What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-04 compared with 2022-05-05 · 242 added, 284 removed, 422 unchanged (55% of the section changed)

FINANCIAL STATEMENTS

APPIAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

March 31, 2022 December 31, 2021

APPIAN CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value and share data)

June 30, 2022 December 31, 2021

Current assets

1 unchanged sentence

Short-term investments and marketable securities 59,748 55,179

Accounts receivable, net of allowance of $ 1,402 and $ 1,400 as of March 31, 2022 and December 31, 2021, respectively

Accounts receivable, net of allowance of $ 1,401 and $ 1,400 , respectively

120,424 130,049

3 unchanged sentences

Total current assets 315,392 338,264

Property and equipment, net of accumulated depreciation of $ 15,473 and $ 14,106 as of March 31, 2022 and December 31, 2021, respectively

Property and equipment, net of accumulated depreciation of $ 16,845 and $ 14,106 , respectively

38,539 36,913

1 unchanged sentence

Goodwill 25,597 27,795

Intangible assets, net of accumulated amortization of $ 1,630 and $ 1,260 as of March 31, 2022 and December 31, 2021, respectively

Operating right-of-use assets 27,556 27,897

Intangible assets, net of accumulated amortization of $ 1,899 and $ 1,260 , respectively

Right-of-use assets for operating leases 27,113 27,897

Deferred commissions, net of current portion 48,671 49,017

19 unchanged sentences

Class A common stock—par value $ 0.0001 ;

500,000,000 shares authorized and 40,829,564 shares issued and outstanding as of March 31, 2022;

500,000,000 shares authorized and 40,946,718 shares issued and outstanding as of June 30, 2022;

500,000,000 shares authorized and 39,964,298 shares issued and outstanding as of December 31, 2021

Class B common stock—par value $ 0.0001 ;

100,000,000 shares authorized and 31,497,796 shares issued and outstanding as of March 31, 2022;

100,000,000 shares authorized and 31,497,796 shares issued and outstanding as of June 30, 2022;

100,000,000 shares authorized and 31,497,796 shares issued and outstanding as of December 31, 2021

5 unchanged sentences

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

APPIAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

Three Months Ended March 31,

APPIAN CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share data)

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

2022 2021 2022 2021

Subscriptions $ 76,668 $ 56,946 $ 160,388 $ 120,712

12 unchanged sentences

Operating loss ( 42,747 ) ( 24,576 ) ( 66,613 ) ( 35,066 )

Other expense

Other expense, net 787 2,893

Other non-operating expense (income)

Other expense (income), net 6,153 ( 1,081 ) 6,940 1,812

Interest expense 60 80 134 161

Total other expense 861 2,974

Total other non-operating expense (income) 6,213 ( 1,001 ) 7,074 1,973

Loss before income taxes ( 48,960 ) ( 23,575 ) ( 73,687 ) ( 37,039 )

Income tax (benefit) expense ( 1,573 ) 123

Income tax expense (benefit) 394 250 ( 1,179 ) 373

Net loss $ ( 49,354 ) $ ( 23,825 ) $ ( 72,508 ) $ ( 37,412 )

4 unchanged sentences

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

APPIAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

APPIAN CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited, in thousands)

Three Months Ended March 31,

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

2022 2021 2022 2021

Net loss $ ( 49,354 ) $ ( 23,825 ) $ ( 72,508 ) $ ( 37,412 )

Comprehensive income, net of income taxes

Foreign currency translation adjustment 757 4,015

Comprehensive income (loss), net of income taxes

Foreign currency translation adjustments 1,967 ( 1,474 ) 2,724 2,541

Unrealized (losses) gains on available-for-sale securities ( 83 ) 23 ( 194 ) 31

1 unchanged sentence

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

APPIAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

APPIAN CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(unaudited, in thousands, except share data)

2 unchanged sentences

Shares Amount

Balance, January 1, 2022 71,462,094 $ 7 $ 497,128 $ ( 5,687 ) $ ( 257,531 ) $ 233,917

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

Net loss — — — — ( 23,154 ) ( 23,154 )

5 unchanged sentences

Balance, March 31, 2022 72,327,360 $ 7 $ 528,475 $ ( 5,041 ) $ ( 280,685 ) $ 242,756

Balance, January 1, 2021 70,679,190 $ 7 $ 470,498 $ ( 5,010 ) $ ( 168,890 ) $ 296,605

Net loss — — — — ( 49,354 ) ( 49,354 )

4 unchanged sentences

Other comprehensive income — — — 1,884 — 1,884

Balance, June 30, 2022 72,444,514 $ 7 $ 538,249 $ ( 3,157 ) $ ( 330,039 ) $ 205,060

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

Net loss — — — — ( 13,587 ) ( 13,587 )

Issuance of common stock to directors 960 — — — — —

Vesting of restricted stock units 56,326 — — — — —

Exercise of stock options 88,269 — 625 — — 625

Stock-based compensation expense — — 7,894 — — 7,894

Other comprehensive income — — — 4,023 — 4,023

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

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

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

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

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

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

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

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

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

APPIAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

APPIAN CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities

Net loss $ ( 72,508 ) $ ( 37,412 )

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

Adjustments to reconcile net loss to net cash used by operating activities

Stock-based compensation 16,091 12,492

Depreciation and amortization 3,573 2,561

2 unchanged sentences

Deferred income taxes ( 1,302 ) ( 144 )

Stock-based compensation 6,943 7,894

Changes in assets and liabilities

7 unchanged sentences

Operating lease liabilities ( 905 ) 52

Net cash used in operating activities ( 20,604 ) ( 2,810 )

Net cash used by operating activities ( 50,261 ) ( 9,373 )

Cash flows from investing activities

7 unchanged sentences

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash ( 205 ) ( 476 )

Net increase in cash, cash equivalents, and restricted cash 5,939 2,290

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 24,862 ) 18,817

Cash, cash equivalents, and restricted cash at beginning of period 103,960 112,462

3 unchanged sentences

Cash paid for income taxes $ 524 $ 806

Supplemental disclosure of non-cash investing and financing activities

Accrued capital expenditures $ 96 $ —

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

APPIAN CORPORATION AND SUBSIDIARIES

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Organization and Description of 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, Sweden, and Japan.

Significant Accounting Policies

Appian Corporation (together with its subsidiaries, “Appian,” the “Company,” “we,” or “our”) is a unified platform for change.

We accelerate customers’ businesses by discovering, designing, and automating their most important processes.

The Appian Low-Code Platform combines the key capabilities needed to get work done faster, Process Mining + Workflow + Automation, in a unified low-code platform.

Appian is open, enterprise grade, and trusted by industry leaders.

We are headquartered in McLean, Virginia and operate both in the U.S.

and internationally, including Australia, Canada, France, Germany, Italy, Japan, the Netherlands, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

Accounting Policies

Basis of Presentation

The accompanying unaudited condensed 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 (“ASC”) for interim financial information.

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

In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations, financial position, changes in stockholders’ equity, and cash flows.

5 unchanged sentences

Although we believe the estimates we use are reasonable, due to the inherent uncertainty involved in making these estimates, actual results reported in future periods could differ from those estimates.

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

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

While the pandemic has been moving toward a controlled stage in the United States, 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 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.

Significant estimates embedded in the condensed consolidated financial statements include, but are not limited to, revenue recognition, income taxes and the related valuation allowance, leases, costs to obtain a contract with a customer, the valuation of financial instruments, and stock-based compensation.

Principles of Consolidation

1 unchanged sentence

All intercompany accounts and transactions have been eliminated in consolidation.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition

Refer to Note 3 for a detailed discussion on specific revenue recognition principles related to our major revenue streams.

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Cost of Revenue

10 unchanged sentences

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

Revenue generated from government agencies represented 18.1 % and 20.9 % of our revenue for the three months ended March 31, 2022 and 2021, respectively, of which the top three U.S.

federal government agencies generated 4.6 % and 6.9 % of our revenue for the three months ended March 31, 2022 and 2021, respectively.

Additionally, 33.5 % and 32.2 % of our revenue during the three months ended March 31, 2022 and 2021, respectively, was generated from foreign customers.

Revenue generated from government agencies represented 18.2 % of our revenue for each of the three and six months ended June 30, 2022, of which the top three U.S.

federal government agencies generated 5.2 % and 4.8 % of our revenue for the three and six months ended June 30, 2022, respectively.

Additionally, 35.0 % and 34.2 % of our revenue during the three and six months ended June 30, 2022, respectively, was generated from foreign customers.

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

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

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

Cash, Cash Equivalents, and Restricted Cash

1 unchanged sentence

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 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.

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

As of March 31,

25 % of the balance becomes due on October 31, 2022 while the remaining 75 % of the balance becomes due on August 11, 2023.

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

June 30, 2022 December 31, 2021 June 30, 2021 December 31, 2020

Cash and cash equivalents $ 76,185 $ 100,796 $ 131,279 $ 112,462

2 unchanged sentences

Total cash, cash equivalents, and restricted cash $ 79,098 $ 103,960 $ 131,279 $ 112,462

APPIAN CORPORATION AND SUBSIDIARIES

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4 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 an immaterial increase in the allowance for doubtful accounts from December 31, 2021 to March 31, 2022.

The allowance for doubtful accounts totaled $ 1.4 million as of June 30, 2022 and December 31, 2021.

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

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 condensed consolidated balance sheets.

We capitalize costs of obtaining a contract with a customer, which consists of 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.

Costs to obtain a contract for a new customer or upsell are amortized over an estimated economic life of five years as sales commissions on initial sales are not commensurate with sales commissions on contract renewals.

4 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 deferred commission is recorded to sales and marketing costs in our condensed consolidated statements of operations.

Commission expense was $ 8.2 million and $ 6.8 million for the three months ended March 31, 2022 and 2021, respectively.

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

Commission expense was $ 8.7 million and $ 16.9 million for the three and six months ended June 30, 2022, respectively.

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

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

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

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 months ended March 31, 2022 or 2021.

Investments and Fair Value of Financial Instruments

1 unchanged sentence

Stock-Based Compensation

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

We account for stock-based compensation expense related to stock-based awards based on the estimated fair value of the award on the grant date.

2 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 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.

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

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

Recent Accounting Pronouncements

In October 2021, the FASB issued Accounting Standard Update (“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.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

adoption is permitted including in interim periods.

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

We did not adopt any new accounting guidance in 2022 that had a material impact on our condensed consolidated financial statements or disclosures.

Not Yet Adopted

There is no pending accounting guidance that we expect to have a material impact on our condensed consolidated financial statements or disclosures.

Revenue Recognition

We generate subscriptions revenue primarily through the sale of software as a service (“SaaS”) subscriptions bundled with maintenance and support and hosting services as well as term license subscriptions bundled with maintenance and support.

We generate subscriptions revenue primarily through the sale of cloud subscriptions bundled with maintenance and support and hosting services as well as term license subscriptions bundled with maintenance and support.

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

The following table summarizes revenue from contracts with customers for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31,

SaaS subscriptions $ 53,379 $ 39,053

The following table summarizes revenue recorded during the three and six months ended June 30, 2022 and 2021 (in thousands):

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

2022 2021 2022 2021

Cloud subscriptions $ 57,083 $ 42,486 $ 110,462 $ 81,539

Term license subscriptions 14,063 9,323 38,770 29,176

6 unchanged sentences

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

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

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

Subscriptions Revenue

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.

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Subscriptions revenue is primarily related to (1) Cloud 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 or through non-user based single application licenses.

1 unchanged sentence

In certain instances, our customers have paid their entire contract up front.

SaaS Subscriptions

Cloud Subscriptions

We generate cloud-based subscriptions revenue primarily from the sales of subscriptions to access our cloud offering, together with related support services to our customers.

4 unchanged sentences

Term License Subscriptions

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

13 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.

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

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

4 unchanged sentences

Training revenue is recognized when the associated training services are delivered.

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Significant Judgments and Estimates

Determining the Transaction Price

The transaction price includes both fixed and variable consideration.

The transaction price is the total amount of consideration we expect to receive in exchange for the service offerings in a contract and may include both fixed and variable components.

Variable consideration is included in the transaction price to the extent it is probable a significant reversal will not occur.

The amount of variable consideration excluded from the transaction price for the three months ended March 31, 2022 and 2021 was insignificant.

The amount of variable consideration excluded from the transaction price for the three and six months ended June 30, 2022 and 2021 was insignificant.

Our estimates of variable consideration are also subject to subsequent true-up adjustments and may result in changes to transaction prices;

5 unchanged sentences

We establish SSP as follows:

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SaaS subscriptions - Given the highly variable selling price of our SaaS subscriptions, we establish the SSP of our SaaS subscriptions using a residual approach after first determining the SSP of consulting and training services.

We have concluded the residual approach to estimating SSP of our SaaS subscriptions is an appropriate allocation of the transaction price.

Cloud subscriptions - Given the highly variable selling price of our cloud subscriptions, we establish the SSP of our cloud subscriptions using a residual approach after first determining the SSP of consulting and training services.

We have concluded the residual approach to estimating SSP of our cloud subscriptions is an appropriate allocation of the transaction price.

Term license subscriptions - Given the highly variable selling price of our term license subscriptions, we have established SSP of term license subscriptions using a residual approach after first determining the SSP of maintenance and support.

7 unchanged sentences

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

As of March 31, 2022 and December 31, 2021, contract assets of $ 15.6 million and $ 14.0 million, respectively, are included in the Prepaid expenses and other current assets and Other assets line items in our condensed consolidated balance sheets.

As of June 30, 2022 and December 31, 2021, contract assets of $ 15.2 million and $ 14.0 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.

1 unchanged sentence

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

For the three months ended March 31, 2022, we recognized $ 65.7 million of revenue that was included in the deferred revenue balance as of December 31, 2021.

For the six months ended June 30, 2022, we recognized $ 107.3 million of revenue that was included in the deferred revenue balance as of December 31, 2021.

Transaction Price Allocated to the Remaining Performance Obligations

As of March 31, 2022, we had an aggregate transaction price of $ 290.8 million allocated to unsatisfied performance obligations.

As of June 30, 2022, we had an aggregate transaction price of $ 298.0 million allocated to unsatisfied performance obligations.

We expect to recognize $ 192.8 million of this balance as revenue over the next 12 months with the remaining amount recognized thereafter.

As of March 31, 2022, we have operating leases for corporate offices.

Our operating leases have remaining lease terms of roughly 1 year 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 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 our condensed consolidated balance sheets leases with a term of one year or less.

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

APPIAN CORPORATION AND SUBSIDIARIES

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The implicit rates within most of our leases are generally not determinable;

therefore, we use the incremental borrowing rate at the lease commencement date to determine the present value of lease payments.

The determination of our incremental borrowing rate requires judgment and is estimated for each lease based on the rate we would have to pay for a collateralized loan with the same term and payments as the lease.

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

Operating lease ROU assets also include any lease prepayments, offset by lease incentives.

Certain of our leases include options to extend or terminate the lease.

An option to extend the lease is considered in connection with determining the ROU asset and lease liability when it is reasonably certain we will exercise that option while an option to terminate is considered unless it is reasonably certain we will not exercise the option.

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

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.

The initial term of the lease was 150 months.

We took initial possession of the first phase of the new headquarters in October 2018 and began to recognize rent expense as of that date.

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

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

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

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 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 March 31, 2022, 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 condensed consolidated balance sheets nor have recorded expense or sublease income on our condensed consolidated statements of operations in relation to the additional spaces.

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.

As of June 30, 2022, our lease portfolio consists entirely of operating leases, most of which are for corporate offices.

Our operating leases have remaining lease terms of roughly 1 year to 10 years, some of which include options to extend the leases for up to an additional 10 years.

Expense for operating leases is recognized on a straight-line basis over the lease term as an operating 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 rather are expensed as incurred and recorded as variable lease expense.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table sets forth the components of lease expense for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31,

The following table sets forth the components of lease expense for the three and six months ended June 30, 2022 and 2021 (in thousands):

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

2022 2021 2022 2021

Operating lease cost $ 1,626 $ 1,695 $ 3,260 $ 3,325

3 unchanged sentences

Supplemental Lease Information

Supplemental balance sheet information related to operating leases as of March 31, 2022 and December 31, 2021 was as follows (in thousands, except for lease term and discount rate):

March 31, 2022 December 31, 2021

Operating right-of-use assets $ 27,556 $ 27,897

Supplemental balance sheet information related to operating leases as of June 30, 2022 and December 31, 2021 was as follows (in thousands, except for lease term and discount rate):

June 30, 2022 December 31, 2021

Right-of-use assets for operating leases $ 27,113 $ 27,897

Operating lease liabilities, current $ 7,988 $ 8,110

3 unchanged sentences

Weighted average discount rate 9.5 % 9.5 %

Supplemental cash flow and expense information related to operating leases for the three months ended March 31, 2022 and 2021 was as follows (in thousands):

Three Months Ended March 31,

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental cash flow and expense information related to operating leases for the six months ended June 30, 2022 and 2021 was as follows (in thousands):

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

2022 2021 2022 2021

Operating cash outflows for operating leases $ 2,074 $ 1,754 $ 4,159 $ 3,503

Amortization of operating ROU assets 306 324

Amortization of operating lease ROU assets 325 353 631 677

Interest expense on operating lease liabilities 1,305 468 2,626 870

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A summary of our future minimum lease commitments under non-cancellable leases as of March 31, 2022 is as follows (in thousands):

A summary of our future minimum lease commitments under non-cancellable leases as of June 30, 2022 is as follows (in thousands):

Operating Leases

2022 (excluding the three months ended March 31, 2022)

2022 (excluding the six months ended June 30, 2022)

Thereafter 48,775

6 unchanged sentences

The transaction was financed through available cash on hand.

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

The allocation of the purchase price is preliminary pending the finalization of deferred income taxes.

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

11 unchanged sentences

Net assets acquired $ 31,017

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

There were no changes to our reportable segments as a result of the acquisition, and acquisition costs incurred in relation to the transaction were immaterial.

1 unchanged sentence

Since the acquisition date, measurement period adjustments have 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 $ 0.3 million increase in deferred revenue stemming from our early adoption of new accounting guidance surrounding deferred revenue recognized pursuant to a business combination, a $ 0.1 million deferred tax adjustment, and an immaterial adjustment to working capital.

No additional measurement period adjustments were recognized for the three months ended March 31, 2022.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

No additional measurement period adjustments were recognized for the six months ended June 30, 2022.

Goodwill and Intangible Assets

Goodwill was comprised of the following as of March 31, 2022 and December 31, 2021 (in thousands):

Goodwill was comprised of the following as of June 30, 2022 and December 31, 2021 (in thousands):

Carrying Amount

5 unchanged sentences

Foreign currency translation adjustments ( 2,198 )

Balance as of March 31, 2022

Intangible assets, net consisted of the following as of March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022 December 31, 2021

Balance as of June 30, 2022

Intangible assets, net consisted of the following as of June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022 December 31, 2021

Developed technology $ 6,696 $ 7,271

4 unchanged sentences

Intangible assets, net $ 5,840 $ 7,144

Intangible amortization expense was $ 0.4 million and $ 0.1 million for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, the weighted average remaining amortization periods for developed technology, non-RPA customer relationships, and RPA customer relationships were approximately 4.2 years, 8.9 years, and 7.8 years, respectively.

The projected annual amortization expense related to amortizable intangible assets as of March 31, 2022 is as follows (in thousands):

Intangible amortization expense was $ 0.4 million and $ 0.8 million for the three and six months ended June 30, 2022, respectively.

Intangible amortization expense was $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2021, respectively.

As of June 30, 2022, the weighted average remaining amortization periods for developed technology, non-RPA customer relationships, and RPA customer relationships were approximately 3.9 years, 8.8 years, and 7.5 years, respectively.

The projected annual amortization expense related to amortizable intangible assets as of June 30, 2022 is as follows (in thousands):

Projected Amortization

2022 (excluding the three months ended March 31, 2022) $ 1,181

2022 (excluding the six months ended June 30, 2022)

Thereafter 375

Total projected amortization expense $ 5,840

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Property and Equipment, net

Property and equipment, net consisted of the following as of March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022 December 31, 2021

Property and equipment, net consisted of the following as of June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022 December 31, 2021

Leasehold improvements $ 42,892 $ 41,005

6 unchanged sentences

Property and equipment, net $ 38,539 $ 36,913

Depreciation expense totaled $ 1.4 million and $ 1.2 million for the three months ended March 31, 2022 and 2021, respectively.

We had no disposals or retirements and recorded no gains or losses on disposal during each of the three months ended March 31, 2022 and 2021.

Depreciation expense totaled $ 1.4 million and $ 2.8 million for the three and six months ended June 30, 2022, respectively.

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

We had no disposals or retirements and recorded no gains or losses on disposal during each of the three and six months ended June 30, 2022 and 2021.

Accrued Expenses

Accrued expenses consisted of the following as of March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022 December 31, 2021

Accrued hosting costs $ 3,044 $ 1,995

Accrued legal costs 7,899 5,511

Accrued marketing and tradeshow expenses 1,019 1,167

Accrued third party license fees 1,283 1,066

Accrued contract labor costs 1,299 891

Accrued reimbursable employee expenses 1,023 870

Accrued taxes payable 732 550

Accrued audit and tax expenses 504 439

Accrued capital expenditures — 379

Accrued expenses consisted of the following as of June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022 December 31, 2021

Hosting costs $ 3,078 $ 1,995

Legal costs 1,264 5,511

Marketing and tradeshow expenses 2,143 1,167

Third party license fees 1,164 1,066

Contract labor costs 2,043 891

Reimbursable employee expenses 4,104 870

Taxes payable 307 550

Audit and tax expenses 404 439

Capital expenditures 96 379

Other accrued expenses 1,775 2,615

1 unchanged sentence

Line of Credit

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

In December 2021, we executed the first loan modification agreement which extended the revolving line of credit's maturity date from November 2022 to November 2025 and amended certain borrowing terms and financial covenants, and in January 2022, we executed the second loan modification agreement to increase the aggregate amount of funds our foreign subsidiaries are allowed to maintain outside of the United States.

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

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

case of Prime rate advances and from 1.75 % to 2.25 % in the case of SOFR 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 March 31, 2022.

As of March 31, 2022, 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 have a $ 20.0 million revolving line of credit with a lender that matures in November 2025.

In January 2022, we executed the second loan modification agreement to increase the aggregate amount of funds our foreign subsidiaries are allowed to maintain outside of the United States.

We were in compliance with all covenants as of June 30, 2022.

As of June 30, 2022, we had no outstanding borrowings under this revolving line of credit, and we had outstanding letters of credit totaling $ 11.0 million in connection with securing our leased office space.

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

1 unchanged sentence

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

For the three months ended March 31, 2022 and 2021, the actual effective tax rates were 6.4 % and ( 0.9 )%, respectively.

The year to date tax benefit for the three months ended March 31, 2022 was primarily driven by a discrete benefit of $ 1.1 million related to the release of a valuation allowance for Lana Labs as a result of post-integration tax planning and the merger of German subsidiaries.

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

As of March 31, 2022, our net unrecognized tax benefits totaled $ 3.1 million, which if recognized would result in no net effect on the effective tax rate due to a valuation allowance.

For the three and six months ended June 30, 2022, the actual effective tax rates were ( 0.8 )% and 1.6 %, respectively.

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

The-year-to date tax benefit for the six months ended June 30, 2022 was primarily driven by a discrete benefit of $ 1.1 million related to the release of a valuation allowance for Lana Labs as a result of post-integration tax planning and the merger of German subsidiaries.

As of June 30, 2022, our net unrecognized tax benefits totaled $ 3.1 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.

1 unchanged sentence

federal jurisdiction and in various state and foreign jurisdictions.

Due to our net operating loss (“NOL”) carryforward, the tax years 2016 through 2021 remain open to examination by the major taxing jurisdictions to which we are subject.

Due to our net operating loss carryforward, the 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 condensed consolidated financial statements.

6 unchanged sentences

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

As of March 31, 2022, there were 7,186,749 shares of Class A common stock reserved for issuance under the 2017 Plan, of which 3,749,501 were available to be issued.

As of June 30, 2022, there were 7,195,029 shares of Class A common stock reserved for issuance under the 2017 Plan, of which 2,964,435 were available to be issued.

Stock Options

2 unchanged sentences

Due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to otherwise estimate the expected term of the stock options, we use the simplified method to estimate the expected term for our stock options.

Under the simplified

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

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.

In May 2019, our Board of Directors granted a stock option to purchase 700,000 shares of our Class A common stock to our Chief Executive Officer (the “2019 CEO Grant”) under the 2017 Plan with an exercise price of $ 33.98 per share.

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 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.

In June 2022, our Board of Directors granted a stock option to purchase 700,000 shares of our Class A common stock to our Chief Executive Officer (the “2022 CEO Grant”) under the 2017 Plan with an exercise price of $ 50.63 per share.

The 2022 CEO Grant is eligible to vest based on the achievement of various stock price appreciation targets of our Class A common stock.

Specifically, the 2022 CEO Grant vests in four installments of 25 % each if the average closing price per share for a 365 day calendar period equals each of $ 175 , $ 200 , $ 225 , and $ 250 , respectively (the “Vesting Price Threshold”), prior to June 7, 2030.

The option also vests if the Company engages in a Corporate Transaction, as defined in the Plan, in which the Company’s Class A common stock is valued at or above the Vesting Price Threshold.

The fair value of the 2022 CEO Grant was determined using a Monte Carlo simulation.

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

In February 2021, the 2019 CEO Grant satisfied all of the conditions required to be considered fully vested and as a result, we accelerated the recognition of approximately $ 3.3 million in stock-based compensation expense in the three months ended March 31, 2021.

The following table summarizes stock option activity for the three months ended March 31, 2022:

The fair value of the award at the grant date was $ 18.8 million and is being amortized over derived service periods ranging from 3.4 to 4.1 years.

The only stock option awarded during the three and six months ended June 30, 2022 and 2021 was the 2022 CEO Grant.

The following table summarizes the assumptions used to estimate the fair value of the 2022 CEO stock option grant:

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

2022 2021 2022 2021

Risk-free interest rate 3.01 % * 3.01 % *

Expected term (in years) ** 4.1 * ** *

Expected volatility 70 % * 70 % *

Expected dividend yield — % * — % *

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

** Each Vesting Price Threshold for the 2022 CEO grant has a unique expected term ranging from 3.4 to 4.1 years.

The following table summarizes stock option activity for the six months ended June 30, 2022:

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

Outstanding at January 1, 2022

Outstanding at December 31, 2021

2,953,356 $ 15.16 4.0 $ 147,812

3 unchanged sentences

Forfeited ( 10,180 ) 12.18

Outstanding at March 31, 2022

Outstanding at June 30, 2022

2,758,608 $ 19.95 5.5 $ 77,903

Exercisable at March 31, 2022

Exercisable at June 30, 2022

2,057,108 $ 9.51 4.1 $ 77,863

There were no stock options granted during the three months ended March 31, 2022 and 2021.

The total fair value of stock options that vested during the three months ended March 31, 2022 and 2021 was $ 0.2 million and $ 9.7 million, respectively.

As of March 31, 2022, the total compensation cost related to unvested stock options not yet recognized was nominal and will be recognized over a weighted average period of 0.2 years.

The total fair value of stock options that vested during the six months ended June 30, 2022 and 2021 was $ 0.8 million and $ 10.5 million, respectively.

As of June 30, 2022, the total compensation cost related to unvested stock options not yet recognized, which relates exclusively to the 2022 CEO Grant, was $ 18.6 million and will be recognized over a weighted average period of 3.7 years.

Restricted Stock Units

The following table summarizes RSU activity for the three months ended March 31, 2022:

The following table summarizes RSU activity for the six months ended June 30, 2022:

Number of Shares Weighted Average Grant Date Fair Value

Non-vested and outstanding at January 1, 2022

Non-vested and outstanding at December 31, 2021

1,209,529 $ 70.99

2 unchanged sentences

Forfeited ( 125,791 ) 76.23

Non-vested and outstanding at March 31, 2022

Non-vested and outstanding at June 30, 2022

1,378,284 65.78

As of March 31, 2022, total unrecognized compensation cost related to unvested RSUs was appro ximately $ 79.1 million, which will be recognized over a weighted average period of 1.9 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 months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31,

As of June 30, 2022, total unrecognized compensation cost related to unvested RSUs was approximately $ 72.6 million, which will be recognized over a weighted average period of 1.8 years.

Stock-Based Compensation Expense

The following table summarizes the components of our stock-based compensation expense by instrument type for the three and six months ended June 30, 2022 and 2021 (in thousands):

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

2022 2021 2022 2021

RSUs $ 8,747 $ 4,403 $ 15,533 $ 8,408

Stock options 244 40 245 3,773

Common stock awards to Board of Directors 156 156

Common stock awards to the Board of Directors 157 155 313 311

Total stock-based compensation expense $ 9,148 $ 4,598 $ 16,091 $ 12,492

Stock-based compensation expense for RSUs, stock options, and issuances of common stock to the Board of Directors is included in the following line items in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31,

Stock-based compensation expense for RSUs, stock options, and issuances of common stock to the Board of Directors is included in the following line items in the accompanying consolidated statements of operations for the three and six months ended June 30, 2022 and 2021 (in thousands):

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

2022 2021 2022 2021

Cost of revenue

6 unchanged sentences

Total stock-based compensation expense $ 9,148 $ 4,598 $ 16,091 $ 12,492

Stockholders' Equity

As of March 31, 2022 , 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 40,829,564 shares of Class A common stock and 31,497,796 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.

The holders of Class A common stock are entitled to one vote per share, and the holders of Class B common stock are entitled to ten votes per share on all matters subject to stockholder vote.

The holders of Class B common stock also have approval rights for certain corporate actions.

Each share of Class B common stock may be converted into one share of Class A common stock at the option of its holder and will be automatically converted upon transfer thereof, subject to certain exceptions.

In addition, upon the date on which the outstanding shares of Class B common stock represent less than 10 % of the aggregate voting power of our capital stock, all outstanding shares of Class B common stock shall convert automatically into Class A common stock.

Basic and Diluted Loss per Common Share

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

Three Months Ended March 31,

Basic and Diluted Loss per Share

Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the reporting period.

Diluted loss per is computed similar to basic, except the weighted average number of common shares outstanding are increased to include additional outstanding shares from the assumed exercise of stock options and vesting of RSUs, if dilutive.

The dilutive effect, if any, of convertible shares calculated using the treasury stock method.

As we reported net losses for all periods presented, there are no outstanding dilutive securities as the outstanding shares would be anti-dilutive if they were to be assumed as vested or exercised.

The following outstanding securities, prior to the use of the treasury stock method, have been excluded from the computation of diluted weighted-average shares outstanding for the respective periods below because they would have been antidilutive to earnings per share:

Three and Six Months Ended June 30,

Stock options 2,758,608 3,089,260

Non-vested restricted stock units 1,378,284 1,126,696

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Commitments and Contingencies

Contractual Warranty and Indemnification Obligations

We provide limited product warranties.

Historically, any payments made under these provisions have been immaterial.

We also agree to standard indemnification provisions in the ordinary course of business.

Pursuant to these provisions, we agree to indemnify, hold harmless, and reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally our customers, in connection with certain intellectual property infringement claims by any third party arising from the use of our products or services in accordance with the agreement.

The term of our contractual indemnity provisions often survives termination or expiration of the applicable agreement.

We carry insurance that covers certain third-party claims relating to our services and limits our exposure.

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.

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 three months ended March 31, 2022 totaled $ 7.8 million.

Spending under this agreement for the three and six months ended June 30, 2022 totaled $ 8.1 million and $ 15.9 million, respectively.

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.

Letters of Credit

At each of March 31, 2022 and December 31, 2021, 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.

Pegasystems Litigation

On May 29, 2020, we filed a civil complaint against Pegasystems, Inc.

(“Pegasystems”) and Youyong Zou, a Virginia resident, in the Circuit Court for Fairfax County, Virginia.

Appian Corp v.

Pegasystems Inc.

& Youyong Zou, No.

2020-07216 (Fairfax Cty.

On May 10, 2022, we announced the jury awarded us $ 2.03 billion in damages for misappropriation of our trade secrets and $ 1 in damages for violating the Virginia Computer Crimes Act.

Pegasystems has filed post-trial motions in which it seeks relief in the form of reducing the damages award or setting aside the jury’s verdict and either granting a new trial or entering judgment in Pegasystems’ favor.

One of these motions was denied on July 28, 2022.

We believe Pegasystems’ motions are without merit.

We simultaneously filed a motion for attorneys’ fees and costs, as well as post-judgment interest on any award of attorneys’ fees and costs, based on the jury's finding that our trade secrets were willfully and maliciously misappropriated.

All legal expenses related to the litigation have been expensed as incurred, within “General and administrative” expense within our consolidated statement of operations.

The jury’s verdict and the court’s entry of judgment is subject to appeal by Pegasystems.

Pegasystems is not required to pay us the amount awarded by the jury until all appeals are exhausted and the judgment is final.

We cannot predict the outcome of any appeals or the time it will take to resolve them.

Like any judgment, there is no guarantee we will be able to collect all or any portion of the judgment.

We will not record the award in our condensed consolidated financial statements until we collect on the judgment.

Other Legal Matters

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

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

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Segment and Geographic Information

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

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

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

The following table summarizes revenue by geography for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31,

We operate one operating and reportable segment, representing our consolidated business that helps organizations build applications and workflows rapidly with our low-code platform to maximize their resources and improve business results.

Our reportable segment determination is based on our management and internal reporting structure, the nature of the subscriptions and services we offer, and the financial information that is evaluated regularly by our chief operation decision maker.

The following table summarizes revenue by geography for the three and six months ended June 30, 2022 and 2021 (in thousands):

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

2022 2021 2022 2021

Domestic $ 71,567 $ 53,704 $ 147,606 $ 113,986

2 unchanged sentences

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

There were no individual foreign countries from which more than 10% of our total revenue was attributable for the three months ended March 31, 2022 or 2021.

Substantially all of our long-lived assets were held in the United States as of March 31, 2022 and December 31, 2021.

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, 2022 or 2021.

Substantially all of our long-lived assets were held in the United States as of June 30, 2022 and December 31, 2021.

Investments and Fair Value Measurements

Fair Value Measurements

We use a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement.

GAAP establishes a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement.

The hierarchy requires us to use observable inputs when available and to minimize the use of unobservable inputs when determining fair value.

2 unchanged sentences

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

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

Unobservable inputs for which there is little or no market data, which require us to develop our own estimates and assumptions, which reflect those that a market participant would use.

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Valuation techniques maximize the use of relevant observable inputs and minimize the use of unobservable inputs.

There were no instruments measured at fair value on a recurring basis using significant unobservable inputs as of March 31, 2022 and December 31, 2021.

There were no instruments measured at fair value on a recurring basis using significant unobservable inputs as of June 30, 2022 and December 31, 2021.

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

2 unchanged sentences

• Cost approach - Based on the amount that currently would be required to replace the service capacity of an asset (i.e., replacement cost).

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The carrying amounts of our cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value as of March 31, 2022 and December 31, 2021 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 June 30, 2022 and December 31, 2021 because of the relatively short duration of these instruments.

Our investment portfolio consists largely of debt investments classified as available-for-sale.

Changes in the fair value of available-for-sale securities, excluding other-than-temporary impairments, are recorded in other comprehensive income (loss).

The components of our investments as of March 31, 2022 are as follows (in thousands):

As of March 31, 2022

The components of our investments as of June 30, 2022 are as follows (in thousands):

As of June 30, 2022

Fair Value Measurement Balance Sheet Classification

16 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 three months ended March 31, 2022 and 2021.

Additionally, there were no transfers between Levels 1 and 2 during the three and three months ended March 31, 2022 and 2021.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The amortized cost basis and fair value of debt securities as of March 31, 2022, by contractual maturity, are as follows (in thousands):

As of March 31, 2022

There were no Level 3 assets held at any point during the three and six months ended June 30, 2022 and 2021.

Additionally, there were no transfers between Levels 1 and 2 during the three and six months ended June 30, 2022 and 2021.

The amortized cost basis and fair value of debt securities as of June 30, 2022, by contractual maturity, are as follows (in thousands):

As of June 30, 2022

Cost Basis Fair Value

4 unchanged sentences

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