What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-05-08 compared with 2024-11-07 · 188 added, 259 removed, 312 unchanged (59% of the section changed)

2 unchanged sentences

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “will,” “would,” or the negative or plural of these words or similar expressions or variations, including statements regarding our future financial and operating performance, anticipated expansion of the usage of partners to perform professional services, the increase of our subscriptions revenue as a percentage of total revenue, the fluctuation of gross margin on a quarterly basis, our future capital requirements, and our ability to meet our financial covenants under our Credit Agreement.

These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “will,” “would,” or the negative or plural of these words or similar expressions or variations, including statements regarding our expectations regarding customer renewals and our future financial and operating performance, anticipated expansion of the usage of partners to perform professional services, the increase of our subscriptions revenue as a percentage of total revenue, the fluctuation of gross margin on a quarterly basis, our future capital requirements, and our ability to meet our financial covenants under our Credit Agreement.

Such forward-looking statements are subject to a number of risks, uncertainties, assumptions, and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements.

3 unchanged sentences

Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Appian is a software company that orchestrates business processes.

The Appian Platform empowers leaders to design, automate, and optimize important processes from start to finish.

With our industry-leading platform and commitment to customer success, Appian is trusted by top organizations to drive transformational process change.

Appian is The Process Company.

We deliver a software platform that helps organizations run better processes that reduce costs, improve customer experiences, and gain a strategic edge.

Committed to client success, we serve many of the world’s largest companies across various industries.

We believe processes define each organization.

Processes are how they operate, deliver value, and interact with their customers.

Nothing is more transformative for an organization than improving their processes.

Appian has both the platform and the expertise to enable enterprise transformation.

Appian provides capabilities to tackle any process challenge.

Appian tightly integrates data fabric;

robotic process automation, or RPA;

intelligent document processing, or IDP;

generative artificial intelligence, or generative AI;

artificial intelligence agents, or AI agents;

low-code design;

application programming interfaces, or APIs;

business rules;

and process intelligence capabilities in a single platform.

These capabilities are unified and scalable, meeting enterprise demands and easy to change as requirements evolve.

• Process Orchestration:

The Appian platform coordinates tasks between AI, automation, and humans to ensure processes run efficiently and intelligently.

RPA enables customers to build bots with low-code to automate repetitive manual tasks.

Appian AI agents extract data, process documents, and initiate processes at scale.

API integration easily connects systems with low-code design tools and hundreds of prebuilt connections.

• Data Fabric:

Appian’s data fabric is an integrated data layer that unifies data across systems without requiring companies to migrate their data.

Appian empowers users to explore data in real-time, build reports, and get AI-powered insights for smarter decision-making.

Our patented data fabric technology supports both analytical and transactional workloads, which allows users to build applications that create and update enterprise data.

It also includes row-level security rules to enforce access controls at every level.

Our data fabric functionality powers and is designed to secure our AI offering.

• Process Intelligence:

Process intelligence allows users to gain deep insights into process performance through Appian’s Process HQ.

It also preps data for process mining with just a few clicks, even across multiple sources.

Companies can use AI to monitor processes, identify issues, and get intelligent recommendations for optimization.

• Artificial Intelligence:

We believe the key to unlocking AI’s full potential is embedding it inside a business process.

Process is where business happens.

It’s where companies make decisions, save and spend money, serve customers, and scale business operations.

When AI operates within processes, it gains purpose, governance, and accountability—all essential to delivering value from AI.

Appian can embed AI into every process, which gives AI the context and actions it needs to accelerate outcomes for the enterprise.

Appian delivers six key benefits with our “AI in process” approach:

Process makes AI easy.

Deploying AI in isolated projects is complex and costly.

By embedding AI within a process, enterprises can easily access valuable AI capabilities when and where they need them.

Process gives AI structure.

AI is only as useful as the structure surrounding it.

A process gives AI defined goals in a structured flow of work.

AI can work alongside humans and automation tools, escalating issues so humans always maintain oversight and control.

Process gives AI data.

AI is nothing without data.

But most enterprises struggle to feed AI complete data from across systems, while still ensuring privacy and maintaining access privileges.

By integrating AI into processes, enterprises ensure AI receives quality, real-time data from all systems.

Organizations can enforce privacy controls to prevent unauthorized access and optimize data governance to comply with regulations (such as GDPR, HIPAA, etc.).

Process makes AI safe.

AI is powerful, but no one wants to give AI free reign over their enterprises.

Processes provide crucial safety mechanisms, including human approval steps for high-risk actions and escalation paths to ensure AI errors don’t cause harm.

Additionally, activity logs make auditing and compliance simple for organizations with strict regulatory requirements.

Process makes AI measurable.

For many enterprises, AI is a black box, which can’t be measured for impact.

Appian processes track every AI action, allowing organizations to measure performance, identify bottlenecks, and optimize outcomes.

Process makes AI enterprise-grade.

A process provides the necessary infrastructure to scale AI use.

The right tooling puts AI to work with security certifications, enterprise scalability, and other capabilities such as process orchestration, automation, and intelligence.

Processes take AI from a collection of disconnected pilots to an enterprise-wide capability.

Appian’s unified approach delivers all the capabilities leading organizations need to orchestrate their business processes in one place.

It empowers enterprises to transform their processes and improve business outcomes.

We have generated the majority of our revenue from sales of subscriptions, which include (1) cloud subscriptions bundled with maintenance and support and hosting services and (2) term license subscriptions bundled with maintenance and support.

3 unchanged sentences

We have invested in our Customer Success organization to help ensure customers are able to build and deploy applications on our platform.

We have several strategic partnerships, including with Accenture, Capgemini, Deloitte, EY, KPMG, PwC, and TCS, which allow them to refer customers to us in order to purchase subscriptions.

We have a number of strategic partnerships with companies, including Accenture, Capgemini, Deloitte, EY, KPMG, PwC, and TCS, which allow them to refer customers to us in order to purchase subscriptions.

Our partners then provide professional services directly to the customers using our platform.

We intend to continue focusing on adding new customers with our strategic partners.

In addition, over time we expect our professional services revenue as a percentage of total revenue to decline as we increasingly rely on strategic partners to help our customers deploy our software.

In addition, over time we expect

our professional services revenue as a percentage of total revenue to decline as we increasingly rely on strategic partners to help our customers deploy our software.

We believe our investment in professional services, including strategic partners building their practices around Appian, will drive increased adoption of our platform.

1 unchanged sentence

Generally, our sales team targets its efforts to organizations with over 2,000 employees and $2 billion in annual revenue.

Revenue from U.S.

federal government

agencies represented 23.2% and 22.5% of our total revenue for the three and nine months ended September 30, 2024, respectively.

Revenue from U.S.

federal government agencies represented 21.1% and 20.6% of our total revenue for the three and nine months ended September 30, 2023, respectively.

No single end-customer accounted for more than 10% of our total revenue in the three and nine months ended September 30, 2024 or 2023.

For the three months ended March 31, 2025, revenue generated from government agencies represented 33.4% of total revenue, of which revenue from U.S.

federal government agencies was 23.9% of total revenue.

For the three months ended March 31, 2024, revenue generated from government agencies represented 29.5% of total revenue, of which revenue from U.S.

federal government agencies was 21.7% of total revenue.

No single end-customer accounted for more than 10% of our total revenue in the three months ended March 31, 2025 or 2024.

We offer our platform globally.

Our platform supports multiple languages to facilitate collaboration and address challenges in multinational organizations.

In the three and nine months ended September 30, 2024, 36.3% and 37.2%, respectively, of our total revenue was generated from customers outside of the United States as compared to 35.3% and 35.6% in the three and nine months ended September 30, 2023, respectively.

As of September 30, 2024, we operated in 16 countries.

In the three months ended March 31, 2025, 36.2% of our total revenue was generated from customers outside of the United States as compared to 37.2% in the three months ended March 31, 2024.

As of March 31, 2025, we operated in 16 countries.

We believe we have a significant opportunity to continue to grow our international footprint, and we are investing in new geographies, including through investment in direct and indirect sales channels, professional services, and customer support and implementation partners.

1 unchanged sentence

We incur significant customer acquisition costs, including expenses associated with hiring new sales representatives, who can take anywhere from six months to a year to become productive given the length of our sales cycle, and marketing costs which, with the exception of certain types of sales commissions, are expensed as incurred.

At the same time, we believe the costs we incur to retain customers and drive additional purchases of software are lower than our customer acquisition costs on a relative basis.

Over time, we expect a large portion of our customers to renew their subscriptions and purchase additional subscriptions as they continue to build more applications and add more users to our platform.

Over the last three completed fiscal years, we had an average cloud subscriptions gross renewal rate of 99%.

We calculate our cloud subscriptions gross renewal rate by dividing (i) the cloud subscriptions revenue from renewing cloud customers in the current 12-month period that were cloud customers during the entirety of the prior 12-month period, by (ii) our cloud subscriptions revenue from all cloud customers in the corresponding prior 12-month period that were cloud customers during the entirety of such prior 12-month period.

The calculation includes the impact of customers that churned during the current 12-month period but excludes the impact of price changes, additional users, upsells, and downsells during the same period.

Key Factors Affecting Our Performance

6 unchanged sentences

We have aggressively invested, and intend to continue to invest, in our sales team in order to drive sales to new customers.

We continue to make investments to enhance the expertise of our sales and marketing organization within our key industry verticals of financial services, government, life sciences, insurance, and manufacturing.

We continue to make investments to enhance the expertise of our sales and marketing

organization within our key industry verticals of financial services, government, life sciences, insurance, and manufacturing.

In addition, we have established relationships with strategic partners who work with organizations undergoing digital transformations.

5 unchanged sentences

Our ability to increase sales to existing customers will depend on a number of factors, including the size of our sales and professional services teams, customers’ level of satisfaction with our platform and professional services, pricing, economic conditions, and our customers’ overall spending levels.

Some of our professional services personnel are customer success managers.

Their role is to ensure customers realize value from our platform and support strategic partners and the “land and expand” strategy versus delivering billable hours.

• Mix of Subscriptions and Professional Services Revenue - We believe our professional services have driven customer success and facilitated the adoption of our platform by customers.

6 unchanged sentences

As the usage of strategic partners expands, we expect the proportion of our total revenue from subscriptions to increase over time relative to professional services.

For the three months ended September 30, 2024 and 2023, 79.9% and 75.7% of our revenue, respectively, was derived from sales of subscriptions while the remaining 20.1% and 24.3%, respectively, was derived from the sale of professional services.

For the nine months ended September 30, 2024 and 2023, 78.6% and 74.1% of our revenue, respectively, was subscriptions-based while the remaining 21.4% and 25.9%, respectively, was related to professional services.

For the three months ended March 31, 2025 and 2024, 80.7% and 78.5% of our revenue, respectively, was derived from sales of subscriptions while the remaining 19.3% and 21.5%, respectively, was derived from the sale of professional services.

• Investments in Growth - We have made, and plan to continue to make, investments for long-term growth, including investing in our platform and infrastructure to continuously maximize their power and speed, meet the evolving needs of our customers, and take advantage of our market opportunity.

4 unchanged sentences

Cloud Subscriptions Revenue

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

2024 2023 % Change 2024 2023 % Change

Three Months Ended March 31,

2025 2024 % Change

Cloud subscriptions revenue

2 unchanged sentences

Our cloud subscriptions revenue for any customer is primarily determined by the number of users who access and utilize the applications built on our platform or by the number of application licenses purchased, as well as the price paid.

We believe increasing cloud subscriptions revenue is an indicator of the demand for our platform, the pace at which the market for our solutions is growing, the productivity of our sales team and strategic relationships in growing our customer base, and our ability to further penetrate our existing customer base.

We believe increasing cloud subscriptions revenue is an indicator of the demand for our platform,

the pace at which the market for our solutions is growing, the productivity of our sales team and strategic relationships in growing our customer base, and our ability to further penetrate our existing customer base.

Cloud Subscriptions Revenue Retention Rate

As of September 30,

As of March 31,

Cloud subscriptions revenue retention rate

2 unchanged sentences

To calculate our cloud subscriptions revenue retention rate for a particular trailing 12-month period, we first establish the recurring cloud subscriptions revenue for the previous trailing 12-month period.

This effectively represents

recurring dollars we should expect in the current trailing 12-month period from the cohort of customers from the previous trailing 12-month period without accounting for any expansion or contraction.

This effectively represents recurring dollars we should expect in the current trailing 12-month period from the cohort of customers from the previous trailing 12-month period without accounting for any expansion or contraction.

We subsequently measure the recurring cloud subscriptions revenue in the current trailing 12-month period from the cohort of customers from the previous trailing 12-month period.

Cloud subscriptions revenue retention rate is then calculated by dividing the aggregate recurring cloud subscriptions revenue in the current trailing 12-month period by the previous trailing 12-month period.

This calculation includes the combined impact on our revenue from customer non-renewals, pricing changes, and growth in the number of users on our platform.

This calculation includes the combined impact on our revenue from customer churn, upsells, downsells, pricing changes, and growth in the number of users on our platform.

Our cloud subscriptions revenue retention rate can fluctuate from period to period due to large customer contracts in any given period.

6 unchanged sentences

Subscriptions

Subscriptions revenue is primarily derived from cloud subscriptions bundled with maintenance and support and hosting services and on-premises term license subscriptions bundled with maintenance and support.

Subscriptions revenue is primarily derived from cloud subscriptions bundled with maintenance and support and hosting services and term license subscriptions bundled with maintenance and support.

Our maintenance and support agreements provide customers with the right to unspecified software upgrades, maintenance releases and patches released during the term of the maintenance and support agreement on a when-and-if-available basis, and rights to technical support.

On-premises term license subscriptions are offered when the customer prefers to self-manage the deployment of our platform within their own infrastructure.

Term license subscriptions are offered when the customer prefers to self-manage the deployment of our platform within their own infrastructure.

When our platform is delivered as a cloud subscription, we manage operational needs in third-party hosted data centers.

10 unchanged sentences

Gross Profit and Gross Margin

Gross profit and gross margin (defined as gross profit as a percentage of total revenue), have been, and will continue to be, affected by various factors, including the mix of cloud subscriptions and on-premises term license subscriptions, the mix of total subscriptions revenue and professional services revenue, subscription pricing, the costs associated with third-party hosting providers, and the extent to which we expand or reduce our professional services to support future changes in our growth.

Gross profit and gross margin (defined as gross profit as a percentage of total revenue), have been, and will continue to be, affected by various factors, including the mix of cloud subscriptions and term license subscriptions, the mix of total subscriptions revenue and professional services revenue, subscription pricing, the costs associated with third-party hosting providers, and the extent to which we expand or reduce our professional services to support future changes in our growth.

Our gross margin may fluctuate from period to period based on the above factors.

5 unchanged sentences

Professional services gross margin is also impacted by the amount of services performed by subcontractors and partners as opposed to internal resources.

In 2024, we expect professional services gross margin to be slightly lower than in 2023;

however, the margin remains subject to fluctuation based on the factors discussed above.

For the full year 2025, we expect professional services gross margin to be consistent with 2024;

however, the margins for individual quarters remain subject to fluctuation based on the factors discussed above.

Operating Expenses

3 unchanged sentences

In addition, operating expenses include allocated overhead costs, which are primarily comprised of facility costs such as rent, employee medical benefits, employee relations expense, and certain information technology costs.

In general, our operating expenses are expected to continue to increase in absolute dollars as we invest resources in growing our various teams although at a more measured rate than prior years.

In general, our operating expenses are expected to continue to increase in absolute dollars as we invest resources in enhancing our product and growing our business, although such growth is expected to be at a more measured rate than prior years.

Sales and Marketing Expense

1 unchanged sentence

Additional major expenses in this category include travel and entertainment, marketing activities and promotional events, subcontracting fees, and allocated overhead costs.

In order to continue to grow our business, geographical footprint, and brand awareness, we expect to continue investing resources in sales and marketing in our principal markets and strategic growth areas.

We expect sales and marketing expense to increase in absolute dollars as we continue to invest to acquire new customers and further expand usage of our platform within our existing customer base.

We will continue our efforts to build on our brand reputation and increase market awareness of our platform.

We are focused on increasing the efficiency of our sales force and marketing activities by enhancing account targeting, messaging, field sales operations, and sales training in order to accelerate the adoption of our platform.

We expect sales and marketing headcount to marginally increase from current levels in 2025 due to expected growth in our principal markets and strategic growth areas.

Furthermore, we expect sales and marketing expense to increase in absolute dollars as we continue to invest in acquiring new customers, further expand usage of our platform within our existing customer base, and broaden our efforts to build on our brand reputation and increase market awareness of our platform.

Research and Development Expense

7 unchanged sentences

Additional expenses included in this category are non-personnel costs such as travel-related expenses, contracting and professional fees for such services as audits, taxation, and legal, insurance and other corporate expenses, including allocated overhead costs, and bad debt expenses.

In 2024, we expect our general and administrative expense to increase in absolute dollars largely due to amortization expense associated with the judgment preservation insurance policy (as discussed in Note 12 to the consolidated financial statements), lease impairments (as discussed in Note 4), and investments in our information technology team.

In 2025, we expect general and administrative expense to increase in absolute dollars largely due to investments in our information technology team.

Other Non-Operating Expense

5 unchanged sentences

The following table sets forth our consolidated statements of operations (in thousands):

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

2024 2023 2024 2023

Three Months Ended March 31,

Subscriptions $ 134,352 $ 117,694

22 unchanged sentences

Loss before income taxes (436) (33,388)

Income tax expense 1,319 178 690 2,137

Income tax expense (benefit) 741 (465)

Net loss $ (1,177) $ (32,923)

The following table sets forth our consolidated statements of operations data expressed as a percentage of total revenue:

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

2024 2023 2024 2023

Three Months Ended March 31,

Subscriptions 80.7 % 78.5 %

16 unchanged sentences

Total other non-operating expense*

(4.1) 5.0 2.7 2.0

Loss before income taxes*

(0.5) (16.1) (17.3) (24.8)

Income tax expense 0.9 0.1 0.2 0.5

Income tax expense (benefit) 0.4 (0.3)

(0.7) % (22.0) %

* Totals may not foot due to rounding.

Comparison of the Three Months Ended September 30, 2024 and 2023

Three Months Ended September 30,

Comparison of the Three Months Ended March 31, 2025 and 2024

Three Months Ended March 31,

2025 2024 $ Change % Change

3 unchanged sentences

Total revenue $ 166,426 $ 149,835 $ 16,591 11.1 %

Total revenue increased $17.0 million, or 12.4%, in the three months ended September 30, 2024 compared to the same period in 2023 due to an increase in our subscriptions revenue of $19.3 million.

Total revenue increased $16.6 million, or 11.1%, in the three months ended March 31, 2025 compared to the same period in 2024 due to an increase in our subscriptions revenue of $16.7 million.

This increase was partially offset by a decrease in our professional services revenue of $0.1 million.

The increase in subscriptions revenue was driven by a $16.8 million increase in cloud subscription revenue, a $1.3 million increase in maintenance and support revenue, and a $1.2 million increase in on-premises subscription revenue.

With respect to new versus existing customers, there was a $5.6 million increase in subscriptions revenue from sales to new customers, while the

remaining $13.7 million of the increase was attributable to expanded deployments, price increases on renewals, and corresponding sales of additional subscriptions to existing customers.

The decrease in professional services revenue was due primarily to a $8.4 million decrease in revenue from existing customers, which was partially offset by a $6.1 million increase in sales to new customers.

The increase in subscriptions revenue was driven by a $13.2 million increase in cloud subscriptions revenue, a $3.1 million increase in term license subscriptions revenue, and a $0.3 million increase in maintenance and support revenue.

With respect to new versus existing customers, there was an $8.1 million increase in subscriptions revenue from sales to new customers, while the remaining $8.5 million of the increase was attributable to expanded deployments, price increases on renewals, and corresponding sales of additional subscriptions to existing customers.

The decrease in professional services

revenue was due primarily to a $4.9 million decrease in revenue from existing customers, which was largely offset by a $4.8 million increase in sales to new customers.

Cost of Revenue

Three Months Ended September 30,

Three Months Ended March 31,

2025 2024 $ Change % Change

7 unchanged sentences

Total gross margin 76.6 % 74.6 %

Cost of revenue increased $1.0 million, or 2.8%, in the three months ended September 30, 2024 compared to the same period in 2023, primarily due to a $2.5 million increase in hosting costs.

This increase was partially offset by a $0.5 million decrease in contractor costs, a $0.3 million decrease in professional services and product support personnel costs, and a $0.1 million decrease in employee relations costs.

Hosting costs increased due to an increase in sales of our cloud offering during the three months ended September 30, 2024.

Contractor costs decreased due to a decrease in the usage of subcontractors for professional services engagements.

Professional services and product support personnel costs decreased due to a decrease in cost of sales headcount of 9% from September 30, 2023 to September 30, 2024 as well as a $0.2 million decrease in stock compensation expense.

Subscriptions gross margin decreased slightly to 88.6% for the three months ended September 30, 2024, compared to 89.1% in the same period in 2023.

The decrease in subscriptions gross margin was attributable to an increase in hosting costs, which was substantially offset by an increase in subscriptions revenue during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

Professional services gross margin increased slightly to 25.6% for the three months ended September 30, 2024 compared to 25.5% in the same period in 2023 due largely to a decrease in professional services expense as described above, which was offset by a decrease in professional services revenue in the comparable period.

Gross margin increased to 75.9% for the three months ended September 30, 2024 compared to 73.7% for the three months ended September 30, 2023, driven largely by the increase in subscriptions revenue.

Cost of revenue increased $0.9 million, or 2.4%, in the three months ended March 31, 2025 compared to the same period in 2024, primarily due to a $2.4 million increase in hosting costs coupled with a $0.4 million increase in contractor costs.

These increases were partially offset by a $1.6 million decrease in professional services and product support personnel costs.

Hosting costs increased due to an increase in sales of our cloud offering during the three months ended March 31, 2025, while contractor costs increased due to an increase in the usage of subcontractors for professional services engagements.

Professional services and product support personnel costs decreased due to a decrease in cost of sales headcount of 11% from March 31, 2024 to March 31, 2025.

Subscriptions gross margin decreased slightly to 88.9% for the three months ended March 31, 2025, compared to 89.6% in the same period in 2024.

The decrease in subscriptions gross margin was attributable to an increase in hosting costs, which was substantially offset by an increase in subscriptions revenue during the three months ended March 31, 2025 as compared to the three months ended March 31, 2024.

Professional services gross margin increased to 25.1% for the three months ended March 31, 2025 compared to 20.0% in the same period in 2024 due largely to a decrease in professional services personnel expense, partially offset by a slight decrease in professional services revenue in the comparable period.

Gross margin increased to 76.6% for the three months ended March 31, 2025 compared to 74.6% for the three months ended March 31, 2024, driven largely by the increase in subscriptions revenue and the improvement in professional services gross margin.

Sales and Marketing Expense

Three Months Ended September 30,

Three Months Ended March 31,

2025 2024 $ Change % Change

2 unchanged sentences

% of revenue 32.8 % 38.8 %

Sales and marketing expense decreased $4.8 million, or 8.6%, in the three months ended September 30, 2024 compared to the same period in 2023, primarily due to a $5.0 million decrease in sales and marketing personnel costs.

This decrease was partially offset by a $0.7 million increase in marketing costs and a $0.4 million increase travel and entertainment costs.

Sales and marketing personnel costs decreased due to a decrease in sales and marketing headcount of 21% from September 30, 2023 to September 30, 2024 and a $1.5 million decrease in stock

compensation expense.

Marketing costs increased primarily due to higher spending on various marketing events and public relations.

Travel and entertainment expense increased due to a higher number of in-person events and engagements relative to the prior year.

Sales and marketing expense decreased $3.6 million, or 6.2%, in the three months ended March 31, 2025 compared to the same period in 2024, primarily due to a $2.2 million decrease in sales and marketing personnel costs.

This decrease was partially offset by a $0.3 million increase travel and entertainment costs and a $0.2 million increase in contractor costs.

Sales and marketing personnel costs decreased due to a decrease in sales and marketing headcount of 24% from March 31, 2024 to March 31, 2025 and a $0.3 million decrease in stock compensation expense.

Travel and entertainment expense increased due to a higher number of in-person events and engagements relative to the prior year, while the increase in contractor costs was attributable to an increase in third-party consulting fees.

Research and Development Expense

Three Months Ended September 30,

Three Months Ended March 31,

2025 2024 $ Change % Change

2 unchanged sentences

% of revenue 23.7 % 26.5 %

Research and development expense increased $1.4 million, or 3.9%, in the three months ended September 30, 2024 compared to the same period in 2023, primarily due to a $0.9 million increase in research and development personnel costs, a $0.4 million increase in cloud computing expense, and a $0.3 million increase in employee medical benefits.

Wages, salaries, and medical benefits were all higher due to research and development personnel headcount increasing 5% from September 30, 2023 to September 30, 2024, while cloud computing expense increased due to increased spending on cloud migrations.

Research and development expense decreased $0.3 million, or 0.6%, in the three months ended March 31, 2025 compared to the same period in 2024.

This change is primarily attributable to a $0.3 million decline in research and development personnel costs.

Research and development headcount remained consistent period over period, but overall personnel costs declined due to realized cost savings from our product development center in India.

General and Administrative Expense

Three Months Ended September 30,

Three Months Ended March 31,

2025 2024 $ Change % Change

3 unchanged sentences

% of revenue 20.6 % 22.3 %

General and administrative expense increased $11.2 million, or 48.0%, in the three months ended September 30, 2024 compared to the same period in 2023 primarily due to increases of $7.7 million in professional fees and $1.6 million in insurance expense.

These increases were partially offset by a $0.9 million decrease in personnel costs.

Higher professional fees were driven by an increase in legal fees incurred in the three months ended September 30, 2024 relative to the prior year along with a $5.7 million decrease in insurance reimbursements associated with our litigation against Pegasystems as a result of receiving reimbursements in the prior year compared to none in the current year.

The increase in insurance expense was driven by the continued amortization of our judgment preservation insurance policy, which was entered into on September 1, 2023.

Personnel costs were lower due to general and administrative personnel headcount decreasing by 6% from September 30, 2023 to September 30, 2024.

General and administrative expense increased $0.8 million, or 2.5%, in the three months ended March 31, 2025 compared to the same period in 2024 primarily due to increases of $0.8 million in information technology spending and $0.7 million in professional fees.

These increases were partially offset by decreases of $1.4 million in insurance expense and $0.3 million in personnel costs.

Information technology costs were higher due to continued investments in computer software while professional fees were higher due to a $1.1 million increase in litigation-related expenses attributable to the Pegasystems cases and a $0.4 million increase in contract labor spending.

The decrease in insurance expense was driven by the lower amortization expense of our judgment preservation insurance policy, and personnel costs were lower due to headcount decreasing by 3% from March 31, 2024 to March 31, 2025.

Other Non-Operating (Income) Expense, Net

Three Months Ended September 30,

Three Months Ended March 31,

2025 2024 $ Change % Change

4 unchanged sentences

*** Indicates a percentage that is not meaningful.

Other income, net was $12.5 million in the three months ended September 30, 2024 compared to other expense, net of $1.9 million in the three months ended September 30, 2023.

This change was primarily due to

$9.2 million in foreign exchange gains in the three months ended September 30, 2024 as compared to $4.3 million in foreign exchange losses in the three months ended September 30, 2023.

In addition, there was a $1.8 million increase in other income related to short-swing profit disgorgement payments to us from a public stockholder of our Class A common stock during the three months ended September 30, 2024.

These increases were partially offset by a $0.9 million decrease in interest income during the three months ended September 30, 2024 relative to the prior year.

Other income, net was $5.7 million in the three months ended March 31, 2025 compared to other expense, net of $8.2 million in the three months ended March 31, 2024.

This change was primarily due to $4.1 million in foreign exchange gains in the three months ended March 31, 2025 as compared to $11.5 million in foreign exchange losses in the three months ended March 31, 2024.

In addition, there was a $1.4 million decrease in other income related to a non-recurring local government incentive payment that was received in the prior year.

Interest Expense

Three Months Ended September 30,

Three Months Ended March 31,

2025 2024 $ Change % Change

2 unchanged sentences

% of revenue 3.2 % 3.8 %

Interest expense increased by $1.3 million in the three months ended September 30, 2024 as compared to the corresponding period in 2023 primarily due to interest expense incurred on additional credit facility borrowings that we entered into during the first quarter of 2024.

Income Tax Expense

Three Months Ended September 30,

2024 2023 $ Change % Change

(dollars in thousands)

Income tax expense

$ 1,319 $ 178 $ 1,141 ***

*** Indicates a percentage that is not meaningful.

Income tax expense increased by $1.1 million in the three months ended September 30, 2024 as compared to the corresponding period in 2023.

This change was primarily driven by increased pre-tax book income in our certain international subsidiaries for the three months ended September 30, 2024.

The change in pre-tax book income was primarily attributable to fluctuations in non-operating unrealized foreign exchange gains and losses.

Comparison of the Nine Months Ended September 30, 2024 and 2023

Nine Months Ended September 30,

2024 2023 $ Change % Change

(dollars in thousands)

Subscriptions $ 353,789 $ 296,554 $ 57,235 19.3 %

Professional services 96,548 103,490 (6,942) (6.7)

Total revenue $ 450,337 $ 400,044 $ 50,293 12.6 %

Total revenue increased $50.3 million, or 12.6%, in the nine months ended September 30, 2024 compared to the same period in 2023 due to an increase in our subscriptions revenue of $57.2 million.

This increase was partially offset by a decrease in our professional services revenue of $6.9 million.

The increase in subscriptions revenue was driven by a $47.7 million increase in cloud subscription revenue, a $6.1 million increase in on-premises subscription

revenue, and a $3.4 million increase in maintenance and support revenue.

With respect to new versus existing customers, there was a $15.0 million increase in subscriptions revenue from sales to new customers, while the remaining $42.2 million of the increase was attributable to expanded deployments, price increases on renewals, and corresponding sales of additional subscriptions to existing customers.

The decrease in professional services revenue was due primarily to a $20.8 million decrease in revenue from existing customers, which was partially offset by a $13.8 million increase in sales to new customers.

Cost of Revenue

Nine Months Ended September 30,

2024 2023 $ Change % Change

(dollars in thousands)

Cost of revenue

Subscriptions $ 39,614 $ 32,492 $ 7,122 21.9 %

Professional services 74,880 76,515 (1,635) (2.1)

Total cost of revenue $ 114,494 $ 109,007 $ 5,487 5.0 %

Subscriptions gross margin 88.8 % 89.0 %

Professional services gross margin 22.4 % 26.1 %

Total gross margin 74.6 % 72.8 %

Cost of revenue increased $5.5 million, or 5.0%, in the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to a $6.3 million increase in hosting costs and a $1.4 million increase in professional services and product support personnel costs.

These increases were partially offset by a $1.7 million decrease in contractor costs and a $0.2 million decrease in travel expense.

Hosting costs increased due to an increase in sales of our cloud offering during the nine months ended September 30, 2024.

Although cost of sales headcount fell 9% year over year, personnel costs increased due to a $1.2 million increase in severance expense during the nine months ended September 30, 2024.

Contractor costs decreased due to a decrease in the usage of subcontractors for professional services engagements.

Subscriptions gross margin decreased slightly to 88.8% for the nine months ended September 30, 2024, compared to 89.0% in the same period in 2023.

The decrease in subscriptions gross margin was attributable to increased hosting costs, which were substantially offset by an increase in subscriptions revenue during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

Professional services gross margin decreased to 22.4% for the nine months ended September 30, 2024 compared to 26.1% in the same period in 2023 due largely to a decrease in professional services revenue in the comparable periods, partially offset by a decrease in professional services expenses.

Gross margin increased to 74.6% for the nine months ended September 30, 2024 compared to 72.8% for the nine months ended September 30, 2023, driven largely by the increase in subscriptions revenue.

Sales and Marketing Expense

Nine Months Ended September 30,

2024 2023 $ Change % Change

(dollars in thousands)

Sales and marketing $ 175,613 $ 181,338 $ (5,725) (3.2) %

% of revenue 39.0 % 45.3 %

Sales and marketing expense decreased $5.7 million, or 3.2%, in the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to a $10.9 million decrease in sales and marketing personnel costs.

This decrease was partially offset by a $4.3 million increase in marketing costs and a $1.4 million increase in

travel expenses.

Sales and marketing personnel costs declined due to a decrease in sales and marketing headcount of 21% from September 30, 2023 to September 30, 2024 in addition due to a $2.2 million decrease in stock-based compensation expense and a $0.8 million decrease in severance costs.

These decreases were partially offset by a $2.0 million increase in commissions expense.

Marketing costs increased primarily due to spending on our annual Appian World conference and internal sales and marketing events as well as increased spending on public relations, advertising, and lead generation.

Travel and entertainment expense increased due to a higher number of in-person events and engagements relative to the prior year.

Research and Development Expense

Nine Months Ended September 30,

2024 2023 $ Change % Change

(dollars in thousands)

Research and development $ 117,789 $ 118,502 $ (713) (0.6) %

% of revenue 26.2 % 29.6 %

Research and development expense decreased $0.7 million, or 0.6%, in the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to a $3.6 million decrease in research and development personnel costs and a $0.2 million decrease in professional fees.

These decreases were partially offset by a $1.2 million increase in employee medical benefits, a $1.1 million increase in cloud computing expense, and a $0.7 million increase in rent expense.

Although research and development personnel headcount increased 5% from September 30, 2023 to September 30, 2024, overall personnel costs decreased partially due to lower bonus expense, a $1.0 million decrease in severance expense, a $0.6 million decrease in stock-based compensation expense, and additional realized cost savings from our product development center in India.

Professional fees decreased due to a decline in consulting fees from lower usage of external resources to assist in our platform development efforts in the nine months ended September 30, 2024 relative to the nine months ended September 30, 2023.

General and Administrative Expense

Nine Months Ended September 30,

2024 2023 $ Change % Change

(dollars in thousands)

General and administrative

$ 108,327 $ 82,342 $ 25,985 31.6 %

% of revenue 24.1 % 20.6 %

General and administrative expense increased $26.0 million, or 31.6%, in the nine months ended September 30, 2024 compared to the same period in 2023 primarily due to an increase of $11.2 million in amortization expense related to our judgment preservation insurance policy.

In addition, professional fees increased $7.2 million due to higher legal fees incurred in the nine months ended September 30, 2024 relative to the prior year and a $5.7 million decrease in insurance reimbursements associated with our litigation against Pegasystems as a result of receiving reimbursements in the prior year compared to none in the current year.

Rent expense also increased $6.3 million, primarily driven by $5.5 million of lease impairment charges recognized during the second quarter of 2024.

Other Non-Operating Income, Net

Nine Months Ended September 30,

Interest expense decreased by $0.3 million in the three months ended March 31, 2025 as compared to the corresponding period in 2024 primarily due to a lower effective interest rate on our outstanding principal across the comparable periods.

Income Tax Expense (Benefit)

Three Months Ended March 31,

2025 2024 $ Change % Change

(dollars in thousands)

Other income, net

$ (5,882) $ (4,637) $ (1,245) 26.8 %

Income tax expense (benefit)

$ 741 $ (465) $ 1,206 ***

Other income, net was $5.9 million in the nine months ended September 30, 2024 compared to other income, net of $4.6 million in the nine months ended September 30, 2023.

This change was attributed to a $1.8 million increase in other income related to short-swing profit disgorgement payments to us from a public stockholder of our Class A common stock during the nine months ended September 30, 2024.

In addition, in the first quarter of 2024, we received a $1.4 million payment from a state government related to the achievement of certain capital investment goals.

These increases were partially offset by a $1.9 million decrease in interest income in the nine months ended September 30, 2024 relative to the prior year stemming from decreased investments.

Interest Expense

Nine Months Ended September 30,

2024 2023 $ Change % Change

(dollars in thousands)

Interest expense $ 17,921 $ 12,790 $ 5,131 40.1 %

% of revenue 4.0 % 3.2 %

Interest expense increased by $5.1 million in the nine months ended September 30, 2024 as compared to the corresponding period in 2023 primarily due to interest expense incurred on additional credit facility borrowings that we entered into during the first quarter of 2024 and the latter half of 2023.

Income Tax Expense

Nine Months Ended September 30,

2024 2023 $ Change % Change

(dollars in thousands)

Income tax expense

0.4 % (0.3) %

Income tax expense decreased by $1.4 million in the nine months ended September 30, 2024 as compared to the corresponding period in 2023 primarily due to lower pre-tax book income at our foreign subsidiaries as well as a discrete benefit recognized in the nine months ended September 30, 2024.

The discrete benefit was primarily related to net operating loss adjustments at one of our foreign subsidiaries.

*** Indicates a percentage that is not meaningful.

Income tax expense increased by $1.2 million in the three months ended March 31, 2025 as compared to the corresponding period in 2024.

This change was primarily driven by increased pre-tax book income in certain international subsidiaries for the three months ended March 31, 2025.

The change in pre-tax book income was primarily attributable to increases in non-operating unrealized foreign exchange gains.

Non-GAAP Financial Measures

1 unchanged sentence

We use these non-GAAP financial performance measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons.

Management believes these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenses that may not be indicative of

our recurring core business operating results.

Management believes these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenses that may not be indicative of our recurring core business operating results.

We believe both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods.

3 unchanged sentences

non-GAAP subscriptions cost of revenue, non-GAAP professional services costs of revenue, non-GAAP total cost of revenue, non-GAAP total operating expense, non-GAAP operating loss, non-GAAP income tax expense, non-GAAP net income (loss), and non-GAAP net income (loss) per share, basic and diluted.

These non-GAAP financial performance measures exclude the effect of stock-based compensation expense, certain non-ordinary litigation-related expenses consisting of legal and other professional fees associated with the Pegasystems cases (net of insurance reimbursements), or Litigation Expense, amortization of the judgment preservation insurance policy, or JPI Amortization, severance costs related to an involuntary reduction in our workforce, or Severance Costs, lease impairment and lease-related charges associated with actions taken to reduce the footprint of our leased office spaces, or Lease Impairment and Lease-Related Charges, and a short-swing profit disgorgement paid to us by an investor, or Short-Swing Profit Payment.

While some of these items may be recurring in nature and should not be disregarded in the evaluation of our earnings performance, it is useful to exclude such items when analyzing current results and trends compared to other periods as these items can vary significantly from period to period depending on specific underlying transactions or events that may occur.

These non-GAAP financial performance measures exclude the effect of stock-based compensation expense, unrealized foreign exchange rate gains and losses, certain non-ordinary litigation-related expenses consisting of legal and other professional fees associated with the Pegasystems cases (net of insurance reimbursements), or Litigation Expense, amortization of the judgment preservation insurance policy, or JPI Amortization, severance costs related to an involuntary reduction in our workforce, or Severance Costs, lease impairment and lease-related charges associated with actions taken to reduce the footprint of our leased office spaces, or Lease Impairment and Lease-Related Charges, and a short-swing profit disgorgement paid to us by an investor, or Short-Swing Profit Payment.

While some of these items may be recurring in nature and should not be disregarded in the evaluation of our earnings performance, it is useful to exclude such items when

analyzing current results and trends compared to other periods as these items can vary significantly from period to period depending on specific underlying transactions or events that may occur.

Therefore, while we may incur or recognize these types of expenses in the future, we believe removing these items for purposes of calculating our non-GAAP financial measures provides investors with a more focused presentation of our ongoing operating performance.

We also discuss adjusted EBITDA, a non-GAAP financial performance measure we believe offers a useful view of the overall operation of our business.

We define adjusted EBITDA as net loss before (1) other expense (income), net, (2) interest expense, (3) income tax expense, (4) depreciation expense and amortization of intangible assets, (5) stock-based compensation expense, (6) Litigation Expense, (7) JPI Amortization, (8) Severance Costs, and (9) Lease Impairment and Lease-Related Charges.

We define adjusted EBITDA as net loss before (1) other expense (income), net, (2) interest expense, (3) income tax expense, (4) depreciation expense and amortization of intangible assets, (5) stock-based compensation expense, (6) Litigation Expense, (7) JPI Amortization, and (8) Lease Impairment and Lease-Related Charges.

The most directly comparable GAAP financial measure to adjusted EBITDA is net loss.

3 unchanged sentences

The following tables reconcile our non-GAAP measures to their nearest comparable GAAP measures (in thousands, except per share data):

GAAP Measure Stock-Based Compensation Litigation Expense JPI Amortization Severance Costs Lease Impairment and Lease-Related Charges

Short-Swing Profit Payment

Non-GAAP Measure

Three Months Ended September 30, 2024

GAAP Measure Stock-Based Compensation Litigation Expense JPI Amortization Lease Impairment and Lease-Related Charges

Unrealized Foreign Exchange Rate Gains and Losses Non-GAAP Measure

Three Months Ended March 31, 2025

Subscriptions cost of revenue $ 14,894 $ (243) $ — $ — $ — $ — $ 14,651

4 unchanged sentences

(834) 10,039 1,712 3,084 312 — 14,313

Income tax expense

1,319 117 — — — — — 1,436

Net (loss) income

(2,100) 9,388 1,979 3,635 — 324 (1,799) 11,427

Net (loss) income per share, basic

$ (0.03) $ 0.13 $ 0.03 $ 0.05 $ — $ — $ (0.02) $ 0.16

Net (loss) income per share, diluted (a,b)

$ (0.03) $ 0.13 $ 0.03 $ 0.05 $ — $ — $ (0.02) $ 0.15

Nine Months Ended September 30, 2024

Subscriptions cost of revenue $ 39,614 $ (641) $ — $ — $ — $ — $ — $ 38,973

Professional services cost of revenue 74,880 (4,364) — — (1,398) — — 69,118

Total cost of revenue 114,494 (5,005) — — (1,398) — — 108,091

Total operating expense 401,729 (25,006) (3,442) (12,643) (4,136) (5,786) — 350,716

Operating (loss) income

Non-operating (income) expense

(5,716) — — — — 4,016 (1,700)

Income tax expense

Income tax impact of above items

741 455 — — — (267) 929

1 unchanged sentence

(1,177) 9,584 1,712 3,084 312 (3,749) 9,766

Net (loss) income per share, basic and diluted (b)

Net (loss) income per share, basic and diluted (a,b)

$ (0.02) $ 0.13 $ 0.02 $ 0.04 $ — $ (0.05) $ 0.13

(a) Accounts for the impact of 1.8 million shares of dilutive securities.

(b) Per share amounts do not foot due to rounding.

GAAP Measure Stock-Based Compensation Litigation Expense

JPI Amortization Severance Costs

Non-GAAP Measure

Three Months Ended September 30, 2023

Three Months Ended March 31, 2024

Subscriptions cost of revenue $ 12,270 $ (213) $ — $ — $ — $ — $ 12,057

4 unchanged sentences

(19,535) 10,606 742 4,504 — — (3,683)

Income tax expense

178 88 — — — 266

Net (loss) income

(22,251) 11,099 (4,961) 1,485 — (14,628)

Net (loss) income per share, basic and diluted

$ (0.30) $ 0.15 $ (0.07) $ 0.02 $ — $ (0.20)

Nine Months Ended September 30, 2023

Subscriptions cost of revenue $ 32,492 $ (713) $ — $ — $ (30) $ 31,749

Professional services cost of revenue 76,515 (4,598) — — (158) 71,759

Total cost of revenue 109,007 (5,311) — — (188) 103,508

Total operating expense 382,182 (27,904) 2,772 (1,485) (6,111) 349,454

Operating (loss) income

Non-operating expense (income)

8,207 — — — — (11,848) (3,641)

Income tax expense

Income tax impact of above items

(465) 604 — — — 935 1,074

1 unchanged sentence

(32,923) 10,002 742 4,504 — 10,913 (6,762)

Net (loss) income per share, basic and diluted (a)

$ (1.39) $ 0.46 $ (0.04) $ 0.02 $ 0.09 $ (0.86)

(a) Per share amounts do not foot due to rounding.

The following table reconciles GAAP net loss to adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023 (in thousands):

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

Net (loss) income per share, basic and diluted

$ (0.45) $ 0.14 $ 0.01 $ 0.06 $ — $ 0.15 $ (0.09)

(a) Accounts for the impact of 0.4 million shares of dilutive securities.

(b) Per share amounts do not foot due to rounding.

The following table reconciles GAAP net loss to adjusted EBITDA for the three months ended March 31, 2025 and 2024 (in thousands):

Three Months Ended March 31,

GAAP net loss $ (1,177) $ (32,923)

3 unchanged sentences

Income tax expense

1,319 178 690 2,137

Depreciation expense and amortization of intangible assets

2,562 2,340 7,503 7,046

Stock-based compensation expense 10,039 10,606

Litigation Expense

1,979 (4,961) 3,442 (2,772)

JPI Amortization

3,635 1,485 12,643 1,485

Severance Costs

— — 5,534 6,299

Lease Impairment and Lease-Related Charges

324 — 5,786 —

Adjusted EBITDA $ 16,759 $ (1,322)

Liquidity and Capital Resources

The following table presents selected financial information and statistics pertaining to liquidity and capital resources as of September 30, 2024 and December 31, 2023:

September 30, 2024 December 31, 2023

The following table presents selected financial information and statistics pertaining to liquidity and capital resources as of March 31, 2025 and December 31, 2024:

March 31, 2025 December 31, 2024

Cash and cash equivalents $ 134,982 $ 118,552

4 unchanged sentences

We believe our existing cash and cash equivalents and short-term investments and marketable securities, together with any positive cash flows from operations and available borrowings under our line of credit, will be sufficient to support working capital and capital expenditure requirements for at least the next twelve months.

We have in the past, and may in the future enter into, investments in or acquisitions of complementary businesses, products, or technologies, which could also require us to seek additional equity financing, incur indebtedness, or use cash resources.

We have in the past entered into, and may in the future enter into, investments in or acquisitions of complementary businesses, products, or technologies, which could also require us to seek additional equity financing, incur indebtedness, or use cash resources.

We have no present binding agreements or commitments to enter into any such acquisitions.

7 unchanged sentences

We have been using the proceeds to fund the growth of our business and support our working capital requirements.

As of September 30, 2024, we were in compliance with all covenants, had used borrowing capacity of $62.0 million under our $100.0 million revolving credit facility, and had outstanding letters of credit totaling $14.7 million in connection with securing our leased office space.

We are currently in compliance with all covenants, had used borrowing capacity of $62.0 million under our $100.0 million revolving credit facility, and had outstanding letters of credit totaling $14.6 million in connection with securing our leased office space.

We expect future sources of funds to consist primarily of cash generated from sales of subscriptions and the related professional services.

10 unchanged sentences

In addition, in February 2024 our Board of Directors authorized a share repurchase program, under which we repurchased approximately 1.3 million shares of our common stock for approximately $50.0 million during the first quarter of 2024.

Outside of the above items and cash used by operations, other uses of cash in 2024 to date have included capital expenditures related to the expansion of the new leased facility for our research development center in India and principal repayments of our term loan debt.

Furthermore, we have a non-cancellable cloud hosting arrangement with Amazon Web Services that contains provisions for minimum purchase commitments.

We may in the future opportunistically repurchase our common stock within the context of maintaining our strong capital position.

Outside of the above items and cash used by operations, other uses of cash in 2025 to date have included capital expenditures related to the expansion of the new leased facilities and principal repayments of our term loan debt.

Furthermore, we have a non-cancellable cloud hosting arrangement with AWS that contains provisions for minimum purchase commitments.

Specifically, purchase commitments under the agreement total $220.0 million over five years.

The agreement, which started in July 2021 and is now in its fourth year as of September 30, 2024, contains minimum spending requirements of $28.0 million in both the fourth and fifth years.

Spending under this agreement for the three and nine months ended September 30, 2024, totaled $10.8 million and $31.8 million, respectively.

Spending under this agreement for the three and nine months ended September 30, 2023, totaled $9.3 million and $27.8 million, respectively.

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.

The agreement, which was originated in July 2021 and amended in October 2024, currently contains minimum annual spending requirements of $44.0 million from November 2024 to October 2029.

Spending under this agreement for the three months ended March 31, 2025 and 2024 totaled $10.4 million and $10.3 million, respectively.

The timing of payments under the agreement may vary.

We expect to meet our minimum annual spending requirement during the term of the arrangement.

Historical Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

2025 2024 $ Change % Change

5 unchanged sentences

Changes in working capital 37,785 27,461 10,324 37.6

Net cash used by operating activities (6,993) (102,198) 95,205 (93.2)

Net cash provided by operating activities 44,966 18,866 26,100 ***

Investing activities:

2 unchanged sentences

Financing activities:

Net cash (used by) provided by financing activities (8,496) 82,388 (90,884) ***

Net cash used by financing activities (5,509) (4,249) (1,260) 29.7

Effect of exchange rates 1,050 (1,319) 2,369 ***

4 unchanged sentences

Operating Activities

Net cash used by operating activities was $7.0 million for the nine months ended September 30, 2024 as compared to $102.2 million used by operating activities for the nine months ended September 30, 2023.

The decrease in net cash used by operating activities was primarily due to the prior year payment of $57.3 million for our JPI policy.

In addition, the decrease in cash used by operating activities was attributed to stronger cash collections from accounts receivable as a result of increased revenues as well as headcount reductions and other cost management activities during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

Net cash provided by operating activities was $45.0 million for the three months ended March 31, 2025 as compared to $18.9 million provided by operating activities for the three months ended March 31, 2024.

The increase in net cash provided by operating activities was primarily driven by increased cash collections stemming from strong contract bookings in the fourth quarter of 2024 and other cost management activities during the three months ended March 31, 2025 as compared to the three months ended March 31, 2024.

Investing Activities

Net cash used by investing activities was $34.3 million for the nine months ended September 30, 2024 as compared to $0.9 million in net cash provided by investing activities for the nine months ended September 30, 2023.

This change was primarily driven by a decline of $51.0 million in proceeds from the sale of investments, which was partially offset by a $10.8 million decrease in purchases of investments and a $5.0 million decrease in capital expenditures.

Net cash used by investing activities was $24.1 million for the three months ended March 31, 2025 as compared to $7.5 million in net cash provided by investing activities for the three months ended March 31, 2024.

This change was primarily driven by a $37.0 million increase in purchases of short-term investments.

This increase was partially offset by a $4.0 million increase in proceeds from the maturity of investments and a $1.5 million decrease in capital expenditure payments.

Financing Activities

Net cash used by financing activities was $8.5 million for the nine months ended September 30, 2024 as compared to $82.4 million of net cash provided by financing activities for the nine months ended September 30, 2023.

The decrease in net cash provided by financing activities was primarily due to a $50.0 million increase in common stock repurchases, a $42.0 million decrease in proceeds from borrowings, and a $1.1 million increase in debt repayments, all of which were partially offset by a $2.4 million decrease in payments for employee taxes related to the net share settlement of equity awards during the nine months ended September 30, 2024.

Net cash used by financing activities was $5.5 million for the three months ended March 31, 2025 as compared to $4.2 million of net cash used by financing activities for the three months ended March 31, 2024.

The increase in net cash used by financing activities was primarily due to a $1.3 million increase in debt repayments and a $0.3 million increase in payments for employee taxes related to the net share settlement of equity awards during the three months ended March 31, 2025.

Critical Accounting Estimates

4 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis