Summary
Appian reported FY2023 Q2 revenue of $127.7 million, up 16.0% from the prior-year quarter. The cloud subscription revenue retention rate was 115% as of June 30, 2023, compared with 116% a year earlier. Management pointed to cloud subscriptions as the main driver of growth within subscriptions, while professional services revenue grew more modestly. Sales to new customers and expanded deployments at existing customers both contributed to the revenue increase. Recent business highlights included a generative AI strategy and expanded AI roadmap, a spot in the 2023 CRN Partner Program Guide, a new EMEA headquarters in London, and a customer win with the French National Rugby League.
Gross profit was $90.9 million, up 18.4% from the prior-year quarter, and gross margin expanded to 71.2% from 69.8%. Operating loss narrowed to $40.7 million from $42.7 million. Net loss narrowed to $42.4 million from $49.4 million, and diluted EPS improved to a loss of $0.58 from a loss of $0.68. Non-GAAP operating loss was $27.1 million, compared with $26.8 million. Adjusted EBITDA loss was $24.7 million, compared with $25.0 million. For the six months ended June 30, 2023, revenue rose 17.2% to $263.0 million, but net loss widened to $79.2 million from $72.5 million. Operating loss for the year-to-date period widened to $75.9 million from $66.6 million.
Appian used $11.9 million of cash in operating activities in the quarter, an improvement from $29.7 million used in the prior-year quarter. For the six months ended June 30, 2023, operating cash flow was negative $37.2 million, compared with negative $50.3 million a year earlier. Capital expenditures were $3.4 million in the quarter, up 161.3% from $1.3 million in the prior-year quarter, reflecting spending tied to the headquarters expansion. Deferred revenue stood at $195.9 million as of June 30, 2023. Remaining performance obligations were $383.8 million, up 28.8% from $298.0 million a year earlier.
Guidance for the third quarter of 2023 calls for cloud subscription revenue of $75.5 million to $76.5 million, up 25% to 26%, along with total revenue growth of 14% to 15%. The company projects an adjusted EBITDA loss of $16.0 million to $12.0 million and a non-GAAP net loss per share of $0.28 to $0.23, assuming 73.3 million weighted average shares. For the full year 2023, Appian guides to cloud subscription revenue of $299.0 million to $301.0 million, up 26% to 27%, and total revenue growth of 15% to 16%. Full-year adjusted EBITDA loss is expected to be $67.0 million to $63.0 million, and non-GAAP net loss per share is projected at $1.16 to $1.10, assuming 73.2 million shares.
The sales cycle remains long and variable, and competition in the low-code and process automation market is intense. Government agencies accounted for 20.1% of total revenue in the quarter and 20.3% year to date, compared with 18.2% in each prior-year period. Revenue outside the United States was 38.4% of total revenue in the quarter and 35.8% year to date, compared with 35.0% and 34.2%. No single end-customer accounted for more than 10% of total revenue. Appian operates under a credit facility with financial covenants, and it drew on its revolving line of credit in March 2023 to guard against credit market volatility. Legal costs tied to the Pegasystems cases remain a factor, though those expenses have declined.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $127.7M | $135.2M | -5.6% | $110.1M | +16.0% |
| Gross profit | $90.9M | $99.1M | -8.3% | $76.8M | +18.4% |
| Gross margin | 71.2% | 73.3% | -2.2 pp | 69.8% | +1.4 pp |
| Research & development | $39.7M | $41.6M | -4.5% | $33.8M | +17.4% |
| Sales & marketing | $62.6M | $63.1M | -0.8% | $56.2M | +11.4% |
| General & administrative | $29.2M | $29.7M | -1.6% | $29.5M | -1.0% |
| Total operating expenses | $131.5M | $134.4M | -2.1% | $119.5M | +10.1% |
| Operating income (loss) | -$40.7M | -$35.3M | -15.3% | -$42.7M | +4.9% |
| Operating margin | -31.8% | -26.1% | -5.8 pp | -38.8% | +7.0 pp |
| Net income (loss) | -$42.4M | -$36.8M | -15.0% | -$49.4M | +14.2% |
| Net margin | -33.2% | -27.2% | -5.9 pp | -44.8% | +11.7 pp |
| Diluted EPS | -$0.58 | -$0.51 | -$0.07 | -$0.68 | +$0.10 |
Risks
In Q4 2022 Appian entered a Senior Secured Credit Agreement with a $150.0M five-year term loan and a $75.0M revolver, and drew $62.0M of the revolver in March 2023. Interest expense rose to $4.8M in the quarter and $7.9M year to date, and the company must stay in compliance with covenants to avoid accelerating repayment.
The MD&A flags direct exposure to the March 2023 Silicon Valley Bank receivership and to broader limited liquidity, defaults or non-performance across financial institutions. Appian drew on its revolver as a defensive measure against credit market volatility even though it states its deposit institutions are financially sound.
The 2021 non-cancellable Amazon Web Services cloud hosting arrangement carries $131.0M of minimum purchase commitments over five years, with $25.0M required in year two and $28.0M in each of years three through five. Spending totaled $18.5M year to date, so shortfalls versus minimums would be a fixed cost burden.
The MD&A notes new sales representatives take six months to a year to become productive given the length of the sales cycle. Sales and marketing expense rose 23.0% year to date and headcount 17.3%, with a $5.3M commission increase and $4.5M severance increase, so payback depends on that ramp.
Revenue from government agencies represented 20.1% and 20.3% of total revenue for the three and six months ended June 30, 2023, up from 18.2% in both prior-year periods, concentrating exposure in public-sector budgets and procurement cycles.
Cloud subscription revenue retention rate declined to 115% as of June 30, 2023 from 116% a year earlier. The MD&A also notes professional services revenue from existing customers decreased $6.2M in the quarter, which pressures the land and expand model.
Professional services gross margin fell to 23.2% in the quarter from 25.8% in the prior-year quarter, and subscriptions gross margin slipped to 88.5% from 88.9%, driven by higher personnel and hosting costs. The MD&A warns these margins will fluctuate quarterly as partner usage and headcount shift.
Appian continues to carry legal costs tied to the Pegasystems intellectual property and reciprocal false advertising cases, including $2.2M of litigation expense added back year to date in the non-GAAP reconciliation. Legal fees declined $16.1M versus the first half of 2022 but remain a live contingency.
SaaS KPIs
All quarters →Cloud Subscription Revenue Retention Rate
Summary, forecast, risks and KPIs are extracted from APPIAN CORP's SEC filings for Q2 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.