What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-02-15 compared with 2023-02-16 · 307 added, 280 removed, 763 unchanged (43% of the section changed)

2 unchanged sentences

Consolidated Financial Statements:

Report of Independent Registered Public Accounting Firm ( BDO USA, LLP ;

McLean, Virginia ;

PCAOB ID # 243 )

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

26 unchanged sentences

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition for Multiple Performance Obligations

2 unchanged sentences

In such cases, the transaction price is allocated to the distinct performance obligations based on their relative standalone selling price or residual approach and revenue is recognized when control of the distinct performance obligation is transferred.

We identified the identification of distinct performance obligations and the determination of standalone selling prices as a critical audit matter.

Auditing these elements of revenue recognition was especially challenging due to the significant judgment involved in assessing the completeness of the distinct performance obligations in arrangements containing multiple performance obligations.

In addition, the evaluation of the reasonableness of the range of prices used to establish the standalone selling price for maintenance and support and professional services was complex, which directly affects the amount of cloud and term license subscriptions revenue recognized using the residual approach.

We identified the revenue recognition for certain revenue contracts as a critical audit matter due to the significant management judgment involved in the identification of distinct performance obligations and the allocation of the transaction price to each performance obligation based on its relative standalone selling price.

Auditing these elements of revenue recognition involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters.

The primary procedures we performed to address this critical audit matter included:

• Testing the design and operating effectiveness of internal controls over the Company's revenue recognition process including controls over:

(i) the identification of distinct performance obligations, and (ii) the determination of standalone selling prices for the distinct performance obligations.

• Testing a sample of revenue contracts and underlying order documents to evaluate management’s identification of distinct performance obligations.

• Evaluating the reasonableness of management’s analysis supporting the standalone selling prices by tracing, on a sample basis, revenue transactions to the underlying source documents and recalculating the mathematical accuracy of the analysis.

/s/ BDO USA, LLP

(i) the identification of distinct performance obligations, and (ii) the allocation of the transaction price to each performance obligation based on its relative standalone selling price.

• Testing a sample of revenue contracts to evaluate management’s identification of distinct performance obligations.

• Testing a sample of revenue contracts to evaluate management’s allocation of the transaction price to each performance obligation based on its relative standalone selling price.

/s/ BDO USA, P.C.

We have served as the Company's auditor since 2013.

25 unchanged sentences

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, LLP

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that

controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, P.C.

McLean, Virginia

February 15, 2024

APPIAN CORPORATION AND SUBSIDIARIES

APPIAN CORPORATION

CONSOLIDATED BALANCE SHEETS

12 unchanged sentences

42,682 41,855

Long-term investments — 12,044

Goodwill 27,106 26,349

Intangible assets, net of accumulated amortization of $ 4,152 and $ 2,715 , respectively

Operating right-of-use assets 37,248 27,897

Right-of-use assets for operating leases

39,975 37,248

Deferred commissions, net of current portion 59,764 55,788

Deferred tax assets 3,453 1,940

Restricted cash, net of current portion — 2,373

Other assets 36,279 3,286

5 unchanged sentences

Accrued compensation and related benefits 38,003 40,718

Deferred revenue, current 194,768 150,169

Debt, current 2,740 —

Operating lease liabilities, current 8,681 8,110

Deferred revenue

235,992 194,768

Operating lease liabilities

Other current liabilities 1,891 3,121

1 unchanged sentence

Long-term debt 140,221 115,379

Operating lease liabilities 57,225 48,784

Deferred revenue 5,556 2,430

Non-current operating lease liabilities

59,067 57,225

Deferred revenue, non-current

Deferred tax liabilities 2 102

Other non-current liabilities — 3,458

Total liabilities 575,162 448,514

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

Commitments and contingent liabilities (see Note 13)

Stockholders’ equity

Class A common stock—par value $ 0.0001 ;

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

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

500,000,000 shares authorized as of December 31, 2023 and 2022 and 42,169,970 and 41,320,091 shares issued and outstanding as of December 31, 2023 and 2022, respectively

Class B common stock—par value $ 0.0001 ;

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

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

100,000,000 shares authorized as of December 31, 2023 and 2022 and 31,196,796 and 31,497,796 shares issued and outstanding as of December 31, 2023 and 2022, respectively

Additional paid-in capital 595,781 561,390

4 unchanged sentences

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

APPIAN CORPORATION AND SUBSIDIARIES

APPIAN CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(in thousands, except per share data)

Year Ended December 31,

14 unchanged sentences

Operating loss

Other non-operating expense (income)

Other expense (income), net 3,545 3,584 ( 5,786 )

( 107,973 ) ( 145,010 ) ( 83,907 )

Other non-operating expense

Other (income) expense, net ( 17,603 ) 3,545 3,584

Interest expense 17,862 1,673 372

Total other non-operating expense (income) 5,218 3,956 ( 5,308 )

Total other non-operating expense 259 5,218 3,956

Loss before income taxes

( 108,232 ) ( 150,228 ) ( 87,863 )

Income tax expense 3,209 692 778

Net loss $ ( 150,920 ) $ ( 88,641 ) $ ( 33,477 )

$ ( 111,441 ) $ ( 150,920 ) $ ( 88,641 )

Net loss per share:

3 unchanged sentences

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

APPIAN CORPORATION AND SUBSIDIARIES

APPIAN CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

2 unchanged sentences

2023 2022 2021

Net loss $ ( 150,920 ) $ ( 88,641 ) $ ( 33,477 )

$ ( 111,441 ) $ ( 150,920 ) $ ( 88,641 )

Comprehensive loss, net of income taxes

Foreign currency translation adjustments ( 16,326 ) ( 1,559 ) ( 677 )

Unrealized losses on available-for-sale securities — — ( 22 )

Unrealized gain on available-for-sale securities 17 — —

Total other comprehensive loss, net of income taxes

$ ( 127,750 ) $ ( 152,479 ) $ ( 89,318 )

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

APPIAN CORPORATION AND SUBSIDIARIES

APPIAN CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

4 unchanged sentences

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

Issuance of common stock from public offering, net of issuance costs 1,931,206 1 107,914 — — 107,915

Issuance of common stock to directors 4,950 — — — — —

19 unchanged sentences

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

APPIAN CORPORATION AND SUBSIDIARIES

APPIAN CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

3 unchanged sentences

Cash flows from operating activities:

Net loss $ ( 150,920 ) $ ( 88,641 ) $ ( 33,477 )

$ ( 111,441 ) $ ( 150,920 ) $ ( 88,641 )

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

Stock-based compensation 43,387 38,830 23,844

Depreciation and amortization of intangible assets 7,297 5,743 5,851

Depreciation expense and amortization of intangible assets

9,473 7,297 5,743

Bad debt expense 1,091 1,298 410

1 unchanged sentence

Loss on disposal of property and equipment

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

Deferred income taxes ( 1,541 ) ( 1,089 ) ( 498 )

Foreign currency transaction gains, net

( 12,263 ) — —

Changes in assets and liabilities:

8 unchanged sentences

Net cash used by operating activities

( 110,442 ) ( 106,551 ) ( 53,918 )

Cash flows from investing activities:

Proceeds from investments 84,642 120,593 —

Proceeds from maturities of investments

91,670 84,642 120,593

Purchases of investments ( 53,443 ) ( 65,283 ) ( 41,870 )

1 unchanged sentence

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

Net cash provided by (used by) investing activities 10,264 41,936 ( 153,357 )

Net cash provided by investing activities 28,590 10,264 41,936

Cash flows from financing activities:

2 unchanged sentences

Debt repayments ( 3,563 ) ( 625 ) —

Payments for employee taxes related to the net share settlement of equity awards ( 9,748 ) — —

Proceeds from exercise of common stock options 752 25,432 2,786

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

Payments of costs related to public offerings — — ( 346 )

Principal payments on finance leases — — ( 3,822 )

Net cash provided by financing activities 79,165 142,867 2,786

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash 1,657 ( 159 ) 694

Net increase (decrease) in cash, cash equivalents, and restricted cash 46,421 ( 8,502 ) ( 47,293 )

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 1,030 ) 46,421 ( 8,502 )

Cash, cash equivalents, and restricted cash at beginning of period 150,381 103,960 112,462

6 unchanged sentences

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

APPIAN CORPORATION AND SUBSIDIARIES

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2 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 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

2 unchanged sentences

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

The accompanying consolidated financial statements include the accounts of Appian and its wholly-owned subsidiaries.

All intercompany accounts and transactions have been eliminated in consolidation.

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.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Appian and its wholly-owned subsidiaries.

All intercompany accounts and transactions have been eliminated in consolidation.

Significant estimates embedded in the consolidated financial statements include, but are not limited to, revenue recognition, income taxes and the related valuation allowance established against deferred tax assets, the amortization of deferred commissions, the amortization period of the cost to obtain the judgment preservation insurance (as discussed in Note 13), and stock-based compensation.

Segment Reporting

5 unchanged sentences

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

APPIAN CORPORATION AND SUBSIDIARIES

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Concentration of Credit and Customer Risk

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

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

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

4 unchanged sentences

Additionally, 35.8 %, 33.5 %, and 34.0 % of our revenue during the years ended December 31, 2023, 2022, and 2021, respectively, was generated from international customers.

No single customer accounted for more than 10% of our total revenue during the years ended December 31, 2023, 2022, and 2021.

As of December 31, 2023, we had one customer whose balance comprised 12.1 % of total accounts receivable.

Cash, Cash Equivalents, and Restricted Cash

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

Restricted cash consists of cash designated to settle an escrow liability stemming from our acquisition of Lana Labs GmbH (“Lana Labs”).

The remaining balance as of December 31, 2022 is due on August 11, 2023.

We consider all highly liquid investments with original maturities of three months or less, as well as overnight repurchase agreements, to be cash equivalents.

Restricted cash consisted of cash designated to settle an escrow liability stemming from a holdback agreement related to our acquisition of Lana Labs GmbH.

We paid the remaining amount owed in August 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):

14 unchanged sentences

Beginning balance $ 2,125 $ 1,400 $ 1,400

Additions 1,298 410 984

Charged to costs and expenses

1,091 1,298 410

Write-offs, net of recoveries

( 610 ) ( 573 ) ( 410 )

Ending balance $ 2,606 $ 2,125 $ 1,400

APPIAN CORPORATION AND SUBSIDIARIES

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

We capitalize incremental costs of obtaining a contract with a customer, which consists of sales commissions paid to our sales team.

Deferred Commissions

We capitalize costs of obtaining a contract with a customer, which consist of sales commissions paid to our sales team, and the associated incremental payroll taxes.

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.

We determine the estimated economic life based on both qualitative and quantitative factors such as customer attrition, expected renewals, product life cycles, and contractual terms.

We periodically review the carrying amount of deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the estimated economic life.

Costs to obtain a contract for a new customer or upsell an existing customer 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.

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

We determine the estimated economic life based on both qualitative and quantitative factors such as expected renewals, product life cycles, contractual terms, and customer attrition.

We periodically review the carrying amount of deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the estimated economic life.

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.

11 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.

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

Asset Category Useful Life (in years)

The following table outlines the useful lives of our major asset categories (in years):

Computer software 3

3 unchanged sentences

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

Business Combinations

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

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

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

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

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

Impairment of Long-Lived Assets

1 unchanged sentence

If such assets are considered to be impaired, the assets are written down to their estimated fair value.

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Goodwill is accounted for at the segment level and allocated to, and tested for impairment at, a level referred to as the reporting unit.

We have determined our one segment consists of a single reporting unit.

We test for impairment annually on the first day of our fourth quarter or between annual tests if events or changes in circumstances indicate the fair value of our reporting unit may be below its carrying amount.

We test for impairment annually on the first day of the fourth quarter or between annual tests if events or changes in circumstances indicate the fair value of our reporting unit may be below its carrying amount.

We have the option to qualitatively assess whether it is more likely than not the fair value our reporting unit is less than its carrying value.

1 unchanged sentence

otherwise, goodwill must be tested for impairment.

In 2022, we elected to not perform the optional qualitative assessment of goodwill and instead performed the quantitative impairment test.

In 2023 and 2022, we elected to not perform the optional qualitative assessment of goodwill and instead performed the quantitative impairment test.

When performing the quantitative test, we determine the fair value of the reporting unit and compare it to the carrying amount, including goodwill.

If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, the reporting unit’s goodwill is impaired, and we must recognize an impairment loss for the difference between the carrying amount and the fair value of the reporting unit.

We estimate the fair value of our reporting unit using a market-based valuation methodology, which is primarily based on our consolidated market capitalization plus a reasonable control premium.

In the fourth quarter of 2022, we completed our annual goodwill impairment test for our reporting unit, and the results of the test indicated the estimated fair value of our reporting unit significantly exceeded the carrying value.

Investments and Fair Value of Financial Instruments

Refer to Note 17 for a detailed discussion on our policies specific to investments and determining fair value.

We estimate the fair value of our reporting unit using a market-based valuation methodology, which is primarily based on our consolidated market capitalization.

In the fourth quarter of 2023 and 2022, we completed our annual goodwill impairment test for our reporting unit, and the results of the test indicated the estimated fair value of our reporting unit significantly exceeded the carrying value.

Stock-Based Compensation

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.

Compensation expense related to stock-based awards is calculated by determining the estimated fair value of the award on the grant date.

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

3 unchanged sentences

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

Refer to Note 11 for additional information related to stock-based compensation.

We combine and account for lease and non-lease components as a single lease component for leases of our facilities.

The discount rates related to the our lease liabilities are based on estimates of our incremental borrowing rate on a secured basis, as the discount rates implicit in our lease agreements cannot be readily determined.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We combine lease and non-lease components and account for them as a single lease component for our facility leases.

The discount rates related to our lease liabilities are based on estimates of our incremental borrowing rate on a secured basis, as the discount rates implicit in our lease agreements cannot be readily determined.

Basic and Diluted Loss per Common Share

2 unchanged sentences

Accordingly, the Class A common stock and Class B common stock share equally in our net losses.

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

Diluted net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period increased by common shares that could be issued upon the conversion or exercise of other outstanding securities to the extent those additional common shares would be dilutive.

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

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

Diluted net loss per common share is computed similar to basic, except the weighted average number of common shares outstanding is 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 is calculated using the treasury stock method.

As we reported net losses for all periods presented, all outstanding shares would be considered antidilutive if they were assumed to be vested or exercised.

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

17 unchanged sentences

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

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

Gains and losses from transactions denominated in foreign currencies resulted in net transaction losses of $ 6.1 million, net transaction losses of $ 3.7 million, and net transaction gains of $ 4.3 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Research and Development

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

Gains and losses from transactions denominated in foreign currencies resulted in net transaction gains of $ 8.7 million, net transaction losses of $ 6.1 million, and net transaction losses of $ 3.7 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Research and Development Expenses

Research and development expenses include payroll, employee benefits, and other headcount-related costs associated with product development.

1 unchanged sentence

Since our software is sold and licensed externally, we consider our software as external-use software for purposes of applying the capitalized software development guidance.

Product development costs are expensed as incurred until

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

technological feasibility has been established, which is defined as the completion of all planning, designing, coding, and testing activities necessary to establish products that meet design specifications including functions, features, and technical performance requirements.

Product development costs are expensed as incurred until technological feasibility has been established, which is defined as the completion of all planning, designing, coding, and testing activities necessary to establish products that meet design specifications including functions, features, and technical performance requirements.

We have determined technological feasibility for our software products is reached shortly before they are released for sale.

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

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Severance Costs

During the first six months of 2023, we incurred severance costs related to involuntary reductions in our workforce designed to right-size our employee base and improve operations.

Severance costs related to these actions totaled $ 6.3 million for the year ended December 31, 2023.

The majority of the costs incurred were paid to the impacted employees by December 31, 2023.

No severance costs were incurred related to an involuntary reduction in our workforce in 2022 and 2021.

Advertising Expenses

3 unchanged sentences

We did not adopt any new accounting guidance in 2023 that had a material impact on our consolidated financial statements or disclosures.

Additionally, there is no pending accounting guidance that we expect to have a material impact on our consolidated financial statements.

Not Yet Adopted

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280):

Improvement to Reportable Segment Disclosures (ASU 2023-07), which enhances the disclosure requirements for operating segments in our annual and interim consolidated financial statements.

The new guidance is effective for us beginning with our annual reporting for fiscal year 2024 and for interim period reporting beginning in fiscal year 2025 and will be applied on a retrospective basis.

Early adoption is permitted.

The new ASU requires public companies to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually.

Additionally, it requires public companies to disclose the title and position of the Chief Operating Decision Maker (CODM).

The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments.

This guidance also applies to public entities that have only one segment.

The new ASU will only impact our disclosures with no impacts to our results of operations, cash flows and financial condition.

In December 2023, the FASB issued ASU 2023-09, Income Tax (Topic 740):

Improvement to Income tax Disclosures (ASU 2023-09), which requires public companies to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold.

In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received.

The new guidance is effective for our annual reporting for fiscal year 2025 on a prospective basis with the option to apply the standard retrospectively.

Early adoption is permitted.

The new ASU will only impact our disclosures with no impacts to our results of operations, cash flows and financial condition.

Revenue Recognition

1 unchanged sentence

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

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes revenue recorded during the years ended December 31, 2023, 2022, and 2021 (in thousands):

14 unchanged sentences

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

We bill customers and collect payment for subscriptions to

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

our platform in advance on an annual, quarterly, or monthly basis.

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

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

6 unchanged sentences

Term License Subscriptions

Our term license subscription revenue is derived from customers with on-premises installations of our platform.

Our term license subscriptions revenue is derived from customers with on-premises installations of our platform.

The majority of our contracts are one year in length.

Although term license subscriptions are sold with maintenance and support, the software is fully functional at the beginning of the subscription and is considered a distinct performance obligation.

If a cloud agreement includes the right for the customer to take possession of the license, the revenue is treated as a term license.

If a cloud-based subscription includes the right for the customer to take possession of the license, the revenue is treated as a term license.

Revenue from term license subscriptions is recognized when control of the software license has transferred to the customer, which is the later of delivery or commencement of the contract term.

Maintenance and Support

Maintenance and support subscriptions include both technical support and when-and-if-available software upgrades, which are treated as a single performance obligation as they are considered a series of distinct services that are substantially the same and have the same duration and measure of progress.

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

that are substantially the same and have the same duration and measure of progress.

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

1 unchanged sentence

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

Our professional services are considered distinct performance obligations when sold standalone or with other products.

Consulting Services

1 unchanged sentence

Customers are not required to use consulting services to fully benefit from the software.

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 service contracts 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.

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

We also sell advisory services on a subscription basis to support customers or partners with their development and deployment.

Consulting services contracts 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.

Revenue from subscription-based consulting contracts is recognized ratably over the contract period.

For time and materials-based consulting contracts, we have elected the practical expedient of recognizing revenue upon invoicing since the invoiced amount corresponds directly to the value of our service to date.

6 unchanged sentences

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

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

extent it is probable a significant reversal will not occur.

The amount of variable consideration excluded from the transaction price for the years ended December 31, 2022, 2021, and 2020 was insignificant.

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 years ended December 31, 2023, 2022, and 2021 was immaterial.

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

6 unchanged sentences

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.

We have concluded the residual approach to estimating the 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 the SSP of term license subscriptions using a residual approach after first determining the SSP of

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

maintenance and support.

Maintenance and support is sold on a standalone basis in conjunction with renewals of our legacy perpetual software licenses and within a narrow range of the net license fee.

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

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

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

4 unchanged sentences

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

As of December 31, 2022 and 2021, contract assets of $ 14.3 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 year ended December 31, 2022, we recognized $ 147.0 million of revenue that was included in the deferred revenue balance as of December 31, 2021.

The following table sets forth contract asset and contract liability balances as of December 31, 2023, 2022, and 2021 (in thousands):

As of December 31,

2023 2022 2021

Contract assets, current *

$ 12,052 $ 12,540 $ 12,515

Contract assets, non-current *

915 1,720 1,492

Total contract assets $ 12,967 $ 14,260 $ 14,007

Deferred revenue, current

$ 235,992 $ 194,768 $ 150,169

Deferred revenue, non-current

4,700 5,556 2,430

Total contract liabilities $ 240,692 $ 200,324 $ 152,599

* Current and non-current contract assets are reported as components of the ‘Prepaid expenses and other current assets’ and ‘Other assets’ line items, respectively, in our consolidated balance sheets.

Revenue recognized from amounts included in contract liabilities at the beginning of the period totaled $ 196.5 million, $ 147.0 million, and $ 114.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Accounts receivable, net of allowance, as of December 31, 2021 was $ 130.0 million.

Transaction Price Allocated to the Remaining Performance Obligations

1 unchanged sentence

We expect to recognize $ 310.9 million of this balance as revenue over the next 12 months with the remaining amount recognized thereafter.

As of December 31, 2022, our lease portfolio consists entirely of operating leases, all of which are for corporate offices.

As of December 31, 2023, our lease portfolio consists entirely of operating leases 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.

APPIAN CORPORATION AND SUBSIDIARIES

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 unchanged sentence

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 consolidated balance sheet as ROU assets, lease liabilities, and, if applicable, long-term lease liabilities.

Operating leases with a term greater than one year are recognized on the consolidated balance sheets as ROU assets, lease liabilities, and 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.

10 unchanged sentences

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

Variable lease payment amounts that cannot be determined at the commencement of the lease, such as maintenance costs based on future obligations, are not included in ROU assets or lease liabilities but rather are expensed as incurred and recorded as variable lease expense.

The following table sets forth the components of lease expense for the years ended December 31, 2022, 2021 and 2020 (in thousands):

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 ROU assets or lease liabilities but rather are expensed as incurred and recorded as variable lease expense.

We often receive customary incentives from our landlords such as tenant improvement allowances (“TIAs”) and rent abatement periods, which effectively reduce total lease payments owed for the leases.

The following table sets forth the components of lease expense for the years ended December 31, 2023, 2022, and 2021 (in thousands, exclusive of sublease income):

Year Ended December 31,

1 unchanged sentence

Operating lease cost $ 9,056 $ 6,950 $ 6,619

Finance lease costs:

Amortization of right-of-use assets — — 1,242

Interest on lease liabilities — — 150

Short-term lease cost 1,444 583 149

1 unchanged sentence

Total $ 14,730 $ 11,350 $ 9,481

APPIAN CORPORATION AND SUBSIDIARIES

Sublease income totaled $ 1.3 million and $ 0.4 million for the years ended December 31, 2023 and 2022, respectively.

There was no sublease income for the year ended December 31, 2021.

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Lease Information

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

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

As of December 31,

5 unchanged sentences

Weighted average discount rate 9.4 % 9.4 %

Supplemental cash flow and expense information related to operating leases for the years ended December 31, 2022 and 2021 is as follows (in thousands):

Supplemental cash flow and expense information related to operating leases for the years ended December 31, 2023, 2022, and 2021 is shown below (in thousands):

Year Ended December 31,

1 unchanged sentence

Operating cash outflows for operating leases $ 8,865 $ 7,073 $ 7,732

Operating cash outflows for finance leases — — 150

Financing cash outflows for finance leases — — 3,822

Amortization of operating lease ROU assets 2,676 1,495 1,361

Interest expense on operating lease liabilities 6,380 5,406 5,268

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

For each of the years ended December 31, 2023 and 2022, TIA reimbursements totaled $ 2.6 million.

No TIA reimbursements were received during the year ended December 31, 2021.

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

Operating Leases

2024 $ 12,208

Thereafter 34,839

2 unchanged sentences

Total $ 70,765

Business Combinations

In August 2021, we acquired 100 % of the outstanding common stock of Lana Labs, a developer of process mining software, for approximately $ 30.7 million, net of cash acquired and debt.

The acquisition was made due to the attractive nature

APPIAN CORPORATION AND SUBSIDIARIES

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of the product offerings of Lana Labs and in furtherance of our objective to enhance our automation platform.

The transaction was financed through available cash on hand.

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

The purchase price allocated to goodwill and intangible assets is not deductible for tax purposes.

The following table summarizes the fair value of the assets acquired and liabilities assumed in connection with the acquisition (in thousands):

Cash acquired $ 256

Other current assets 106

Property and equipment 59

Developed technology 5,974

Customer relationships 750

Goodwill 24,521

Other non-current assets 27

Total assets acquired 31,693

Current liabilities 638

Non-current liabilities 38

Total liabilities assumed 676

Net assets acquired $ 31,017

During the third quarter of 2022, we finalized the fair value of the assets acquired and liabilities assumed in the acquisition, and the amounts presented above are now final.

Measurement period adjustments recorded in 2021 included a $ 0.8 million adjustment to developed technology and goodwill related to an update to the discount rate utilized in our valuation of intangible assets, a $ 0.3 million increase in deferred revenue stemming from our early adoption of new accounting guidance relating to deferred revenue recognized pursuant to a business combination, a $ 0.1 million deferred tax adjustment, and an immaterial adjustment to working capital.

Goodwill and Intangible Assets

The following table summarizes goodwill balances as of December 31, 2022 and 2021 (in thousands):

The following table details the changes in goodwill during the fiscal years ended December 31, 2023 and 2022 (in thousands):

Carrying Amount

Balance as of December 31, 2021

Goodwill acquired, net of measurement period adjustments 24,521

Foreign currency translation adjustments ( 1,446 )

Balance as of December 31, 2022

Goodwill acquired —

Foreign currency translation adjustments 757

Balance as of December 31, 2023

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

1 unchanged sentence

Developed technology $ 7,091 $ 6,893

Customer relationships - Non-Robotic Process Automation (“RPA”) 827 872

Customer relationships - RPA 246 261

Customer relationships

Intangible assets, gross 8,041 7,966

2 unchanged sentences

Intangible amortization expense was $ 1.5 million, $ 1.5 million, and $ 0.8 million for the years ended December 31, 2023, 2022, and 2021, respectively.

As of December 31, 2022, the weighted average remaining amortization periods for developed technology, non-RPA customer relationships, and RPA customer relationships were approximately 3.4 years, 8.7 years, and 7.0 years, respectively.

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

As of December 31, 2023, the weighted average remaining amortization periods for developed technology and customer relationships were approximately 2.5 years and 7.3 years, respectively.

The following table shows the projected annual amortization expense related to amortizable intangible assets as of December 31, 2023 (in thousands):

Year Ended December 31,

1 unchanged sentence

Total projected amortization expense $ 3,889

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property and Equipment, net

10 unchanged sentences

Depreciation expense totaled $ 8.0 million, $ 5.8 million, and $ 4.9 million for the years ended December 31, 2023, 2022, and 2021, respectively.

During the year ended December 31, 2022, we retired and disposed of fully depreciated laptops and computer hardware with a gross asset value of approximately $ 1.0 million.

During the years ended December 31, 2023, and 2022, we disposed of or retired $ 1.4 million and $ 1.0 million worth of fully depreciated property and equipment, respectively.

Disposals during the year ended December 31, 2021 were not significant.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accrued Expenses

11 unchanged sentences

Other accrued expenses 1,723 1,776

Total $ 12,227 $ 15,483

Total accrued expenses

$ 11,046 $ 12,227

Senior Secured Credit Facilities Credit Agreement

On November 3, 2022, we entered into a new Senior Secured Credit Facilities Credit Agreement (the “Credit Agreement”) which provides for a five-year term loan facility in an aggregate principal amount of $ 100.0 million and, in addition, up to $ 50.0 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 December 13, 2022, we executed the first amendment to the credit agreement which increased the aggregate principal amount of the term loan facility by $ 20.0 million and the limit of the revolving credit facility by $ 10.0 million.

As of December 31, 2023, 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).

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On February 12, 2024, we executed the fourth amendment to the credit agreement which increased the aggregate principal amount of the term loan facility by $ 50.0 million, increased the limit of the revolving credit facility by $ 25.0 million, and amended certain covenants and definitions.

The total aggregate term loan facility is now $ 200.0 million and the revolving credit facility is $ 100.0 million.

The Credit Agreement matures on November 3, 2027.

We will use the proceeds from the $ 120.0 million term loan to fund the continued growth of our business and support our working capital requirements.

We will use the proceeds to continue funding the 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”).

2 unchanged sentences

During the final two years of the Credit Agreement, the interest rate margin ranges from 0.5 % to 2.5 % in the case of Base Rate advances and from 1.5 % to 3.5 % in the case of Term SOFR advances, depending on our debt to consolidated adjusted EBITDA leverage ratio (as defined in the Credit Agreement).

In addition, the Credit Agreement contains other customary representations, warranties and covenants, including covenants by us limiting additional indebtedness, guaranties, liens, fundamental changes, mergers and consolidations, dispositions of assets, investments, paying dividends on capital stock or redeeming, repurchasing or retiring capital stock, or prepaying certain junior indebtedness and preferred stock , certain corporate changes, and transactions with affiliates.

In addition, the Credit Agreement contains other customary representations, warranties, and covenants, including covenants by us limiting additional indebtedness, guarantees, liens, fundamental changes, mergers and consolidations, dispositions of assets, investments, paying dividends on capital stock or redeeming, repurchasing or retiring capital stock, prepaying certain junior indebtedness and preferred stock, certain corporate changes, and transactions with affiliates.

The Credit Agreement also provides for customary events of default, including but not limited to non-payment, breaches, or defaults in the performance of covenants, insolvency, bankruptcy, and the occurrence of a material adverse effect on us.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The following table summarizes outstanding debt balances as of December 31, 2023 and 2022 (in thousands):

As of December 31,

Borrowings under revolving credit facility

Secured term loan facility 145,813 119,375

Debt issuance costs (1)

Total long-term debt, net of debt issuance costs $ 118,119 $ —

Long-term debt, current $ 2,740 $ —

Long-term debt, net of current portion 115,379 —

Total long-term debt $ 118,119 $ —

The following table summarizes the annual maturities of the principal amount of total debt due (in thousands):

Repayment schedule of principal long-term debt as of December 31, 2022

( 1,224 ) ( 1,256 )

Total debt, net of debt issuance costs $ 206,589 $ 118,119

Debt, current

$ 66,368 $ 2,740

Long-term debt

140,221 115,379

Total debt $ 206,589 $ 118,119

(1) Deferred debt issuance costs associated with the term loan facility are recorded net of the debt obligation and amortized to interest expense over the term of the Credit Agreement.

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the annual maturities of the principal amount of total debt due as of December 31, 2023 (in thousands):

Year Ended December 31,

Total $ 207,813

We were in compliance with all covenants as of December 31, 2022.

As of December 31, 2022, we had no outstanding borrowings under the revolving credit facility, and we had outstanding letters of credit totaling $ 12.0 million in connection with securing our leased office space.

* The contractual maturity of our outstanding revolving credit facility of $ 62.0 million is November 3, 2027, and is shown in the table above in fiscal year 2027.

The revolving credit facility is presented as current debt on our consolidated balance sheet due to management’s intention to repay the outstanding balance within the next 12 months.

We were in compliance with all covenants contained in the Credit Agreement.

As of December 31, 2023, we had $ 62.0 million outstanding borrowings under our $ 75.0 million revolving credit facility, and we had outstanding letters of credit totaling $ 11.8 million in connection with securing our leased office space.

For the years ended December 31, 2023, 2022, and 2021, our loss before income taxes was comprised of the following (in thousands):

4 unchanged sentences

Total $ ( 108,232 ) $ ( 150,228 ) $ ( 87,863 )

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022, 2021, and 2020, our income tax expense (benefit) was comprised of the following (in thousands):

For the years ended December 31, 2023, 2022, and 2021, our income tax expense was comprised of the following (in thousands):

Year Ended December 31,

8 unchanged sentences

Total income tax expense $ 3,209 $ 692 $ 778

For the years ended December 31, 2022, 2021, and 2020, the provision for income taxes differs from the amount computed by applying the federal statutory income tax rates to our loss before the provision (benefit) for income taxes as follows:

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2023, 2022, and 2021, the provision for income taxes differs from the amount computed by applying the federal statutory income tax rates to our loss before the provision for income taxes as follows:

Year Ended December 31,

13 unchanged sentences

Total ( 3.0 ) % ( 0.5 ) % ( 0.9 ) %

The effective tax rate of ( 0.5 )% in 2022 includes $ 39.2 million of tax expense attributable to the change in the valuation allowance in the United States, Switzerland, and Germany (Lana Labs GmbH), partially offset by $ 8.6 million of favorable excess tax benefits for equity compensation and research credits.

APPIAN CORPORATION AND SUBSIDIARIES

The effective tax rate of ( 3.0 )% in 2023 includes $ 27.3 million of tax expense attributable to the change in the valuation allowance in the United States and Switzerland, partially offset by $ 10.3 million of favorable tax benefits for research credits.

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19 unchanged sentences

Right-of-use assets ( 10,626 ) ( 10,056 )

Unbilled receivables — ( 1,248 )

Depreciation ( 3,779 ) ( 4,275 )

3 unchanged sentences

Net deferred tax assets $ 3,451 $ 1,839

As of December 31, 2022 and 2021, we had $ 237.7 million and $ 239.9 million of gross net operating loss (“NOL”) carryforwards for U.S.

federal tax purposes, respectively.

federal NOL carryforwards in the amount of $ 16.9 million, gross, generated prior to 2018 will expire, if unused, in 2037.

As of December 31, 2023 and 2022, we had $ 295.9 million and $ 237.7 million, respectively, of gross net operating loss (“NOL”) carryforwards for U.S.

federal tax purposes.

federal NOL carryforwards in the gross amount of $ 24.4 million and generated prior to 2018 will expire, if unused, in 2037.

Under the Tax Cuts and Jobs Act of 2017 (the “TCJA”), as modified by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), federal NOL carryforwards generated in tax years beginning after December 31, 2017 may be carried forward indefinitely.

7 unchanged sentences

or outside of the U.S.

This change resulted in an increase to gross deferred tax assets of approximately $ 30.0 million in 2022.

Due to the full valuation allowance recorded against our U.S.

The new research and development expenditures rules resulted in a tax-effected deferred tax asset (before valuation allowance) of approximately $ 35.0 million and $ 30.0 million as of December 31, 2023 and 2022, respectively.

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

to the full valuation allowance recorded against our U.S.

deferred tax assets, there was no impact to net deferred tax assets.

Additionally, there was no cash tax impact for 2023 due to our ability to use NOL carryforwards to fully offset taxable income generated by the changes to research and development expenditures.

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 and 2022, we had $ 27.2 million and $ 19.3 million, respectively, of U.S.

7 unchanged sentences

As of December 31, 2023 and 2022, we had foreign gross NOL carryforwards of $ 192.3 million and $ 163.4 million, respectively, primarily attributable to our subsidiary in Switzerland.

In 2022, $ 8.1 million of Swiss NOLs expired related to the 2015 tax year.

An additional piece of those NOL carryforwards will expire each year, if unused, between 2023 and 2029.

The net change in the total valuation allowance during the year ended December 31, 2022 was $ 38.2 million, primarily driven by the valuation allowance recorded against the United States and Switzerland deferred tax assets.

The $ 1.1 million valuation allowance against the Germany (Lana Labs GmbH) deferred tax assets was released in 2022 as a result of post-integration tax planning and the merger of German subsidiaries.

We had tax-effected foreign NOL carryforwards of $ 21.8 million and $ 18.7 million as of December 31, 2023 and 2022, respectively.

In 2023, $ 1.1 million of tax-effected Swiss NOLs expired related to the 2016 tax year.

An additional portion of those NOL carryforwards will expire each year, if unused, between 2024 and 2030.

As of December 31, 2023 and 2022 we had a total valuation allowance of $ 162.0 million and $ 132.6 million, respectively.

The following table summarizes the activity related to our valuation allowances for the years ended December 31, 2023, 2022, and 2021 (in thousands):

Year Ended December 31,

2023 2022 2021

Beginning balance

$ 132,581 $ 94,399 $ 65,914

Charged to expense

27,267 39,203 28,450

Foreign currency translation adjustments

2,118 ( 1,021 ) 35

Deductions from reserve

Ending balance

$ 161,966 $ 132,581 $ 94,399

As of December 31, 2023, we continued to maintain a full valuation allowance against U.S.

7 unchanged sentences

income tax liability is not practicable.

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 and 2022, we had unrecognized tax benefits of $ 6.5 million and $ 4.5 million, respectively, none of which would affect our effective tax rate if recognized due to the valuation allowance.

The following table summarizes the activity related to our unrecognized tax benefit from December 31, 2020 to December 31, 2023 (in thousands):

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Balance as of December 31, 2020

15 unchanged sentences

We recognize interest and penalties related to uncertain tax positions in income tax expense.

Our uncertain tax positions primarily relate to federal research and development tax credits.

During the years ended December 31, 2023, 2022, and 2021, we recognized nominal amounts in interest.

The cumulative balance of interest and penalties as of December 31, 2022 and 2021 were not meaningful.

The cumulative balances of interest and penalties as of December 31, 2023 and 2022 were immaterial.

We anticipate total unrecognized tax benefits will not decrease over the next year.

5 unchanged sentences

Equity Incentive Plans

In May 2017, our Board of Directors adopted, and our stockholders approved, the 2017 Equity Incentive Plan (the “2017 Plan”), which became effective as of the date of the final prospectus for our initial public offering.

In May 2017, our Board of Directors adopted, and our stockholders approved, the 2017 Equity Incentive Plan (the “2017 Plan”).

The 2017 Plan provides for the grant of incentive stock options to employees and for the grant of nonstatutory stock options, restricted stock awards, restricted stock units (“RSUs”), stock appreciation rights, performance-based stock awards, and other forms of equity compensation to employees, including officers, non-employee directors, and consultants.

2 unchanged sentences

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

As of December 31, 2022, there were 7,196,149 shares of Class A common stock reserved for issuance under the 2017 Plan, of which 2,839,475 were available to be issued.

As of December 31, 2023, there were 7,196,149 shares of Class A common stock reserved for issuance under the 2017 Plan, of which 2,516,133 are still available to be issued.

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Options

3 unchanged sentences

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

Expected volatility is based on the

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

historical volatility of our publicly traded stock over the estimated expected term of the stock options.

Expected volatility is based on the historical volatility of our publicly traded stock over the estimated expected term of the stock options.

We assume zero dividend yield because we have historically not paid dividends and do not anticipate paying dividends in the near future.

1 unchanged sentence

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.

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 or exceeds 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.

11 unchanged sentences

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

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes stock option activity for the years ended December 31, 2023, 2022, and 2021:

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

Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years)

Aggregate Intrinsic Value (in thousands)

Outstanding at December 31, 2020

5 unchanged sentences

2,953,356 15.16 4.0 147,812

Granted 700,000 50.63

Exercised ( 937,217 ) 27.14 32,858

3 unchanged sentences

2,697,959 20.25 5.1 45,867

Granted 700,000 50.63

Exercised ( 98,610 ) 7.56 3,387

Expired ( 7,900 ) 4.06

Forfeited — —

3 unchanged sentences

1,899,349 $ 9.71 2.6 $ 53,089

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The total fair value of stock options that vested during the years ended December 31, 2022, 2021, and 2020 was $ 0.9 million, $ 10.8 million, and $ 2.8 million, respectively.

No stock options were vested during the year ended December 31, 2023.

The total fair value of stock options that vested during the years ended December 31, 2022 and 2021 was $ 0.9 million and $ 10.8 million, respectively.

As of December 31, 2023, the total compensation cost related to unvested stock options not yet recognized, which relates exclusively to the 2022 CEO Grant, was $ 10.9 million.

This amount will be recognized over a weighted average period of 3.19 years.

This amount will be recognized over a remaining weighted average period of 2.20 years.

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Units

26 unchanged sentences

Total stock-based compensation expense $ 43,387 $ 38,830 $ 23,844

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-based compensation expense for RSUs, stock options, and issuances of common stock to the Board of Directors is included in the following line items in the accompanying consolidated statements of operations for the years ended December 31, 2022, 2021, and 2020 (in thousands):

The following table summarizes stock-based compensation expense by line item in the accompanying consolidated statements of operations for the years ended December 31, 2023, 2022, and 2021 (in thousands):

Year Ended December 31,

8 unchanged sentences

Total stock-based compensation expense $ 43,387 $ 38,830 $ 23,844

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stockholders' Equity

As of December 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 41,320,091 shares of Class A common stock and 31,497,796 shares of Class B common stock were issued and outstanding.

We have 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.

As of December 31, 2023, our shares of Class A common stock, which are publicly traded on the Nasdaq Global Market, totaled 42,169,970 issued and outstanding while our Class B common stock, which are not publicly traded, totaled 31,196,796 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.

2 unchanged sentences

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.

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 will convert automatically into Class A common stock.

Basic and Diluted Loss per Common Share

5 unchanged sentences

Net loss per share, basic and diluted $ ( 1.52 ) $ ( 2.08 ) $ ( 1.25 )

Due to net losses for the years ended December 31, 2022, 2021, and 2020, basic and diluted net loss per share were the same as the effect of potentially dilutive securities would have been antidilutive.

Due to net losses for the years ended December 31, 2023, 2022, and 2021, basic and diluted net loss per share were equal as the effect of potentially dilutive securities would have been antidilutive.

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:

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31,

4 unchanged sentences

Minimum Purchase Commitments

In July 2021, we executed a non-cancellable cloud hosting arrangement with Amazon Web Services (“AWS”) that contains provisions for minimum purchase commitments.

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

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

Spending under this agreement for the year ended December 31, 2022 totaled $ 33.1 million.

Letters of Credit

At December 31, 2022 and 2021, we had outstanding letters of credit totaling $ 12.0 million and $ 11.2 million, respectively, in connection with securing our leased office space.

All letters of credit are secured by our current or historical borrowing arrangements as described in Note 9.

We have 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.

The agreement, which started July 2021 and is now in its third year as of December 31, 2023, contains minimum spending requirements of $ 28.0 million in each of the third, fourth, and fifth years.

Spending under this agreement for the year ended December 31, 2023, 2022, and 2021 totaled $ 36.6 million, $ 33.1 million, and $ 11.8 million, respectively.

The timing of payments under the agreement may vary.

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Exclusive of the AWS contract, we have other non-cancellable agreements for subscription software products that contain provisions stipulating minimum purchase commitments.

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

Pegasystems Litigation

10 unchanged sentences

Defendant Youyong Zou has satisfied the judgment of $ 5,000 (plus interest) against him in lieu of appealing that judgment.

On September 15, 2022, Pegasystems filed a notice of appeal, and on February 6, 2023, Pegasystems filed its opening brief with the Court of Appeals of Virginia.

Appian expects to file its responsive brief in March 2023, to which Pegasystems will file a reply brief.

After submission of the reply brief, the timeline of the case is solely within the control of the Court of Appeals until it rules.

On September 15, 2022, Pegasystems filed a notice of appeal to the Court of Appeals of Virginia.

Both sides have submitted their respective appeal briefs to the Court of Appeals, and the Court held a hearing on the appeal on November 15, 2023.

The timeline of the case is solely within the control of the Court of Appeals until it rules.

Pegasystems is not required to pay us the judgment, attorney’s fees, or post-judgment interest until all appeals are exhausted.

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

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

Consistent with other judgments, there is no guarantee we will be able to collect all or any portion of the judgment.

Consequently, we will not record the award in our consolidated financial statements until all contingencies are resolved and we collect on the judgment.

Judgment Preservation Insurance

On September 1, 2023, we entered into a Judgment Preservation Insurance (“JPI”) policy in connection with our $ 2.036 billion judgment against Pegasystems.

The total cost of the policy was $ 57.3 million and is comprised of the premium, a one-time broker fee, and Virginia lines tax.

The policy provides up to $ 500.0 million of coverage.

The total cost of the policy was capitalized and will be amortized on a straight-line basis over the estimated length of the appeals process.

As of December 31, 2023, we estimated the length of the appeals process (solely for amortization purposes) to be approximately three years .

This estimate will be updated each reporting period.

Amortization expense associated with the JPI premium is recorded to general and administrative expenses in our consolidated statements of operations.

JPI amortization expense was $ 6.0 million for the year ended December 31, 2023.

As of December 31, 2023, $ 18.1 million of the unamortized balance is classified as ‘Prepaid expenses and other current assets’ while the remaining $ 33.2 million is classified as ‘Other assets’ on our consolidated balance sheets.

Other Legal Matters

1 unchanged sentence

Other than as disclosed elsewhere in this Annual Report, we are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition, or cash flows.

We do not believe any material liability will be imposed as a result of any of the foregoing matters.

APPIAN CORPORATION AND SUBSIDIARIES

Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7 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 years ended December 31, 2022 and 2021.

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

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

The value of our long-lived assets, which are comprised of property and equipment and intangible assets, held in the United States and internationally as of December 31, 2023 were $ 34.0 million and $ 12.6 million, respectively.

As of December 31, 2022, our long-lived assets held in the United States and internationally were $ 38.8 million and $ 8.3 million, respectively.

Retirement Plans

10 unchanged sentences

The three tiers are defined as follows:

Observable inputs based on unadjusted quoted prices in active markets for identical assets or liabilities;

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, and which require us to develop our own estimates and assumptions reflecting those that a market participant would use.

• Level 1 - Observable inputs based on unadjusted quoted prices in active markets for identical assets or liabilities;

• Level 2 - Inputs, other than quoted prices in active markets, that are observable either directly or indirectly;

• Level 3 - Unobservable inputs for which there is little or no market data, and which require us to develop our own estimates and assumptions reflecting 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 during the years ended December 31, 2023 and 2022.

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

APPIAN CORPORATION AND SUBSIDIARIES

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• Market approach.

Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities;

• Income approach.

Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts;

• 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 December 31, 2022 and 2021 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 a relatively short durations to the then market rates.

• Market approach - Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities;

• Income approach - Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts;

• 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 restricted cash, accounts receivable, accounts payable, and accrued expenses approximate fair value as of December 31, 2023 and 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.

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

3 unchanged sentences

Fair Value Measurement Balance Sheet Classification

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

Fair Value Level Cost Basis Unrealized Gains (Losses) Fair Value

Cash and Cash Equivalents Short-term Investments and Marketable Securities

Level 1 $ — $ — $ 93,029 $ 93,029 $ —

Money market fund Level 1 56,322 — 56,322 56,322 —

Treasury bonds Level 1 4,830 ( 2 ) 4,828 — 4,828

Commercial paper Level 2 26,704 — 26,704 — 26,704

Corporate bonds Level 2 9,353 ( 12 ) 9,341 — 9,341

Agency bonds Level 2 4,828 ( 3 ) 4,825 — 4,825

3 unchanged sentences

Fair Value Measurement Balance Sheet Classification

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

Fair Value Level Cost Basis Unrealized Gains (Losses) Fair Value

Cash and Cash Equivalents Short-Term Investments and Marketable Securities

Level 1 $ — $ — $ 108,663 $ 108,663 $ —

Money market fund Level 1 39,469 — 39,469 39,469 —

2 unchanged sentences

Corporate bonds Level 2 9,353 ( 12 ) 9,341 — 9,341

Asset-backed securities Level 2 15,655 ( 8 ) 15,647 — 15,647 —

Level 2 2,432 3 2,435 — 2,435

Total investments $ 87,354 $ ( 22 ) $ 195,995 $ 148,132 $ 47,863

APPIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

There were no Level 3 assets held at any point during the year ended December 31, 2022 and 2021.

There were no Level 3 assets held at any point during the years ended December 31, 2023 and 2022.

Additionally, there were no transfers between Levels 1 and 2 during the years ended December 31, 2023 and 2022.

Interest income on our investments totaled $ 0.9 million for the year ended December 31, 2022.

The amortized cost basis and fair value of debt securities at December 31, 2022 and 2021, by contractual maturity, are as follows (in thousands):

As of December 31, 2022

Cost Basis Fair Value

Due in one year or less $ 87,354 $ 87,332

Due after one year through five years — —

Total investments $ 87,354 $ 87,332

As of December 31, 2021

Cost Basis Fair Value

Due in one year or less $ 93,497 $ 93,480

Due after one year through five years 12,049 12,044

Total investments $ 105,546 $ 105,524

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

APPIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Interest income on our investments totaled $ 9.0 million and $ 0.9 million for the years ended December 31, 2023 and 2022, respectively.

Interest income on investments was immaterial for the year ended December 31, 2021.

The contractual maturities of our debt securities as of December 31, 2023 and 2022 are all one year or less.

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

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

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data