What changed in this filing

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Item 1. Financial Statements

2021-05-06 compared with 2020-11-05 · 205 added, 257 removed, 449 unchanged (51% of the section changed)

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(in thousands, except share and per share data)

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Current assets

Cash and cash equivalents $ 114,752 $ 112,462

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

Short-term investments and marketable securities 118,012 109,826

Accounts receivable, net of allowance of $ 1,400 as of each of March 31, 2021 and December 31, 2020

87,424 97,278

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Property and equipment, net 34,682 35,404

Long-term investments 22,317 36,120

Goodwill 4,651 4,862

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

Intangible assets, net of accumulated amortization of $ 513 and $ 429 as of March 31, 2021 and December 31, 2020, respectively

Operating right-of-use assets 30,610 30,659

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Operating lease liabilities, current 7,664 6,923

Finance lease liabilities, current 1,549 1,447

Other current liabilities 509 940

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Operating lease liabilities, net of current portion 50,572 51,194

Finance lease liabilities, net of current portion 1,192 2,375

Deferred revenue, net of current portion 2,698 3,886

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Class A common stock—par value $ 0.0001 ;

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

500,000,000 shares authorized and 39,321,079 shares issued and outstanding as of March 31, 2021;

500,000,000 shares authorized and 38,971,324 shares issued and outstanding as of December 31, 2020

Class B common stock—par value $ 0.0001 ;

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

100,000,000 shares authorized and 31,503,666 shares issued and outstanding as of March 31, 2021;

100,000,000 shares authorized and 31,707,866 shares issued and outstanding as of December 31, 2020

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

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

2020 2019 2020 2019

Three Months Ended March 31,

Subscriptions $ 63,766 $ 50,436

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Operating loss ( 10,490 ) ( 8,606 )

Other (income) expense

Other (income) expense, net ( 4,277 ) 2,262 ( 1,845 ) 1,881

Other expense

Other expense, net 2,893 3,114

Interest expense 81 143

Total other (income) expense ( 4,158 ) 2,358 ( 1,455 ) 2,117

Total other expense 2,974 3,257

Loss before income taxes ( 13,464 ) ( 11,863 )

Income tax expense 255 5 335 394

Income tax expense (benefit) 123 ( 194 )

Net loss $ ( 13,587 ) $ ( 11,669 )

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(unaudited, in thousands)

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

2020 2019 2020 2019

Three Months Ended March 31,

Net loss $ ( 13,587 ) $ ( 11,669 )

Comprehensive income (loss), net of income taxes:

Comprehensive income, net of income taxes

Foreign currency translation adjustment 4,015 17

Unrealized gains on available-for-sale securities 8 —

Total other comprehensive loss, net of income taxes $ ( 9,564 ) $ ( 11,652 )

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APPIAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

(unaudited, in thousands, except share data)

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Balance, March 31, 2021 70,824,745 $ 7 $ 479,017 $ ( 987 ) $ ( 182,477 ) $ 295,560

Net loss — — — — ( 11,815 ) ( 11,815 )

Issuance of common stock from public offering, net of issuance costs 1,931,206 1 107,914 — — 107,915

Issuance of common stock to directors 2,296 — — — — —

Vesting of restricted stock units 13,567 — — — — —

Exercise of stock options 248,165 — 1,571 — — 1,571

Stock-based compensation expense — — 3,614 — — 3,614

Other comprehensive loss — — — ( 214 ) — ( 214 )

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.

Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity

Common Stock Additional Paid-In Capital Accumulated Deficit

Shares Amount

Balance, January 1, 2020 67,468,022 $ 6 $ 340,929 $ ( 285 ) $ ( 135,413 ) $ 205,237

Cumulative effect of adoption of ASC 606

— — — — 60,941 60,941

Net loss — — — — ( 11,669 ) ( 11,669 )

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Balance, March 31, 2020 67,645,081 $ 6 $ 345,075 $ ( 268 ) $ ( 147,082 ) $ 197,731

Net loss — — — — ( 10,051 ) ( 10,051 )

Issuance of common stock to directors 2,684 — — — — —

Vesting of restricted stock units 6,010 — — — — —

Exercise of stock options 147,852 — 914 — — 914

Stock-based compensation expense — — 2,689 — — 2,689

Other comprehensive loss — — — ( 490 ) — ( 490 )

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.

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(unaudited, in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

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Loss on disposal of property and equipment — 7

Change in fair value of available-for-sale securities ( 8 ) —

Deferred income taxes ( 448 ) —

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Accrued compensation and related benefits ( 1,955 ) ( 399 )

Other liabilities 2,963 ( 251 )

Other current and non-current liabilities 151 ( 154 )

Deferred revenue ( 7,192 ) ( 2,503 )

Operating lease liabilities 168 1,159

Deferred rent, non-current — 5,718

Net cash used in operating activities ( 2,810 ) ( 3,859 )

Cash flows from investing activities:

Proceeds from sale of investments 5,625 —

Payments for acquisitions, net of cash acquired — ( 6,138 )

Purchases of property and equipment ( 468 ) ( 202 )

Net cash used in investing activities ( 7,174 ) ( 31,430 )

Net cash provided by (used in) investing activities 5,157 ( 6,340 )

Cash flows from financing activities:

Principal payments on finance leases — ( 357 )

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

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

Proceeds from exercise of common stock options 625 670

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Effect of foreign exchange rate changes on cash and cash equivalents ( 682 ) ( 706 )

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

Net increase (decrease) in cash and cash equivalents 2,290 ( 10,592 )

Cash and cash equivalents, beginning of period 112,462 159,755

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Cash paid for income taxes $ 148 $ 43

Supplemental disclosure of non-cash financing information:

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.

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Organization and Description of Business

Appian Corporation (together with its subsidiaries, “Appian,” the “Company,” “we,” or “our”) provides a low-code automation platform that accelerates the creation of high-impact business applications, enabling our customers to automate the most important aspects of their business.

Global organizations use our applications to improve customer experience, achieve operational excellence, and simplify global risk management and compliance.

Appian Corporation (together with its subsidiaries, “Appian,” the “Company,” “we,” or “our”) helps organizations build applications and workflows rapidly, with a low-code automation platform.

Combining people, technologies, and data in a single workflow, Appian can help companies maximize their resources and improve business results.

Many of the world’s largest organizations use Appian applications to improve customer experience, achieve operational excellence, and simplify global risk management and compliance.

We were incorporated in the state of Delaware in August 1999.

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These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (the “SEC”) on February 18, 2021.

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 to 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.

We elected to use this extended transition period, and accordingly, did not report revenues under ASC 606 or leases under ASC 842 in our Quarterly Reports on Form 10-Q during 2019.

Refer to our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 20, 2020, for a complete reconciliation of our revenues under the old and new guidance.

Prior period amounts in this Form 10-Q have been recast as if we had reported under ASC 606 for the applicable periods.

Use of Estimates

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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 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 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.

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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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Principles of Consolidation

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The underwriter purchased the shares from us and the selling stockholders at a price of $ 56.50 per share.

Our net proceeds from the offering were $ 107.9 million, after deducting underwriting discounts and commissions and offering expenses.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

proceeds from the offering were $ 107.9 million, after deducting underwriting discounts and commissions and offering expenses.

We did not receive any of the proceeds from the sale of shares by the selling stockholders.

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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, travel costs, third-party contractor costs, and allocated facility costs and overhead.

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 facility costs and overhead, and the costs of billable expenses such as travel and lodging.

The unpredictability of the timing of entering into significant professional services agreements sold on a standalone basis may cause significant fluctuations in our quarterly financial results and allocated facility costs and overhead.

Concentration of Credit and Customer Risk

Our financial instruments exposed to concentration of credit and customer risk consist primarily of cash and cash equivalents and trade accounts receivable.

Our financial instruments exposed to concentration of credit and customer risk consist primarily of cash and cash equivalents, trade accounts receivable, and our short- and long-term investments.

Deposits held with banks may exceed the amount of insurance provided on such deposits.

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

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.

Revenue generated from government agencies represented 20.9 % and 14.9 % of our revenue for the three months ended March 31, 2021 and 2020, respectively, of which the top three federal government agencies generated 6.9 % and 6.0 % of our revenue for the three months ended March 31, 2021 and 2020, respectively.

Additionally, 32.2 % and 33.5 % of our revenue during the three months ended March 31, 2021 and 2020, respectively, was generated from foreign customers.

Cash and Cash Equivalents

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

We consider all highly liquid investments with an original or remaining maturity of three months or less at the date of purchase, as well as overnight repurchase investments, to be cash equivalents.

We consider all highly liquid investments with an original or remaining maturity of three months or less at the date of purchase, as well as overnight repurchase agreements, to be cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts

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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.

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

There was no increase in the allowance for doubtful accounts from December 31, 2020 to March 31, 2021.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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.

Commission expense was $ 6.8 million and $ 5.3 million for the three months ended March 31, 2021 and 2020, respectively.

Property and Equipment

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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 following table outlines useful lives of our major asset categories:

The following table outlines the useful lives of our major asset categories:

Asset Category Useful Life (in years)

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Impairment of Long-Lived Assets

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Long-lived assets and certain intangible assets are reviewed for impairment whenever events or 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.

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 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.

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:

Observable inputs based on unadjusted quoted prices in active markets for identical assets or liabilities;

Inputs other than quoted prices in active markets that are observable either directly or indirectly;

Unobservable inputs for which there is little or no market data, which require us to develop our own assumptions.

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 September 30, 2020 and December 31, 2019.

No indicators of impairment were identified for the three months ended March 31, 2021 and 2020.

Investments and Fair Value of Financial Instruments

Refer to Note 15 for a detailed discussion on our policies specific to investments and determining fair value.

Stock-Based Compensation

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

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments-Credit Losses (Topic 326) ("ASU 2016-13"), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost.

This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

Adopting the standard did not have a material impact on our condensed consolidated financial statements.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"), which eliminates, modifies, and adds disclosure requirements for fair value measurements.

This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

Adopting the standard did not have a material impact on our condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40), Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract , which aligns the requirements for capitalizing implementation costs in cloud computing arrangements with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

In December 2019, the FASB issued Accounting Standards Update ("ASU") 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes , which amends and aims to simplify accounting disclosure requirements regarding a number of topics including, but not limited to, intraperiod tax allocations, accounting for deferred taxes when there are changes in the consolidation of certain investments, tax basis step ups in an acquisition, and the application of effective rate changes during interim periods.

This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

Adopting the standard did not have a material impact on our condensed consolidated financial statements.

The adoption of the new guidance did not have a material impact on our consolidated financial statements.

Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848), which provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates such as the Secured Overnight Financing Rate ("SOFR").

This guidance is effective upon issuance and generally can be applied through the end of calendar year 2022.

We are currently evaluating the impact and applicability of this new standard.

Revenue Recognition

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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 nine months ended September 30, 2020 and 2019 (in thousands):

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

2020 2019 2020 2019

The following table summarizes revenue from contracts with customers for the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended March 31,

SaaS subscriptions $ 39,053 $ 28,390

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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.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 SaaS subscriptions, maintenance and support, and professional services are delivered over time.

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SaaS Subscriptions

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 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.

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Term License Subscriptions

Our term license subscription revenue is derived from customers with on-premise installations of our platform pursuant to contracts that were historically one to three years in length.

Our term license subscriptions revenue is derived from customers with on-premises installations of our platform pursuant to contracts that were historically one to three years in length.

The majority of recent contracts have been one year in length.

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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

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.

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Revenue under consulting contracts is recognized over time as services are delivered.

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.

For time and materials-based

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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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 nine months ended September 30, 2020 was insignificant.

The amount of variable consideration excluded from the transaction price for the three months ended March 31, 2021 and 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

Allocating the Transaction Price Based on Standalone Selling Prices ("SSP")

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Because an economic relationship exists between the license and maintenance and support, we have concluded the residual approach to estimating SSP of term license subscriptions is an appropriate allocation of the transaction price.

Maintenance and support - We establish 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.

Consulting services and training services - 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.

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.

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.

Contract Balances

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

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.

As of March 31, 2021 and December 31, 2020, contract assets of $ 17.4 million and $ 20.1 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 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.

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.

Deferred revenue that will be recognized during the succeeding 12-month period is recorded as current, and the remaining deferred revenue is recorded as

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended March 31, 2021, we recognized $ 48.5 million of revenue that was included in the deferred revenue balance as of December 31, 2020.

Transaction Price Allocated to the Remaining Performance Obligations

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

As of March 31, 2021, we had an aggregate transaction price of $ 202.5 million allocated to unsatisfied performance obligations.

We expect to recognize $ 184.3 million of this balance as revenue over the next 24 months with the remaining amount recognized thereafter.

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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

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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Variable lease payment amounts that cannot be determined at the commencement of the lease, such as maintenance costs based on future obligations, are not included in ROU assets or lease liabilities but rather are expensed as incurred and recorded as variable lease expense.

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

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.

As of March 31, 2021, we have operating leases for corporate offices.

Our operating leases have remaining lease terms of 1 year to 11 years, some of which include options to extend the leases for up to 10 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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We took initial possession of the first phase of the new headquarters in October 2018 and began to recognize rent expense as of that date.

In February 2019, we took possession of a further 28,805 square feet of adjacent office space.

In February 2019, we took possession of an additional 28,805 square feet of adjacent office space.

In January 2020, we entered into an amendment which adjusts the original terms of the headquarters lease.

Under this amendment, we exercised an option to expand occupancy, adding 34,158 square feet of space.

Occupancy of the added space is to commence upon the earlier of the completion of certain improvements or October 14, 2020.

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.

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

Under this amendment, we exercised an option to expand occupancy, adding 34,158 square feet of office space.

Occupancy of the added space commenced on October 14, 2020.

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

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

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

As of the date of the paydown, the titles to the assets were transferred to us, the associated lease liabilities were retired, the carrying values of the purchased assets were adjusted, and the assets were reclassified from finance leases to property and equipment, net on the condensed consolidated balance sheets.

The following table sets forth the components of lease expense for the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended March 31,

Operating lease cost $ 1,630 $ 1,868

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Total $ 1,696 $ 2,660

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Supplemental balance sheet information related to operating leases as of March 31, 2021 and December 31, 2020 was as follows (in thousands, except for lease term and discount rate):

March 31, 2021 December 31, 2020

Operating right-of-use assets $ 30,610 $ 30,659

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Total operating lease liabilities $ 58,236 $ 58,117

Finance Leases

Property and equipment, at cost $ 4,471

Accumulated depreciation ( 1,818 )

Property and equipment, net $ 2,653

Finance lease liabilities, current $ 1,549

Finance lease liabilities, net of current portion 1,192

Total finance lease liabilities $ 2,741

Weighted average remaining lease term (in years) 10.3 10.6

Operating leases 10.8

Finance leases 1.8

Weighted average discount rate 9.6 % 9.6 %

Operating leases 9.6 %

Finance leases 5.5 %

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

For the three months ended March 31, 2021 and 2020, amortization of operating ROU assets totaled $ 0.3 million and $ 0.7 million, respectively.

For both the three months ended March 31, 2021 and 2020, interest expense on operating lease liabilities totaled $ 0.4 million.

Supplemental cash flow information related to leases for the three months ended March 31, 2021 and 2020 was as follows (in thousands):

Three Months Ended March 31,

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

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Financing cash outflows for finance leases — 357

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Operating Leases Finance Leases

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

$ 1,687 $ 405

2021 7,455 1,620

2022 8,078 859

A summary of our future minimum lease commitments under non-cancellable leases as of March 31, 2021 is as follows (in thousands):

Operating Leases

2021 (excluding the three months ended March 31, 2021)

Thereafter 48,049

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Novayre Solutions SL

In January 2020, we acquired 100 % of the outstanding common stock of Novayre Solutions SL, a developer of a robotic process automation platform, for approximately $ 6.9 million.

In January 2020, we acquired 100 % of the outstanding common stock of Novayre Solutions SL ("Novayre"), a developer of a robotic process automation platform, for approximately $ 6.9 million.

The acquisition was made due to the attractive nature of the product offerings of Novayre and in furtherance of our objective to enhance our automation platform.

The transaction was financed through available cash on hand.

The allocation of the purchase price is preliminary pending the finalization of the fair value of the acquired net assets, liabilities assumed, deferred income taxes, and assumed income and non-income based tax liabilities.

The allocation of the purchase price was based upon the estimated fair values of the assets acquired and liabilities assumed.

As of the acquisition date, the purchase price was assigned to the acquired assets and assumed liabilities as follows (in thousands):

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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 September 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 March 31, 2021 were immaterial.

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

Acquired property and equipment is depreciated on a straight-line basis over the assets' respective estimated remaining useful lives.

Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce, non-contractual relationships, and expected future synergies.

We do not expect the purchase price allocated to goodwill and intangible assets to be deductible for tax purposes.

Property and Equipment, net

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

for separate recognition, including assembled workforce, non-contractual relationships, and expected future synergies.

We do not expect the purchase price allocated to goodwill and intangible assets to be deductible for tax purposes.

Property and Equipment, net

Property and equipment, net consisted of the following as of March 31, 2021 and December 31, 2020 (in thousands):

March 31, 2021 December 31, 2020

Leasehold improvements $ 36,247 $ 36,263

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Property and equipment, net $ 34,682 $ 35,404

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.

Depreciation expense totaled $ 1.2 million for the three months ended March 31, 2021.

There were no disposals or retirements recorded during the three months ended March 31, 2021.

Depreciation expense totaled $ 1.4 million for the three months ended March 31, 2020.

During the three months ended March 31, 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 months ended March 31, 2020.

Accrued Expenses

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

September 30, 2020 December 31, 2019

Accrued expenses consisted of the following as of March 31, 2021 and December 31, 2020 (in thousands):

March 31, 2021 December 31, 2020

Accrued hosting costs $ 2,040 $ 1,229

Accrued legal costs 888 760

Accrued contract labor costs 774 908

Accrued marketing and tradeshow expenses 687 365

Accrued audit and tax expenses 549 370

Accrued legal costs 377 422

Accrued reimbursable employee expenses 183 1,353

Accrued marketing and tradeshow expenses 286 596

Accrued third party license fees 257 570

Accrued reimbursable employee expenses 138 231

Other accrued expenses 845 1,157

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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

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

The revolving line of credit contains an unused facility

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

The agreement contains certain customary affirmative and negative covenants and requires us to maintain (i) an adjusted quick ratio of at least 1.35 to 1.00 and (ii) minimum adjusted EBITDA, in the amounts and for the periods set forth in the agreement.

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

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.

We were in compliance with all covenants as of March 31, 2021.

As of March 31, 2021, 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.

We are monitoring the LIBOR to SOFR transition, which may result in modification or amendment of our existing revolving line of credit.

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.

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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 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.

For the three months ended March 31, 2021 and 2020, the actual effective tax rates were ( 0.9 )% and 1.6 %, respectively.

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

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.

As of March 31, 2021, our net unrecognized tax benefits totaled $ 2.3 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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As a result of the adoption of the 2017 Plan, no further grants may be made under the 2007 Plan.

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.

As of March 31, 2021, there were 7,166,609 shares of Class A common stock reserved for issuance under the 2017 Plan, of which 4,259,664 were available to be issued.

Stock Options

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.

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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 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.

Specifically, the 2019 CEO Grant vests 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.

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 %

Expected term (in years) * 2.6

Expected volatility * 55.0 %

Expected dividend yield * — %

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

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

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

Effective February 2021, the 2019 CEO Grant has satisfied all of the conditions required to be considered fully vested.

As a result, we accelerated the recognition of approximately $ 3.3 million in stock-based compensation expense in the three months ended March 31, 2021.

The following table summarizes stock option activity for the three months ended March 31, 2021:

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

5 unchanged sentences

Canceled ( 1,200 ) 11.02 —

Outstanding at September 30, 2020

Outstanding at March 31, 2021

3,309,771 $ 14.25 4.7 $ 392,855

Exercisable at September 30, 2020

Exercisable at March 31, 2021

2,882,511 $ 14.68 4.5 $ 340,919

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

There were no stock options granted during the three months ended March 31, 2021 and 2020.

The total fair value of stock options that vested during the three months ended March 31, 2021 and 2020 was $ 9.7 million and $ 0.3 million, respectively.

As of March 31, 2021, the total compensation cost related to unvested stock options not yet recognized was $ 0.2 million, which will be recognized over a weighted average period of 1.0 year.

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 nine months ended September 30, 2020:

The following table summarizes RSU activity for the three months ended March 31, 2021:

Number of Shares Weighted Average Grant Date Fair Value

4 unchanged sentences

Canceled ( 17,581 ) 49.01

Non-vested and outstanding at September 30, 2020

1,110,438 37.06

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.

The awards were approved by the Board of Directors.

The value of these awards at the grant date was $ 7.7 million and was amortized over the vesting periods .

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 nine months ended September 30, 2020 and 2019 (in thousands):

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

Non-vested and outstanding at March 31, 2021

1,125,631 51.15

As of March 31, 2021, total unrecognized compensation cost related to unvested RSUs was approximatel y $ 50.4 million, which will be recognized over a weighted average period of 2.2 years.

The following table summarizes the components of our stock-based compensation expense by instrument type for the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended March 31,

RSUs $ 4,005 $ 2,299

2 unchanged sentences

Total stock-based compensation expense $ 7,894 $ 3,476

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

Stock-based compensation expense for RSUs, stock options, and issuances of common stock to the Board of Directors is included in the following line items in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended March 31,

Cost of revenue

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Stockholders' Equity

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.

As of March 31, 2021, 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 39,321,079 shares of Class A common stock and 31,503,666 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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Basic and Diluted Loss per Common Share

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 Nine Months Ended September 30,

The following outstanding securities, 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 antidilutive:

Three Months Ended March 31,

Stock options 3,309,771 4,308,009

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Letters of Credit

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.

At each of March 31, 2021 and December 31, 2020, we had outstanding letters of credit totaling $ 11.2 million in connection with securing our leased office space.

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

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Segment and Geographic Information

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

The following table summarizes revenue by geography for the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended March 31,

Domestic $ 60,282 $ 52,455

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

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.

There were no individual foreign countries from which more than 10% of our total revenue was attributable for the three months ended March 31, 2021.

Revenue from customers attributed to the United Kingdom was 12.5 % of our total revenue for the three months ended March 31, 2020.

There were no other individual foreign countries from which more than 10% of our total revenue was attributable for the three months ended March 31, 2020.

Substantially all of our long-lived assets were held in the United States as of March 31, 2021 and December 31, 2020.

Investments and Fair Value Measurements

Fair Value Measurements

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:

Observable inputs based on unadjusted quoted prices in active markets for identical assets or liabilities;

Inputs, other than quoted prices in active markets, that are observable either directly or indirectly;

Unobservable inputs for which there is little or no market data, which require us to develop our own assumptions.

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 as of March 31, 2021 and December 31, 2020.

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;

• 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 cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value as of March 31, 2021 and December 31, 2020 because of the relatively short duration of these instruments.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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, are recorded in other comprehensive income (loss).

The components of our investments as of March 31, 2021 are as follows (in thousands):

As of March 31, 2021

Fair Value Measurement Balance Sheet Classification

Fair Value Level Cost Basis Unrealized Gains / (Losses) Market Value Cash and Cash Equivalents Short-Term Investments Long-Term Investments

Money market fund Level 1 $ 49,930 $ — $ 49,930 $ 49,930 $ — $ —

Treasury bonds Level 1 24,445 4 24,449 — 24,449 —

Commercial paper Level 2 60,412 — 60,412 — 60,412 —

Corporate bonds Level 2 29,113 ( 15 ) 29,098 — 27,550 1,548

Asset-backed securities Level 2 26,373 ( 3 ) 26,370 — 5,601 20,769

Total investments $ 190,273 $ ( 14 ) $ 190,259 $ 49,930 $ 118,012 $ 22,317

At December 31, 2020, our investments consisted of the following (in thousands):

As of December 31, 2020

Fair Value Measurement Balance Sheet Classification

Fair Value Level Cost Basis Unrealized Gains / (Losses) Market Value Cash and Cash Equivalents Short-Term Investments Long-Term Investments

Money market fund Level 1 $ 27,150 $ — $ 27,150 $ 27,150 $ — $ —

Treasury bonds Level 1 24,445 ( 3 ) 24,442 — 16,273 8,169

Commercial paper Level 2 76,905 — 76,905 16,493 60,412 —

Corporate bonds Level 2 34,738 ( 11 ) 34,727 — 27,542 7,185

Asset-backed securities Level 2 26,373 ( 8 ) 26,365 — 5,599 20,766

Total investments $ 189,611 $ ( 22 ) $ 189,589 $ 43,643 $ 109,826 $ 36,120

There were no Level 3 assets held at any point during the three months ended March 31, 2021.

Additionally, there were no transfers between Levels 1 and 2 during the three months ended March 31, 2021.

The amortized cost basis and fair value of debt securities at March 31, 2021, by contractual maturity, are as follows (in thousands):

As of March 31, 2021

Cost Basis Fair Value

Due in one year or less $ 167,953 $ 167,942

Due after one year through five years 22,320 22,317

Total investments $ 190,273 $ 190,259

Actual maturities may differ from the contractual maturities in the table above because borrowers have the right to call or prepay certain obligations.

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