APPIAN CORP Q3 FY2023 earnings

Appian's third-quarter revenue was $137.1 million, up 16.3% from the third quarter of 2022. Cloud subscription revenue, a key metric, reached $77.2 million, up 27% year over year. Total subscriptions revenue rose 20% to $103.8 million, and professional services revenue was $33.3 million, up 6%. The cloud subscription revenue retention rate was 117% as of September 30, 2023, compared with 115% a year earlier. GAAP operating loss was $(15.2) million, and GAAP net loss was $(22.3) million, or $(0.30) per diluted share, and both the net loss and diluted EPS improved from the prior-year quarter.

The top line flowed through to profitability measures. Gross margin expanded to 73.7% year over year, and operating margin was negative 11.1%, an improvement from the prior-year quarter. GAAP operating loss narrowed by $22.6 million, while GAAP net loss narrowed by $21.7 million. Operating cash flow was negative $65.0 million for the quarter, a larger outflow than a year earlier. Capital expenditures were $0.47 million, down 59.8% from the prior-year quarter. Deferred revenue was $197.8 million as of September 30, 2023, and remaining performance obligations were $391.9 million, up 22.5% from the prior-year quarter.

Appian issued guidance for the fourth quarter and full year 2023. For the fourth quarter of 2023, Appian expects cloud subscription revenue of $78.6 million to $79.6 million, representing year-over-year growth of 19% to 21%. Total revenue is guided to $138.0 million to $143.0 million, up 10% to 14% year over year. Adjusted EBITDA loss is expected to be $(16.1) million to $(12.1) million, and non-GAAP net loss per share is expected to be $(0.29) to $(0.24), assuming weighted average common shares outstanding of 73.3 million. For the full year 2023, cloud subscription revenue is guided to $300.0 million to $301.0 million, up 27% year over year. Total revenue is guided to $538.0 million to $543.0 million, up 15% to 16%. Adjusted EBITDA loss is expected to be $(62.0) million to $(58.0) million, and non-GAAP net loss per share is expected to be $(1.13) to $(1.07), assuming weighted average common shares outstanding of 73.1 million.

Operational momentum included recognition as a Leader in the 2023 Gartner Magic Quadrant for Enterprise Low-Code Application Platforms and a number one ranking for business workflow automation with integration. Appian also launched Case Management as a Service for the public sector and Connected Underwriting for Life Insurance with Swiss Re, and highlighted AI Copilot and customer work with Aon and the Texas Secretary of State's office. Government agencies represented 21.1% of revenue in the quarter, while non-U.S. customers generated 35.3% of revenue. The company operated in 16 countries as of September 30, 2023.

Risks remain visible. The company cited a long and variable sales cycle, competition, customer concentration, the timing of subscription revenue recognition, reliance on third parties, and compliance with financial covenants under its Credit Agreement. Foreign exchange losses were $4.3 million in the quarter, or $(0.06) per share. Appian paid $57.3 million for a judgment preservation insurance policy tied to its $2.036 billion judgment against Pegasystems, which weighed on operating cash flow. As of September 30, 2023, it held $169.5 million in total cash, cash equivalents, and investments. It had used $62.0 million of borrowing capacity under a $75.0 million revolving credit facility and had $11.9 million of outstanding letters of credit. AWS purchase commitments total $131.0 million over five years, with minimum spending of $28.0 million in each of the third, fourth, and fifth years.