our platform,
the ease of integration of our applications, and the relatively low total cost of ownership of our applications. We feel this is validated by the
fact Gartner ranked Appian #1 for the use case of Complex Internal Applications in the 2024 Gartner Critical Capabilities for Enterprise Low-
Code Application
®
8
Platforms (LCAP) as well as positioned Appian as a Leader in the 2024 Gartner Magic Quadrant™ for Enterprise LCAP.
Intellectual Property
Our success depends in part upon our ability to protect our core technology and intellectual property. We rely on patents, trademarks,
copyrights, trade secret laws, confidentiality procedures, and employee disclosure and invention assignment agreements to protect our
intellectual property rights.
As of December 31, 2024, we had 21 granted patents and 20 patents pending related to our platform and its technology. None of our
issued patents expire before 2034. We cannot provide complete assurance that any of our patent applications will result in the issuance of a
patent or that the examination process will not require us to narrow our claims. Any patents we may be issued may be contested,
circumvented, found unenforceable, or invalidated, and we may not be able to prevent third parties from infringing them. We also license
software from third parties for integration into our products, including open source software and other software available on commercially
reasonable terms. We control access to and use of our proprietary software and other confidential information through the use of internal
and external controls, including contractual protections with employees, contractors, end customers, and partners, and our software is
protected by U.S. and international copyright and trade secret laws.
Corporate Information
Our Class A common stock is listed on the Nasdaq Global Market under the symbol “APPN.”
Our corporate headquarters is located at 7950 Jones Branch Drive, McLean, Virginia 22102, and our telephone number is (703) 442-
8844.
“Appian,” the Appian logo, and other trademarks or service marks of Appian Corporation appearing in this Annual Report on Form 10-K
are the property of Appian Corporation. This Annual Report on Form 10-K contains additional trade names, trademarks, and service marks of
others, which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this Annual
Report on Form 10-K exclude the ® or TM symbols.
Available Information
Our website address is www.appian.com. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Exchange Act are made available free of charge
on or through our website at investors.appian.com as soon as reasonably practicable after such reports are filed with, or furnished to, the
United States Securities and Exchange Commission, or SEC. The information contained on, or that can be accessed through, our website is
not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any
references to our website are intended to be inactive textual references only.
Gartner, Magic Quadrant for Enterprise Low-Code Application Platforms 16 October 2024, Oleksandr Matvitskyy, Kyle Davis, Akash Jain
Gartner, Critical Capabilities for Enterprise Low-Code Application Platforms 21 October 2024, Akash Jain, Kyle Davis, Oleksandr Matvitskyy
Gartner does not endorse any vendor, product or service depicted in its research publications and does not advise technology users to select only those vendors with the highest
ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner
disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.
GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally, and MAGIC QUADRANT is a registered trademark of
Gartner, Inc. and/or its affiliates and are used herein with permission. All rights reserved.
The Gartner content described herein (the “Gartner Content”) represents research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc.
("Gartner"), and is not a representation of fact. Gartner Content speaks as of its original publication date (and not as of the date of this 10-K), and the opinions expressed in the
Gartner Content are subject to change without notice.
1
1
9
Forward-Looking Statements
This Annual Report on Form 10-K, including the sections entitled “Business,” “Risk Factors,” and “Management's Discussion and Analysis
of Financial Condition and Results of Operations,” contains forward-looking statements that involve known and unknown risks, uncertainties,
and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from the
information expressed or implied by these forward-looking statements. Statements that are not purely historical are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the
Securities Exchange Act of 1934, as amended, or the Exchange Act. In some cases, forward-looking statements can be identified by the
words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,”
“project,” “potential,” “should,” “will,” or “would,” or the negative of these terms, or other comparable terminology intended to identify
statements about the future. These forward-looking statements include, but are not limited to, statements concerning the following:
•
Our market opportunity and the expansion of our core software markets in general;
•
The opportunity and competitive impact of AI;
•
The effects of increased competition as well as innovations by new and existing competitors in our market;
•
Our ability to adapt to technological change and effectively enhance, innovate, and scale our platform and professional services;
•
Our ability to effectively manage or sustain our growth and to achieve profitability;
•
Potential acquisitions and integration of complementary businesses and technologies;
•
Our ability to maintain, or strengthen awareness of, our brand;
•
Perceived or actual problems with the integrity, reliability, quality, or compatibility of our platform, including unscheduled downtime
or outages;
•
The anticipated expansion of the usage of partners to perform professional services;
•
General macroeconomic conditions, including rising interest rates and inflation, slower growth or recession, and geopolitical turmoil;
•
Future revenue, hiring plans, expenses, capital expenditures, capital requirements, and stock performance;
•
Our ability to attract and retain qualified employees and key personnel and manage our overall headcount;
•
The expected benefits to our clients and potential clients of our product and service offerings;
•
The timing of revenue recognition under license and cloud arrangements;
•
Our expectation that subscriptions revenue as a percentage of total revenue will continue to increase;
•
Our expectation that professional services as a percentage of total revenue will continue to decrease;
•
Our backlog of license, maintenance, cloud, and services agreements and the timing of future cash receipts from committed license
and cloud arrangements;
•
Our expectation that cost of revenue, sales and marketing expenses, research and development expenses, and general and
administrative expenses will continue to increase in absolute dollar values;
•
The fluctuation of subscriptions gross margin and professional services gross margin over time;
•
Our ability to stay abreast of new or modified laws and regulations that currently apply or become applicable to our business both in
the United States and internationally;
•
Our ability to collect on the judgment against Pegasystems or the judgment preservation insurance;
•
Our ability to maintain, protect, and enhance our intellectual property; and
•
Costs associated with defending intellectual property infringement and other claims.
10
These statements represent the beliefs and assumptions of our management based on information currently available to us. Such
forward-looking statements are subject to risks, uncertainties, and other important factors that could cause actual results and the timing of
certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors” included under Part I, Item
1A. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no
obligation to update any forward-looking statements to reflect events or circumstances that occur after the date of this report.
Risk Factors Summary
The risk factors summarized below could materially harm our business, operating results, and/or financial condition, impair our future
prospects, and/or cause the price of our common stock to decline. These risks are discussed more fully in the section titled “Risk Factors.”
Material risks that may affect our business, financial condition, results of operations, and trading price of our Class A common stock include,
but are not necessarily limited to, the following:
•
If we are unable to sustain our revenue growth rate, we may not achieve or maintain profitability in the future.
•
We may not be able to scale our business quickly enough to meet our customers’ growing needs, and if we are not able to grow
efficiently, our operating results could be harmed.
•
We are dependent on a single product, and the lack of continued market acceptance of our platform could cause our operating
results to suffer.
•
We currently face significant competition.
•
Our recent corporate growth may not be indicative of our future growth and, if we continue to grow, we may not be able to manage
our growth effectively.
•
If our security measures are actually or perceived to have been breached, or if unauthorized access to our platform or customer data
occurs, our platform may be perceived as not being secure, and customers may reduce the use of or stop using our platform, and
we may incur significant liabilities.
•
We derive a material portion of our revenue from a limited number of customers, and the loss of one or more of these customers
could materially and adversely impact our business, results of operations, and financial condition.
•
A portion of our revenue is generated from subscriptions sold to governmental entities and heavily regulated organizations, which
are subject to a number of challenges and risks.
•
We have experienced losses in the past, and we may not achieve or sustain profitability in the future.
•
AI is a disruptive set of technologies that may affect the markets for our software dramatically and in unpredictable ways.
•
We rely on the performance of highly skilled personnel, including senior management and our engineering, professional services,
sales, and technology professionals, and if we are unable to retain or motivate key personnel or hire, retain, and motivate qualified
personnel, our business would be harmed.
•
If we do not continue to innovate and provide a platform that is useful to our customers, we may not remain competitive, and our
revenue and operating results could suffer.
•
We are substantially dependent upon customer renewals, the addition of new customers, and the continued growth of our
subscriptions revenue.
•
Because we generally recognize revenue from cloud subscriptions ratably over the term of the subscription agreement, near term
changes in sales may not be reflected immediately in our operating results.
•
We may not achieve market acceptance of our pre-built solutions, which may adversely affect our financial results.
11
•
If our platform fails to perform properly or there are defects or disruptions in the rollout of our platform updates or enhancements,
our reputation could be adversely affected, our market share could decline, and we could be subject to liability claims.
•
We rely upon Amazon Web Services, or AWS, to operate our cloud offering; any disruption of or interference with our use of AWS
would adversely affect our business, results of operations, and financial condition.
•
Our growth depends in part on the success of our strategic relationships with third parties.
•
We employ third-party licensed software for use in or with our software, and the inability to maintain these licenses or errors in the
software we license could result in increased costs or reduced service levels, which would adversely affect our business.
•
If we do not or cannot maintain the compatibility of our platform with third-party applications that our customers use in their
businesses, our revenue will decline.
•
Because we collect and store personal information, domestic and international privacy concerns could result in additional costs and
liabilities to us or inhibit sales of our software, and subject us to complex and evolving federal, state, and foreign laws and
regulations regarding privacy, data protection, and other related matters.
•
If our platform fails to function in a manner that allows our customers to operate in compliance with regulations and/or industry
standards, our revenue and operating results could be harmed.
•
We are subject to governmental export and import controls and economic and trade sanctions that could impair our ability to
conduct business in international markets and subject us to liability if we are not in compliance with applicable laws and regulations.
•
Any failure to protect our proprietary technology and intellectual property rights could substantially harm our business and operating
results.
•
Portions of our platform utilize open source software, and any failure to comply with the terms of one or more of these open source
licenses could negatively affect our business.
•
Our ability to use net operating losses to offset future taxable income may be subject to certain limitations.
•
The dual class structure of our common stock and the existing ownership of capital stock by Matt Calkins, our founder and Chief
Executive Officer, have the effect of concentrating voting control with Mr. Calkins for the foreseeable future, which will limit the ability
of others to influence corporate matters.
•
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit
attempts by our stockholders to replace or remove our current management, and limit the market price of our Class A common
stock.
•
Our stock price has been volatile and may be volatile in the future.
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Item 1A. Risk Factors.
Our operations and financial results are subject to various risks and uncertainties including those described below and other information
contained in this Annual Report on Form 10-K. The risks and uncertainties described below are not the only ones we face. Additional risks
and uncertainties we are unaware of, or we currently believe are not material, may also become important factors that adversely affect our
business. If any of the following risks or others not specified below materialize, our business, financial condition, and results of operations
could be materially and adversely affected, and the trading price of our Class A common stock could decline.
Risks Related to Our Business and Industry
If we are unable to sustain our revenue growth rate, we may not achieve or maintain profitability in the future.
We have experienced revenue growth with revenue of $617.0 million, $545.4 million, and $468.0 million in 2024, 2023, and 2022,
respectively. Although we have experienced rapid revenue growth historically, we may not continue to grow as rapidly in the future, and our
revenue growth rates may decline. Any success we may experience in the future will depend in large part on our ability to, among other
things:
•
Maintain and expand our customer base;
•
Increase revenue from existing customers through increased or broader use of our platform within their organizations;
•
Compete in an AI-accelerated environment;
•
Further penetrate the existing industry verticals we serve and expand into other industry verticals; and
•
Continue to successfully expand our business domestically and internationally.
If we are unable to maintain consistent revenue or revenue growth, our stock price could be volatile, and it may be difficult to achieve
and maintain profitability. Our revenue for any prior quarterly or annual periods should not be relied upon as any indication of our future
revenue or revenue growth.
We may not be able to scale our business quickly enough to meet our customers’ growing needs, and if we are not able to grow
efficiently, our operating results could be harmed.
Customers may use our platform for more advanced and frequent projects, resulting in usage growth for our platform. With such
growth, we may need to devote additional resources to improving our software architecture, integrating with third-party systems, and
maintaining infrastructure performance. In addition, we will need to continue to appropriately scale our internal business operations as well
as grow our partner services systems, including our Customer Success organization and operations, to serve our growing customer base,
particularly as our customer base expands over time. Any failure of or delay in these efforts could cause impaired system performance and
reduced customer satisfaction. These issues could reduce the attractiveness of our platform to customers, resulting in decreased sales to
new customers, lower renewal rates by existing customers, the issuance of service credits, or requested refunds, any of which could hurt our
revenue growth and our reputation. Even if we are able to upgrade our systems and expand our staff, any such expansion will be expensive
and complex, requiring management time and attention. We could also face inefficiencies or operational failures as a result of our efforts to
scale our infrastructure. Moreover, there are inherent risks associated with upgrading, improving, and expanding our information technology
systems. We cannot be sure the expansion and improvements to our infrastructure and systems will be fully or effectively implemented on a
timely basis, if at all. These efforts may reduce revenue and our margins and adversely impact our financial results.
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We are dependent on a single product, and the lack of continued market acceptance of our platform could cause our operating results to
suffer.
Sales of our software platform account for substantially all of our subscriptions revenue and are the source of substantially all of our
professional services revenue. We expect we will be substantially dependent on our platform to generate revenue for the foreseeable future.
As a result, our operating results or revenue growth rates could suffer due to:
•
Any decline or lower than expected growth in demand for our platform;
•
The failure of our platform to achieve continued market acceptance;
•
The market for process automation solutions not continuing to grow or growing more slowly than we expect;
•
The introduction of products and technologies (including AI technologies) that serve as a replacement or substitute for, or represent
an improvement over, our platform;
•
Technological innovations or new standards that our platform does not address;
•
Sensitivity to current or future prices offered by us or competing solutions;
•
The inability to further penetrate our existing industry verticals or expand our customer base; and
•
Our inability to release enhanced versions of our platform on a timely basis.
Our sales cycle is long and unpredictable, particularly with respect to large customers, and our sales efforts require considerable time
and expense, all of which may cause our operating results to fluctuate.
Our operating results may fluctuate, in part, because of the resource-intensive nature of our sales efforts, the length and variability of
the sales cycle of our platform, and the difficulty we face in adjusting our short-term operating expenses to respond to the fluctuations in the
sales cycles. Our operating results depend in part on sales to large customers and promotion of increasing usage by those large customers.
The length of our sales cycle, from initial evaluation to delivery of and payment for our software, varies substantially from customer to
customer, and it is difficult to predict if or when we will make a sale to a potential customer. We may spend substantial time, effort, and
money on our sales and marketing efforts without any assurance our efforts will result in revenue. As a result of these factors, we may face
greater costs, longer sales cycles, and less predictability in the future. In the past, certain individual sales have occurred in periods later than
we expected or have not occurred at all. The loss or delay of one or more large transactions in a quarter could impact our operating results
for that quarter and any future quarters in which such revenue otherwise would have been recognized because a substantial portion of our
expenses are relatively fixed in the short-term. As a result of these factors, it is difficult for us to forecast our revenue accurately in any
quarter, and our quarterly results may fluctuate substantially.
Market adoption of process automation platforms to drive process automation may not grow as we expect, which may harm our business
and prospects.
We believe our future success will depend in large part on growth in the demand for process automation platforms to drive software-
enabled process automation. It is difficult to predict customer demand for our platform, renewal rates, the rate at which existing customers
expand their subscriptions, the size and growth rate of the market for our platform, the entry of competitive products, or the success of
existing competitive products. Any expansion in our addressable market depends on a number of factors, including businesses continuing to
desire to differentiate themselves through software-enabled process automation, increasing their reliance on process automation solutions,
changes in the competitive landscape, technological changes, including due to advancements in AI, budgetary constraints of our customers,
and changes in economic conditions. If our platform does not achieve widespread adoption or there is a reduction in demand for process
automation solutions caused by these factors, it could result in reduced customer purchases, reduced renewal rates, and decreased revenue,
any of which will adversely affect our business, operating results, and financial condition.
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We currently face significant competition.
The markets for process automation platforms, business process management, case management software, and custom software are
highly competitive, rapidly evolving, and have relatively low barriers to entry. The principal competitive factors in our market include the
following: platform features, reliability, performance, and effectiveness; ease of use and speed; data fabric; utilization of AI; platform
extensibility and ability to integrate with other technology infrastructures; deployment flexibility; robustness of professional services and
customer support; price and total cost of ownership; strength of platform security and adherence to industry standards and certifications;
strength of sales and marketing efforts; and brand awareness and reputation. If we fail to compete effectively with respect to any of these
competitive factors, we may fail to attract new customers or lose or fail to renew existing customers, which would cause our operating
results to suffer.
Our main competitors fall into four categories: (1) providers of custom software and customer software solutions that address, or are
developed to address, some of the use cases that can be addressed by applications developed on our platform; (2) providers of low-code
development platforms; and (3) providers of one or more automation technologies, including BPM, case management, process mining, and
RPA and (4) potential customers using their own internal technology departments to develop, build, and modify their own proprietary
systems.
Some of our actual and potential competitors have advantages over us such as longer operating histories, more established relationships
with current or potential customers and commercial partners, significantly greater financial, technical, marketing, or other resources,
stronger brand recognition, larger intellectual property portfolios, and broader global distribution and presence. Such competitors may make
their solutions available at a low cost or no cost basis in order to enhance their overall relationships with current or potential customers. Our
competitors may also be able to respond more quickly and effectively than we can to new or changing opportunities, technologies,
standards, or customer requirements, including with respect to AI. With the introduction of AI and new market entrants, we expect
competition to intensify in the future. In addition, some of our larger competitors have substantially broader offerings and can bundle
competing products with other software offerings. As a result, customers may choose a bundled offering from our competitors, even if
individual products have more limited functionality than our platform. These larger competitors are also often in a better position to
withstand any significant reduction in capital spending and will therefore not be as susceptible to economic downturns.
Our recent corporate growth may not be indicative of our future growth and, if we continue to grow, we may not be able to manage our
growth effectively.
We have focused on scaling our operations and headcount to ensure they remain in line with our growth plan and the size of our
customer base, which we have significantly increased over the last several years. While we have expanded our operations and headcount in
prior periods, such measures are not indicative of our future growth, and are subject to reversal in the other direction, as we have done at
various times in the past. Our growth has placed, and any future growth will place, a significant strain on our management, administrative,
operational, and financial infrastructure. Our success will depend in part on our ability to manage this growth effectively, and we will need to
continue to improve our operational, financial, and management controls and our reporting systems and procedures. Failure to effectively
manage our growth could result in difficulty or delays in deploying our platform to customers, decreased efficiency, declines in quality or
customer satisfaction, increases in costs, difficulties in introducing new features, or other operational difficulties. Any of these difficulties
could adversely impact our business performance and results of operations.
If our security measures are actually or perceived to have been breached, or if unauthorized access to our platform or customer data
occurs, our platform may be perceived as not being secure, and customers may reduce the use of or stop using our platform, and we may
incur significant liabilities.
Our platform, which can be deployed in the cloud or on-premises, allows for the storage and transmission of our customers’ proprietary
or confidential information, which may include trade secrets, personally identifiable information, personal health information, and payment
card information. Any actual or perceived unauthorized access to, or security incidents affecting, our platform or the information stored on or
transmitted by our platform,
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including through unauthorized and/or malicious activity by one of our employees, could result in the loss of information, litigation,
regulatory investigations, penalties, indemnity obligations and other costs, expenses, and liabilities, which could exceed our existing
insurance coverage and could result in a substantial financial loss. While we have security measures in place designed to protect customer
information and prevent data loss and other security breaches, there can be no assurance these measures will be completely effective in
protecting against malicious unauthorized access to our platform or our customers’ information. Similarly, if cyber incidents such as phishing
attacks, viruses, denial of service attacks, supply chain attacks, malware installation, ransomware attacks, server malfunction, software or
hardware failures, loss of data or other computer assets, adware, or other similar issues impair the integrity or availability of our systems by
affecting our data or reducing access to or shutting down one or more of our computing systems or our IT network, we may be subject to
negative treatment by our customers, our business partners, the press, and the public at large. Further, even though we have security
measures in place that are tested and verified by third parties, because the techniques used to obtain unauthorized access or sabotage
systems change frequently and generally are not identified until they are launched against a target, we may be unable to anticipate these
techniques or to implement adequate preventative measures. Additionally, we may be subject to attacks on our networks or systems or
attempts to gain unauthorized access to our proprietary or confidential information or other data we or our vendors maintain, such as data
about our employees. Such attacks and other breaches of security may occur as a result of malicious attacks, human error, social
engineering, or other causes. Any of the foregoing risks may be heightened by our use of AI, and the use of AI may enhance the
effectiveness of any of the foregoing threat actors or their attempts to gain unauthorized access to our platform or our customers’
confidential, proprietary, or personal information. Any actual or perceived breach of our security measures or failure to adequately protect
our customers’ or our confidential, proprietary, or personal information could negatively affect our ability to attract new customers, cause
existing customers to elect not to renew their subscriptions to our software, or result in reputational damage, any of which could adversely
affect our operating results.
Further, security compromises experienced by our customers with respect to data hosted on our platform, even if caused by the
customer’s own misuse or negligence, may lead to public disclosures, which could harm our reputation, erode customer confidence in the
effectiveness of our security measures, negatively impact our ability to attract new customers, or cause existing customers to elect not to
renew their subscriptions with us. We may be subjected to indemnity demands, regulatory proceedings, audits, penalties, or litigation based
on our customers’ misuse of our platform with respect to such sensitive information. Defending against such litigation and otherwise
addressing such matters may be expensive, cause distraction, and may result in us incurring liability, all of which may affect our operating
results.
While we maintain general liability insurance coverage and coverage for errors or omissions, we cannot provide assurance such coverage
will be adequate or otherwise protect us from liabilities or damages with respect to claims alleging compromises of personal data or that
such coverage will continue to be available on acceptable terms or at all.
16
We derive a material portion of our revenue from a limited number of customers, and the loss of one or more of these customers could
materially and adversely impact our business, results of operations, and financial condition.
Our customer base is concentrated. For example, during the years ended December 31, 2024, 2023, and 2022, revenue from U.S.
federal government agencies represented 23.9%, 21.3%, and 19.2% of our total revenue, respectively, and the top three U.S. federal
government customers generated 4.0%, 4.2%, and 4.5% of our total revenue for the years ended December 31, 2024, 2023, and 2022,
respectively. Changes in the administration and their priorities may impact public sector budgets and funding for federal government
agencies. Further, nearly 12% of our subscription customers spent more than $1 million on our software in 2024. If we were to lose one or
more of our significant customers and we were unable to recover the revenue from that customer from other customers, our revenue would
significantly decline. In addition, revenue from significant customers may vary from period to period depending on the timing of renewing
existing agreements or entering into new agreements. The loss of one or more of our significant customers could materially and adversely
affect our business, results of operations, and financial condition.
A portion of our revenue is generated from subscriptions sold to governmental entities and heavily regulated organizations, which are
subject to a number of challenges and risks.
A significant portion of our revenue is generated from subscriptions sold to governmental entities, both in the United States and
internationally. Additionally, many of our current and prospective customers such as those in the financial services, life sciences, insurance,
and healthcare industries are highly regulated and may be required to comply with more stringent regulations in connection with subscribing
to and implementing our platform. Selling subscriptions to these entities can be highly competitive, expensive, and time-consuming, often
requiring significant upfront time and expense without any assurance we will successfully complete a sale. In addition, if our software or
personnel do not meet the standards of new or existing regulations, we may be in breach of our contracts with our customers, allowing them
to terminate their agreements.
Governmental demand and payment for our platform may also be impacted by public sector budgetary cycles and funding
authorizations, with funding reductions or delays adversely affecting public sector demand for our platform. In addition, changes in the
administration and their priorities could also affect public sector budgets and funding. The United States has previously experienced lapses in
federal appropriations, and any such future lapses could negatively affect our business, results of operations, and financial condition. In
addition, governmental and highly regulated entities impose compliance requirements that are complicated, make pricing readily available,
subject continued business to unpredictable competitive processes, or are otherwise time-consuming and expensive to satisfy. In the United
States, applicable federal contracting regulations change frequently, and the President may issue executive orders requiring federal
contractors to adhere to new compliance requirements after a contract is signed. If we commit to meeting special standards or requirements
and do not meet them, we could be subject to significant liability from our customers or regulators. Even if we do meet these special
standards or requirements, the additional costs associated with providing our platform to government and highly regulated customers could
harm our operating results. Moreover, changes in the underlying statutory and regulatory conditions that affect these types of customers
could compromise our ability to efficiently provide them access to our platform and to grow or maintain our customer base. In addition,
engaging in sales activities to foreign governments introduces additional compliance risks specific to the U.S. Foreign Corrupt Practices Act,
the U.K. Bribery Act, and other similar statutory requirements prohibiting bribery and corruption in the jurisdictions in which we operate.
We have experienced losses in the past, and we may not achieve or sustain profitability in the future.
We generated GAAP net losses of $92.3 million, $111.4 million, and $150.9 million in 2024, 2023, and 2022, respectively. As of
December 31, 2024, we had an accumulated deficit of $612.2 million. We will need to generate and sustain increased revenue levels in
future periods in order to achieve or sustain profitability in the future. We also expect our costs to increase in future periods, which could
negatively affect our future operating results if our revenue does not increase commensurately. For example, we intend to continue to
expend funds to expand our sales and marketing operations, develop and enhance our platform, and expand into new markets. Our efforts
to
17
grow our business may be more costly than we expect, and we may not be able to increase our revenue enough to offset our higher
operating expenses. We may incur significant losses in the future for a number of reasons, including the other risks described in this Annual
Report on Form 10-K, unforeseen expenses, difficulties, complications or delays, and other unknown events. If we are unable to achieve and
sustain profitability, our stock price may significantly decrease.
AI is a disruptive set of technologies that may affect the markets for our software dramatically and in unpredictable ways.
The emerging technologies described as AI, which include machine learning, application of large language models, generative AI, and
similar means of algorithm self-generation have the ability to affect the market for our software by directing what are now human-
orchestrated processes into machine-orchestrated processes. In recent years, AI technologies have been the subject of great interest to our
customers and to followers of our markets, and these technologies have been showcased and subject to substantial interest among our
customer base. Should we either fail to adopt or integrate with emerging AI technologies that show benefits to our customers or AI
technologies for code generation or application development reduce the demand for our process automation platform, we could struggle to
continue to grow our business or lose business with existing customers to such technologies.
We have incorporated, and may continue to incorporate, AI in our products and services, and this incorporation of AI in our business and
operations may become more significant over time. The use of generative AI, a technology that has evolved significantly over the years,
exposes us to additional risks such as damage to our reputation, competitive position, business, legal, and regulatory risks, and additional
costs. For example, generative AI has been known to produce false or “hallucinatory” inferences or output, and certain generative AI uses
machine learning and predictive analytics, which can create inaccurate, incomplete, or misleading content, unintended biases, and other
discriminatory or unexpected results, errors, or inadequacies, any of which may not be easily detectable by us or any of our related service
providers. While we make efforts to implement and use AI products and services to improve the accuracy and reduce the chances of
hallucinatory outputs, we cannot completely eliminate the chances of inaccurate or false outputs. Moreover, given we rely on third party
providers for underlying large language model technology, as do many others in the software industry, we do not have full access to the
underlying software code to address such issues. If the content, analyses, or recommendations produced by any of our products or services
that use or incorporate generative AI are, or are perceived to be, deficient, inaccurate, biased, unethical or otherwise flawed, our reputation,
competitive position and business may be materially and adversely affected.
In addition, new laws and regulations, or the interpretation of existing laws and regulations, in any of the jurisdictions we operate may
affect our ability to leverage AI in any of our products and services and may expose us to government enforcement or civil suits. As the legal
and regulatory framework encompassing AI matures, it may result in increases in our operational and development expenses that impact our
ability to develop, earn revenue from, or utilize any products or services incorporating AI. Additionally, if any of our employees, contractors,
vendors or service providers use any third-party software incorporating AI in connection with our business or the services they provide to us,
it may lead to the inadvertent disclosure or incorporation of our confidential, sensitive or proprietary information into publicly available
training sets which may impact our ability to realize the benefit of, or adequately maintain, protect and enforce our intellectual property or
sensitive or confidential information, harming our competitive position and business. Our ability to mitigate risks associated with disclosure of
our proprietary, sensitive or confidential information, including in connection with the use of AI, will depend on our implementation,
maintenance, monitoring and enforcement of appropriate technical and administrative safeguards, policies, and procedures governing the
use of AI in our business. In the U.S., a number of civil lawsuits have been initiated related to the foregoing and other concerns, any of
which may, amongst other things, require us to limit the ways in which AI tools and technologies are trained, refined or implemented, and
may affect our ability to develop products or services using or incorporating AI.
Furthermore, our competitors, customers, or other third parties may incorporate AI into their products more quickly or more successfully
than us, which could impair our ability to compete effectively. Given we rely on third party providers for underlying large language model
technology, our ability to differentiate our AI offerings from our
18
competitors could be limited. Further, to the extent other, larger technology companies with greater resources and market power gain
exclusive or advantageous access to large language model providers, our ability to offer competing AI services could be negatively impacted.
The increasing use of generative AI by third parties may also negatively impact the integrity of our own proprietary data, data sets, and
content databases if and to the extent any invalid, inaccurate, biased, or otherwise flawed data produced by any such AI systems may
inadvertently be incorporated in our proprietary data, data sets, or content databases, negatively affecting our reputation, and the value of
our proprietary data, data sets, or content databases. As generative AI and other AI tools are relatively new, sophisticated, and evolving
quickly, we cannot predict all of the risks that may arise from our current or future use of AI in our business. Any of the foregoing and any
similar issues, whether actual or perceived, could negatively impact our customers’ experience and diminish the perceived quality and value
of our products and services. This in turn could damage our brand, reputation, competitive position, and business.
Regulatory and legislative developments related to the use of AI could adversely affect our use of such technologies in our products,
services, and business.
As the regulatory framework for machine learning technology, generative AI and automated decision making evolves, our business,
financial condition and results of operations may be adversely affected. The regulatory framework for AI and similar technologies, and
automated decision making, is changing rapidly. It is possible that new laws and regulations will be adopted in the United States and in non-
U.S. jurisdictions, or that existing laws and regulations may be interpreted in ways that would affect the operation of our business, including
our data analytics products and services and the way in which we use AI and similar technologies in our business. For example, the
European Union’s proposed Artificial Intelligence Act will likely have a material impact on the way AI is regulated in the EU, including
significant fines for violations related to offering prohibited AI systems or data governance, high-risk AI systems and for supplying incorrect,
incomplete, or misleading information to EU and member-state authorities.
Our future results of operations may fluctuate significantly due to a wide range of factors, which makes our future results difficult to
predict.
Our revenue and results of operations have historically varied from period to period, and we expect they will continue to do so as a
result of a number of factors, many of which are outside of our control, including:
•
The level of demand for our platform and our professional services;
•
The rate of renewal of subscriptions with, and extent of sales of additional subscriptions to, existing customers;
•
Large customers failing to renew their subscriptions;
•
The size, timing, and terms of our subscription agreements with existing and new customers, including revenue recognition issues;
•
Variations in the revenue mix of our professional services and growth rates of our cloud subscription and professional services
offerings, as well as the timing of subscriptions and sales offerings that include an on-premises software element for which the
revenue allocated to that deliverable is recognized upfront;
•
The timing and growth of our business, in particular through our hiring of new employees and international expansion;
•
The timing of our adoption of new or revised accounting pronouncements applicable to public companies and the impact on our
results of operations;
•
The introduction of new products and product enhancements by existing competitors or new entrants into our market and changes
in pricing for solutions offered by us or our competitors;
•
Network outages, security breaches, technical difficulties, or interruptions with our platform;
•
Changes in the growth rate of the markets in which we compete;
•
The mix of subscriptions to our platform and professional services sold during a period;
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•
Customers delaying purchasing decisions in anticipation of new developments or enhancements by us or our competitors or
otherwise;
•
Changes in customers’ budgets;
•
Changes in the administration and their priorities in terms of public sector budgets and funding;
•
Lapses of federal appropriations in the United States for our government customers;
•
Seasonal variations related to sales and marketing and other activities such as expenses related to our customers;
•
Our ability to increase, retain, and incentivize the strategic partners that market and sell our platform;
•
Our ability to control costs, including our operating expenses;
•
Our ability to hire, train, and maintain our direct sales team;
•
Unforeseen litigation and intellectual property infringement;
•
Fluctuations in our effective tax rate; and
•
General economic and political conditions, both domestically and internationally, as well as economic conditions specifically affecting
industries in which our customers operate.
Any one of these or other factors discussed elsewhere in this Annual Report on Form 10-K or the cumulative effect of some of these
factors may result in fluctuations in our revenue and operating results, meaning quarter-to-quarter comparisons of our revenue, results of
operations, and cash flows may not necessarily be indicative of our future performance, may cause us to miss our guidance or analyst
expectations, and may cause our stock price to decline.
In addition, we have historically experienced seasonality in terms of when we enter into agreements with customers. We typically enter
into a significantly higher percentage of agreements with new customers, as well as renewal agreements with existing customers, in the
fourth quarter. The increase in customer agreements for the fourth quarter is attributable to large enterprise account buying patterns typical
in the software industry. Furthermore, we usually enter into a significant portion of agreements with customers during the last month, and
often the last two weeks, of each quarter. This seasonality is reflected to a much lesser extent, and sometimes is not immediately apparent,
in revenue due to the fact we recognize cloud subscriptions revenue over the term of the subscription agreement, which is generally one to
three years. We expect seasonality will continue to affect our operating results in the future and may reduce our ability to predict cash flow
and optimize the timing of our operating expenses.
We may fail to meet our publicly announced guidance or other expectations about our business and future operating results, which could
cause our stock price to decline.
We have provided, and may continue to provide, guidance about our business, future operating results, and other business metrics. In
developing this guidance, our management must make certain assumptions and judgments about our future performance. Furthermore,
analysts and investors may develop and publish their own projections of our business, which may form a consensus about our future
performance. Our business results may vary significantly from such guidance or consensus due to a number of factors, many of which are
outside of our control, including due to global economic uncertainty and financial market conditions which could adversely affect our
operations and operating results. Furthermore, if our publicly announced guidance of future operating results fails to meet our previously
announced guidance or the expectations of securities analysts, investors, or other interested parties, the price of our common stock would
decline.
We rely on the performance of highly skilled personnel, including senior management and our engineering, professional services, sales,
and technology professionals; if we are unable to retain or
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motivate key personnel or hire, retain, and motivate qualified personnel, our business would be harmed.
We believe our success has depended, and continues to depend, on the efforts and talents of our senior management team, particularly
Matt Calkins, our founder and Chief Executive Officer, and our highly skilled team members, including our sales personnel, professional
services personnel, cloud engineering and support personnel, and software engineers. We do not maintain key person insurance on any of
our executive officers or key employees. From time to time, there have been, and may continue to be, changes in our senior management
team resulting from the termination or departure of our executive officers and key employees. Our senior management and key employees
are employed on an at-will basis, which means they could terminate their employment with us at any time.
Many of our executive officers and key employees receive equity compensation as a significant portion of their overall compensation
package. A substantial decrease in the market price of our Class A common stock would effectively reduce the compensation of such
persons. The loss of any of our senior management or key employees, particularly Mr. Calkins, could adversely affect our ability to build on
the efforts they have undertaken and to execute our business plan, and we may not be able to find adequate replacements. We cannot
ensure we will be able to retain the services of any members of our senior management or other key employees.
Our ability to successfully pursue our growth strategy also depends on our ability to attract, motivate, and retain our personnel.
Competition for highly-qualified employees in all aspects of our business is intense. As a result of the COVID-19 pandemic, many more
employers allowed remote work, which resulted in the market for employee talent becoming more national and some employees preferring
remote work. As we have chosen to return to office-based work over time to benefit from the better culture and productivity we believe in-
office work affords, we may not be able to attract and retain employees who would choose to work remotely, while we also still face hiring
competition from companies with remote-based workforces who can hire without respect to office location. Our continued ability to compete
effectively depends on our ability to attract new employees and to retain and motivate existing employees.
If we do not continue to innovate and provide a platform that is useful to our customers, we may not remain competitive, and our
revenue and operating results could suffer.
Our success depends on continued innovation to provide features that make our platform useful for our customers, including with
respect to developments in AI, our ability to persuade existing customers to expand their use of our platform to additional use cases and
additional applications, and to purchase additional software licenses to our platform. We must continue to invest significant resources in
research and development in order to continually improve the speed and power of our platform. We may introduce significant changes to our
platform or develop and introduce new and unproven products, including using technologies with which we have little or no prior
development or operating experience. If we are unable to continue offering innovative solutions or if new or enhanced solutions fail to
engage our customers, we may be unable to attract additional customers or retain our current customers, which may adversely affect our
business, operating results, and financial condition.
We may need to reduce or change our pricing model to remain competitive.
The market for our platform is still evolving, and competitive dynamics may cause pricing levels to change as the market matures and as
existing and new market participants introduce new types of solutions and different approaches to enable customers to address their needs.
As a result, we may be forced to reduce the prices we charge for software and may be required to offer terms less favorable to us for new
and renewing agreements. We generally sell our software on a per-user basis or through non-user-based single application licenses. We have
changed, and expect we will continue to need to change, our pricing model from time to time. As competitors introduce new products that
compete with ours or reduce their prices, we may be unable to attract new customers or retain existing customers based on our historical
pricing. We also must determine the appropriate price to enable us to compete effectively internationally. Moreover, mid- to large-
size enterprises may demand substantial price discounts as part of the negotiation of sales contracts. As a result, we may be required or
choose to reduce our
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prices or change our pricing model, which could adversely affect our business, operating results, and financial condition.
Our business could be adversely affected if our customers are not satisfied with the deployment services provided by us or our partners.
The success of our business depends on our customers’ satisfaction with our platform, the support we provide for our platform, and the
professional services we provide to help our customers deploy our platform. Professional services may be performed by our own staff, a third
party, or a combination of the two. Our strategy is to work with third parties to increase the breadth, capability, and depth of capacity for
delivery of these services to our customers, and third parties provide a significant portion of our deployment services. If a customer is not
satisfied with the quality of work performed by us or a third party or with the type of applications delivered, we could incur additional costs
to address the deficiency, which would diminish the profitability of the customer relationship. Further, a customer’s dissatisfaction with our
services could impair our ability to expand the number of licenses to our software purchased by that customer or adversely affect the
customer’s renewal of existing licenses. In addition, negative publicity related to our customer relationships, regardless of accuracy, may
further damage our business by affecting our ability to compete for new business with actual and prospective customers.
We are substantially dependent upon customer renewals, the addition of new customers, and the continued growth of our subscriptions
revenue.
We derive, and expect to increasingly derive in the future, a substantial portion of our revenue from the sale of software subscriptions.
For 2024, 2023, and 2022, approximately 79.5%, 75.6%, and 72.7%, respectively, of our total revenue was subscriptions revenue. In order
for us to improve our operating results, it is important our customers renew their subscriptions with us when their initial term expires as well
as purchase additional subscriptions from us. In general, our customers have no renewal obligation after their initial term expires, and we
cannot provide assurance we will be able to renew subscriptions with any of our customers at the same or higher contract value.
Further, while we offer access to our platform primarily through multi-year subscription agreements, some agreements may have shorter
durations. Additionally, some of our contracts limit the amount we can increase prices from period to period or include pricing guarantees. If
our customers do not renew their agreements, terminate their agreements, renew their agreements on terms less favorable to us, or fail to
purchase additional software subscriptions, our revenue may decline and our operating results would likely be harmed as a result.
Because we generally recognize revenue from cloud subscriptions ratably over the term of the subscription agreement, near term
changes in sales may not be reflected immediately in our operating results.
We offer our solution primarily through multi-year cloud subscription agreements and generally recognize revenue ratably over the
related subscription period. As a result, much of the revenue we report in each quarter is derived from the recognition of previously unbilled
or deferred contract value relating to agreements entered into during prior periods. Accordingly, a decline in new or renewal subscription
agreements in any quarter is not likely to be reflected immediately in our revenue results for that quarter. Such declines, however, would
negatively affect our revenue, and to a lesser extent, deferred revenue balance in future periods, and the effect of significant downturns in
sales and market acceptance of our platform and potential changes in our rate of renewals may not be fully reflected in our results of
operations until future periods.
We may not achieve market acceptance of our pre-built solutions, which may adversely impact our financial results.
We have been developing and releasing pre-built solutions on our software platform in order to maximize the value of our platform to
our customers and to reduce the sales cycles associated with software sales to new and existing customers. Each solution requires an
investment in development, marketing, sales, support, finance, and legal resources to bring the solution to market. Although we make efforts
to identify the solutions that will receive
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favorable market acceptance, there can be no guarantee any solution will become the source of material revenue, and the investment in the
solution may not produce a positive return. If unsuccessful, such solutions may adversely impact our financial results to the extent our
expenses increase without any increase in sales or to the extent attempted sales of such solutions reduce sales of our existing platform.
If we are not able to maintain and enhance our brand, our business and operating results may be adversely affected.
We believe developing and maintaining widespread awareness of our brand in a cost-effective manner is critical to achieving widespread
acceptance of our platform and attracting new customers. Brand promotion activities may not generate customer awareness or increase
revenue and, even if they do, any increase in revenue may not offset the expenses we incur in building our brand. If we fail to successfully
promote and maintain our brand or incur substantial expenses, we may fail to attract or retain customers necessary to realize a sufficient
return on our brand-building efforts or to achieve the widespread brand awareness critical for broad customer adoption of our platform.
If our platform fails to perform properly or there are defects or disruptions in the rollout of our platform updates or enhancements, our
reputation could be adversely affected, our market share could decline, and we could be subject to liability claims.
Our platform is inherently complex and may contain material defects or errors. Any defects in functionality, security, or other conditions
that cause interruptions in the availability of our platform could result in:
•
Loss or delayed market acceptance and sales;
•
Breach of warranty claims;
•
Sales credits or refunds for prepaid amounts related to unused subscription services;
•
Loss of customers;
•
Diversion of development and support resources; and/or
•
Injury to our reputation.
The costs incurred in correcting any material defects or errors might be substantial and could adversely affect our operating results.
Our customer agreements often provide service level commitments on a monthly basis. If we are unable to meet the stated service level
commitments or suffer extended periods of unavailability for our platform, we may be contractually obligated to provide these customers
with service credits or refunds for prepaid amounts, or we could face contract terminations. Our revenue could be significantly affected if we
suffer unscheduled downtime that exceeds the allowed downtimes under our agreements with our customers.
Because of the large amount of data we collect and manage, it is possible hardware failures or errors in our systems could result in data
loss or corruption or cause the information we collect to be incomplete or contain inaccuracies our customers regard as significant.
Furthermore, the availability or performance of our platform could be adversely affected by a number of factors, including customers’
inability to access the internet, our customers’ increased usage of our cloud offering, the failure of our network or software systems, security
breaches, or variability in user traffic for our services. In addition to potential liability, if we experience interruptions in the availability of our
cloud offering, our reputation could be adversely affected, and we could lose customers.
We also provide frequent incremental releases of software updates and functional enhancements to our platform. Despite extensive pre-
release testing, such new versions occasionally contain undetected errors when first introduced or released. We have, from time to time,
found errors in our software, and new errors in our existing software may be detected in the future. Since our customers use our software
for important aspects of their business, any errors, defects, disruptions in our platform, or other performance problems with our solution
could hurt our reputation and may damage our customers’ businesses. If that occurs, our customers may delay or
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withhold payment to us, elect not to renew, or make service credit claims, warranty claims, or other claims against us, and we could lose
future sales. The occurrence of any of these events could result in an increase in our bad debt expense, an increase in collection cycles for
accounts receivable, decreased future revenue and earnings, require us to increase our warranty provisions, or incur the risk or expense of
litigation.
We rely upon AWS to operate our cloud offering; any disruption of or interference with our use of AWS would adversely affect our
business, results of operations, and financial condition.
We outsource substantially all of the infrastructure relating to our cloud offering to AWS, which hosts our platform on our customers’
behalf. Customers of our cloud offering need to be able to access our platform at any time, without interruption or degradation of
performance, and we provide them with service level commitments with respect to uptime. AWS runs its own platform we access; therefore,
we are vulnerable to service interruptions at AWS. We may experience material interruptions, delays, and outages in service and availability
from time to time as a result of problems with our AWS provided infrastructure, which could render our cloud offering inaccessible to
customers. Additionally, AWS has suffered outages at specific customer locations in the past, rendering the customer unable to access our
offering for periods of time. Lack of availability of our AWS infrastructure could be due to a number of potential causes including technical
failures, natural disasters, fraud, or security attacks we cannot predict or prevent. Such outages could lead to the triggering of our service
level agreements and the issuance of credits to our cloud offering customers, which may impact our operating results.
In addition, if the security of the AWS infrastructure is compromised or believed to have been compromised, our business, results of
operations, and financial condition could be adversely affected. It is possible our customers and potential customers would hold us
accountable for any breach of security affecting the AWS infrastructure, and we may incur significant liability from those customers and from
third parties with respect to any breach affecting AWS systems. Because our agreement with AWS limits AWS’s liability for damages, we may
not be able to recover a material portion of our liabilities to our customers and third parties from AWS. Customers and potential customers
may refuse to do business with us because of the perceived or actual failure of our cloud offering as hosted by AWS, and our operating
results could be harmed.
Our agreement with AWS allows AWS to terminate the agreement by providing two years' prior written notice and may allow AWS to
terminate in case of a breach of contract if such breach is uncured for 30 days or to terminate upon 30 days’ advance written notice if AWS’s
further provision of services to us becomes impractical for legal or regulatory reasons. Although we expect we could receive similar services
from other third parties if any of our arrangements with AWS are terminated, we could experience interruptions on our platform and in our
ability to make our platform available to customers, as well as delays and additional expenses in arranging alternative cloud infrastructure
services.
Our growth depends in part on the success of our strategic relationships with third parties.
In order to grow our business, we anticipate we will continue to depend on relationships with strategic partners to provide broader
customer coverage and solution delivery capabilities. Identifying partners, and negotiating and documenting relationships with them,
requires significant time and resources. Our agreements with our strategic partners are non-exclusive and do not prohibit them from working
with our competitors or offering competing solutions. Our competitors may be effective in providing incentives to third parties to favor their
products or services or to prevent or reduce subscriptions to our services. If our partners choose to place greater emphasis on products of
their own or those offered by our competitors or do not effectively market and sell our platform, our ability to grow our business and sell
software and professional services may be adversely affected. In addition, acquisitions of our partners by our competitors could result in a
decrease in the number of our current and potential customers as our partners may no longer facilitate the adoption of our platform by
potential customers.
If we are unsuccessful in establishing or maintaining our relationships with third parties, our ability to compete in the marketplace or to
grow our revenue could be impaired and our operating results may suffer. Even if we are successful, we cannot be sure these relationships
will result in increased customer usage of our platform or increased revenue.
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Because our long-term growth strategy involves further expansion of our sales to customers outside the United States, our business will
be susceptible to risks associated with international operations.
A component of our growth strategy involves the further expansion of our operations and customer base internationally. In 2024, 2023,
and 2022, revenue generated from customers outside the United States was 36.6%, 35.8%, and 33.5%, respectively, of our total revenue.
We currently operate in Canada, Switzerland, the United Kingdom, France, Germany, the Netherlands, Italy, Australia, Spain, Singapore,
Sweden, Japan, Mexico, India, and Portugal and sell through resellers into many additional countries. In the future, we may expand to other
international locations. Our current international operations and future initiatives will involve a variety of risks, including:
•
Changes in a specific country’s or region’s political or economic conditions;
•
Unexpected changes in regulatory requirements, taxes, tariffs, or trade laws;
•
More stringent regulations relating to data security and the unauthorized use of, or access to, commercial and personal information,
particularly in the European Union;
•
Differing labor regulations, especially in the European Union, where labor laws are generally more advantageous to employees as
compared to the United States, including deemed hourly wage and overtime regulations in these locations;
•
Challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need
to implement appropriate systems, policies, benefits, and compliance programs;
•
Difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute
systems, and regulatory systems;
•
Increased travel, real estate, infrastructure, and legal compliance costs associated with international operations;
•
Currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into
hedging transactions if we choose to do so in the future;
•
Limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other
countries;
•
Laws and business practices favoring local competitors or general preferences for local vendors;
•
Limited or insufficient levels of protection of our corporate proprietary information and assets, including intellectual property and
customer information and records;
•
Political instability or terrorist activities;
•
Exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S. Foreign Corrupt Practices Act and
similar laws and regulations in other jurisdictions; and
•
Adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash.
Our limited experience in operating our business internationally increases the risk any potential future expansion efforts we may
undertake will not be successful. If we invest substantial time and resources to expand our international operations and are unable to do so
successfully and in a timely manner, our business and operating results will suffer.
We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.
We intend to continue to make investments to support our business growth and may require additional funds to respond to business
challenges, including the need to develop new features or enhance our platform, improve our
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operating infrastructure, or acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt
financings to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our
existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges
superior to those of holders of our Class A common stock. We may not be able to obtain additional financing on terms favorable to us, if at
all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to
support our business growth and to respond to business challenges could be significantly impaired, and our business may be adversely
affected.
We are seeking to reinstate a substantial judgment against our competitor, Pegasystems, for willful and malicious trade secret
misappropriation, and elements of our ability to reinstate and ultimately obtain payment with respect to that judgment are subject to risk.
On May 9, 2022, a jury returned a verdict that Pegasystems, Inc., willfully and maliciously misappropriated trade secrets from us and
awarded us $2.036 billion in damages for Pegasystems’ unjust enrichment for usage of our trade secrets. A judge entered a final judgment
on that verdict on September 15, 2022 and further granted us $23.6 million in attorney’s fees as well as statutory post-judgment interest at
an annual rate of 6%, or approximately $122.0 million per year.
On September 15, 2022, Pegasystems filed a notice of appeal to the Court of Appeals of Virginia. On July 30, 2024, the Court of Appeals
of Virginia issued a decision reversing the judgment against Pegasystems and remanding for a new trial. On August 29, 2024, Appian
submitted a petition to the Supreme Court of Virginia seeking to reverse the Court of Appeals decision and reinstate the full judgment
against Pegasystems. Pegasystems filed an opposition to the petition and cross-issues for appeal on October 21, 2024. Appian’s petition was
heard on February 11, 2025. While we are seeking to reinstate the judgment in full or proceed to a remanded re-trial if necessary, we cannot
guarantee the outcome of any legal proceedings.
In September 2023, we obtained a judgment preservation insurance policy that would pay us up to $500.0 million in coverage to the
extent the final judgment were reversed or reduced after all appeals and further litigation are exhausted. While we believe strongly the final
judgment should be reinstated by the Virginia Supreme Court, we cannot guarantee it will be reinstated in its entirety or in part. In addition,
while Pegasystems has made public assurances it could raise the funds necessary to pay the judgment, it does not currently have the cash
necessary to satisfy the full amount of the final judgment, and we would be at risk of having to collect a substantial judgment as a creditor if
Pegasystems is unable to raise the necessary funds when and if the final judgment becomes enforceable. Finally, as with any insurance
policy, our ability to collect judgment preservation insurance proceeds is subject to the financial soundness of the insurers underwriting our
policy, as well as any denial of coverage under the policy. While we have not included any payment from Pegasystems or insurance proceeds
in our financial statements or operational planning, any failure to collect on all or a portion of the judgment or the insurance proceeds may
be viewed negatively and our stock price could decline.
We maintain cash deposits in excess of federally insured limits. Adverse developments affecting financial institutions, including bank
failures, could adversely affect our liquidity and financial performance.
We regularly maintain domestic cash deposits in banks insured by the Federal Deposit Insurance Corporation, or the FDIC, that exceed
the FDIC insurance limits. Bank failures, events involving limited liquidity, defaults, non-performance or other adverse developments that
affect financial institutions, or concerns or rumors about such events, may lead to liquidity constraints. For example, on March 10, 2023,
Silicon Valley Bank, or SVB, was closed by the California Department of Financial Protection and Innovation, and the FDIC was appointed
receiver. If other banks and financial institutions enter receivership or become insolvent in the future due to financial conditions affecting the
banking system and financial markets, our ability to access our cash, cash equivalents, and investments, including transferring funds, making
payments, or receiving funds may be threatened and could have a material adverse effect on our business and financial condition. There can
be no assurance our deposits in excess of the FDIC or other comparable insurance limits will be backstopped by the U.S. government or that
any bank or
26
financial institution with which we do business will be able to obtain needed liquidity from other banks, government institutions, or by
acquisition in the event of a failure or liquidity crisis.
Pursuant to the terms of our outstanding indebtedness, we may be limited in our ability to incur future debt.
We have a Senior Secured Credit Facilities Credit Agreement (as amended from time to time, the “Credit Agreement”) with First Citizens
Bank & Trust Company, as administrative agent and collateral agent for the lenders thereto, which as of December 31, 2024, provides for a
five-year term loan facility in an aggregate principal amount of $200.0 million and up to $100.0 million for a revolving credit facility, including
a letter of credit sub-facility in the aggregate availability amount of $20.0 million and a swingline sub-facility in the aggregate availability
amount of $10.0 million (as a sublimit of the revolving loan facility). Our obligations under the Credit Agreement are secured by substantially
all of our assets.
Pursuant to the terms of the Credit Agreement, we are limited in our ability to incur additional indebtedness other than on the terms and
conditions thereof. In addition, a failure to comply with the covenants under the Credit Agreement could result in an event of default by us
and an acceleration of amounts due. If an event of default occurs that is not waived by the lenders, and the lenders accelerate any amounts
due, we may not be able to make accelerated payments, and the lender could seek to enforce their security interests in the collateral
securing such indebtedness, which could have a material adverse effect on our business and results of operations.
If currency exchange rates fluctuate substantially in the future, our financial results, which are reported in U.S. dollars, could be
adversely affected.
Generally, contracts executed by our foreign operations are denominated in the currency of that country or region and a portion of our
revenue is therefore subject to foreign currency risks. As we continue to expand our international operations, we become more exposed to
the effects of fluctuations in currency exchange rates. A strengthening of the U.S. dollar could reduce the dollar value of revenue generated
by our customers outside of the United States, adversely affecting our business operations and financial results. We incur expenses for
employee compensation and other operating expenses at our non-U.S. locations in the local currency, and fluctuations in the exchange rates
between the U.S. dollar and other currencies could result in the dollar equivalent of such expenses being higher. This could have a negative
impact on our reported operating results. To date, we have not engaged in any hedging strategies, and any such strategies such as forward
contracts, options, and foreign exchange swaps related to transaction exposures we may implement to mitigate this risk may not eliminate
our exposure to foreign exchange fluctuations.
We employ third-party licensed software for use in or with our software, and the inability to maintain these licenses or errors in the
software we license could result in increased costs or reduced service levels, which would adversely affect our business.
Our software incorporates certain third-party software obtained under licenses from other companies, including database software from
Kx Systems. We anticipate we will continue to rely on such third-party software and development tools from third parties in the future.
Although we believe there are commercially reasonable alternatives to the third-party software we currently license, including open source
software, this may not always be the case, or it may be difficult or costly to migrate to other third-party software. Our use of additional or
alternative third-party software would require us to enter into license agreements with third parties. In addition, integration of the third-party
software used in our software with new third-party software may require significant work and require substantial investment of our time and
resources. Also, any undetected errors or defects in third-party software could prevent the deployment or impair the functionality of our
software, delay new updates or enhancements to our platform, or result in a failure of our platform, injuring our reputation.
If we do not or cannot maintain the compatibility of our platform with third-party applications that our customers use in their businesses,
our revenue will decline.
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The functionality and attractiveness of our platform depends, in part, on our ability to integrate our platform with third-party applications
and platforms, including customer relationship management, human resources information, accounting, and enterprise resource planning
systems our customers use and from which they obtain data. Third-party providers of applications and application programming interfaces,
or APIs, may change the features of their applications and platforms, restrict our access to their applications and platforms, or alter the
terms governing use of their applications and APIs and access to those applications and platforms in an adverse manner. Such changes could
functionally limit or terminate our ability to use these third-party applications and platforms in conjunction with our platform, which could
negatively impact our offerings and harm our business. If we fail to integrate our software with new third-party applications and platforms
our customers use, we may not be able to offer the functionality our customers need, which would negatively impact our ability to generate
revenue and adversely impact our business.
Catastrophic events may disrupt our business.
Our corporate headquarters are located in northern Virginia. The area around Washington, D.C. could be subjected to domestic or
foreign terrorist attacks. Additionally, we rely on our network and third-party infrastructure and enterprise applications, internal technology
systems, and our website for our development, marketing, operational support, hosted services, and sales activities. In the event of a major
hurricane, earthquake, or catastrophic event such as fire, power loss, telecommunications failure, cyberattack, outbreak of regional or global
pandemic diseases, war, or terrorist attack, we may be unable to continue our operations and may endure system interruptions, reputational
harm, delays in our software development, lengthy interruptions in our services, breaches of data security, and loss of critical data, all of
which could have an adverse effect on our future operating results.
Adverse economic conditions abroad may negatively impact our business.
Our business depends on the overall demand for enterprise software and on the economic health of our current and prospective
customers. The economies of countries in Europe have experienced weakness from time to time in the recent past and may experience
weakness in the future. We have operations in the United Kingdom and in Europe and current and potential new customers in Europe. If
economic conditions in Europe and other key markets for our platform weaken or deteriorate, many customers may delay or reduce their
information technology spending. This could result in reductions in sales of our platform, a decrease in our renewal rate, longer sales cycles,
reductions in subscription duration and value, slower adoption of new technologies, and increased price competition. Any of these events
would likely have an adverse effect on our business, operating results, and financial position.
Future acquisitions could disrupt our business and adversely affect our business operations and financial results.
In the past we have chosen and may continue to choose, to expand by acquiring businesses or technologies. Our ability as an
organization to successfully acquire and integrate technologies or businesses is unproven. Acquisitions involve many risks, including the
following:
•
An acquisition may negatively affect our financial results because it may require us to incur charges or assume substantial debt or
other liabilities, cause adverse tax consequences or unfavorable accounting treatment, expose us to claims and disputes by third
parties, including intellectual property claims and disputes, or not generate sufficient financial return to offset additional costs and
expenses related to the acquisition;
•
We may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel, or
operations of any company we acquire, particularly if key personnel of the acquired company decide not to work for us;
•
An acquisition may disrupt our ongoing business, divert resources, increase our expenses, and distract our management;
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•
An acquisition may result in a delay or reduction of customer purchases for both us and the company acquired due to customer
uncertainty about continuity and effectiveness of service from either company;
•
We may encounter difficulties in successfully selling, or may be unable to successfully sell, any acquired solutions;
•
An acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where
competitors have stronger market positions;
•
Our use of cash to pay for an acquisition would limit other potential uses for our cash; and
•
If we incur debt to fund such acquisition, such debt may subject us to material restrictions on our ability to conduct our business as
well as financial maintenance covenants.
The occurrence of any of these risks could have a material adverse effect on our business operations and financial results. In addition,
we may only be able to conduct limited due diligence on an acquired company’s operations. Following an acquisition, we may be subject to
unforeseen liabilities arising from an acquired company’s past or present operations, and these liabilities may be greater than the warranty
and indemnity limitations we negotiate. Any unforeseen liability greater than these warranty and indemnity limitations could have a negative
impact on our financial condition.
Risks Related to Regulatory Compliance and Governmental Matters
Failure to comply with governmental laws and regulations could harm our business.
Our business is subject to regulation by various federal, state, local, and foreign governments. In certain jurisdictions, these regulatory
requirements may be more stringent than those in the United States. Noncompliance with applicable regulations or requirements could
subject us to investigations, sanctions, mandatory product recalls, enforcement actions, disgorgement of profits, fines, damages, civil and
criminal penalties, injunctions, or other collateral consequences. If any governmental sanctions are imposed or if we do not prevail in any
possible civil or criminal litigation, our business, results of operations, and financial condition could be materially adversely affected. In
addition, responding to any action will likely result in a significant diversion of management’s attention and resources and an increase in
professional fees. Enforcement actions and sanctions could harm our business, reputation, results of operations, and financial condition.
Because we collect and store personal information, domestic and international privacy and security concerns could result in additional
costs and liabilities to us, inhibit sales of our software, and subject us to complex and evolving federal, state, and foreign laws and
regulations regarding privacy, data protection, and other related matters.
Personal privacy has become a significant issue in the United States and in many other countries where we offer our software for sale.
The regulatory framework for privacy issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. An
increasing number of countries and U.S. states have enacted comprehensive privacy laws, and many are considering adopting additional
laws, rules, regulations, and industry standards regarding the collection, use, storage, or other processing of data. Interpretation of these
laws, rules, and regulations and their application to our software and professional services, as well as to our corporate and marketing
activities in the United States and foreign jurisdictions, is ongoing and cannot be fully determined at this time.
In the United States, these include rules and regulations promulgated under the authority of the Federal Trade Commission, the
Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, the Health Insurance Portability and Accountability Act of 1996,
the Gramm Leach Bliley Act, the California Consumer Privacy Act (as modified by the California Privacy Rights Act), or the CCPA, and other
state laws relating to privacy and data security. The CCPA contains detailed requirements regarding collecting and processing personal
information, imposes certain limitations on how such information may be used, and provides rights to consumers and employees that have
never before been available, all of which may be imposed on us by our customers and oblige us to become more rigorous in how we treat
our employees’ data. Further, the CCPA expands consumers’ rights with
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respect to certain sensitive personal information. Some state laws may be more stringent or broader in scope or offer greater individual
rights with respect to confidential, sensitive, and personal information than federal, international, or other state laws, and such laws may
differ from each other, which may complicate compliance efforts. New legislation proposed or enacted in various other states will continue to
shape the data privacy environment nationally.
Internationally, the GDPR continues to place robust obligations on data processors and controllers and heavier documentation
requirements for data protection compliance programs by companies in general. In addition, absent appropriate safeguards or other
circumstances, the GDPR generally restricts the transfer of personal data to non-adequate countries and/or organizations outside of the
European Economic Area, or EEA, such as India, Australia, Mexico, and non-certified organizations in the United States, which the European
Commission does not consider to provide an adequate level of data privacy and security. We are currently certified under the EU-US Data
Privacy Framework (“EU-US DPF”). The EU-US DPF requires parties relying upon that legal mechanism to comply with obligations similar to
those required under GDPR, such as conducting transfer impact assessments to determine whether additional security measures are
necessary to protect the at-issue personal data. Due to potential legal challenges, however, there exists some uncertainty regarding whether
the new EU-US DPF will remain a valid mechanism for transfers of personal data out of the EEA.
Additionally, new EU legislation which came into force in 2023 such as the Digital Services Act (impacting online advertising), the Digital
Markets Act (impacting those providing core platform services), the Data Governance Act (impacting public sector data), and the NIS2
Directive (cybersecurity) impact our own activities, those of our regulated and public sector customers, and those of our significant partners
such as AWS.
Virtually every jurisdiction or regulated industry in which we operate has established its own data security and privacy legal framework
with which we or our customers must comply. Since we operate across a variety of industries, we may be hosting or otherwise processing
substantial amounts of sensitive or otherwise regulated personal information such as identifiable health information. The effects of any of
this legislation and future changes to interpretations of this legislation could be potentially far-reaching and will require us to modify our data
management practices and to incur substantial expense in an effort to comply.
In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards
that may apply to us. Because the interpretation and application of privacy and data protection laws are still uncertain, it is possible these
laws and other actual or alleged legal obligations such as contractual or self-regulatory obligations may be interpreted and applied in a
manner inconsistent with our existing data management practices or the features of our platform. If so, in addition to the possibility of fines,
lawsuits, and other claims, we could be required to fundamentally change our business activities and practices or modify our software, which
could have an adverse effect on our business.
Any inability to adequately address privacy or cybersecurity concerns, even if unfounded, or comply with applicable privacy or data
protection laws, regulations, and policies could result in additional cost and liability to us, damage our reputation, inhibit sales, and adversely
affect our business.
Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations, and policies applicable to the
businesses of our customers may limit the use and adoption of, and reduce the overall demand for, our platform. Privacy concerns, whether
valid or not valid, may inhibit market adoption of our platform, particularly in certain industries and foreign countries.
If our platform fails to function in a manner allowing our customers to operate in compliance with regulations and/or industry standards,
our revenue and operating results could be harmed.
Certain of our customers use our platform to create applications that ensure secure communications given the nature of the content
being distributed and associated applicable regulatory requirements. As attitudes towards privacy and data security evolve, governmental
and other customers may also require our platform to comply with certain privacy, security, and other certifications and standards that are
specialized or industry-specific. Our cloud platform holds various security certifications from government agencies and industry organizations,
including the
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Federal Risk and Authorization Management Program, or FedRAMP, compliance and HITRUST certification. It also meets the ISO 27001,
Payment Card Industry Data Security Standard, or PCI DSS, and the various United States Health Insurance Portability and Accountability
Act, or HIPAA, standards. Governments and industry organizations may also adopt new laws, regulations, or requirements or make changes
to existing laws or regulations that could impact the demand for, or value of, our applications such as the European Banking Authority's
regulations. If we fail to maintain our current security certifications and/or to continue to meet security standards, or if we are unable to
adapt our platform to changing legal and regulatory standards or other requirements in a timely manner, our customers may lose confidence
in our platform, and our business could be negatively impacted.
Changes in laws and regulations related to the internet or changes in the internet infrastructure itself may diminish the demand for our
platform and could have a negative impact on our business.
The future success of our business, and particularly our cloud offering, depends upon the continued use of the internet as a primary
medium for commerce, communication, and business applications. Federal, state, or foreign government bodies or agencies have in the past
adopted, and may in the future adopt, laws or regulations affecting the use of the internet as a commercial medium. Changes in these laws
or regulations could require us to modify our platform in order to comply with these changes. In addition, government agencies or private
organizations may begin to impose taxes, fees, or other charges for accessing the internet or commerce conducted via the internet. These
laws or charges could limit the growth of internet-related commerce or communications generally, resulting in reductions in the demand for
internet-based solutions such as ours.
In addition, the use of the internet as a business tool could be adversely affected due to delays in the development or adoption of new
standards and protocols to handle increased demands of internet activity, security, reliability, cost, ease of use, accessibility, and quality of
service. The performance of the internet and its acceptance as a business tool have been adversely affected by viruses, worms, and similar
malicious programs, along with distributed denial of service and similar attacks. As a result, the internet has experienced a variety of outages
and other delays as a result of such damage to or attacks on portions of its infrastructure. If the use of the internet is adversely affected by
these issues, demand for our platform could suffer.
We are subject to anti-corruption laws with respect to our domestic and international operations, and non-compliance with such laws can
subject us to criminal and/or civil liability and materially harm our business.
We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, the U.S. domestic bribery statute contained
in 18 U.S.C. § 201, the U.S. Travel Act, the United Kingdom Bribery Act 2010, and other anti-corruption laws in countries in which we
conduct activities. Anti-corruption laws are interpreted broadly and prohibit our company from authorizing, offering, or providing, directly or
indirectly, improper payments or benefits to recipients in the public or private sector. We use third-party law firms, accountants, and other
representatives for regulatory compliance, sales, and other purposes in several countries. We can be held liable for the corrupt or other
illegal activities of these third-party representatives, our employees, contractors, and other agents, even if we do not explicitly authorize such
activities. In addition, although we have implemented policies and procedures to ensure compliance with anti-corruption laws, there can be
no assurance all of our employees, representatives, contractors, or agents will comply with these laws at all times.
Non-compliance with these laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other
enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or
debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage, and other
collateral consequences. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not
prevail in any possible civil or criminal litigation, our business, results of operations, and financial condition could be materially harmed. In
addition, responding to any action will likely result in a materially significant diversion of management’s attention and resources and
significant defense costs and other professional fees. Enforcement actions and sanctions could further harm our business, results of
operations, and financial condition. Moreover, as an issuer of securities, we also are subject to the accounting and internal controls provisions
of the FCPA. These provisions require us to maintain accurate books and records and a system of internal controls sufficient to detect
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and prevent corrupt conduct. Failure to abide by these provisions may have an adverse effect on our business, operations, or financial
condition.
We are subject to governmental export and import controls and economic and trade sanctions that could impair our ability to conduct
business in international markets and subject us to liability if we are not in compliance with applicable laws and regulations.
The United States and other countries maintain and administer export and import laws and regulations, including various economic and
trade sanctions such as those administered by the Office of Foreign Assets Control, which apply to our business. We are required to comply
with these laws and regulations. If we fail to comply with such laws and regulations, we and certain of our employees could be subject to
substantial civil or criminal penalties, including the possible loss of export or import privileges, fines which may be imposed on us and
responsible employees or managers, and, in extreme cases, the incarceration of responsible employees or managers.
Changes in our platform, or changes in applicable export or import laws and regulations, may create delays in the introduction and sale
of our platform in international markets or, in some cases, prevent the export or import of our platform to certain countries, governments, or
persons altogether. Any change in export or import laws and regulations or economic or trade sanctions, shift in the enforcement or scope of
existing laws and regulations, or change in the countries, governments, persons, or technologies targeted by such laws and regulations could
also result in decreased use of our platform or in our decreased ability to export or sell our platform to existing or potential customers. Any
decreased use of our services or limitation on our ability to export or sell our services would likely adversely affect our business, financial
condition, and results of operations.
We incorporate encryption technology into certain of our products. Encryption products may be exported outside of the United States
only with the required export authorization, including by license, license exception, or other appropriate government authorization. Obtaining
the necessary export license or other authorization for a particular sale may be time-consuming and may result in the delay or loss of sales
opportunities. In addition, various countries regulate the import of certain encryption technology, including import permitting and licensing
requirements, and have enacted laws that could limit our ability to distribute our products or could limit our customers’ ability to implement
our products in those countries. Although we take precautions to prevent our products from being provided in violation of such laws, our
products may have been in the past, and could in the future, be provided inadvertently in violation of such laws, despite the precautions we
take. Governmental regulation of encryption technology and regulation of imports or exports, or our failure to obtain required import or
export approval for our products, could harm our international sales and adversely affect our revenue.
Moreover, U.S. export control laws and economic sanctions programs prohibit the provision of services to countries, governments, and
persons subject to U.S. economic embargoes and trade sanctions. Even though we take precautions to prevent our platform from being used
by U.S. sanctions targets, our platform could be used by a sanctioned person or in an embargoed country despite such precautions. Any
such shipment could have negative consequences, including government investigations, penalties, and reputational harm.
Risks Related to Our Intellectual Property
Any failure to protect our proprietary technology and intellectual property rights could substantially harm our business and operating
results.
Our success and ability to compete depend in part on our ability to protect our proprietary technology and intellectual property. To
safeguard these rights, we rely on a combination of patent, trademark, copyright, and trade secret laws and contractual protections in the
United States and other jurisdictions, all of which provide only limited protection and may not now or in the future provide us with a
competitive advantage.
As of December 31, 2024, we had 21 issued patents and 20 pending patent applications related to our platform and its technology. We
have registered the “Appian” name and logo in the United States and certain other countries. We have registrations and/or pending
applications for additional marks in the United States. We cannot
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provide assurance any current or future applications for registrations for patent or trademark applications will result in the grant of any valid,
enforceable intellectual property rights. Further, we cannot provide assurance any granted patent or trademark will provide the protection we
seek, will be valid if challenged, or will be sufficiently broad in actions against alleged infringers. Moreover, any of our granted intellectual
property rights may be rendered invalid by future changes in the law, defects in our prosecution processes, or preexisting technology, rights,
or marks.
In order to protect our unpatented proprietary technologies and processes, we rely on trade secret laws and confidentiality and invention
assignment agreements with our employees, consultants, strategic partners, vendors, and others. Despite our efforts to protect our
proprietary technology and trade secrets, unauthorized parties may attempt to misappropriate, copy, reverse engineer, or otherwise obtain
and use them. In addition, others may independently discover our trade secrets, in which case we would not be able to assert trade secret
rights or develop similar technologies and processes. Further, the contractual provisions we enter into may not prevent unauthorized use or
disclosure of our proprietary technology or intellectual property rights and may not provide an adequate remedy in the event of any such
unauthorized use or disclosure.
Policing unauthorized use of our technologies, trade secrets, and intellectual property is difficult, expensive, and time-consuming,
particularly in foreign countries where the laws may not be as protective of intellectual property rights as those in the United States and
where mechanisms for enforcement of intellectual property rights may be weak. To the extent we expand our activities outside of the United
States, our exposure to unauthorized copying and use of our platform and proprietary information may increase. We may be unable to
determine the extent of any unauthorized use or infringement of our platform, technologies, or intellectual property rights.
There can be no assurance the steps we take will be adequate to protect our proprietary technology and intellectual property, that others
will not develop or patent similar or superior technologies, products or services, or that our trademarks, patents, and other intellectual
property will not be challenged, invalidated, or circumvented by others. Furthermore, effective trademark, patent, copyright, and trade secret
protection may not be available in every country in which our software is available or where we have employees or independent contractors.
In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these
rights. Litigation brought to protect and enforce our intellectual property rights has been and could be costly, time-consuming, and
distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to
enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of
our intellectual property rights. Our failure to secure, protect, and enforce our intellectual property rights could seriously adversely affect our
brand and impact our business.
We may be subject to intellectual property rights claims by third parties, which are extremely costly to defend, could require us to pay
significant damages, and could limit our ability to use certain technologies.
Companies in the software and technology industries, including some of our current and potential competitors, own significant numbers
of patents, copyrights, trademarks, and trade secrets and frequently enter into litigation based on allegations of infringement or other
violations of intellectual property rights. In addition, many of these companies have the capability to dedicate substantially greater resources
to enforce their intellectual property rights and to defend claims that may be brought against them. The litigation may involve patent holding
companies or other adverse patent owners that have no relevant product revenue and against which our patents may therefore provide little
or no deterrence. In the past, we have been subject to allegations of patent infringement that were unsuccessful, and we may in the future
be subject to claims we have misappropriated, misused, or infringed other parties’ intellectual property rights, and, to the extent we gain
greater market visibility or face increasing competition, we face a higher risk of being the subject of intellectual property infringement claims,
which is not uncommon with respect to enterprise software companies. We also generally grant our customers ownership of any custom
applications we develop for them, subject to our continued ownership of our pre-existing intellectual property rights and, in the past, a
customer for whom we have developed custom applications has incorrectly alleged applications we have independently developed infringed
the customer’s intellectual property rights. In addition, we have in the past, and may in the future, be subject to claims that our employees,
contractors, or we
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ourselves have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of our competitors or other
parties. To the extent intellectual property claims are made against our customers based on their usage of our technology, we have certain
obligations to indemnify and defend such customers from those claims. The term of our contractual indemnity provisions often survives
termination or expiration of the applicable agreement. Large indemnity payments, defense costs, or damage claims from contractual breach
could harm our business, results of operations, and financial condition.
There may be third-party intellectual property rights, including issued or pending patents that cover significant aspects of our
technologies or business methods. Any intellectual property claims, with or without merit, could be very time-consuming, expensive to settle
or litigate, divert our management’s attention and other resources, and result in adverse publicity. These claims could also subject us to
making substantial payments for legal fees, settlement payments, and other costs or damages, potentially including treble damages if we are
found to have willfully infringed patents or copyrights. These claims could also result in our having to stop making, selling, offering for sale,
or using technology found to be in violation of a third party’s rights. We might be required to seek a license for the third-party intellectual
property rights, which may not be available on reasonable terms or at all. Moreover, to the extent we only have a license to any intellectual
property used in our platform, there may be no guarantee of continued access to such intellectual property, including on reasonable terms.
As a result, we may be required to develop alternative non-infringing technology, which could require significant effort and expense. If a
third party is able to obtain an injunction preventing us from accessing such third-party intellectual property rights, or if we cannot license or
develop technology for any infringing aspect of our business, we would be forced to limit or stop sales of our software or cease business
activities covered by such intellectual property and may be unable to compete effectively. Any of these results would adversely affect our
business, results of operations, financial condition, and cash flows.
Further, our use of AI technologies internally and implemented as part of our platform may expose us to additional risks regarding our
intellectual property. To the extent we do not have sufficient rights to use any data or other material or content produced by generative AI in
our business, or if we experience cybersecurity incidents in connection with our use of AI, it could adversely affect our reputation and expose
us to legal liability or regulatory risk, including with respect to third-party intellectual property, privacy, publicity, contractual, or other rights.
Given we rely on third-party providers for underlying large language model technology, and we do not have full knowledge as to the entire
set of data on which each underlying third-party AI model was trained on, our ability to mitigate such risks directly is limited. For more
information on the legal and regulatory risks associated with the
use of AI, please see our risk factors above at “—AI is a disruptive set of technologies that may affect the markets
for our software dramatically and in unpredictable ways,” and “—Regulatory and legislative developments related to
the use of AI could adversely affect our use of such technologies in our products, services, and business.”
Portions of our platform utilize open source software, and any failure to comply with the terms of one or more of these open source
licenses could negatively affect our business.
Our software contains software licensed to us by third parties under so-called “open source” licenses, including the GNU Lesser General
Public License, the BSD License, and others. From time to time, there have been claims against companies that distribute or use open source
software in their products and services, asserting such open source software infringes the claimants’ intellectual property rights. We could be
subject to suits by parties claiming what we believe to be licensed open source software infringes their intellectual property rights. Use and
distribution of open source software may entail greater risks than use of third-party commercial software, as open source licensors generally
do not provide warranties or other contractual protections regarding infringement claims or the quality of the code. In addition, certain open
source licenses require source code for software programs subject to the license be made available to the public and that any modifications
or derivative works to such open source software continue to be licensed under the same terms.
Although we monitor our use of open source software in an effort both to comply with the terms of the applicable open source licenses
and to avoid subjecting our software to conditions we do not intend, the terms of many open source licenses have not been interpreted by
U.S. courts, and there is a risk these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our
ability to commercialize our platform. By the terms of certain open source licenses, we could be required to release the source code of our
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software and to make our software available under open source licenses, if we combine or distribute our software with open source software
in a certain manner. In the event portions of our software are determined to be subject to an open source license, we could be required to
publicly release the affected portions of our source code, re-engineer all, or a portion of, that software or otherwise be limited in the
licensing of our software, each of which could reduce or eliminate the value of our platform. Many of the risks associated with usage of open
source software cannot be eliminated and could negatively affect our business, results of operations, and financial condition.
Risks Related to Tax and Accounting Matters
If our estimates or judgments relating to our critical accounting estimates prove to be incorrect, our results of operations could be
adversely affected.
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions
that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical
experience and on various other assumptions we believe to be reasonable under the circumstances as provided in Part II, Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K. The results of
these estimates form the basis for making judgments about the amount of revenue. Significant assumptions and estimates used in preparing
our consolidated financial statements include those related to revenue recognition. Our results of operations may be adversely affected if our
assumptions change or if actual circumstances differ from those in our assumptions in our critical accounting policies, which could cause our
results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our
Class A common stock.
Our operating results may be negatively affected by additional tax liabilities.
We currently collect and remit sales and use, value added, and other transaction taxes in certain of the jurisdictions where we do
business based on our assessment of whether tax is owed by us in such jurisdictions. However, in some jurisdictions in which we do
business, we do not believe we owe such taxes, and therefore we currently do not collect and remit such taxes or record contingent tax
liabilities in those jurisdictions. Further, due to uncertainty in the application and interpretation of applicable tax laws in various jurisdictions,
we may be exposed to sales and use, value added, or other transaction tax liability. A successful assertion that we are required to pay
additional taxes in connection with sales of our platform, or the imposition of new laws or regulations requiring the payment of additional
taxes, would create increased costs and administrative burdens for us. If we are subject to additional taxes and determined to offset such
increased costs by collecting and remitting sales taxes from our customers, or otherwise passing those costs through to our customers,
companies may be discouraged from using our platform. Any increased tax burden may decrease our ability or willingness to compete in
relatively burdensome tax jurisdictions, result in substantial tax liabilities related to past sales, or otherwise harm our business and operating
results.
In addition, as a multinational organization, we may be subject to taxation in several jurisdictions around the world with increasingly
complex tax laws and the amount of taxes we pay in these jurisdictions could increase substantially as a result of changes in the applicable
tax principles, including increased tax rates, new tax laws, or revised interpretations of existing tax laws and precedents. Furthermore, the
authorities in these jurisdictions could review our tax returns and impose additional tax, interest, and penalties, and the authorities could
claim various withholding requirements apply to us or our subsidiaries or assert benefits of tax treaties are not available to us or our
subsidiaries, any of which could have a material impact on us and the results of our operations.
Our ability to use net operating losses to offset future taxable income may be subject to certain limitations.
As of December 31, 2024, we had gross U.S. federal and state net operating loss carryforwards, or NOLs, of $287.5 million and $297.5
million, respectively, available to offset future taxable income. NOLs generated in tax years ended on or prior to December 31, 2017 will
substantially expire by 2037 if unused. As a result of certain
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provisions in the Tax Cuts and Jobs Act of 2017, or the TCJA, as modified by the Coronavirus Aid, Relief, and Economic Security Act, or
CARES Act, federal NOLs generated in tax years beginning after December 31, 2017 may be carried forward indefinitely but, in the case of
tax years beginning after 2020, may only be used to offset 80% of our taxable income annually. Under the provisions of the Internal
Revenue Code of 1986, as amended, or the Internal Revenue Code, substantial changes in our ownership may limit the amount of pre-
change NOLs that can be utilized annually in the future to offset taxable income. Section 382 of the Internal Revenue Code imposes
limitations on a company’s ability to use NOLs if a company experiences a more-than-50-percent ownership change over a three-year testing
period. Based upon our analysis as of December 31, 2024, we have determined we do not expect these limitations to impair our ability to
use our NOLs prior to expiration. However, if changes in our ownership occur in the future, our ability to use our NOLs may be further
limited. For these reasons, we may not be able to utilize a material portion of the NOLs, even if we achieve profitability.
As of December 31, 2024, we also had gross foreign NOLs of $230.1 million, primarily at our Swiss subsidiary, Appian Software
International. As of December 31, 2024, we had tax-effected Swiss NOLs of $26.2 million. We also had tax-effected Swiss NOL expirations of
$1.0 million in 2024, and some of our foreign NOLs will continue to expire each year if unutilized. If we are limited in our ability to use our
NOLs in future years in which we have taxable income, we will pay more taxes than if we were able to fully utilize our NOLs. This could
adversely affect our operating results and the market price of our Class A common stock.
We are obligated to develop and maintain proper and effective internal controls over financial reporting, and any failure to maintain the
adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our Class A
common stock.
We are required, pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404, to furnish a report by management on, among
other things, the effectiveness of our internal control over financial reporting on an annual basis. This assessment includes disclosure of any
material weaknesses identified by our management in our internal control over financial reporting.
During the evaluation and testing process of our internal controls, if we identify one or more material weaknesses in our internal control
over financial reporting, we will be unable to assert our internal control over financial reporting is effective. While we have established
certain procedures and controls over our financial reporting processes, we cannot provide assurance these efforts will prevent restatements
of our financial statements in the future. Our independent registered public accounting firm is also required, pursuant to Section 404, to
attest to and report on management’s assessment of our internal control over financial reporting, which report is included elsewhere in this
Annual Report on Form 10-K. This assessment is required to include disclosure of any material weaknesses identified by our management in
our internal control over financial reporting. For future reporting periods, our independent registered public accounting firm may issue a
report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed, or operating. We may not
be able to remediate any future material weaknesses or to complete our evaluation, testing, and any required remediation in a timely
fashion.
Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial
condition or results of operations. If we are unable to conclude our internal control over financial reporting is effective, or if our independent
registered public accounting firm determines we have a material weakness in our internal control over financial reporting, we could lose
investor confidence in the accuracy and completeness of our financial reports, the market price of our Class A common stock could decline,
and we could be subject to sanctions or investigations by the Nasdaq Global Market, the SEC, or other regulatory authorities. Failure to
remedy any material weakness in our internal control over financial reporting or to implement or maintain other effective control systems
required of public companies could also restrict our future access to the capital markets.
Risks Related to Our Class A Common Stock
The dual class structure of our common stock and the existing ownership of capital stock by Matt Calkins, our founder and Chief
Executive Officer, has the effect of concentrating voting control with
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Mr. Calkins for the foreseeable future, which will limit the ability of others to influence corporate matters.
Our Class B common stock has ten votes per share, and our Class A common stock has one vote per share. Given the greater number of
votes per share attributed to our Class B common stock, our Class B stockholders collectively beneficially owned shares representing
approximately 88% of the voting power of our outstanding capital stock as of December 31, 2024. Further, Mr. Calkins, our founder and
Chief Executive Officer, together with his affiliates, collectively beneficially owned shares representing approximately 77% of the voting
power of our outstanding capital stock as of December 31, 2024. Consequently, Mr. Calkins, together with his affiliates, is able to control a
majority of the voting power even if their stock holdings represent as few as approximately 24% of the outstanding number of shares of our
common stock. This concentrated control will limit the ability of others to influence corporate matters for the foreseeable future. For
example, Mr. Calkins will be able to control elections of directors, amendments of our certificate of incorporation or bylaws, increases to the
number of shares available for issuance under our equity incentive plans or adoption of new equity incentive plans, and approval of any
merger or sale of assets for the foreseeable future. This concentrated control could also discourage a potential investor from acquiring our
Class A common stock due to the limited voting power of such stock relative to the Class B common stock and might harm the market price
of our Class A common stock. In addition, Mr. Calkins has the ability to control the management and major strategic investments of our
company as a result of his position as our Chief Executive Officer and his ability to control the election or replacement of our directors. As a
board member and officer, Mr. Calkins owes a fiduciary duty to our stockholders and must act in good faith in a manner he reasonably
believes to be in the best interests of our stockholders. However, as a stockholder, even a controlling stockholder, Mr. Calkins is entitled to
vote his shares, and shares over which he has voting control, in his own interests, which may not always be in the interests of our
stockholders generally.
Future transfers by Mr. Calkins and other holders of Class B common stock will generally result in those shares converting on a 1:1 basis
to Class A common stock, which will have the effect, over time, of increasing the relative voting power of those holders of Class B common
stock who retain their shares in the long-term.
We do not intend to pay dividends on our common stock for the foreseeable future so any returns will depend on appreciation in the
price of our Class A common stock.
We have never declared or paid any cash dividends on our common stock, and we do not intend to pay any cash dividends in the
foreseeable future. We anticipate we will retain all of our future earnings for use in the development of our business and for general
corporate purposes. Additionally, our ability to pay dividends on our common stock is limited by restrictions under the terms of our Credit
Agreement. Any determination to pay dividends in the future will be at the discretion of our Board of Directors. Accordingly, investors must
rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on
their investments.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts
by our stockholders to replace or remove our current management, and limit the market price of our Class A common stock.
In addition to the effects of our dual class structure, provisions in our amended and restated certificate of incorporation and amended
and restated bylaws may have the effect of delaying or preventing a change in control or changes in our management. Our amended and
restated certificate of incorporation and amended and restated bylaws include provisions that may frustrate or prevent any attempts by our
stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board of
Directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we
are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibit a Delaware corporation
from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the
date on which the stockholder became an “interested” stockholder. Any of the foregoing provisions could limit the price investors might be
willing to pay in the future for shares of our Class A common stock, and they could deter potential acquirers of our company,
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thereby reducing the likelihood a stockholder would receive a premium for its shares of our Class A common stock in an acquisition.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum
for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum
for disputes with us and limit the market price of our Class A common stock.
Pursuant to our amended and restated certificate of incorporation, unless we consent in writing to the selection of an alternative forum,
the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (1) any derivative action or proceeding brought on
our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or
our stockholders, (3) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our amended
and restated certificate of incorporation, or our amended and restated bylaws, or (4) any action asserting a claim governed by the internal
affairs doctrine. Our amended and restated certificate of incorporation also provides the federal district courts of the United States of
America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. Our amended
and restated certificate of incorporation further provides any person or entity purchasing or otherwise acquiring any interest in shares of our
Class A common stock is deemed to have notice of and consented to the foregoing provisions. The forum selection clause in our amended
and restated certificate of incorporation may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us and limit
the market price of our Class A common stock.
General Risk Factors
Unfavorable conditions in the global economy or the vertical markets we serve could limit our ability to grow our business and negatively
affect our operating results.
General worldwide economic conditions have experienced significant instability due to the global economic uncertainty and financial
market conditions caused by the ongoing Russia-Ukraine war and unrest in the Middle East. In addition, inflation rates in the recent past rose
to historically high levels. The existence of inflation in the U.S. and global economy has, and may continue to result in, higher interest rates
and capital costs, increased costs of labor, fluctuating exchange rates, and other similar effects.
These conditions make it extremely difficult for customers and us to accurately forecast and plan future business activities and could
cause customers to reduce or delay their software spending. At this time, the potential impact on customer spend from an economic
slowdown is difficult to predict and, therefore, it is not possible to fully determine the impact on our future results. Historically, economic
downturns have resulted in overall reductions in software spending. If macroeconomic conditions deteriorate or are characterized by
uncertainty or volatility, customers may curtail or freeze spending on software in general and for software such as ours specifically, which
could have an adverse impact on our business, financial condition, and operating results.
Furthermore, we cannot predict the timing, strength, or duration of any economic slowdown or recovery. In addition, even if the overall
economy is robust, we cannot provide assurances the market for services such as ours will experience growth or that we will experience
growth.
Our stock price has been volatile and may be volatile in the future.
The market price of our Class A common stock has been volatile and may continue to fluctuate substantially as a result of a variety of
factors. Since shares of our Class A common stock were sold in our initial public offering, or IPO, in May 2017 at a price of $12.00 per share,
our stock price has ranged from an intraday low of $14.60 to an intraday high of $260.00 through February 17, 2025. Factors that may affect
the market price of our Class A common stock and our ability to raise capital through the sale of additional equity securities include:
•
Actual or anticipated fluctuations in our financial condition and operating results;
•
Variance in our financial performance from expectations of securities analysts;
38
•
Changes in the prices of subscriptions to our platform;
•
Changes in our projected operating and financial results;
•
Changes in laws or regulations applicable to our platform;
•
Announcements by us or our competitors of significant business developments, acquisitions, or new offerings;
•
Our involvement in any litigation;
•
Our sale of our Class A common stock or other securities in the future;
•
Changes in senior management or key personnel;
•
The trading volume of our Class A common stock;
•
Trading activity by any of our four large stockholders who collectively owned approximately 50% of our publicly traded Class A
common stock as of December 31, 2024;
•
Changes in the anticipated future size and growth rate of our market; and
•
General economic, regulatory, and market conditions.
The stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices
of equity securities of many companies, particularly during this time of uncertainty with increasing interest rates, inflation, and the prospects
of a recession. These fluctuations have often been unrelated or disproportionate to the operating performance of those companies. Broad
market and industry fluctuations, as well as general economic, political, regulatory, and market conditions, may negatively impact the market
price of our Class A common stock. In the past, companies that have experienced volatility in the market price of their securities have been
subject to securities class action litigation. We may be the target of this type of litigation in the future, which could result in substantial costs
and divert our management’s attention.
If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business,
our stock price and trading volume could decline.
The trading market for our Class A common stock depends, in part, on the research and reports securities or industry analysts publish
about us or our business. We do not have any control over these analysts. If our financial performance fails to meet analyst estimates or one
or more of the analysts who cover us downgrade our shares or change their opinion of our shares, our share price would likely decline. If
one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial
markets, which could cause our share price or trading volume to decline.
39
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
Cybersecurity Risk Management
As part of our overall risk management system, we have established certain procedures to assess, identify, and manage material risks
from cybersecurity threats. Our cybersecurity risk management system is designed to align with industry best practices, including
International Organization for Standardization, or ISO, standards, provide a framework for handling cybersecurity threats and incidents, and
facilitate coordination across different departments of our company. As part of this system, we have a formally documented information
security management program and conduct regular tabletop exercises that include participation from executive officers. In addition, we
engage consultants and other third parties who are experts in the cybersecurity risk management field to review and provide testing services
as well as general incident management services. These engagements directly contribute to industry certifications and attestations that
demonstrate our dedication to protecting the data that we are entrusted with by customers. Our Governance, Risk, and Compliance team
within the information security management program oversees and identifies material cybersecurity risks associated with our use of these
third-party service providers through a formal vendor security risk management program.
Board Governance Disclosure
One of the Board’s key functions is informed oversight of our risk management process, which includes responsibility for ensuring
management has processes in place designed to identify, evaluate, manage, and mitigate cybersecurity risks to which it is exposed. The
Board receives regular updates, on at least a quarterly basis, from our senior management team on such cybersecurity risks, developments
in cybersecurity, and updates to the Company’s information security management program. The Board is also involved in strategic decisions
related to the impact of these risks on our business.
Management Governance Disclosure
Our senior management team, which includes our Chief Information Security Officer, or CISO, is responsible for identifying, assessing,
and managing material risks from cybersecurity threats, as well as for establishing processes to ensure such risks are monitored and
mitigated, with the CISO taking the lead on such matters. Our CISO, who joined Appian in May 2021, brings over 18 years’ experience in
security and compliance initiatives, including experience in the software-as-a-service and platform-as-a-service cloud industries. We have
documented the framework and process for when and by whom senior management is informed and when such information will be reported
to the other parties in our Incident Response Guide, which is regularly reviewed and updated by the information security team.
Item 2. Properties.
As of December 31, 2024, our corporate headquarters occupies approximately 300,000 square feet in McLean, Virginia under an
operating lease that expires in October 2031. Approximately 32,000 square feet of headquarters space is subleased. We also lease space in
Australia, Italy, India, Spain, and the United Kingdom under operating lease agreements with various expiration dates through 2028. In
addition, we utilize flexible workspaces depending on the occupancy needs in each of the countries we operate in. We believe our facilities
are suitable and adequate to meet our needs.
40
Item 3. Legal Proceedings.
Pegasystems Litigation
On May 29, 2020, we filed a civil complaint against Pegasystems, Inc. (“Pegasystems”) and Youyong Zou, a Virginia resident, in the
Circuit Court for Fairfax County, Virginia. Appian Corp v. Pegasystems Inc. & Youyong Zou, No. 2020-07216 (Fairfax Cty. Ct.). On May 10,
2022, we announced the jury awarded us $2.036 billion in damages for misappropriation of our trade secrets and $1 in damages for violating
the Virginia Computer Crimes Act. Pegasystems filed several post-trial motions seeking relief in the form of reducing the damages award or
setting aside the jury’s verdict and either granting a new trial or entering judgment in Pegasystems’ favor. All of these motions were denied,
and final judgment was entered by the Court on September 15, 2022. The final judgment reaffirmed the $2.036 billion in damages and also
ordered Pegasystems to pay Appian $23.6 million in attorney's fees associated with the case as well as statutory post-judgment interest on
the judgment at an annual rate of 6%, or approximately $122.0 million per year.
Defendant Youyong Zou has satisfied the judgment of $5,000 (plus interest) against him in lieu of appealing that judgment. On
September 15, 2022, Pegasystems filed a notice of appeal to the Court of Appeals of Virginia. On July 30, 2024, the Court of Appeals of
Virginia issued a decision reversing the judgment against Pegasystems and remanding for a new trial. The decision rejected Pegasystems’
argument that Appian had not presented evidence that trade secrets were misappropriated but reversed the judgment on the basis of
evidentiary and damages rulings made by the trial court. On August 29, 2024, Appian submitted a petition to the Supreme Court of Virginia
seeking to reverse the Court of Appeals decision and reinstate the full judgment against Pegasystems. Pegasystems filed an opposition to the
petition and cross-issues for appeal on October 21, 2024. Appian's petition was heard on February 11, 2025. The timeline for rendering a
decision is solely in the control of the Supreme Court.
Other Matters
From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business.
Other than as disclosed elsewhere in this Annual Report on Form 10-K, we are not presently a party to any legal proceedings that, if
determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial
condition, or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs,
diversion of management time and resources, and other factors.
Item 4. Mine Safety Disclosures.
Not applicable.
41
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.
Market Information
Our Class A common stock is listed on the Nasdaq Global Market under the symbol “APPN.” Our Class B common stock is not listed or
traded on any stock exchange.
As of February 17, 2025, there were 16 holders of record of our Class A common stock and 29 holders of record of our Class B common
stock. Because many of our shares of Class A common stock are held by brokers and other institutions on behalf of stockholders, we are
unable to estimate the total number of stockholders represented by these record holders.
Dividends
We have never declared or paid as a public company, and do not anticipate declaring or paying in the foreseeable future, any cash
dividends on our common stock. Any future determination as to the declaration and payment of dividends or share repurchase program, if
any, will be at the discretion of our Board of Directors, subject to applicable laws, and depend on then existing conditions, including our
financial condition, operating results, contractual restrictions pursuant to our outstanding Credit Agreement, capital requirements, business
prospects, and other factors our Board of Directors may deem relevant.
42
Stock Performance Graph
This section is not deemed “filed” with the SEC and shall not be deemed incorporated by reference into any of our other filings under the
Exchange Act or the Securities Act, irrespective of any general incorporation language in any such filing.
The following graph shows a comparison from December 31, 2019 through December 31, 2024, of the cumulative five year total return
for an investment of $100 in our Class A common stock, the Nasdaq Global Market Composite Index, and the Nasdaq Computer Index. Data
for the Nasdaq Global Market Composite Index and the Nasdaq Computer Index assume reinvestment of any dividends. The comparisons in
the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock.
Comparison of Cumulative Five Year Total Return
Among Appian Corporation, the Nasdaq Global Market Composite Index, and the Nasdaq Computer Index
As of December 31,
2019
2020
2021
2022
2023
2024
Appian Corporation
$
100.00
$
424.21
$
170.66
$
85.21
$
98.56
$
85.82
Nasdaq Global Market Composite
$
100.00
$
164.88
$
139.88
$
77.41
$
82.40
$
88.91
Nasdaq Computer
$
100.00
$
149.98
$
206.76
$
132.79
$
221.06
$
304.86
43
Purchase of Equity Securities by the Issuer and Affiliated Purchases
Total number of
shares purchased
Average price paid
per share
Total number of
shares purchased as
part of publicly
announced plan
Maximum number of
shares that may yet
be purchased under
the plan
October 1 to October 31, 2024
6,030
$
34.05
6,030
796,828
November 1 to November 30, 2024
5,088
$
37.82
5,088
791,740
December 1 to December 31, 2024
4,344
$
40.48
4,344
787,396
Total
15,462
$
37.10
15,462
787,396
Shares purchased represent shares purchased on the open market pursuant to the Appian Corporation Employee Stock Purchase Plan, or ESPP, which was approved by the
Company’s stockholders on June 11, 2021. The ESPP provides employees with an opportunity to purchase the Company’s common stock through payroll deductions and
provides for a Company match of 5% to 15%, subject to limits set forth in the ESPP. Shares purchased under the ESPP are deposited into the participants’ accounts.
Because the number of shares that may be purchased under the ESPP depends on each employee’s voluntary election to participate, individual contribution elections, and the
fair market value of our Class A common stock at various future dates, the actual number of shares that may be purchased under the plan cannot be determined in advance.
We have filed a registration statement on S-8 that covers 1,000,000 shares.
Item 6.
[Reserved]
(1)
(2)
(1)
(2)
44
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our
consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. In addition to historical financial
information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results
could differ materially from those contained in or implied by any forward-looking statements. Factors that could cause or contribute to these
differences include those under “Risk Factors” included in Part I, Item 1A or in other parts of this Annual Report on Form 10-K.
Overview
Appian is a software company that orchestrates business processes. The Appian Platform empowers leaders to design, automate, and
optimize important processes from start to finish. With our industry-leading platform and commitment to customer success, Appian is trusted
by top organizations to drive transformational process change.
We have generated the majority of our revenue from sales of subscriptions, which include (1) cloud subscriptions bundled with
maintenance and support and hosting services and (2) term license subscriptions bundled with maintenance and support. Our subscription
contracts are priced based primarily on the number of users who access and utilize the applications built on our platform or, alternatively,
non-user-based single application licenses. Our subscription contract terms generally vary from one to three years with most providing for
payment in advance on an annual, quarterly, or monthly basis. Due to the variability of our billing terms and the episodic nature of our
customers purchasing additional subscriptions, we do not believe changes in our deferred revenue in a given period are directly correlated
with our revenue growth.
We have invested in our Customer Success organization to help ensure customers are able to build and deploy applications on our
platform. We have several strategic partnerships, including with Accenture, Capgemini, Deloitte, EY, KPMG, PwC, and TCS, which allow them
to refer customers to us in order to purchase subscriptions. Our partners then provide professional services directly to the customers using
our platform. Additionally, they often go to market with their own pre-built solutions using our platform, delivering software license revenue
to us. We intend to continue focusing on adding new customers with our strategic partners. In addition, over time we expect our
professional services revenue as a percentage of total revenue to decline as we increasingly rely on strategic partners to help our customers
deploy our software. We believe our investment in professional services, including strategic partners building their practices around Appian,
will drive increased adoption of our platform.
As of December 31, 2024, we had over 1,000 customers. Our customers primarily include financial services, government, life sciences,
insurance, manufacturing, energy, healthcare, telecommunications, and transportation organizations. Generally, our sales team targets its
efforts to organizations with over 2,000 employees and $2.0 billion in annual revenue. Revenue from government agencies represented
32.2%, 29.1%, and 26.1% of our total revenue in 2024, 2023, and 2022, respectively. No single end-customer accounted for more than
10% of our total revenue in 2024, 2023, and 2022.
We offer our platform globally. Our platform supports multiple languages to facilitate collaboration and address challenges in
multinational organizations. In 2024, 2023, and 2022, 36.6%, 35.8%, and 33.5%, respectively, of our total revenue was generated from
customers outside of the United States. As of December 31, 2024, we operated in 16 countries. We believe we have a significant opportunity
to continue to grow our international footprint, and we are investing in new geographies, including through investment in direct and indirect
sales channels, professional services, and customer support and implementation partners.
We have experienced strong revenue growth, with revenue of $617.0 million, $545.4 million, and $468.0 million in 2024, 2023, and
2022, respectively. Our subscriptions revenue was $490.6 million, $412.3 million, and $340.2 million in 2024, 2023, and 2022, respectively,
and includes sales of our cloud subscriptions, on-premises term license subscriptions, and maintenance and support. Our cloud subscriptions
revenue was $368.0 million, $304.5 million, and $236.9 million in 2024, 2023, and 2022, respectively.
45
We have invested in developing our platform, expanding our sales and marketing and research and development capabilities, and
providing general and administrative resources to support our growth. As a result, we incurred net losses of $92.3 million, $111.4 million,
and $150.9 million in 2024, 2023, and 2022, respectively. In 2024, cash provided by operations was $6.9 million, while cash used by
operations totaled $110.4 million and $106.6 million in 2023 and 2022, respectively.
We intend to continue to invest in our business to take advantage of our market opportunity. In 2025, we will take a more balanced
approach to growth, making ongoing, targeted investments that enhance our capabilities and competitive position, while ensuring we
continue on our path to profitability.
Our Business Model
Our business model focuses on maximizing the lifetime value of customer relationships, which is a function of the duration of a
customer’s deployment of our platform as well as the price and number of subscriptions of our platform a customer purchases. We incur
significant customer acquisition costs, including expenses associated with hiring new sales representatives, who can take anywhere from six
months to a year to become productive given the length of our sales cycle, sales commissions, and marketing costs, all of which, with the
exception of certain types of sales commissions, are expensed as incurred.
At the same time, we believe the costs we incur to retain customers and drive additional purchases of software are lower than our
customer acquisition costs on a relative basis. Over time, we expect a large portion of our customers to renew their subscriptions and
purchase additional subscriptions as they continue to build more applications and add more users to our platform. Over the last three
completed fiscal years, we had an average cloud subscription gross revenue renewal rate of 98%, which is calculated by dividing (i) the
cloud subscriptions revenue from renewing cloud customers in the current 12-month period that were cloud customers during the entirety of
the prior 12-month period, giving effect to price increases but excluding additional cloud subscriptions for additional users, or upsells, by (ii)
our cloud subscriptions revenue from all cloud customers in the corresponding prior 12-month period that were cloud customers during the
entirety of such prior 12-month period.
We also measure the effectiveness of our business model by comparing the lifetime value of our customer relationships to our customer
acquisition costs. On a rolling 12-month basis, we estimate that for each of the past five fiscal years, the average lifetime value of a
customer has been at least seven times greater than the associated average cost of acquiring them, including the year ended December 31,
2024.
Key Factors Affecting Our Performance
The following are several key factors that affect our performance:
•
Market Adoption of Our Platform - Our ability to grow our customer base and drive market adoption of our platform is affected by
the pace at which organizations digitally transform. We expect our revenue growth will be primarily driven by the pace of adoption
and penetration of our platform. We offer a leading custom software platform and intend to continue to invest to expand our
customer base. The degree to which prospective customers recognize the need for our software platform and its ability to enable
their organizations to digitally transform, and subsequently allocate budget dollars to purchase our software, will drive our ability to
acquire new customers and increase sales to existing customers, which, in turn, will affect our future financial performance.
•
Growth of Our Customer Base - We believe we have a substantial opportunity to grow our customer base. We define a customer as
an entity with an active subscription or maintenance and support contract or a legacy perpetual license as of the specified
measurement date. Furthermore, we define a new customer as an entity that has entered into its first active subscription or
maintenance and support contract within one calendar year of the specified measurement date. We have aggressively invested, and
intend to continue to invest, in our sales team in order to drive sales to new customers. We continue to make investments to
enhance the expertise of our sales and marketing organization within our key industry verticals of financial services, government, life
sciences, and insurance. In 2024, we generated over 77% of our subscriptions revenue from customers in these verticals. In
addition, we have established relationships
46
with strategic partners who work with organizations undergoing digital transformations. Our ability to continue to grow our customer
base is dependent, in part, upon our ability to differentiate ourselves within the increasingly competitive markets in which we
participate.
•
Further Penetration of Existing Customers - Our sales team seeks to generate additional revenue from existing customers by adding
new users to our platform. Many of our customers begin by building a single application and then grow to build dozens of
applications on our platform. Generally, the development of new applications on our platform results in the expansion of our user
base within an organization and a corresponding increase in revenue. As a result of this “land and expand” strategy, we have
generated significant additional revenue from our customer base. Our ability to increase sales to existing customers will depend on a
number of factors, including the size of our sales and professional services teams, customers’ level of satisfaction with our platform
and professional services, pricing, economic conditions, and our customers’ overall spending levels.
•
Mix of Subscriptions and Professional Services Revenue - We believe our professional services have driven customer success and
facilitated the adoption of our platform by customers. During the initial period of deployment of our platform by a customer, we
generally provide a greater amount of support in building applications and training than later in the deployment, with a typical
engagement lasting from two to six months. At the same time, many of our customers have historically purchased subscriptions for
only a limited set of their total potential end users. As a result of these factors, the proportion of total revenue for a customer
associated with professional services is relatively high during the initial deployment period. Over time, as the need for professional
services associated with user deployments decreases and the number of end users increases, we expect subscriptions revenue as a
percentage of total revenue to increase. In addition, we continue to grow our base of strategic partners to provide broader customer
coverage and solution delivery capabilities. These partners perform professional services with respect to any new service contracts
they originate. As the usage of strategic partners expands, we expect the proportion of our total revenue from subscriptions to
increase over time relative to professional services. In 2024, 2023, and 2022, 79.5%, 75.6%, and 72.7% of our revenue,
respectively, was derived from sales of subscriptions, while the remaining 20.5%, 24.4%, and 27.3%, respectively, was derived from
the sale of professional services.
•
Investments in Growth - We have made, and plan to continue to make, investments for long-term growth, including investing in our
platform and infrastructure to continuously maximize their power and speed, meet the evolving needs of our customers, and take
advantage of our market opportunity. We will continue to prioritize investments in revenue generating areas and limit growth in
corporate functions. In addition, we will continue to grow and leverage our product development center in India to gain efficiencies
in research and development spending. We may pursue strategic acquisitions that enhance our product offerings. We also intend to
continue to invest in sales and marketing as we further expand our sales teams, increase our marketing activities, and grow our
international operations.
Seasonality
We have historically experienced seasonality in terms of when we enter into agreements with customers. We typically enter into a
significantly higher percentage of agreements with new customers, as well as renewal agreements with existing customers, in the fourth
quarter. The increase in customer agreements for the fourth quarter is attributable to large enterprise account buying patterns typical in the
software industry. Furthermore, we usually enter into a significant portion of agreements with customers during the last month of each
quarter and often the last two weeks of each quarter. However, we recognize the majority of our subscriptions revenue ratably over the
terms of our subscription agreements. As a result, a substantial portion of the subscriptions revenue we report in each period will be derived
from the recognition of deferred revenue relating to agreements entered into during previous periods. Consequently, a decline in new sales
or renewals in any one period may not be immediately reflected in our revenue results for that period. Such a decline, however, will
negatively affect our revenue in future periods. Accordingly, the effect of significant downturns in sales, the market acceptance of our
platform, or potential changes in our rate of renewals may not be fully reflected in our results of operations until future periods.
While we will continue to recognize the majority of our subscriptions revenue ratably over the terms of our subscription agreements, we
may experience greater variability and reduced comparability of our quarterly revenue
47
and results with respect to the timing and nature of our term license subscription agreements due to the upfront revenue recognition. See
Note 3 to the consolidated financial statements for further details on our revenue recognition policies.
Key Metrics
We monitor the following metrics to help us measure and evaluate the effectiveness of our operations. All dollar amounts are presented
in thousands.
Cloud Subscriptions Revenue
Year Ended December 31,
2024
2023
2022
Cloud subscriptions revenue
$
368,030
$
304,481
$
236,922
Cloud subscriptions revenue includes cloud subscriptions bundled with maintenance and support and hosting services. In 2024, 2023,
and 2022, 75.0%, 73.8%, and 69.7%, respectively, of subscriptions revenue was cloud subscriptions revenue. Our cloud subscriptions
revenue for any customer is primarily determined by the number of users who access and utilize the applications built on our platform or by
the number of application licenses purchased, as well as the price paid. We believe increasing cloud subscriptions revenue is an indicator of
the demand for our platform, the pace at which the market for our solutions is growing, the productivity of our sales team and strategic
relationships in growing our customer base, and our ability to further penetrate our existing customer base.
Cloud Subscriptions Revenue Retention Rate
As of December 31,
2024
2023
2022
Cloud subscriptions revenue retention rate
116 %
119 %
115 %
A key factor to our success is the renewal and expansion of subscription agreements with our existing customers. We calculate this
metric over a set of customers who have been with us for at least one full year. To calculate our cloud subscriptions revenue retention rate
for a particular trailing 12-month period, we first establish the recurring cloud subscriptions revenue for the previous trailing 12-month
period. This effectively represents recurring dollars we should expect in the current trailing 12-month period from the cohort of customers
from the previous trailing 12-month period without accounting for any expansion or contraction. We subsequently measure the recurring
cloud subscriptions revenue in the current trailing 12-month period from the cohort of customers from the previous trailing 12-month period.
Cloud subscriptions revenue retention rate is then calculated by dividing the aggregate recurring cloud subscriptions revenue in the current
trailing 12-month period by the previous trailing 12-month period. This calculation includes the combined impact on our revenue from
customer non-renewals, pricing changes, and growth in the number of users on our platform. Our cloud subscriptions revenue retention rate
can fluctuate from period to period due to large customer contracts in any given period.
Key Components of Results of Operations
Revenue
We generate revenue primarily through sales of subscriptions to our platform as well as professional services. We typically sell our
software on a per-user basis or through non-user-based single application licenses. We generally bill customers and collect payment for
subscriptions to our platform in advance on an annual, quarterly, or monthly basis.
48
Our revenue is comprised of the following:
Subscriptions
Subscriptions revenue is primarily derived from cloud subscriptions bundled with maintenance and support and hosting services and on-
premises term license subscriptions bundled with maintenance and support. Our maintenance and support agreements provide customers
with the right to unspecified software upgrades, maintenance updates, patches released during the term of the maintenance and support
agreement on a when-and-if-available basis, and technical support. On-premises term license subscriptions are offered when the customer
prefers to self-manage the deployment of our platform within their own infrastructure. When our platform is delivered as a cloud
subscription, we manage operational needs in third-party hosted data centers.
Professional Services
Our professional services revenue is comprised of fees for consulting services, including application development, deployment assistance,
and training related to our platform. Over time, we expect professional services revenue as a percentage of total revenue to decrease as the
usage of our partner network expands.
Cost of Revenue
Subscriptions
Cost of subscriptions revenue consists primarily of fees paid to our third-party managed hosting providers and other third-party service
providers, personnel costs, including payroll and benefits for our technology operations and customer support teams, amortization of
acquired technology, and allocated overhead costs. We expect cost of revenue to continue to increase in absolute dollars for the foreseeable
future as our customer base grows.
Professional Services
Cost of professional services revenue includes all direct and indirect costs to deliver our professional services and training, including
employee compensation for our global professional services and training personnel, third-party contractor costs, allocated overhead costs,
and the costs of billable expenses such as travel and lodging. The unpredictability of the timing of providing services related to significant
professional services agreements sold on a standalone basis may cause significant fluctuations in our cost of professional services which, in
turn, may impact our financial results.
Gross Profit and Gross Margin
Gross profit and gross margin (defined as gross profit as a percentage of total revenue), have been, and will continue to be, affected by
various factors, including the mix of cloud subscriptions and on-premises term license subscriptions, the mix of total subscriptions revenue
and professional services revenue, subscription pricing, the costs associated with third-party hosting providers, and the extent to which we
expand or reduce our professional services to support future changes in our growth. Our gross margin may fluctuate from period to period
based on the preceding factors.
Subscriptions Gross Margin
Subscriptions gross margin is primarily affected by the growth in our subscriptions revenue as compared to the growth in, and timing of,
costs to support such revenue. We expect to continue to invest in customer support and cloud operations to support growth in our business,
and the timing of those investments is expected to cause subscriptions gross margin to fluctuate on a quarterly basis.
49
Professional Services Gross Margin
Professional services gross margin is affected by the growth in our professional services revenue as compared to the growth in, and
timing of, the costs of our Customer Success organization as well as by consultant utilization rates. Professional services gross margin is also
impacted by the amount of services performed by subcontractors and partners as opposed to internal resources. In 2025, we expect
professional services gross margin to be consistent with 2024; however, the margin remains subject to fluctuation based on the factors
discussed above.
Operating Expenses
Operating expenses consist of sales and marketing, research and development, and general and administrative expenses. Personnel-
related costs such as salaries, bonuses, commissions, payroll tax payments, severance costs, and stock-based compensation expense are the
most significant components of each of these expense categories. Other components of each category include professional fees for third-
party services such as legal, software development resources, contractors, and cloud computing services. In addition, operating expenses
include allocated overhead costs, which are primarily comprised of facility costs such as rent, employee medical benefits, employee relations
expense, and certain information technology costs.
In general, our operating expenses are expected to continue to increase in absolute dollars as we invest resources in enhancing our
product and growing our business, although such growth is expected to be at a more measured rate than prior years. In 2024, our total
employee headcount decreased from 2,257 employees at December 31, 2023 to 2,033 employees at December 31, 2024. In 2025, we
expect overall headcounts to rise slightly as we hire new employees in key growth areas while maintaining headcounts at or near current
levels in non-customer facing teams.
Sales and Marketing Expense
Sales and marketing expense primarily includes personnel costs, including salaries, bonuses, commissions, stock-based compensation,
and other personnel costs related to sales teams. Additional major expenses in this category include travel and entertainment, marketing
activities and promotional events, subcontracting fees, and allocated overhead costs.
The number of employees in sales and marketing functions decreased from 666 at December 31, 2023 to 509 at December 31, 2024.
While headcount declined in 2024 due to changes in our go-to-market functions, we expect sales and marketing headcount to marginally
increase from current levels in 2025 due to expected growth in our principal markets and strategic growth areas. Furthermore, we expect
sales and marketing expense to increase in absolute dollars as we continue to invest in acquiring new customers, further expand usage of
our platform within our existing customer base, and broaden our efforts to build on our brand reputation and increase market awareness of
our platform.
Research and Development Expense
Research and development expense consists primarily of personnel costs for our employees who develop and enhance our platform,
including salaries, bonuses, stock-based compensation, and other personnel costs. Also included are non-personnel costs such as
subcontracting, consulting, professional fees to third party development resources, certain information technology expenses, and allocated
overhead costs.
Our research and development efforts are focused on enhancing the capabilities, speed, and power of our software platform. The
number of employees in research and development functions increased from 681 at December 31, 2023 to 702 at December 31, 2024. Most
of this increase was attributable to continued expansion at our product development center in India that we opened in August 2022.
Although we expect research and development expense to continue to increase in absolute dollars as such costs are critical to maintain and
improve the quality of applications and our competitive position, we believe our product development center will result in cost efficiencies
over time.
50
General and Administrative Expense
General and administrative expense consists primarily of personnel costs, including salaries, bonuses, stock-based compensation, and
other personnel costs for our administrative, legal, information technology, human resources, finance and accounting teams as well as our
senior executives. Additional expenses included in this category are non-personnel costs such as travel-related expenses, contracting and
professional fees for such services as audits, taxation, and legal, insurance and other corporate expenses, including allocated overhead costs,
and bad debt expenses.
The number of employees in general and administrative functions decreased from 280 at December 31, 2023 to 267 at December 31,
2024. In 2025, we expect general and administrative expense to increase in absolute dollars largely due to investments in our information
technology team.
Other Non-Operating Expense
Other Expense (Income), Net
Other expense (income), net, consists primarily of gains and losses related to changes in foreign currency exchange rates, interest
income on our cash and cash equivalents and investments, and other sources of income or expense not related to our core business
operations.
Interest Expense
Interest expense consists primarily of interest on our debt, amortization of deferred financing fees, unused credit facility fees, and
commitment fees on our letters of credit.
51
Results of Operations
The following table sets forth our consolidated statements of operations (in thousands):
Year Ended December 31,
2024
2023
2022
Revenue
Subscriptions
$
490,568
$
412,337
$
340,152
Professional services
126,454
133,026
127,839
Total revenue
617,022
545,363
467,991
Cost of revenue
Subscriptions
53,487
43,563
36,005
Professional services
96,692
99,759
97,301
Total cost of revenue
150,179
143,322
133,306
Gross profit
466,843
402,041
334,685
Operating expenses
Sales and marketing
230,885
242,381
220,374
Research and development
154,977
153,098
139,210
General and administrative
141,834
114,535
120,111
Total operating expenses
527,696
510,014
479,695
Operating loss
(60,853)
(107,973)
(145,010)
Other non-operating expense
Other expense (income), net
6,773
(17,603)
3,545
Interest expense
23,582
17,862
1,673
Total other non-operating expense
30,355
259
5,218
Loss before income taxes
(91,208)
(108,232)
(150,228)
Income tax expense
1,054
3,209
692
Net loss
$
(92,262)
$
(111,441)
$
(150,920)
52
The following table sets forth our consolidated statements of operations data expressed as a percentage of total revenue:
Year Ended December 31,
2024
2023
2022
Revenue
Subscriptions
79.5 %
75.6 %
72.7 %
Professional services
20.5
24.4
27.3
Total revenue
100.0
100.0
100.0
Cost of revenue
Subscriptions
8.7
8.0
7.7
Professional services
15.7
18.3
20.8
Total cost of revenue
24.4
26.3
28.5
Gross profit
75.6
73.7
71.5
Operating expenses
Sales and marketing
37.4
44.4
47.1
Research and development
25.1
28.1
29.7
General and administrative
23.0
21.0
25.7
Total operating expenses
85.5
93.5
102.5
Operating loss
(9.9)
(19.8)
(31.0)
Other non-operating expense
Other expense (income), net
1.1
(3.2)
0.8
Interest expense
3.8
3.3
0.4
Total other non-operating expense
4.9
0.1
1.2
Loss before income taxes
(14.8)
(19.9)
(32.2)
Income tax expense
0.2
0.6
0.1
Net loss
(15.0)%
(20.5)%
(32.3)%
Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023
Revenue
Year Ended December 31,
2024
2023
$ Change
% Change
(dollars in thousands)
Revenue:
Subscriptions
$
490,568
$
412,337
$
78,231
19.0%
Professional services
126,454
133,026
(6,572)
(4.9)%
Total revenue
$
617,022
$
545,363
$
71,659
13.1%
Total revenue increased $71.7 million, or 13.1%, in 2024 compared to 2023 due to an increase in our subscriptions revenue of $78.2
million, which was partially offset by a decrease in our professional services revenue of $6.6 million. The increase in subscriptions revenue
was driven by a $63.5 million increase in cloud subscriptions revenue, a $9.9 million increase in on-premises software revenue, and a $4.8
million increase in maintenance and support revenue. With respect to new versus existing customers, $63.3 million of the increase in
subscriptions revenue was derived from expanded deployments and corresponding sales of additional subscriptions to existing customers
while $14.9 million was driven from sales of subscriptions to new customers. The decrease in professional services revenue was due to an
$18.7 million decrease in revenue from existing customers, which was partially offset by a $12.1 million increase in sales to new customers.
53
Cost of Revenue
Year Ended December 31,
2024
2023
$ Change
% Change
(dollars in thousands)
Cost of revenue:
Subscriptions
$
53,487
$
43,563
$
9,924
22.8%
Professional services
96,692
99,759
(3,067)
(3.1)%
Total cost of revenue
$
150,179
$
143,322
$
6,857
4.8%
Subscriptions gross margin
89.1 %
89.4 %
Professional services gross margin
23.5 %
25.0 %
Total gross margin
75.7 %
73.7 %
Cost of revenue increased $6.9 million, or 4.8%, in 2024 compared to 2023, primarily due to an $8.5 million increase in hosting costs
and a $0.2 million increase in professional services and product support personnel costs, both of which were partially offset by a $1.5 million
decrease in contractor costs. Hosting costs increased due to an increase in sales of our cloud offering during 2024. Although professional
services and product support personnel headcount decreased 11.9% from December 31, 2023 to December 31, 2024, personnel costs
increased due to a $1.2 million increase in severance costs and slightly higher salaries and benefits, which were substantially offset by a
$0.7 million decrease in bonus expense and a $0.5 million decrease in stock compensation expense. Contractor costs decreased in 2024
compared to 2023 due to a decrease in the usage of subcontractors for professional service engagements.
Subscriptions gross margin was 89.1% in 2024, consistent with an 89.4% margin in the prior year as increases in subscriptions revenue
were offset by a corresponding increase in hosting costs. Professional services gross margin decreased to 23.5% in 2024 as compared to
25.0% in 2023 due to a decline in professional services revenue and a marginal increase in personnel costs, both of which were partially
offset by lower contractor costs. Total gross margin increased to 75.7% in 2024 as compared to 73.7% in 2023 driven largely by the increase
in subscriptions revenue.
Sales and Marketing Expense
Year Ended December 31,
2024
2023
$ Change
% Change
(dollars in thousands)
Sales and marketing
$
230,885
$
242,381
$
(11,496)
(4.7)%
% of revenue
37.4 %
44.4 %
Sales and marketing expense decreased $11.5 million, or 4.7%, in 2024 compared to 2023, primarily due to a $15.3 million decrease in
sales and marketing personnel costs and a $1.5 million decrease in information technology costs. These decreases were partially offset by a
$3.6 million increase in marketing costs and a $1.7 million increase in travel and entertainment expenses. Personnel costs decreased due to
a 23.6% decrease in sales and marketing personnel headcount from December 31, 2023 to December 31, 2024 and a $2.6 million decrease
in stock compensation expense, both of which were partially offset by a $3.5 million increase in sales commissions driven by both contracts
with new customers and renewals with existing customers. Information technology costs decreased primarily due to lower cloud computing
expenses. Marketing costs increased due to a $3.2 million increase in spending on marketing events, in addition to increases in digital
marketing and public relations expense. Travel and entertainment expenses rose due to increases in airfare and lodging associated with a
higher number of in-person events and engagements relative to the prior year.
54
Research and Development Expense
Year Ended December 31,
2024
2023
$ Change
% Change
(dollars in thousands)
Research and development
$
154,977
$
153,098
$
1,879
1.2%
% of revenue
25.1 %
28.1 %
Research and development expense increased $1.9 million, or 1.2%, in 2024 compared to 2023, primarily due to a $1.9 million increase
in employee medical benefits and a $1.8 million increase in information technology costs. These increases were partially offset by a
$1.6 million decrease in research and development personnel costs. Information technology costs increased primarily due to higher cloud
computing expense. Although research and development personnel headcount increased 3.1% from December 31, 2023 to December 31,
2024, personnel costs decreased due to realized cost savings from our product development center in India, a $1.0 million decrease in
severance expense, and a $0.8 million decrease in stock compensation expense.
General and Administrative Expense
Year Ended December 31,
2024
2023
$ Change
% Change
(dollars in thousands)
General and administrative expense
$
141,834
$
114,535
$
27,299
23.8%
% of revenue
23.0 %
21.0 %
General and administrative expense increased $27.3 million, or 23.8%, in 2024 compared to 2023, primarily due to a $9.8 million
increase in amortization expense related to our judgment preservation insurance policy. Additionally, professional fees increased $7.4 million,
which was the result of higher net legal fees driven by a $5.7 million decrease in insurance reimbursements associated with our litigation
against Pegasystems as a result of receiving reimbursements in the prior year compared to none in the current year. Rent expense also
increased $6.9 million, primarily attributable to a $5.5 million in lease impairment charge recognized in the second quarter of 2024. These
increases were partially offset by a $1.8 million decrease in general and administrative personnel costs, driven largely by a 4.6% decrease in
general and administrative headcount from December 31, 2023 to December 31, 2024.
Other Expense (Income), Net
Year Ended December 31,
2024
2023
$ Change
% Change
(dollars in thousands)
Other expense (income), net
$
6,773
$
(17,603)
$
24,376
***
% of revenue
1.1 %
(3.2)%
*** - Indicates a percentage change that is not meaningful
Other expense, net was $6.8 million in 2024 compared to other income, net of $17.6 million in 2023. There were $16.8 million in foreign
exchange losses in 2024 compared to $8.7 million in foreign exchange gains in 2023. Additionally, there was a $2.1 million decrease in
interest income across the comparative periods. These decreases were partially offset by a $3.2 million increase in other income attributable
to payments received in 2024, including a payment from a local government as a result of achieving certain economic development criteria
and payments related to a short-swing profit disgorgement paid to us by a public shareholder of our Class A common stock.
55
Interest Expense
Year Ended December 31,
2024
2023
$ Change
% Change
(dollars in thousands)
Interest expense
$
23,582
$
17,862
$
5,720
32.0%
% of revenue
3.8 %
3.3 %
Interest expense increased $5.7 million in 2024 as compared to the corresponding period in 2023, primarily due to interest expense
attributable to higher outstanding balances on our credit facility related to amendments we entered into during the fourth quarter of 2023
and first quarter of 2024.
Income Tax Expense
Year Ended December 31,
2024
2023
$ Change
% Change
(dollars in thousands)
Income tax expense
$
1,054
$
3,209
$
(2,155)
(67.2)%
% of revenue
0.2 %
0.6 %
Income tax expense decreased by $2.2 million in 2024 as compared to the corresponding period in 2023. This change was primarily
driven by decreased pre-tax book income in certain international subsidiaries in 2024. The change in pre-tax book income was primarily
attributable to increases in unrealized foreign exchange losses.
Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022
For a discussion and analysis of changes in financial condition and results of operations for the year ended December 31, 2023 as
compared to the year ended December 31, 2022, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2023,
filed with the SEC on February 15, 2024.
Backlog
Backlog represents non-cancellable future amounts to be recognized under cloud and on-premises term license subscription agreements
and is representative of our remaining performance obligations. As of December 31, 2024 and 2023, we had backlog of $546.0 million and
$489.7 million, respectively. Approximately 34% of our backlog as of December 31, 2024 is not expected to be recognized in 2025.
Additionally, we expect backlog to continue to increase in absolute dollars as we continue to increase the number of cloud agreements we
enter into. However, the amount of backlog relative to the total value of our contracts can change from quarter to quarter and year to year
for several reasons, including the specific timing and duration of cloud and on-premises term license subscription agreements with large
customers, the specific timing of customer renewals, changes in customer financial circumstances, and foreign currency fluctuations.
Additionally, we often sign multiple-year subscription agreements, and backlog may vary based on changes in the average non-
cancellable term of our cloud and on-premises term license subscription agreements.
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide investors
with certain non-GAAP financial performance measures. We use these non-GAAP financial performance measures for financial and
operational decision-making and as a means to evaluate period-to-period comparisons. Management believes these non-GAAP financial
measures provide meaningful supplemental information regarding our performance by excluding certain expenses that may not be indicative
of our recurring core business operating results. We believe both management and investors benefit from referring to these non-GAAP
financial measures in assessing our performance and when planning, forecasting, and analyzing
56
future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to historical performance as well as
comparisons to competitors’ operating results. We believe 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 institutional investors and the analyst community to help them analyze the health of our business.
Our non-GAAP financial performance measures include the following: non-GAAP subscriptions cost of revenue, non-GAAP professional
services cost of revenue, non-GAAP total cost of revenue, non-GAAP total operating expense, non-GAAP operating loss, non-GAAP income
tax expense, non-GAAP net loss, and non-GAAP net loss per share, basic and diluted. These non-GAAP financial performance measures
exclude the effect of stock-based compensation expense, certain non-ordinary litigation-related expenses consisting of legal and other
professional fees associated with the Pegasystems cases (net of insurance reimbursements), or Litigation Expense, amortization of the
judgment preservation insurance policy, or JPI Amortization, severance costs related to involuntary reductions in our workforce, or Severance
Costs, lease impairment and lease-related charges associated with actions taken to reduce the footprint of our leased office spaces, or Lease
Impairment and Lease-Related Charges, and a short-swing profit disgorgement paid to us by a shareholder, or Short-Swing Profit Payment.
While some of these items may be recurring in nature and should not be disregarded in the 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, we believe removing these items for purposes of calculating our non-GAAP financial measures provides
investors with a more focused presentation of our ongoing operating performance.
We also discuss adjusted EBITDA, a non-GAAP financial performance measure we believe offers a useful view of the overall operation of
our business. We define adjusted EBITDA as net loss before (1) other expense (income), net, (2) interest expense, (3) income tax expense,
(4) depreciation expense and amortization of intangible assets, (5) stock-based compensation expense, (6) Litigation Expense, (7) JPI
Amortization, (8) Severance Costs, and (9) Lease Impairment and Lease-Related Charges. 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 alternative 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 our non-GAAP measures may be different from non-
GAAP measures used by other companies.
The following tables reconcile our non-GAAP measures to their nearest comparable GAAP measures (in thousands, except per share
data):
57
GAAP
Measure
Stock-Based
Compensation
Litigation
Expense
JPI Amortization
Severance
Costs
Lease
Impairment and
Lease-Related
Charges
Short-Swing Profit
Payment
Non-GAAP
Measure
Year Ended December 31, 2024
Subscriptions cost of
revenue
$
53,487
$
(848)
$
—
$
—
$
—
$
—
$
—
$
52,639
Professional services
cost of revenue
96,692
(5,674)
—
—
(1,398)
—
—
89,620
Total cost of revenue
150,179
(6,522)
—
—
(1,398)
—
—
142,259
Total operating expense
527,696
(32,523)
(4,602)
(15,795)
(4,136)
(6,104)
—
464,536
Operating (loss) income
(60,853)
39,045
4,602
15,795
5,534
6,104
—
10,227
Income tax expense
1,054
1,499
—
—
1,096
—
—
3,649
Net (loss) income
(92,262)
37,546
4,602
15,795
4,438
6,104
(1,799)
(25,576)
Net (loss) income per
share, basic and diluted $
(1.26)
$
0.51
$
0.06
$
0.22
$
0.06
$
0.08
$
(0.02)
$
(0.35)
Year Ended December 31, 2023
Subscriptions cost of
revenue
$
43,563
$
(925)
$
—
$
—
$
(30)
$
—
$
—
$
42,608
Professional services
cost of revenue
99,759
(6,055)
—
—
(158)
—
—
93,546
Total cost of revenue
143,322
(6,980)
—
—
(188)
—
—
136,154
Total operating expense
510,014
(36,407)
2,064
(6,038)
(6,111)
—
—
463,522
Operating (loss) income
(107,973)
43,387
(2,064)
6,038
6,299
—
—
(54,313)
Income tax expense
3,209
1,302
—
—
139
—
—
4,650
Net (loss) income
(111,441)
42,085
(2,064)
6,038
6,160
—
—
(59,222)
Net (loss) income per
share, basic and diluted $
(1.52)
$
0.58
$
(0.03)
$
0.08
$
0.08
$
—
$
—
$
(0.81)
Year Ended December 31, 2022
Subscriptions cost of
revenue
$
36,005
$
(996)
$
—
$
—
$
—
$
—
$
—
$
35,009
Professional services
cost of revenue
97,301
(5,309)
—
—
—
—
—
91,992
Total cost of revenue
133,306
(6,305)
—
—
—
—
—
127,001
Total operating expense
479,695
(32,525)
(22,886)
—
—
—
—
424,284
Operating (loss) income
(145,010)
38,830
22,886
—
—
—
—
(83,294)
Net (loss) income
(150,920)
38,830
22,886
—
—
—
—
(89,204)
Net (loss) income per
share, basic and
diluted
$
(2.08)
$
0.54
$
0.32
$
—
$
—
$
—
$
—
$
(1.23)
Per share amounts do not foot due to rounding.
(a)
(a)
58
The following table reconciles GAAP net loss to adjusted EBITDA for the years ended December 31, 2024, 2023, and 2022 (in
thousands):
Year Ended December 31,
2024
2023
2022
GAAP net loss
$
(92,262)
$
(111,441)
$
(150,920)
Other expense (income), net
6,773
(17,603)
3,545
Interest expense
23,582
17,862
1,673
Income tax expense
1,054
3,209
692
Depreciation expense and amortization of intangible assets
10,030
9,473
7,297
Stock-based compensation expense
39,045
43,387
38,830
Litigation Expense
4,602
(2,064)
22,886
JPI Amortization
15,795
6,038
—
Severance Costs
5,534
6,299
—
Lease Impairment and Lease-Related Charges
6,104
—
—
Adjusted EBITDA
$
20,257
$
(44,840)
$
(75,997)
Liquidity and Capital Resources
The following table presents selected financial information and statistics pertaining to liquidity and capital resources as of December 31,
2024 and 2023 (in thousands):
As of December 31,
2024
2023
Cash and cash equivalents
$
118,552
$
149,351
Short-term investments and marketable securities
41,308
9,653
Property and equipment, net
37,109
42,682
Working capital
80,787
43,183
Defined as current assets net of current liabilities.
We believe our existing cash and cash equivalents and short-term investments and marketable securities, together with any positive cash
flows from operations and available borrowings under our line of credit, will be sufficient to support working capital and capital expenditure
requirements for at least the next twelve months.
We have in the past, and may in the future, enter into investments in or acquisitions of complementary businesses, products, or
technologies, which could also require us to seek additional equity financing, incur indebtedness, or use cash resources. We have no present
binding agreements or commitments to enter into any such acquisitions. If we are unable to raise additional capital when desired, our
business, operating results, and financial condition could be adversely affected.
Sources of Funds
We have historically financed our operations in large part with equity financing arrangements. Our last public offering was completed in
June 2020. Through these public offerings, we received net proceeds of $344.8 million.
To further help strengthen our financial position and support our growth initiatives, in November 2022 we entered into a Senior Secured
Credit Facilities Credit Agreement, or the Credit Agreement, which, as amended to date, provides for a five-year term loan facility in an
aggregate principal amount of $200.0 million and, in addition, up to $100.0 million for a revolving credit facility, including a letter of credit
sub-facility in the aggregate availability amount of $20.0 million and a swingline sub-facility in the aggregate availability amount of
$10.0 million (as a sublimit of the revolving loan facility).
*
*
59
The Credit Agreement matures on November 3, 2027. We have been using the proceeds to fund the growth of our business and support
our working capital requirements. As of December 31, 2024, we were in compliance with all covenants, had used borrowing capacity of
$62.0 million under our $100.0 million revolving credit facility, and had outstanding letters of credit totaling $14.6 million in connection with
securing our leased office space.
We expect future sources of funds to consist primarily of cash generated from sales of subscriptions and the related professional
services. We may also elect to raise additional sources of funding through draws on our revolving credit facility, entering into new debt
financing arrangements or conducting additional public offerings. Our future capital requirements will depend on many factors, including our
growth rate, the timing and extent of spending to support research and development efforts, the expansion of sales and marketing activities,
the introduction of new and enhanced product solutions and functions as well as platform enhancements and professional services offerings,
and the level of market acceptance of our product.
Uses of Funds
Our current principal uses of cash are funding operations and other working capital requirements. Historically, we have also utilized cash
to pay for the acquisition of businesses that were complementary to ours, and we may pursue similar opportunities in the future. Over the
past several years, revenue has increased significantly from year to year and, as a result, cash flows from customer collections have also
grown. However, as we continue to invest in growing our business, operating expenses have also increased.
In 2023, we entered into a Judgment Preservation Insurance policy in connection with our $2.036 billion judgment against Pegasystems.
See Note 13 to the consolidated financial statements for additional details. The total cost of the policy was $57.3 million, which we paid with
operating cash on hand. In addition, in February 2024 our Board of Directors authorized a share repurchase program, under which we
repurchased approximately 1.3 million shares of our common stock for approximately $50.0 million during the first quarter of 2024.
Outside of the above items and cash used by operations, other uses of cash in 2024 included capital expenditures related to the
expansion of the recently leased facility for our research development center in India and principal repayments of our term loan debt.
Furthermore, we have a non-cancellable cloud hosting arrangement with Amazon Web Services that contains provisions for minimum
purchase commitments. Specifically, purchase commitments under the agreement total $220.0 million over five years. The agreement, which
was originated in July 2021 and amended in October 2024, currently contains minimum annual spending requirements of $44.0 million from
November 2024 to October 2029. Spending under this agreement for the years ended December 31, 2024, 2023, and 2022 totaled
$41.2 million, $36.6 million, and $33.1 million, respectively. The timing of payments under the agreement may vary, and the total amount of
payments may exceed the minimum depending on the volume of services utilized. We expect to meet our minimum annual spending
requirement during the term of the arrangement.
60
Historical Cash Flows
Year Ended December 31,
2024
2023
$ Change
% Change
(dollars in thousands)
Beginning cash, cash equivalents, and restricted cash
$
149,351
$
150,381
$
(1,030)
(0.7)%
Operating activities:
Net loss
(92,262)
(111,441)
19,179
17.2
Stock-based compensation and other non-cash adjustments
72,732
40,591
32,141
79.2
Changes in working capital
26,408
(39,592)
66,000
***
Net cash provided by (used by) operating activities
6,878
(110,442)
117,320
***
Investing activities:
Net cash (used by) provided by investing activities
(35,390)
28,590
(63,980)
***
Financing activities:
Net cash (used by) provided by financing activities
(258)
79,165
(79,423)
***
Effect of exchange rates
(2,029)
1,657
(3,686)
***
Net decrease in cash, cash equivalents, and restricted cash
(30,799)
(1,030)
(29,769)
***
Ending cash, cash equivalents, and restricted cash
$
118,552
$
149,351
$
(30,799)
(20.6)%
*** Indicates a percentage that is not meaningful.
Operating Activities
Net cash provided by operating activities was $6.9 million for 2024 as compared to net cash used by operating activities of $110.4 million
for 2023. The increase in net cash provided by operating activities was primarily due to the prior year payment of $57.3 million for our
judgment preservation insurance policy. Additionally, there were stronger cash collections from accounts receivable as a result of increased
revenues as well as reduced expenditures stemming from headcount reductions and other cost management activities in 2024 as compared
to 2023.
Investing Activities
Net cash used by investing activities was $35.4 million for 2024 as compared to $28.6 million in net cash provided by investing activities
for 2023. This change was primarily driven by a decline of $71.6 million in proceeds from investments. This decrease was partially offset by a
$5.8 million decrease in capital expenditures and a $1.8 million decrease in purchases of investments.
Financing Activities
Net cash used by financing activities was $0.3 million for 2024 as compared to $79.2 million in net cash provided by financing activities
for 2023. This change was primarily due to a $50.0 million increase in share repurchases, a $42.0 million decrease in proceeds from
borrowings, and a $2.7 million increase in principal payments on the term loan, partially offset by a $13.7 million increase in proceeds
received from the exercise of stock options and a $1.8 million decrease in payments for employee tax withholdings associated with the net
settlement of stock awards.
61
For a discussion and analysis of net cash used by or provided by operating, investing, and financing activities for the year ended
December 31, 2022, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February
15, 2024.
Critical Accounting Estimates
The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires
us to make estimates and judgments that affect the amounts reported in those financial statements and accompanying notes. Although we
believe the estimates we use are reasonable, due to the inherent uncertainty involved in making those estimates, actual results reported in
future periods could differ from those estimates.
We believe the following accounting estimates embedded in our revenue recognition involve a high degree of judgment and complexity.
Accordingly, we believe the estimates included in our revenue recognition accounting are the most critical to aid in fully understanding and
evaluating our consolidated financial condition and results of operations. This commentary should be read in conjunction with our
consolidated financial statements and the remainder of this Form 10-K.
Revenue Recognition
We generate subscriptions revenue primarily through the sale of cloud subscriptions bundled with maintenance and support and hosting
services and term license subscriptions bundled with maintenance and support. We generate professional services revenue from fees for our
consulting services, including application development and deployment assistance and training related to our platform. Significant judgments
and estimates inherent in our revenue recognition are as follows:
Determining the Transaction Price
The transaction price, or the amount of consideration we expect to be entitled to receive in exchange for transferring services to our
customers, includes both fixed and variable components. The variable components of our contracts, which have been nominal to date,
include performance penalties, extended payment terms or implied price concessions, and warranty refunds. If necessary, we estimate these
components using the expected value method, which estimates variable consideration as the sum of probability-weighted amounts in a range
of possible consideration amounts. We believe this method is the most appropriate to utilize because our variable components could vary by
contract, leading to multiple potential outcomes.
Our variable consideration estimates are subject to subsequent true-up adjustments which may result in changes to transaction prices,
but such true-up adjustments are not expected to be material. Variable consideration is also included in the transaction price only to the
extent it is probable a significant reversal will not occur. Factors considered when determining to incorporate variable consideration in the
transaction price include, but are not limited to, whether the variable consideration is highly susceptible to factors outside of the Company's
influence, the length of time the uncertainty surrounding reversal is expected to last, our experience levels with similar types of contracts,
our historical practices for similar contracts in similar circumstances, and the number and range of possible consideration amounts. The
amount of variable consideration excluded from the transaction price for the years ended December 31, 2024, 2023, and 2022 was
immaterial.
Allocating the Transaction Price Based on Standalone Selling Prices
We allocate the transaction price to each performance obligation in a contract based on its relative standalone selling price, or SSP. The
SSP is the observable price at which we sell the product or service separately. In the absence of observable pricing, we estimate SSP using
the residual approach. We establish SSP as follows:
62
1.
Cloud subscriptions - Given the highly variable selling price of our could subscriptions, we establish the SSP of our cloud
subscriptions using a residual approach after first determining the SSP of consulting and training services.
2.
On-premises term license subscriptions - Given the highly variable selling price of our term license subscriptions, we have established
the SSP of term license subscriptions using a residual approach after first determining the SSP of maintenance and support.
Maintenance and support is sold on a standalone basis with renewals of our legacy perpetual software licenses and within a narrow
range of the net license fee, resulting in a defined economic relationship existing between the license and maintenance and support.
3.
Maintenance and support - We establish the SSP of maintenance and support as a percentage of the stated net subscription fee
based on observable pricing of maintenance and support renewals from our legacy perpetual software licenses.
4.
Consulting services and training services - The SSP of consulting services and training services is established based on the
observable pricing of standalone sales within each geographic region where the services are sold.
Recent Accounting Pronouncements
See Note 2 of our consolidated financial statements for information related to recently issued accounting standards.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our
financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations
in interest rates and foreign currency exchange rates.
Interest Rate Risk
We had cash and cash equivalents of $118.6 million as of December 31, 2024, which consisted of investments in a money market fund,
cash in readily available checking accounts, and overnight repurchase investments.
In addition, as of December 31, 2024, we held $41.3 million of fixed income securities such as U.S. treasury bonds, commercial paper,
and corporate bonds. These securities are subject to market risk due to fluctuations in interest rates, which may affect our interest income
and the fair value of our investments. We classify investments as available-for-sale, including those with stated maturities beyond 12 months.
As such, no gains or losses due to changes in interest rates are recognized in our consolidated statements of operations unless such
securities are sold prior to maturity or due to expected credit losses. A hypothetical 100 basis point change in interest rates would not have
had a material effect on the fair market value of our investment portfolio as of December 31, 2024. To date, fluctuations in interest income
have also not been significant. Our investments are made for the purpose of preserving capital, fulfilling liquidity needs, and maximizing total
return. We do not enter into investments for trading or speculative purposes.
As of December 31, 2024, we had outstanding debt of $250.4 million, which carries interest as defined in our Credit Agreement. Refer to
Note 8 of the consolidated financial statements in this 2024 Annual Report for additional details. We assessed our exposure to changes in
interest rates by analyzing sensitivity to our operating results assuming various changes in market interest rates. A hypothetical increase of
one percentage point in the interest rate as of December 31, 2024 would increase our interest expense by approximately $2.5 million
annually.
Inflation Risk
We are exposed to market risks related to inflation in personnel costs, third-party service providers, subcontracting costs, professional
fees, and general overhead expenses. Although inflation has decreased from the relative highs experienced in 2023, if inflation pressure
increases in severity, we may not be able to fully offset such higher costs through price increases and productivity initiatives. While we do
not believe inflation has had a material
63
impact on our results of operations to date, a continued high rate of inflation in the future may have an adverse effect on our ability to
maintain operating costs and adversely affect our gross profit margin.
Foreign Currency Exchange Risk
Our reporting currency is the U.S. dollar. Due to our international operations, we have foreign currency risks related to revenue and
operating expenses denominated in currencies other than the U.S. dollar, primarily the British pound sterling, Euro, Australian dollar, and
Swiss franc. Our sales contracts are primarily denominated in the local currency of the customer making the purchase. In addition, portions
of operating expenses are incurred outside the United States and denominated in foreign currencies. An increase in the relative value of the
U.S. dollar to other currencies will negatively affect revenue and other operating results as expressed in U.S. dollars. Based on a sensitivity
analysis, a 10% change in the foreign currency exchange rates would have impacted our total revenue by approximately 4% and our
operating loss by approximately 8%. This calculation assumes all currencies change in the same direction and proportion relative to the U.S.
dollar.
We have experienced, and will continue to experience, fluctuations in net loss as a result of transaction gains or losses related to
remeasuring certain current asset and current liability balances denominated in currencies other than the functional currency of the entities
in which they are recorded. We have not engaged in the hedging of foreign currency transactions to date, although we may choose to do so
in the future.
64
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements:
Page
Report of Independent Registered Public Accounting Firm
66
Consolidated Balance Sheets
70
Consolidated Statements of Operations
71
Consolidated Statements of Comprehensive Loss
72
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
73
Consolidated Statements of Cash Flows
74
Notes to Consolidated Financial Statements
75
65
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Appian Corporation
McLean, Virginia
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Appian Corporation (the “Company”) as of December 31, 2024 and 2023,
the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for each of
the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the
Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated
February 19, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or
fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material
to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication
of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not,
by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to
which it relates.
Revenue Recognition for Multiple Performance Obligations
66
As discussed in Note 3 to the consolidated financial statements, certain of the Company's revenue contracts contain multiple performance
obligations that might include cloud subscriptions, term license subscriptions, maintenance and support and professional services. The
Company accounts for individual products and services separately if they are capable of being distinct and are distinct within the context of
the contract. In such cases, the transaction price is allocated to the distinct performance obligations based on their relative standalone
selling price, which either is the observable price at which the Company sells the product or service separately, or estimated standalone
selling price using a residual approach in the absence of observable pricing. Revenue is recognized when control of the distinct performance
obligation is transferred.
We identified the revenue recognition for certain revenue contracts as a critical audit matter due to the significant management judgment
involved in the identification of distinct performance obligations and the allocation of the transaction price to each performance obligation
based on its relative standalone selling price. Auditing these elements of revenue recognition involved especially challenging auditor
judgment due to the nature and extent of audit effort required to address these matters.
The primary procedures we performed to address this critical audit matter included:
• Testing the design and operating effectiveness of internal controls over the Company's revenue recognition process including controls
over: (i) the identification of distinct performance obligations, and (ii) the allocation of the transaction price to each performance
obligation based on its relative standalone selling price.
• Testing a sample of revenue contracts to evaluate management’s identification of distinct performance obligations.
• Testing a sample of revenue contracts to evaluate management’s allocation of the transaction price to each performance obligation
based on its relative standalone selling price.
/s/ BDO USA, P.C.
We have served as the Company's auditor since 2013.
McLean, Virginia
February 19, 2025
67
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Appian Corporation
McLean, Virginia
Opinion on Internal Control over Financial Reporting
We have audited Appian Corporation’s (the “Company’s”) internal control over financial reporting as of December 31, 2024, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the “COSO criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the
consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of operations,
comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31,
2024, and the related notes and our report dated February 19, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Annual Report on Internal
Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based
on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles.
A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
68
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ BDO USA, P.C.
McLean, Virginia
February 19, 2025
69
APPIAN CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
As of December 31,
2024
2023
Assets
Current assets
Cash and cash equivalents
$
118,552
$
149,351
Short-term investments and marketable securities
41,308
9,653
Accounts receivable, net of allowance of $3,396 and $2,606, respectively
195,069
171,561
Deferred commissions, current
36,630
34,261
Prepaid expenses and other current assets
43,984
49,529
Total current assets
435,543
414,355
Property and equipment, net of accumulated depreciation of $32,142 and $25,141, respectively
37,109
42,682
Goodwill
25,555
27,106
Intangible assets, net of accumulated amortization of $5,341 and $4,152, respectively
2,240
3,889
Right-of-use assets for operating leases
31,081
39,975
Deferred commissions, net of current portion
60,540
59,764
Deferred tax assets
4,129
3,453
Other assets
24,842
36,279
Total assets
$
621,039
$
627,503
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities
Accounts payable
$
4,322
$
6,174
Accrued expenses
11,388
11,046
Accrued compensation and related benefits
34,223
38,003
Deferred revenue
281,760
235,992
Debt
9,598
66,368
Operating lease liabilities
12,378
11,698
Other current liabilities
1,087
1,891
Total current liabilities
354,756
371,172
Long-term debt
240,826
140,221
Non-current operating lease liabilities
52,189
59,067
Deferred revenue, non-current
5,477
4,700
Deferred tax liabilities
—
2
Other non-current liabilities
431
—
Total liabilities
653,679
575,162
Commitments and contingent liabilities (see Note 13)
Stockholders’ (deficit) equity
Class A common stock—par value $0.0001; 500,000,000 shares authorized as of December 31, 2024 and 2023 and 42,938,701 and
42,169,970 shares issued and outstanding as of December 31, 2024 and 2023, respectively
4
4
Class B common stock—par value $0.0001; 100,000,000 shares authorized as of December 31, 2024 and 2023 and 31,090,085 and
31,196,796 shares issued and outstanding as of December 31, 2024 and 2023, respectively
3
3
Additional paid-in capital
591,281
595,781
Accumulated other comprehensive loss
(11,774)
(23,555)
Accumulated deficit
(612,154)
(519,892)
Total stockholders’ (deficit) equity
(32,640)
52,341
Total liabilities and stockholders’ (deficit) equity
$
621,039
$
627,503
The accompanying notes are an integral part of these consolidated financial statements.
70
APPIAN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Year Ended December 31,
2024
2023
2022
Revenue
Subscriptions
$
490,568
$
412,337
$
340,152
Professional services
126,454
133,026
127,839
Total revenue
617,022
545,363
467,991
Cost of revenue
Subscriptions
53,487
43,563
36,005
Professional services
96,692
99,759
97,301
Total cost of revenue
150,179
143,322
133,306
Gross profit
466,843
402,041
334,685
Operating expenses
Sales and marketing
230,885
242,381
220,374
Research and development
154,977
153,098
139,210
General and administrative
141,834
114,535
120,111
Total operating expenses
527,696
510,014
479,695
Operating loss
(60,853)
(107,973)
(145,010)
Other non-operating expense
Other expense (income), net
6,773
(17,603)
3,545
Interest expense
23,582
17,862
1,673
Total other non-operating expense
30,355
259
5,218
Loss before income taxes
(91,208)
(108,232)
(150,228)
Income tax expense
1,054
3,209
692
Net loss
$
(92,262)
$
(111,441)
$
(150,920)
Net loss per share:
Basic and diluted
$
(1.26)
$
(1.52)
$
(2.08)
Weighted average common shares outstanding:
Basic and diluted
72,988
73,102
72,455
The accompanying notes are an integral part of these consolidated financial statements.
71
APPIAN CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
Year Ended December 31,
2024
2023
2022
Net loss
$
(92,262)
$
(111,441)
$
(150,920)
Comprehensive loss, net of income taxes
Foreign currency translation adjustments
11,718
(16,326)
(1,559)
Unrealized gains on available-for-sale securities
63
17
—
Other comprehensive loss, net of income taxes
$
(80,481)
$
(127,750)
$
(152,479)
The accompanying notes are an integral part of these consolidated financial statements.
72
APPIAN CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands, except share data)
Common Stock
Treasury
Stock
Additional
Paid-In Capital
Accumulated Other
Comprehensive Loss
Accumulated
Deficit
Total Stockholders'
Equity (Deficit)
Shares
Amount
Balance December 31, 2021
71,462,094
$
7
$
—
$
497,128
$
(5,687)
$
(257,531)
$
233,917
Net loss
—
—
—
—
—
(150,920)
(150,920)
Issuance of common stock to directors
14,928
—
—
—
—
—
—
Vesting of restricted stock units
403,648
—
—
—
—
—
—
Exercise of stock options
937,217
—
—
25,432
—
—
25,432
Stock-based compensation expense
—
—
—
38,830
—
—
38,830
Other comprehensive loss
—
—
—
—
(1,559)
—
(1,559)
Balance December 31, 2022
72,817,887
7
—
561,390
(7,246)
(408,451)
145,700
Net loss
—
—
—
—
—
(111,441)
(111,441)
Issuance of common stock to directors
19,687
—
—
—
—
—
—
Vesting of restricted stock units
430,582
—
—
(9,748)
—
—
(9,748)
Exercise of stock options
98,610
—
—
752
—
—
752
Stock-based compensation expense
—
—
—
43,387
—
—
43,387
Other comprehensive loss
—
—
—
—
(16,309)
—
(16,309)
Balance December 31, 2023
73,366,766
7
—
595,781
(23,555)
(519,892)
52,341
Net loss
—
—
—
—
—
(92,262)
(92,262)
Issuance of common stock to directors
20,216
—
369
(369)
—
—
—
Vesting of restricted stock units
418,899
—
5,546
(13,533)
—
—
(7,987)
Exercise of stock options
1,543,436
—
44,104
(29,643)
—
—
14,461
Repurchase of common stock
(1,320,531)
—
(50,019)
—
—
—
(50,019)
Stock-based compensation expense
—
—
—
39,045
—
—
39,045
Other comprehensive income
—
—
—
—
11,781
—
11,781
Balance December 31, 2024
74,028,786
$
7
$
—
$
591,281
$
(11,774)
$
(612,154)
$
(32,640)
The accompanying notes are an integral part of these consolidated financial statements.
73
APPIAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
2024
2023
2022
Cash flows from operating activities:
Net loss
$
(92,262)
$
(111,441)
$
(150,920)
Adjustments to reconcile net loss to net cash provided by (used by) operating activities:
Stock-based compensation
39,045
43,387
38,830
Depreciation expense and amortization of intangible assets
10,030
9,473
7,297
Lease impairment charges
5,462
—
—
Bad debt expense
1,760
1,091
1,298
Amortization of debt issuance costs
589
444
43
Loss on disposal of property and equipment
—
—
3
Benefit for deferred income taxes
(899)
(1,541)
(1,089)
Foreign currency transaction losses (gains), net
16,745
(12,263)
—
Changes in assets and liabilities:
Accounts receivable
(28,353)
(1,868)
(37,922)
Prepaid expenses and other assets
16,551
(54,753)
(2,027)
Deferred commissions
(3,144)
(8,043)
(12,298)
Accounts payable and accrued expenses
(871)
(1,394)
(3,289)
Accrued compensation and related benefits
(2,947)
(3,157)
6,582
Other current and non-current liabilities
(1,478)
(1,134)
(264)
Deferred revenue
49,309
28,668
47,534
Operating lease assets and liabilities
(2,659)
2,089
(329)
Net cash provided by (used by) operating activities
6,878
(110,442)
(106,551)
Cash flows from investing activities:
Proceeds from maturities of investments
20,038
91,670
84,642
Payments for investments
(51,630)
(53,443)
(65,283)
Purchases of property and equipment
(3,798)
(9,637)
(9,095)
Net cash (used by) provided by investing activities
(35,390)
28,590
10,264
Cash flows from financing activities:
Proceeds from borrowings
50,000
92,000
120,000
Payments for debt issuance costs
(463)
(276)
(1,940)
Debt repayments
(6,250)
(3,563)
(625)
Repurchase of common stock
(50,019)
—
—
Payments for employee taxes related to the net share settlement of equity awards
(7,987)
(9,748)
—
Proceeds from exercise of common stock options
14,461
752
25,432
Net cash (used by) provided by financing activities
(258)
79,165
142,867
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash
(2,029)
1,657
(159)
Net (decrease) increase in cash, cash equivalents, and restricted cash
(30,799)
(1,030)
46,421
Cash, cash equivalents, and restricted cash at beginning of period
149,351
150,381
103,960
Cash, cash equivalents, and restricted cash at end of period
$
118,552
$
149,351
$
150,381
Supplemental cash flow information:
Cash paid for interest
$
22,574
$
16,906
$
1,671
Cash paid for income taxes
$
3,334
$
3,999
$
1,239
Supplemental non-cash investing and financing information:
Accrued capital expenditures
$
155
$
654
$
1,774
The accompanying notes are an integral part of these consolidated financial statements.
74
APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Description of Business
Appian Corporation (together with its subsidiaries, “Appian,” the “Company,” “we,” or “our”) is a software company that orchestrates
business processes. The Appian Platform empowers leaders to design, automate, and optimize important processes from start to finish. With
our industry-leading platform and commitment to customer success, Appian is trusted by top organizations to drive transformational process
change.
We are headquartered in McLean, Virginia and operate both in the U.S. and internationally including Australia, Canada, France, Germany,
India, Italy, Japan, Mexico, the Netherlands, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.
2. Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements and footnotes have been prepared in accordance with accounting principles
generally accepted in the United States (“U.S. GAAP”) as contained in the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”). The accompanying consolidated financial statements include the accounts of Appian and its wholly-owned
subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of our consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that
affect the amounts reported in these consolidated financial statements and accompanying notes. Although we believe the estimates we use
are reasonable, due to the inherent uncertainty involved in making these estimates, actual results reported in future periods could differ from
those estimates.
Significant estimates embedded in the consolidated financial statements include, but are not limited to, revenue recognition, income
taxes and the related valuation allowance established against deferred tax assets, the amortization period of deferred commissions, the
amortization period of the cost to obtain the judgment preservation insurance policy (as discussed in Note 13), lease impairments, and stock-
based compensation.
Revenue Recognition
Refer to Note 3 for a detailed discussion on specific revenue recognition principles related to our major revenue streams.
Concentration of Credit and Customer Risk
Our financial instruments exposed to concentration of credit and customer risk consist primarily of cash, cash equivalents, accounts
receivable, and our short-term investments. Deposits held with banks may exceed the amount of insurance provided on such deposits;
however, we believe the financial institutions holding our cash deposits are financially sound and, accordingly, minimal credit risk exists with
respect to these balances.
With regard to our customers, credit evaluation and account monitoring procedures are used to minimize the risk of loss. Revenue
generated from government agencies represented 32.2%, 29.1%, and 26.1% of our revenue for the years ended December 31, 2024, 2023,
and 2022, respectively, of which the top three U.S. federal government agencies generated 4.0%, 4.2%, and 4.5% of our revenue for the
years ended December 31, 2024, 2023, and 2022, respectively. Additionally, 36.6%, 35.8%, and 33.5% of our revenue during the years
ended December 31, 2024, 2023, and 2022, respectively, was generated from international customers. No single customer accounted for
more than 10% of our total revenue during the years ended December 31, 2024, 2023, and 2022. As of December 31, 2024, we had one
reseller whose balance comprised 17.5% of total accounts receivable.
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APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Cash, Cash Equivalents, and Restricted Cash
We consider all highly liquid investments with original maturities of three months or less, as well as overnight repurchase agreements, to
be cash equivalents. Restricted cash consisted of cash designated to settle an escrow liability stemming from a holdback agreement related
to our acquisition of Lana Labs GmbH. We paid the remaining amount owed on August 11, 2023.
The following table presents a reconciliation of cash, cash equivalents, and restricted cash as presented in the consolidated statements
of cash flows (in thousands):
Year Ended December 31,
2024
2023
2022
Cash and cash equivalents
$
118,552
$
149,351
$
148,132
Restricted cash, current
—
—
2,249
Total cash, cash equivalents, and restricted cash
$
118,552
$
149,351
$
150,381
Accounts Receivable and Allowance for Expected Credit Losses
Accounts receivable and unbilled revenue are stated at realizable value, net of an allowance for expected credit losses. The allowance is
based on our assessment of the collectability of accounts and incorporates an estimation of expected lifetime credit losses on our
receivables. We regularly review the composition of the accounts receivable aging, historical bad debts, changes in payment patterns,
customer creditworthiness, current economic trends, and reasonable economic forecasts that affect collectibility. If the financial condition of
our customers were to deteriorate, resulting in their inability to make required payments, additional provisions for doubtful accounts would
be required and would increase bad debt expense.
Activity in the allowance for doubtful accounts was as follows (in thousands):
Year Ended December 31,
2024
2023
2022
Beginning balance
$
2,606
$
2,125
$
1,400
Additions: Charged to costs and expenses
1,760
1,091
1,298
Deductions: Write-offs, net of recoveries
(970)
(610)
(573)
Ending balance
$
3,396
$
2,606
$
2,125
Deferred Commissions
We capitalize costs of obtaining a contract with a customer, which consist of sales commissions paid to our sales team, and the
associated incremental payroll taxes. These costs are recorded as deferred commissions in the consolidated balance sheets. Costs to obtain a
contract for a new customer or upsell an existing customer are amortized over an estimated economic life of five years as sales commissions
on these types of activities are not commensurate with sales commissions on contract renewals. Commissions paid relating to contract
renewals are deferred and amortized over the related renewal period. We determine the estimated economic life based on both qualitative
and quantitative factors such as expected renewals, product life cycles, contractual terms, and customer attrition. We periodically review the
carrying amount of deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could
impact the estimated economic life. Costs to obtain a contract for professional services arrangements are expensed as incurred as the
contractual period of our professional services arrangements are one year or less.
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APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Amortization associated with deferred commissions is recorded to sales and marketing expense in our consolidated statements of
operations. The following table summarizes the activity of costs to obtain a contract with a customer for the years ended December 31,
2024, and 2023 (in thousands):
Year Ended December 31,
2024
2023
Beginning balance
$
94,025
$
85,984
Additional contract costs deferred
44,770
53,894
Amortization of deferred contract costs
(41,625)
(45,853)
Ending balance
$
97,170
$
94,025
Commission expense was $50.4 million, $46.8 million, and $39.4 million for the years ended December 31, 2024, 2023, and 2022,
respectively.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets. Significant additions or improvements extending the useful life of an asset are capitalized, while
repairs and maintenance costs which do not significantly improve the related assets or extend their useful lives are charged to expense as
incurred. The estimated useful lives of our property and equipment are generally 3 years for computer software, computer hardware, and
internally developed software, 5 years for equipment, and 10 years for office furniture and fixtures. Leasehold improvements have an
estimated useful life of the shorter of the useful life of the assets or the lease term.
Impairment of Goodwill and Long-Lived Assets
Long-lived tangible assets and intangible assets with definite useful lives are reviewed for impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not be recoverable through undiscounted cash flows from the use of the assets.
If such assets are considered to be impaired, the assets are written down to their estimated fair value.
Goodwill is accounted for at the segment level and allocated to, and tested for impairment at, a level referred to as the reporting unit.
We have determined our one segment consists of a single reporting unit. We test for impairment annually on the first day of the fourth
quarter or between annual tests if events or changes in circumstances indicate the fair value of our reporting unit may be below its carrying
amount. We have the option to qualitatively assess whether it is more likely than not the fair value our reporting unit is less than its carrying
value. If we elect to perform a qualitative assessment and conclude it is more likely than not the fair value of the reporting unit is equal to or
greater than its carrying value, no further assessment of that reporting unit’s goodwill is necessary; otherwise, goodwill must be tested for
impairment.
When performing the quantitative test, we determine the fair value of the reporting unit and compare it to the carrying amount,
including goodwill. If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, the reporting unit’s goodwill is
impaired, and we must recognize an impairment loss for the difference between the carrying amount and the fair value of the reporting unit.
We estimate the fair value of our reporting unit using a market-based valuation methodology, which is primarily based on our consolidated
market capitalization.
In 2024, our qualitative assessment concluded the fair value of our reporting unit is more likely than not higher than its carrying value.
Therefore, we did not perform a quantitative assessment. No goodwill impairment was identified in the years ended December 31, 2024,
2023, and 2022.
77
APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock-Based Compensation
Compensation expense related to stock-based awards is calculated by determining the estimated fair value of the award on the grant
date. We calculate the fair value of stock options containing only a service condition using the Black-Scholes option pricing model. The fair
value of restricted stock units (“RSUs”) is based on the closing market price of our common stock on the Nasdaq Global Market on the date
of grant. For service-based awards such as RSUs, stock-based compensation expense is recognized on a straight-line basis over the requisite
service period. For awards that contain market conditions, compensation expense is measured using a Monte Carlo simulation and
recognized using the accelerated attribution method over the derived service period based on the expected market performance as of the
grant date. We account for forfeitures as they occur rather than estimating expected forfeitures.
Leases
We combine lease and non-lease components and account for them as a single lease component for our facility leases. The discount
rates related to our lease liabilities are based on estimates of our incremental borrowing rate on a secured basis, as the discount rates
implicit in our lease agreements cannot be readily determined.
Basic and Diluted Loss per Common Share
We compute net loss per common share using the two-class method required for multiple classes of common stock and participating
securities. The rights, including the liquidation and dividend rights, of the Class A common stock and Class B common stock are substantially
identical, other than voting and conversion rights. Accordingly, the Class A common stock and Class B common stock share equally in our net
losses.
Basic net loss per common share is computed by dividing net loss by the weighted-average number of shares of common shares
outstanding during the period. Diluted net loss per common share is computed similar to basic, except the weighted average number of
common shares outstanding is increased to include additional outstanding shares from the assumed exercise of stock options and vesting of
RSUs, if dilutive. The dilutive effect, if any, of convertible shares is calculated using the treasury stock method. As we reported net losses for
all periods presented, all outstanding shares would be considered antidilutive if they were assumed to be vested or exercised.
Income Taxes
We use the asset and liability method of accounting for income taxes in which deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recoverable or settled. We recognize the effect on deferred tax
assets and liabilities of a change in tax rates as income and expense in the period that includes the enactment date. A valuation allowance is
established if it is more likely than not that all or a portion of the deferred tax asset will not be realized.
Our tax positions are subject to income tax audits by multiple tax jurisdictions throughout the world. We recognize the tax benefit of an
uncertain tax position only if it is more likely than not the position is sustainable upon examination by the taxing authority. We measure the
tax benefit recognized as the largest amount of benefit which is more likely than not to be realized upon settlement with the taxing authority.
We recognize penalties and interest related to unrecognized tax benefits as income tax expense.
We calculate the current and deferred income tax provision based on estimates and assumptions that could differ from the actual results
reflected in income tax returns filed in subsequent years and record adjustments based on filed income tax returns when identified. The
amount of income taxes paid is subject to examination by U.S. federal, state, and foreign tax authorities. The estimate of the potential
outcome of any uncertain tax issue is subject to our assessment of relevant risks, facts, and circumstances existing at that time. To the
extent the
78
APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
assessment of such tax position changes, we record the change in estimate in the period in which we make that determination.
Foreign Currency
Our operations located outside of the United States where the local currency is the functional currency are translated into U.S. dollars
using the current rate method. Results of operations are translated at the average rate of exchange for the period. Assets and liabilities are
translated at the closing rates on the balance sheet date. Gains and losses on translation of these accounts are accumulated and reported as
a separate component of stockholders’ equity and other comprehensive loss.
Gains and losses on foreign currency transactions are recognized in the accompanying consolidated statements of operations as a
component of ‘Other expense (income), net’. Gains and losses from transactions denominated in foreign currencies resulted in net
transaction losses of $16.8 million, net transaction gains of $8.7 million, and net transaction losses of $6.1 million for the years ended
December 31, 2024, 2023, and 2022, respectively.
Research and Development Expenses
Research and development expenses include payroll, employee benefits, and other headcount-related costs associated with product
development. Our product utilizes a common codebase, whether accessed by customers via the cloud or via an on-premises installation.
Since our software is sold and licensed externally, we consider our software as external-use software for purposes of applying the capitalized
software development guidance. Product development costs are expensed as incurred until technological feasibility has been established,
which is defined as the completion of all planning, designing, coding, and testing activities necessary to establish products that meet design
specifications including functions, features, and technical performance requirements. We have determined technological feasibility for our
software products is reached shortly before they are released for sale. Costs incurred after technological feasibility is established are not
significant, and accordingly we expense all research and development costs when incurred.
Severance Costs
Severance costs related to benefits provided in accordance with mutually understood and ongoing agreements are recognized when an
obligation has been incurred, it is probable the benefits will be paid, and the amount to be paid can be reasonably estimated. Severance
costs totaled $5.5 million and $6.3 million for the years ended December 31, 2024 and 2023, respectively. No severance costs were incurred
related to an involuntary reduction in our workforce for the year ended December 31, 2022. The majority of the severance liability was paid
to the impacted employees by December 31, 2024.
Advertising Expenses
We expense advertising costs as they are incurred. Advertising expenses were $3.9 million, $4.2 million, and $5.8 million for the years
ended December 31, 2024, 2023, and 2022, respectively.
Treasury Stock
We account for treasury stock under the cost method. In 2024, we reissued treasury stock to satisfy employee stock option exercises
and the vesting of restricted stock units as well as for issuances of common stock to our Board of Directors. Because we are in an
accumulated deficit position, all reissuances of treasury stock have been recorded as a decrease to additional-paid-in-capital in our
consolidated balance sheets.
79
APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Recent Accounting Pronouncements
Adopted
In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvement to
Reportable Segment Disclosures, which enhances the disclosure requirements for operating segments in our annual and interim consolidated
financial statements. The new guidance is effective for us beginning with our annual reporting for fiscal year 2024 and for interim period
reporting beginning in fiscal year 2025 and will be applied on a retrospective basis. The new ASU requires public companies to disclose
significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a
reportable segment’s profit or loss and assets that are currently required annually. Additionally, it requires public companies to disclose the
title and position of the Chief Operating Decision Maker. The ASU does not change how a public entity identifies its operating segments,
aggregates them, or applies the quantitative thresholds to determine its reportable segments. This guidance also applies to public entities
that have only one segment. This ASU only impacted our disclosures with no impacts to our results of operations, cash flows, and financial
condition. Refer to Note 14 for further details.
Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Tax (Topic 740): Improvement to Income Tax Disclosures, which requires
public companies to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into
specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified
threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local,
and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. The new guidance will be
effective for our annual reporting for fiscal year 2025 on a prospective basis with the option to apply the standard retrospectively. Early
adoption is permitted. This ASU will only impact our disclosures with no impacts to our results of operations, cash flows and financial
condition.
In March 2024, the SEC issued its final climate disclosure rule, which requires the disclosure of material Scope 1 and Scope 2
greenhouse gas emissions and other climate-related topics in annual reports if they are reasonably likely to have a material impact on the
Company’s business. For large accelerated filers, disclosure requirements will begin phasing in for fiscal years beginning on or after January
1, 2025. Subsequent to issuance, the rules became the subject of litigation, and the SEC has issued a stay to allow the legal process to
proceed. We are currently evaluating the impact these rules will have on our financial statements and related disclosures and will monitor the
litigation progress for possible impacts on the disclosure requirements under the rules.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation
Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires more detailed disclosures of certain categories
of expenses such as employee compensation, depreciation, and intangible asset amortization that are components of existing expense
captions presented on the face of the income statement. The new guidance will be effective beginning with our annual reporting for fiscal
year 2027 and for interim period reporting beginning in fiscal year 2028. Companies have the option to apply the guidance either on a
retrospective or prospective basis, and early adoption is permitted. We are currently evaluating the impact this standard will have on our
financial statement presentation and disclosures.
3. Revenue
Revenue Recognition
We generate subscriptions revenue primarily through the sale of cloud subscriptions bundled with maintenance and support and hosting
services as well as term license subscriptions bundled with maintenance and support. We generate professional services revenue from fees
for our consulting services, including application development and deployment assistance as well as training related to our platform.
80
APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes revenue recorded during the years ended December 31, 2024, 2023, and 2022 (in thousands):
Year Ended December 31,
2024
2023
2022
Cloud subscriptions
$
368,030
$
304,481
$
236,922
Term license subscriptions
92,188
82,282
79,753
Maintenance and support
30,350
25,574
23,477
Total subscriptions
490,568
412,337
340,152
Professional services
126,454
133,026
127,839
Total revenue
$
617,022
$
545,363
$
467,991
Performance Obligations and Timing of Revenue Recognition
We primarily sell products and services that fall into the categories discussed below. Each category contains one or more performance
obligations that are either (1) capable of being distinct (i.e., the customer can benefit from the product or service on its own or together with
readily available resources, including those purchased separately from us) and distinct within the context of the contract (i.e., separately
identified from other promises in the contract) or (2) a series of distinct products or services that are substantially the same and have the
same pattern of transfer to the customer. Our term license subscriptions are delivered at a point in time while our cloud subscriptions,
maintenance and support, and professional services are delivered over time.
Subscriptions Revenue
Subscriptions revenue is primarily related to (1) cloud subscriptions bundled with maintenance and support and hosting services and
(2) term license subscriptions bundled with maintenance and support. We generally charge subscription fees on a per-user basis or through
non-user-based single application licenses. We bill customers and collect payment for subscriptions to our platform in advance on an annual,
quarterly, or monthly basis. In certain instances, our customers have paid their entire contract up front.
Cloud Subscriptions
We generate cloud-based subscriptions revenue primarily from the sales of subscriptions to access our cloud offering, together with
related support services to our customers. We perform all required maintenance and support for our cloud offering. Revenue is recognized
on a ratable basis over the contract term beginning on the date the service is made available to the customer. Our cloud-based subscription
contracts generally have a term of one to three years in length. We bill customers and collect payment for subscriptions to our platform in
advance, and they are non-cancellable.
Term License Subscriptions
Our term license subscriptions revenue is derived from customers with on-premises installations of our platform. The majority of our
term license contracts are one year in length. Although term license subscriptions are sold with maintenance and support, the software is
fully functional at the beginning of the subscription and is considered a distinct performance obligation. If a cloud-based subscription
includes the right for the customer to take possession of the license, the revenue is treated as a term license. Revenue from term license
subscriptions is recognized when control of the software license has transferred to the customer, which is the later of delivery or
commencement of the contract term.
Maintenance and Support
Maintenance and support subscriptions include both technical support and when-and-if-available software upgrades, which are treated as
a single performance obligation as they are considered a series of distinct services
81
APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
that are substantially the same and have the same duration and measure of progress. Revenue from maintenance and support is recognized
ratably over the contract period, which is the period over which the customer has continuous access to maintenance and support.
Professional Services Revenue
Our professional services revenue is comprised of fees for consulting services, including application development and deployment
assistance as well as training services related to our platform. Our professional services are considered distinct performance obligations when
sold standalone or with other products.
Consulting Services
We sell consulting services to assist customers in planning and executing the deployment of our software. Customers are not required to
use consulting services to fully benefit from the software. Consulting services are regularly sold on a standalone basis and most often as
either (1) under a fixed-fee arrangement or (2) on a time and materials basis. We also sell advisory services on a subscription basis to
support customers or partners with their development and deployment. Consulting services contracts are considered separate performance
obligations because they do not integrate with each other or with other products and services to deliver a combined output to the customer,
do not modify or customize (or are not modified or customized by) each other or other products and services, and do not affect the
customer's ability to use other consulting offerings or other products and services. Revenue under consulting contracts is recognized over
time as services are delivered. Revenue from subscription-based consulting contracts is recognized ratably over the contract period. For time
and materials-based consulting contracts, we have elected the practical expedient of recognizing revenue upon invoicing since the invoiced
amount corresponds directly to the value of our service to date.
Training Services
We sell various training services to our customers. Training services are sold in the form of prepaid training credits that are redeemed
based on a fixed rate per course. Training revenue is recognized when the associated training services are delivered.
Significant Judgments and Estimates
Determining the Transaction Price
The transaction price is the total amount of consideration we expect to receive in exchange for the service offerings in a contract and
may include both fixed and variable components. Variable consideration is included in the transaction price to the extent it is probable a
significant reversal will not occur. The amount of variable consideration excluded from the transaction price for the years ended December
31, 2024, 2023, and 2022 was immaterial. Our estimates of variable consideration are also subject to subsequent true-up adjustments and
may result in changes to transaction prices; however, such true-up adjustments are not expected to be material.
Allocating the Transaction Price Based on Standalone Selling Prices (“SSP”)
We allocate the transaction price to each performance obligation in a contract based on its relative SSP. The SSP is the observable price
at which we sell the product or service separately. In the absence of observable pricing, we estimate SSP using the residual approach. We
establish SSP as follows:
1.
Cloud subscriptions - Given the highly variable selling price of our cloud subscriptions, we establish the SSP of our cloud
subscriptions using a residual approach after first determining the SSP of consulting and training services. We have concluded the residual
approach to estimating the SSP of our cloud subscriptions is an appropriate allocation of the transaction price.
2.
Term license subscriptions - Given the highly variable selling price of our term license subscriptions, we have established the SSP of
term license subscriptions using a residual approach after first determining the SSP of
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APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
maintenance and support. Maintenance and support is sold on a standalone basis in conjunction with renewals of our legacy perpetual
software licenses and within a narrow range of the net license fee. Because an economic relationship exists between the license and
maintenance and support, we have concluded the residual approach to estimating the SSP of term license subscriptions is an appropriate
allocation of the transaction price.
3.
Maintenance and support - We establish the SSP of maintenance and support as a percentage of the stated net subscription fee
based on observable pricing of maintenance and support renewals from our legacy perpetual software licenses.
4.
Consulting and training services - The SSP of consulting and training services is established based on the observable pricing of
standalone sales within each geographic region where the services are sold.
Contract Balances
Timing may differ between the satisfaction of performance obligations and the invoicing and collection of amounts related to our
contracts with customers. Contract assets primarily relate to unbilled amounts for contracts with customers for which the amount of revenue
recognized exceeds the amount billed to the customer. Contract assets are transferred to accounts receivable when the right to invoice
becomes unconditional. Contract liabilities consist of deferred revenue and include payments received in advance of the satisfaction of
performance obligations. Deferred revenue is then recognized as the revenue recognition criteria are met. Deferred revenue that will be
recognized during the succeeding 12-month period is recorded as current, and the remaining deferred revenue is recorded as non-current.
The following table sets forth contract asset and contract liability balances as of December 31, 2024, 2023, and 2022 (in thousands):
As of December 31,
2024
2023
2022
Contract assets, current
$
12,933
$
12,052
$
12,540
Contract assets, non-current
643
915
1,720
Total contract assets
$
13,576
$
12,967
$
14,260
Deferred revenue, current
$
281,760
$
235,992
$
194,768
Deferred revenue, non-current
5,477
4,700
5,556
Total contract liabilities
$
287,237
$
240,692
$
200,324
Current and non-current contract assets are reported as components of the ‘Prepaid expenses and other current assets’ and ‘Other assets’ line items, respectively, in our
consolidated balance sheets.
Revenue recognized from amounts included in contract liabilities at the beginning of the period totaled $234.5 million, $196.5 million,
and $147.0 million for the years ended December 31, 2024, 2023, and 2022, respectively.
Transaction Price Allocated to the Remaining Performance Obligations
As of December 31, 2024, we had an aggregate transaction price of $546.0 million allocated to unsatisfied performance obligations. We
expect to recognize $360.0 million of this balance as revenue over the next 12 months with the remaining amount recognized thereafter.
4. Leases
As of December 31, 2024, our lease portfolio consists entirely of operating leases for corporate offices. Our operating leases have
remaining lease terms with various expiration dates through 2031, and some leases include options to extend the term for up to an
additional 10 years.
*
*
*
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APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Right-of-Use (“ROU”) Assets and Lease Liabilities
At the inception of an arrangement, we determine whether the arrangement is or contains a lease based on the unique facts and
circumstances present and the classification of the lease. Operating leases with a term greater than one year are recognized on the
consolidated balance sheets as ROU assets, lease liabilities, and long-term lease liabilities. ROU assets represent our right to use an
underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. We have
elected not to recognize on our consolidated balance sheets leases with a term of one year or less.
Lease liabilities and their corresponding ROU assets are recorded based on the present value of lease payments over the expected lease
term. The implicit rates within most of our leases are generally not determinable; therefore, we estimate our incremental borrowing rate to
determine the present value of lease payments. The determination of our incremental borrowing rate requires judgment and is estimated for
each lease based on the rate we would have to pay for a collateralized loan with the same terms as the lease. We consider various factors,
including our level of collateralization, estimated credit rating, and the currency in which the lease is denominated. Operating lease ROU
assets also include any lease prepayments, offset by lease incentives. Certain of our leases include options to extend or terminate the lease.
An option to extend the lease is considered in connection with determining the ROU asset and lease liability when it is reasonably certain we
will exercise that option.
Lease Costs
Expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense. We have lease
agreements which require payments for lease and non-lease components (i.e., common area maintenance) that are accounted for as a
single lease component. Variable lease payment amounts that cannot be determined at the commencement of the lease such as
maintenance costs, utilities, and service charges are not included in right-of-use (“ROU”) assets or lease liabilities but rather are expensed as
incurred and recorded as variable lease expense. We often receive customary incentives from our landlords such as tenant improvement
allowances (“TIAs”) and rent abatement periods, which effectively reduce total lease payments owed for the leases.
The following table sets forth the components of lease expense for the years ended December 31, 2024, 2023, and 2022 (in thousands,
exclusive of sublease income):
Year Ended December 31,
2024
2023
2022
Operating lease cost
$
9,519
$
9,056
$
6,950
Short-term lease cost
1,513
1,444
583
Variable lease cost
5,238
4,230
3,817
Total
$
16,270
$
14,730
$
11,350
Sublease income totaled $1.3 million, $1.3 million, and $0.4 million for the years ended December 31, 2024, 2023, and 2022
respectively.
Lease Impairment Charges
In connection with headcount reductions approved in June 2024 and our continued efforts to streamline operations and maximize
efficiencies, we initiated supplemental actions to reduce the footprint of our leased office spaces. Pursuant to these initiatives, we amended
and extended the terms of our existing sublease agreement and are seeking a sublease for an additional floor within our corporate
headquarters facility.
During the year ended December 31, 2024, we recorded non-cash lease impairment charges of $5.5 million within general and
administrative expenses in our consolidated statements of operations. These charges represented the amount the carrying value of two asset
groups, consisting of two separate floors within our corporate headquarters facility, exceeded their estimated fair values. The fair values of
the two asset groups were
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APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
measured using discounted cash flow models based on market rents and sublease incomes projected over the remaining lease terms. No
impairment charges were incurred during the years ended December 31, 2023 and 2022.
Supplemental Lease Information
Supplemental balance sheet information related to operating leases as of December 31, 2024 and 2023 is presented in the following
table (in thousands, except for lease term and discount rate):
As of December 31,
2024
2023
Right-of-use assets for operating leases
$
31,081
$
39,975
Operating lease liabilities, current
$
12,378
$
11,698
Operating lease liabilities, net of current portion
52,189
59,067
Total operating lease liabilities
$
64,567
$
70,765
Weighted average remaining lease term (in years)
6.5
7.4
Weighted average discount rate
9.4 %
9.4 %
Supplemental cash flow and expense information related to operating leases for the years ended December 31, 2024, 2023, and 2022 is
shown below (in thousands):
Year Ended December 31,
2024
2023
2022
Operating cash outflows for operating leases
$
12,179
$
8,865
$
7,073
Amortization of operating lease ROU assets
3,179
2,676
1,495
Interest expense on operating lease liabilities
6,340
6,380
5,406
No TIA reimbursements were received during the year ended December 31, 2024. For each of the years ended December 31, 2023 and
2022, TIA reimbursements totaled $2.6 million.
A summary of our future minimum lease commitments under non-cancellable leases as of December 31, 2024 is shown below (in
thousands):
Operating Leases
2025
$
12,898
2026
13,219
2027
13,469
2028
12,420
2029
11,968
Thereafter
22,871
Total lease payments
86,845
Less: imputed interest
(22,278)
Total
$
64,567
85
APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Goodwill and Intangible Assets
The following table details the changes in goodwill during the fiscal years ended December 31, 2024 and 2023 (in thousands):
Carrying Amount
Balance as of December 31, 2022
$
26,349
Foreign currency translation adjustments
757
Balance as of December 31, 2023
27,106
Foreign currency translation adjustments
(1,551)
Balance as of December 31, 2024
$
25,555
Intangible assets, net consisted of the following as of December 31, 2024 and 2023 (in thousands):
As of December 31,
2024
2023
Developed technology
$
6,685
$
7,091
Customer relationships
896
950
Intangible assets, gross
7,581
8,041
Less: Accumulated amortization
(5,341)
(4,152)
Intangible assets, net
$
2,240
$
3,889
Intangible amortization expense was $1.5 million for each of the years ended December 31, 2024, 2023, and 2022. As of December 31,
2024, the weighted average remaining amortization periods for developed technology and customer relationships were approximately 1.7
years and 6.3 years, respectively.
The following table shows the projected annual amortization expense related to amortizable intangible assets as of December 31, 2024
(in thousands):
Year Ended
December 31,
2025
$
1,135
2026
730
2027
90
2028
90
2029
90
Thereafter
105
Total projected amortization expense
$
2,240
86
APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Property and Equipment, net
Property and equipment, net consisted of the following as of December 31, 2024 and 2023 (in thousands):
As of December 31,
2024
2023
Leasehold improvements
$
54,088
$
53,313
Office furniture and fixtures
4,445
3,825
Computer software and hardware
9,363
10,491
Internally developed software
545
—
Equipment
191
194
Work in process
619
—
Property and equipment, gross
69,251
67,823
Less: Accumulated depreciation
(32,142)
(25,141)
Property and equipment, net
$
37,109
$
42,682
Depreciation expense totaled $8.5 million, $8.0 million, and $5.8 million for the years ended December 31, 2024, 2023, and 2022,
respectively. During the years ended December 31, 2024, 2023, and 2022, we disposed of or retired $1.3 million, $1.4 million, and $1.0
million worth of fully depreciated property and equipment, respectively.
7. Accrued Expenses
Accrued expenses consisted of the following as of December 31, 2024 and 2023 (in thousands):
As of December 31,
2024
2023
Hosting costs
$
3,047
$
2,973
Contract labor costs
1,043
600
Marketing and tradeshow expenses
1,728
685
Audit and tax fees
1,029
1,499
Taxes payable
1,285
1,261
Legal costs
289
103
Reimbursable employee expenses
1,569
880
Third party license fees
668
678
Capital expenditures
66
644
Other accrued expenses
664
1,723
Total accrued expenses
$
11,388
$
11,046
8. Debt
Senior Secured Credit Facilities Credit Agreement
We have a Senior Secured Credit Facilities Credit Agreement (the “Credit Agreement”) which provides for a five-year term loan facility in
an aggregate principal amount of $200.0 million and, in addition, up to $100.0 million for a revolving credit facility, including a letter of credit
sub-facility in the aggregate availability amount of $20.0 million and a swingline sub-facility in the aggregate availability amount of
$10.0 million (as a sublimit of the revolving loan facility). The Credit Agreement matures on November 3, 2027. We have been using the
proceeds to fund the growth of our business and support our working capital requirements.
87
APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Under the agreement, we may elect whether amounts drawn bear interest on the outstanding principal amount at a rate per annum
equal to either (a) the higher of the Prime rate or the Federal Funds Effective rate (“Base Rate”) plus 0.5% or (b) the forward-looking term
rate based on the secured overnight financing rate (“Term SOFR”). An additional interest rate margin is added to the elected interest rates.
During the first three years of the Credit Agreement, the additional interest rate margin ranges from 1.5% to 2.5% in the case of Base Rate
advances or from 2.5% to 3.5% in the case of Term SOFR advances, depending on our debt to recurring revenue leverage ratio (as defined
in the Credit Agreement). During the final two years of the Credit Agreement, the interest rate margin ranges from 0.5% to 2.5% in the case
of Base Rate advances and from 1.5% to 3.5% in the case of Term SOFR advances, depending on our debt to consolidated adjusted EBITDA
leverage ratio (as defined in the Credit Agreement).
In addition, the Credit Agreement contains other customary representations, warranties, and covenants, including covenants by us
limiting additional indebtedness, guarantees, liens, fundamental changes, mergers and consolidations, dispositions of assets, investments,
paying dividends on capital stock or redeeming, repurchasing or retiring capital stock, prepaying certain junior indebtedness and preferred
stock, certain corporate changes, and transactions with affiliates. The Credit Agreement also provides for customary events of default,
including but not limited to non-payment, breaches, or defaults in the performance of covenants, insolvency, bankruptcy, and the occurrence
of a material adverse effect on us.
The following table summarizes outstanding debt balances as of December 31, 2024 and 2023 (in thousands):
As of December 31,
2024
2023
Borrowings under revolving credit facility
$
62,000
$
62,000
Secured term loan facility
189,563
145,813
Less: Debt issuance costs
(1,139)
(1,224)
Total debt, net of debt issuance costs
$
250,424
$
206,589
Debt, current
$
9,598
$
66,368
Long-term debt
240,826
140,221
Total debt
$
250,424
$
206,589
Deferred debt issuance costs associated with the term loan facility are recorded net of the debt obligation and amortized to interest expense over the term of the Credit
Agreement.
The following table summarizes the annual maturities of the principal amount of total debt due as of December 31, 2024 (in thousands):
Year Ended December
31,
2025
$
10,000
2026
10,000
2027
231,563
Total
$
251,563
As of December 31, 2024, we were in compliance with all covenants contained in the Credit Agreement. In addition, we had
$62.0 million outstanding borrowings under our $100.0 million revolving credit facility, and we had outstanding letters of credit totaling
$14.6 million in connection with securing our leased office space.
(1)
(1)
88
APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Income Taxes
For the years ended December 31, 2024, 2023, and 2022, our loss before income taxes was comprised of the following (in thousands):
Year Ended December 31,
2024
2023
2022
Domestic
$
(55,183)
$
(89,925)
$
(102,434)
Foreign
(36,025)
(18,307)
(47,794)
Total
$
(91,208)
$
(108,232)
$
(150,228)
For the years ended December 31, 2024, 2023, and 2022, our income tax expense was comprised of the following (in thousands):
Year Ended December 31,
2024
2023
2022
Current:
Federal
$
(10)
$
34
$
72
State
149
223
119
Foreign
1,864
4,523
1,409
Total current expense
2,003
4,780
1,600
Deferred:
Federal
—
—
—
State
—
—
—
Foreign
(949)
(1,571)
(908)
Total deferred benefit
(949)
(1,571)
(908)
Total income tax expense
$
1,054
$
3,209
$
692
89
APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2024, 2023, and 2022, the provision for income taxes differs from the amount computed by applying
the federal statutory income tax rates to our loss before the provision for income taxes as follows:
Year Ended December 31,
2024
2023
2022
U.S. federal statutory tax rate
21.0 %
21.0 %
21.0 %
State tax expense
4.3
3.8
4.1
Foreign rate differential
(4.0)
(3.1)
(3.3)
Nondeductible expenses
(1.0)
(0.7)
(0.3)
Foreign tax expense
0.1
(0.4)
0.3
Equity compensation
3.7
(2.4)
1.0
Tax credits
7.3
9.5
4.7
Unrecognized tax benefits
(1.5)
(1.8)
(0.9)
Global intangible low-taxed income
(3.0)
—
—
Change in tax rate
0.8
(0.9)
0.3
Other
(0.5)
0.2
(0.5)
Return to provision
3.3
—
—
Deferred adjustments
(1.4)
(3.0)
(0.8)
Change in valuation allowance
(30.3)
(25.2)
(26.1)
Total
(1.2)%
(3.0)%
(0.5)%
The effective tax rate of (1.2)% in 2024 includes $27.6 million of tax expense attributable to the change in the valuation allowance in the
United States and Switzerland, partially offset by $6.7 million of favorable tax benefits for research credits. In 2023, the effective tax rate of
(3.0)% included $27.3 million of tax expense attributable to the change in the valuation allowance in the United States and Switzerland,
partially offset by $10.3 million of favorable tax benefits for research credits. In 2022, the effective tax rate of (0.5)% included $39.2 million
of tax expense attributable to the change in the valuation allowance in the United States, Switzerland, and Germany partially offset by
$8.6 million of favorable tax benefits for research credits.
90
APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amount of the assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes.
As of December 31, 2024 and 2023, significant components of our deferred tax assets and liabilities were as follows (in thousands):
As of December 31,
2024
2023
Deferred tax assets:
Net operating losses
$
107,170
$
103,299
Tax credits
34,885
29,582
Deferred revenue
521
861
Equity compensation
3,994
4,879
Lease liabilities
17,465
18,822
Accrued compensation
3,225
3,323
Bad debt
502
447
Other accrued expense
318
218
Capitalized research and development costs
45,820
35,047
Other
4,033
1,369
Gross deferred tax assets
217,933
197,847
Less: Valuation allowance
(187,969)
(161,966)
Total deferred tax assets
29,964
35,881
Deferred tax liabilities:
Prepaid expenses
(13,298)
(16,505)
Right-of-use assets
(8,406)
(10,626)
Depreciation
(3,245)
(3,779)
Intangible assets
(688)
(1,179)
Other
(198)
(341)
Total deferred tax liabilities
(25,835)
(32,430)
Net deferred tax assets
$
4,129
$
3,451
As of December 31, 2024 and 2023, we had $287.5 million and $295.9 million, respectively, of gross net operating loss (“NOL”)
carryforwards for U.S. federal tax purposes. U.S. federal NOL carryforwards in the gross amount of $16.6 million and generated prior to 2018
will expire, if unused, in 2037. Under the Tax Cuts and Jobs Act of 2017 (the “TCJA”), as modified by the Coronavirus Aid, Relief, and
Economic Security Act (the “CARES Act”), federal NOL carryforwards generated in tax years beginning after December 31, 2017 may be
carried forward indefinitely. As of December 31, 2024, we had $270.9 million of gross NOL carryforwards generated after 2017 for U.S.
federal tax purposes, which may be used to offset 80% of our taxable income annually.
Section 382 of the Internal Revenue Code limits the utilization of NOL carryforwards when ownership changes occur, as defined by that
section. A number of states have similar state laws that limit utilization of state NOL carryforwards when ownership changes occur. We have
performed an analysis of our Section 382 ownership changes and have determined all U.S. federal and state NOL carryforwards are available
for use as of December 31, 2024.
Beginning in 2022, the TCJA eliminated the option to deduct research and development expenditures immediately in the year incurred
and requires companies to amortize such expenditures over five or fifteen years for tax purposes, depending on whether the activities were
incurred in the U.S. or outside of the U.S. The new research and development expenditures rules resulted in a tax-effected deferred tax asset
(before valuation allowance) of approximately $45.8 million and $35.0 million as of December 31, 2024 and 2023, respectively. Due
91
APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
to the full valuation allowance recorded against our U.S. deferred tax assets, there was no impact to net deferred tax assets. Additionally,
there was no cash tax impact for 2024 due to our ability to use NOL carryforwards to fully offset taxable income generated by the changes to
research and development expenditures.
As of December 31, 2024 and 2023, we had $32.5 million and $27.2 million, respectively, of U.S. federal tax credit carryforwards which
will expire, if unused, between 2031 and 2044.
As of December 31, 2024 and 2023, we had U.S. gross state NOL carryforwards of $297.5 million and $306.8 million, respectively. We
had tax-effected state NOL carryforwards of $17.8 million and $17.0 million as of December 31, 2024 and 2023, respectively. The rules
regarding carryforwards vary from state to state, and the ability to utilize NOLs varies based on timing and amount. The majority of state
NOL carryforwards generated prior to 2018 will expire, if unused, in 2037. Due to the TCJA, certain state NOL carryforwards generated after
2017 have an indefinite carryforward period.
As of December 31, 2024 and 2023, we had foreign gross NOL carryforwards of $230.1 million and $192.3 million, respectively, primarily
attributable to our subsidiary in Switzerland. We had tax-effected foreign NOL carryforwards of $29.0 million and $21.8 million as of
December 31, 2024 and 2023, respectively. In 2024, $1.0 million of tax-effected Swiss NOLs expired related to the 2017 tax year. An
additional portion of those NOL carryforwards will expire each year, if unused, between 2025 and 2031.
As of December 31, 2024 and 2023 we had a total valuation allowance of $188.0 million and $162.0 million, respectively. The following
table summarizes the activity related to our valuation allowances for the years ended December 31, 2024, 2023, and 2022 (in thousands):
Year Ended December 31,
2024
2023
2022
Beginning balance
$
161,966
$
132,581
$
94,399
Charged to expense
27,605
27,267
39,203
Foreign currency translation adjustments
(1,602)
2,118
(1,021)
Deductions from reserve
—
—
—
Ending balance
$
187,969
$
161,966
$
132,581
As of December 31, 2024, we continued to maintain a full valuation allowance against U.S. deferred tax assets based on our cumulative
operating results as of December 31, 2024, three-year cumulative loss, and an assessment of our expected future results of operations. We
have evaluated all evidence, both positive and negative, in assessing the likelihood of realizability, and we determined the negative evidence
outweighed the positive evidence.
As of December 31, 2024, we have a valuation allowance of $26.2 million against foreign deferred tax assets at our subsidiary in
Switzerland. Based on our cumulative operating results as of December 31, 2024 and assessment of our expected future results of
operations, we determined it was not more likely than not we would be able to realize the deferred tax assets prior to expiration.
We plan to distribute previously undistributed earnings of our foreign subsidiaries back to the United States in future years. Upon
repatriation of those earnings, if any, we may be subject to taxes, including withholding taxes, net of any applicable foreign tax credits.
Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable.
92
APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2024 and 2023, we had unrecognized tax benefits of $7.8 million and $6.5 million, respectively, none of which would
affect our effective tax rate if recognized due to the valuation allowance. The following table summarizes the activity related to our
unrecognized tax benefit from December 31, 2021 to December 31, 2024 (in thousands):
Balance as of December 31, 2021
$
3,089
Additions for tax positions in current years
1,399
Additions for tax positions in prior years
—
Reductions due to lapse in statutes of limitations
—
Settlements
—
Balance as of December 31, 2022
4,488
Additions for tax positions in current years
1,740
Additions for tax positions in prior years
256
Reductions due to lapse in statutes of limitations
—
Settlements
—
Balance as of December 31, 2023
6,484
Additions for tax positions in current years
1,374
Reductions for tax positions in prior years
(18)
Reductions due to lapse in statutes of limitations
—
Settlements
—
Balance as of December 31, 2024
$
7,840
We recognize interest and penalties related to uncertain tax positions in income tax expense. Our uncertain tax positions primarily relate
to federal research and development tax credits. During the years ended December 31, 2024, 2023, and 2022, we recognized nominal
amounts in interest. The cumulative balances of interest and penalties as of December 31, 2024 and 2023 were immaterial. We anticipate
total unrecognized tax benefits will not decrease over the next year.
We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. Due to the NOL carryforward, tax
years 2016 through 2024 remain open to examination by the major taxing jurisdictions to which we are subject. There are no open
examinations that would have a meaningful impact to our consolidated financial statements.
10. Stock-Based Compensation
Equity Incentive Plans
In May 2017, our Board of Directors adopted, and our stockholders approved, the 2017 Equity Incentive Plan (the “2017 Plan”). The
2017 Plan provides for the grant of incentive stock options to employees and for the grant of nonstatutory stock options, restricted stock
awards, restricted stock units (“RSUs”), stock appreciation rights, performance-based stock awards, and other forms of equity compensation
to employees, including officers, non-employee directors, and consultants. We initially reserved 6,421,442 shares of Class A common stock
for issuance under the 2017 Plan, which included 421,442 shares that remained available for issuance under our 2007 Stock Option Plan (the
“2007 Plan”) at the time the 2017 Plan became effective. The number of shares reserved under the 2017 Plan increases for any shares
subject to outstanding awards originally granted under the 2007 Plan that expire or are forfeited prior to exercise. As a result of the adoption
of the 2017 Plan, no further grants may be made under the 2007 Plan. As of December 31, 2024, there were 7,196,533 shares of Class A
common stock reserved for issuance under the 2017 Plan, of which 2,009,200 are still available to be issued.
93
APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock Options
In June 2022, our Board of Directors granted a stock option to purchase 700,000 shares of our Class A common stock to our Chief
Executive Officer (the “2022 CEO Grant”) under the 2017 Plan with an exercise price of $50.63 per share. The 2022 CEO Grant is eligible to
vest based on the achievement of various stock price appreciation targets of our Class A common stock. Specifically, the 2022 CEO Grant
vests in four installments of 25% each if the average closing price per share for a 365 day calendar period equals or exceeds each of $175,
$200, $225, and $250, respectively (the “Vesting Price Threshold”), prior to June 7, 2030. The option also vests if the Company engages in a
Corporate Transaction, as defined in the Plan, in which the Company’s Class A common stock is valued at or above the Vesting Price
Threshold. The fair value of the 2022 CEO Grant was determined using a Monte Carlo simulation. The fair value of the award at the grant
date was $18.8 million and is being amortized over derived service periods ranging from 3.4 years to 4.1 years.
The only stock option awarded during the years ended December 31, 2024, 2023, and 2022 was the 2022 CEO Grant. The following
table summarizes the assumptions used to estimate the fair value of the 2022 CEO stock option grant:
Year Ended December 31,
2024
2023
2022
Risk-free interest rate
*
*
3.01%
Expected term (in years)
*
*
**
Expected volatility
*
*
70.00%
Expected dividend yield
*
*
—%
* Not applicable because no stock options were granted during the period.
** Each Vesting Price Threshold for the 2022 CEO grant has a unique expected term ranging from 3.4 years to 4.1 years.
94
APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes stock option activity for the years ended December 31, 2024, 2023, and 2022:
Number of Shares
Weighted Average
Exercise Price
Weighted Average
Remaining
Contractual Term (in
years)
Aggregate Intrinsic
Value (in thousands)
Outstanding at December 31, 2021
2,953,356
$
15.16
4.0
$
147,812
Granted
700,000
50.63
Exercised
(937,217)
27.14
32,858
Expired
(7,900)
4.06
Forfeited
(10,280)
12.28
Outstanding at December 31, 2022
2,697,959
20.25
5.1
45,862
Granted
—
—
Exercised
(98,610)
7.56
3,387
Expired
—
—
Forfeited
—
—
Outstanding at December 31, 2023
2,599,349
20.73
4.2
53,089
Granted
—
—
Exercised
(1,543,436)
9.37
36,383
Expired
(384)
12.00
Forfeited
—
—
Outstanding at December 31, 2024
1,055,529
$
37.34
5.6
$
7,751
Exercisable at December 31, 2024
355,529
$
11.18
2.1
$
7,751
No stock options were vested during the year ended December 31, 2024 and 2023. The total fair value of stock options that vested
during the year ended December 31, 2022 was $0.9 million. As of December 31, 2024, the total compensation cost related to unvested stock
options not yet recognized, which relates exclusively to the 2022 CEO Grant, was $5.9 million. This amount will be recognized over a
remaining weighted average period of 1.22 years.
95
APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Restricted Stock Units
The following table summarizes RSU activity for the years ended December 31, 2024, 2023, and 2022:
Number of Shares
Weighted Average
Grant Date Fair
Value
Non-vested and outstanding at December 31, 2021
1,209,529
$
70.99
Granted
606,203
52.63
Vested
(403,648)
58.63
Forfeited
(221,364)
70.30
Non-vested and outstanding at December 31, 2022
1,190,720
65.97
Granted
710,278
42.52
Vested
(668,119)
58.64
Forfeited
(154,815)
62.73
Non-vested and outstanding at December 31, 2023
1,078,064
55.52
Granted
987,528
35.61
Vested
(657,897)
52.04
Forfeited
(261,535)
45.81
Non-vested and outstanding at December 31, 2024
1,146,160
$
42.59
As of December 31, 2024, total unrecognized compensation cost related to unvested RSUs was approximately $32.1 million, which will
be recognized over a weighted average period of 1.5 years.
The following table summarizes the components of our stock-based compensation expense by instrument type for the years ended
December 31, 2024, 2023, and 2022 (in thousands):
Year Ended December 31,
2024
2023
2022
RSUs
$
33,267
$
37,563
$
35,290
Stock options
5,059
5,045
2,790
Common stock awards to Board of Directors
719
779
750
Total stock-based compensation expense
$
39,045
$
43,387
$
38,830
The following table summarizes stock-based compensation expense by line item in the accompanying consolidated statements of
operations for the years ended December 31, 2024, 2023, and 2022 (in thousands):
Year Ended December 31,
2024
2023
2022
Cost of revenue
Subscriptions
$
848
$
925
$
996
Professional services
5,674
6,055
5,309
Operating expenses
Sales and marketing
8,200
10,842
9,152
Research and development
11,716
12,486
12,523
General and administrative
12,607
13,079
10,850
Total stock-based compensation expense
$
39,045
$
43,387
$
38,830
96
APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Stockholders' Equity
We have authorized 500,000,000 shares of Class A common stock and 100,000,000 shares of Class B common stock, each with a par
value of $0.0001 per share. As of December 31, 2024, our shares of Class A common stock, which are publicly traded on the Nasdaq Global
Market, totaled 42,938,701 issued and outstanding while our shares of Class B common stock, which are not publicly traded, totaled
31,090,085 issued and outstanding. The rights of the holders of Class A common stock and Class B common stock are identical except with
respect to voting and conversion rights. The holders of Class A common stock are entitled to one vote per share, and the holders of Class B
common stock are entitled to ten votes per share on all matters subject to stockholder vote. The holders of Class B common stock also have
approval rights for certain corporate actions. Each share of Class B common stock may be converted into one share of Class A common stock
at the option of its holder and will be automatically converted upon transfer thereof, subject to certain exceptions. In addition, upon the date
on which the outstanding shares of Class B common stock represent less than 10% of the aggregate voting power of our capital stock, all
outstanding shares of Class B common stock will convert automatically into Class A common stock.
12. Basic and Diluted Loss per Common Share
The following table sets forth the computation of basic and diluted net loss per share for the years ended December 31, 2024, 2023, and
2022 (in thousands, except share and per share data):
Year Ended December 31,
2024
2023
2022
Numerator:
Net loss
$
(92,262)
$
(111,441)
$
(150,920)
Denominator:
Weighted average common shares outstanding, basic and diluted
72,988,064
73,102,470
72,455,175
Net loss per share, basic and diluted
$
(1.26)
$
(1.52)
$
(2.08)
Due to net losses for the years ended December 31, 2024, 2023, and 2022, basic and diluted net loss per share were equal as the effect
of potentially dilutive securities would have been antidilutive.
The following outstanding securities, prior to the use of the treasury stock method, have been excluded from the computation of diluted
weighted-average shares outstanding for the respective periods below because they would have been antidilutive to earnings per share:
Year Ended December 31,
2024
2023
2022
Stock options
1,055,529
2,599,349
2,697,959
Non-vested restricted stock units
1,146,160
1,078,064
1,190,720
13. Commitments, Contingencies, and Other Matters
Minimum Purchase Commitments
We have a non-cancellable cloud hosting arrangement with Amazon Web Services (“AWS”) that contains provisions for minimum
purchase commitments. Specifically, purchase commitments under the agreement total $220.0 million over five years. The agreement, which
was originated in July 2021 and amended in October 2024, currently contains minimum annual spending requirements of $44.0 million from
November 2024 to October 2029. Spending under this agreement for the years ended December 31, 2024, 2023, and 2022 totaled
$41.2 million, $36.6 million, and $33.1 million, respectively. The timing of payments under the agreement may vary. We expect to meet our
minimum annual spending requirement during the term of the arrangement.
97
APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Exclusive of the AWS contract, we have other non-cancellable agreements for subscription software products that contain provisions
stipulating minimum purchase commitments. However, the annual purchase commitments under these contracts are, individually and in the
aggregate, immaterial to our consolidated financial statements.
Pegasystems Litigation
On May 29, 2020, we filed a civil complaint against Pegasystems, Inc. (“Pegasystems”) and Youyong Zou, a Virginia resident, in the
Circuit Court for Fairfax County, Virginia. Appian Corp v. Pegasystems Inc. & Youyong Zou, No. 2020-07216 (Fairfax Cty. Ct.). On May 10,
2022, we announced the jury awarded us $2.036 billion in damages for misappropriation of our trade secrets and $1 in damages for violating
the Virginia Computer Crimes Act. Pegasystems filed several post-trial motions seeking relief in the form of reducing the damages award or
setting aside the jury’s verdict and either granting a new trial or entering judgment in Pegasystems’ favor. All of these motions were denied,
and final judgment was entered by the Court on September 15, 2022. The final judgment reaffirmed the $2.036 billion in damages and also
ordered Pegasystems to pay Appian $23.6 million in attorney's fees associated with the case as well as statutory post-judgment interest on
the judgment at an annual rate of 6%, or approximately $122.0 million per year.
Defendant Youyong Zou has satisfied the judgment of $5,000 (plus interest) against him in lieu of appealing that judgment. On
September 15, 2022, Pegasystems filed a notice of appeal to the Court of Appeals of Virginia. On July 30, 2024, the Court of Appeals of
Virginia issued a decision reversing the judgment against Pegasystems and remanding for a new trial. The decision rejected Pegasystems’
argument that Appian had not presented evidence that trade secrets were misappropriated but reversed the judgment on the basis of
evidentiary and damages rulings made by the trial court. On August 29, 2024, Appian submitted a petition to the Supreme Court of Virginia
seeking to reverse the Court of Appeals decision and reinstate the full judgment against Pegasystems. Pegasystems filed an opposition to the
petition and cross-issues for appeal on October 21, 2024. Appian's petition was heard on February 11, 2025. The timeline for rendering a
decision is solely in the control of the Supreme Court.
We cannot predict the outcome of any appeals or the exact time it will take to resolve them.
Judgment Preservation Insurance
On September 1, 2023, we entered into a Judgment Preservation Insurance (“JPI”) policy in connection with our $2.036 billion judgment
against Pegasystems. The total cost of the policy was $57.3 million and is comprised of the premium, a one-time broker fee, and Virginia
lines tax. The policy provides up to $500.0 million of coverage.
The total cost of the policy was capitalized and is being amortized on a straight-line basis over the estimated length of the appeals
process. We currently estimate the total length of the appeals process (solely for amortization purposes) to be approximately four years. This
estimate is reviewed each reporting period. Amortization expense associated with the JPI premium is recorded to general and administrative
expenses in our consolidated statements of operations. JPI amortization expense was $15.8 million and $6.0 million for the years ended
December 31, 2024 and 2023, respectively. As of December 31, 2024, $12.5 million of the unamortized balance is classified as ‘Prepaid
expenses and other current assets’ while the remaining $22.9 million is classified as ‘Other assets’ on our consolidated balance sheets.
Other Legal Matters
From time to time, we are subject to legal, regulatory, and other proceedings and claims that arise in the ordinary course of business.
Other than as disclosed elsewhere in this Annual Report, we are not presently a party to any legal proceedings that, if determined adversely
to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition, or cash
flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of
management resources, and other factors.
98
APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Share Repurchase Program
In February 2024, our Board of Directors authorized a program to repurchase up to $50.0 million of our common stock from March 2024
to February 2026. In March 2024, we repurchased 1.3 million shares under this program at an average share price of $37.86, totaling an
aggregate cost of $50.0 million. As of December 31, 2024, shareholders’ equity included 74.0 million shares outstanding, and all treasury
shares were reissued.
14. Segment and Geographic Information
Operating segments are defined as components of an enterprise for which discrete financial information is available that is evaluated
regularly by the chief operating decision maker (“CODM”) for purposes of allocating resources and evaluating financial performance. We have
determined our CODM is our Chief Executive Officer.
We have one operating and one reportable segment, representing our consolidated business that helps organizations design, automate,
and optimize important business processes from start to finish. We generate revenue from customers primarily through the sale of cloud and
term subscriptions bundled with maintenance and support as well as professional services revenue from fees for our consulting services and
training related to our platform. Our reportable segment determination is based on our management and internal reporting structure, the
nature of the subscriptions and services we offer, and the financial information evaluated regularly by our CODM.
The CODM uses operating loss and net loss reported on the consolidated statements of operations to assess performance for the
segment and decide how to allocate resources. In addition, the CODM reviews the expense categories presented on the consolidated
statements of operations to manage the Company’s operations. Operating loss and net loss are used to evaluate profitability trends in the
business, and the CODM considers budget-to-actual variances for both profit measures when making decisions about allocating capital and
resources. Further, the measure of segment assets is total assets as reported on the consolidated balance sheets.
The following table summarizes revenue by geography for the years ended December 31, 2024, 2023, and 2022 (in thousands):
Year Ended December 31,
2024
2023
2022
Domestic
$
391,002
$
350,210
$
311,075
International
226,020
195,153
156,916
Total
$
617,022
$
545,363
$
467,991
With respect to geographic information, revenue is attributed to respective geographies based on the contracting address of the
customer. The value of our long-lived assets, which are comprised of property and equipment and intangible assets with finite lives as well as
right-of-use assets, held in the United States and internationally as of December 31, 2024 were $29.6 million and $9.8 million, respectively.
As of December 31, 2023, our long-lived assets held in the United States and internationally were $34.0 million and $12.6 million,
respectively.
99
APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Retirement Plans
We have a defined contribution 401(k) retirement and savings plan (the “Plan”) to provide retirement benefits for all eligible employees.
With limited exceptions, all employees over the age of 21 on the first day of the month immediately following the month of hiring are eligible
to participate in the Plan. The Plan allows eligible employees to make salary-deferred contributions up to 75% of their pre-tax annual
compensation, as defined in the Plan, as long as the total contributed does not exceed the annual maximum allowable amount under the
Internal Revenue Code. The Company makes a semi-monthly matching contribution of 100% of the employee's contribution for that pay
period, up to a maximum of 4% of the employee's eligible gross compensation for that pay period. Company contributions vest ratably based
on years of service over a four year period, beginning with the completion of the first year of service. For the years ended December 31,
2024, 2023, and 2022, we incurred $12.8 million, $12.9 million, and $11.5 million, respectively, in contribution expense related to employer
matching contributions.
16. Investments and Fair Value Measurements
Fair Value Measurements
U.S. GAAP establishes a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a
recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial
measurement. The hierarchy requires us to use observable inputs when available and to minimize the use of unobservable inputs when
determining fair value. The three tiers are defined as follows:
•
Level 1 - Observable inputs based on unadjusted quoted prices in active markets for identical assets or liabilities;
•
Level 2 - Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
•
Level 3 - Unobservable inputs for which there is little or no market data, and which require us to develop our own estimates and
assumptions reflecting those that a market participant would use.
The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is
significant to the fair value measurement. Valuation techniques maximize the use of relevant observable inputs and minimize the use of
unobservable inputs. There were no instruments measured at fair value on a recurring basis using significant unobservable inputs during the
years ended December 31, 2024 and 2023.
The valuation techniques that may be used to measure fair value are as follows:
•
Market approach - Uses prices and other relevant information generated by market transactions involving identical or comparable
assets or liabilities;
•
Income approach - Uses valuation techniques to convert future amounts to a single present amount based on current market
expectations about those future amounts; and
•
Cost approach - Based on the amount that currently would be required to replace the service capacity of an asset (i.e., replacement
cost).
The carrying amounts of our accounts receivable, accounts payable, and accrued expenses approximate fair value as of December 31,
2024 and 2023 because of the relatively short duration of these instruments. Additionally, the carrying value of our debt associated with the
term loan facility approximates fair value because the interest rates are variable and reset on relatively short durations to then-market rates.
100
APPIAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Investments
Our investment portfolio consists largely of debt investments classified as available-for-sale. Changes in the fair value of available-for-
sale securities, excluding other-than-temporary impairments, have been recorded in ‘Accumulated other comprehensive loss’ in our
consolidated balance sheets. The components of our investments as of December 31, 2024 and 2023 are as follows (in thousands):
As of December 31, 2024
Fair Value Measurement
Balance Sheet Classification
Fair Value Level
Cost Basis
Unrealized Gains
(Losses)
Fair Value
Cash and Cash
Equivalents
Short-term
Investments and
Marketable
Securities
Cash
Level 1
$
106,338
$
—
$
106,338
$
106,338
$
—
Money market fund
Level 1
12,214
—
12,214
12,214
—
U.S. Treasury bonds
Level 1
24,376
26
24,402
—
24,402
Commercial paper
Level 2
2,974
3
2,977
—
2,977
Corporate bonds
Level 2
13,900
29
13,929
—
13,929
Total investments
$
159,802
$
58
$
159,860
$
118,552
$
41,308
As of December 31, 2023, our investments consisted of the following (in thousands):
As of December 31, 2023
Fair Value Measurement
Balance Sheet Classification
Fair Value Level
Cost Basis
Unrealized Gains
(Losses)
Fair Value
Cash and Cash
Equivalents
Short-Term
Investments and
Marketable
Securities
Cash
Level 1
$
93,029
$
—
$
93,029
$
93,029
$
—
Money market fund
Level 1
56,322
—
56,322
56,322
—
U.S. Treasury bonds
Level 1
4,830
(2)
4,828
—
4,828
Agency bonds
Level 2
4,828
(3)
4,825
—
4,825
Total investments
$
159,009
$
(5)
$
159,004
$
149,351
$
9,653
There were no Level 3 assets held at any point during the years ended December 31, 2024 and 2023. Additionally, there were no
transfers between Levels 1 and 2 during the years ended December 31, 2024 and 2023. Interest income on our investments totaled
$6.8 million, $9.0 million, and $0.9 million for the years ended December 31, 2024, 2023, and 2022, respectively.
The contractual maturities of our debt securities as of December 31, 2024 and 2023 are all one year or less. Actual maturities may differ
from contractual maturities because borrowers have the right to call or prepay certain obligations.
101
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act that are
designed to ensure information required to be disclosed by a company in the reports it files or submits under the Exchange Act is recorded,
processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure information required to be disclosed by a company in the reports it
files or submits under the Exchange Act is accumulated and communicated to its management, including its principal executive and principal
financial officers, as appropriate to allow timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer and our Interim Chief Financial Officer, evaluated the effectiveness
of our disclosure controls and procedures as of December 31, 2024. Based on the evaluation of our disclosure controls and procedures as of
December 31, 2024, our Chief Executive Officer and Interim Chief Financial Officer concluded, as of such date, our disclosure controls and
procedures were effective at the reasonable assurance level.
Management's Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is
defined in Rules 13a-15(f) and 15(d)-15(f) of the Exchange Act. Our management assessed the effectiveness of our internal control over
financial reporting as of December 31, 2024 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) in Internal Control - Integrated Framework (2013). Based on this assessment, management concluded that, as of
December 31, 2024, our internal control over financial reporting was effective.
The Annual Report on Form 10-K includes an attestation report of our independent registered public accounting firm regarding internal
control over financial reporting, which appears in Part II, Item 8 of this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
There have been no material changes in our internal control over financial reporting that occurred during the quarter ended
December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Interim Chief Financial Officer, believes our disclosure controls and
procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are
effective at the reasonable assurance level. However, our management does not expect our disclosure controls and procedures or our
internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance the objectives of the control system are met. Further, the design of a control system
must reflect the fact there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of
fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that
breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the controls. The design of any system
102
of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance any design
will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of
changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-
effective control system, misstatements due to error or fraud may occur and not be detected.
Item 9B. Other Information.
The information set forth below is included herein for purposes of providing disclosure under Form 8-K.
Rule 10b5-1 Trading Plans
The adoption or termination of contracts, instructions, or written plans for the purchase or sale of our securities by our Section 16
officers and directors for the three months ended December 31, 2024, each of which is intended to satisfy the affirmative defense conditions
of Rule 10b5-1(c) under the Exchange Act (“Rule 10b5-1 Plan”), were as follows:
Name
Title
Action
Date Adopted
Expiration Date
Aggregate # of
Securities to be
Purchased/Sold
Robert Kramer
General Manager and Director
Adoption
12/3/2024
3/5/2026
236,382
Robert Kramer, General Manager and a member of the Board of Directors, entered into a prearranged stock trading plan pursuant to Rule 10b5-1 on December 3, 2024. Mr.
Kramer’s plan provides for the potential sale of up to 236,382 shares of Appian Class A common stock. The plan commences on March 6, 2025 and expires on the earlier of the
completion of all authorized transactions under the plan or March 5, 2026.
Other than disclosed above, none of our directors or officers adopted or terminated a "non-Rule 10b5-1 trading arrangement" as defined
in Item 408 of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None.
(1)
(1)
103
Part III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this item is incorporated by reference to our Proxy Statement for our 2025 Annual Meeting of Stockholders
to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2024.
We have adopted a Code of Conduct, applicable to all of our employees, executive officers, and directors. The Code of Conduct is
available on our website at www.appian.com. We expect any amendments to the Code of Conduct or any waivers of its requirement will be
disclosed on our website as required by applicable law or the listing standards of the Nasdaq Global Market. The information contained on, or
that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K or in any other report or
document we file with the SEC, and any references to our website are intended to be inactive textual references only.
We have adopted an insider trading policy governing the purchase, sale, and/or other dispositions of our securities by our directors,
officers, and employees that we believe is reasonably designed to promote compliance with insider trading laws, rules and regulations, and
the exchange listing standards applicable to us. A copy of our insider trading policy is filed as Exhibit 19 to this Annual Report on Form 10-K.
Item 11. Executive Compensation.
The information required by this item is incorporated by reference to our Proxy Statement for our 2025 Annual Meeting of Stockholders
to be filed with the SEC within 120 days after the end of the year ended December 31, 2024.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this item is incorporated by reference to our Proxy Statement for our 2025 Annual Meeting of Stockholders
to be filed with the SEC within 120 days after the end of the year ended December 31, 2024.
Item 13. Certain Relationships and Related Transactions and Director Independence.
The information required by this item is incorporated by reference to our Proxy Statement for our 2025 Annual Meeting of Stockholders
to be filed with the SEC within 120 days after the end of the year ended December 31, 2024.
Item 14. Principal Accountant Fees and Services.
The information required by this item is incorporated by reference to our Proxy Statement for our 2025 Annual Meeting of Stockholders
to be filed with the SEC within 120 days after the end of the year ended December 31, 2024.
104
Part IV
Item 15. Exhibits and Financial Statement Schedules.
(a) The following documents are filed as part of this Annual Report on Form 10-K:
(1) Consolidated Financial Statements and Report of Independent Registered Public Accounting Firm (BDO USA, P.C.; McLean, Virginia;
PCAOB ID #243) are shown in the Index to Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
(2) All financial statement schedules are omitted because they are not applicable or the required information is shown in the financial
statements or notes thereto.
(3) Exhibits are incorporated herein by reference or are filed with this Annual Report on Form 10-K as indicated below.
(b) Exhibits
Exhibit No.
Description
Reference
3.1
Amended and Restated Certificate of
Incorporation of Appian Corporation.
Previously filed as Exhibit 3.2 to Amendment No. 3 to the Company’s Registration
Statement on Form S-1 (File No. 333-217510), filed with the Securities and Exchange
Commission on May 12, 2017, and incorporated herein by reference.
3.2
Amended and Restated Bylaws of Appian
Corporation.
Previously filed as Exhibit 3.4 to Amendment No. 2 to the Company’s Registration
Statement on Form S-1 (File No. 333-217510), filed with the Securities and Exchange
Commission on May 10, 2017, and incorporated herein by reference.
4.1
Form of Class A common stock certificate of
Appian Corporation.
Previously filed as Exhibit 4.1 to Amendment No. 3 to the Registrant’s Registration
Statement on Form S-1 (File No. 333-217510), filed with the Securities and Exchange
Commission on May 12, 2017, and incorporated herein by reference.
4.2
Description of Securities.
Previously filed as Exhibit 4.3 to the Company’s Annual Report on 10-K (File No. 001-
38098), filed with the Securities and Exchange Commission on February 17, 2022, and
incorporated herein by reference.
10.1
2007 Stock Option Plan and Form of Option
Agreement and Exercise Notice thereunder, as
amended to date.
Previously filed as Exhibit 10.1 to the Company’s Registration Statement on Form S-1
(File No. 333-217510), filed with the Securities and Exchange Commission on April 27,
2017, and incorporated herein by reference.
10.2
2017 Equity Incentive Plan and Forms of Stock
Option Agreement, Notice of Exercise and Stock
Option Grant Notice thereunder.
Previously filed as Exhibit 10.2 to Amendment No. 2 to the Company’s Registration
Statement on Form S-1 (File No. 333-217510), filed with the Securities and Exchange
Commission on May 10, 2017, and incorporated herein by reference.
10.3
2017 Equity Incentive Plan French Qualifying Sub-
Plan, with Forms of Restricted Stock Unit Grant
Notice and Restricted Stock Unit Award
Agreement thereunder.
Previously filed as Exhibit 10.14 to the Company’s Annual Report on Form 10-K (File
No. 001-38098), filed with the Securities and Exchange Commission on February 23,
2018, and incorporated herein by reference.
10.4
2017 Equity Incentive Plan CSOP Sub-Plan for UK
Eligible Employees, with Forms of CSOP Stock
Option Grant Notice and CSOP Option Agreement
thereunder.
Previously filed as Exhibit 10.15 to the Company’s Annual Report on Form 10-K (File
No. 001-38098), filed with the Securities and Exchange Commission on February 23,
2018, and incorporated herein by reference.
+
+
+
+
105
10.5
Forms of Restricted Stock Unit Grant Notices and
Restricted Stock Unit Award Agreements under
2017 Equity Incentive Plan.
Previously filed as Exhibit 10.12 to the Company’s Annual Report on Form 10-K (File
No. 001-38098), filed with the Securities and Exchange Commission on February 23,
2018, and incorporated herein by reference.
10.6
Forms of Restricted Stock Award Grant Notice and
Restricted Stock Award Agreement under 2017
Equity Incentive Plan.
Previously filed as Exhibit 10.13 to the Company’s Annual Report on Form 10-K (File
No. 001-38098), filed with the Securities and Exchange Commission on February 23,
2018, and incorporated herein by reference.
10.7
Appian Corporation Employee Stock Purchase
Plan.
Previously filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q (File
No. 001-38098) filed with the Securities and Exchange Commission on August 5,
2021, and incorporated herein by reference.
10.8
Agreement on the Sale and Transfer of Shares
dated as of August 4, 2021, by and among Appian
Europe Ltd., and each of the Sellers and
Managers identified therein.
Previously filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q (File
No. 001-38098) filed with the Securities and Exchange Commission on November 4,
2021, and incorporated herein by reference.
10.9
Non-Employee Director Compensation Plan, as
amended December 16, 2020.
Previously filed as Exhibit 10.3 to the Company’s Annual Report on 10-K (File No. 001-
38098), filed with the Securities and Exchange Commission on February 18, 2021,
and incorporated herein by reference.
10.10
Form of Indemnification Agreement by and
between Appian Corporation and each of its
directors and executive officers.
Previously filed as Exhibit 10.4 to Amendment No. 2 to the Company’s Registration
Statement on Form S-1 (File No. 333-217510), filed with the Securities and Exchange
Commission on May 10, 2017, and incorporated herein by reference.
10.11
Senior Executive Cash Incentive Bonus Plan.
Previously filed as Exhibit 10.11 to the Company’s Annual Report on Form 10-K (File
No. 001-38098), filed with the Securities and Exchange Commission on February 23,
2018, and incorporated herein by reference.
10.12
Employment Agreement, dated as of September
7, 2012, by and between Appian Corporation and
Matthew Calkins.
Previously filed as Exhibit 10.5 to the Company’s Registration Statement on Form S-1
(File No. 333-217510), filed with the Securities and Exchange Commission on April 27,
2017, and incorporated herein by reference.
10.13
Form of Amended and Restated Employment
Agreement, dated as of April 27, 2017, by and
between Appian Corporation and Chris Winters.
Previously filed as Exhibit 10.7 to the Company’s Registration Statement on Form S-1
(File No. 333-217510), filed with the Securities and Exchange Commission on April 27,
2017, and incorporated herein by reference.
10.14
Employment Agreement, dated as of September
7, 2012, by and between Appian Corporation and
Robert Kramer.
Previously filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q (File
No. 001-38098) filed with the Securities and Exchange Commission on May 7, 2020,
and incorporated herein by reference.
10.15
Employment Agreement, dated as of March 31,
2020, by and between Appian Corporation and
Pavel Zamudio-Ramirez .
Previously filed as Exhibit 10.16 to the Company’s Annual Report on Form 10-K (File
No. 001-38098) filed with the Securities and Exchange Commission on February 16,
2023, and incorporated herein by reference.
10.16
Employment Agreement, dated as of April 2,
2022, by and between Appian Corporation and
Mark Matheos.
Previously filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File
No. 001-38098) filed with the Securities and Exchange Commission on May 5, 2022,
and incorporated herein by reference.
10.17
Letter of Engagement dated October 10, 2024 by
and between Appian Corporation and Mark
Lynch.
Previously filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File
No. 001-38098) filed with the Securities and Exchange Commission on November 7,
2024, and incorporated herein by reference.
+
+
+
+
+
+
+
+
+
+
+
+
106
10.18
Deed of Lease, dated April 17, 2018, between
Appian Corporation and Tamares 7950 Owner
LLC.
Previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No.
001-38098), filed with the Securities and Exchange Commission on April 23, 2018,
and incorporated herein by reference.
10.19
First Amendment to Deed of Lease, dated
December 23, 2019, between Appian Corporation
and Tamares 7950 Owner LLC.
Previously filed as Exhibit 10.15 to the Company's Annual Report on Form 10-K (File
No. 001-38098), filed with the Securities and Exchange Commission on February 20,
2020, and incorporated herein by reference.
10.20
Second Amendment to Deed of Lease, effective as
of January 1, 2020, between Appian Corporation
and Tamares 7950 Owner LLC.
Previously filed as Exhibit 10.16 to the Company's Annual Report on Form 10-K (File
No. 001-38098), filed with the Securities and Exchange Commission on February 20,
2020, and incorporated herein by reference.
10.21
Third Amendment to Deed of Lease, dated as of
November 30, 2021, between Appian Corporation
and Tamares 7950 Owner LLC.
Previously filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K (File
No. 001-38098), filed with the Securities and Exchange Commission on February 17,
2022, and incorporated herein by reference.
10.22
Agreement of Sublease, dated as of November
30, 2021, between Appian Corporation and
Octagon, Inc.
Previously filed as Exhibit 10.22 to the Company's Annual Report on Form 10-K (File
No. 001-38098), filed with the Securities and Exchange Commission on February 17,
2022, and incorporated herein by reference.
10.23
Software Enterprise OEM License Agreement,
dated as of June 15, 2016, by and between
Appian Corporation and Kx Systems, Inc.
Previously filed as Exhibit 10.11 to the Company’s Registration Statement on Form S-1
(File No. 333-217510), filed with the Securities and Exchange Commission on April 27,
2017, and incorporated herein by reference.
10.24
Addendum No. 1 to Software Enterprise OEM
License Agreement, dated as of August 20, 2019,
by and between Appian Corporation and Kx
Systems, Inc.
Previously filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q (File
No. 001-38098) filed with the Securities and Exchange Commission on October 31,
2019, and incorporated herein by reference.
10.25
Addendum No. 2 to Software Enterprise OEM
License Agreement, dated as of August 31, 2023,
by and between Appian Corporation and Kx
Systems, Inc.
Previously filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File
No. 001-38098) filed with the Securities and Exchange Commission on November 2,
2023, and incorporated herein by reference.
10.26
Senior Secured Credit Facilities Credit Agreement,
dated as of November 3, 2022, by and among
Appian Corporation, Wells Fargo Bank, National
Association, Comerica Bank, and Silicon Valley
Bank.
Previously filed as Exhibit 10.27 to the Company’s Annual Report on Form 10-K (File
No. 001-38098) filed with the Securities and Exchange Commission on February 16,
2023, and incorporated herein by reference.
10.27
Joinder and First Amendment to Credit
Agreement, dated as of December 13, 2022, by
and among Appian Corporation, MUFG Bank, Ltd.,
Wells Fargo Bank, National Association, Comerica
Bank, and Silicon Valley Bank.
Previously filed as Exhibit 10.28 to the Company’s Annual Report on Form 10-K (File
No. 001-38098) filed with the Securities and Exchange Commission on February 16,
2023, and incorporated herein by reference
10.28
Joinder and Second Amendment to Credit
Agreement, dated as of February 21, 2023, by
and among Appian Corporation, MUFG Bank, Ltd.,
Wells Fargo Bank, National Association, Comerica
Bank, Customers Bank, and Silicon Valley Bank.
Previously filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File
No. 001-38098) filed with the Securities and Exchange Commission on May 9, 2023,
and incorporated herein by reference.
†
107
10.29
Third Amendment to Credit Agreement, dated as
of June 13, 2023, by and among Appian
Corporation, MUFG Bank, Ltd., Wells Fargo Bank,
National Association, Comerica Bank, Customers
Bank, and Silicon Valley Bank, a division of First-
Citizens Bank & Trust Company (successor by
purchase to the Federal Deposit Insurance
Corporation as receiver for Silicon Valley Bridge
Bank, N.A. (as successor to Silicon Valley Bank)).
Previously filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File
No. 001-38098) filed with the Securities and Exchange Commission on August 3,
2023, and incorporated herein by reference.
10.30
Joinder and Fourth Amendment to Credit
Agreement, dated as of February 12, 2024, by
and among Appian Corporation, Silicon Valley
Bank, a division of First-Citizens Bank & Trust
Company, MUFG Bank, Ltd., Wells Fargo Bank,
N.A., Comerica Bank, Customers Bank, The
Toronto-Dominion Bank, New York Branch, and
The Bank of Nova Scotia.
Previously filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File
No. 001-38098) filed with the Securities and Exchange Commission on May 2, 2024,
and incorporated herein by reference.
10.31
Fifth Amendment to Credit Agreement, dated as
of March 12, 2024, by and among Appian
Corporation, Silicon Valley Bank, a division of
First-Citizens Bank & Trust Company, Wells Fargo
Bank, N.A., Comerica Bank, MUFG Bank, Ltd.,
Customers Bank, The Toronto-Dominion Bank,
New York Branch, and The Bank of Nova Scotia.
Previously filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File
No. 001-38098) filed with the Securities and Exchange Commission on May 2, 2024,
and incorporated herein by reference.
10.32
Employment Agreement, dated as of November
20, 2024, by and between Appian Corporation
and Mark Dorsey.
Filed herewith.
19
Insider Trading Policy.
Filed herewith.
21.1
Subsidiaries of Appian Corporation.
Filed herewith.
23.1
Consent of BDO USA, P.C., independent registered
public accounting firm.
Filed herewith.
24.1
Power of Attorney. Reference is made to the
signature page hereto.
Filed herewith.
31.1
Certification of Principal Executive Officer
Pursuant to Rules 13a-14(a) and 15d-14(a) under
the Securities Exchange Act of 1934, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
Filed herewith.
31.2
Certification of Principal Financial Officer Pursuant
to Rules 13a-14(a) and 15d-14(a) under the
Securities Exchange Act of 1934, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
Filed herewith.
32.1
Certifications of Principal Executive Officer and
Principal Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
Filed herewith.
97
Appian Corporation Compensation Recoupment
Policy dated October 31, 2023
Previously filed as Exhibit 97 to the Company’s Annual Report on Form 10-K (File No.
001-38098) filed with the Securities and Exchange Commission on February 15, 2024,
and incorporated herein by reference.
+
*
108
101.INS
XBRL Instance Document - The instance
document does not appear in the interactive data
file because its XBRL tags are embedded within
the inline XBRL document.
Attached.
101.SCH
Inline XBRL Taxonomy Extension Schema
Document
Attached.
101.CAL
Inline XBRL Taxonomy Extension Calculation
Linkbase Document
Attached.
101.DEF
Inline XBRL Taxonomy Extension Definition
Linkbase Document
Attached.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase
Document
Attached.
101.PRE
Inline XBRL Taxonomy Extension Presentation
Linkbase Document
Attached.
104
Cover page interactive data file (formatted as
Inline XBRL and contained in Exhibit 101)
Attached.
+ Indicates management contract or compensatory plan.
† Confidential treatment has been granted as to certain portions of this exhibit. These portions have been omitted and filed separately with the Securities and Exchange
Commission.
* This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor
shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
Item 16. Form 10-K Summary.
None.
109
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
APPIAN CORPORATION
February 19, 2025
By:
/s/ Matthew Calkins
/s/ Mark Lynch
Name: Matthew Calkins
Name: Mark Lynch
Title: Chief Executive Officer and
Chairman of the Board (Principal
Executive Officer)
Title: Interim Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Matthew
Calkins, Mark Lynch, and Christopher Winters, and each of them acting individually, as his or her true and lawful attorneys-in-fact and
agents, with full power of each to act alone, with full powers of substitution and resubstitution, for him or her and in his or her name, place,
and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, with full
power of each to act alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or his, her or their substitutes, may lawfully do or cause to be done by virtue hereof.
110
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Matthew Calkins
Matthew Calkins
Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
February 19, 2025
/s/ Mark Lynch
Mark Lynch
Interim Chief Financial Officer and Director
(Principal Financial Officer)
February 19, 2025
/s/ Michael Beckley
Michael Beckley
Chief Technology Officer and Director
February 19, 2025
/s/ Robert Kramer
Robert Kramer
General Manager and Director
February 19, 2025
/s/ A.G.W. “Jack” Biddle, III
A.G.W. "Jack" Biddle, III
Director
February 19, 2025
/s/ Shirley Edwards
Shirley Edwards
Director
February 19, 2025
/s/ Carl ”Boe” Hartman II
Carl “Boe” Hartman II
Director
February 19, 2025
/s/ Barbara “Bobbie” Kilberg
Barbara “Bobbie” Kilberg
Director
February 19, 2025
/s/ William McCarthy
William McCarthy
Director
February 19, 2025
111
Exhibit 10.32
APPIAN CORPORATION EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (“Agreement”) is made by and between APPIAN CORPORATION, a Delaware corporation, and its
affiliates, successors, assigns and agents (“Appian” or “Company”), and Mark Dorsey (“you” and all similar references or “employee”)
(collectively, the “parties”) in consideration of employee’s at-will employment relationship with Appian.
1. Employment. By accepting employment with Appian, you agree: (a) to devote your professional time, best efforts, attention and
energies to Appian’s business and to refrain from outside employment or professional practice other than on account of or for the benefit of
Appian (unless Appian consents in writing to such outside work); (b) to perform any and all work assigned to you by Appian faithfully and at
such times and places as Appian designates; (c) to abide by all policies of Appian, both current and future; and (d) that you are not currently
bound by any agreement that could prohibit or restrict you from being employed by Appian or from performing any duties under this
Agreement.
2. Compensation and Benefits. Upon the commencement of your employment, Appian will pay you as provided in your offer letter (or as
otherwise agreed in writing), payable in accordance with its normal payroll practices. From time to time, Appian may adjust your salary and
other compensation at its discretion. During your employment, if you meet the minimum requirements of Appian’s plans, you will be eligible
to participate in any employee compensation or benefit plans (including group health and 401(k)), incentive award programs, and to receive
other fringe benefits that Appian may decide to make available to you. Appian may add, amend or discontinue any of its plans, programs,
policies and procedures at any time for any or no reason with or without notice.
3. Restrictive Covenants. You further understand that Appian invests significant resources in the training and development of its
employees. Therefore, in light of this, you agree to the following restrictions which are reasonably designed to protect Appian’s legitimate
business interests without unreasonably restricting your ability to seek or obtain work upon voluntary or involuntary termination of your
employment with Appian:
3.1 Prohibition on Competition. During your employment with Appian and for a period of twelve (12) months from the date your
employment with Appian terminates, you shall not, within the United States of America, directly or indirectly, provide, aid or assist any other
person or entity in providing Similar Products or Services for or on behalf of any Named Company in the same or similar functional capacity
as you did for Appian. This provision shall not be construed to prevent you from obtaining employment with any person or entity that
provides Similar Products or Services, so long as your new endeavor does not violate the above-stated prohibition.
3.2 Covenant Not to Solicit or Perform Services for Customers or Prospective Customers. During your employment with Appian and for
a period of eighteen (18) months from the date your employment with Appian terminates, you agree not to contact, directly or indirectly, any
Customer or Prospective Customer with whom you have had any written, electronic, verbal, or other contact on behalf of Appian, to sell,
market, render or provide Similar Products or Services.
3.3 Covenant Not to Perform Services for Appian’s Business Partners. During your employment with Appian and for a period of twelve
(12) months from the date your employment with Appian terminates, you agree not to provide, directly or indirectly, Similar Products or
Services for or on behalf of any of Appian’s Business Partners.
3.4 Restriction on the Solicitation of Appian’s Employees. During your employment with Appian, and for a period of twelve (12) months
from the date your employment with Appian terminates, you agree not to, directly or indirectly, induce or solicit any Appian employee to
terminate his or her employment or to seek or accept any employment with any other business entity.
Exhibit 10.32
3.5 Prohibition from Employing or Retaining Appian’s Employees. During your employment with Appian and for a period of twelve (12)
months from the date your employment with Appian terminates, you agree not to retain, hire or employ, directly or indirectly, any Appian
employee who was employed by Appian on your termination date, or during the twelve (12) months preceding your termination date.
3.6 Definitions. For the purpose of this Section of the Agreement, the following definitions shall apply:
3.6.1 “Similar Products or Services” shall include (i) any Low-Code software development Platform, Business Process Management
software, Case Management software, Application Platform as a Service, or workflow software product, whether sold as an on-premise,
hosted, or Software-as-a-Service offering; (ii) e-procurement systems; and (iii) any services pertaining to the implementation of such
software technologies described in items 3.6.1(i)-3.6.1(ii) above.
3.6.2 “Customer” means any entity for which Appian has performed Services during your employment with the Company.
3.6.3 “Named Company” shall include any one of the companies listed in Exhibit A. At any time during the Specified Periods, in any
year that this agreement is in effect, Appian may modify or replace companies listed in Exhibit A, at Appian’s sole discretion; however, Appian
must, in good faith, believe that all companies listed in Exhibit A are competitors of Appian. At any time, you may request a copy of Exhibit A
from Appian’s legal department.
3.6.4 “Specified Period” means one of the following quarterly two week periods: January 1 through January 15; April 1 through
April 15; July 1 through July 15; and October 1 through October 15.
3.6.5 “Prospective Customer” means any entity that is not a Customer but with respect to whom, within twelve (12) months from
your termination date, you conducted, prepared, submitted (or assisted or supervised such conduct) any proposal, client development work
product or marketing efforts on behalf of Appian.
3.6.6 The term “Business Partner” means any entity that had a contractual agreement with Appian during your employment with
the Company to engage in joint marketing and/or sales efforts, professional services (as a prime contractor or subcontractor), or as a re-
seller of the Company’s software.
3.6.7 The term “induce” means the act or process of enticing or persuading another person to take a certain course of action.
3.6.8 The term “solicit” means the act or process of obtaining by entreaty, persuasion, or application, formal or otherwise, a
certain course of conduct.
3.7 Reasonableness of Restrictions. You agree that the restrictions set forth in this Section are reasonable, proper and no greater than
necessary to protect the legitimate business interest of Appian and do not constitute an unlawful or unreasonable restraint upon your ability
to earn a livelihood. In the event that any term set forth above including, but not limited to, the duration of the restraint or the geographic
scope, is held unenforceable by court of competent jurisdiction, the parties agree that the unenforceable term may be reduced or modified
by the court of competent jurisdiction.
3.8 Waiver. Any of the provisions listed in Sections 3.1 – 3.5 above may be waived in advance only with the express written consent of
the CEO or General Counsel of Appian Corporation.
4. Employee Representations. You represent and warrant that you have the legal ability to perform your duties for Appian and that your
employment does not violate the terms of any agreement, whether
Exhibit 10.32
written or otherwise, including but not limited to any non-compete agreement, that would limit or impair your ability to perform your duties.
You further represent and warrant that you will not use any confidential or proprietary information from a prior employer, or any other third
party.
5. Nondisclosure of Confidential Information. You acknowledge that all information related to the business of Appian that is not in the
public domain, nor available from sources other than Appian is considered Confidential Information. For the purpose of this Agreement,
Confidential Information also includes Appian’s Trade Secrets and/or Proprietary Information and Confidential Information of third parties
provided to Appian under terms of a confidentiality or nondisclosure agreement.
For the purpose of this Agreement, the definition of a “Trade Secret” shall be congruent with the Virginia Uniform Trade Secret Act, Virginia
Code Section 59.1-336(4). “Proprietary Information” includes, but is not limited to, the following types of information (whether or not
reduced to writing): Appian’s fees, rates, sales data, customer lists, discoveries, inventions, concepts, software in various states of
development and related documentation, design sheets, design data, drawings, design specifications, techniques, consulting or development
methodologies, models, source code, object code, documentation, diagrams, flow charts, research, development, processes, training
materials, templates, procedures, “know-how,” tools, client identities, client accounts, web design needs, client advertising needs and history,
client reports, client proposals, product information and reports, accounts, billing methods, pricing, data, sources of supply, business
methods, production or merchandising systems or plans, marketing, sales and business strategies and plans, finances, operations, and
information regarding employees. Notwithstanding the foregoing, information publicly known that is generally employed by the trade at or
after the time you first learn of such information (other than as a result of your breach of this Agreement) shall not constitute Proprietary
Information.
You agree to hold Confidential Information in the strictest of confidence and further agree not to release, divulge, misappropriate, publish or
communicate Confidential Information to any person or entity outside of Appian, except as necessary in the good faith performance of your
duties for Appian, without the express written consent of Appian’s CEO or his express designee. You understand that the obligations
contained in this Section are effective upon your first day of employment, or earlier (if you receive Confidential Information sooner), and
shall survive the expiration of this Agreement, regardless of the reason your employment with Appian is terminated. Furthermore, nothing
contained in this Section of the Agreement is designed to waive its statutory rights to seek relief pursuant to the Virginia Trade Secrets Act,
Virginia Code Section 59.1-336 et seq.
6. Inventions. For the purposes of this Agreement, "Inventions" mean any concepts, ideas, processes, designs, specifications,
improvements, discoveries or other developments, whether or not reduced to practice or patentable, that you conceive or create, in whole or
in part, alone or jointly with others, during your employment by the Company, whether during normal work hours or otherwise, if such
Inventions meet one of the following conditions (i) the Inventions directly relate to the Company's business (including without limitation the
Company's present or contemplated products and research) or to tasks assigned to you by or on behalf of the Company or (ii) the Inventions
are written or developed using any of the Company's equipment, facilities, materials, trade secrets, labor, money, time or other resources.
"Inventions" also shall be deemed to include any concepts, ideas, processes, designs, specifications, improvements, discoveries or other
developments, whether or not reduced to practice or patentable, that you conceive or create within ninety (90) days after your employment
with the Company ends that directly relate to the Company's business as conducted prior to the date your employment ended or to any tasks
assigned to you by or on behalf of the Company at any time during the last two (2) years of your employment by the Company. “Inventions”
do not include any concepts, ideas, processes, designs, discoveries or other developments reduced to practice prior to joining Appian.
6.1 Assignment of Inventions. You agree that all Inventions are the sole and exclusive property of the Company and hereby assign to
the Company all right, title and interest in all Inventions.
Exhibit 10.32
7. Termination and Resignation.
A. Your employment is terminable at-will. That means that you or Appian may terminate your employment relationship at any time, for
any reason or no reason at all. In the event that you terminate your employment, you will be entitled to earned and unpaid salary, less
required and authorized withholdings and deductions, through your last day of employment. Regardless of the basis of your termination of
employment, you agree to provide all reasonable assistance requested by Appian in transitioning your duties, responsibilities, clients and
other Appian relationships to other Appian personnel, both during your employment and after your termination or resignation. Furthermore,
you agree to cooperate with Appian from time to time as necessary concerning matters that may have arisen during the course of your
employment with Appian. Such cooperation is an express condition of this Agreement.
B. Notwithstanding anything to the contrary in Subsection (A), in the event that Appian undergoes a Change in Control as defined
herein, and immediately prior to or within six months after the change of control you are terminated without Cause or you terminate your
employment for Good Reason as defined herein, within thirty days prior or one year following such Change in Control, you will receive the
following severance from Appian:
i. Base Salary Severance. You will receive continuing payments of severance at a rate equal to your then current base salary rate
(disregarding for this purpose, any reduction of your base salary that results in a termination of your employment for Good Reason), less
applicable tax withholdings, as in effect immediately prior to your termination of employment or, if greater, as in effect immediately prior to
the Change in Control, for six (6) months (“Severance Period”) from the date of such termination of employment, to be paid periodically in
accordance with Appian’s normal payroll policies (and subject to Subsection 7(D) below).
ii. Equity. With respect to any stock options, restricted stock units, or other form of equity allowed by Appian’s equity plans held by
you that are unvested at the time of termination (“Unvested Equity”), such Unvested Equity shall immediately vest, subject to Section 7(D)
below, in full.
iii. Continued Employee Benefits. If you timely elect continuation coverage pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (“COBRA”) for you and and your eligible dependents (as applicable), within the time period
prescribed pursuant to COBRA, Appian will reimburse you for, or pay directly on your behalf, the COBRA premiums for such coverage (at the
coverage levels in effect immediately prior to your termination of employment) until the earlier of (a) the end of the Severance Period, or (b)
the date upon which you and/or your eligible dependents becomes covered under similar plans. Notwithstanding the foregoing, if Appian
determines, in its sole discretion, that it cannot provide the foregoing benefit without potentially incurring financial costs or penalties under
applicable law (including, without limitation, Section 2716 of the Public Health Service Act), Appian shall in lieu thereof provide you with a
taxable monthly amount (which amount shall be based on the premium for the first month of COBRA coverage hereunder), which such
payments shall be made regardless of whether you elect COBRA continuation coverage. If Appian elects to make such payments in lieu of
paying such COBRA premiums, the payments will end on the earlier of either (1) the end of the Severance Period or (2) the date upon which
you and/or your eligible dependents becomes covered under similar plans.
C. Definitions.
i. Change in Control. For purposes of this Agreement “Change in Control” shall mean the occurrence of any of the following:
a. A change in the ownership of Appian that occurs on the date that any one person or entity, or more than one person or
entity acting as a group (“Person”), acquires ownership of the stock of
Exhibit 10.32
Appian or that, together with the stock held by such Person, constitutes more than 50% of the total voting power of the stock of Appian,
provided that such Person is not Matthew Calkins; or
b. A change in the effective control of Appian that occurs on the date that a majority of members of the Board (each, a
“Director”) of Appian is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a
majority of the members of the Board prior to the date of the appointment or election, except where such replacement of the Directors is as
a result of Matthew Calkins voting a majority of Appian's shares in favor of such replacement. For purposes of this subsection (b), if any
Person is considered to be in effective control of Appian, the acquisition of additional control of Appian by the same Person will not be
considered a Change in Control; or
c. A change in the ownership of a substantial portion of Appian's assets which occurs on the date that any Person acquires (or
has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from
Appian that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of the
Company immediately prior to such acquisition or acquisitions; provided, however, that for purposes of this subsection (c), the following will
not constitute a change in the ownership of a substantial portion of Appian's assets: (A) a transfer to an entity that is controlled by Appian’s
stockholders immediately after the transfer, or (B) a transfer of assets by Appian to: (1) a stockholder of Appian (immediately before the
asset transfer) in exchange for or with respect to Appian's stock, (2) an entity, 50% or more of the total value or voting power of which is
owned, directly or indirectly, by Appian, (3) a Person, that owns, directly or indirectly, 50% or more of the total value or voting power of all
the outstanding stock of Appian, or (4) an entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by
a Person described in this subsection 7(C)(i)(c)(B)(3). For purposes of this subsection (c), gross fair market value means the value of the
assets of Appian, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
For purposes of this definition of Change in Control, persons will be considered to be acting as a group if they are owners of a
corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company or
Parent.
Notwithstanding the foregoing, a transaction will not be deemed a Change in Control unless the transaction qualifies as a change in
control event within the meaning of Internal Revenue Code Section 409A, as it has been and may be amended from time to time, and any
proposed or final Treasury Regulations and Internal Revenue Service guidance that has been promulgated or may be promulgated
thereunder from time to time.
Further and for the avoidance of doubt, a transaction will not constitute a Change in Control if: (i) its sole purpose is to change the
state of Appian’s incorporation, or (ii) its sole purpose is to create a holding company that will be owned in substantially the same
proportions by the persons who held Appian’s securities immediately before such transaction.
ii. Good Reason. For purposes of this Agreement, “Good Reason” shall mean any of the following:
a. A decrease in the amount of your salary plus bonus potential; or
b. A material decrease in your title; or
c. A requirement that you move your primary residence to retain employment; provided, however,
that for you to be able to terminate your employment with Appian on account of Good Reason, you must provide notice of the
occurrence of the event constituting Good Reason and your desire to terminate your employment with Appian on account of such within
ninety (90) days following the initial existence of the condition constituting Good Reason, and Appian must have a period of thirty
Exhibit 10.32
(30) days following receipt of such notice to cure the condition. If Appian does not cure the event constituting Good Reason within such
thirty (30) day period, your termination shall be effective the day immediately following the end of such thirty (30) day period, unless Appian
provides for an earlier termination.
D. Severance Contingencies. The severance provided in Subsection 7(B) shall have the following contingencies:
i. Release of Claims Agreement. The receipt of any severance payments or benefits pursuant to this Agreement is subject to
you signing and not revoking a separation agreement and release of claims in a form acceptable to Appian (the “Release”) and the Release
becoming effective and irrevocable all within sixty (60) days following the date of your termination of employment (the “Release Deadline”).
If the Release does not become effective and irrevocable by the Release Deadline, you will forfeit any right to severance payments or
benefits under this Agreement. No severance payments and benefits under this Agreement will be paid or provided until the Release
becomes effective and irrevocable, and any such severance payments and benefits otherwise payable between the date of your termination
of employment and the date the Release becomes effective and irrevocable will be paid on the date the Release becomes effective and
irrevocable, provided, however, that if the relevant 60-day period begins in one calendar year and ends in a second calendar year, such
payments shall be paid or begin to be paid in the second calendar year by the last day of such 60-day period; provided, further, that the
initial payment shall include a catch-up payment to cover amounts retroactive to the day immediately following the date of your termination
of employment. Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation
Section 1.409A-2(b)(2).
ii. Non-Compete, Non-Solicitation, Confidential Information and Invention Assignment Agreements and Return of Company
Materials. Your receipt of any payments or benefits under this Agreement will be subject to (a) you continuing to comply with Sections 3, 5
and 6 of this Agreement; and (b) your compliance with Section 8 of this Agreement. Any breach of those terms shall result in your
immediate forfeiture of all severance benefits.
8. Return of Company Materials. Upon the termination of your employment with Appian, regardless of the basis of the termination, you
shall promptly deliver to Appian any of the following items or materials: any laptop or personal computer issued to you, or paid for, by
Appian; any material, in any form whatsoever, that constitutes Appian’s Confidential Information, Trade Secret and/or Proprietary
Information; the Employee Handbook; the Consulting Best Practices Book (“CBP”); and any other material that is the property of Appian
Corporation or Appian Corporation’s customers, including, but not limited to, books, key cards, passes, and other material. You agree that, to
the extent permissible by law, Appian may withhold payment of any compensation or reimbursements until you return all such Appian
materials.
9. Investments. This Agreement shall not be interpreted to prohibit you from making passive personal investments or conducting private
business affairs subject to Paragraph 1 of this Agreement. However, you shall not directly or indirectly acquire, hold, or retain any interest in
any business competing with Appian's business; provided, however, that the foregoing shall not prohibit you from owning securities of not in
excess of 2% of any class of securities of a company if such class of securities is registered with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended.
10. Authority Limited. It is expressly agreed that you shall have no right or authority at any time to make any contract or binding promise
of any nature on behalf of Appian, without Appian’s express written consent except within established duties of your employment.
Exhibit 10.32
11. Assignment and Survival. The rights and obligations of Appian under this Agreement shall inure to the benefit of, and shall be binding
upon, the successors and assigns of Appian. Your rights and obligations are personal and may not be assigned or delegated without the
Company’s proper written consent. However, if you become deceased prior to the expiration of this Agreement, any sums that may be due to
you as of the date of your death shall be paid to your executor, administrator, heirs, personal representative, successors or assigns.
Furthermore, it is expressly understood that the obligations under Sections 3, 4, or 5 of this Agreement shall survive any termination of this
Agreement.
12. Remedies. You acknowledge that the damages Appian will suffer as a result of your breach of any provision of Sections 3, 4, or 5 of
this Agreement may be impossible to reasonably calculate and that violation of this Agreement will irreparably harm Appian. Accordingly, you
agree that Appian will be entitled, in addition to all other rights and remedies that may be available, to obtain injunctive relief enjoining and
restraining you from committing a breach of this Agreement. You also agree that in the event Appian is successful in whole or in part in any
legal action against you under this Agreement, Appian will be entitled to recover all costs, including reasonable attorney fees from you.
13. Severability. If any provision of this Agreement is held invalid or unenforceable for any reason, the invalidity shall not nullify the validity
of the remaining provisions of this Agreement. If any provision of this Agreement is determined by a court to be overly broad in duration,
geographical coverage or scope, or unenforceable for any other reason, such provision will be narrowed so that it will be enforced as much
as permitted by law.
14. Choice of Law. The laws of the Commonwealth of Virginia shall govern this Agreement. You and Appian consent to the jurisdiction and
venue of any state or federal court in the Commonwealth of Virginia.
15. Waiver. Any party’s waiver of any other party’s breach of any provision of this Agreement shall not waive any other right or any future
breaches of the same or any other provision. Appian’s CEO may, in his or her sole discretion, waive in writing any provision of this
Agreement.
16. Notices. Any notices, requests, demands or other communications provided for in this Agreement shall be in writing and shall be given
either manually or by certified mail. Notice to Appian shall be addressed to Human Resources. Notice to you shall be addressed to the last
address you have filed with Human Resources. You may change your address by providing written notice in accordance with this Section. If
you fail to keep Appian informed of your most recent address, you agree to waive any claim against Appian related to any damage you may
suffer as a result of Appian failing to provide you with a notice under this or any other Agreement you may have with Appian.
17. Section 409A. The payments and benefits under this Agreement are intended to qualify for an exemption from application of Section
409A of the Internal Revenue Code of 1986, as amended (the “Code”) or comply with its requirements to the extent necessary to avoid
adverse personal tax consequences under Section 409A of the Code, and any ambiguities herein shall be interpreted accordingly. To the
extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the
Code, and to the extent that such payment or benefit is payable upon the termination of your employment, then such payments or benefits
will be payable only upon your “separation from service.” The determination of whether and when a separation from service has occurred will
be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A1(h). Anything in this Agreement to the
contrary notwithstanding, if at the time of your separation from service, Appian determines that you are a “specified employee” within the
meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that you become entitled to under this
Agreement on account of your separation from service would be considered deferred compensation subject to the 20 percent additional tax
imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment will
not be payable and such benefit will not be provided until the date that is the earlier of (A) six months and one
Exhibit 10.32
day after your separation from service, (B) your death, or (C) such earlier date as permitted under Section 409A without imposition of
adverse taxation. If any such delayed cash payment is otherwise payable on an installment basis, the first payment will include a catch-up
payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and
the balance of the installments will be payable in accordance with their original schedule. Appian makes no representation or warranty and
will have no liability to you or any other person if any provisions of this Agreement are determined to constitute deferred compensation
subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, Section 409A of the Code.
18. Entire Agreement. This Agreement is the entire agreement between you and Appian regarding these matters and supersedes any
verbal and written agreements on such matters. This Agreement may be modified only by written agreement signed by you and Appian’s
CEO. All Section headings are for convenience only and do not modify or restrict any of this Agreement’s terms.
19. Counterparts. For convenience of the parties, this Agreement may be executed in one or more counterparts, each of which shall be
deemed an original for all purposes.
The parties state that they have read, understood and agree to be bound by this Agreement and that they have had the opportunity to
seek the advice of legal counsel before signing it and have either sought such counsel or have voluntarily decided not to do so:
APPIAN CORPORATION
EMPLOYEE
By: /s/ Susan Charnaux
By: /s/ Mark Dorsey
Name: Susan Charnaux
Date:
Appian Corporation
Insider Trading Policy
(Amended February 11, 2025)
Introduction
During the course of your relationship with Appian Corporation and its subsidiaries (“Appian”), you may receive important information
that is not yet publicly available about Appian or other publicly traded companies that Appian has business relationships with in connection
with your employment or relationship with Appian (“inside information”). Inside information may give you or someone you pass that
information on to a leg up over others when deciding whether to buy, sell, or otherwise deal in Appian’s securities or the securities of
another publicly traded company. This policy sets forth acceptable transactions in Appian securities by our employees, directors, and
consultants.
Insider Trading Policy
Securities Transactions
Using inside information for personal gain or passing this information (also known as a “tip”) to someone who uses it for personal gain (a
“tippee”) is illegal and squarely prohibited by this policy. Exploiting inside information like this remains unlawful regardless of how many
shares are bought or sold. You can be held liable for your own transactions, as well as the transactions by a tippee and even the transactions
of a tippee’s tippee. Although it is imperative to refrain from any insider trading, it is equally important to avoid even the appearance of
insider trading.
Inside Information
It is not always easy to figure out whether you possess inside information. But there is one important factor to determine whether
nonpublic information you know about a public company is inside information: whether sharing the information would likely affect the market
price of that company’s securities or be considered important or “material” by investors who are considering trading that company’s
securities. If the information makes you want to trade, it would probably have the same effect on others. Keep in mind that both positive
and negative information can be material.
The following items may be considered inside information until publicly disclosed. There may be other types of information that would
qualify as inside information as well; use this list merely as a non-exhaustive guide:
•
financial results or forecasts;
•
major new products, features, or processes;
•
acquisitions or dispositions of assets, divisions, or companies;
•
pending public or private sales of debt or equity securities;
•
stock splits, dividends, or changes in dividend policy;
•
major contract awards or cancellations;
•
key management or control changes;
•
possible tender offers or proxy fights;
•
significant accounting write-offs;
•
significant litigation or settlements;
•
impending bankruptcy;
•
gain or loss of a significant license agreement or other contracts with customers or suppliers;
•
pricing changes or discount policies; and
•
changes or new corporate partner relationships.
1.
If you do possess inside information, you may not trade in a company’s securities, advise anyone else to do so, or communicate the
information to anyone else until you know that the information has been publicly disseminated. This policy also applies to all family
members, other household members of individuals covered by this policy, and all companies and entities controlled by individuals covered by
this policy or over which over which such individuals have or share the power, directly or indirectly, to make investment decisions. You should
never recommend to another person that they buy, hold, or sell our securities. In some circumstances, you may need to forgo a planned
transaction even if you had planned it before learning of the inside information. This prohibition is absolute. So even if you believe you may
suffer an economic loss or sacrifice an anticipated profit by waiting to trade, you must wait. “Trading” includes engaging in short sales,
transactions in put or call options, hedging transactions, and other inherently speculative transactions.
The prohibition on trading when you have inside information lifts once that information becomes publicly disseminated. But for
information to be considered publicly disseminated, it must be widely disclosed through a press release, an SEC filing, or other public
announcement and enough time must have passed for the information to be widely known. Generally speaking, information will be
considered publicly disseminated after two full trading days have elapsed since the information was publicly disclosed. For example, if we
announce inside information before trading begins on Wednesday, then you may execute a transaction in Appian securities (or the securities
of other companies that could be impacted by the inside information) on Friday.
Stock Trading by Appian Employees, Directors, and Consultants
Because our workplace culture tends to be open, odds are that the vast majority of Appian employees, directors, and consultants will
possess inside information at certain points throughout the year. To minimize even the appearance of insider trading among our employees,
directors, and consultants we have established blackout periods during which Appian employees, directors, and consultants—regardless of
whether they possess insider information or not—may not conduct any trades in Appian securities. That means that all Appian employees,
directors, and consultants will be able to sell Appian securities only during limited trading windows that open after Appian has disseminated
its quarterly and annual financial results.
Covered Insiders
Our stock-trading policy sets forth a basic set of rules for all employees, directors, and consultants and a separate set of more stringent
rules for officers, directors, and other members of management. What’s more, any entities, immediate family members (i.e., parents,
children, spouses, domestic partners, and any other person to whom the person provides material financial support), or others whose trading
activities are controlled by persons subject to this policy are likewise subject to the same restrictions.
Open Window
Generally, except as described in this policy, all Appian employees, directors, and consultants may buy or sell Appian securities only
during an “open window” that opens after two full trading days have elapsed since the public dissemination of Appian’s annual or quarterly
financial results and closes at the end of the last trading day three weeks before the end of the next fiscal quarter. This open window may be
closed early or may not open at all if, in the judgment of the Chief Executive Officer, Chief Financial Officer, or General Counsel, there exists
undisclosed information that would make trades by employees, directors, and consultants inappropriate. The fact that the open window has
closed early or has not opened should be considered inside information. An employee, director, or consultant who believes that special
circumstances require them to trade outside the open window should consult the General Counsel. Permission to trade outside the open
window will be granted only where the circumstances are extenuating and there appears to be no significant risk that the trade may be
subsequently questioned.
Exceptions to Open Window Period
1.
Option Exercises and RSU Net Settlement. Employees, directors, and consultants may (i) exercise options for cash granted under
Appian’s stock-option plans, and (ii) net settle restricted stock units (“RSUs”) and have Appian withhold shares of common stock to satisfy
tax withholding obligations when RSUs settle. But this stock-trading policy would then apply to any later sales of stock (including sales of
stock in a cashless exercise) that were acquired on the exercise of options or delivery of the vested RSUs.
2.
10b5-1 Automatic Trading Programs. Under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (“Exchange Act”),
employees, directors, and consultants may establish a trading plan under which a broker is instructed to buy and sell Appian securities based
on pre-determined criteria (a “Trading Plan”). So long as a Trading Plan is properly established, purchases and sales of Appian securities
pursuant to that plan may be made at any time—even in a blackout period. An employee’s, director’s, or consultant’s Trading Plan must be
established in compliance with the requirements of Rule 10b5-1 and Appian’s 10b5-1 Trading Plan Guidelines when such individual does not
possess inside information about Appian and when Appian is not in a trading blackout period. Moreover, all Trading Plans must be reviewed
by Appian before they are established, amended, or terminated, so Appian can confirm that the Trading Plan complies with all pertinent
company policies and securities laws.
Prohibition of Speculative or Short-term Trading
No employee, director, or consultant to Appian may engage in short sales, transactions in put or call options, hedging transactions,
margin accounts, or other inherently speculative transactions with respect to Appian’s securities.
Pre-Clearance and Advance Notice of Transactions
In addition to the requirements above, officers, directors, and other applicable members of management who have been notified that
they are subject to pre-clearance requirements face a further restriction: Even during an open trading window, they may not engage in any
transaction in Appian’s securities, including any purchase or sale in the open market, loan, or other transfer of beneficial ownership without
first obtaining pre-clearance of the transaction from Appian’s General Counsel at least two business days before the proposed transaction.
The General Counsel will then determine whether the transaction may proceed and, if so, will direct the Compliance Coordinator (as
identified in Appian’s Section 16 Compliance Program) to help comply with any required reporting requirements under Section 16(a) of the
Exchange Act. Pre-cleared transactions not completed within five business days will require new pre-clearance. Appian may choose to
shorten this period. Notwithstanding pre-clearance, every person is individually responsible for their compliance with this policy and with
applicable insider trading laws.
For persons subject to pre-clearance, advance notice of gifts or plans to exercise an outstanding stock option must be given to the
General Counsel. Once any transaction takes place, the officer, director, or applicable member of management must immediately notify the
Compliance Coordinator and any other individuals identified under the heading “Notification of Execution of Transaction” in Appian’s Section
16 Compliance Program so that Appian may assist in any Section 16 reporting obligations.
Short-Swing Trading, Control Stock, and Section 16 Reports
Officers and directors subject to the reporting obligations under Section 16 of the Exchange Act may not violate the prohibition on short-
swing trading (Section 16(b) of the Exchange Act) and the restrictions on sales by control persons (Rule 144 under the Securities Act of
1933, as amended). In addition, such officers and directors will file all appropriate Section 16(a) reports (Forms 3, 4, and 5), which are
described in Appian’s Section 16 Compliance Program, and any notices of sale required by Rule 144.
Prohibition of Trading During Pension Fund Blackouts
In accordance with Regulation BTR under the Exchange Act, no director or executive officer of Appian may, directly or indirectly,
purchase, sell or otherwise acquire or transfer any equity security of Appian (other than an exempt security) during any “blackout period’’ (as
defined in Regulation BTR) with respect to such equity security, if a director or executive officer acquires or previously acquired such equity
security in connection with his or her service or employment as a director or executive officer. This prohibition does not apply to any
transactions that are specifically exempted, including but not limited to, purchases or sales of Appian’s securities made pursuant to, and in
compliance with, a Trading Plan; compensatory grants or awards of equity securities pursuant to a plan that, by its terms, permits executive
officers and directors to receive automatic grants or awards and specifies the terms of the grants and awards; acquisitions or dispositions of
equity securities involving a bona fide gift or by will or the laws of descent or pursuant to a domestic relations order. Appian will notify each
director and executive officer of any blackout periods in accordance with the provisions of Regulation BTR.
Exceptions
The only exceptions to these trading restrictions are permitted transactions directly with Appian, such as option exercises for cash.
However, the subsequent sale, including the sale of shares in a cashless exercise or other disposition of stock is subject to these restrictions.
Policy’s Duration
This policy continues to apply to your transactions involving Appian’s securities as well as securities of any other companies that engage
in business transactions with Appian even after your relationship with Appian has ended. If you possess inside information when your
relationship with Appian ends, you may not trade Appian’s securities or the securities of other companies that could be affected by the
insider information until the inside information has been publicly disseminated or is no longer material.
Penalties
Anyone who engages in insider trading or otherwise violates this stock-trading policy may be subject to both civil liability and criminal
penalties. Violators also risk disciplinary action by Appian, including termination. Anyone who has questions about this policy should contact
their own attorney or Appian’s General Counsel, at chris.winters@appian.com. Please also see Frequently Asked Questions, which are
attached as Exhibit A.
Exhibit A
Insider Trading Policy
Frequently Asked Questions
1.
What is insider trading?
A: Insider trading is the buying or selling of stocks, bonds, futures, or other securities by someone who possesses material nonpublic
information. Insider trading also includes trading in options (puts and calls) where the price is linked to the underlying price of a company’s
stock. It does not matter how many shares you buy or sell, or whether it has an effect on the stock price. Bottom line: If you have material
nonpublic information and you trade, you have broken the law.
2.
Why is insider trading illegal?
A: If company insiders are able to use their confidential knowledge to their financial advantage, other investors would not have
confidence in the fairness and integrity of the market. This ensures that there is an even playing field by requiring those who have inside
information to disclose the information to the public or refrain from trading.
3.
What is material nonpublic information?
A: Information is material if it would influence a reasonable investor to buy or sell a stock, bond, future, or other security. This could
mean many things: financial results, potential acquisitions, or major contracts to name just a few. Information is nonpublic if it has not yet
been released and disseminated to the public.
4.
Who can be guilty of insider trading?
A: Anyone who buys or sells a security while possessing material nonpublic information can be guilty of insider trading. This applies
to all individuals, including officers, directors, and others who don’t even work at Appian. Regardless of who you are, if you know something
material about the value of a security that not everyone knows and you or one of your associates trades using that material information, you
can be found guilty of insider trading.
5.
Does Appian have an insider trading policy?
A: Yes, the insider trading policy is available to read on our website at www.appian.com.
6.
What if I work in a foreign office?
A: The same rules apply to U.S. and foreign employees and consultants. Because our common stock trades on a U.S. securities
exchange, the insider trading laws of the United States apply. The Securities and Exchange Commission (the U.S. government agency in
charge of investor protection) and the Financial Industry Regulatory Authority (a private regulator that oversees U.S. securities exchanges)
routinely investigate trading in a company’s securities conducted by individuals and firms based abroad. In addition, as an Appian employee
or consultant, our policies apply to you no matter where you work.
7.
What if I don’t buy or sell anything, but I tell someone else the information and they buy or sell?
A: That is called “tipping.” You are the “tipper” and the other person is called the “tippee.” If the tippee buys or sells based on that
material nonpublic information, you might still be guilty of insider trading. In fact, if you tell family members who tell others and those
people then trade on the information, those family members might be guilty of insider trading too. To prevent this, you should not
1.
discuss material nonpublic information about the company with anyone outside Appian, including spouses, family members, friends, or
business associates. This includes anonymous discussions on the internet about Appian or companies with which Appian does business.
8.
What if I don’t tell them the information itself; I just tell them whether they should buy or sell?
A: That is still tipping, and you can still be responsible for insider trading. You should not recommend to another person that they
buy, hold, or sell our common stock, any derivative security related to our common stock or other securities of ours, since that could be a
form of tipping.
9.
What are the penalties if I trade on inside information or tip off someone else?
A: In addition to disciplinary action by Appian—which may include termination—you may be liable for civil penalties for trading on
inside information. The penalties for doing so may include paying the U.S. government up to three times any profit made or any loss
avoided. Persons found liable for tipping inside information, even if they did not trade themselves, may also face a penalty of up to three
times the amount of any profit gained or loss avoided by everyone in the chain of tippees. In addition, anyone convicted of criminal insider
trading could face prison and additional fines.
10.
What is “loss avoided”?
A: If you sell common stock or a related derivative security before negative news is publicly announced, and as a result of the
announcement the stock price declines, you have avoided the loss caused by the negative news.
11.
Am I restricted from trading securities of any companies other than Appian, for example, a customer or competitor of Appian?
A: Possibly. U.S. insider trading laws restrict everyone from trading in a company’s securities based on material nonpublic information
about that company, regardless of whether the person is directly connected with that company. Therefore, if in connection with your
employment or relationship with Appian you receive material nonpublic information about another company that Appian has business
relationships with, you should not trade in that company’s securities. You should be particularly conscious of this restriction if, through your
position at Appian, you sometimes obtain sensitive, material information about other companies and their business dealings with Appian.
12.
So if I do not trade Appian securities when I have material nonpublic information, and I don’t “tip” other people, I am in the clear,
right?
A: Not necessarily. Even if you do not violate U.S. law, you may still violate our policies. For example, employees and consultants
may violate our policies by breaching their confidentiality obligations or by recommending Appian stock as an investment, even if these
actions do not violate securities laws. Our policies are stricter than the law requires so that we and our employees and consultants can avoid
even the appearance of wrongdoing. Therefore, please review the entire policy carefully.
13.
If I am aware of new product or feature developments that have not been announced to the public, do I possess material non-public
information?
A: In most circumstances, Appian does not consider new product and service developments to be material information that would
require the trading window to close for those who know about these developments. But there are circumstances when a new product or
feature in development or issues with respect to current or past products or services could be so significant that it constitutes material
nonpublic information. In these circumstances, you will be notified by email if the trading window is closed for you.
14.
So when can I buy or sell my Appian securities?
A: If you have material nonpublic information, you may not buy or sell our common stock until the third trading day after that
information is released or announced to the public. At that point, the information is considered public. Even if you do not have material,
nonpublic information, you may not trade our common stock during any trading “blackout” period. Our insider trading policy describes the
quarterly blackout period, and additional trading blackout periods may be announced by email.
15.
If I have an open order to buy or sell Appian securities on the date the trading window closes, can I leave it to my broker to cancel
the open order and avoid executing the trade?
A: No. If you have any open orders when the trading window closes, it is your responsibility to cancel these orders with your broker.
If you have an open order and it executes after the trading window closes, you will have violated our insider trading policy and may also
have violated insider trading laws.
16.
Am I allowed to trade derivative securities of Appian? Or short Appian common stock?
A: No. Under our policies, you may not trade in derivative securities related to our common stock, which include publicly traded call
and put options. In addition, under our policies, you may not engage in short selling of our common stock at any time.
“Derivative securities” are securities other than common stock that are speculative in nature because they permit a person to
leverage their investment using a relatively small amount of money. Examples of derivative securities include “put options” and “call options.”
These are different from employee stock options, which are not derivative securities.
“Short selling” is profiting when you expect the price of the stock to decline, and includes transactions in which you borrow stock
from a broker, sell it, and eventually buy it back on the market to return the borrowed shares to the broker. Profit is realized if the stock price
decreases during the period of borrowing.
17.
Why does Appian prohibit trading in derivative securities and short selling?
A: Many companies with volatile stock prices have adopted similar policies because of the temptation it represents to try to benefit
from a relatively low-cost method of trading on short-term swings in stock prices, without actually holding the underlying common stock, and
encourages speculative trading. We agree. After all, because we are dedicated to building stockholder value, short selling our common stock
conflicts with our values and would not be received well by our stockholders.
18.
Can I purchase Appian securities on margin or hold them in a margin account?
A: Under our policies, you may not purchase our common stock on margin or hold it in a margin account at any time.
“Purchasing on margin” is the use of borrowed money from a brokerage firm to purchase our securities. Holding our securities in a
margin account includes holding the securities in an account in which the shares can be sold to pay a loan to the brokerage firm.
19.
Why does Appian prohibit me from purchasing Appian securities on margin or holding them in a margin account?
A: Margin loans are subject to a margin call whether or not you possess insider information at the time of the call. If a margin call
were to be made at a time when you had insider information and you could not or did not supply other collateral, you and Appian may be
restricted based on your insider trading activities because of the sale of the stock (through the margin call) when you possessed material
nonpublic information. The sale would be attributed to you even though the lender made the ultimate determination to sell. The Securities
and Exchange Commission takes the view that you made the determination to not supply the additional collateral and you are therefore
responsible for the sale.
20.
Can I exercise stock options during a trading blackout period or when I possess material nonpublic information?
A: Yes. You may exercise your employee stock options and receive shares, but you may not sell the shares (even to pay the exercise
price or any taxes due) or net settle the option during a trading blackout period or any time that you have material nonpublic information.
Also note that if you choose to exercise and hold the shares, you will be responsible at that time for any taxes due.
21.
Am I subject to the trading blackout period if I am no longer an employee or consultant of Appian?
A: It depends. If your employment with Appian ends on a day that the trading window is closed, you will be subject to the trading
blackout period then in effect. If your employment with Appian ends on a day that the trading window is open, you will not be subject to the
next trading blackout period. However, even if you are not subject to our trading blackout period after you leave Appian, you should not
trade in Appian securities if you possess material nonpublic information. That restriction stays with you as long as the information you
possess is material and not released by Appian.
22.
Can I gift stock while I possess material nonpublic information or during a trading blackout period?
A: Because of the potential for the appearance of impropriety, you may not make gifts, whether to charities, a trust, or otherwise, of
our common stock when you possess material nonpublic information or during a trading blackout period.
23.
What if I purchased publicly traded options or other derivative securities before I became an Appian employee, contractor, or
consultant?
A: The same rules apply as for employee stock options. You may exercise the publicly traded options at any time, but you may not
sell the securities during a trading blackout period or at any time that you have material nonpublic information.
24.
May I own shares of a mutual fund that invests in Appian?
A: Yes.
25.
Are mutual fund shares holding Appian common stock subject to the trading blackout periods?
A: No. You may trade in mutual funds holding Appian common stock at any time.
26.
May I use a “routine trading program” or “10b5-1 plan”?
A: Yes, subject to the requirements discussed in our insider trading policy. A routine trading program, also known as a 10b5-1 plan,
allows you to set up a highly structured program with your stock broker where you specify ahead of time the date, price, and amount of
securities to be traded. If you wish to create a 10b5-1 plan, please contact the Corporate Legal team for approval.
27.
What happens if I violate our insider trading policy?
A: Violating our policies may result in disciplinary action, which may include termination of your employment or other relationship
with Appian. In addition, you may be subject to criminal and civil actions.
28.
Who should I contact if I have questions about our insider trading policy?
A: You should contact our General Counsel at chris.winters@appian.com.
Exhibit 21.1
Subsidiaries of Appian Corporation
Name of Subsidiary
Jurisdiction of Organization
Appian Europe Ltd.
England and Wales
Appian Software International GmbH
Switzerland (Zug Canton)
Appian Netherlands BV
Netherlands
Appian Software Australia Pty. Ltd
Australia
Appian France SARL
France
Appian Software Italy S.R.L.
Italy
Appian Software Germany GmbH
Germany
Appian Singapore Pte. Ltd.
Singapore
Appian Spain SL
Spain
Appian Sweden AB
Sweden
Appian Japan GK
Japan
Appian Canada Corporation
Canada
Appian Mexico Software SRL de C.V.
Mexico
Appian Computer Technologies India Private Ltd
India
Appian Portugal Unipessoal LDA
Portugal
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-258903) and Form S-8 (No. 333-
218342 and 333-259268) of Appian Corporation (“the Company”) of our reports dated February 19, 2025, relating to the consolidated
financial statements, and the effectiveness of the Company’s internal control over financial reporting, which appear in this Annual Report on
Form 10-K.
/s/ BDO USA, P.C.
McLean, Virginia
February 19, 2025
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Matthew Calkins, certify that:
1. I have reviewed this Annual Report on Form 10-K for the period ended December 31, 2024 of Appian Corporation (the
“registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing
the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 19, 2025
/s/ Matthew Calkins
Matthew Calkins
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Mark Lynch, certify that:
1. I have reviewed this Annual Report on Form 10-K for the period ended December 31, 2024 of Appian Corporation (the
“registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing
the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 19, 2025
/s/ Mark Lynch
Mark Lynch
Interim Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
Exhibit 32.1
CERTIFICATIONS OF
PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)
and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Matthew Calkins, Chief Executive Officer of Appian
Corporation (the “Company”), and Mark Lynch, Interim Chief Financial Officer of the Company, each hereby certifies that, to the best of his
knowledge:
1. The Company’s Annual Report on Form 10-K for the period ended December 31, 2024, to which this Certification is attached as
Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and
2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
IN WITNESS WHEREOF, the undersigned have set their hands hereto as of the 19th day of February, 2025.
/s/ Matthew Calkins
/s/ Mark Lynch
Matthew Calkins
Mark Lynch
Chief Executive Officer
(Principal Executive Officer)
Interim Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
*
This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is
not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act
(whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing.