Appian Corporation, a leading provider of low-code automation solutions, has reported its financial results for the first quarter of 2024, showcasing strong performance and continued innovation in its platform offerings.

In the first quarter of 2024, Appian's cloud subscription revenue grew 24% year-over-year to $86.6 million. Total subscriptions revenue, which includes both cloud and on-premises term license subscriptions, increased 19% to $117.7 million. The company's total revenue for the quarter reached $149.8 million, representing an 11% year-over-year growth.

Appian's cloud subscription revenue retention rate, a key metric reflecting customer loyalty and expansion, stood at 120% as of March 31, 2024, up from 115% a year ago and 119% in the prior quarter. The company continues to target a cloud subscription revenue retention rate of 110% to 120% on a quarterly basis.

Business Overview

Appian is a software company that automates business processes. The company's AI Process Platform includes everything needed to design, automate, and optimize even the most complex processes, from start to finish. Appian's platform is trusted by the world's most innovative organizations to improve workflows, unify data, and optimize operations, resulting in better growth and superior customer experiences.

The company generates the majority of its revenue from sales of subscriptions, which include cloud subscriptions bundled with maintenance and support and hosting services, as well as term license subscriptions bundled with maintenance and support. Appian's subscription contracts are priced based primarily on the number of users who access and utilize the applications built on its platform or through non-user-based single application licenses. The subscription contract terms generally vary from one to three years, with most providing for payment in advance on an annual, quarterly, or monthly basis.

Appian has invested in its Customer Success organization to help ensure customers can effectively build and deploy applications on its platform. The company has also established strategic partnerships, including with Accenture, Capgemini, Deloitte, EY, KPMG, PwC, and TCS, which allow these partners to refer customers to Appian to purchase subscriptions. Appian's partners then provide professional services directly to the customers using its platform. Over time, the company expects its professional services revenue as a percentage of total revenue to decline as it increasingly relies on strategic partners to help its customers deploy its software.

Appian's customers primarily include organizations in the financial services, government, life sciences, insurance, manufacturing, energy, healthcare, telecommunications, and transportation industries. Generally, the company's sales team targets its efforts towards organizations with over 2,000 employees and $2 billion in annual revenue. Revenue from government agencies represented 21.7% and 20.5% of Appian's total revenue for the three months ended March 31, 2024 and 2023, respectively. No single end-customer accounted for more than 10% of the company's total revenue in these periods.

Appian operates globally, with its platform supporting multiple languages to facilitate collaboration and address challenges in multinational organizations. In the three months ended March 31, 2024 and 2023, 37.2% and 33.4%, respectively, of the company's total revenue was generated from customers outside of the United States. As of March 31, 2024, Appian operated in 16 countries and believes it has a significant opportunity to continue growing its international footprint.

Financials

Appian's financial performance in the first quarter of 2024 showcased its ability to drive growth and optimize its cost structure. The company's non-GAAP gross margin was 76% in the quarter, compared to 75% in the year-ago period and 78% in the prior quarter. Subscriptions non-GAAP gross profit margin was 90%, consistent with the year-ago period and compared to 91% in the prior quarter.

Total non-GAAP operating expenses were $117.3 million, down 2% from $119.3 million in the year-ago period. Adjusted EBITDA loss was $1.3 million for the quarter, a significant improvement compared to an adjusted EBITDA loss of $15.8 million in the same period last year. The company's non-GAAP net loss was $17.7 million, or $0.24 per share, compared to a non-GAAP net loss of $19.7 million, or $0.27 per share, in the first quarter of 2023.

As of March 31, 2024, Appian had cash and cash equivalents of $170.1 million, providing significant liquidity to fund its operations and investments. For the first quarter, the company generated $18.9 million in cash from operations, compared to cash used in operations of $25.3 million in the same period last year. This improvement reflects the company's progress towards profitability.

Outlook

For the second quarter of 2024, Appian expects cloud subscription revenue to be between $86 million and $88 million, representing year-over-year growth of 16% to 18%. Total revenue is expected to be between $140 million and $144 million, representing year-over-year growth of 10% to 13%. The company anticipates an adjusted EBITDA loss of between $17 million and $13 million for the second quarter.

For the full year 2024, Appian is reaffirming its previously announced cloud revenue and total revenue guidance. The company has also improved its full year adjusted EBITDA guidance, now expecting an adjusted EBITDA loss of between $22.5 million and $17.5 million, an improvement of $2.5 million or 11% from the previous guidance range midpoint.

Recent Developments

During Appian's recent annual user conference, the company showcased several major platform enhancements, including its unique edge AI capabilities, the launch of Process HQ (a real-time, actionable process mining solution), and the introduction of Elastic Process Execution (EPEx), which scales infrastructure on demand to handle spikes in usage.

Appian's edge AI leverages the company's strengths in complementary technologies, such as processes and data. The platform's data fabric connects data sources without requiring data movement, allowing AI to be informed by the right information from across the enterprise. This approach addresses key concerns around privacy, cost efficiency, auditability, and security clearance observance.

The new Process HQ solution provides customers with real-time, actionable process mining capabilities, enabling them to navigate their entire enterprise information, drill down to individual processes, and receive intelligent recommendations for process improvements. This offering builds on Appian's leadership in process automation and the synergies between process mining, process, and data.

Furthermore, the introduction of EPEx demonstrates Appian's commitment to delivering scalable solutions for high-end use cases. This feature allows the platform to increase throughput by 10x to 100x, further cementing the company's leadership in scalability.

Appian also launched ProcureSight, an AI-backed website built on its platform, to help procurement professionals leverage public data sets and gain insights for writing new procurement requests. This offering aligns with the company's strategy of providing AI-powered data synthesis tools to complement its government acquisition management suite.

Conclusion

Appian's strong first quarter performance, coupled with its innovative platform enhancements, positions the company well to capitalize on the growing demand for low-code automation solutions. The company's focus on delivering value to its customers, optimizing its cost structure, and investing in strategic growth initiatives, such as its data fabric and AI capabilities, suggest a promising outlook for Appian's future. As the company continues to execute on its strategy, investors should closely monitor Appian's ability to drive further revenue growth, improve profitability, and solidify its position as a leader in the low-code automation market.