What changed in this filing

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Item 1. Financial Statements

2020-11-05 compared with 2020-08-06 · 134 added, 114 removed, 572 unchanged (30% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Current assets

Cash and cash equivalents $ 251,088 $ 159,755

Accounts receivable, net of allowance of $ 800 and $ 600 as of June 30, 2020 and December 31, 2019, respectively

Accounts receivable, net of allowance of $ 1,200 and $ 600 as of September 30, 2020 and December 31, 2019, respectively

89,219 70,408

4 unchanged sentences

Goodwill 4,637 —

Intangible assets, net of accumulated amortization of $ 196 as of June 30, 2020

Intangible assets, net of accumulated amortization of $ 307 as of September 30, 2020

Operating right-of-use assets 30,855 24,205

21 unchanged sentences

Class A common stock—par value $ 0.0001 ;

500,000,000 shares authorized and 37,558,379 shares issued and outstanding as of June 30, 2020;

500,000,000 shares authorized and 37,805,423 shares issued and outstanding as of September 30, 2020;

500,000,000 shares authorized and 34,525,386 shares issued and outstanding as of December 31, 2019

Class B common stock—par value $ 0.0001 ;

100,000,000 shares authorized and 32,281,936 shares issued and outstanding as of June 30, 2020;

100,000,000 shares authorized and 32,214,766 shares issued and outstanding as of September 30, 2020;

100,000,000 shares authorized and 32,942,636 shares issued and outstanding as of December 31, 2019

8 unchanged sentences

(unaudited, in thousands, except share and per share data)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

28 unchanged sentences

(unaudited, in thousands)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Net loss $ ( 3,612 ) $ ( 14,650 ) $ ( 27,096 ) $ ( 39,917 )

Comprehensive loss, net of income taxes:

Comprehensive income (loss), net of income taxes:

Foreign currency translation adjustment ( 1,960 ) 680 ( 2,157 ) 486

23 unchanged sentences

Balance, June 30, 2020 69,840,315 7 458,174 ( 482 ) ( 158,897 ) 298,802

Net loss — — — — ( 3,612 ) ( 3,612 )

Issuance of common stock to directors 2,417 — — — — —

Vesting of restricted stock units 33,641 — — — — —

Exercise of stock options 143,816 — 934 — — 934

Stock-based compensation expense — — 3,578 — — 3,578

Other comprehensive loss — — — ( 1,960 ) — ( 1,960 )

Balance, September 30, 2020 70,020,189 $ 7 $ 462,686 $ ( 2,442 ) $ ( 162,509 ) $ 297,742

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

19 unchanged sentences

Balance, June 30, 2019 64,837,568 6 230,185 348 ( 109,966 ) 120,573

Net loss — — — — ( 14,650 ) ( 14,650 )

Issuance of common stock from public offering, net of issuance costs 1,825,000 — 101,303 — — 101,303

Issuance of common stock to directors 2,563 — — — — —

Vesting of restricted stock units 94,772 — — — — —

Exercise of stock options 387,095 — 2,065 — — 2,065

Stock-based compensation expense — — 3,141 — — 3,141

Other comprehensive income — — — 680 — 680

Balance, September 30, 2019 67,146,998 $ 6 $ 336,694 $ 1,028 $ ( 124,616 ) $ 213,112

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2 unchanged sentences

(unaudited, in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

Net loss $ ( 27,096 ) $ ( 39,917 )

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 4,485 3,273

13 unchanged sentences

Deferred rent, non-current — 5,718

Net cash (used in) provided by operating activities ( 6,957 ) 12,007

Net cash used in operating activities ( 13,453 ) ( 2,880 )

Cash flows from investing activities:

4 unchanged sentences

Principal payments on finance leases ( 1,080 ) ( 299 )

Proceeds from public offering, net of underwriting discounts 108,260 —

Proceeds from public offerings, net of underwriting discounts 108,260 101,653

Payments of costs related to public offerings ( 18 ) ( 12 )

2 unchanged sentences

Effect of foreign exchange rate changes on cash and cash equivalents 1,623 ( 460 )

Net increase (decrease) in cash and cash equivalents 96,391 ( 13,829 )

Net increase in cash and cash equivalents 91,333 70,624

Cash and cash equivalents, beginning of period 159,755 94,930

4 unchanged sentences

Supplemental disclosure of non-cash financing information:

Capital lease obligations to acquire new office furniture and fixtures $ — $ 3,673

Capital lease obligations to acquire new office furniture and fixtures and computer hardware $ — $ 4,491

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

14 unchanged sentences

We adopted ASC 606, the new revenue recognition guidance, on January 1, 2019 using the modified retrospective method.

Under this method of adoption, we recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of accumulated deficit and applied the new standard only to contracts that were not completed prior January 1, 2019.

Because we were an emerging growth company until December 31, 2019, the Jumpstart Our Business Startups Act allowed us to delay adoption of certain accounting standards such as ASC 606 and ASC 842 until such time they were made applicable to private companies.

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Significant estimates embedded in the condensed consolidated financial statements include revenue recognition, income taxes and the related valuation allowance, the valuation of goodwill and intangible assets, leases, costs to obtain a contract with a customer, and stock-based compensation.

The outbreak of the novel coronavirus disease ("COVID-19") has resulted in the declaration of a global pandemic and introduced a level of disruption and uncertainty into the financial markets and global economy.

The ongoing outbreak of the novel coronavirus disease ("COVID-19") has resulted in the declaration of a global pandemic and introduced a level of disruption and uncertainty into the financial markets and global economy.

While we continue to monitor the developments surrounding the pandemic, as of the date of issuance of these financial statements, we are not aware of any specific events or circumstances that would require us to update our estimates, assumptions, and judgments or revise the carrying value of our assets or liabilities.

However, the ultimate impact of COVID-19 on our business is not estimable at this time and will be largely dependent upon a number of factors outside of our control including the extent and duration of the outbreak as well as any mitigating actions which may be undertaken by global governments and the general public.

We cannot estimate the impacts COVID-19 will have on our business going forward as such impacts will be largely dependent upon a number of factors outside of our control including the extent and duration of the outbreak as well as any mitigating actions which may be undertaken by global governments and the general public.

APPIAN CORPORATION AND SUBSIDIARIES

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We believe no additional credit risk beyond amounts provided for collection loss are inherent in accounts receivable.

When accounted for under ASC 606, revenue generated from government agencies represented 19.0 % and 16.8 % of our revenue for the three and six months ended June 30, 2020, respectively, of which the top three federal government agencies generated 7.6 % and 6.7 % of our revenue for the three and six months ended June 30, 2020, respectively.

Additionally, 36.8 % and 35.0 % of our revenue during the three and six months ended June 30, 2020, respectively, was generated from foreign customers.

Revenue generated from government agencies represented 16.8 % and 17.3 % of our revenue for three and six months ended June 30, 2019, respectively, of which the top three federal government agencies generated 6.4 % and 7.3 % of our revenue for the three and six months ended June 30, 2019, respectively.

Additionally, 32.9 % and 32.4 % of our revenue during the three and six months ended June 30, 2019, respectively, was generated from foreign customers.

R evenue generated from government agencies represented 19.9 % and 17.9 % of our revenue for the three and nine months ended September 30, 2020, respectively, of which the top three federal government agencies generated 8.7 % and 7.4 % of our revenue for the three and nine months ended September 30, 2020, respectively.

Additionally, 32.2 % and 34.0 % of our revenue during the three and nine months ended September 30, 2020, respectively, was generated from foreign customers.

When accounted for under ASC 606, revenue generated from government agencies represented 19.5 % and 18.0 % of our revenue for three and nine months ended September 30, 2019, respectively, of which the top three federal government agencies generated 8.6 % and 7.2 % of our revenue for the three and nine months ended September 30, 2019, respectively.

Additionally, 31.0 % and 31.9 % of our revenue during the three and nine months ended September 30, 2019, respectively, was generated from foreign customers.

Cash and Cash Equivalents

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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.

To date, our allowance and related bad debt write-offs have been nominal.

There was a $ 0.2 million increase in the allowance for doubtful accounts from December 31, 2019 to June 30, 2020.

There was a $ 0.6 million increase in the allowance for doubtful accounts from December 31, 2019 to September 30, 2020.

Assets Recognized from the Costs to Obtain a Contract with a Customer

8 unchanged sentences

Amortization associated with commission expense is recorded to sales and marketing costs in our condensed consolidated statements of operations.

Commission expense was $ 5.8 million and $ 11.1 million for the three and six months ended June 30, 2020, respectively.

Commission expense was $ 3.6 million and $ 6.6 million for the three and six months ended June 30, 2019, respectively.

Commission expense was $ 5.6 million and $ 16.7 million for the three and nine months ended September 30, 2020, respectively.

Commission expense was $ 3.6 million and $ 10.2 million for the three and nine months ended September 30, 2019, respectively.

Property and Equipment

14 unchanged sentences

If such assets are considered to be impaired, the assets are written down to their estimated fair value.

No indicators of impairment were identified for the three and six months ended June 30, 2020 and June 30, 2019.

No indicators of impairment were identified for the three and nine months ended September 30, 2020 and 2019.

Fair Value of Financial Instruments

The carrying amounts of our cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value as of June 30, 2020 and December 31, 2019 because of the relatively short duration of these instruments.

Our line of credit is recorded at carrying value, which approximates fair value.

The carrying amounts of our cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value as of September 30, 2020 and December 31, 2019 because of the relatively short duration of these instruments.

We use 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.

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Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs

There were no instruments measured at fair value on a recurring basis using significant unobservable inputs as of June 30, 2020 and December 31, 2019.

There were no instruments measured at fair value on a recurring basis using significant unobservable inputs as of September 30, 2020 and December 31, 2019.

Stock-Based Compensation

1 unchanged sentence

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 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, stock-based compensation expense is recognized on a straight-line basis over the requisite service period.

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 performance-based awards, stock-based compensation expense is recognized using the accelerated attribution method based on the probability of satisfying the performance condition.

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.

For restricted stock units, stock-based compensation expense is recognized on a straight-line basis over the requisite service period.

We account for forfeitures as they occur rather than estimating expected forfeitures.

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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.

The following table summarizes revenue from contracts with customers for the three and six months ended June 30, 2020 and June 30, 2019 (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

The following table summarizes revenue from contracts with customers for the three and nine months ended September 30, 2020 and 2019 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

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We generate cloud-based subscription 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, and we do not separately charge customers for hosting costs.

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.

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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 stand alone or with other products.

Our professional services are considered distinct performance obligations when sold standalone or with other products.

Consulting Services

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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 six months ended June 30, 2020 was insignificant.

Our estimates of variable consideration are also

The amount of variable consideration excluded from the transaction price for the nine months ended September 30, 2020 was insignificant.

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.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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")

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Contract assets are transferred to accounts receivable when the right to invoice becomes unconditional.

As of June 30, 2020 and December 31, 2019, contract assets of $ 20.8 million and $ 22.8 million, respectively, are included in the prepaid expenses and other current assets and other assets line items in our condensed consolidated balance sheets.

As of September 30, 2020 and December 31, 2019, contract assets of $ 18.4 million and $ 22.8 million, respectively, are included in the Prepaid expenses and other current assets and Other assets line items in our condensed consolidated balance sheets.

Contract liabilities consists of deferred revenue and include payments received in advance of the satisfaction of performance obligations.

1 unchanged sentence

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.

For the six months ended June 30, 2020, we recognized $ 57.9 million of revenue that was included in the deferred revenue balance as of December 31, 2019.

For the nine months ended September 30, 2020, we recognized $ 75.3 million of revenue that was included in the deferred revenue balance as of December 31, 2019.

Transaction Price Allocated to the Remaining Performance Obligations

As of June 30, 2020, we had an aggregate transaction price of $ 175.9 million allocated to unsatisfied performance obligations.

As of September 30, 2020, we had an aggregate transaction price of $ 185.8 million allocated to unsatisfied performance obligations.

We expect to recognize $ 171.1 million of this balance as revenue over the next 24 months with the remaining amount recognized thereafter.

3 unchanged sentences

We have elected not to recognize on the balance sheet leases with a term of one year or less.

For contracts with lease and non-lease components, we have elected not to allocate the contract consideration and to account for the lease and non-lease components as a single lease component.

Finance leases are included in the Property and equipment,

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For contracts with lease and non-lease components, we have elected not to allocate the contract consideration and to account for the lease and non-lease components as a single lease component.

Finance leases are included in property and equipment, net, finance lease liabilities, current, and finance lease liabilities, net of current portion line items in our condensed consolidated balance sheets.

net, Finance lease liabilities, current, and Finance lease liabilities, net of current portion line items in our condensed consolidated balance sheets.

Lease liabilities and their corresponding ROU assets are recorded based on the present value of lease payments over the expected lease term.

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We consider various factors, including our level of collateralization, estimated credit rating, and the currency in which the lease is denominated.

The operating lease ROU also includes any lease prepayments, offset by lease incentives.

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 while an option to terminate is considered as well unless it is reasonably certain we will not exercise the option.

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 while an option to terminate is considered unless it is reasonably certain we will not exercise the option.

For certain equipment leases, we apply a portfolio approach to effectively account for the operating lease ROU assets and liabilities.

3 unchanged sentences

We have operating and finance leases for corporate offices, office furniture and fixtures, and computer hardware.

Our leases have remaining lease terms of 1 year to 12 years, some of which include options to extend the leases for up to 5 years.

Our leases have remaining lease terms of 1 to 12 years, some of which include options to extend the leases for up to 5 years.

In April 2018, we entered into a lease agreement with respect to 176,222 square feet of office space in McLean, Virginia for a new corporate headquarters.

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Pursuant to the guidance of ASC 842, the amendment is considered a modification to the original lease and is accounted for as a separate contract because it represents a new right-of-use asset and the lease costs charged on the new space are at prevailing market rates.

As of June 30, 2020, we have not taken possession of the space nor met the criteria for the lease to be considered commenced.

Accordingly, we have not reported a right-of-use asset or liability on our condensed consolidated balance sheets nor have recorded expense on our condensed consolidated statements of operations in relation to the additional space.

The following table sets forth the components of lease expense for the three and six months ended June 30, 2020 (in thousands):

Three Months Ended June 30, 2020 Six Months Ended June 30, 2020

Effective July 1, 2020, we have taken possession of the space, begun to recognize rent expense, and reported a $ 7.9 million ROU asset and lease liability on our condensed consolidated balance sheets.

The following table sets forth the components of lease expense for the three and nine months ended September 30, 2020 (in thousands):

Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020

Operating lease cost $ 1,695 $ 4,971

7 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental balance sheet information related to leases as of June 30, 2020 was as follows (in thousands, except for lease term and discount rate):

June 30, 2020

Supplemental balance sheet information related to leases as of September 30, 2020 was as follows (in thousands, except for lease term and discount rate):

September 30, 2020

Operating Leases

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Finance leases 5.5 %

For the three and six months ended June 30, 2020, amortization of operating right-of-use assets totaled $ 0.2 million and $ 0.9 million, respectively.

For the three and six months ended June 30, 2020, interest expense on operating right-of-use liabilities totaled $ 1.0 million and $ 1.4 million, respectively.

Supplemental cash flow information related to leases for the six months ended June 30, 2020 was as follows (in thousands):

Six Months Ended June 30, 2020

For the three and nine months ended September 30, 2020, amortization of operating right-of-use assets totaled $ 0.4 million and $ 1.3 million, respectively.

For the three and nine months ended September 30, 2020, interest expense on operating right-of-use liabilities totaled $ 0.7 million and $ 2.2 million, respectively.

Supplemental cash flow information related to leases for the nine months ended September 30, 2020 was as follows (in thousands):

Nine Months Ended September 30, 2020

Cash paid for amounts included in the measurement of lease liabilities:

2 unchanged sentences

Financing cash outflows for finance leases 1,080

A summary of our future minimum lease commitments under non-cancellable leases as of June 30, 2020 is as follows (in thousands):

A summary of our future minimum lease commitments under non-cancellable leases as of September 30, 2020 is as follows (in thousands):

APPIAN CORPORATION AND SUBSIDIARIES

1 unchanged sentence

Operating Leases Finance Leases

2020 (excluding the six months ended June 30, 2020) $ 2,319 $ 810

2020 (excluding the nine months ended September 30, 2020)

$ 1,687 $ 405

2021 7,455 1,620

2022 8,078 859

Thereafter 57,382 —

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Net assets acquired $ 6,909

There were no changes to our reportable segments as a result of the acquisition, and revenue and expenses from the date of the acquisition through June 30, 2020 were immaterial.

There were no changes to our reportable segments as a result of the acquisition, and revenue and expenses from the date of the acquisition through September 30, 2020 were immaterial.

Additionally, acquisition costs incurred in relation to the transaction were immaterial.

5 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Property and equipment, net consisted of the following as of June 30, 2020 and December 31, 2019 (in thousands):

June 30, 2020 December 31, 2019

Property and equipment, net consisted of the following as of September 30, 2020 and December 31, 2019 (in thousands):

September 30, 2020 December 31, 2019

Leasehold improvements $ 36,220 $ 37,130

3 unchanged sentences

Equipment 48 72

45,995 46,880

Property and equipment, gross 46,388 46,880

accumulated depreciation ( 9,973 ) ( 7,326 )

Property and equipment, net $ 36,415 $ 39,554

Depreciation expense totaled $ 1.4 million and $ 2.8 million for the three and six months ended June 30, 2020, respectively.

There were nominal disposals recorded during the three months ended June 30, 2020.

During the six months ended June 30, 2020, we retired $ 1.3 million of leasehold improvements, $ 0.1 million of computer hardware, and $ 0.1 million o f office furniture and fixtur es and equipment.

Nominal losses on disposal were recorded for the three and six months ended June 30, 2020.

Depreciation expense totaled $ 1.1 million and $ 1.9 million for the three and six months ended June 30, 2019, respectively.

During the three and six months ended June 30, 2019, we retired $ 3.2 million of leasehold improvements and $ 0.8 million of office furniture and fixtures.

During the three and six months ended June 30, 2019, we recorded a loss on disposal of $ 0.1 million.

At June 30, 2020, property and equipment included $ 4.5 million of assets acquired under finance lease arrangements.

Accumulated depreciation related to these finance lease arrangements totaled $ 1.4 million at June 30, 2020.

Depreciation expense totaled $ 1.4 million and $ 4.2 million for the three and nine months ended September 30, 2020, respectively.

There were no disposals recorded during the three months ended September 30, 2020.

During the nine months ended September 30, 2020, we retired $ 1.3 million of leasehold improvements, $ 0.1 million of computer hardware, and $ 0.1 million of office furniture and fixtures and equipment.

Nominal losses on disposal were recorded for the three and nine months ended September 30, 2020.

Depreciation expense totaled $ 1.3 million and $ 3.3 million for the three and nine months ended September 30, 2019, respectively.

During the three months ended September 30, 2019, we retired $ 0.4 million of computer hardware and $ 0.1 million of equipment.

During the nine months ended September 30, 2019, we retired $ 3.2 million of leasehold improvements, $ 0.8 million of computer hardware, $ 0.4 million of office furniture and fixtures, and $ 0.1 million of equipment.

During the three and nine months ended September 30, 2019, we recorded a loss on disposal of $ 0.1 million.

At September 30, 2020, property and equipment included $ 4.5 million of assets acquired under finance lease arrangements.

Accumulated depreciation related to these finance lease arrangements totaled $ 1.8 million at September 30, 2020.

Amortization of assets acquired under finance leases is included in depreciation and amortization expense.

Accrued Expenses

Accrued expenses consisted of the following as of June 30, 2020 and December 31, 2019 (in thousands):

June 30, 2020 December 31, 2019

Accrued expenses consisted of the following as of September 30, 2020 and December 31, 2019 (in thousands):

September 30, 2020 December 31, 2019

Accrued hosting costs $ 1,332 $ 1,865

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The facility matures in November 2022.

We may elect whether amounts drawn on the revolving line of credit bear interest at a floating rate per annum equal to either LIBOR or the prime rate plus an additional interest rate margin that is determined by the availability of the borrowings under the revolving line of credit.

The additional interest rate margin will range from 2.00 % to 2.50 % in the case of LIBOR

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

advances and from 1.00 % to 1.50 % in the case of prime rate advances.

under the revolving line of credit.

The additional interest rate margin will range from 2.00 % to 2.50 % in the case of LIBOR advances and from 1.00 % to 1.50 % in the case of prime rate advances.

The revolving line of credit contains an unused facility fee in an amount between 0.15 % and 0.25 % of the average unused portion of the revolving line of credit, which is payable quarterly.

1 unchanged sentence

Any amounts borrowed under the credit facility are collateralized by substantially all of our assets.

We were in compliance with all covenants as of June 30, 2020.

As of June 30, 2020, we had no outstanding borrowings under this revolving line of credit, and we had outstanding letters of credit totaling $ 11.1 million in connection with securing our leased office space.

We were in compliance with all covenants as of September 30, 2020.

As of September 30, 2020, we had no outstanding borrowings under this revolving line of credit, and we had outstanding letters of credit totaling $ 11.2 million in connection with securing our leased office space.

The provision for income taxes is based upon the estimated annual effective tax rates for the year applied to the current period income before tax plus the tax effect of any significant or unusual items, discrete events, or changes in tax law.

1 unchanged sentence

Fluctuations in the distribution of pre-tax income among our operating subsidiaries can lead to fluctuations of the effective tax rate in the condensed consolidated financial statements.

For the three and six months ended June 30, 2020, the actual effective tax rates were ( 2.4 )% and ( 0.3 )%, respectively.

For the three and six months ended June 30, 2019, the actual effective tax rates were ( 2.7 )% and ( 1.6 )%, respectively.

For the three and nine months ended September 30, 2020, the actual effective tax rates were ( 7.6 )% and ( 1.3 )%, respectively.

For the three and nine months ended September 30, 2019, the actual effective tax rates were ( 0.0 )% and ( 1.0 )%, respectively.

We assess uncertain tax positions in accordance with ASC 740-10, Accounting for Uncertainties in Income Taxes .

As of June 30, 2020, our net unrecognized tax benefits totaled $ 1.6 million, which if recognized would result in no net effect on the effective tax rate due to a valuation allowance.

As of September 30, 2020, our net unrecognized tax benefits totaled $ 1.6 million, which if recognized would result in no net effect on the effective tax rate due to a valuation allowance.

The amount of reasonably possible unrecognized tax benefits that could decrease over the next 12 months due to the expiration of certain statutes of limitations or settlements of tax audits is not material to our condensed consolidated financial statements.

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In May 2017, our Board of Directors adopted, and our stockholders approved, the 2017 Equity Incentive Plan (the “2017 Plan”), which became effective as of the date of the final prospectus for our initial public offering.

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 unit awards ("RSUs"), stock appreciation rights, performance-based stock awards, and other forms of equity compensation to employees, including officers, non-employee directors, and consultants.

The 2017 Plan provides for the grant of incentive stock options to employees, and for the grant of nonstatutory stock options, restricted stock awards, 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.

1 unchanged sentence

As a result of the adoption of the 2017 Plan, no further grants may be made under the 2007 Plan.

As of June 30, 2020, there were 7,142,549 shares of Class A common stock reserved for issuance under the 2017 Plan, of which 4,545,733 were available to be issued.

Stock Options

As of September 30, 2020, there were 7,162,409 shares of Class A common stock reserved for issuance under the 2017 Plan, of which 4,536,688 were available to be issued.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Stock Options

We estimate the fair value of stock options containing only a service condition using the Black-Scholes option pricing model, which requires the use of subjective assumptions, including the expected term of the option, the current price of the underlying stock, the expected stock price volatility, expected dividend yield, and the risk-free interest rate for the expected term of the option.

6 unchanged sentences

The 2019 CEO Grant is eligible to vest based on the achievement of a stock price appreciation target of our Class A common stock.

Specifically, the 2019 CEO Grant will vest when shares of our Class A common stock closes at or above $ 84.63 per share for a period equal to or greater than 90 calendar days or upon the occurrence of a change in control in which the value of our Class A common stock is equal to or greater than $ 84.63 per share within five years of the grant date.

Specifically, the 2019 CEO Grant will vest when shares of our Class A common stock close at or above $ 84.63 per share for a period equal to or greater than 90 consecutive calendar days or upon the occurrence of a change in control in which the value of our Class A common stock is equal to or greater than $ 84.63 per share within five years of the grant date.

The fair value of the 2019 CEO Grant was determined using a Monte Carlo simulation.

The fair value of the award at the grant date was $ 9.5 million and will be amortized over the derived service period of 2.6 years.

The following table summarizes the assumptions used to estimate the fair value of stock options granted during the three and six months ended June 30, 2020 and June 30, 2019:

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

There were no stock options granted during the three months ended September 30, 2020 and 2019.

The following table summarizes the assumptions used to estimate the fair value of stock options granted during the nine months ended September 30, 2020 and 2019:

Nine Months Ended September 30,

Risk-free interest rate * 2.1 %

3 unchanged sentences

* Not applicable because no stock options were granted during the period

The following table summarizes the stock option activity for the six months ended June 30, 2020:

The following table summarizes stock option activity for the nine months ended September 30, 2020:

Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (in thousands)

5 unchanged sentences

Canceled ( 53,580 ) 11.36 — —

Outstanding at June 30, 2020

Outstanding at September 30, 2020

3,882,588 $ 13.14 5.1 $ 200,397

Exercisable at June 30, 2020

Exercisable at September 30, 2020

2,659,928 $ 8.07 5.2 $ 150,767

There were no stock options granted during the six months ended June 30, 2020.

The weighted average grant date fair value of stock options granted during the six months ended June 30, 2019 was $ 13.57 per share.

The total fair value of stock options that vested during the six months ended June 30, 2020 and June 30, 2019 was $ 1.0 million and $ 1.5 million, respectively.

As of June 30, 2020, the total compensation cost related to unvested stock options not yet recognized was $ 6.1 million, which will be recognized over a weighted average period of 1.5 years.

There were no stock options granted during the nine months ended September 30, 2020.

The weighted average grant date fair value of stock options granted during the nine months ended September 30, 2019 was $ 13.57 per share.

The total fair value

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of stock options that vested during the nine months ended September 30, 2020 and 2019 was $ 1.4 million and $ 1.7 million, respectively.

As of September 30, 2020, the total compensation cost related to unvested stock options not yet recognized was $ 5.0 million, which will be recognized over a weighted average period of 1.2 years.

Restricted Stock Units

The following table summarizes RSU activity for the six months ended June 30, 2020:

The following table summarizes RSU activity for the nine months ended September 30, 2020:

Number of Shares Weighted Average Grant Date Fair Value

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Canceled ( 125,318 ) 32.00

Non-vested and outstanding at June 30, 2020

Non-vested and outstanding at September 30, 2020

1,110,438 37.06

As of June 30, 2020, total unrecognized compensation cost related to unvested RSUs was approximately $ 33.6 million, which will be recognized over a weighted average period of 2.3 years.

As of September 30, 2020, total unrecognized compensation cost related to unvested RSUs was approximately $ 33.4 million, which will be recognized over a weighted average period of 2.3 years.

In November 2018, our co-founders were granted 255,930 RSUs under the 2017 Plan at a fair value of $ 30.06 per share.

2 unchanged sentences

The RSUs vested during the three months ended March 31, 2019.

The following table summarizes the components of our stock-based compensation expense by instrument type for the three and six months ended June 30, 2020 and June 30, 2019 (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

The following table summarizes the components of our stock-based compensation expense by instrument type for the three and nine months ended September 30, 2020 and 2019 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

3 unchanged sentences

Total stock-based compensation expense $ 3,578 $ 3,141 $ 10,668 $ 13,055

Stock-based compensation expense for RSUs, stock options, and issuances of common stock is included in the following line items in the accompanying condensed consolidated statements of operations for the three and six months ended June 30, 2020 and June 30, 2019 (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Stock-based compensation expense for RSUs, stock options, and issuances of common stock is included in the following line items in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

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Stockholders' Equity

As of June 30, 2020, we had 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, of which 37,558,379 shares of Class A common stock and 32,281,936 shares of Class B common stock were issued and outstanding.

As of September 30, 2020, we had 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, of which 37,805,423 shares of Class A common stock and 32,214,766 shares of Class B common stock were 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.

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The following potentially dilutive securities outstanding, prior to the use of the treasury stock method or the if-converted method, have been excluded from the computation of diluted weighted-average shares outstanding for the respective periods below because they would have been anti-dilutive:

Three and Six Months Ended June 30,

Three and Nine Months Ended September 30,

Stock options 3,882,588 4,645,057

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Letters of Credit

At June 30, 2020 and December 31, 2019, we had outstanding letters of credit totaling $ 11.1 million and $ 10.5 million, respectively, in connection with securing our leased office space.

At September 30, 2020 and December 31, 2019, we had outstanding letters of credit totaling $ 11.2 million and $ 10.5 million, respectively, in connection with securing our leased office space.

All letters of credit are secured by our borrowing arrangement as described in Note 8.

From time to time, we are subject to legal, regulatory, and other proceedings and claims that arise in the ordinary course of business.

There are no issues or resolution of any matters expected to have a material adverse impact on our condensed consolidated financial statements.

There are no issues or resolutions of any matters expected to have a material adverse impact on our condensed consolidated financial statements.

APPIAN CORPORATION AND SUBSIDIARIES

1 unchanged sentence

Segment and Geographic Information

The following table summarizes revenue by geography for the three and six months ended June 30, 2020 and June 30, 2019 (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

The following table summarizes revenue by geography for the three and nine months ended September 30, 2020 and 2019 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

3 unchanged sentences

With respect to geographic information, revenue is attributed to respective geographies based on the contracting address of the customer.

Revenues from external customers attributed to the United Kingdom were 12.4 % of our total revenue for each of the three and six months ended June 30, 2020.

Revenues from external customers attributed to the United Kingdom were 12.8 % and 11.9 % of our total revenue for the three and six months ended June 30, 2019, respectively.

There were no other individual foreign countries from which more than 10% of our total revenue was attributable for each of the three and six months ended June 30, 2020 and June 30, 2019.

Substantially all of our long-lived assets were held in the United States as of June 30, 2020 and December 31, 2019.

Revenues from customers attributed to the United Kingdom were 13.6 % and 12.8 % of our total revenue for the three and nine months ended September 30, 2020, respectively.

Revenues from customers attributed to the United Kingdom were 12.6 % and 12.1 % of our total revenue for the three and nine months ended September 30, 2019, respectively.

There were no other individual foreign countries from which more than 10% of our total revenue was attributable for each of the three and nine months ended September 30, 2020 and 2019.

Substantially all of our long-lived assets were held in the United States as of September 30, 2020 and December 31, 2019.

Subsequent Events

Principal Paydown of Finance Leases

In October 2020, we paid $ 2.7 million to the lessor of our finance leases pursuant to an option included in our agreement permitting us to pay, in full at any time, the principal balances outstanding on our leases.

As of the date of the paydown, the titles to the assets were transferred to us, the associated right-of-use liabilities were retired, and the carrying values of the purchased assets were adjusted accordingly.

On November 3, 2020, the Compensation Committee of the Board of Directors approved a grant of 190,900 RSUs to certain employees of the Company.

The awards, valued at $ 12.9 million, will vest annually over a period of 4 years.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements