APPIAN CORP

Previous wording

We have invested in our Customer Success organization to help ensure customers are able to build and deploy applications on our platform. 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. We believe our investment in professional services, including strategic partners building their practices around Appian, will drive increased adoption of our platform.

Current wording

We have invested in our professional services organization to help ensure customers are able to build and deploy applications on our platform. We believe our professional services have driven customer success and facilitated the adoption of our platform by customers. 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. We believe our investment in professional services, including strategic partners building their practices around Appian, will drive increased adoption of our platform.

Previous wording

Our customers primarily include financial services, government, life sciences, insurance, manufacturing, energy, healthcare, telecommunications, and transportation organizations. Generally, our sales team targets its efforts to organizations with over 2,000 employees and $2 billion in annual revenue. 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.

Current wording

Our customers primarily include financial services, government, life sciences, insurance, manufacturing, energy, healthcare, telecommunications, and transportation organizations. Generally, our sales team targets its efforts at organizations with over 2,000 employees and $2 billion in annual revenue. For the three and six months ended June 30, 2025, revenue generated from government agencies represented 34.1% and 33.8%, respectively, of total revenue, of which revenue from U.S. federal government agencies was 25.9% and 24.9% of total revenue in each period. For the three and six months ended June 30, 2024, revenue generated from government agencies represented 31.4% and 30.4%, respectively, of total revenue, of which revenue from U.S. federal government agencies was 22.6% and 22.1% of total revenue, respectively.

Previous wording

We offer our platform globally. Our platform supports multiple languages to facilitate collaboration and address challenges in multinational organizations. 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.

Current wording

We offer our platform globally. Our platform supports multiple languages to facilitate collaboration and address challenges in multinational organizations. In the three and six months ended June 30, 2025, 38.4% and 37.3%, respectively, of our total revenue was generated from customers outside of the United States as compared to 38.2% and 37.7% in the three and six months ended June 30, 2024, respectively. As of June 30, 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.

Previous wording

•Further Penetration of Existing Customers -Our sales team seeks to generate additional revenue from existing customers by adding new users to our platform. Many of our customers begin by building a single application and then grow to build dozens of applications on our platform. Generally, the development of new applications on our platform results in the expansion of our user base within an organization and a corresponding increase in revenue. As a result of this “land and expand” strategy, we have generated significant additional revenue from our customer base. 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.

Current wording

•Further Penetration of Existing Customers -Our sales team seeks to generate additional revenue from existing customers by adding new users or application licenses to our platform. Many of our customers begin by building a single application and then grow to build dozens of applications on our platform. Generally, the development of new applications on our platform results in the expansion of our user base within an organization and a corresponding increase in revenue. As a result of this “land and expand” strategy, we have generated significant additional revenue from our customer base. 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.

Previous wording

Our professional services revenue is comprised of fees for consulting services, including application development, deployment assistance, and training related to our platform. Over time, we expect professional services revenue as a percentage of total revenue to decrease as the usage of our partner network expands.

Current wording

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

Previous wording

Professional services gross margin is affected by the growth in our professional services revenue as compared to the growth in, and timing of, the costs of our Customer Success organization as we continue to invest in the growth of our business, as well as by consultant utilization rates. Professional services gross margin is also impacted by the amount of services performed by subcontractors and partners as opposed to internal resources. 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.

Current wording

Professional services gross margin is affected by the growth in our professional services revenue as compared to the growth in, and timing of, the costs of our professional services organization as we continue to invest in the growth of our business, as well as by consultant utilization rates. Professional services gross margin is also impacted by the amount of services performed by subcontractors and partners as opposed to internal resources. The professional services margins for individual quarters remain subject to fluctuation based on the factors discussed above.

Previous wording

Other Non-Operating (Income) Expense, Net

Current wording

Other Non-Operating (Income) Expense

Previous wording

Other expense (income), net consists primarily of gains and losses related to changes in foreign currency exchange rates, interest income on our cash and cash equivalents and investments, and other sources of income or expense not related to our core business operations.

Current wording

Other (income) expense, net consists primarily of gains and losses related to changes in foreign currency exchange rates, interest income on our cash and cash equivalents and investments, and other sources of income or expense not related to our core business operations.

Previous wording

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 $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.

Current wording

Total revenue increased $24.2 million, or 17%, in the three months ended June 30, 2025 compared to the same period in 2024 due to an increase in our subscriptions revenue of $19.7 million coupled with an increase in our professional services revenue of $4.5 million. The increase in subscriptions revenue was driven by an $18.5 million increase in cloud subscriptions revenue, a $0.5 million increase in term license subscriptions revenue, and a $0.7 million increase in maintenance and support revenue. With respect to new versus existing customers, there was an $11.3 million increase in subscriptions revenue from sales to new customers, while the remaining $8.4 million of the increase was attributable to expanded deployments, price increases on renewals, and corresponding sales of additional subscriptions to existing customers. The increase in professional services revenue was due primarily to a $6.1 million increase in revenue from sales to new customers customers, which was partially offset by a $1.6 million decrease in sales to existing customers.

Previous wording

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.

Current wording

Cost of revenue increased $4.5 million, or 11%, in the three months ended June 30, 2025 compared to the same period in 2024, primarily due to a $3.4 million increase in hosting costs coupled with a $2.0 million increase in contractor costs. These increases were partially offset by a $0.9 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 June 30, 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 headcount of 8% from June 30, 2024 to June 30, 2025.

Previous wording

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.

Current wording

Income tax expense increased by $1.7 million in the three months ended June 30, 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 June 30, 2025. The change in pre-tax book income was primarily attributable to increases in unrealized foreign exchange gains.

Previous wording

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.

Current wording

Sales and marketing expense decreased $9.7 million, or 8%, in the six months ended June 30, 2025 compared to the same period in 2024, primarily due to a $7.3 million decrease in sales and marketing personnel costs, a $1.6 million decrease in allocated costs such as rent and employee medical costs, and a $0.7 million decrease in marketing expenses. These decreases were partially offset by a $0.7 million increase in travel and entertainment costs and a $0.6 million increase in contractor costs. Sales and marketing personnel costs decreased due to a decrease in sales and marketing headcount of 25% from June 30, 2024 to June 30, 2025. 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.

Previous wording

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.

Current wording

Research and development expense increased $0.6 million, or 1%, in the six months ended June 30, 2025 compared to the same period in 2024. This change is primarily attributable to a $0.6 million increase in research and development personnel costs. Although research and development headcount remained consistent period over period, overall personnel costs increased due to higher stock compensation and severance expense, offset by a reduction in salaries expense.

Previous wording

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.

Current wording

Other income, net was $23.3 million in the six months ended June 30, 2025 compared to other expense, net of $6.7 million in the six months ended June 30, 2024. This change was primarily due to $19.7 million in foreign exchange gains in the six months ended June 30, 2025 as compared to $11.7 million in foreign exchange losses in the six months ended June 30, 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.

Previous wording

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.

Current wording

Interest expense decreased by $1.1 million in the six months ended June 30, 2025 as compared to the corresponding period in 2024 primarily due to a lower effective interest rate and lower outstanding principal across the comparable periods.

Previous wording

Our non-GAAP financial performance measures include the following: 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, 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.

Current wording

Our non-GAAP financial performance measures include the following: non-GAAP subscriptions cost of revenue, non-GAAP professional services cost of revenue, non-GAAP total cost of revenue, non-GAAP total operating expense, non-GAAP operating income (loss), non-GAAP income tax expense (benefit), 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, 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, and 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. 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.

Previous wording

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, and (8) Lease Impairment and Lease-Related Charges. The most directly comparable GAAP financial measure to adjusted EBITDA is net loss. Users should consider the limitations of using adjusted EBITDA, including the fact that this measure does not provide a complete measure of our operating performance. Adjusted EBITDA is not intended to purport to be an alternative to net loss as a measure of operating performance or to cash flows from operating activities as a measure of liquidity.

Current wording

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 (income) expense , net, (2) interest expense, (3) income tax expense (benefit), (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. The most directly comparable GAAP financial measure to adjusted EBITDA is net loss. Users should consider the limitations of using adjusted EBITDA, including the fact that this measure does not provide a complete measure of our operating performance. Adjusted EBITDA is not intended to purport to be an alternative to net loss as a measure of operating performance or to cash flows from operating activities as a measure of liquidity.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

The following table reconciles GAAP net loss to adjusted EBITDA for the three and six months ended June 30, 2025 and 2024 (in thousands):

Previous wording

The Credit Agreement matures on November 3, 2027. We have been using the proceeds to fund the growth of our business and support our working capital requirements. 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.

Current wording

The Credit Agreement matures on November 3, 2027. We have been using the proceeds to fund the growth of our business and support our working capital requirements. 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 $14.7 million in connection with securing our leased office space.

Previous wording

In 2024, we entered into a Judgment Preservation Insurance policy in connection with our $2.036 billion judgment against Pegasystems. See Note 12 to the consolidated financial statements for additional details. The total cost of the policy was $57.3 million, which we paid with operating cash on hand. 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. We may in the future opportunistically repurchase our common stock within the context of maintaining our strong capital position.

Current wording

In 2024, we entered into a Judgment Preservation Insurance policy in connection with our $2.036 billion judgment against Pegasystems. See Note 12 to the consolidated financial statements for additional details. The total cost of the policy was $57.3 million, which we paid with operating cash on hand. 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. In addition, in May 2025, our Board of Directors authorized a second program to repurchase up to $10.0 million of our common stock from May 2025 to December 2025. In the second quarter of 2025, we repurchased 0.3 million shares under this program at an average share price of $31.91 and totaling $10.0 million.

Previous wording

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 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.

Current wording

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 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 and six months ended June 30, 2025 totaled $12.9 million and $23.3 million, respectively. Spending under this agreement for the three and six months ended June 30, 2024 totaled $10.7 million and $21.0 million, respectively. We expect to meet our minimum annual spending requirement during the term of the arrangement.

Previous wording

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.

Current wording

Net cash provided by operating activities was $43.0 million for the six months ended June 30, 2025 as compared to $1.3 million provided by operating activities for the six months ended June 30, 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 first half of 2025 as well as our continuing cost management activities.

Previous wording

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.

Current wording

Net cash used by investing activities was $33.1 million for the six months ended June 30, 2025 as compared to $21.6 million in net cash used by investing activities for the six months ended June 30, 2024. This change was primarily driven by a $30.9 million increase in purchases of short-term investments. This increase was partially offset by an $18.3 million increase in proceeds from the maturity of investments and a $1.1 million decrease in capital expenditure payments.

Previous wording

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.

Current wording

Net cash used by financing activities was $19.0 million for the six months ended June 30, 2025 as compared to $6.7 million of net cash used by financing activities for the six months ended June 30, 2024. The increase in net cash used by financing activities was primarily due to a $50.0 million decrease in proceeds from borrowings, which was partially offset by a $40.0 million decrease in repurchases of common stock and a $2.5 million increase in debt repayments during the six months ended June 30, 2025.