What changed in this filing

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Item 1. Financial Statements

2023-08-03 compared with 2023-05-09 · 117 added, 125 removed, 479 unchanged (34% of the section changed)

3 unchanged sentences

(in thousands, except par value and share data)

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Current assets

33 unchanged sentences

Class A common stock—par value $ 0.0001 ;

500,000,000 shares authorized and 41,457,783 shares issued and outstanding as of March 31, 2023;

500,000,000 shares authorized and 41,615,737 shares issued and outstanding as of June 30, 2023;

500,000,000 shares authorized and 41,320,091 shares issued and outstanding as of December 31, 2022

Class B common stock—par value $ 0.0001 ;

100,000,000 shares authorized and 31,497,596 shares issued and outstanding as of March 31, 2023;

100,000,000 shares authorized and 31,497,596 shares issued and outstanding as of June 30, 2023;

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

8 unchanged sentences

(unaudited, in thousands, except per share data)

Three Months Ended March 31,

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

2023 2022 2023 2022

Subscriptions $ 93,794 $ 76,668 $ 192,751 $ 160,388

27 unchanged sentences

(unaudited, in thousands)

Three Months Ended March 31,

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

2023 2022 2023 2022

Net loss $ ( 42,355 ) $ ( 49,354 ) $ ( 79,184 ) $ ( 72,508 )

1 unchanged sentence

Foreign currency translation adjustments ( 3,127 ) 1,967 ( 3,873 ) 2,724

Unrealized gains (losses) on available-for-sale securities 46 ( 111 )

Unrealized (losses) gains on available-for-sale securities ( 45 ) ( 83 ) 1 ( 194 )

Total other comprehensive loss, net of income taxes $ ( 45,527 ) $ ( 47,470 ) $ ( 83,056 ) $ ( 69,978 )

14 unchanged sentences

Balance, March 31, 2023 72,955,379 7 569,618 ( 7,946 ) ( 445,280 ) 116,399

Net loss — — — — ( 42,355 ) ( 42,355 )

Issuance of common stock to directors 4,928 — — — — —

Vesting of restricted stock units 99,836 — ( 1,816 ) — — ( 1,816 )

Exercise of stock options 53,190 — 428 — — 428

Stock-based compensation expense — — 11,148 — — 11,148

Other comprehensive loss — — — ( 3,172 ) — ( 3,172 )

Balance, June 30, 2023

73,113,333 $ 7 $ 579,378 $ ( 11,118 ) $ ( 487,635 ) $ 80,632

10 unchanged sentences

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

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

Issuance of common stock to directors 2,565 — — — — —

Vesting of restricted stock units 52,634 — — — — —

Exercise of stock options 61,955 — 626 — — 626

Stock-based compensation expense — — 9,148 — — 9,148

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

Balance, June 30, 2022

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

3 unchanged sentences

(unaudited, in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities

29 unchanged sentences

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash 309 ( 205 )

Net increase in cash, cash equivalents, and restricted cash 50,578 5,939

Net increase (decrease) in cash, cash equivalents, and restricted cash 23,421 ( 24,862 )

Cash, cash equivalents, and restricted cash at beginning of period 150,381 103,960

10 unchanged sentences

Appian Corporation (together with its subsidiaries, “Appian,” the “Company,” “we,” or “our”) is a software company that automates business processes.

The Appian Platform includes everything you need to design, automate, and optimize even the most complex processes from start to finish.

The Appian AI-Powered Process Platform includes everything you need to design, automate, and optimize even the most complex processes, from start to finish.

The world's most innovative organizations trust Appian to improve their workflows, unify data, and optimize operations—resulting in better growth and superior customer experiences.

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

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

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

Accounting Policies

5 unchanged sentences

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on February 16, 2023.

In addition, certain reclassifications have been made to the prior year’s condensed consolidated financial statements to conform to the current year’s presentation, specifically as it relates to our presentation of certain adjustments to reconcile net loss to net cash used by operating activities in our consolidated statements of cash flows.

Use of Estimates

2 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, but are not limited to, revenue recognition, income taxes and the related valuation allowance, costs to obtain a contract with a customer, and stock-based compensation.

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

Principles of Consolidation

3 unchanged sentences

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

7 unchanged sentences

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

In March 2023, Silicon Valley Bank’s (“SVB”) U.S.

operations were placed into receivership by the Federal Deposit Insurance Corporation (“FDIC”), and its U.K.

operations were placed into a Bank Insolvency Procedure by the Bank of England.

operations were later sold to First Citizens Bank and Trust Company (“First Citizens”), and its U.K.

operations were sold to HSBC UK Bank, Plc (“HSBC”).

We have access to all of our cash, cash equivalents, and investments that were in accounts previously held by SVB, and we do not expect a material impact to our ongoing operations stemming from the SVB matter.

Refer to Note 8 for further discussion regarding the receivership’s impact on our credit facility.

We believe the financial institutions holding our cash deposits are financially sound.

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.

Revenue generated from government agencies represented 20.5 % and 18.1 % of our revenue for the three months ended March 31, 2023 and 2022, respectively, of which the top three U.S.

federal government agencies generated 4.2 % and 4.6 % of our revenue for the three months ended March 31, 2023 and 2022, respectively.

Additionally, 33.4 % and 33.5 % of our revenue during the three months ended March 31, 2023 and 2022, respectively, was generated from foreign customers.

Revenue generated from government agencies represented 20.1 % and 20.3 % of our revenue for the three and six months ended June 30, 2023, respectively, of which the top three U.S.

federal government agencies generated 4.6 % and 4.4 % of our revenue for the three and six months ended June 30, 2023, respectively.

Additionally, 38.4 % and 35.8 % of our revenue during the three and six months ended June 30, 2023, respectively, was generated from international customers.

Revenue generated from government agencies represented 18.2 % of our revenue for 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 international customers.

No single end-customer accounted for more than 10% of our total revenue in the three and six months ended June 30, 2023 or 2022.

Cash, Cash Equivalents, and Restricted Cash

2 unchanged sentences

We paid 25 % of the balance on September 28, 2022, and the remaining 75 % of the balance is due on August 11, 2023.

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

March 31, 2023 December 31, 2022 March 31, 2022 December 31, 2021

June 30, 2023 December 31, 2022 June 30, 2022 December 31, 2021

Cash and cash equivalents $ 171,530 $ 148,132 $ 76,185 $ 100,796

7 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.

The allowance for doubtful accounts totaled $ 2.2 million and $ 2.1 million as of March 31, 2023 and December 31, 2022, respectively.

The allowance for doubtful accounts totaled $ 2.2 million and $ 2.1 million as of June 30, 2023 and December 31, 2022, respectively.

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

8 unchanged sentences

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

Total commission expense was $ 11.0 million and $ 8.2 million for the three months ended March 31, 2023 and 2022, respectively.

Total commission expense was $ 11.3 million and $ 22.3 million for the three and six months ended June 30, 2023, respectively.

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

Property and Equipment

2 unchanged sentences

Significant additions or improvements extending the useful life of an asset are capitalized, while repairs and maintenance costs which do not significantly improve the related assets or extend their useful lives are charged to expense as incurred.

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

5 unchanged sentences

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

Severance Costs

In 2023, we have incurred severance costs related to involuntary reductions in our workforce designed to right-size our employee base and improve operations.

Severance costs totaled $ 2.1 million and $ 6.3 million for the three and six months ended June 30, 2023, respectively.

Recent Accounting Pronouncements

3 unchanged sentences

Revenue Recognition

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 recorded during the three months ended March 31, 2023 and 2022 (in thousands):

Three Months Ended March 31,

The following table summarizes revenue recorded during the three and six months ended June 30, 2023 and 2022 (in thousands):

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

2023 2022 2023 2022

Cloud subscriptions $ 74,442 $ 57,083 $ 144,134 $ 110,462

6 unchanged sentences

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

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

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of transfer to the customer.

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

29 unchanged sentences

For time and materials-based consulting contracts, we

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

have elected the practical expedient of recognizing revenue upon invoicing since the invoiced amount corresponds directly to the value of our service to date.

7 unchanged sentences

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

The amount of variable consideration excluded from the transaction price for the three months ended March 31, 2023 and 2022 was insignificant.

The amount of variable consideration excluded from the transaction price for the three and six months ended June 30, 2023 and 2022 was insignificant.

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

16 unchanged sentences

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

As of March 31, 2023 and December 31, 2022, contract assets of $ 14.9 million and $ 14.3 million, respectively, are included in the Prepaid expenses and other current assets and Other assets line items in our consolidated balance sheets.

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2023 and December 31, 2022, contract assets of $ 12.9 million and $ 14.3 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, 2023, we recognized $ 85.4 million of revenue that was included in the deferred revenue balance as of December 31, 2022.

For the six months ended June 30, 2023, we recognized $ 141.3 million of revenue that was included in the deferred revenue balance as of December 31, 2022.

Transaction Price Allocated to the Remaining Performance Obligations

As of March 31, 2023, we had an aggregate transaction price of $ 366.1 million allocated to unsatisfied performance obligations.

As of June 30, 2023, we had an aggregate transaction price of $ 383.8 million allocated to unsatisfied performance obligations.

We expect to recognize $ 245.0 million of this balance as revenue over the next 12 months with the remaining amount recognized thereafter.

As of March 31, 2023, our lease portfolio consists entirely of operating leases, most of which are for corporate offices.

As of June 30, 2023, our lease portfolio consists entirely of operating leases, most of which are for corporate offices.

Our operating leases have remaining lease terms with various expiration dates through 2031, and some leases include options to extend the term for up to an additional 10 years.

2 unchanged sentences

Variable lease payment amounts that cannot be determined at the commencement of the lease such as maintenance costs, utilities, and service charges, are not included in right-of-use (“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 three months ended March 31, 2023 and 2022 (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, 2023 and 2022 (in thousands):

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

2023 2022 2023 2022

Operating lease cost $ 2,145 $ 1,626 $ 4,291 $ 3,260

2 unchanged sentences

Total $ 3,527 $ 2,655 $ 7,064 $ 5,350

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Sublease income totaled $ 0.3 million and $ 0.7 million for the three and six months ended June 30, 2023, respectively.

Supplemental Lease Information

Supplemental balance sheet information related to operating leases as of March 31, 2023 and December 31, 2022 is presented in the following table (in thousands, except for lease term and discount rate):

March 31, 2023 December 31, 2022

ROU assets for operating leases $ 35,425 $ 37,248

Supplemental balance sheet information related to operating leases as of June 30, 2023 and December 31, 2022 is presented in the following table (in thousands, except for lease term and discount rate):

June 30, 2023 December 31, 2022

Right-of-use assets for operating leases $ 39,197 $ 37,248

Operating lease liabilities, current $ 9,876 $ 8,681

3 unchanged sentences

Weighted average discount rate 9.4 % 9.4 %

Supplemental cash flow and expense information related to operating leases for the three months ended March 31, 2023 and 2022 is shown below (in thousands):

Three Months Ended March 31,

Supplemental cash flow and expense information related to operating leases for the three and six months ended June 30, 2023 and 2022 is shown below (in thousands):

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

2023 2022 2023 2022

Operating cash outflows for operating leases $ 988 $ 2,074 $ 2,120 $ 4,159

Amortization of operating lease ROU assets 652 306

Amortization of operating lease right-of-use assets 591 325 1,243 631

Interest expense on operating lease liabilities 1,552 1,305 3,047 2,626

A summary of our future minimum lease commitments under non-cancellable leases as of March 31, 2023 is shown below (in thousands):

A summary of our future minimum lease commitments under non-cancellable operating leases as of June 30, 2023 is shown below (in thousands):

Operating Leases

2023 (excluding the three months ended March 31, 2023)

2023 (excluding the six months ended June 30, 2023)

Thereafter 46,864

2 unchanged sentences

Total $ 69,955

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Goodwill and Intangible Assets

Goodwill was comprised of the following as of March 31, 2023 and December 31, 2022 (in thousands):

The following table details the changes in goodwill during the six months ended June 30, 2023 and fiscal year ended December 31, 2022 (in thousands):

Carrying Amount

3 unchanged sentences

Foreign currency translation adjustments 269

Balance as of March 31, 2023

Intangible assets, net consisted of the following as of March 31, 2023 and December 31, 2022 (in thousands):

March 31, 2023 December 31, 2022

Balance as of June 30, 2023

Intangible assets, net consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands):

June 30, 2023 December 31, 2022

Developed technology $ 6,963 $ 6,893

Customer relationships - Non-Robotic Process Automation (“RPA”) 838 827

Customer relationships - RPA 250 246

Customer relationships 1,085 1,073

Intangible assets, gross 8,048 7,966

1 unchanged sentence

Intangible assets, net $ 4,562 $ 5,251

Intangible amortization expense was $ 0.4 million for each of the three months ended March 31, 2023 and 2022.

As of March 31, 2023, the weighted average remaining amortization periods for developed technology, non-RPA customer relationships, and RPA customer relationships were approximately 3.2 years, 8.4 years, and 6.8 years, respectively.

The following table shows the projected annual amortization expense related to amortizable intangible assets as of March 31, 2023:

Intangible amortization expense was $ 0.4 million and $ 0.7 million for the three and six months ended June 30, 2023, respectively.

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

As of June 30, 2023, the weighted average remaining amortization periods for developed technology, non-RPA customer relationships, and RPA customer relationships were approximately 3.0 years, 8.2 years, and 6.5 years, respectively.

The following table shows the projected annual amortization expense related to amortizable intangible assets as of June 30, 2023:

Projected Amortization

2023 (excluding the three months ended March 31, 2023)

2023 (excluding the six months ended June 30, 2023)

Thereafter 297

Total projected amortization expense $ 4,562

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Property and Equipment, net

Property and equipment, net consisted of the following as of March 31, 2023 and December 31, 2022 (in thousands):

March 31, 2023 December 31, 2022

Property and equipment, net consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands):

June 30, 2023 December 31, 2022

Leasehold improvements $ 51,294 $ 45,959

6 unchanged sentences

Property and equipment, net $ 44,514 $ 41,855

Depreciation expense totaled $ 2.0 million and $ 1.4 million for the three months ended March 31, 2023 and 2022, respectively.

We disposed of or retired $ 1.4 million worth of fully depreciated property and equipment during the three months ended March 31, 2023.

There were no disposals or retirements during the three months ended March 31, 2022.

Depreciation expense totaled $ 2.0 million and $ 4.0 million for the three and six months ended June 30, 2023, respectively.

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

We had no disposals or retirements during the three months ended June 30, 2023 and disposed of $ 1.4 million worth of fully depreciated property and equipment during the six months ended June 30, 2023.

There were no disposals or retirements during the three and six months ended June 30, 2022.

Accrued Expenses

Accrued expenses consisted of the following as of March 31, 2023 and December 31, 2022 (in thousands):

March 31, 2023 December 31, 2022

Accrued expenses consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands):

June 30, 2023 December 31, 2022

Hosting costs $ 2,936 $ 2,802

8 unchanged sentences

Total $ 11,943 $ 12,227

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Senior Secured Credit Facilities Credit Agreement

We have a Senior Secured Credit Facilities Credit Agreement (the “Credit Agreement”) which provides for a five-year term loan facility in an aggregate principal amount of $ 150.0 million and, in addition, up to $ 75.0 million for a revolving credit facility, including a letter of credit sub-facility in the aggregate availability amount of $ 15.0 million and a swingline sub-facility in the aggregate availability amount of $ 10.0 million (as a sublimit of the revolving loan facility).

On February 21, 2023, we executed the second amendment to the credit agreement which increased the aggregate principal amount of the term loan facility by $ 30.0 million and the limit of the revolving credit facility by $ 15.0 million.

The Credit Agreement matures on November 3, 2027.

We will use the proceeds from the $ 150.0 million term loan to fund the continued growth of our business and support our working capital requirements.

We will use the proceeds from the $ 150.0 million term loan and access to the revolving credit facility to fund the continued growth of our business and support our working capital requirements.

Under the agreement, we may elect whether amounts drawn bear interest on the outstanding principal amount at a rate per annum equal to either (a) the higher of the Prime rate or the Federal Funds Effective (“Base Rate”) rate plus 0.50 % or (b) the forward-looking term rate based on the secured overnight financing rate (“Term SOFR”).

5 unchanged sentences

The following table summarizes outstanding debt balances (in thousands):

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Borrowings under revolving credit facility expiring November 3, 2027

7 unchanged sentences

We believe, based on our current financial forecasts and trends, that we will remain compliant with all covenants for the foreseeable future.

As of March 31, 2023, we had $ 62.0 million outstanding under our $ 75.0 million revolving credit facility, and we had outstanding letters of credit totaling $ 12.0 million in connection with securing our leased office space.

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As discussed in Note 2, in March 2023 SVB, the lead lender of our Credit Agreement, was placed into receivership by the FDIC and subsequently purchased by First Citizens.

Under the purchase and assumption agreement, First Citizens assumed SVB’s obligations under our existing credit facility.

None of the terms of our Credit Agreement were amended or otherwise impacted by First Citizen’s acquisition of SVB.

As of June 30, 2023, we had $ 62.0 million outstanding under our $ 75.0 million revolving credit facility, and we had outstanding letters of credit totaling $ 11.9 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, 2023 and 2022, the actual effective tax rates were ( 3.2 )% and 6.4 %, respectively.

The tax benefit recognized in 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 GmbH as a result of post-acquisition tax planning and the merger of German subsidiaries.

As of March 31, 2023, our net unrecognized tax benefits totaled $ 4.5 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, 2023, the actual effective tax rates were ( 2.0 )% and ( 2.5 )%, respectively.

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

The tax benefit recognized in 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 GmbH as a result of post-acquisition tax planning and the merger of German subsidiaries.

As of June 30, 2023, our net unrecognized tax benefits totaled $ 4.5 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.

8 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 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.

As of March 31, 2023, the total compensation cost related to unvested stock options not yet recognized, which relates exclusively to the 2022 CEO Grant, was $ 14.7 million and will be recognized over a weighted average period of 2.9 years.

In June 2022, our Board of Directors granted to our Chief Executive Officer (“CEO”) a stock option award that is eligible to vest based on the achievement of various stock price appreciation targets.

This 2022 CEO option grant is our only stock-based award that vests based on the achievement of market conditions.

For awards with market based conditions, compensation expense is measured using a Monte Carlo simulation and expense is 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 of our stock-based awards as they occur rather than estimating expected forfeitures.

As of June 30, 2023, the total compensation cost related to unvested stock options not yet recognized, which relates exclusively to the 2022 CEO option grant, was $ 13.5 million and will be recognized over a weighted average period of 2.7 years.

Total unrecognized compensation cost related to unvested RSUs was approximately $ 47.8 million, which will be recognized over a weighted average period of 1.4 years.

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the components of our stock-based compensation expense for the three months ended March 31, 2023 and 2022 (in thousands):

Three Months Ended March 31,

The following table summarizes the components of our stock-based compensation expense for the three and six months ended June 30, 2023 and 2022 (in thousands):

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

2023 2022 2023 2022

Cost of revenue

12 unchanged sentences

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 Months Ended March 31,

Three and Six Months Ended June 30,

Stock options 2,625,286 2,758,608

4 unchanged sentences

Specifically, purchase commitments under the agreement total $ 131.0 million over five years.

The agreement, which is in its second year, contains minimum spending requirements of $ 25.0 million in the second year and $ 28.0 million in each of the third, fourth, and fifth years.

Spending under this agreement for the three months ended March 31, 2023 and 2022 totaled $ 9.4 million and $ 7.8 million, respectively.

The agreement, which is in its second year as of June 30, 2023, contains minimum spending requirements of $ 25.0 million in the second year and $ 28.0 million in each of the third, fourth, and fifth years.

Spending under this agreement for the three and six months ended June 30, 2023 totaled $ 9.1 million and $ 18.5 million, respectively.

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

The timing of payments under the agreement may vary.

2 unchanged sentences

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

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Pegasystems Litigation

25 unchanged sentences

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 months ended March 31, 2023 and 2022 (in thousands):

Three Months Ended March 31,

The following table summarizes revenue by geography for the three and six months ended June 30, 2023 and 2022 (in thousands):

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

2023 2022 2023 2022

Domestic $ 78,694 $ 71,567 $ 168,699 $ 147,606

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, 2023 or 2022.

Substantially all of our long-lived assets were held in the United States as of March 31, 2023 and December 31, 2022.

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

There were no individual international countries from which more than 10% of our total revenue was attributable for the three and six months ended June 30, 2023 or 2022.

Substantially all of our long-lived assets were held in the United States as of June 30, 2023 and December 31, 2022.

Investments and Fair Value Measurements

8 unchanged sentences

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

There were no instruments measured at fair value on a recurring basis using significant unobservable inputs as of March 31, 2023 and December 31, 2022.

There were no instruments measured at fair value on a recurring basis using significant unobservable inputs as of June 30, 2023 and December 31, 2022.

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

2 unchanged sentences

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

The carrying amounts of our cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value as of March 31, 2023 and December 31, 2022 because of the relatively short duration of these instruments.

The carrying amounts of our cash, cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued expenses approximate fair value as of June 30, 2023 and December 31, 2022 because of the relatively short duration of these instruments.

Additionally, the carrying value of our debt associated with the term loan facility approximates fair value because the interest rates are variable and reset on relatively short durations to the then market rates.

1 unchanged sentence

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, 2023 are as follows (in thousands):

APPIAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2023

The components of our investments as of June 30, 2023 are as follows (in thousands):

As of June 30, 2023

Fair Value Measurement Balance Sheet Classification

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Total investments $ 87,354 $ ( 22 ) $ 87,332 $ 39,469 $ 47,863

There were no Level 3 assets held at any point during the three months ended March 31, 2023 and 2022.

Additionally, there were no transfers between Levels 1 and 2 during the three months ended March 31, 2023 and 2022.

I nterest income on our investments totaled $ 2.1 million and $ 0.1 million for the three months ended March 31, 2023 and 2022, respectively.

The amortized cost basis and fair value of debt securities as of March 31, 2023, by contractual maturity, are as follows (in thousands):

As of March 31, 2023

There were no Level 3 assets held at any point during the three and six months ended June 30, 2023 and 2022.

Additionally, there were no transfers between Levels 1 and 2 during the six months ended June 30, 2023 and 2022.

I nterest income on our investments totaled $ 2.7 million and $ 4.7 million for the three and six months ended June 30, 2023, respectively.

I nterest income on our investments totaled $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2022, respectively.

The amortized cost basis and fair value of debt securities as of June 30, 2023, by contractual maturity, are as follows (in thousands):

As of June 30, 2023

Cost Basis Fair Value

3 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