What changed in this filing

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Item 1. Financial Statements

2021-11-04 compared with 2021-08-05 · 200 added, 144 removed, 538 unchanged (39% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Current assets

1 unchanged sentence

Short-term investments and marketable securities 61,384 109,826

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

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

110,223 97,278

5 unchanged sentences

Goodwill 27,414 4,862

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

Intangible assets, net of accumulated amortization of $ 902 and $ 429 as of September 30, 2021 and December 31, 2020, respectively

Operating right-of-use assets 29,218 30,659

1 unchanged sentence

Deferred tax assets 991 489

Restricted cash, non-current 3,240 —

Other assets 2,096 3,625

16 unchanged sentences

Class A common stock—par value $ 0.0001 ;

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

500,000,000 shares authorized and 39,667,317 shares issued and outstanding as of September 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 31,499,516 shares issued and outstanding as of June 30, 2021;

100,000,000 shares authorized and 31,499,516 shares issued and outstanding as of September 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 June 30, Six Months Ended June 30,

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

2021 2020 2021 2020

13 unchanged sentences

Operating loss ( 22,897 ) ( 7,515 ) ( 57,963 ) ( 28,216 )

Other (income) expense

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

Other expense (income)

Other expense (income), net 2,329 ( 4,277 ) 4,141 ( 1,845 )

Interest expense 72 119 233 390

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

Total other expense (income) 2,401 ( 4,158 ) 4,374 ( 1,455 )

Loss before income taxes ( 25,298 ) ( 3,357 ) ( 62,337 ) ( 26,761 )

9 unchanged sentences

(unaudited, in thousands)

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

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

2021 2020 2021 2020

Net loss $ ( 25,384 ) $ ( 3,612 ) $ ( 62,796 ) $ ( 27,096 )

Comprehensive (loss) income, net of income taxes

Comprehensive income (loss), net of income taxes

Foreign currency translation adjustment 28 ( 1,960 ) 2,569 ( 2,157 )

23 unchanged sentences

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

Net loss — — — — ( 25,384 ) ( 25,384 )

Issuance of common stock to directors 1,130 — — — — —

Vesting of restricted stock units 38,148 — — — — —

Exercise of stock options 46,960 — 286 — — 286

Stock-based compensation expense — — 5,200 — — 5,200

Other comprehensive income — — — 28 — 28

Balance, September 30, 2021 71,166,833 $ 7 $ 490,565 $ ( 2,410 ) $ ( 231,686 ) $ 256,476

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

21 unchanged sentences

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

Net loss — — — — ( 3,612 ) ( 3,612 )

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

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

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

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

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

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

APPIAN CORPORATION AND SUBSIDIARIES

1 unchanged sentence

(unaudited, in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

28 unchanged sentences

Net cash provided by financing activities 2,375 110,337

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

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

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

Cash and cash equivalents, end of period $ 131,279 $ 256,146

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash ( 1,367 ) 1,623

Net increase in cash, cash equivalents, and restricted cash 17,900 91,333

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

Cash, cash equivalents, and restricted cash at end of period $ 130,362 $ 251,088

Supplemental disclosure of cash flow information:

9 unchanged sentences

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

We are headquartered in McLean, Virginia and operate in Canada, Switzerland, the United Kingdom, France, Germany, the Netherlands, Italy, Australia, Spain, Singapore, and Sweden.

We are headquartered in McLean, Virginia and operate in Canada, Switzerland, the United Kingdom, France, Germany, the Netherlands, Italy, Australia, Spain, Singapore, Sweden, and Japan.

Significant Accounting Policies

12 unchanged sentences

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

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.

We cannot estimate the impacts COVID-19 may 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.

Principles of Consolidation

17 unchanged sentences

Concentration of Credit and Customer Risk

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.

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

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

We believe the financial institutions holding our cash deposits are financially sound and, accordingly, minimal credit risk exists with respect to these balances.

however, we believe the financial institutions holding our cash deposits are financially sound and, accordingly, minimal credit risk exists with respect to these balances.

With regard to our customers, credit evaluation and account monitoring procedures are used to minimize the risk of loss.

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

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

Revenue generated from government agencies represented 19.2 % and 20.0 % of our revenue for the three and nine months ended September 30, 2021, respectively, of which the top three U.S.

federal government agencies generated 7.5 % and 6.3 % of our revenue for the three and nine months ended September 30, 2021, respectively.

Additionally, 32.0 % and 33.1 % of our revenue during the three and nine months ended September 30, 2021, respectively, was generated from foreign customers.

Revenue 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 U.S.

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.

Cash, Cash Equivalents, and Restricted Cash

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.

Restricted cash consists of cash designated to settle an escrow liability stemming from a holdback agreement enacted pursuant to our acquisition of Lana Labs GmbH ("Lana Labs").

The restrictions on 25 % of the restricted cash balance will lapse on the later of either two months following the establishment of Lana Labs' annual financial statements for the year ended December 31, 2021 or October 31, 2022.

The restrictions on the remaining 75 % of the balance will lapse on August 11, 2023.

The following table presents a reconciliation of cash, cash equivalents, and restricted cash as presented in the condensed consolidated statements of cash flows:

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of September 30,

Cash and cash equivalents $ 127,122 $ 251,088

Restricted cash, non-current 3,240 —

Total cash, cash equivalents, and restricted cash $ 130,362 $ 251,088

Accounts Receivable and Allowance for Doubtful Accounts

3 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 June 30, 2021.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

We capitalize the incremental costs of obtaining a contract with a customer, including sales commissions paid to our direct sales force, that are incremental costs to obtaining customer contracts.

We capitalize costs of obtaining a contract with a customer, including sales commissions paid to our direct sales force, that are incremental costs to obtaining customer contracts.

These costs are recorded as deferred commissions in the condensed consolidated balance sheets.

5 unchanged sentences

Costs to obtain a contract for professional services arrangements are expensed as incurred as the contractual period of our professional services arrangements are one year or less.

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

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.

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

Commission expense was $ 8.2 million and $ 22.5 million for the three and nine months ended September 30, 2021, respectively.

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

Property and Equipment

9 unchanged sentences

(a) Leasehold improvements have an estimated useful life of the shorter of the useful life of the assets or the lease term.

Impairment of Long-Lived Assets

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.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Business Combinations

We account for business combinations using the acquisition method of accounting as of the business combination date.

Under this method, we allocate the fair value of purchase consideration to identifiable tangible and intangible assets acquired and liabilities assumed at their estimated fair values on the acquisition date.

The excess of the consideration transferred over the fair value of the identifiable net assets acquired is recorded as goodwill 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.

Determining the fair value of assets acquired and liabilities assumed requires us to use significant judgments and estimates, including the selection of valuation methodologies, estimates of future revenue, costs, and cash flows, and discount rates.

During the measurement period, which can be up to one year from the acquisition date, these estimates may be refined, as necessary, and we may record adjustments to the fair value of tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill.

Upon the conclusion of the measurement period or the final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our condensed consolidated statements of operations.

Acquisition related expenses and post-acquisition integration costs are recognized separately from the business combination and are expensed as incurred.

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

Impairment of Goodwill and Long-Lived Assets

Long-lived assets and certain intangible assets are reviewed for impairment at least annually or more frequently whenever events or changes in 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 six months ended June 30, 2021 and 2020.

With respect to goodwill, we have the option to qualitatively assess whether it is more likely than not the fair value of a reporting unit is less than its carrying value.

If we elect to perform a qualitative assessment and conclude it is more likely than not the fair value of the reporting unit is equal to or greater than its carrying value, no further assessment of that reporting unit’s goodwill is necessary;

otherwise, goodwill must be tested for impairment.

Absent a specifically identified triggering event, we historically perform our annual assessment on the first day of the fourth quarter.

Because we operate under one reporting unit, the fair value of our reporting unit is based on our enterprise value.

No indicators of impairment were identified for the three and nine months ended September 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

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

common stock on the Nasdaq Global Market on the date of grant.

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.

2 unchanged sentences

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

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Refer to Note 4 for a detailed discussion on our policies specific to leasing arrangements.

3 unchanged sentences

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

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

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

Not Yet Adopted

2 unchanged sentences

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

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which aims to improve the accounting for acquired revenue contracts with customers in a business combination.

The ASU requires an entity (acquirer) to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606.

The guidance is effective for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years.

Early adoption is permitted including in interim periods.

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

Revenue Recognition

1 unchanged sentence

We generate professional services revenue from fees for our consulting services, including application development and deployment assistance as well as training related to our platform.

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

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

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

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

2021 2020 2021 2020

2 unchanged sentences

Maintenance and support 5,427 4,618 15,424 13,330

Total subscriptions 67,240 50,760 187,952 142,614

Professional services 25,177 26,544 76,319 80,329

46 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 and six months ended June 30, 2021 and 2020 was insignificant.

The amount of variable consideration excluded from the transaction price for the three and nine months ended September 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;

16 unchanged sentences

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

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.

As of September 30, 2021 and December 31, 2020, contract assets of $ 13.4 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.

3 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

For the nine months ended September 30, 2021, we recognized $ 103.5 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 June 30, 2021, we had an aggregate transaction price of $ 223.8 million allocated to unsatisfied performance obligations.

As of September 30, 2021, we had an aggregate transaction price of $ 246.7 million allocated to unsatisfied performance obligations.

We expect to recognize $ 223.9 million of this balance as revenue over the next 24 months with the remaining amount recognized thereafter.

16 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 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.

As of September 30, 2021, we have operating leases for corporate offices.

Our operating leases have remaining lease terms of roughly 2 years to 10 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.

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

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

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

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

2021 2020 2021 2020

6 unchanged sentences

Total $ 2,629 $ 2,195 $ 6,805 $ 6,910

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

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

September 30, 2021 December 31, 2020

Operating right-of-use assets $ 29,218 $ 30,659

4 unchanged sentences

Weighted average discount rate 9.6 % 9.6 %

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):

For the three and nine months ended September 30, 2021, amortization of operating ROU assets totaled $ 0.7 million and $ 1.4 million, respectively.

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

For the three and nine months ended September 30, 2021, interest expense on operating lease liabilities totaled $ 0.5 million and $ 1.4 million, respectively.

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

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

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30,

Nine Months Ended September 30,

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

2 unchanged sentences

Financing cash outflows for finance leases — 1,080

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

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

Operating Leases

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

2021 (excluding the nine months ended September 30, 2021)

Thereafter 48,775

2 unchanged sentences

Total $ 56,198

In August 2021, we completed the acquisition of Lana Labs, a developer of process mining software, for approximately $ 30.7 million, net of cash acquired and debt.

The acquisition was made due to the attractive nature of the product offerings of Lana Labs 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.

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

Cash acquired $ 256

Other current assets 86

Property and equipment 59

Developed technology 6,819

Customer relationships 750

Goodwill 23,443

Other non-current assets 27

Total assets acquired 31,440

Current liabilities 335

Non-current liabilities 120

Total liabilities assumed 455

Net assets acquired $ 30,985

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

There were no changes to our reportable segments as a result of the acquisition.

From the acquisition date to September 30, 2021, Lana Labs' revenue was immaterial and net loss before taxes was $ 1.2 million.

Acquisition costs incurred in relation to the transaction were immaterial.

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 June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021 December 31, 2020

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

September 30, 2021 December 31, 2020

Leasehold improvements $ 37,541 $ 36,263

6 unchanged sentences

Property and equipment, net $ 34,280 $ 35,404

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

Depreciation expense totaled $ 1.2 million and $ 3.6 million for the three and nine months ended September 30, 2021, respectively.

We retired $ 0.1 million of leasehold improvements during the three and nine months ended September 30, 2021 and similarly recorded $ 0.1 million in losses on disposal for the three and nine months ended September 30, 2021.

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

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.

No minal losses on disposal were recorded for the nine months ended September 30, 2020.

Accrued Expenses

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

June 30, 2021 December 31, 2020

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

September 30, 2021 December 31, 2020

Accrued hosting costs $ 2,006 $ 1,229

Accrued legal costs 1,975 760

Accrued contract labor costs 884 908

Accrued taxes payable 579 527

Accrued audit and tax expenses 345 370

Accrued marketing and tradeshow expenses 1,868 596

Accrued third party license fees 957 570

Accrued contract labor costs 683 908

Accrued reimbursable employee expenses 481 231

Accrued audit and tax expenses 256 370

Accrued taxes payable — 527

Other accrued expenses 2,052 630

1 unchanged sentence

Line of Credit

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In November 2017, we entered into a $ 20.0 million revolving line of credit with a lender.

5 unchanged sentences

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

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

As of September 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.

2 unchanged sentences

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

For the three and six months ended June 30, 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.

For the three and nine months ended September 30, 2021, the actual effective tax rates were ( 0.3 )% and ( 0.7 )%, respectively.

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

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

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.

As of September 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.

1 unchanged sentence

We are not currently under examination by the Internal Revenue Service for any open tax years.

In response to the COVID-19 pandemic, the United States passed the Coronavirus Aid, Relief, and Economic Security ("CARES") Act in March 2020.

The CARES Act includes various income and payroll tax measures.

Pursuant to these measures, we have elected the option to defer the deposit and payment of our share of social security taxes that would otherwise be due between March 27, 2020 and December 31, 2020.

Under the CARES Act, half of these deferred payments are due by the end of fiscal year 2021 while the other half are due by the end of fiscal year 2022.

At this time, beyond the above deferral, the CARES Act is not expected to materially impact our financial statements, but we continue to evaluate potential impacts.

Stock-Based Compensation

5 unchanged sentences

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

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.

As of September 30, 2021, there were 7,177,909 shares of Class A common stock reserved for issuance under the 2017 Plan, of which 4,077,122 were available to be issued.

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.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

term of the option.

The expected term represents the period of time the stock options are expected to be outstanding.

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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 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:

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

The following table summarizes stock option activity for the nine months ended September 30, 2021:

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

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Forfeited ( 11,420 ) 11.67 — —

Outstanding at June 30, 2021

Outstanding at September 30, 2021

3,039,860 $ 14.90 4.2 $ 235,916

Exercisable at June 30, 2021

Exercisable at September 30, 2021

2,844,040 $ 15.12 4.1 $ 220,107

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.

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

The total fair value of stock options that vested during the nine months ended September 30, 2021 and 2020 was $ 10.7 million and $ 1.4 million, respectively.

As of September 30, 2021, the total compensation cost related to unvested stock options not yet recognized was $ 0.1 million, which will be recognized over a weighted average period of 0.6 years.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Units

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

The following table summarizes RSU activity for the nine months ended September 30, 2021:

Number of Shares Weighted Average Grant Date Fair Value

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Forfeited ( 67,324 ) 60.14

Non-vested and outstanding at June 30, 2021

Non-vested and outstanding at September 30, 2021

1,235,880 62.67

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,

As of September 30, 2021, total unrecognized compensation cost related to unvested RSUs was appro ximately $ 64.6 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 and nine months ended September 30, 2021 and 2020 (in thousands):

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

2021 2020 2021 2020

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Total stock-based compensation expense $ 5,200 $ 3,578 $ 17,692 $ 10,668

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,

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 nine months ended September 30, 2021 and 2020 (in thousands):

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

2021 2020 2021 2020

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Total stock-based compensation expense $ 5,200 $ 3,578 $ 17,692 $ 10,668

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Stockholders' Equity

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.

As of September 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 39,667,317 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.

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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 and Six Months Ended June 30,

Three and Nine Months Ended September 30,

Stock options 3,039,860 3,882,588

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Commitments and Contingencies

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Contractual Warranty and Indemnification Obligations

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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.

In July 2021, we executed a non-cancellable cloud hosting arrangement with Amazon Web Services ("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.

Exclusive of the AWS contract, 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.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Letters of Credit

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.

At each of September 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 8.

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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,

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

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

2021 2020 2021 2020

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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 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

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

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

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

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

Investments and Fair Value Measurements

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

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 June 30, 2021 and December 31, 2020.

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

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

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• 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 June 30, 2021 and December 31, 2020 because of the relatively short duration of these instruments.

The carrying amounts of our cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value as of September 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 June 30, 2021 are as follows (in thousands):

As of June 30, 2021

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

As of September 30, 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

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

Money market fund Level 1 $ 59,394 $ — $ 59,394 $ 59,394 $ — $ —

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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

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

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

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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 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

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

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

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

As of September 30, 2021

Cost Basis Fair Value

Due in one year or less $ 120,769 $ 120,778

Due after one year through five years 7,043 7,048

Total investments $ 190,639 $ 190,647

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.

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