What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-02-17 compared with 2021-02-18 · 313 added, 214 removed, 798 unchanged (40% of the section changed)

2 unchanged sentences

Consolidated Financial Statements:

Report of Independent Registered Public Accounting Firm - Opinion on Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm - Opinion on Consolidated Financial Statements ( BDO USA, LLP ;

McLean, Virginia ;

PCAOB ID # 243 )

Report of Independent Registered Public Accounting Firm - Opinion on Internal Controls over Financial Reporting

2 unchanged sentences

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Changes in Stockholders' Equity (Deficit)

Consolidated Statements of Changes in Stockholders' Equity

Consolidated Statements of Cash Flows

57 unchanged sentences

We believe that our audit provides a reasonable basis for our opinion.

As indicated in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Lana Labs GmbH (“Lana Labs”), which was acquired on August 11, 2021, and which is included in the consolidated balance sheet of the Company as of December 31, 2021, and the related consolidated statement of operations, comprehensive loss, changes in stockholders’ equity, and cash flows for the year then ended.

Lana Labs constituted 6% of total assets as of December 31, 2021, and 0.1% of revenues for the year then ended.

Management did not assess the effectiveness of internal control over financial reporting of Lana Labs because of the timing of the acquisition which was completed on August 11, 2021.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Lana Labs.

Definition and Limitations of Internal Control over Financial Reporting

1 unchanged sentence

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

11 unchanged sentences

Short-term investments and marketable securities 55,179 109,826

Accounts receivable, net of allowance of $ 1,400 and $ 600 as of December 31, 2020 and December 31, 2019, respectively

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

130,049 97,278

1 unchanged sentence

Prepaid expenses and other current assets 26,781 27,955

Restricted cash, current 791 —

Total current assets 338,264 365,420

2 unchanged sentences

Goodwill 27,795 4,862

Intangible assets, net of accumulated amortization of $ 429 as of December 31, 2020

Intangible assets, net of accumulated amortization of $ 1,260 and $ 429 as of December 31, 2021 and December 31, 2020, respectively

Operating right-of-use assets 27,897 30,659

1 unchanged sentence

Deferred tax assets 1,025 489

Restricted cash, net of current portion 2,373 —

Other assets 2,047 3,625

7 unchanged sentences

Operating lease liabilities, current 8,110 6,923

Finance lease liabilities, current — 1,447

Other current liabilities 1,067 940

1 unchanged sentence

Operating lease liabilities, net of current portion 48,784 51,194

Finance lease liabilities, net of current portion — 2,375

Deferred revenue, net of current portion 2,430 3,886

2 unchanged sentences

Total liabilities 270,602 215,916

Commitments and contingent liabilities (see Notes 4 and 13)

Commitments and contingent liabilities (see Note 4 and Note 14)

Stockholders’ equity

30 unchanged sentences

Operating loss ( 83,907 ) ( 37,902 ) ( 50,468 )

Other (income) expense

Other (income) expense, net ( 5,786 ) ( 941 ) 2,295

Other expense (income)

Other expense (income), net 3,584 ( 5,786 ) ( 941 )

Interest expense 372 478 367

Total other (income) expense ( 5,308 ) ( 574 ) 2,493

Total other expense (income) 3,956 ( 5,308 ) ( 574 )

Loss before income taxes ( 87,863 ) ( 32,594 ) ( 49,894 )

12 unchanged sentences

Net loss $ ( 88,641 ) $ ( 33,477 ) $ ( 50,714 )

Comprehensive income (loss), net of income taxes:

Comprehensive loss, net of income taxes

Foreign currency translation adjustment ( 677 ) ( 4,703 ) ( 827 )

3 unchanged sentences

APPIAN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(in thousands, except share data)

2 unchanged sentences

Balance December 31, 2018 63,916,437 $ 6 $ 218,284 $ 542 $ ( 145,640 ) $ 73,192

60,599,877 $ 6 $ 141,268 $ 439 $ ( 96,189 ) $ 45,524

Cumulative-effect adjustment for the adoption of ASC 606 — — — — 60,941 60,941

Net loss — — — — ( 50,714 ) ( 50,714 )

4 unchanged sentences

Stock-based compensation expense — — 16,443 — — 16,443

Other comprehensive income — — — 103 — 103

Other comprehensive loss — — — ( 827 ) — ( 827 )

Balance December 31, 2019 67,468,022 6 340,929 ( 285 ) ( 135,413 ) 205,237

63,916,437 6 218,284 542 ( 145,640 ) 73,192

Cumulative-effect adjustment for the adoption of ASC 606 — — — — 60,941 60,941

Net loss — — — — ( 33,477 ) ( 33,477 )

6 unchanged sentences

Balance December 31, 2020 70,679,190 7 470,498 ( 5,010 ) ( 168,890 ) 296,605

67,468,022 6 340,929 ( 285 ) ( 135,413 ) 205,237

Net loss — — — — ( 88,641 ) ( 88,641 )

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 4,950 — — — — —

4 unchanged sentences

Balance December 31, 2021 71,462,094 $ 7 $ 497,128 $ ( 5,687 ) $ ( 257,531 ) $ 233,917

70,679,190 $ 7 $ 470,498 $ ( 5,010 ) $ ( 168,890 ) $ 296,605

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

9 unchanged sentences

Bad debt expense 410 984 99

Loss (gain) on disposal of property and equipment 22 146 ( 4 )

Loss on disposal of property and equipment 79 22 146

Change in fair value of available-for-sale securities — 22 —

9 unchanged sentences

Deferred revenue 33,378 27,626 12,573

Operating lease liabilities 3,407 6,827 —

Deferred rent, non-current — — ( 266 )

Operating lease assets and liabilities 1,544 3,407 6,827

Net cash used in operating activities ( 53,918 ) ( 7,620 ) ( 8,926 )

2 unchanged sentences

Payments for acquisitions, net of cash acquired ( 30,729 ) ( 6,138 ) —

Proceeds from sale of equipment — — 4

Proceeds from investments 120,593 — —

Purchases of property and equipment ( 6,058 ) ( 1,251 ) ( 32,421 )

Net cash used in investing activities ( 153,357 ) ( 32,421 ) ( 7,010 )

Net cash provided by (used in) investing activities 41,936 ( 153,357 ) ( 32,421 )

Cash flows from financing activities:

4 unchanged sentences

Net cash provided by financing activities 2,786 110,468 105,549

Effect of foreign exchange rate changes on cash and cash equivalents 3,216 623 ( 1,459 )

Net (decrease) increase in cash and cash equivalents ( 47,293 ) 64,825 21,172

Cash and cash equivalents, beginning of period 159,755 94,930 73,758

Cash and cash equivalents, end of period $ 112,462 $ 159,755 $ 94,930

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash 694 3,216 623

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 8,502 ) ( 47,293 ) 64,825

Cash, cash equivalents, and restricted cash at beginning of period 112,462 159,755 94,930

Cash, cash equivalents, and restricted cash at end of period $ 103,960 $ 112,462 $ 159,755

Supplemental disclosure of cash flow information:

1 unchanged sentence

Cash paid for income taxes $ 1,505 $ 1,182 $ 356

Supplemental disclosure of non-cash financing information:

Supplemental disclosure of non-cash investing and financing information:

Accrued capital expenditures $ 379 $ — $ —

Finance lease obligations to acquire new office furniture and fixtures and computer hardware $ — $ — $ 4,475

4 unchanged sentences

Organization and Description of Business

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

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

The Appian Low-Code Platform unifies the key capabilities needed to get work done faster:

Process Mining + Workflow + Automation.

Since 1999, industry leaders have trusted Appian and our open, enterprise-grade platform.

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

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

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

1 unchanged sentence

The accompanying consolidated financial statements and footnotes have been prepared in accordance with accounting principles generally accepted in the United States (“U.S.

GAAP”) as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (the “Codification” or “ASC”).

We adopted Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASC 606"), the new revenue recognition guidance, on January 1, 2019 using the modified retrospective method.

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

GAAP”) as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).

We adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC

606”), the new revenue recognition guidance, on January 1, 2019 using the modified retrospective method.

Under this method

of adoption, we recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening

balance of accumulated deficit and applied the new standard only to contracts that were not completed prior to January 1, 2019.

For fiscal years 2018 and prior, revenue was recognized under ASC Topic 605, Revenue Recognition (“ASC 605”).

6 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

2 unchanged sentences

Public Offerings

In June 2020, we completed an underwritten public offering of 2,500,000 shares of our Class A common stock, of which 1,931,206 shares of Class A common stock were sold by us and 568,794 shares of Class A common stock were sold by existing stockholders.

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

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

In September 2019, we completed an underwritten public offering of 2,329,000 shares of our Class A common stock, of which 1,825,000 shares of Class A common stock were sold by us and 504,000 shares of Class A common stock were sold by existing stockholders.

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

1 unchanged sentence

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

In August 2018, we completed an underwritten public offering of 2,000,000 shares of our Class A common stock, of which 1,675,000 shares of Class A common stock were sold by us and 325,000 shares of Class A common stock were sold by existing stockholders, at an offering price to the public of $ 35.15 per share.

The underwriter purchased the shares from us and the selling stockholders at a price of $ 55.70 per share.

Our net proceeds from the offering were $ 101.3 million, after deducting underwriting discounts and commissions and offering expenses.

9 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, 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 18.1 %, 17.1 %, and 15.7 % of our revenue for the years ended December 31, 2020, 2019, and 2018, respectively, of which the top three federal government agencies generated 6.6 %, 7.4 %, and 7.8 % of our revenue for the years ended December 31, 2020, 2019, and 2018, respectively.

Additionally, 33.8 %, 32.3 %, and 28.7 % of our revenue during the years ended December 31, 2020, 2019, and 2018, respectively, was generated from customers outside the United States.

Cash and Cash Equivalents

Revenue generated from government agencies represented 19.6 %, 18.1 %, and 17.1 % of our revenue for the years ended December 31, 2021, 2020, and 2019, respectively, of which the top three U.S.

federal government agencies generated 5.6 %, 6.6 %, and 7.4 % of our revenue for the years ended December 31, 2021, 2020, and 2019, respectively.

Additionally, 34.0 %, 33.8 %, and 32.3 % of our revenue during the years ended December 31, 2021, 2020, and 2019, 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.

The restriction on 25 % of the 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.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

Year Ended December 31,

2021 2020 2019

Cash and cash equivalents $ 100,796 $ 112,462 $ 159,755

Restricted cash, current 791 — —

Restricted cash, non-current 2,373 — —

Total cash, cash equivalents, and restricted cash $ 103,960 $ 112,462 $ 159,755

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 a $ 0.8 million increase in the allowance for doubtful accounts from December 31, 2019 to December 31, 2020.

Activity in the allowance for doubtful accounts was as follows (in thousands):

5 unchanged sentences

Balance as of December 31 $ 1,400 $ 1,400 $ 600

Non-Trade Receivables

Non-Trade Receivable

We record non-trade receivables to reflect amounts due for activities other than sales of subscriptions to our platform and professional services.

Our non-trade receivables related entirely to a receivable resulting from our tenant improvement allowance.

The tenant improvement allowance receivable was $ 14.4 million as of December 31, 2018 and was classified within Prepaid expenses and other current assets in the accompanying consolidated balance sheets.

We recognized our initial tenant improvement allowance receivable of $ 15.8 million related to our new headquarters once we took initial possession of the space in October 2018.

We recognized an additional tenant improvement allowance receivable of $ 2.6 million when we took possession of adjacent office space in February 2019.

We had received the entire tenant improvement allowance of $ 17.0 million as of December 31, 2019, and therefore, there was no receivable balance remaining as of such date.

Our non-trade receivables relate largely to receivables resulting from the tenant improvement allowance granted to us for the build out of the fourth floor of our headquarters.

The balance of the tenant improvement allowance receivable was $ 2.0 million as of December 31, 2021 and was classified within Prepaid expenses and other current assets in the accompanying consolidated balance sheets.

We have received $ 0.9 million of the tenant improvement allowance as of December 31, 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 team, that are incremental costs to obtaining customer contracts.

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

3 unchanged sentences

Commissions paid relating to contract renewals are deferred and amortized over the related renewal period.

We also capitalize the incremental fringe benefits associated with commission expenses paid to our direct sales force.

We also capitalize the incremental fringe benefits associated with commission expenses paid to our direct sales team.

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 consolidated statements of operations.

The following table summarizes the activity of costs to obtain a contract with a customer for the years ended December 31, 2020 and December 31, 2019 (in thousands):

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The following table summarizes the activity of costs to obtain a contract with a customer for the years ended December 31, 2021, 2020, and 2019 (in thousands):

Year Ended December 31,

2021 2020 2019

Balance as of January 1 $ 52,097 $ 43,522 $ 29,108

3 unchanged sentences

Balance as of December 31 $ 73,685 $ 52,097 $ 43,522

For the periods prior to January 1, 2019 under ASC 605, deferred commissions are the incremental costs directly associated with subscription agreements with customers and consist of sales commissions paid to our direct sales force.

Commissions are considered direct and incremental and as such are deferred and amortized over the terms of the related customer contracts consistent with the related revenue.

Commission expense was $ 32.4 million, $ 23.3 million, and $ 15.7 million for the years ended December 31, 2021, 2020, and 2019, respectively.

10 unchanged sentences

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

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 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.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

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 years ended December 31, 2021, 2020, and 2019.

6 unchanged sentences

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

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the performance condition.

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.

8 unchanged sentences

The dilutive effect of potentially dilutive securities is reflected in diluted net loss per share by application of the treasury stock method.

Due to net losses for the years ended December 31, 2020, 2019, and 2018, basic and diluted net loss per share were the same as the effect of potentially dilutive securities would have been anti-dilutive.

Due to net losses for the years ended December 31, 2021, 2020, and 2019, basic and diluted net loss per share were the same as the effect of potentially dilutive securities would have been antidilutive.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We use the asset and liability method of accounting for income taxes in which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

13 unchanged sentences

Operating segments are defined as components of an enterprise for which discrete financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) for purposes of allocating resources and evaluating financial performance.

Our CODM is our chief executive officer, who reviews financial information presented on a company wide basis for purposes of allocating resources and evaluating financial performance.

As such, our operations constitute a single operating segment and one reportable segment.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Accordingly, we have determined we have one reportable segment and operating unit structure.

Foreign Currency

4 unchanged sentences

Gains and losses on translation of these accounts are accumulated and reported as a separate component of stockholders’ equity and other comprehensive income.

Gains and losses on foreign currency transactions are recognized in the accompanying consolidated statements of operations as a component of other expense, net.

Transaction gains and losses from transactions denominated in foreign currencies resulted in net transaction gains of $ 4.3 million for the year ended December 31, 2020 and net transaction losses of $ 0.2 million and $ 3.0 million for the years ended December 31, 2019 and 2018, respectively.

Gains and losses on foreign currency transactions are recognized in the accompanying consolidated statements of operations as a component of Other expense (income), net.

Transaction gains and losses from transactions denominated in foreign currencies resulted in net transaction losses of $ 3.7 million for the year ended December 31, 2021, net transaction gains of $ 4.3 million, and net transaction losses of $ 0.2 million for the years ended December 31, 2020 and 2019, respectively.

Research and Development

5 unchanged sentences

Costs incurred after technological feasibility is established are not significant, and accordingly we expense all research and development costs when incurred.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Advertising Expenses

2 unchanged sentences

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments-Credit Losses (Topic 326):

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

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

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

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

In August 2018, the FASB issued ASU No.

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

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

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

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

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

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

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

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

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

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Not Yet Adopted

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

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

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

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

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

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 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.

Refer to Note 5 for further details on the impact of adopting this new guidance.

Revenue Recognition

3 unchanged sentences

Year Ended December 31,

2021 2020 2019

SaaS subscriptions $ 179,415 $ 129,219 $ 95,028

1 unchanged sentence

Maintenance and support 21,120 18,076 15,843

Total subscriptions 263,738 198,710 151,299

Professional services 105,521 105,863 109,053

1 unchanged sentence

Performance Obligations and Timing of Revenue Recognition

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

3 unchanged sentences

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.

6 unchanged sentences

We bill customers and collect payment for subscriptions to our platform in advance, and they are non-cancellable.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Term License Subscriptions

7 unchanged sentences

Revenue from maintenance and support is recognized ratably over the contract period, which is the period over which the customer has continuous access to maintenance and support.

Professional Services

Professional Services Revenue

Our professional services revenue is comprised of fees for consulting services, including application development and deployment assistance as well as training services related to our platform.

4 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.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

12 unchanged sentences

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

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We allocate the transaction price to each performance obligation in a contract based on its relative SSP.

7 unchanged sentences

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

Maintenance and support - We establish SSP of maintenance and support as a percentage of the stated net subscription fee based on observable pricing of maintenance and support renewals from our legacy perpetual software licenses.

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

Maintenance and support - We establish the SSP of maintenance and support as a percentage of the stated net subscription fee based on observable pricing of maintenance and support renewals from our legacy perpetual software licenses.

Consulting 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 December 31, 2020 and December 31, 2019, contract assets of $ 20.1 million and $ 22.8 million, respectively, are included in the Prepaid expenses and other current assets and Other assets line items in our consolidated balance sheets.

As of December 31, 2021 and 2020, contract assets of $ 14.0 million and $ 20.1 million, respectively, are included in the Prepaid expenses and other current assets and Other assets line items in our consolidated balance sheets.

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

Deferred revenue is then recognized as the revenue recognition criteria are met.

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

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

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2021, we recognized $ 114.2 million of revenue that was included in the deferred revenue balance as of December 31, 2020.

2 unchanged sentences

We expect to recognize $ 189.6 million of this balance as revenue over the next 12 months with the remaining amount recognized thereafter.

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

Our operating leases have remaining lease terms of roughly two years to 10 years, some of which include options to extend the leases for up to an additional 10 years.

Right-of-Use (“ROU”) Assets and Lease Liabilities

At the inception of an arrangement, we determine whether the arrangement is or contains a lease based on the unique facts and circumstances present and the classification of the lease.

Operating leases with a term greater than one year are recognized on the balance sheet as right-of-use ("ROU") assets, lease liabilities, and, if applicable, long-term lease liabilities.

Operating leases with a term greater than one year are recognized on the balance sheet as ROU assets, lease liabilities, and, if applicable, long-term lease liabilities.

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.

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

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We have elected not to recognize on our 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.

7 unchanged sentences

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

Expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense while the expense for finance leases is recognized as depreciation expense and interest expense.

We have lease agreements which require payments for lease and non-lease components (i.e., common area maintenance) that are accounted for as a single lease component.

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 are rather expensed as incurred and recorded as variable lease expense.

As of December 31, 2020, we have operating leases for corporate offices.

Our operating leases have remaining lease terms ranging from 3 months to 11 years, some of which include options to extend the leases for up to 10 years.

Headquarters Lease

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.

2 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.

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

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

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

The amendment is considered a modification to the original lease and is accounted for as a separate contract because it represents a new ROU asset and the lease costs on the new space are charged at prevailing market rates.

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

In November 2021, we entered into a third amendment to our headquarters lease, in which we exercised an option to expand occupancy into two adjacent office spaces of 32,883 and 25,925 square feet, with occupancy to commence on September 1, 2022 and May 1, 2023, respectively.

Concurrent with the amendment, we also entered into a sublease agreement in which we agreed to sublease 32,883 square feet of space effective September 1, 2022.

The sublease terminates on August 31, 2025 but may be extended one additional year at the sublessee’s option.

The amendment is considered a modification to the

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

original lease and each space is accounted for as a separate contract because it represents a new ROU asset and the lease costs charged on the new spaces are at prevailing market rates.

As of December 31, 2021, we have not taken possession of either space nor met the criteria for the leases and sublease to be considered commenced.

Accordingly, we have not reported an ROU asset or liability on our consolidated balance sheets nor have recorded expense or sublease income on our consolidated statements of operations in relation to the additional spaces.

Paydown of Finance Leases

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

As of the date of the paydown, the titles to the assets were transferred to us, the associated ROU 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 consolidated balance sheets.

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 consolidated balance sheets.

We have lease agreements which require payments for lease and non-lease components (i.e., common area maintenance) that are accounted for as a single lease component.

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.

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

Year Ended December 31,

Operating lease cost $ 6,649 $ 9,733

Operating lease costs $ 6,619 $ 6,649

Finance lease costs:

1 unchanged sentence

Interest on lease liabilities — 150

Short-term lease cost 565 462

Variable lease cost 281 409

Short-term lease costs 149 565

Variable lease costs 2,713 281

Total $ 9,481 $ 8,887

Supplemental balance sheet information related to leases as of December 31, 2020 and December 31, 2019 was as follows (in thousands, except for lease term and discount rate):

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Lease Information

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

As of December 31,

Operating Leases

Operating right-of-use assets $ 27,897 $ 30,659

2 unchanged sentences

Total operating lease liabilities $ 56,894 $ 58,117

Finance Leases

Property and equipment, at cost $ — $ 4,475

Accumulated depreciation — ( 703 )

Property and equipment, net $ — $ 3,772

Finance lease liabilities, current $ — $ 1,447

Finance lease liabilities, net of current portion — 2,375

Total finance lease liabilities $ — $ 3,822

Weighted average remaining lease term (in years) 9.5 10.6

Operating leases 10.6 11.4

Finance leases 0.0 2.5

Weighted average discount rate 9.5 % 9.6 %

Operating leases 9.6 % 9.8 %

Finance leases — % 5.5 %

For the year ended December 31, 2020, amortization of operating ROU assets totaled $ 1.6 million while interest expense on operating ROU liabilities totaled $ 1.9 million.

For the years ended December 31, 2021 and 2020, amortization of operating ROU assets totaled $ 1.4 million and $ 1.6 million, respectively.

For the years ended December 31, 2021 and 2020, interest expense on operating ROU liabilities totaled $ 5.3 million and $ 1.9 million, respectively.

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

Year Ended December 31,

2021 2020 2019

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

6 unchanged sentences

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

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Operating Leases

3 unchanged sentences

Total $ 56,894

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Business Combinations

In August 2021, we acquired 100 % of the outstanding common stock 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 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 any 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 106

Property and equipment 59

Developed technology 5,974

Customer relationships 750

Goodwill 24,521

Other non-current assets 27

Total assets acquired 31,693

Current liabilities 638

Non-current liabilities 38

Total liabilities assumed 676

Net assets acquired $ 31,017

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

From the acquisition date to December 31, 2021, Lana Labs' revenue was $ 0.3 million and net loss before taxes was $ 2.6 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.

Measurement period adjustments recognized in the year ended December 31, 2021 included a $ 0.8 million adjustment to developed technology and goodwill related to an update to the discount rate utilized in our valuation of intangibles, a $ 0.1 million deferred tax adjustment, and an immaterial adjustment to working capital.

Additionally, as a result of our early adoption of ASU 2021-08, deferred revenue as of the acquisition date increased by $ 0.3 million, $ 0.1 million of which was recognized as revenue through December 31, 2021.

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

The transaction was financed through available cash on hand.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The final allocation of the purchase price is as follows:

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

Cash acquired $ 731

4 unchanged sentences

Goodwill 4,348

Other noncurrent assets 10

Other non-current assets 10

Total assets acquired 7,267

Current liabilities 14

Noncurrent liabilities 344

Non-current 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 December 31, 2020 were immaterial.

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

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

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

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

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

Property and Equipment, net

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

Goodwill and Intangible Assets

Goodwill was comprised of the following as of December 31, 2021 and 2020 (in thousands):

Carrying Amount

Balance as of December 31, 2019

Goodwill acquired 4,348

Foreign currency translation adjustments 514

Balance as of December 31, 2020

Goodwill acquired 24,521

Foreign currency translation adjustments ( 1,588 )

Balance as of December 31, 2021

Intangible assets, net consisted of the following as of December 31, 2021 and 2020 (in thousands):

As of December 31,

Developed technology $ 7,271 $ 1,719

Customer relationships - Non-Robotic Process Automation (“RPA”) 872 172

Customer relationships - RPA 261 282

Intangible assets, gross 8,404 2,173

accumulated amortization ( 1,260 ) ( 429 )

Intangible assets, net $ 7,144 $ 1,744

Intangible amortization expense was $ 0.8 million and $ 0.4 million for the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, the weighted average remaining amortization periods for developed technology, non-RPA customer relationships, and RPA customer relationships were approximately 4.4 years, 9.0 years, and 8.0 years, respectively.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The projected annual amortization expense related to amortizable intangible assets as of December 31, 2021 is as follows (in thousands):

Year Ended December 31,

Thereafter 408

Total projected amortization expense $ 7,144

Property and Equipment, net

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

As of December 31,

8 unchanged sentences

Depreciation expense totaled $ 4.9 million, $ 5.4 million, and $ 4.7 million for the years ended December 31, 2021, 2020, and 2019, respectively.

During the year ended December 31, 2020, we retired $ 1.3 million of leasehold improvements, $ 0.2 million of computer hardware, and $ 0.1 million of office furniture and fixtures and equipment, and nominal losses on disposal were recorded.

During the year ended December 31, 2019, we retired $ 3.2 million of leasehold improvements, $ 0.9 million of computer hardware, $ 0.4 million of office furniture and fixtures, $ 0.4 million of software, and $ 0.1 million of equipment and recorded a loss on disposal of $ 0.1 million.

During the year ended December 31, 2021, we retired $ 0.1 million of leasehold improvements, and $ 0.1 million losses on disposal were recorded.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accrued Expenses

2 unchanged sentences

Accrued hosting costs $ 1,995 $ 1,229

Accrued contract labor costs 908 1,921

Accrued marketing and trade show expenses 596 365

Accrued labor costs 891 908

Accrued marketing and tradeshow expenses 1,167 596

Accrued audit and tax expenses 439 370

Accrued taxes payable 550 —

Accrued legal costs 5,511 760

1 unchanged sentence

Accrued third party license fees 1,066 570

Accrued capital expenditures 379 —

Other accrued expenses 2,615 1,157

1 unchanged sentence

Line of Credit

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

The facility matures in November 2022.

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

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

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

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.

In November 2017, we entered into a $ 20.0 million revolving line of credit with a lender with an original maturity date of November 2022.

In December 2021, we executed the first loan modification agreement which extended the revolving line of credit's maturity date to November 2025 and amended certain borrowing terms and financial covenants.

Under the amended agreement, we may elect whether amounts drawn on the revolving line of credit bear interest on the outstanding principal amount at a rate per annum equal to either a) the Prime rate plus an additional interest rate margin or b) the secured overnight financing rate (“SOFR”) plus an additional interest rate margin that is determined by the availability of the borrowings under the revolving line of credit.

The additional interest rate margin will range from 0.75 % to 1.25 % in the case of Prime rate advances and from 1.75 % to 2.25 % in the case of SOFR rate advances.

The revolving line of credit contains an unused facility fee up to 0.20 % 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 subject to a net cash threshold as set forth in the agreement 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 December 31, 2021.

As of December 31, 2020, we had no outstanding borrowings under this revolving line of credit, and we had outstanding letters of credit totaling $ 11.2 million in connection with securing our

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

As of December 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.

For the years ended December 31, 2021, 2020, and 2019, our loss before income taxes was comprised of the following (in thousands):

5 unchanged sentences

For the years ended December 31, 2021, 2020, and 2019, our income tax expense (benefit) was comprised of the following (in thousands):

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31,

15 unchanged sentences

Nondeductible expenses ( 0.5 ) ( 0.6 ) ( 0.7 )

Foreign tax expense ( 0.2 ) — —

Equity compensation 7.0 46.2 12.0

1 unchanged sentence

Unrecognized tax benefits ( 0.9 ) ( 2.2 ) ( 1.1 )

Change in tax rate ( 1.2 ) — —

Other ( 0.1 ) ( 1.1 ) ( 0.8 )

Remeasurement of deferred taxes ( 1.7 ) ( 1.6 ) —

Deferred adjustments 0.9 ( 1.7 ) ( 1.6 )

Change in valuation allowance ( 32.5 ) ( 90.9 ) ( 38.9 )

Total ( 0.9 ) % ( 2.7 ) % ( 1.6 ) %

The effective tax rate of ( 0.9 )% in 2021 includes $ 28.5 million of tax expense attributable to the change in the valuation allowance in the United States, Switzerland, and Germany (Lana Labs GmbH), partially offset by $ 10.5 million of favorable excess tax benefits for equity compensation and research credits.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The effective tax rate of ( 2.7 )% in 2020 includes $ 29.6 million of tax expense attributable to the change in the valuation allowance in the United States and Switzerland, partially offset by $ 18.8 million of favorable excess tax benefits for equity compensation and research credits.

Deferred tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amount of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

7 unchanged sentences

Lease liabilities 15,089 15,768

Accrued vacation 339 409

Accrued compensation 3,390 339

Bad debt 373 383

Other accrued expense 1,452 —

Other 301 1,234

7 unchanged sentences

Depreciation ( 3,892 ) ( 4,221 )

Intangible ( 2,102 ) —

Other ( 603 ) ( 512 )

16 unchanged sentences

We had tax effected state NOL carryforwards of $ 14.1 million and $ 11.2 million as of December 31, 2021 and 2020, respectively.

The rules regarding carryforwards vary from state to state, and the ability to utilize NOLs varies based on

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

timing and amount.

The rules regarding carryforwards vary from state to state, and the ability to utilize NOLs varies based on timing and amount.

The majority of state NOL carryforwards generated prior to 2018 will expire, if unused, in 2037.

Due to the TCJA, certain state NOL carryforwards generated after 2017 have an indefinite carryforward period.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2021 and 2020, we had foreign gross NOL carryforwards of $ 126.6 million and $ 78.6 million, respectively, primarily attributable to our subsidiary in Switzerland.

Those NOL carryforwards will begin to expire, if unused, between 2022 to 2029.

The net change in the total valuation allowance during the year ended December 31, 2020 was $ 30.3 million, primarily driven by the valuation allowance recorded against the United States and Switzerland deferred tax assets.

The net change in the total valuation allowance during the year ended December 31, 2021 was $ 28.5 million, primarily driven by the valuation allowance recorded against the United States, Switzerland, and Germany (Lana Labs GmbH) deferred tax assets.

As of December 31, 2021, we continued to maintain a full valuation allowance against U.S.

1 unchanged sentence

We have evaluated all evidence, both positive and negative, in assessing the likelihood of realizability, and we determined the negative evidence outweighed the positive evidence.

As of December 31, 2020, we have a valuation allowance of $ 9.2 million against foreign deferred tax assets, primarily for deferred tax assets at our subsidiary in Switzerland.

As of December 31, 2021, we have a valuation allowance of $ 14.8 million against foreign deferred tax assets, primarily for deferred tax assets at our subsidiary in Switzerland and Germany.

Based on our cumulative operating results as of December 31, 2021 and assessment of our expected future results of operations, we determined it was not more likely than not that we would be able to realize the deferred tax assets prior to expiration.

3 unchanged sentences

income tax liability is not practicable.

As of December 31, 2020 and 2019, we had unrecognized tax benefits of $ 2.3 million and $ 1.6 million, respectively, of which no ne would affect our effective tax rate if recognized due to the valuation allowance.

As of December 31, 2021 and 2020, we had unrecognized tax benefits of $ 3.1 million and $ 2.3 million, respectively, none of which would affect our effective tax rate if recognized due to the valuation allowance.

The following table summarizes the activity related to our unrecognized tax benefit from January 1, 2019 to December 31, 2021 (in thousands):

17 unchanged sentences

During the years ended December 31, 2021, 2020, and 2019, we recognized nominal amounts in interest.

We did no t recognize any interest during the year ended December 31, 2018.

The cumulative balance of interest and penalties as of December 31, 2021 and 2020 were not meaningful.

4 unchanged sentences

federal jurisdiction and in various state and foreign jurisdictions.

The tax years 2017 through 2020 remain open to examination by the major taxing jurisdictions to which we are subject.

Due to the NOL carryforward, tax years 2016 through 2021 remain open to examination by the major taxing jurisdictions to which we are subject.

There are no open examinations that would have a meaningful impact to our consolidated financial statements.

The CARES Act also includes various other income and payroll tax measures outside of the carryforward provisions discussed previously.

Pursuant to one of 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.

Stock-Based Compensation

11 unchanged sentences

Under the simplified method, the expected term of an option is presumed to be the mid-point between the vesting date and the end of the contractual term.

Expected volatility is based on historical volatilities for publicly traded stock of comparable companies over the estimated expected term of the stock options.

Expected volatility is based on historical volatilities for our common stock and the publicly traded stock of comparable companies over the estimated expected term of the stock options.

We assume no dividend yield because dividends are not expected to be paid in the near future, which is consistent with our history of not paying dividends.

1 unchanged sentence

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

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

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

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

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

Refer to Note 17 for further details on the status of this award.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

As a result, we accelerated the recognition of approximately $ 3.3 million in stock-based compensation expense during the year ended December 31, 2021.

The following table summarizes the assumptions used to estimate the fair value of stock options granted during the years ended December 31, 2021, 2020, and 2019:

6 unchanged sentences

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

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes stock option activity for the years ended December 31, 2021, 2020, and 2019:

2 unchanged sentences

5,021,068 $ 7.30 6.4 $ 97,440

Granted 700,000 33.98

Exercised ( 1,194,471 ) 4.11 44,081

Canceled ( 503,601 ) 9.51

Forfeited ( 67,986 ) 10.17

Outstanding at December 31, 2019

4,458,611 12.30 5.8 115,501

Granted 700,000 33.98

Exercised ( 1,001,411 ) 6.39 81,181

Canceled ( 67,986 ) 10.17

Expired ( 1,380 ) 11.82

Forfeited ( 56,580 ) 11.33

Outstanding at December 31, 2020

2 unchanged sentences

Expired ( 4,100 ) 10.54

Canceled ( 56,580 ) 11.33

Forfeited ( 17,960 ) 11.78

Outstanding at December 31, 2021

5 unchanged sentences

The total fair value of stock options that vested during the years ended December 31, 2021, 2020, and 2019 was $ 10.8 million, $ 2.8 million, and $ 2.0 million, respectively.

As of December 31, 2020, the total compensation cost related to unvested stock options not yet recognized was $ 4.0 million, which will be recognized over a weighted average period of one year .

As of December 31, 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 0.4 years.

APPIAN CORPORATION AND SUBSIDIARIES

7 unchanged sentences

Vested ( 521,460 ) 27.81

Canceled ( 35,702 ) 23.97

Forfeited ( 67,666 ) 26.38

Non-vested and outstanding at December 31, 2019

2 unchanged sentences

Vested ( 270,609 ) 31.29

Canceled ( 67,666 ) 26.38

Forfeited ( 176,915 ) 32.01

Non-vested and outstanding at December 31, 2020

2 unchanged sentences

Vested ( 354,130 ) 43.39

Canceled ( 176,915 ) 32.01

Forfeited ( 89,806 ) 62.72

Non-vested and outstanding at December 31, 2021

5 unchanged sentences

The RSUs vested during the year ended December 31, 2020.

Stock-Based Compensation Expense

The following table summarizes the components of our stock-based compensation expense by instrument type for the years ended December 31, 2021, 2020, and 2019 (in thousands):

7 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-based compensation expense for RSUs, stock options, and issuances of common stock to directors is included in the following line items in the accompanying consolidated statements of operations for the years ended December 31, 2020, 2019, and 2018 (in thousands):

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 consolidated statements of operations for the years ended December 31, 2021, 2020, and 2019 (in thousands):

Year Ended December 31,

17 unchanged sentences

The following table sets forth the computation of basic and diluted net loss per share for the years ended December 31, 2021, 2020, and 2019 (in thousands, except share and per share data):

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31,

8 unchanged sentences

Non-vested restricted stock units 1,209,529 1,165,003 1,022,835

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Commitments and Contingencies

7 unchanged sentences

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

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.

Spending under this agreement for the year ended December 31, 2021 totaled $ 11.8 million.

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 consolidated statements of operations.

Letters of Credit

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

At each of December 31, 2021 and 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 9.

3 unchanged sentences

We also have entered into a non-cancellable agreement for the use of technology that is integral in the development of our software and pay annual royalty fees of $ 0.3 million.

Segment and Geographic Information

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.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Segment and Geographic Information

The following table summarizes revenue by geography for the years ended December 31, 2021, 2020, and 2019 (in thousands):

5 unchanged sentences

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

Revenues from customers attributed to the United Kingdom were 12.5 % and 12.2 % of our total revenue for the years ended December 31, 2020 and 2019, respectively.

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

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

Revenue from customers attributed to the United Kingdom were 12.5 % and 12.2 % of our total revenue for the year ended December 31, 2020 and 2019, respectively.

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

Retirement Plans

We have a defined contribution 401(k) retirement and savings plan (the “401(k) Plan”) to provide retirement benefits for all eligible employees.

All employees over the age of 21 on their first day of the month immediately following the month of hiring are eligible to participate in the 401(k) Plan.

We have a defined contribution 401(k) retirement and savings plan (the “Plan”) to provide retirement benefits for all eligible employees.

With limited exceptions, all employees over the age of 21 on the first day of the month immediately following the month of hiring are eligible to participate in the Plan.

The Plan excludes United States expatriate employees, employees who are residents of Puerto Rico, and employees covered by another country’s pension retirement plan who are receiving employer contributions in that plan.

The 401(k) Plan allows eligible employees to make salary-deferred contributions up to 75 % of their pre-tax annual compensation, as defined and subject to certain Internal Revenue Service limitations.

Employer contributions are made semi-monthly and calculated as 100 % of the employee's contribution for each pay period up to a maximum of 4 % of the employee's eligible gross compensation for the pay period.

Employer contributions vest at 25 % per year over four years , beginning with the completion of the first year of service.

For th e years ended December 31, 2020, 2019, and 2018, we incurred $ 6.8 million, $ 5.5 million, and $ 4.7 million, respectively, in contribution expense related to employer matching contributions.

The Plan allows eligible employees to make salary-deferred contributions up to 75 % of their pre-tax annual compensation, as defined in the Plan, as long as the total contributed does not exceed the annual maximum allowable amount under the Internal Revenue Code.

The Company makes a semi-monthly matching contribution of 100 % of the employee's contribution for that pay period, up to a maximum of 4 % of the employee's eligible gross compensation for that pay period.

Company contributions vest ratably based on years of service over a four year period, beginning with the completion of the first year of service.

For the years ended December 31, 2021, 2020, and 2019, we incurred $ 8.7 million, $ 6.8 million, and $ 5.5 million, respectively, in contribution expense related to employer matching contributions.

We are obligated to make plan contributions for the employees of certain of our wholly-owned foreign subsidiaries.

9 unchanged sentences

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

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 during the years ended December 31, 2021 and 2020.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

minimize the use of unobservable inputs.

There were no instruments measured at fair value on a recurring basis using significant unobservable inputs during the years ended December 31, 2020 and 2019.

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

5 unchanged sentences

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 December 31, 2020 are as follows (in thousands):

Year Ended December 31, 2020

Our investments as of December 31, 2021 and 2020 are as follows (in thousands):

As of December 31, 2021

Fair Value Measurement Balance Sheet Classification

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

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 $ 38,301 $ — $ 38,301 $ 38,301 $ — $ —

4 unchanged sentences

Total investments $ 105,546 $ ( 22 ) $ 105,524 $ 38,301 $ 55,179 $ 12,044

There were no Level 3 assets held at any point during the year ended December 31, 2020.

Additionally, there were no transfers between Levels 1 and 2 during the year ended December 31, 2020.

The amortized cost basis and fair value of debt securities at December 31, 2020, by contractual maturity, are as follows (in thousands):

As of December 31, 2020

Fair Value Measurement Balance Sheet Classification

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

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

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

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

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

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

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

There were no Level 3 assets held at any point during the year ended December 31, 2021 and 2020.

Additionally, there were no transfers between Levels 1 and 2 during the year ended December 31, 2021 and 2020.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The amortized cost basis and fair value of debt securities at December 31, 2021 and 2020, by contractual maturity, are as follows (in thousands):

As of December 31, 2021

Cost Basis Fair Value

2 unchanged sentences

Total investments $ 105,546 $ 105,524

As of December 31, 2020

Cost Basis Fair Value

Due in one year or less $ 153,483 $ 153,469

Due after one year through five years 36,128 36,120

Total investments $ 189,611 $ 189,589

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

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Subsequent Events

Effective February 3, 2021, the 2019 CEO Grant as discussed in Note 10 has satisfied all of the conditions required to be considered fully vested.

As a result, we expect to accelerate the recognition of approximately $ 3.3 million in stock-based compensation expense in the first quarter of 2021.

In January 2022, our Chief Executive Officer exercised the 2019 CEO Grant of stock options as described in Note 11.

Pursuant to this exercise, we received cash proceeds from the exercise of common stock options totaling $ 23.8 million.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

1 unchanged sentence

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-K

Item 8. Financial Statements and Supplementary Data