What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-05 compared with 2021-05-06 · 173 added, 145 removed, 509 unchanged (38% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Current assets

1 unchanged sentence

Short-term investments and marketable securities 111,324 109,826

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

Accounts receivable, net of allowance of $ 1,400 as of each of June 30, 2021 and December 31, 2020

82,301 97,278

5 unchanged sentences

Goodwill 4,707 4,862

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

Intangible assets, net of accumulated amortization of $ 623 and $ 429 as of June 30, 2021 and December 31, 2020, respectively

Operating right-of-use assets 30,528 30,659

19 unchanged sentences

Class A common stock—par value $ 0.0001 ;

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

500,000,000 shares authorized and 39,581,079 shares issued and outstanding as of June 30, 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 31,503,666 shares issued and outstanding as of March 31, 2021;

100,000,000 shares authorized and 31,499,516 shares issued and outstanding as of June 30, 2021;

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

8 unchanged sentences

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

Three Months Ended March 31,

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

2021 2020 2021 2020

Subscriptions $ 56,946 $ 41,418 $ 120,712 $ 91,854

12 unchanged sentences

Operating loss ( 24,576 ) ( 12,095 ) ( 35,066 ) ( 20,701 )

Other expense

Other expense, net 2,893 3,114

Other (income) expense

Other (income) expense, net ( 1,081 ) ( 682 ) 1,812 2,432

Interest expense 80 128 161 271

Total other expense 2,974 3,257

Total other (income) expense ( 1,001 ) ( 554 ) 1,973 2,703

Loss before income taxes ( 23,575 ) ( 11,541 ) ( 37,039 ) ( 23,404 )

Income tax expense (benefit) 123 ( 194 )

Income tax expense 250 274 373 80

Net loss $ ( 23,825 ) $ ( 11,815 ) $ ( 37,412 ) $ ( 23,484 )

7 unchanged sentences

(unaudited, in thousands)

Three Months Ended March 31,

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

2021 2020 2021 2020

Net loss $ ( 23,825 ) $ ( 11,815 ) $ ( 37,412 ) $ ( 23,484 )

Comprehensive income, net of income taxes

Comprehensive (loss) income, net of income taxes

Foreign currency translation adjustment ( 1,474 ) ( 214 ) 2,541 ( 197 )

3 unchanged sentences

APPIAN CORPORATION AND SUBSIDIARIES

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

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(unaudited, in thousands, except share data)

Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity

Accumulated Other Comprehensive (Loss) Income Total Stockholders' Equity

Common Stock Additional Paid-In Capital Accumulated Deficit

8 unchanged sentences

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

Net loss — — — — ( 23,825 ) ( 23,825 )

Issuance of common stock to directors 1,175 — — — — —

Vesting of restricted stock units 43,024 — — — — —

Exercise of stock options 211,651 — 1,464 — — 1,464

Stock-based compensation expense — — 4,598 — — 4,598

Other comprehensive loss — — — ( 1,451 ) — ( 1,451 )

Balance, June 30, 2021 71,080,595 $ 7 $ 485,079 $ ( 2,438 ) $ ( 206,302 ) $ 276,346

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

APPIAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(unaudited, in thousands, except share data)

Accumulated Other Comprehensive (Loss) Income 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

6 unchanged sentences

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

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

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

APPIAN CORPORATION AND SUBSIDIARIES

1 unchanged sentence

(unaudited, in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

24 unchanged sentences

Principal payments on finance leases — ( 716 )

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

Payments of costs related to public offerings — ( 18 )

Proceeds from exercise of common stock options 2,089 2,242

1 unchanged sentence

Effect of foreign exchange rate changes on cash and cash equivalents ( 476 ) 404

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

Net increase in cash and cash equivalents 18,817 96,391

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

51 unchanged sentences

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

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.

Revenue generated from government agencies represented 19.8 % and 20.4 % of our revenue for the three and six months ended June 30, 2021, respectively, of which the top three U.S.

federal government agencies generated 6.5 % of our revenue for each of the three and six months ended June 30, 2021.

Additionally, 35.3 % and 33.7 % of our revenue during the three and six months ended June 30, 2021, respectively, was generated from foreign customers.

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 U.S.

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.

Cash and Cash Equivalents

5 unchanged sentences

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

There was no increase in the allowance for doubtful accounts from December 31, 2020 to June 30, 2021.

APPIAN CORPORATION AND SUBSIDIARIES

10 unchanged sentences

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

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

Commission expense was $ 7.5 million and $ 14.3 million for the three and six months ended June 30, 2021, respectively.

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

Property and Equipment

12 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 months ended March 31, 2021 and 2020.

No indicators of impairment were identified for the three and six months ended June 30, 2021 and 2020.

Investments and Fair Value of Financial Instruments

3 unchanged sentences

We calculate the fair value of stock options containing only a service condition using the Black-Scholes option pricing model.

The fair value of restricted stock units ("RSUs") is based on the closing market price of our common stock on the Nasdaq Global Market on the date of grant.

For service-based awards such as RSUs, stock-based compensation expense is recognized on a straight-line basis over the requisite service period.

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

The fair value of restricted stock units ("RSUs") is based on the closing market price of our

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

the performance condition.

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.

13 unchanged sentences

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 months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended March 31,

The following table summarizes revenue from contracts with customers for the three and six months ended June 30, 2021 and 2020 (in thousands):

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

2021 2020 2021 2020

SaaS subscriptions $ 42,486 $ 29,580 $ 81,539 $ 57,970

4 unchanged sentences

Performance Obligations and Timing of Revenue Recognition

We primarily sell products and services that fall into the categories discussed below.

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.

We primarily sell products and services that fall into the categories discussed below.

Each category contains one or more performance obligations that are either (1) capable of being distinct (i.e., the customer can benefit from the product or service on its own or together with readily available resources, including those purchased separately from us) and distinct within the context of the contract (i.e., separately identified from other promises in the contract) or (2) a series of distinct products or services that are substantially the same and have the same pattern of transfer to the customer.

Our term license subscriptions are delivered at a point in time while our SaaS subscriptions, maintenance and support, and professional services are delivered over time.

1 unchanged sentence

Subscriptions revenue is primarily related to (1) SaaS subscriptions bundled with maintenance and support and hosting services and (2) term license subscriptions bundled with maintenance and support.

We generally charge subscription fees on a per-user basis and, to a lesser degree, non-user based single application licenses.

We generally charge subscription fees on a per-user basis or through non-user based single application licenses.

We bill customers and collect payment for subscriptions to our platform in advance on an annual, quarterly, or monthly basis.

22 unchanged sentences

Consulting services are regularly sold on a standalone basis and either (1) under a fixed-fee arrangement or (2) on a time and materials basis.

Consulting contracts are each considered separate performance obligations because they do not integrate with each other or with other products and services to deliver a combined output to the customer, do not modify or customize (or are not modified or customized by) each other or other products and services, and do not affect the customer's ability to use the other consulting offerings or other products and services.

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

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.

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.

Training Services

6 unchanged sentences

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 three months ended March 31, 2021 and 2020 was insignificant.

The amount of variable consideration excluded from the transaction price for the three and six months ended June 30, 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;

11 unchanged sentences

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.

Consulting and training services - The SSP of consulting and training services is established based on the observable pricing of standalone sales within each geographic region where the services are sold.

Contract Balances

2 unchanged sentences

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

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.

As of June 30, 2021 and December 31, 2020, contract assets of $ 16.2 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.

3 unchanged sentences

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.

For the six months ended June 30, 2021, we recognized $ 81.1 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 March 31, 2021, we had an aggregate transaction price of $ 202.5 million allocated to unsatisfied performance obligations.

As of June 30, 2021, we had an aggregate transaction price of $ 223.8 million allocated to unsatisfied performance obligations.

We expect to recognize $ 201.3 million of this balance as revenue over the next 24 months with the remaining amount recognized thereafter.

2 unchanged sentences

ROU assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease.

We have elected not to recognize on 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.

We have elected not to recognize on our condensed consolidated balance sheets 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 but rather to account for the lease and non-lease components as a single lease component.

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

10 unchanged sentences

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.

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

As of June 30, 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.

3 unchanged sentences

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.

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

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

6 unchanged sentences

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,

The following table sets forth the components of lease expense for the three and six months ended June 30, 2021 and 2020 (in thousands):

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

2021 2020 2021 2020

Operating lease cost $ 1,695 $ 1,408 $ 3,325 $ 3,276

5 unchanged sentences

Total $ 2,480 $ 2,055 $ 4,176 $ 4,715

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

Supplemental balance sheet information related to operating leases as of June 30, 2021 and December 31, 2020 was as follows (in thousands, except for lease term and discount rate):

June 30, 2021 December 31, 2020

Operating right-of-use assets $ 30,528 $ 30,659

4 unchanged sentences

Weighted average discount rate 9.5 % 9.6 %

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,

For the three and six months ended June 30, 2021, amortization of operating ROU assets totaled $ 0.4 million and $ 0.7 million, respectively.

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

For the three and six months ended June 30, 2021, interest expense on operating lease liabilities totaled $ 0.5 million and $ 0.9 million, respectively.

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

Supplemental cash flow information related to leases for the six months ended June 30, 2021 and 2020 was as follows (in thousands):

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30,

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

2 unchanged sentences

Financing cash outflows for finance leases — 716

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

A summary of our future minimum lease commitments under non-cancellable leases as of June 30, 2021 is as follows (in thousands):

Operating Leases

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

2021 (excluding the six months ended June 30, 2021)

Thereafter 48,775

2 unchanged sentences

Total $ 58,039

Novayre Solutions SL

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 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):

Cash acquired $ 731

Other current assets 213

Property and equipment 22

Developed technology 1,537

Customer relationships 406

Goodwill 4,348

Other noncurrent assets 10

Total assets acquired 7,267

Current liabilities 14

Noncurrent liabilities 344

Total liabilities assumed 358

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 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

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Property and equipment, net consisted of the following as of June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021 December 31, 2020

Leasehold improvements $ 36,394 $ 36,263

6 unchanged sentences

Property and equipment, net $ 34,064 $ 35,404

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.

Depreciation expense totaled $ 1.2 million and $ 2.4 million for the three and six months ended June 30, 2021, respectively.

There were no disposals or retirements recorded during the three and six months ended June 30, 2021.

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

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 of office furniture and fixtures and equipment.

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

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Accrued Expenses

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

March 31, 2021 December 31, 2020

Accrued expenses consisted of the following as of June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021 December 31, 2020

Accrued hosting costs $ 2,093 $ 1,229

1 unchanged sentence

Accrued contract labor costs 884 908

Accrued taxes payable 579 527

Accrued audit and tax expenses 345 370

9 unchanged sentences

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

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 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.

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 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.

We were in compliance with all covenants as of June 30, 2021.

As of June 30, 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 also continue to monitor 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.

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

For the three and six months ended June 30, 2021, the actual effective tax rates were ( 1.1 )% and ( 1.0 )%, respectively.

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

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

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.

As of June 30, 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.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

We file income tax returns in the United States federal jurisdiction and in many states and foreign jurisdictions.

13 unchanged sentences

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

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.

As of June 30, 2021, there were 7,175,469 shares of Class A common stock reserved for issuance under the 2017 Plan, of which 4,223,260 were available to be issued.

Stock Options

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

10 unchanged sentences

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:

As a result, we accelerated the recognition of approximately $ 3.3 million in stock-based compensation expense in the six months ended June 30, 2021.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes stock option activity for the six months ended June 30, 2021:

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

4 unchanged sentences

Expired — — — —

Canceled ( 1,200 ) 11.02 —

Outstanding at March 31, 2021

Forfeited ( 10,060 ) 11.62 — —

Outstanding at June 30, 2021

3,089,260 $ 14.76 4.4 $ 379,935

Exercisable at March 31, 2021

Exercisable at June 30, 2021

2,850,280 $ 15.04 4.3 $ 349,747

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

There were no stock options granted during the six months ended June 30, 2021 and 2020.

The total fair value of stock options that vested during the six months ended June 30, 2021 and 2020 was $ 10.5 million and $ 1.0 million, respectively.

As of June 30, 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 0.8 years.

Restricted Stock Units

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

The following table summarizes RSU activity for the six months ended June 30, 2021:

Number of Shares Weighted Average Grant Date Fair Value

3 unchanged sentences

Vested ( 99,350 ) 46.44

Canceled ( 17,581 ) 49.01

Non-vested and outstanding at March 31, 2021

Forfeited ( 48,965 ) 63.20

Non-vested and outstanding at June 30, 2021

1,126,696 54.35

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,

As of June 30, 2021, total unrecognized compensation cost related to unvested RSUs was appro ximately $ 51.8 million, which will be recognized over a weighted average period of 2.2 years.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the components of our stock-based compensation expense by instrument type for the three and six months ended June 30, 2021 and 2020 (in thousands):

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

2021 2020 2021 2020

RSUs $ 4,403 $ 2,475 $ 8,408 $ 4,774

2 unchanged sentences

Total stock-based compensation expense $ 4,598 $ 3,614 $ 12,492 $ 7,090

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,

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 and six months ended June 30, 2021 and 2020 (in thousands):

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

2021 2020 2021 2020

Cost of revenue

6 unchanged sentences

Total stock-based compensation expense $ 4,598 $ 3,614 $ 12,492 $ 7,090

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Stockholders' Equity

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.

As of June 30, 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 39,581,079 shares of Class A common stock and 31,499,516 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.

5 unchanged sentences

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,

Three and Six Months Ended June 30,

Stock options 3,089,260 4,046,544

1 unchanged sentence

Commitments and Contingencies

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Contractual Warranty and Indemnification Obligations

6 unchanged sentences

We have never incurred costs to defend lawsuits or settle claims related to these indemnification provisions.

Minimum Purchase Commitments

Exclusive of the Amazon Web Services ("AWS") contract discussed in Note 15, we have other non-cancellable agreements for subscription software products that contain provisions stipulating minimum purchase commitments.

However, the annual purchase commitments under these contracts are, individually and in the aggregate, immaterial to our condensed consolidated financial statements.

Letters of Credit

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.

At each of June 30, 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 7.

1 unchanged sentence

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Segment and Geographic Information

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

Three Months Ended March 31,

We consider operating segments to be components of our business in which separate financial information is available and evaluated regularly by our Chief Operating Decision Maker ("CODM").

Our CODM, who is our Chief Executive Officer, reviews financial information on a consolidated basis when deciding how to allocate resources and assessing performance.

Accordingly, we have determined we have a single reporting segment and operating unit structure.

The following table summarizes revenue by geography for the three and six months ended June 30, 2021 and 2020 (in thousands):

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

2021 2020 2021 2020

Domestic $ 53,704 $ 42,191 $ 113,986 $ 94,646

2 unchanged sentences

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

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.

There were no individual foreign countries from which more than 10% of our total revenue was attributable for the three and six months ended June 30, 2021.

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

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

Substantially all of our long-lived assets were held in the United States as of June 30, 2021 and December 31, 2020.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Investments and Fair Value Measurements

8 unchanged sentences

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.

There were no instruments measured at fair value on a recurring basis using significant unobservable inputs as of June 30, 2021 and December 31, 2020.

The valuation techniques that may be used to measure fair value are as follows:

2 unchanged sentences

• 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

The carrying amounts of our cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value as of June 30, 2021 and December 31, 2020 because of the relatively short duration of these instruments.

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

The components of our investments as of June 30, 2021 are as follows (in thousands):

As of June 30, 2021

Fair Value Measurement Balance Sheet Classification

7 unchanged sentences

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

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2020

7 unchanged sentences

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

There were no Level 3 assets held at any point during the three and six months ended June 30, 2021.

Additionally, there were no transfers between Levels 1 and 2 during the three and six months ended June 30, 2021.

The amortized cost basis and fair value of debt securities as of June 30, 2021, by contractual maturity, are as follows (in thousands):

As of June 30, 2021

Cost Basis Fair Value

3 unchanged sentences

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

Subsequent Events

Amazon Web Services Agreement

In July 2021, we executed a non-cancellable cloud hosting arrangement with AWS that contains provisions for minimum purchase commitments.

Specifically, purchase commitments under the agreement total $ 131.0 million over five years, including $ 22.0 million in the first year, $ 25.0 million in the second year, and $ 28.0 million in each of the third, fourth, and fifth years.

The timing of payments under the agreement may vary, and the total amount of payments may exceed the minimum depending on the volume of services utilized.

Acquisition of Lana Labs

On August 4, 2021, we completed the acquisition of Lana Labs GMBH, a developer of process mining software, for approximately $ 31.0 million, net of cash acquired and debt.

We financed the transaction with available cash on hand.

It is not practicable to disclose the preliminary purchase price allocation for this transaction given the short period of time between the respective acquisition date and the issuance of this Form 10-Q.

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