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What changed in APPIAN CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of APPIAN CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+389 added−398 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-16)

Top changes in APPIAN CORP's 2023 10-K

389 paragraphs added · 398 removed · 283 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

34 edited+20 added−36 removed15 unchanged
Biggest changeMaterial risks that may affect our business, financial condition, results of operations, and trading price of our Class A common stock include, but are not necessarily limited to, the following: • Our recent growth may not be indicative of our future growth and, if we continue to grow, we may not be able to manage our growth effectively. • If we are unable to sustain our revenue growth rate, we may not achieve or maintain profitability in the future. • We may not be able to scale our business quickly enough to meet our customers’ growing needs, and if we are not able to grow efficiently, our operating results could be harmed. • We are dependent on a single product, and the lack of continued market acceptance of our platform could cause our operating results to suffer. • Market adoption of low-code platforms to drive digital transformation is new and unproven and may not grow as we expect, which may harm our business and prospects. • We currently face significant competition. • If our security measures are actually or perceived to have been breached or unauthorized access to our platform or customer data is otherwise obtained, our platform may be perceived as not being secure, customers may reduce the use of or stop using our platform, and we may incur significant liabilities. • We derive a material portion of our revenue from a limited number of customers, and the loss of one or more of these customers could adversely impact our business, results of operations, and financial condition. • We rely on the performance of highly skilled personnel, including senior management and our engineering, professional services, sales, and technology professionals. • If we do not continue to innovate and provide a platform that is useful to our customers, we may not remain competitive, and our revenue and operating results could suffer. 11 • We are substantially dependent upon customer renewals, the addition of new customers, and the continued growth of our subscriptions revenue. • Because we generally recognize revenue from cloud subscriptions ratably over the term of the subscription agreement, near term changes in sales may not be reflected immediately in our operating results. • We rely upon Amazon Web Services, or AWS, to operate our cloud offering; any disruption of or interference with our use of AWS would adversely affect our business, results of operations, and financial condition. • We employ third-party licensed software for use in or with our software, and the inability to maintain these licenses or errors in the software we license could result in increased costs or reduced service levels, which would adversely affect our business. • If we do not or cannot maintain the compatibility of our platform with third-party applications that our customers use in their businesses, our revenue will decline. • Because our software could be used to collect and store personal information, domestic and international privacy concerns could result in additional costs and liabilities to us or inhibit sales of our software. • If our platform fails to function in a manner that allows our customers to operate in compliance with regulations and/or industry standards, our revenue and operating results could be harmed. • We are subject to anti-corruption laws with respect to our domestic and international operations. • We are subject to governmental export and import controls and economic and trade sanctions that could impair our ability to conduct business in international markets and subject us to liability if we are not in compliance with applicable laws and regulations. • Any failure to protect our proprietary technology and intellectual property rights could substantially harm our business and operating results. • Portions of our platform utilize open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business. • If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected. • Our ability to use net operating losses to offset future taxable income may be subject to certain limitations. • The dual class structure of our common stock and the existing ownership of capital stock by Matt Calkins, our founder and Chief Executive Officer, has the effect of concentrating voting control with Mr.
Biggest changeThese risks are discussed more fully in the section titled “Risk Factors.” Material risks that may affect our business, financial condition, results of operations, and trading price of our Class A common stock include, but are not necessarily limited to, the following: • Our recent growth may not be indicative of our future growth and, if we continue to grow, we may not be able to manage our growth effectively. • If we are unable to sustain our revenue growth rate, we may not achieve or maintain profitability in the future. • We may not be able to scale our business quickly enough to meet our customers’ growing needs, and if we are not able to grow efficiently, our operating results could be harmed. • We are dependent on a single product, and the lack of continued market acceptance of our platform could cause our operating results to suffer. • We currently face significant competition. • If our security measures are actually or perceived to have been breached, or if unauthorized access to our platform or customer data occurs, our platform may be perceived as not being secure, and customers may reduce the use of or stop using our platform, and we may incur significant liabilities. • We derive a material portion of our revenue from a limited number of customers, and the loss of one or more of these customers could materially and adversely impact our business, results of operations, and financial condition. • We have experienced losses in the past, and we may not achieve or sustain profitability in the future. • AI is a disruptive set of technologies that may affect the markets for our software dramatically and in unpredictable ways. • We rely on the performance of highly skilled personnel, including senior management and our engineering, professional services, sales, and technology professionals, and if we are unable to retain or motivate key personnel or hire, retain, and motivate qualified personnel, our business would be harmed. • If we do not continue to innovate and provide a platform that is useful to our customers, we may not remain competitive, and our revenue and operating results could suffer. • We are substantially dependent upon customer renewals, the addition of new customers, and the continued growth of our subscriptions revenue. • Because we generally recognize revenue from cloud subscriptions ratably over the term of the subscription agreement, near term changes in sales may not be reflected immediately in our operating results. • We may not achieve market acceptance of our pre-built solutions, which may adversely affect our financial results. 11 • If our platform fails to perform properly or there are defects or disruptions in the rollout of our platform updates or enhancements, our reputation could be adversely affected, our market share could decline, and we could be subject to liability claims. • We rely upon Amazon Web Services, or AWS, to operate our cloud offering; any disruption of or interference with our use of AWS would adversely affect our business, results of operations, and financial condition. • Our growth depends in part on the success of our strategic relationships with third parties. • We employ third-party licensed software for use in or with our software, and the inability to maintain these licenses or errors in the software we license could result in increased costs or reduced service levels, which would adversely affect our business. • If we do not or cannot maintain the compatibility of our platform with third-party applications that our customers use in their businesses, our revenue will decline. • Because we collect and store personal information, domestic and international privacy concerns could result in additional costs and liabilities to us or inhibit sales of our software, and subject us to complex and evolving federal, state, and foreign laws and regulations regarding privacy, data protection, and other related matters. • If our platform fails to function in a manner that allows our customers to operate in compliance with regulations and/or industry standards, our revenue and operating results could be harmed. • We are subject to governmental export and import controls and economic and trade sanctions that could impair our ability to conduct business in international markets and subject us to liability if we are not in compliance with applicable laws and regulations. • Any failure to protect our proprietary technology and intellectual property rights could substantially harm our business and operating results. • Portions of our platform utilize open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business. • Our ability to use net operating losses to offset future taxable income may be subject to certain limitations. • The dual class structure of our common stock and the existing ownership of capital stock by Matt Calkins, our founder and Chief Executive Officer, have the effect of concentrating voting control with Mr.
At the same time, our industry-leading Customer Success team helps customers to build and deploy applications on our platform to achieve their digital transformation goals more quickly. Our Growth Strategy Key elements of our growth strategy include: • Expand our customer base.
At the same time, our industry-leading Customer Success team helps customers build and deploy applications on our platform to achieve their digital transformation goals more quickly. Our Growth Strategy Key elements of our growth strategy include: • Expand our customer base.
Our strategic partners work with organizations undergoing digital transformation projects, and when they recognize an opportunity for our platform, they often introduce us to potential customers. Many of our customers begin by building a single application and grow to create dozens of applications on our platform, which implicitly increases their return on investment.
Our strategic partners work with organizations undergoing digital transformation projects, and when they recognize an opportunity for our platform, they often introduce us to potential customers. 5 Many of our customers begin by building a single application and grow to create dozens of applications on our platform, which implicitly increases their return on investment.
We cannot provide complete assurance that any of our patent applications will result in the issuance of a patent or that the examination process will not require us to narrow our claims. Any patents we may be issued may be contested, circumvented, found unenforceable, or invalidated, and we may not be able to prevent third parties from infringing them.
We cannot provide complete assurance that any of our 8 patent applications will result in the issuance of a patent or that the examination process will not require us to narrow our claims. Any patents we may be issued may be contested, circumvented, found unenforceable, or invalidated, and we may not be able to prevent third parties from infringing them.
The principal competitive factors in our market include: • Platform features, reliability, performance, and effectiveness; • Ease of use and speed; • Platform extensibility and ability to integrate with other technology infrastructures; • Deployment flexibility; • Robustness of professional services and customer support; • Price and total cost of ownership; • Strength of platform security and adherence to industry standards and certifications; • Strength of sales and marketing efforts; and • Brand awareness and reputation.
The principal competitive factors in our market include: • Platform features, reliability, performance, and effectiveness; • Ease of use and speed; • Data Fabric; • Platform extensibility and ability to integrate with other technology infrastructures; • Deployment flexibility; • Robustness of professional services and customer support; • Price and total cost of ownership; • Strength of platform security and adherence to industry standards and certifications; • Strength of sales and marketing efforts; and • Brand awareness and reputation.
With this functionality, our customers gain a deeper understanding of their business operations and pinpoint areas for improvement. Using this data, customers can drive continuous process improvement and optimize their processes for maximum efficiency and effectiveness. These features provide customers with the necessary insights to make informed decisions and optimize their operations to meet the evolving needs of their business.
Customers can gain a deeper understanding of their business operations and pinpoint areas for improvement. Using this data, customers can drive continuous process improvement and optimize their processes for maximum efficiency and effectiveness. These features provide customers with the necessary insights to make informed decisions and optimize their operations to meet the evolving needs of their business.
Appian and our partners offer pre-built solutions in certain of our key industries such as financial services, government acquisition, and insurance to give our customers an even faster start. Every Appian solution is built on our platform and designed to be standardized, upgradeable, and compatible with each other. 6 • Expand our international footprint.
We, along with our partners, offer pre-built solutions in certain of our key industries such as financial services, government acquisition, and insurance to give our customers an even faster start. Every Appian solution is built on our platform and designed to be standardized, upgradeable, and compatible with each other. • Expand our international footprint.
Facilities As of December 31, 2022, we lease our headquarters office in McLean, Virginia, and we also have four leased offices in cities outside the United States. In addition to our leased offices, we occupied seven flexible workspaces outside of the United States. Our use of flexible workspaces is dependent upon our current business needs.
Facilities As of December 31, 2023, we lease our headquarters office in McLean, Virginia, and we also have five leased offices in cities outside the United States. In addition to our leased offices, we occupied seven flexible workspaces outside of the United States. Our use of flexible workspaces is dependent upon our current business needs.
Corporate Information Our Class A common stock is listed on the Nasdaq Global Market under the symbol “APPN”. 9 Our corporate headquarters is located at 7950 Jones Branch Drive, McLean, Virginia 22102, and our telephone number is (703) 442-8844.
Corporate Information Our Class A common stock is listed on the Nasdaq Global Market under the symbol “APPN.” Our corporate headquarters is located at 7950 Jones Branch Drive, McLean, Virginia 22102, and our telephone number is (703) 442-8844.
These forward-looking statements include, but are not limited to, statements concerning the following: • Our market opportunity and the expansion of our core software markets in general; • The effects of increased competition as well as innovations by new and existing competitors in our market; • Our ability to adapt to technological change and effectively enhance, innovate, and scale our platform and professional services; • Our ability to effectively manage or sustain our growth and to achieve profitability; • Potential acquisitions and integration of complementary businesses and technologies; • Our ability to maintain, or strengthen awareness of, our brand; • Perceived or actual problems with the integrity, reliability, quality, or compatibility of our platform, including unscheduled downtime or outages; • The anticipated expansion of the usage of partners to perform professional services; • General macroeconomic conditions, including rising interest rates and inflation, slower growth or recession, and geopolitical turmoil; • Future revenue, hiring plans, expenses, capital expenditures, capital requirements, and stock performance; • Our ability to attract and retain qualified employees and key personnel and manage our overall headcount; • The expected benefits to our clients and potential clients of our product and service offerings; 10 • The timing of revenue recognition under license and cloud arrangements; • Our expectation that subscriptions revenue as a percentage of total revenue will continue to increase; • Our backlog of license, maintenance, cloud, and services agreements and the timing of future cash receipts from committed license and cloud arrangements; • Our expectation that cost of revenue, sales and marketing expenses, research and development expenses, and general and administrative expenses will continue to increase in absolute dollar values; • The fluctuation of subscriptions gross margin and professional services gross margin over time; • Our expectations regarding the impact of recent accounting pronouncements on our consolidated financial statements; • Our ability to stay abreast of new or modified laws and regulations that currently apply or become applicable to our business both in the United States and internationally; • Our ability to maintain, protect, and enhance our intellectual property; and • Costs associated with defending intellectual property infringement and other claims.
These forward-looking statements include, but are not limited to, statements concerning the following: • Our market opportunity and the expansion of our core software markets in general; • The opportunity and competitive impact of AI; • The effects of increased competition as well as innovations by new and existing competitors in our market; • Our ability to adapt to technological change and effectively enhance, innovate, and scale our platform and professional services; • Our ability to effectively manage or sustain our growth and to achieve profitability; • Potential acquisitions and integration of complementary businesses and technologies; • Our ability to maintain, or strengthen awareness of, our brand; • Perceived or actual problems with the integrity, reliability, quality, or compatibility of our platform, including unscheduled downtime or outages; • The anticipated expansion of the usage of partners to perform professional services; • General macroeconomic conditions, including rising interest rates and inflation, slower growth or recession, and geopolitical turmoil; • Future revenue, hiring plans, expenses, capital expenditures, capital requirements, and stock performance; • Our ability to attract and retain qualified employees and key personnel and manage our overall headcount; • The expected benefits to our clients and potential clients of our product and service offerings; • The timing of revenue recognition under license and cloud arrangements; • Our expectation that subscriptions revenue as a percentage of total revenue will continue to increase; • Our expectation that professional services as a percentage of total revenue will continue to decrease; • Our backlog of license, maintenance, cloud, and services agreements and the timing of future cash receipts from committed license and cloud arrangements; • Our expectation that cost of revenue, sales and marketing expenses, research and development expenses, and general and administrative expenses will continue to increase in absolute dollar values; • The fluctuation of subscriptions gross margin and professional services gross margin over time; • Our ability to stay abreast of new or modified laws and regulations that currently apply or become applicable to our business both in the United States and internationally; • Our ability to collect on the judgment against Pegasystems or the judgment preservation insurance; • Our ability to maintain, protect, and enhance our intellectual property; and • Costs associated with defending intellectual property infringement and other claims. 10 These statements represent the beliefs and assumptions of our management based on information currently available to us.
Generally, our sales 8 team targets its efforts to organizations with over 2,000 employees and $2 billion in annual revenue. The number of customers paying us in excess of $1 million of annual recurring revenue has grown from 75 at the end of 2021 to 94 at the end of 2022.
Generally, our sales team targets its efforts to organizations with over 2,000 employees and $2 billion in annual revenue. The number of customers paying us in excess of $1 million of annual recurring revenue has grown from 94 at the end of 2022 to 110 at the end of 2023.
We also believe our individual experiences, knowledge, and ways of working enable us to learn from one another and be innovative. We sponsor several affinity groups, initiated by employees, that aim to build stronger internal and external networks and partnerships, create a positive lasting impact through social and educational outreach, and create development opportunities for future leaders.
We also believe our individual experiences, knowledge, and ways of working enable us to learn from one another and discover creative solutions. We sponsor a number of affinity groups, initiated by employees, that aim to build stronger internal and external networks and partnerships, create a positive lasting impact through social and educational outreach, and create development opportunities for future leaders.
We rely on patents, trademarks, copyrights, trade secret laws, confidentiality procedures, and employee disclosure and invention assignment agreements to protect our intellectual property rights. As of December 31, 2022, we had 11 granted patents and six patents pending related to our platform and its technology. None of our issued patents expire before 2034.
We rely on patents, trademarks, copyrights, trade secret laws, confidentiality procedures, and employee disclosure and invention assignment agreements to protect our intellectual property rights. As of December 31, 2023, we had 16 granted patents and nine patents pending related to our platform and its technology. None of our issued patents expire before 2034.
Calkins for the foreseeable future, which will limit the ability of others to influence corporate matters. • Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management, and limit the market price of our Class A common stock. • Our stock price may be volatile, and investors may lose some or all of their investment. 12
Calkins for the foreseeable future, which will limit the ability of others to influence corporate matters. • Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management, and limit the market price of our Class A common stock. • Our stock price has been volatile and may be volatile in the future. 12
Our platform is designed to be natively multilingual to facilitate collaboration and address challenges in multinational organizations. Appian Cloud meets the data residency requirements of our global customers by operating in 15 countries across 31 regions and 99 availability zones. In 2022, approximately 34% of our total revenue was generated from customers outside of the United States.
Our platform is designed to be natively multilingual to facilitate collaboration and address challenges in multinational organizations. Appian Cloud meets the data residency requirements of our global customers by operating in 16 countries across 33 regions and 105 availability zones. In 2023, approximately 36% of our total revenue was generated from customers outside of the United States.
We believe our facilities are adequate to meet our ongoing needs, including substantial rights to expand within certain properties we lease. If we require additional space in the future, we believe we will be able to obtain additional facilities on commercially reasonable terms.
We believe our facilities are adequate to meet our ongoing needs, including substantial rights to expand within certain properties we lease. If we require additional space in the future, we believe we will be able to obtain additional facilities on commercially reasonable terms. Seasonality We have historically experienced seasonality in terms of when we enter into agreements with customers.
Such providers include Pegasystems, Celonis, UiPath, SAP, and Oracle. As our market grows, we expect it will attract more highly specialized vendors as well as larger vendors that may continue to acquire or bundle their products more effectively.
As our market grows, we expect it will attract more highly specialized vendors as well as larger vendors that may continue to acquire or bundle their products more effectively.
These statements represent the beliefs and assumptions of our management based on information currently available to us. Such forward-looking statements are subject to risks, uncertainties, and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements.
Such forward-looking statements are subject to risks, uncertainties, and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements.
Forward-Looking Statements This Annual Report on Form 10-K, including the sections entitled “Business,” “Risk Factors,” and “Management's Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements that involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from the information expressed or implied by these forward-looking statements.
The information contained on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our website are intended to be inactive textual references only. 9 Forward-Looking Statements This Annual Report on Form 10-K, including the sections entitled “Business,” “Risk Factors,” and “Management's Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements that involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from the information expressed or implied by these forward-looking statements.
Our Competition Our main competitors fall into three categories: (1) providers of custom software solutions that address, or are developed to address, some of the use cases that applications developed on our platform target; (2) providers of low-code development platforms such as Microsoft, Salesforce.com, ServiceNow, OutSystems, and Mendix; and (3) providers of one or more automation technologies, including business process management, case management, process mining, and robotic process automation.
No single end customer accounted for more than 10% of our total revenue in 2023, 2022, or 2021. 7 Our Competition Our main competitors fall into three categories: (1) providers of custom software solutions that address, or are developed to address, some of the use cases that applications developed on our platform target; (2) providers of low-code development platforms; and (3) providers of one or more automation technologies, including business process management, case management, process mining, and robotic process automation.
We have strategic partnerships including with KPMG, Accenture, PwC, EY, Infosys, Wipro, and Deloitte. These partners work with organizations undergoing digital transformation projects. When they recognize an opportunity for our platform, they introduce us to potential customers. Additionally, they leverage pre-built solutions using our platform, delivering software license revenue to Appian.
These partners work with organizations undergoing digital transformation projects. When they recognize an opportunity for our platform, they introduce us to potential customers. Additionally, they go to market with their own pre-built solutions using our platform, delivering software license revenue to Appian.
We believe focusing on the digital transformation needs of organizations within these industry verticals helps drive adoption of our platform. • Continue to innovate and enhance our platform . We continue to invest in research and development to strengthen our platform and expand the number of features available to our customers.
In 2023, we generated over 76% of our subscriptions revenue from customers in these verticals. We believe focusing on the digital transformation needs of organizations within these industry verticals helps drive adoption of our platform. • Continue to innovate and enhance our platform .
As of December 31, 2022, we were operating in 15 countries, and we believe we have a significant opportunity to continue to grow our international footprint. We are investing in new geographies through direct and indirect sales channels, professional services and customer support, and implementation partners. • Grow our partner base.
We believe we have a significant opportunity to continue to grow our international footprint. We are investing in new geographies through direct and indirect sales channels, professional services and customer support, and implementation partners. • Leverage our partner base. We have strategic partnerships including with Accenture, Capgemini, Deloitte, EY, KPMG, PwC, and TCS.
Our culture was purposefully cultivated by our four founders, who are still heavily involved in operating our business, including recruiting, interviewing, and educating new employees at Appian.
We promote an inclusive environment where our employees can contribute their unique perspectives to help create transformative solutions for our customers. Our culture was purposefully cultivated by our four founders, who are still heavily involved in operating our business, including recruiting, interviewing, and educating new employees at Appian.
While our platform is industry-agnostic, we continue to make investments to enhance the expertise of our sales and marketing organization within our key industry verticals of financial services, government, insurance, and life sciences. In 2022, we generated over 71% of our subscriptions revenue from customers in these verticals.
We also have a strong ecosystem of strategic partners that help identify new customer opportunities for us. • Grow revenue from key industry verticals. While our platform is industry-agnostic, 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.
Our business rules technology allows organizations to encode and enforce policies and routing decisions that reduce risk, while our native RPA and AI enable organizations to automate process steps to deliver greater efficiency and increase customer and employee satisfaction. We sell our platform as a unified set of automation technologies that accelerates customer implementation times and return on investment.
Our process capabilities are crucial in orchestrating AI alongside humans and systems within business environments. Our business rules technology allows organizations to encode and enforce policies and routing decisions that reduce risk, while our native RPA and AI enable organizations to automate process steps to deliver greater efficiency and increase customer and employee satisfaction.
In addition, the secure infrastructure of our data fabric architecture provides a safe environment for storing and handling sensitive information, ensuring that confidential data remains protected.
This capability is pivotal in feeding AI algorithms and human workers with quality data and extracting meaningful insights that drive business decisions. In addition, the secure infrastructure of our data fabric architecture is designed to provide a safe environment for storing and handling sensitive information, ensuring confidential data remains protected.
We offer multiple upgrades each year that allow our customers to benefit from ongoing innovation.
We continue to invest in research and development to strengthen our platform and expand the number of features available to our customers. We offer multiple upgrades each year that allow our customers to benefit from ongoing innovation.
We utilize an extensive campus recruiting program, provide an employee referral program, and offer opportunities for internal transfers, and competitive compensation and benefits programs. We also provide resources to help our employees grow in their current roles and build new skills, including access to Appian University, a system that houses Appian's in-house learning and development solutions.
We also provide resources to help our employees grow in their current roles and build new skills, including access to Appian University, a system that houses Appian's in-house learning and development solutions. Inclusion and Diversity We respect all people. We believe diversity of ideas and an inclusive environment are paramount to our continued success.
Our Customers Our customers operate in various industries, including financial services, government, life sciences, insurance, manufacturing, energy, healthcare, telecommunications, and transportation. As of December 31, 2022, we had 925 customers, of which 712 customers were commercial and 213 customers were government or non-commercial entities.
See “Seasonality - Management Discussion and Analysis Financial Condition and Results of Operations” for a discussion of the seasonality of our business. Our Customers Our customers operate in various industries, including financial services, government, life sciences, insurance, manufacturing, energy, healthcare, telecommunications, and transportation. As of December 31, 2023, we had approximately 1,000 customers.
Led by Matt Calkins, one of our founders and our Chief Executive Officer, we have grown our business organically by employing a unified team to maximize the cohesion and simplicity of our platform and our company. We respect all people. We believe diversity of ideas and an inclusive environment are paramount to our continued success.
Led by Matt Calkins, one of our founders and our Chief Executive Officer, we have grown our business organically by employing a unified team to maximize the cohesion and simplicity of our platform and our company. As of December 31, 2023, we had a total global workforce of 2,243 full-time employees, 1,518 of which were based in the United States.
Human Capital Resources and Management Employees, Culture, and Labor Relations Our distinct culture of innovation is an important contributor to our success as a company. We promote an inclusive environment where our employees can contribute their unique perspectives to help create transformative solutions for our customers.
We intend to further leverage our base of partners to provide broader customer coverage and solution delivery capabilities. 6 Human Capital Resources and Management Employees, Culture, and Labor Relations Our distinct culture of innovation is an important contributor to our success as a company.
As of December 31, 2022, we had a total global workforce of 2,307 full-time employees, 1,668 of which were based in the United States. None of our U.S. employees are covered by collective bargaining agreements. We believe our employee relations are good, and we have not experienced any work stoppages.
None of our U.S. employees are covered by collective bargaining agreements. We believe our employee relations are good, and we have not experienced any work stoppages. Additionally, we are subject to, and comply with, local labor law requirements in all countries in which we operate.
We combine people, technologies, and data in end-to-end processes that maximize our customers' resources and dramatically improve business results. Our unified platform for process automation is a key differentiator in the marketplace.
We empower our customers to transform the way they work by using our platform to combine people, technologies, and data in end-to-end processes that can maximize our customers' resources and dramatically improve business results. We believe organizations across all industries face pressure to keep up with a rapid pace of technological innovation, particularly in AI.
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Item 1. Business. Overview Appian Corporation (together with its subsidiaries, “Appian,” “the Company,” “we,” or “our”) provides a process automation platform that helps organizations unleash digital innovation and drive efficiency. Appian was founded on the optimistic premise that when given a platform to do so, people will embrace the opportunity to transform the way they work.
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Item 1. Business. Overview Appian Corporation (together with its subsidiaries, “Appian,” “the Company,” “we,” or “our”) is a software company that automates business processes and operationalizes artificial intelligence (“AI”) with low-code design, providing rapid time to value for our customers.
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Today, we are one of the only enterprise software vendors that offer Workflow, Artificial Intelligence, or AI, Robotic Process Automation, or RPA, Data Fabric, and Process Mining in one fully integrated low-code platform.
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The past year has ushered in a whole new economy, in which AI promises to transform workflows to drive efficiency and innovation. As we enter 2024, the focus will shift from exploring these technologies to actively leveraging them to innovate with new products, services, and value creation for customers and employees alike.
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The result is a platform that makes it easier and faster to address complex use cases, particularly those that involve multiple departments within an organization and their external customers and vendors. Organizations across all industries are digitally transforming by leveraging software to automate and optimize mission-critical operations, enhance customer experiences, and drive competitive differentiation.
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We believe companies that can quickly incorporate AI's full potential into their business processes will lead the future AI economy. We are dedicated to helping our customers navigate this new AI economy and realize transformational change.
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Historically, organizations have relied on off-the-shelf packaged software and custom software solutions to operationalize and automate their businesses. Packaged software often fails to address unique use cases or to enable differentiation. It also requires organizations to adapt their business (processes, systems of record, etc.) to the software package, as opposed to adapting the software to their unique business needs.
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We see a human-centric future for AI, one of teamwork rather than replacement, where AI adds value to data and employees, and where all customers and businesses—not big tech—are the winners. We recognize AI is not a standalone technology. It is highly dependent on two foundational technologies: data and process.
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While traditional custom software solutions can be differentiated and tailored to meet strategic objectives, development requires a long, iterative, and cumbersome process, as well as costly integration that relies on scarce developer talent. Our platform greatly reduces the iterative development process, allowing for real-time optimization and ultimately shortening the time it takes to design, build, and deploy applications.
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Data is the intellectual fuel for AI, empowering it to make smart, informed decisions. The more data AI gets, and the better that data is, the better the AI answers may be. Data was already among the most important assets for leading organizations; now, it’s worth more than ever.
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Our go-to-market strategy consists of both direct sales and sales through strategic partners. We sell our software almost exclusively through subscriptions. We intend to grow our revenue both by adding new customers and increasing the number of users or applications built on our platform at existing customers.
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Process is the necessary layer for customers to create a mixed autonomy, routing tasks between humans and AI automations. We believe customers will increasingly rely on AI to accelerate common tasks but must ensure humans maintain control and oversight of business processes. We offer leading expertise in all three areas.
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Our strategic partners include industry-leading global system integrators, software vendors, and cloud and technology providers. We intend to continue to invest in our partner ecosystem, with a particular emphasis on expanding our strategic alliances and cloud-focused partnerships with global system integrators.
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We have been leveraging AI technologies for many years as part of our automation suite. We have a leading data fabric which powered billions of data fabric queries in 2023, and we offer innovative process platforms, supporting billions of transactions every day.
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The Appian Platform Our platform is the only fully integrated automation platform that enables organizations to transform the way they work, allowing them to design, automate, and optimize end-to-end processes and complex business operations. Global organizations use the Appian Platform to improve customer and employee experiences, achieve operational excellence, and simplify global risk management and compliance.
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We weave all three elements together in a single product that empowers our customers to achieve rapid value. 4 The Appian Platform The Appian Platform enables customers to easily design, automate, and optimize their mission-critical business processes, driving continuous innovation.
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We believe effective processes are at the heart of highly successful organizations. Appian helps our customers master and scale up their unique business processes. Our platform allows organizations to deliver excellent customer experiences, maximize operational efficiency, and effortlessly ensure compliance with laws and regulations. We provide a unified platform with the capabilities our customers need to quickly achieve process excellence.
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Through Appian's unified platform, customers can swiftly develop new digital solutions using a low-code approach, creating applications and workflows tailored to their unique business requirements. We catalyze the AI-driven enterprise by combining AI, data, and process capabilities in a single platform. Our low-code design experience delivers solutions for customers quickly.
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These capabilities include a unified toolset for data, process automation, total experience, and process optimization that supports data-driven decision-making, enhanced customer experiences, and optimized processes for maximum efficiency and effectiveness. 4 Automation Our platform provides a comprehensive range of native automation capabilities that enable our customers to streamline their operations.
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It is unified, reduces training times and dependencies on additional tools, and is built for enterprise-grade applications requiring high reliability, security, and scalability. Appian’s architecture is based on our four critical capabilities: process automation, data fabric, total experience, and continuous improvement through process mining. Process Automation We are a long-time innovator in process automation.
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The Appian Process Modeler allows organizations to connect customers, employees, systems, AI, and software robots in end-to-end processes for complete control over business operations.
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We sell our platform as a unified set of automation technologies that accelerates customer implementation times and return on investment. Data Fabric Data is at the heart of AI's transformative power, and we excel in enabling customers to utilize data effectively.
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Data Fabric Our patented data fabric architecture delivers an innovative solution, enabling organizations to make informed decisions and intelligently route processes from a 360-degree view of business operations. The architecture comprises an extensive library of integration adapters to enterprise systems that integrate previously siloed data into a single, powerful data fabric.
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By leveraging our sophisticated data fabric, organizations can unify data across the enterprise into a single virtual data model, empower users to make informed decisions, and train AI models, transforming reservoirs of enterprise data into a source of powerful innovation.
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The unique and patented design of our data fabric architecture sets it apart from other solutions on the market, providing organizations with a comprehensive platform for making data-driven decisions and optimizing workflows through intelligent process routing and gaining a complete view of their business operations.
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Total Experience Total experience is about creating superior experiences across desktop and mobile devices for every user, uniting customers and employees in a seamless workflow.
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Total Experience Our complete platform further extends our customers’ ability to engage external and internal users in a total experience that merges the customer journey with the employee experience.
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Our patented Self-Assembling Interface Layer, or SAIL, user experience architecture delivers the speed and flexibility to provide new experiences that capture our customers’ brands quickly and instantly work on the latest web browsers and mobile devices. Continuous Improvement Our integrated process mining and process analytics capabilities enable customers to measure and track their process performance accurately.
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Our patented Self-Assembling Interface Layer, or SAIL, technology and utilization of low-code design allow our customers to quickly create dynamic and intuitive user experiences and deploy them across web and mobile devices.
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Talent Acquisition and Development We have a robust talent acquisition program to attract, recruit, and retain new talent. We utilize an extensive campus recruiting program, provide an employee referral program, and offer opportunities for internal transfers, as well as competitive compensation and benefits programs.
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Our customers then use our platform to seamlessly engage users with their business processes across digital touchpoints, such as Internet of things, or IoT, devices, chatbots, or virtual personal assistants, no matter where they are located. 5 Optimization Our integrated process analytics and mining capabilities enable customers to measure and track their process performance accurately.
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We feel this is validated by the fact Gartner ranked Appian #1 for the Business Workflow Automation with Integration Use Case in the 2023 Gartner® Critical Capabilities for Enterprise Low-Code Application Platforms, or LCAP, report as well as positioned as a Leader in the 2023 Gartner® Magic Quadrant for Enterprise LCAP.
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We offer the Appian Community Edition, a free trial platform with guided learning for our prospects and customers to quickly access the Appian Platform for up to 15 users.
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Gartner, Critical Capabilities for Enterprise Low-Code Application Platforms, October 2023 Gartner, Magic Quadrant for Enterprise Low-Code Application Platforms, October 2023 Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation.
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Once prospects or customers decide to move forward from trial to transaction, they can transfer from the Appian Community Edition over to a production environment with a seamless export. • Grow revenue from key industry verticals.
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Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.
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We intend to further grow our base of partners to provide broader customer coverage and solution delivery capabilities. Sales and Marketing Sales Our sales organization is responsible for account acquisition and overall market development, which includes managing relationships with our customers. We also sell our software through our strategic partners.
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GARTNER and Magic Quadrant are registered trademarks and service marks of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved. The Gartner content described herein, (the "Gartner Content") represent(s) research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc.
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While our platform is industry-agnostic, we continue to make investments to enhance the expertise of our sales organization within our core industry verticals of financial services, government, insurance, and life sciences. We expect to continue to grow our sales headcount in all of our principal markets and expand into countries where we currently do not have a direct sales presence.
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("Gartner"), and are not representations of fact. Gartner Content speaks as of its original publication date (and not as of the date of this 10K) and the opinions expressed in the Gartner Content are subject to change without notice. Intellectual Property Our success depends in part upon our ability to protect our core technology and intellectual property.
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We also intend to expand our partner base to provide broader customer coverage and solution delivery capabilities. Marketing Our marketing efforts focus on building our brand reputation and increasing market awareness of our platform.
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Marketing activities include sponsorship of, and attendance at, trade shows and conferences; our annual Appian World, Appian Europe, and Appian Asia, Pacific, and Japan conferences; social media, advertising, and other digital programs; management of our corporate website and partner portal; press outreach; and customer relations.
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As global concerns about the COVID-19 pandemic decline, we plan to responsibly increase the number of in-person marketing events as compared to 2020 through 2022. Partner Strategy We have a strong and growing ecosystem of partners that helps accelerate our customers' digital transformation initiatives and deliver customer value at scale.
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Our platform's ability to design, automate, and optimize end-to-end processes, and our partners' industry and functional domain experience help organizations digitally transform their businesses. Partners also allow us to offer industry-focused solutions that help our joint customers deliver end-to-end process control for crucial business functions.
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We have strategic partnerships around the world including with companies such as KPMG, Accenture, PwC, EY, Infosys, Wipro, and Deloitte. These partners refer software subscription customers to us and generally perform professional services with respect to any new service contracts they originate, increasing our subscription revenue without any change to our professional services revenue.
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We expect professional services revenue to decline as a percentage of total revenue over time, since our growing strategic partner network may perform more of the professional services associated with our software subscriptions. We are also growing our network of regional and channel partners further to expand our business into traditional and new markets.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny of these results would adversely affect our business, results of operations, financial condition, and cash flows. Portions of our platform utilize open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.
Biggest changeFor more information on the legal and regulatory risks associated with the use of AI, please see our risk factors above at “—AI is a disruptive set of technologies that may affect the markets for our software dramatically and in unpredictable ways,” and “—Regulatory and legislative developments related to the use of AI could adversely affect our use of such technologies in our products, services, and business.” Portions of our platform utilize open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.
Additionally, many of our current and prospective customers such as those in the financial services, insurance, life sciences, and healthcare industries are highly regulated and may be required to comply with more stringent regulations in connection with subscribing to and implementing our platform.
Additionally, many of our current and prospective customers such as those in the financial services, life sciences, insurance, and healthcare industries are highly regulated and may be required to comply with more stringent regulations in connection with subscribing to and implementing our platform.
Our current international operations and future initiatives will involve a variety of risks, including: • Changes in a specific country’s or region’s political or economic conditions; • Unexpected changes in regulatory requirements, taxes, or trade laws; • More stringent regulations relating to data security and the unauthorized use of, or access to, commercial and personal information, particularly in the European Union; • Differing labor regulations, especially in the European Union, where labor laws are generally more advantageous to employees as compared to the United States, including deemed hourly wage and overtime regulations in these locations; • Challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs; • Difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems, and regulatory systems; • Increased travel, real estate, infrastructure, and legal compliance costs associated with international operations; • Currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if we choose to do so in the future; • Limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries; • Laws and business practices favoring local competitors or general preferences for local vendors; • Limited or insufficient levels of protection of our corporate proprietary information and assets, including intellectual property and customer information and records; • Political instability or terrorist activities; 22 • Exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S.
Our current international operations and future initiatives will involve a variety of risks, including: • Changes in a specific country’s or region’s political or economic conditions; • Unexpected changes in regulatory requirements, taxes, or trade laws; • More stringent regulations relating to data security and the unauthorized use of, or access to, commercial and personal information, particularly in the European Union; • Differing labor regulations, especially in the European Union, where labor laws are generally more advantageous to employees as compared to the United States, including deemed hourly wage and overtime regulations in these locations; • Challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs; • Difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems, and regulatory systems; • Increased travel, real estate, infrastructure, and legal compliance costs associated with international operations; • Currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if we choose to do so in the future; • Limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries; • Laws and business practices favoring local competitors or general preferences for local vendors; • Limited or insufficient levels of protection of our corporate proprietary information and assets, including intellectual property and customer information and records; • Political instability or terrorist activities; • Exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S.
Acquisitions involve many risks, including the following: • An acquisition may negatively affect our financial results because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition; • We may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel, or operations of any company we acquire, particularly if key personnel of the acquired company decide not to work for us; • An acquisition may disrupt our ongoing business, divert resources, increase our expenses, and distract our management; • An acquisition may result in a delay or reduction of customer purchases for both us and the company acquired due to customer uncertainty about continuity and effectiveness of service from either company; • We may encounter difficulties in successfully selling, or may be unable to successfully sell, any acquired solutions; • An acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions; • Our use of cash to pay for an acquisition would limit other potential uses for our cash; and • If we incur debt to fund such acquisition, such debt may subject us to material restrictions on our ability to conduct our business as well as financial maintenance covenants.
Acquisitions involve many risks, including the following: • An acquisition may negatively affect our financial results because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition; • We may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel, or operations of any company we acquire, particularly if key personnel of the acquired company decide not to work for us; • An acquisition may disrupt our ongoing business, divert resources, increase our expenses, and distract our management; • An acquisition may result in a delay or reduction of customer purchases for both us and the company acquired due to customer uncertainty about continuity and effectiveness of service from either company; • We may encounter difficulties in successfully selling, or may be unable to successfully sell, any acquired solutions; 28 • An acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions; • Our use of cash to pay for an acquisition would limit other potential uses for our cash; and • If we incur debt to fund such acquisition, such debt may subject us to material restrictions on our ability to conduct our business as well as financial maintenance covenants.
Pursuant to our amended and restated certificate of incorporation, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our stockholders, (3) any action asserting a claim arising pursuant to any 33 provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation, or our amended and restated bylaws, or (4) any action asserting a claim governed by the internal affairs doctrine.
Pursuant to our amended and restated certificate of incorporation, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our stockholders, (3) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation, or our amended and restated bylaws, or (4) any action asserting a claim governed by the internal affairs doctrine.
Similarly, if cyber incidents such as phishing attacks, viruses, denial of service attacks, supply chain attacks, malware installation, ransomware attacks, server malfunction, software or hardware failures, loss of data or other computer assets, adware, or other similar issues impair the integrity or availability of our systems by affecting our data or reducing access to or shutting down one or more of our computing systems or our IT network, we may be subject to negative treatment by our customers, our business partners, the press, and the public at large.
Similarly, if cyber incidents such as phishing 15 attacks, viruses, denial of service attacks, supply chain attacks, malware installation, ransomware attacks, server malfunction, software or hardware failures, loss of data or other computer assets, adware, or other similar issues impair the integrity or availability of our systems by affecting our data or reducing access to or shutting down one or more of our computing systems or our IT network, we may be subject to negative treatment by our customers, our business partners, the press, and the public at large.
If we are unable to conclude our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our Class A common stock could decline, and we could be subject to sanctions or investigations by the Nasdaq Stock Market, the SEC, or other regulatory authorities.
If we are unable to conclude our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our Class A common stock could decline, and we could be subject to sanctions or investigations by the Nasdaq Global Market, the SEC, or other regulatory authorities.
Any one of these or other factors discussed elsewhere in this Annual Report on Form 10-K or the cumulative effect of some of these factors may result in fluctuations in our revenue and operating results, meaning quarter-to-quarter comparisons of 17 our revenue, results of operations, and cash flows may not necessarily be indicative of our future performance, may cause us to miss our guidance or analyst expectations, and may cause our stock price to decline.
Any one of these or other factors discussed elsewhere in this Annual Report on Form 10-K or the cumulative effect of some of these factors may result in fluctuations in our revenue and operating results, meaning quarter-to-quarter comparisons of our revenue, results of operations, and cash flows may not necessarily be indicative of our future performance, may cause us to miss our guidance or analyst expectations, and may cause our stock price to decline.
In addition to potential liability, if we experience interruptions in the availability of our cloud offering, our reputation could be adversely affected, and we could lose customers. We also provide frequent incremental releases of software updates and functional enhancements to our platform. Despite extensive pre-release testing, such new versions occasionally contain undetected errors when first introduced or released.
In addition to potential liability, if we experience interruptions in the availability of our cloud offering, our reputation could be adversely affected, and we could lose customers. We also provide frequent incremental releases of software updates and functional enhancements to our platform. Despite extensive pre-release testing, such new versions occasionally contain undetected errors when first 23 introduced or released.
In the past, we have been subject to allegations of patent infringement that were unsuccessful, and we may in the future be subject to claims we have 29 misappropriated, misused, or infringed other parties’ intellectual property rights, and, to the extent we gain greater market visibility or face increasing competition, we face a higher risk of being the subject of intellectual property infringement claims, which is not uncommon with respect to enterprise software companies.
In the past, we have been subject to allegations of patent infringement that were unsuccessful, and we may in the future be subject to claims we have misappropriated, misused, or infringed other parties’ intellectual property rights, and, to the extent we gain greater market visibility or face increasing competition, we face a higher risk of being the subject of intellectual property infringement claims, which is not uncommon with respect to enterprise software companies.
In the United States, applicable federal contracting regulations change frequently, and the President may issue executive orders requiring federal contractors to adhere to new compliance requirements after a contract is signed. If we commit to meet special standards or requirements and do not meet them, we could be subject to significant liability from our customers or regulators.
In the United States, applicable federal contracting regulations change frequently, and the President may issue executive orders requiring federal contractors to adhere to new compliance requirements after a contract is signed. If we commit to meeting special standards or requirements and do not meet them, we could be subject to significant liability from our customers or regulators.
We may experience interruptions, delays, and outages in service and availability from time to time as a result of problems with our AWS provided infrastructure, which could render our cloud offering inaccessible to customers. Additionally, AWS has suffered outages at specific customer locations in the past, rendering the customer unable to access our offering for periods of time.
We may experience material interruptions, delays, and outages in service and availability from time to time as a result of problems with our AWS provided infrastructure, which could render our cloud offering inaccessible to customers. Additionally, AWS has suffered outages at specific customer locations in the past, rendering the customer unable to access our offering for periods of time.
If we invest substantial time and resources to expand our international operations and are unable to do so successfully and in a timely manner, our business and operating results will suffer. We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.
If we invest substantial time and resources to expand our international operations and are unable to do so successfully and in a timely manner, our business and operating results will suffer. 25 We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.
As a result, our operating results or revenue growth rates could suffer due to: • Any decline or lower than expected growth in demand for our platform; • The failure of our platform to achieve continued market acceptance; • The market for low-code solutions not continuing to grow or growing more slowly than we expect; • The introduction of products and technologies that serve as a replacement or substitute for, or represent an improvement over, our platform; • Technological innovations or new standards that our platform does not address; • Sensitivity to current or future prices offered by us or competing solutions; • The inability to further penetrate our existing industry verticals or expand our customer base; and • Our inability to release enhanced versions of our platform on a timely basis.
As a result, our operating results or revenue growth rates could suffer due to: • Any decline or lower than expected growth in demand for our platform; • The failure of our platform to achieve continued market acceptance; • The market for low-code solutions not continuing to grow or growing more slowly than we expect; • The introduction of products and technologies (including AI technologies) that serve as a replacement or substitute for, or represent an improvement over, our platform; • Technological innovations or new standards that our platform does not address; • Sensitivity to current or future prices offered by us or competing solutions; • The inability to further penetrate our existing industry verticals or expand our customer base; and • Our inability to release enhanced versions of our platform on a timely basis.
It is difficult to predict customer demand for our platform, renewal rates, the rate at which existing customers expand their subscriptions, the size and growth rate of the market for our platform, the entry of competitive products, or the success of existing competitive products. The utilization of low-code software to drive digital transformation is still relatively new.
It is difficult to predict customer demand for our platform, renewal rates, the rate at which existing customers expand their subscriptions, the size and growth rate of the market for 14 our platform, the entry of competitive products, or the success of existing competitive products. The utilization of low-code software to drive digital transformation is still relatively new.
We may not be able to remediate any future material weaknesses or to complete our evaluation, testing, and any required remediation in a timely fashion. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations.
We may not be able to remediate any future material weaknesses or to complete our evaluation, testing, and any required remediation in a timely fashion. 36 Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations.
The loss of one or more of our significant customers could adversely affect our business, results of operations, and financial condition. A portion of our revenue is generated from subscriptions sold to governmental entities and heavily regulated organizations, which are subject to a number of challenges and risks.
The loss of one or more of our significant customers could materially and adversely affect our business, results of operations, and financial condition. A portion of our revenue is generated from subscriptions sold to governmental entities and heavily regulated organizations, which are subject to a number of challenges and risks.
Any inability to adequately 26 address privacy or cybersecurity concerns, even if unfounded, or comply with applicable privacy or data protection laws, regulations, and policies, could result in additional cost and liability to us, damage our reputation, inhibit sales, and adversely affect our business.
Any inability to adequately address privacy or cybersecurity concerns, even if unfounded, or comply with applicable privacy or data protection laws, regulations, and policies could result in additional cost and liability to us, damage our reputation, inhibit sales, and adversely affect our business.
We cannot 13 be sure the expansion and improvements to our infrastructure and systems will be fully or effectively implemented on a timely basis, if at all. These efforts may reduce revenue and our margins and adversely impact our financial results.
We cannot be sure the expansion and improvements to our infrastructure and systems will be fully or effectively implemented on a timely basis, if at all. These efforts may reduce revenue and our margins and adversely impact our financial results.
We rely on the performance of highly skilled personnel, including senior management and our engineering, professional services, sales, and technology professionals; if we are unable to retain or motivate key personnel or hire, retain, and motivate qualified personnel, our business would be harmed.
We rely on the performance of highly skilled personnel, including senior management and our engineering, professional services, sales, and technology professionals; if we are unable to retain or 20 motivate key personnel or hire, retain, and motivate qualified personnel, our business would be harmed.
This seasonality is reflected to a much lesser extent, and sometimes is not immediately apparent, in revenue due to the fact we recognize cloud subscription revenue over the term of the subscription agreement, which is generally one to three years.
This seasonality is reflected to a much lesser extent, and sometimes is not immediately apparent, in revenue due to the fact we recognize cloud subscriptions revenue over the term of the subscription agreement, which is generally one to three years.
We derive a material portion of our revenue from a limited number of customers, and the loss of one or more of these customers could adversely impact our business, results of operations, and financial condition. Our customer base is concentrated.
We derive a material portion of our revenue from a limited number of customers, and the loss of one or more of these customers could materially and adversely impact our business, results of operations, and financial condition. Our customer base is concentrated.
Section 382 of the Internal Revenue Code imposes limitations on a company’s ability to use NOLs if a company experiences a more-than-50-percent ownership change over a three-year testing period. Based upon our analysis as of December 31, 2022, we have determined we do not expect these limitations to impair our ability to use our NOLs prior to expiration.
Section 382 of the Internal Revenue Code imposes limitations on a company’s ability to use NOLs if a company experiences a more-than-50-percent ownership change over a three-year testing period. Based upon our analysis as of December 31, 2023, we have determined we do not expect these limitations to impair our ability to use our NOLs prior to expiration.
Many of the risks associated with usage of open source software cannot be eliminated and could negatively affect our business, results of operations, and financial condition. Risks Related to Tax and Accounting Matters 30 If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected.
Many of the risks associated with usage of open source software cannot be eliminated and could negatively affect our business, results of operations, and financial condition. Risks Related to Tax and Accounting Matters If our estimates or judgments relating to our critical accounting estimates prove to be incorrect, our results of operations could be adversely affected.
Any such shipment could have negative consequences, including government investigations, penalties, and reputational harm. Risks Related to Our Intellectual Property 28 Any failure to protect our proprietary technology and intellectual property rights could substantially harm our business and operating results. Our success and ability to compete depend in part on our ability to protect our proprietary technology and intellectual property.
Any such shipment could have negative consequences, including government investigations, penalties, and reputational harm. 32 Risks Related to Our Intellectual Property Any failure to protect our proprietary technology and intellectual property rights could substantially harm our business and operating results. Our success and ability to compete depend in part on our ability to protect our proprietary technology and intellectual property.
Some of these state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to confidential, sensitive, and personal information than federal, international, or other state laws, and such laws may differ from each other, which may complicate compliance efforts.
Some state laws may be more stringent or broader in scope or offer greater individual rights with respect to confidential, sensitive, and personal information than federal, international, or other state laws, and such laws may differ from each other, which may complicate compliance efforts.
Factors that may affect the market price of our Class A common stock and our ability to raise capital through the sale of additional equity securities include: • Actual or anticipated fluctuations in our financial condition and operating results; • Variance in our financial performance from expectations of securities analysts; • Changes in the prices of subscriptions to our platform; • Changes in our projected operating and financial results; • Changes in laws or regulations applicable to our platform; • Announcements by us or our competitors of significant business developments, acquisitions, or new offerings; • Our involvement in any litigation; • Our sale of our Class A common stock or other securities in the future; 34 • Changes in senior management or key personnel; • The trading volume of our Class A common stock; • Trading activity by any of our four large stockholders who collectively owned approximately 42% of our publicly traded Class A common stock as of December 31, 2022; • Changes in the anticipated future size and growth rate of our market; and • General economic, regulatory, and market conditions.
Factors that may affect the market price of our Class A common stock and our ability to raise capital through the sale of additional equity securities include: • Actual or anticipated fluctuations in our financial condition and operating results; • Variance in our financial performance from expectations of securities analysts; • Changes in the prices of subscriptions to our platform; • Changes in our projected operating and financial results; • Changes in laws or regulations applicable to our platform; • Announcements by us or our competitors of significant business developments, acquisitions, or new offerings; • Our involvement in any litigation; • Our sale of our Class A common stock or other securities in the future; • Changes in senior management or key personnel; • The trading volume of our Class A common stock; • Trading activity by any of our four large stockholders who collectively owned approximately 37% of our publicly traded Class A common stock as of December 31, 2023; • Changes in the anticipated future size and growth rate of our market; and • General economic, regulatory, and market conditions.
Our revenue and results of operations have historically varied from period to period, and we expect they will continue to do so as a result of a number of factors, many of which are outside of our control, including: • The level of demand for our platform and our professional services; • The rate of renewal of subscriptions with, and extent of sales of additional subscriptions to, existing customers; • Large customers failing to renew their subscriptions; • The size, timing, and terms of our subscription agreements with existing and new customers, including revenue recognition issues; • Variations in the revenue mix of our professional services and growth rates of our cloud subscription and professional services offerings, including the timing of subscriptions and sales offerings that include an on-premises software element for which the revenue allocated to that deliverable is recognized upfront; • The timing and growth of our business, in particular through our hiring of new employees and international expansion; • The timing of our adoption of new or revised accounting pronouncements applicable to public companies and the impact on our results of operations; • The introduction of new products and product enhancements by existing competitors or new entrants into our market and changes in pricing for solutions offered by us or our competitors; • Network outages, security breaches, technical difficulties, or interruptions with our platform; • Changes in the growth rate of the markets in which we compete; • The mix of subscriptions to our platform and professional services sold during a period; • Customers delaying purchasing decisions in anticipation of new developments or enhancements by us or our competitors or otherwise; • Changes in customers’ budgets; • Seasonal variations related to sales and marketing and other activities such as expenses related to our customers; • Our ability to increase, retain, and incentivize the strategic partners that market and sell our platform; • Our ability to control costs, including our operating expenses; • Our ability to hire, train, and maintain our direct sales team; • Unforeseen litigation and intellectual property infringement; • Any changes in accounting principles generally accepted in the United States, or GAAP; • Fluctuations in our effective tax rate; and • General economic and political conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers operate.
Our revenue and results of operations have historically varied from period to period, and we expect they will continue to do so as a result of a number of factors, many of which are outside of our control, including: • The level of demand for our platform and our professional services; • The rate of renewal of subscriptions with, and extent of sales of additional subscriptions to, existing customers; • Large customers failing to renew their subscriptions; • The size, timing, and terms of our subscription agreements with existing and new customers, including revenue recognition issues; • Variations in the revenue mix of our professional services and growth rates of our cloud subscription and professional services offerings, including the timing of subscriptions and sales offerings that include an on-premises software element for which the revenue allocated to that deliverable is recognized upfront; • The timing and growth of our business, in particular through our hiring of new employees and international expansion; • The timing of our adoption of new or revised accounting pronouncements applicable to public companies and the impact on our results of operations; • The introduction of new products and product enhancements by existing competitors or new entrants into our market and changes in pricing for solutions offered by us or our competitors; 19 • Network outages, security breaches, technical difficulties, or interruptions with our platform; • Changes in the growth rate of the markets in which we compete; • The mix of subscriptions to our platform and professional services sold during a period; • Customers delaying purchasing decisions in anticipation of new developments or enhancements by us or our competitors or otherwise; • Changes in customers’ budgets; • Lapses of federal appropriations in the United States for our government customers; • Seasonal variations related to sales and marketing and other activities such as expenses related to our customers; • Our ability to increase, retain, and incentivize the strategic partners that market and sell our platform; • Our ability to control costs, including our operating expenses; • Our ability to hire, train, and maintain our direct sales team; • Unforeseen litigation and intellectual property infringement; • Fluctuations in our effective tax rate; and • General economic and political conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers operate.
We do not maintain key man insurance on any of our executive officers or key employees. From time to time, there have been and may continue to be changes in our senior management team resulting from the termination or departure of our executive officers and key employees.
We do not maintain key person insurance on any of our executive officers or key employees. From time to time, there have been and may continue to be changes in our senior management team resulting from the termination or departure of our executive officers and key employees.
Given the greater number of votes per share attributed to our Class B common stock, our Class B stockholders collectively beneficially owned shares representing approximately 88% of the voting power of our outstanding capital stock as of December 31, 2022. Further, Mr.
Given the greater number of votes per share attributed to our Class B common stock, our Class B stockholders collectively beneficially owned shares representing approximately 88% of the voting power of our outstanding capital stock as of December 31, 2023. Further, Mr.
The effects of any of this legislation, and future changes to interpretations of this legislation, could be potentially far-reaching and may require us to modify our data management practices and to incur substantial expense in an effort to comply.
The effects of any of this legislation and future changes to interpretations of this legislation could be potentially far-reaching and will require us to modify our data management practices and to incur substantial expense in an effort to comply.
Such competitors may make their solutions available at a low cost or no cost basis in order to enhance their overall relationships with current or potential customers. Our competitors may also be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or customer requirements.
Such competitors may make their solutions available at a low cost or no cost basis in order to enhance their overall relationships with current or potential customers. Our competitors may also be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or customer requirements, including with respect to AI.
Governmental and highly regulated entities impose compliance requirements that are complicated, make pricing readily available, subject continued business to unpredictable competitive processes, or are otherwise time-consuming and expensive to satisfy.
In addition, governmental and highly regulated entities impose compliance requirements that are complicated, make pricing readily available, subject continued business to unpredictable competitive processes, or are otherwise time-consuming and expensive to satisfy.
Our obligations under the Credit Facility are secured by substantially all of our assets. Pursuant to the terms of the Credit Facility, we are limited in our ability to incur additional indebtedness other than on the terms and conditions thereof.
Our obligations under the Credit Agreement are secured by substantially all of our assets. Pursuant to the terms of the Credit Agreement, we are limited in our ability to incur additional indebtedness other than on the terms and conditions thereof.
Any expansion in our addressable market depends on a number of factors, including businesses continuing to desire to differentiate themselves through software-enabled digital transformation, increasing their reliance on low-code solutions, changes in the competitive landscape, technological changes, budgetary constraints of our customers, and changes in economic conditions.
Any expansion in our addressable market depends on a number of factors, including businesses continuing to desire to differentiate themselves through software-enabled digital transformation, increasing their reliance on low-code solutions, changes in the competitive landscape, technological changes, including due to advancements in AI, budgetary constraints of our customers, and changes in economic conditions.
The United States and other countries maintain and administer export and import laws and regulations, including various economic and trade sanctions such as those administered by the Office of Foreign Assets Control, or OFAC, which apply to our business. We are required to comply with these laws and regulations.
The United States and other countries maintain and administer export and import laws and regulations, including various economic and trade sanctions such as those administered by the Office of Foreign Assets Control (“OFAC”), which apply to our business. We are required to comply with these laws and regulations.
Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our Class A common stock.
Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions in our critical accounting policies, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our Class A common stock.
The principal competitive factors in our market include the following: platform features, reliability, performance, and effectiveness; ease of use and speed; platform extensibility and ability to integrate with other technology infrastructures; deployment flexibility; robustness of professional services and customer support; price and total cost of ownership; strength of platform security and adherence to industry standards and certifications; strength of sales and marketing efforts; and brand awareness and reputation.
The principal competitive factors in our market include the following: platform features, reliability, performance, and effectiveness; ease of use and speed; data fabric; utilization of AI; platform extensibility and ability to integrate with other technology infrastructures; deployment flexibility; robustness of professional services and customer support; price and total cost of ownership; strength of platform security and adherence to industry standards and certifications; strength of sales and marketing efforts; and brand awareness and reputation.
Since shares of our Class A common stock were sold in our initial public offering, or IPO, in May 2017 at a price of $12.00 per share, our stock price has ranged from an intraday low of $14.60 to an intraday high of $260.00 through February 13, 2023.
Since shares of our Class A common stock were sold in our initial public offering, or IPO, in May 2017 at a price of $12.00 per share, our stock price has ranged from an intraday low of $14.60 to an intraday high of $260.00 through February 12, 2024.
In addition, a failure to comply with the covenants under the Credit Facility could result in an event of default by us and an acceleration of amounts due.
In addition, a failure to comply with the covenants under the Credit Agreement could result in an event of default by us and an acceleration of amounts due.
In the United States, these include rules and regulations promulgated under the authority of the Federal Trade Commission, the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, the Health Insurance Portability and Accountability Act of 1996, the Gramm Leach Bliley Act, the California Consumer Privacy Act, or the CCPA, and other state laws relating to privacy and data security.
In the United States, these include rules and regulations promulgated under the authority of the Federal Trade Commission, the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, the Health Insurance Portability and Accountability Act of 1996, the Gramm Leach Bliley Act, the California Consumer Privacy Act (as modified by the California Privacy Rights Act), or the CCPA, and other state laws relating to privacy and data security.
Any success we may experience in the future will depend in large part on our ability to, among other things: • Maintain and expand our customer base; • Increase revenue from existing customers through increased or broader use of our platform within their organizations; • Further penetrate the existing industry verticals we serve and expand into other industry verticals; and • Continue to successfully expand our business domestically and internationally.
Any success we may experience in the future will depend in large part on our ability to, among other things: • Maintain and expand our customer base; • Increase revenue from existing customers through increased or broader use of our platform within their organizations; • Compete in an AI-accelerated environment; • Further penetrate the existing industry verticals we serve and expand into other industry verticals; and • Continue to successfully expand our business domestically and internationally.
Calkins, our founder and Chief Executive Officer, together with his affiliates, collectively beneficially owned 32 shares representing approximately 81% of the voting power of our outstanding capital stock as of December 31, 2022. Consequently, Mr.
Calkins, our founder and Chief Executive Officer, together with his affiliates, collectively beneficially owned shares representing approximately 81% of the voting power of our outstanding capital stock as of December 31, 2023. Consequently, Mr.
Because our software could be used to collect and store personal information, domestic and international privacy and security concerns could result in additional costs and liabilities to us or inhibit sales of our software and subject us to complex and evolving federal, state, and foreign laws and regulations regarding privacy, data protection, and other related matters.
Because we collect and store personal information, domestic and international privacy and security concerns could result in additional costs and liabilities to us, inhibit sales of our software, and subject us to complex and evolving federal, state, and foreign laws and regulations regarding privacy, data protection, and other related matters.
If our platform does not achieve widespread adoption or there is a reduction in demand for low-code solutions caused by these factors, it could result in reduced customer purchases, reduced renewal rates, and decreased revenue, any of which will adversely affect our business, operating results, and financial condition.
If our platform does not achieve widespread adoption or there is a reduction in demand for low-code solutions caused by these factors, it could result in reduced customer purchases, reduced renewal rates, and decreased revenue, any of which will adversely affect our business, operating results, and financial condition. We currently face significant competition.
The performance of the internet and its acceptance as a business tool have been adversely affected by viruses, worms, and similar malicious programs, along with distributed denial of service, or DDoS, and similar attacks.
The performance of the internet and its acceptance as a business tool have been adversely affected by viruses, worms, and similar malicious programs, along with distributed denial of service (“DDoS”), and similar attacks.
If our security measures are actually or perceived to have been breached or unauthorized access to our platform or customer data is otherwise obtained, our platform may be perceived as not being secure, customers may reduce the use of or stop using our platform, and we may incur significant liabilities.
If our security measures are actually or perceived to have been breached, or if unauthorized access to our platform or customer data occurs, our platform may be perceived as not being secure, and customers may reduce the use of or stop using our platform, and we may incur significant liabilities.
In addition, absent appropriate safeguards or other circumstances, the EU GDPR generally restricts the transfer of personal data to non-adequate countries outside of the European Economic Area, or EEA, such as the United States, which the European Commission does not consider to provide an adequate level of data privacy and security.
In addition, absent appropriate safeguards or other circumstances, the GDPR generally restricts the transfer of personal data to non-adequate countries and/or organizations outside of the European Economic Area, or EEA, such as India, Australia, and non-certified organizations in the United States, which the European Commission does not consider to provide an adequate level of data privacy and security.
Further, nearly 11% of our subscription customers spent more than $1 million on our software in 2022. If we were to lose one or more of our significant customers, our revenue may significantly decline. In addition, revenue from significant customers may vary from period to period depending on the timing of renewing existing agreements or entering into new agreements.
Further, nearly 12% of our subscription customers spent more than $1 million on our software in 2023. If we were to lose one or more of our significant customers, our revenue would significantly decline. In addition, revenue from significant customers may vary from period to period depending on the timing of renewing existing agreements or entering into new agreements.
If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline. 35 Item 1B. Unresolved Staff Comments. None.
If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline. 39 I tem 1B. Unresolved Staff Comments. None.
Further, while security tested and techniques are in place and tested by third parties, because the techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.
Further, even though we have security measures in place that are tested and verified by third parties, because the techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.
General risk factors Unfavorable conditions in the global economy or the vertical markets we serve could limit our ability to grow our business and negatively affect our operating results. General worldwide economic conditions have experienced significant instability due to the global economic uncertainty and financial market conditions caused by the COVID-19 pandemic and the ongoing Russia-Ukraine war.
General Risk Factors Unfavorable conditions in the global economy or the vertical markets we serve could limit our ability to grow our business and negatively affect our operating results. General worldwide economic conditions have experienced significant instability due to the global economic uncertainty and financial market conditions caused by the ongoing Russia-Ukraine war and unrest in the Middle East.
Third-party providers of applications and APIs may change the features of their applications and platforms, restrict our access to their applications and platforms, or alter the terms governing use of their applications and APIs and access to those applications and platforms in an adverse manner.
Third-party providers of applications and application programming interfaces, or APIs, may change the features of their applications and platforms, restrict our access to their applications and platforms, or alter the 27 terms governing use of their applications and APIs and access to those applications and platforms in an adverse manner.
Bribery Act, and other similar statutory requirements prohibiting bribery and corruption in the jurisdictions in which we operate. We have experienced losses in the past, and we may not achieve or sustain profitability in the future. We generated net losses of $150.9 million, $88.6 million, and $33.5 million in 2022, 2021, and 2020, respectively.
Bribery Act, and other similar statutory requirements prohibiting bribery and corruption in the jurisdictions in which we operate. We have experienced losses in the past, and we may not achieve or sustain profitability in the future. We generated net losses of $111.4 million, $150.9 million, and $88.6 million in 2023, 2022, and 2021, respectively.
Our main competitors fall into three categories: (1) providers of custom software and customer software solutions that address, or are developed to address, some of the use cases that can be addressed by applications developed on our platform; (2) providers of low-code development platforms such as Microsoft, Salesforce.com, ServiceNow, OutSystems, and Mendix; and (3) providers of one or more automation technologies, including BPM, case management, process mining, and RPA.
Our main competitors fall into three categories: (1) providers of custom software and customer software solutions that address, or are developed to address, some of the use cases that can be addressed by applications developed on our platform; (2) providers of low-code development platforms; and (3) providers of one or more automation technologies, including BPM, case management, process mining, and RPA.
As of December 31, 2022, we had 11 issued patents and six pending patent applications related to our platform and its technology. We have registered the “Appian” name and logo in the United States and certain other countries. We have registrations and/or pending applications for additional marks in the United States.
As of December 31, 2023, we had 16 issued patents and nine pending patent applications related to our platform and its technology. We have registered the “Appian” name and logo in the United States and certain other countries. We have registrations and/or pending applications for additional marks in the United States.
Interpretation of these laws, rules, and regulations and their application to our software and professional services in the United States and foreign jurisdictions is ongoing and cannot be fully determined at this time.
Interpretation of these laws, rules, and regulations and their application to our software and professional services, as well as to our corporate and marketing activities in the United States and foreign jurisdictions, is ongoing and cannot be fully determined at this time.
Such providers include Pegasystems, Celonis, UiPath, Microsoft, SAP, and Oracle. Some of our actual and potential competitors have advantages over us such as longer operating histories, more established relationships with current or potential customers and commercial partners, significantly greater financial, technical, marketing, or other resources, stronger brand recognition, larger intellectual property portfolios, and broader global distribution and presence.
Some of our actual and potential competitors have advantages over us such as longer operating histories, more established relationships with current or potential customers and commercial partners, significantly greater financial, technical, marketing, or other resources, stronger brand recognition, larger intellectual property portfolios, and broader global distribution and presence.
If we are unable to sustain our revenue growth rate, we may not achieve or maintain profitability in the future. We have experienced revenue growth with revenue of $468.0 million, $369.3 million, and $304.6 million in 2022, 2021, and 2020, respectively.
If we are unable to sustain our revenue growth rate, we may not achieve or maintain profitability in the future. We have experienced revenue growth with revenue of $545.4 million, $468.0 million, and $369.3 million in 2023, 2022, and 2021, respectively.
For example, during the years ended December 31, 2022, 2021, and 2020, revenue from U.S. federal government agencies represented 19.2%, 19.6%, and 18.1% of our total revenue, respectively, and the top three U.S. federal government customers generated 4.5%, 5.6%, and 6.6% of our total revenue for the years ended December 31, 2022, 2021, and 2020, respectively.
For example, during the years ended December 31, 2023, 2022, and 2021, revenue from U.S. federal government agencies represented 21.3%, 19.2%, and 19.6% of our total revenue, respectively, and the top three U.S. federal government customers generated 4.2%, 4.5%, and 5.6% of our total revenue for the years ended December 31, 2023, 2022, and 2021, respectively.
We have operations in the United Kingdom and in Europe and current and potential new customers in Europe. If economic conditions in Europe and other key markets for our platform continue to remain uncertain or deteriorate further, many customers may delay or reduce their information technology spending.
We have operations in the United Kingdom and in Europe and current and potential new customers in Europe. If economic conditions in Europe and other key markets for our platform weaken or deteriorate, many customers may delay or reduce their information technology spending.
In addition, inflation rates have recently risen to historically high levels. The existence of inflation in the U.S. and global economy has, and may continue to result in, higher interest rates and capital costs, increased costs of labor, fluctuating exchange rates, and other similar effects.
In addition, inflation rates in the recent past rose to historically high levels. The existence of inflation in the U.S. and global economy has, and may continue to result in, higher interest rates and capital costs, increased costs of labor, fluctuating exchange rates, and other similar effects.
Our customer agreements often provide service level commitments on a monthly basis. If we are unable to meet the stated service level commitments or suffer extended periods of unavailability for our platform, we may be contractually obligated to provide these customers with service credits or refunds for prepaid amounts, or we could face contract terminations.
If we are unable to meet the stated service level commitments or suffer extended periods of unavailability for our platform, we may be contractually obligated to provide these customers with service credits or refunds for prepaid amounts, or we could face contract terminations.
Our success depends on continued innovation to provide features that make our platform useful for our customers, our ability to persuade existing customers to expand their use of our platform to additional use cases and additional applications, and to purchase additional software licenses to our platform.
Our success depends on continued innovation to provide features that make our platform useful for our customers, including with respect to developments in AI, our ability to persuade existing customers to expand their use of our platform to additional use cases and additional applications, and to purchase additional software licenses to our platform.
As of December 31, 2022, we had an accumulated deficit of $408.5 million. We will need to generate and sustain increased revenue levels in future periods in order to achieve or sustain profitability in the future.
As of December 31, 2023, we had an accumulated deficit of $519.9 million. We will need to generate and sustain increased revenue levels in future periods in order to achieve or sustain profitability in the future.
We currently face significant competition. 14 The markets for low-code platforms, business process management, case management software, and custom software are highly competitive, rapidly evolving, and have relatively low barriers to entry.
The markets for low-code platforms, business process management, case management software, and custom software are highly competitive, rapidly evolving, and have relatively low barriers to entry.
Our ability to use net operating losses to offset future taxable income may be subject to certain limitations. As of December 31, 2022, we had gross U.S. federal and state net operating loss carryforwards, or NOLs, of $237.7 million and $256.3 million, respectively, available to offset future taxable income.
Our ability to use net operating losses to offset future taxable income may be subject to certain limitations. As of December 31, 2023, we had gross U.S. federal and state net operating loss carryforwards, or NOLs, of $295.9 million and $306.8 million, respectively, available to offset future taxable income.
Any defects in functionality, security, or other conditions that cause interruptions in the availability of our platform could result in: • Loss or delayed market acceptance and sales; • Breach of warranty claims; • Sales credits or refunds for prepaid amounts related to unused subscription services; • Loss of customers; • Diversion of development and support resources; and/or • Injury to our reputation. 20 The costs incurred in correcting any material defects or errors might be substantial and could adversely affect our operating results.
Any defects in functionality, security, or other conditions that cause interruptions in the availability of our platform could result in: • Loss or delayed market acceptance and sales; • Breach of warranty claims; • Sales credits or refunds for prepaid amounts related to unused subscription services; • Loss of customers; • Diversion of development and support resources; and/or • Injury to our reputation.
A substantial decrease in the market price of our Class A common stock would effectively reduce the compensation of such persons and could increase the risk they depart from our company. The loss of any of our senior management or key employees, particularly Mr.
A substantial decrease in the market price of our Class A common stock would effectively reduce the compensation of such persons. The loss of any of our senior management or key employees, particularly Mr.
Internationally, the European Union has adopted a comprehensive and evolving general data protection regulation, or the GDPR, which contains numerous requirements related to rights of data subjects in their personal data, including more robust obligations on data processors and heavier documentation requirements for data protection compliance programs by companies in general.
New legislation proposed or enacted in various other states will continue to shape the data privacy environment nationally. 29 Internationally, the European Union has adopted a comprehensive and evolving general data protection regulation, or the GDPR, which contains numerous requirements related to rights of data subjects in their personal data, including more robust obligations on data processors and heavier documentation requirements for data protection compliance programs by companies in general.
Each solution requires an investment in development, marketing, sales, support, finance, and legal resources to bring the solution to market. Although we make efforts to identify the solutions that will receive favorable market acceptance, there can be no guarantee any solution will become the source of material revenue, and the investment in the solution may not produce a positive return.
Although we make efforts to identify the solutions that will receive 22 favorable market acceptance, there can be no guarantee any solution will become the source of material revenue, and the investment in the solution may not produce a positive return.
Furthermore, we cannot predict the timing, strength, or duration of any economic slowdown or recovery. In addition, even if the overall economy is robust, we cannot provide assurance the market for services such as ours will experience growth or that we will experience growth. Our stock price has been volatile and may be volatile in the future.
In addition, even if the overall economy is robust, we cannot provide assurances that the market for services such as ours will experience growth or that we will experience growth. Our stock price has been volatile and may be volatile in the future.
We may be subject to intellectual property rights claims by third parties, which are extremely costly to defend, could require us to pay significant damages, and could limit our ability to use certain technologies.
Our failure to secure, protect, and enforce our intellectual property rights could seriously adversely affect our brand and impact our business. 33 We may be subject to intellectual property rights claims by third parties, which are extremely costly to defend, could require us to pay significant damages, and could limit our ability to use certain technologies.
If macroeconomic conditions deteriorate or are characterized by uncertainty or volatility, customers may curtail or freeze spending on software in general and for software such as ours specifically, which could have an adverse impact on our business, financial condition, and operating results.
If macroeconomic conditions deteriorate or are characterized by uncertainty or volatility, 38 customers may curtail or freeze spending on software in general and for software such as ours specifically, which could have an adverse impact on our business, financial condition, and operating results. Furthermore, we cannot predict the timing, strength, or duration of any economic slowdown or recovery.
Any actual or perceived breach of our security measures or failure to adequately protect our customers’ or our confidential or proprietary information could negatively affect our ability to attract new customers, cause existing customers to elect to not renew their subscriptions to our software, or result in reputational damage, any of which could adversely affect our operating results. 15 Further, security compromises experienced by our customers with respect to data hosted on our platform, even if caused by the customer’s own misuse or negligence, may lead to public disclosures, which could harm our reputation, erode customer confidence in the effectiveness of our security measures, negatively impact our ability to attract new customers, or cause existing customers to elect not to renew their subscriptions with us.
Further, security compromises experienced by our customers with respect to data hosted on our platform, even if caused by the customer’s own misuse or negligence, may lead to public disclosures, which could harm our reputation, erode customer confidence in the effectiveness of our security measures, negatively impact our ability to attract new customers, or cause existing customers to elect not to renew their subscriptions with us.
Competition for well-qualified employees in all aspects of our business, including sales personnel, professional services personnel, cloud engineering and support personnel, and software engineers, is intense. Our continued ability to compete effectively depends on our ability to attract new employees and to retain and motivate existing employees.
Our ability to successfully pursue our growth strategy also depends on our ability to attract, motivate, and retain our personnel. Competition for highly-qualified employees in all aspects of our business, including sales personnel, professional services personnel, cloud engineering and support personnel, and software engineers, is intense.
In addition, negative publicity related to our customer relationships, regardless of accuracy, may further damage our business by affecting our ability to compete for new business with actual and prospective customers.
In addition, negative publicity related to our customer relationships, regardless of accuracy, may further damage our business by affecting our ability to compete for new business with actual and prospective customers. We are substantially dependent upon customer renewals, the addition of new customers, and the continued growth of our subscriptions revenue.
It contains detailed requirements regarding collecting and processing personal information, imposes certain limitations on how such information may be used, and provides rights to consumers that have never before been available, all of which may be imposed on us by our customers. This could increase our costs of doing business.
The CCPA contains detailed requirements regarding collecting and processing personal information, imposes certain limitations on how such information may be used, and provides rights to consumers that have never before been available, all of which may be imposed on us by our customers. Further, the CCPA expands consumers’ rights with respect to certain sensitive personal information.
Professional services may be performed by our own staff, a third party, or a combination of the two. Our strategy is to work with third parties to increase the breadth, capability, and depth of capacity for delivery of these services to our customers, and third parties provide a significant portion of our deployment services.
Our strategy is to work with third parties to increase the breadth, capability, and depth of capacity for delivery of these services to our customers, and third parties provide a significant portion of our deployment services.
Our operating results may fluctuate, in part, because of the resource-intensive nature of our sales efforts, the length and variability of the sales cycle of our platform, and the difficulty we face in adjusting our short-term operating expenses. Our operating results depend in part on sales to large customers and promotion of increasing usage by those large customers.
Our operating results may fluctuate, in part, because of the resource-intensive nature of our sales efforts, the length and variability of the sales cycle of our platform, and the difficulty we face in adjusting our short-term operating expenses to respond to the fluctuations in the sales cycles.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. As of December 31, 2022, our corporate headquarters occupies approximately 272,000 square feet in McLean, Virginia under an operating lease that expires in October 2031. Approximately 32,000 square feet of headquarters space is subleased. We also lease space in the United Kingdom, Italy, Australia, and Spain under operating lease agreements with various expiration dates through 2028.
Biggest changeItem 2. Properties. As of December 31, 2023, our corporate headquarters occupies approximately 300,000 square feet in McLean, Virginia under an operating lease that expires in October 2031. Approximately 32,000 square feet of headquarters space is subleased. We also lease space in Australia, Italy, India, Spain, and the United Kingdom under operating lease agreements with various expiration dates through 2028.
In addition, we utilize flexible workspaces depending on the occupancy needs in each of the countries we operate in. We believe our facilities are suitable and adequate to meet our needs.
In addition, we utilize flexible workspaces depending on the occupancy needs in each of the countries we operate in. We believe our facilities are suitable and adequate to meet our needs. 40

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAppian expects to file its responsive brief in March 2023, to which Pegasystems will file a reply brief. After submission of the reply brief, the timeline of the case is solely within the control of the Court of Appeals until it rules.
Biggest changeBoth sides have submitted their respective appeal briefs to the Court of Appeals, and the Court held a hearing on the appeal on November 15, 2023. The timeline of the case is solely within the control of the Court of Appeals until it rules.
Pegasystems is not required to pay us the judgment, attorney’s fees, or post-judgment interest until all appeals are exhausted. We cannot predict the outcome of any appeals or the time it will take to resolve them. Consistent with other judgments, there is no guarantee we will be able to collect all or any portion of the judgment.
Pegasystems is not required to pay us the judgment, attorney’s fees, or post-judgment interest until all appeals are exhausted. We cannot predict the outcome of any appeals or the exact time it will take to resolve them. Consistent with other judgments, there is no guarantee we will be able to collect all or any portion of the judgment.
Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management time and resources, and other factors. Item 4. Mine Safety Disclosures. Not applicable. 36 PART II
Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management time and resources, and other factors. Item 4. Mine Safety Disclosures. Not applicable. 41 PART II
Defendant Youyong Zou has satisfied the judgment of $5,000 (plus interest) against him in lieu of appealing that judgment. On September 15, 2022, Pegasystems filed a notice of appeal, and on February 6, 2023, Pegasystems filed its opening brief with the Court of Appeals of Virginia.
Defendant Youyong Zou has satisfied the judgment of $5,000 (plus interest) against him in lieu of appealing that judgment. On September 15, 2022, Pegasystems filed a notice of appeal to the Court of Appeals of Virginia.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeComparison of Cumulative Five Year Total Return Among Appian Corporation, the Nasdaq Global Market Composite Index, and the Nasdaq Computer Index As of December 31, 2017 2018 2019 2020 2021 2022 Appian Corporation $ 100.00 $ 84.85 $ 121.38 $ 514.90 $ 207.15 $ 103.43 Nasdaq Global Market Composite $ 100.00 $ 93.55 $ 128.97 $ 212.65 $ 180.40 $ 99.84 Nasdaq Computer $ 100.00 $ 96.32 $ 144.80 $ 217.17 $ 299.39 $ 192.28 38 Purchase of Equity Securities by the Issuer and Affiliated Purchases Period Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publicly announced plan Maximum number of shares that may yet be purchased under the plan (2) October 1 to October 31, 2022 5,220 $ 44.09 5,220 941,935 November 1 to November 30, 2022 4,517 $ 49.22 4,517 937,418 December 1 to December 31, 2022 5,413 $ 38.03 5,413 932,005 Total 15,150 $ 43.45 15,150 932,005 (1) Shares purchased represent shares purchased on the open market pursuant to the Appian Corporation Employee Stock Purchase Plan (“ESPP”), which was approved by the Company’s stockholders on June 11, 2021.
Biggest changeComparison of Cumulative Five Year Total Return Among Appian Corporation, the Nasdaq Global Market Composite Index, and the Nasdaq Computer Index As of December 31, 2018 2019 2020 2021 2022 2023 Appian Corporation $ 100.00 $ 143.06 $ 606.85 $ 244.14 $ 121.90 $ 141.00 Nasdaq Global Market Composite $ 100.00 $ 137.87 $ 227.32 $ 192.85 $ 106.73 $ 113.60 Nasdaq Computer $ 100.00 $ 150.34 $ 225.48 $ 310.84 $ 199.64 $ 332.34 43 Purchase of Equity Securities by the Issuer and Affiliated Purchases Period Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publicly announced plan Maximum number of shares that may yet be purchased under the plan (2) October 1 to October 31, 2023 5,182 $ 44.05 5,182 876,206 November 1 to November 30, 2023 5,370 $ 41.70 5,370 870,836 December 1 to December 31, 2023 5,657 $ 38.51 5,657 865,179 Total 16,209 $ 41.34 16,209 865,179 (1) Shares purchased represent shares purchased on the open market pursuant to the Appian Corporation Employee Stock Purchase Plan (“ESPP”), which was approved by the Company’s stockholders on June 11, 2021.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities. Market Information Our Class A common stock is listed on the Nasdaq Global Market under the symbol “APPN”. Our Class B common stock is not listed or traded on any stock exchange.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities. Market Information Our Class A common stock is listed on the Nasdaq Global Market under the symbol “APPN.” Our Class B common stock is not listed or traded on any stock exchange.
Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of our Board of Directors, subject to applicable laws, and will depend on then existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects, and other factors our Board of Directors may deem relevant. 37 Stock Performance Graph This section is not deemed “filed” with the SEC and shall not be deemed incorporated by reference into any of our other filings under the Exchange Act or the Securities Act, irrespective of any general incorporation language in any such filing.
Any future determination as to the declaration and payment of dividends or share repurchase program, if any, will be at the discretion of our Board of Directors, subject to applicable laws, and will depend on then existing conditions, including our financial condition, operating results, contractual restrictions pursuant to our outstanding Credit Agreement, capital requirements, business prospects, and other factors our Board of Directors may deem relevant. 42 Stock Performance Graph This section is not deemed “filed” with the SEC and shall not be deemed incorporated by reference into any of our other filings under the Exchange Act or the Securities Act, irrespective of any general incorporation language in any such filing.
The following graph shows a comparison from December 31, 2017 through December 31, 2022, of the cumulative five year total return for an investment of $100 in our Class A common stock, the Nasdaq Global Market Composite Index, and the Nasdaq Computer Index.
The following graph shows a comparison from December 31, 2018 through December 31, 2023, of the cumulative five year total return for an investment of $100 in our Class A common stock, the Nasdaq Global Market Composite Index, and the Nasdaq Computer Index.
Dividends We have never declared or paid, and do not anticipate declaring or paying in the foreseeable future, any cash dividends on our common stock.
Dividends We have never declared or paid as a public company, and do not anticipate declaring or paying in the foreseeable future, any cash dividends on our common stock.
We have filed a registration statement on S-8 that covers 1,000,000 shares.
We have filed a registration statement on S-8 that covers 1,000,000 shares. Item 6. [Reserved] 44
As of February 13, 2023, there were 19 holders of record of our Class A common stock and 34 holders of record of our Class B common stock.
As of February 12, 2024, there were 18 holders of record of our Class A common stock and 32 holders of record of our Class B common stock.
The ESPP provides employees an opportunity to purchase the Company’s common stock through payroll deductions at 85% of the stock’s fair market value. The Company satisfies its ESPP obligation by purchasing the additional 15% of the stock’s fair value on the open market. Shares purchased under the ESPP are deposited into the participants’ accounts.
The ESPP provides employees with an opportunity to purchase the Company’s common stock through payroll deductions and provides for a Company match of 5% to 15%, subject to limits set forth in the ESPP. Shares purchased under the ESPP are deposited into the participants’ accounts.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table reconciles GAAP net loss per share to non-GAAP net loss per share for the years ended December 31, 2022, 2021, and 2020: Year Ended December 31, 2022 2021 2020 GAAP net loss per share, basic and diluted $ (2.08) $ (1.25) $ (0.48) Add back: Non-GAAP adjustments to net loss per share 0.85 0.57 0.22 Non-GAAP net loss per share, basic and diluted $ (1.23) $ (0.68) $ (0.26) The following table reconciles GAAP net loss to adjusted EBITDA for the years ended December 31, 2022, 2021, and 2020 (in thousands): Year Ended December 31, 2022 2021 2020 GAAP net loss $ (150,920) $ (88,641) $ (33,477) Other expense (income), net 3,545 3,584 (5,786) Interest expense 1,673 372 478 Income tax expense 692 778 883 Depreciation and amortization of intangible assets 7,297 5,743 5,851 Stock-based compensation expense 38,830 23,844 15,279 Litigation expenses 22,886 16,400 — Adjusted EBITDA $ (75,997) $ (37,920) $ (16,772) 52 Liquidity and Capital Resources The following table presents selected financial information and statistics pertaining to liquidity and capital resources as of and for the years ended December 31, 2022 and 2021 (in thousands): As of December 31, 2022 2021 Cash and cash equivalents $ 148,132 $ 100,796 Short-term investments and marketable securities 47,863 55,179 Property and equipment, net 41,855 36,913 Long-term investments — 12,044 Working capital* 149,996 121,752 * Defined as current assets net of current liabilities, excluding the current portion of restricted cash As of December 31, 2022, we had $148.1 million of cash and cash equivalents and $47.9 million of short-term investments and marketable securities.
Biggest changeThe presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as a substitute for, or superior to the financial information prepared and presented in accordance with GAAP, and our non-GAAP measures may be different from non-GAAP measures used by other companies. 57 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 Non-GAAP Measure Year Ended December 31, 2023 Subscriptions cost of revenue $ 43,563 $ (925) $ — $ — $ (30) $ 42,608 Professional services cost of revenue 99,759 (6,055) — — (158) 93,546 Total cost of revenue 143,322 (6,980) — — (188) 136,154 Total operating expense 510,014 (36,407) 2,064 (6,038) (6,111) 463,522 Operating loss (107,973) 43,387 (2,064) 6,038 6,299 (54,313) Income tax expense 3,209 1,302 — — 139 4,650 Net loss (111,441) 42,085 (2,064) 6,038 6,160 (59,222) Net loss per share, basic and diluted $ (1.52) $ 0.58 $ (0.03) $ 0.08 $ 0.08 $ (0.81) Year Ended December 31, 2022 Subscriptions cost of revenue $ 36,005 $ (996) $ — $ — $ — $ 35,009 Professional services cost of revenue 97,301 (5,309) — — — 91,992 Total cost of revenue 133,306 (6,305) — — — 127,001 Total operating expense 479,695 (32,525) (22,886) — — 424,284 Operating loss (145,010) 38,830 22,886 — — (83,294) Net loss (150,920) 38,830 22,886 — — (89,204) Net loss per share, basic and diluted $ (2.08) $ 0.54 $ 0.32 $ — $ — $ (1.23) Year Ended December 31, 2021 Subscriptions cost of revenue $ 27,330 $ (1,199) $ — $ — $ — $ 26,131 Professional services cost of revenue 76,763 (3,131) — — — 73,632 Total cost of revenue 104,093 (4,330) — — — 99,763 Total operating expense 349,073 (19,514) (16,400) — — 313,159 Operating loss (83,907) 23,844 16,400 — — (43,663) Net loss (88,641) 23,844 16,400 — — (48,397) Net loss per share, basic and diluted $ (1.25) $ 0.34 $ 0.23 $ — $ — $ (0.68) 58 The following table reconciles GAAP net loss to adjusted EBITDA for the years ended December 31, 2023, 2022, and 2021 (in thousands): Year Ended December 31, 2023 2022 2021 GAAP net loss $ (111,441) $ (150,920) $ (88,641) Other (income) expense, net (17,603) 3,545 3,584 Interest expense 17,862 1,673 372 Income tax expense 3,209 692 778 Depreciation expense and amortization of intangible assets 9,473 7,297 5,743 Stock-based compensation expense 43,387 38,830 23,844 Litigation Expense (2,064) 22,886 16,400 JPI Amortization 6,038 — — Severance Costs 6,299 — — Adjusted EBITDA $ (44,840) $ (75,997) $ (37,920) Liquidity and Capital Resources The following table presents selected financial information and statistics pertaining to liquidity and capital resources as of December 31, 2023 and 2022 (in thousands): As of December 31, 2023 2022 Cash and cash equivalents $ 149,351 $ 148,132 Short-term investments and marketable securities 9,653 47,863 Property and equipment, net 42,682 41,855 Working capital * 43,183 149,996 * Defined as current assets net of current liabilities, excluding the current portion of restricted cash As of December 31, 2023, we had $149.4 million of cash and cash equivalents and $9.7 million of short-term investments and marketable securities.
Research and Development Expense Research and development expense consists primarily of personnel costs for our employees who develop and enhance our platform, including salaries, bonuses, stock-based compensation, and other personnel costs. Also included are non-personnel costs such as subcontracting, consulting, and professional fees to third party development resources, and allocated overhead costs.
Research and Development Expense Research and development expense consists primarily of personnel costs for our employees who develop and enhance our platform, including salaries, bonuses, stock-based compensation, and other personnel costs. Also included are non-personnel costs such as subcontracting, consulting, professional fees to third party development resources, and allocated overhead costs.
Factors considered when determining to incorporate variable consideration in the transaction price include, but are not limited to, whether the variable consideration is highly susceptible to factors outside of the Company's influence, the length of time the uncertainty surrounding reversal is expected to last, our experience levels with similar types of contracts, our historical practices for similar contracts in similar 55 circumstances, and the number and range of possible consideration amounts.
Factors considered when determining to incorporate variable consideration in the transaction price include, but are not limited to, whether the variable consideration is highly susceptible to factors outside of the Company's influence, the length of time the uncertainty surrounding reversal is expected to last, our experience levels with similar types of contracts, our historical practices for similar contracts in similar circumstances, and the number and range of possible consideration amounts.
Our cloud subscription revenue retention rate can fluctuate from period to period due to large customer contracts in any given period. Key Components of Results of Operations We generate revenue primarily through sales of subscriptions to our platform as well as professional services. We generally sell our software on a per-user basis or through non-user based single application licenses.
Our cloud subscriptions revenue retention rate can fluctuate from period to period due to large customer contracts in any given period. Key Components of Results of Operations Revenue We generate revenue primarily through sales of subscriptions to our platform as well as professional services. We generally sell our software on a per-user basis or through non-user-based single application licenses.
While 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.
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.
Our maintenance and support agreements provide customers with the right to unspecified software upgrades, maintenance releases and patches released 43 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.
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.
Although we expect research and development expense to continue to increase in absolute dollars as such costs are critical to maintain and improve the quality of applications and our competitive position, we believe our new product development center will result in cost savings over time.
Although we expect research and development expense to continue to increase in absolute dollars as such costs are critical to maintain and improve the quality of applications and our competitive position, we believe our product development center will result in cost savings over time.
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.
Many of our customers begin by building a 46 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.
General and Administrative Expense General and administrative expense consists primarily of personnel costs, including salaries, bonuses, stock-based compensation, and other personnel costs for our administrative, legal, information technology, human resources, finance and accounting, as well as our senior executives.
General and Administrative Expense General and administrative expense consists primarily of personnel costs, including salaries, bonuses, stock-based compensation, and other personnel costs for our administrative, legal, information technology, human resources, finance and accounting teams as well as our senior executives.
The SSP is the observable price at which we sell the product or service separately. In the absence of observable pricing, we estimate SSP using the residual approach. We establish SSP as follows: 1.
The SSP is the observable price at which we sell the product or service separately. In the absence of observable pricing, we estimate SSP using the residual approach. We establish SSP as follows: 62 1.
Revenue Our revenue is comprised of the following: 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.
Our revenue is comprised of the following: 48 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.
We use these non-GAAP financial performance 50 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 its recurring core business operating results.
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.
However, the amount of backlog relative to the total value of our contracts can change from quarter to quarter and year to year for several reasons, including the specific timing and duration of cloud and term license subscription agreements with large customers, the specific timing of customer renewals, changes in customer financial circumstances, and foreign currency fluctuations.
However, the amount of backlog relative to the total value of our contracts can change from quarter to quarter and year to year for several reasons, including the specific timing and duration of cloud and on-premises term license subscription agreements with large customers, the specific timing of customer renewals, changes in customer financial circumstances, and foreign currency fluctuations.
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 12 months.
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.
Cloud subscription revenue retention rate is then calculated by dividing the aggregate recurring cloud subscription 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.
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.
The Appian Platform includes everything you need to design, automate, and optimize even the most complex processes, from start to finish. The world's most innovative organizations trust Appian to improve their workflows, unify data, and optimize operations—resulting in better growth and superior customer experiences.
The Appian AI Process Platform includes everything you need to design, automate, and optimize even the most complex processes, from start to finish. The world's most innovative organizations trust Appian to improve their workflows, unify data, and optimize operations—resulting in better growth and superior customer experiences.
Over the last three completed fiscal years, we had an average cloud subscription gross revenue renewal rate of 99%, which is calculated by dividing (i) the cloud subscription revenue from renewing cloud customers in the current 12-month period that were cloud customers during the entirety of the prior 12-month period, giving effect to price increases but excluding additional cloud subscription for additional users, or upsells, by (ii) our cloud subscription 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.
Over the last three completed fiscal years, we had an average cloud subscription gross revenue renewal rate of 98%, which is calculated 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, giving effect to price increases but excluding additional cloud subscriptions for additional users, or upsells, 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.
See Note 3 to the consolidated financial statements for further details on our revenue recognition policies. 42 Key Metrics We monitor the following metrics to help us measure and evaluate the effectiveness of our operations. All dollar amounts are presented in thousands.
See Note 3 to the consolidated financial statements for further details on our revenue recognition policies. 47 Key Metrics We monitor the following metrics to help us measure and evaluate the effectiveness of our operations. All dollar amounts are presented in thousands.
We calculate this metric over a set of customers who have been with us for at least one full year. To calculate our cloud subscription revenue retention rate for a particular trailing 12-month period, we first establish the recurring cloud subscription revenue for the previous trailing 12-month period.
We calculate this metric over a set of customers who have been with us for at least one full year. 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.
We measure the effectiveness of our business model by comparing the lifetime value of our customer relationships to our customer acquisition costs.
We also measure the effectiveness of our business model by comparing the lifetime value of our customer relationships to our customer acquisition costs.
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, and life sciences.
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.
Such a decline, however, will negatively affect our revenue in future periods. Accordingly, the effect of significant downturns in sales and market acceptance of our platform and potential changes in our rate of renewals may not be fully reflected in our results of operations until future periods.
Such a decline, however, will negatively affect our revenue in future periods. Accordingly, the effect of significant downturns in sales, the market acceptance of our platform, or potential changes in our rate of renewals may not be fully reflected in our results of operations until future periods.
We believe increasing cloud subscription 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.
Our cloud subscription 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.
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.
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 any expansion or contraction. We subsequently measure the recurring cloud subscription revenue in the current trailing 12-month period from the cohort of customers from 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 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.
We often sign multiple-year cloud subscription agreements. Backlog may vary based on changes in the average non-cancellable term of a cloud and on-premises term license subscription agreements. Non-GAAP Financial Measures To supplement its consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide investors with certain non-GAAP financial performance measures.
We often sign multiple-year cloud subscription agreements. Backlog may vary based on changes in the average non-cancellable term of our cloud and on-premises term license subscription agreements. Non-GAAP Financial Measures To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide investors with certain non-GAAP financial performance measures.
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, with the exception of sales commissions, are expensed as incurred.
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.
Therefore, while we may incur or recognize these types of expenses in the future, the Company believes removing these items for purposes of calculating the non-GAAP financial measures provides investors with a more focused presentation of our ongoing operating performance.
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.
Cloud Subscription Revenue Retention Rate As of December 31, 2022 2021 2020 Cloud subscription revenue retention rate 115 % 116 % 119 % A key factor to our success is the renewal and expansion of subscription agreements with our existing customers.
Cloud Subscriptions Revenue Retention Rate As of December 31, 2023 2022 2021 Cloud subscriptions revenue retention rate 119 % 115 % 116 % A key factor to our success is the renewal and expansion of subscription agreements with our existing customers.
The amount of variable consideration excluded from the transaction price for the years ended December 31, 2022, 2021, and 2020 was insignificant. Allocating the Transaction Price Based on Standalone Selling Prices We allocate the transaction price to each performance obligation in a contract based on its relative standalone selling price, or SSP.
The amount of variable consideration excluded from the transaction price for the years ended December 31, 2023, 2022, and 2021 was immaterial. Allocating the Transaction Price Based on Standalone Selling Prices We allocate the transaction price to each performance obligation in a contract based on its relative standalone selling price, or SSP.
Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020 For a discussion and analysis of changes in financial condition and results of operations for the year ended December 31, 2021 as compared to the year ended December 31, 2020, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 17, 2022.
Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 For a discussion and analysis of changes in financial condition and results of operations for the year ended December 31, 2022 as compared to the year ended December 31, 2021, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 16, 2023.
Although we believe the estimates we use are reasonable, due to the inherent uncertainty involved in making those estimates, actual results reported in future periods could differ from those estimates. We believe the following accounting estimates involve a high degree of judgment and complexity.
Although we believe the estimates we use are reasonable, due to the inherent uncertainty involved in making those estimates, actual results reported in future periods could differ from those estimates. We believe the following accounting estimates embedded in our revenue recognition involve a high degree of judgment and complexity.
Professional services gross margin is also impacted by the amount of services performed by subcontractors and partners as opposed to internal resources. In 2021, we had a lower usage of subcontractors and performed fewer in-person professional services engagements and deployments, both of which reduced certain classes of expenses and improved professional services margins. In 2022, these margins began to decline.
Professional services gross margin is also impacted by the amount of services performed by subcontractors and partners as opposed to internal resources. In 49 2022, we had a lower usage of subcontractors and performed fewer in-person professional services engagements and deployments, both of which reduced certain classes of expenses and improved professional services margins.
Accordingly, these are the estimates we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of our operations. This commentary should be read in conjunction with our consolidated financial statements and the remainder of this Form 10-K.
Accordingly, we believe the estimates included in our revenue recognition accounting are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. This commentary should be read in conjunction with our consolidated financial statements and the remainder of this Form 10-K.
Backlog Backlog represents non-cancellable future amounts to be recognized under cloud and on-premises term license subscription agreements and is representative of our remaining performance obligations. As of December 31, 2022 and 2021, we had backlog of $376.5 million and $285.5 million, respectively. Approximately 35% of our backlog as of December 31, 2022 is not expected to be recognized in 2023.
Backlog Backlog represents non-cancellable future amounts to be recognized under cloud and on-premises term license subscription agreements and is representative of our remaining performance obligations. As of December 31, 2023 and 2022, we had backlog of $489.7 million and $376.5 million, respectively. Approximately 37% of our backlog as of December 31, 2023 is not expected to be recognized in 2024.
In 2023, we expect professional services gross margin to be consistent with 2022; however, the margin remains subject to fluctuation based on the factors discussed above. Operating Expenses 44 Operating expenses consist of sales and marketing, research and development, and general and administrative expenses.
In 2023, these margins began to decline. In 2024, we expect professional services gross margin to be consistent with 2023; however, the margin remains subject to fluctuation based on the factors discussed above. Operating Expenses Operating expenses consist of sales and marketing, research and development, and general and administrative expenses.
To further help strengthen our financial position and support our growth initiatives, on November 3, 2022 we entered into a new Senior Secured Credit Facilities Credit Agreement (the “Credit Agreement”) which provides for a five-year term loan facility in an aggregate principal amount of $100.0 million and, in addition, up to $50.0 million for a revolving credit facility, including a letter of credit sub-facility in the aggregate availability amount of $15.0 million and a swingline sub-facility in the aggregate availability amount of $10.0 million (as a sublimit of the revolving loan facility).
To further help strengthen our financial position and support our growth initiatives, in November 2022 we entered into a Senior Secured Credit Facilities Credit Agreement, or the Credit Agreement, which provides for a five-year term loan facility in an aggregate principal amount of $150.0 million and, in addition, up to $75.0 million for a revolving credit facility, including a letter of credit sub-facility in the aggregate availability amount of $15.0 million 59 and a swingline sub-facility in the aggregate availability amount of $10.0 million (as a sublimit of the revolving loan facility).
Professional Services Gross Margin Professional services gross margin is affected by the growth in our professional services revenue as compared to the growth in, and timing of, the cost of our Customer Success organization as we continue to invest in the growth of our business.
Professional Services Gross Margin 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.
We intend to continue to invest in our 40 business to take advantage of our market opportunity. As a result, we incurred net losses of $150.9 million, $88.6 million, and $33.5 million in 2022, 2021, and 2020, respectively. We also used cash in operations of $106.6 million, $53.9 million, and $7.6 million in 2022, 2021, and 2020, respectively.
We intend to continue to invest in our business to take advantage of our market opportunity. As a result, we incurred net losses of $111.4 million, $150.9 million, and $88.6 million in 2023, 2022, and 2021, respectively. We also used cash in operations of $110.4 million, $106.6 million, and $53.9 million in 2023, 2022, and 2021, respectively.
Uses of Funds 53 Our current principal uses of cash are funding operations and other working capital requirements. Historically, we have also utilized cash to acquire complementary businesses, and we may pursue similar opportunities in the future.
Uses of Funds Our current principal uses of cash are funding operations and other working capital requirements. Historically, we have also utilized cash to pay for the acquisition of businesses that were complementary to ours, and we may pursue similar opportunities in the future.
With respect to new versus existing customers, $63.2 million of the increase in subscriptions revenue was derived from expanded deployments and corresponding sales of additional subscriptions to existing customers while $13.2 million was driven from sales of subscriptions to new customers.
With respect to new versus existing customers, $53.8 million of the increase in subscriptions revenue was derived from expanded deployments and corresponding sales of additional subscriptions to existing customers while $18.4 million was driven from sales of subscriptions to new customers.
Our cloud subscription revenue was $236.9 million, $179.4 million, and $129.2 million in 2022, 2021, and 2020, respectively. We have invested in developing our platform, expanding our sales and marketing and research and development capabilities, and providing general and administrative resources to support our growth.
Our cloud subscriptions revenue was $304.5 million, $236.9 million, and $179.4 million in 2023, 2022, and 2021, respectively. 45 We have invested in developing our platform, expanding our sales and marketing and research and development capabilities, and providing general and administrative resources to support our growth.
We also intend to continue to invest in sales and marketing as we further expand our sales teams, increase our marketing activities, and grow our international operations. Seasonality We have historically experienced seasonality in terms of when we enter into agreements with customers.
In addition, we may pursue strategic acquisitions that enhance our product offerings. We also intend to continue to invest in sales and marketing as we further expand our sales teams, increase our marketing activities, and grow our international operations. Seasonality We have historically experienced seasonality in terms of when we enter into agreements with customers.
Furthermore, we usually enter into a significant portion of agreements with customers during the last month of each quarter, and often the last two weeks of each quarter. However, we recognize the majority of our subscriptions revenue ratably over the terms of our subscription agreements, which are generally one to three years in length.
Furthermore, we usually enter into a significant portion of agreements with customers during the last month of each quarter and often the last two weeks of each quarter. However, we recognize the majority of our subscriptions revenue ratably over the terms of our subscription agreements.
We have several strategic partnerships, including with KPMG, Accenture, PwC, EY, Infosys, Wipro, and Deloitte, which allow them to refer customers to us in order to purchase subscriptions and then our partners provide professional services directly to the customers using 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. 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.
The increase in subscriptions revenue was driven by a $57.5 million increase in cloud subscription revenue, a $16.6 million increase in on-premises software revenue, and a $2.4 million increase in maintenance and support revenue.
The increase in subscriptions revenue was driven by a $67.6 million increase in cloud subscriptions revenue, a $2.5 million increase in on-premises software revenue, and a $2.1 million increase in maintenance and support revenue.
The degree to which prospective customers recognize the need for our software platform that enables organizations to digitally transform, and subsequently allocate budget dollars to purchase our software, will drive our ability to acquire new customers and increase sales to existing customers, which, in turn, will affect our future financial performance. • Growth of Our Customer Base.
The degree to which prospective customers recognize the need for our software platform and its ability to enable their organizations to digitally transform, and subsequently allocate budget dollars to purchase our software, will drive our ability to acquire new customers and increase sales to existing customers, which, in turn, will affect our future financial performance. • Growth of Our Customer Base - We believe we have a substantial opportunity to grow our customer base.
Cloud Subscription Revenue Year Ended December 31, 2022 2021 2020 Cloud subscription revenue $ 236,922 $ 179,415 $ 129,219 Cloud subscription revenue includes cloud subscriptions bundled with maintenance and support and hosting services. In 2022, 2021, and 2020, 69.7%, 68.0%, and 65.0%, respectively, of subscriptions revenue was cloud subscription revenue.
Cloud Subscriptions Revenue Year Ended December 31, 2023 2022 2021 Cloud subscriptions revenue $ 304,481 $ 236,922 $ 179,415 Cloud subscriptions revenue includes cloud subscriptions bundled with maintenance and support and hosting services. In 2023, 2022, and 2021, 73.8%, 69.7%, and 68.0%, respectively, of subscriptions revenue was cloud subscriptions revenue.
On a rolling 12-month basis, we estimate that for each of the past five fiscal years, the average lifetime value of a customer has exceeded 7x the associated average cost of acquiring them, including the year ended December 31, 2022.
On a rolling 12-month basis, we estimate that for each of the past five fiscal years, the average lifetime value of a customer has been at least seven times greater than the associated average cost of acquiring them, including the year ended December 31, 2023.
As a result, 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 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.
In addition, we continue to grow our base of strategic partners to provide broader customer coverage and solution delivery capabilities. These partners perform professional services with respect to any new service contracts they originate. As the usage of partners expands, we expect the proportion of our total revenue from subscriptions to increase over time relative to professional services.
These partners perform professional services with respect to any new service contracts they originate. 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.
If we are unable to raise additional capital when desired, our business, operating results, and financial condition could be adversely affected. Sources of Funds We have historically financed our operations in large part with equity financing arrangements. Through 2022, we have completed four public offerings and received net proceeds of $344.8 million.
If we are unable to raise additional capital when desired, our business, operating results, and financial condition could be adversely affected. Sources of Funds We have historically financed our operations in large part with equity financing arrangements. Our last public offering was completed in June 2020, which was our fourth round of public offerings.
Other Expense, Net Year Ended December 31, 2022 2021 $ Change % Change (dollars in thousands) Other expense, net $ 3,545 $ 3,584 $ (39) (1.1)% % of revenue 0.8 % 1.0 % Other expense, net was $3.5 million in 2022 compared to other expense, net of $3.6 million in 2021.
Other (Income) Expense, Net Year Ended December 31, 2023 2022 $ Change % Change (dollars in thousands) Other (income) expense, net $ (17,603) $ 3,545 $ (21,148) *** % of revenue (3.2) % 0.8 % Other income, net was $17.6 million in 2023 compared to other expense, net of $3.5 million in 2022.
For a discussion and analysis of net cash used in or provided by operating, investing, and financing activities for the year ended December 31, 2020, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 17, 2022.
These decreases were partially offset by a $1.7 million decrease in payments for debt issuance costs. 61 For a discussion and analysis of net cash used in or provided by operating, investing, and financing activities for the year ended December 31, 2021, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 16, 2023.
Our research and development efforts are focused on enhancing the capabilities, speed, and power of our software platform. The number of employees in research and development functions grew from 488 at December 31, 2021 to 652 at December 31, 2022. A portion of our headcount growth in 2022 was attributable to a new product development center opened in India.
Our research and development efforts are focused on enhancing the capabilities, speed, and power of our software platform. The number of employees in research and development functions grew from 652 at December 31, 2022 to 681 at December 31, 2023.
We may also elect to raise additional sources of funding through draws on our new revolving credit facility, entering into new debt financing arrangements, or conducting additional public offerings.
We expect future sources of funds to consist primarily of cash generated from sales of subscriptions and the related professional services. We may also elect to raise additional sources of funding through draws on our revolving credit facility, entering into new debt financing arrangements, or conducting additional public offerings.
Our customers 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. Revenue from government agencies represented 19.2%, 19.6%, and 18.1% of our total revenue in 2022, 2021, and 2020, respectively.
As of December 31, 2023, we had approximately 1,000 customers. 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.
Personnel-related costs such as salaries, bonuses, commissions, payroll tax payments, and stock-based compensation expense are the most significant components of each of these expense categories.
Personnel-related costs such as salaries, bonuses, commissions, payroll tax payments, and stock-based compensation expense are the most significant components of each of these expense categories. Other components of each category include professional fees for third-party services such as legal, software development resources, and contractors.
Personnel costs increased due to an increase in sales and marketing personnel headcount of 32.2% from December 31, 2021 to December 31, 2022 in addition to increased wages and fringe benefits, increased sales commissions driven by both contracts with new customers and renewals with existing customers, and a $3.7 million increase in stock-based compensation expense.
Although there was a 8.8% decrease in sales and marketing personnel headcount from December 31, 2022 to December 31, 2023, personnel costs overall increased due to increased wages, a $7.4 million increase in sales commissions driven by both contracts with new customers and renewals with existing customers, a $4.7 million increase in severance expense, and a $1.7 million increase in stock-based compensation expense.
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. The number of employees in general and administrative functions grew from 224 at December 31, 2021 to 316 at December 31, 2022.
Additional expenses included in this category are non-personnel costs such as travel-related expenses, contracting and professional fees for such 50 services as audits, taxation, and legal, insurance and other corporate expenses, including allocated overhead costs, and bad debt expenses.
During the initial period of deployment by a customer, we generally provide a greater amount of support in building applications and training than later in the deployment, with a typical engagement lasting from two to six months. At the same time, many of our customers have historically purchased subscriptions only for a limited set of their total potential end users.
During the initial period of deployment of our platform by a customer, we generally provide a greater amount of support in building applications and training than later in the deployment, with a typical engagement lasting from two to six months.
Results of Operations The following table sets forth our consolidated statements of operations data (in thousands): Year Ended December 31, 2022 2021 2020 Revenue Subscriptions $ 340,152 $ 263,738 $ 198,710 Professional services 127,839 105,521 105,863 Total revenue 467,991 369,259 304,573 Cost of revenue Subscriptions (1) 36,005 27,330 20,826 Professional services (1) 97,301 76,763 67,940 Total cost of revenue 133,306 104,093 88,766 Gross profit 334,685 265,166 215,807 Operating expenses Sales and marketing (1) 220,374 167,852 130,316 Research and development (1) 139,210 97,517 70,241 General and administrative (1) 120,111 83,704 53,152 Total operating expenses 479,695 349,073 253,709 Operating loss (145,010) (83,907) (37,902) Other non-operating expense (income) Other expense (income), net 3,545 3,584 (5,786) Interest expense 1,673 372 478 Total other non-operating expense (income) 5,218 3,956 (5,308) Loss before income taxes (150,228) (87,863) (32,594) Income tax expense 692 778 883 Net loss $ (150,920) $ (88,641) $ (33,477) (1) Stock-based compensation as a component of these line items is as follows: 46 Year Ended December 31, 2022 2021 2020 (in thousands) Cost of revenue Subscriptions $ 996 $ 1,199 $ 943 Professional services 5,309 3,131 1,477 Operating expenses Sales and marketing 9,152 5,426 2,821 Research and development 12,523 5,224 2,718 General and administrative 10,850 8,864 7,320 Total stock-based compensation expense $ 38,830 $ 23,844 $ 15,279 The following table sets forth our consolidated statements of operations data expressed as a percentage of total revenue: Year Ended December 31, 2022 2021 2020 Revenue Subscriptions 72.7 % 71.4 % 65.2 % Professional services 27.3 28.6 34.8 Total revenue 100.0 100.0 100.0 Cost of revenue Subscriptions 7.7 7.4 6.8 Professional services 20.8 20.8 22.3 Total cost of revenue 28.5 28.2 29.1 Gross profit 71.5 71.8 70.9 Operating expenses Sales and marketing 47.1 45.5 42.8 Research and development 29.7 26.4 23.1 General and administrative 25.7 22.7 17.5 Total operating expenses 102.5 94.6 83.4 Operating loss (31.0) (22.8) (12.5) Other non-operating expense (income) Other expense (income), net 0.8 1.0 (1.9) Interest expense 0.4 0.1 0.2 Total other non-operating expense (income) 1.2 1.1 (1.7) Loss before income taxes (32.2) (23.9) (10.8) Income tax expense 0.1 0.2 0.3 Net loss (32.3) % (24.1) % (11.1) % Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 Revenue 47 Year Ended December 31, 2022 2021 $ Change % Change (dollars in thousands) Revenue: Subscriptions $ 340,152 $ 263,738 $ 76,414 29.0% Professional services 127,839 105,521 22,318 21.2% Total revenue $ 467,991 $ 369,259 $ 98,732 26.7% Total revenue increased $98.7 million, or 26.7%, in 2022 compared to 2021 due to an increase in our subscriptions revenue of $76.4 million and an increase in our professional services revenue of $22.3 million.
Interest Expense Interest expense consists primarily of interest on our debt, amortization of deferred financing fees, unused credit facility fees, and commitment fees on our letters of credit. 51 Results of Operations The following table sets forth our consolidated statements of operations (in thousands): Year Ended December 31, 2023 2022 2021 Revenue Subscriptions $ 412,337 $ 340,152 $ 263,738 Professional services 133,026 127,839 105,521 Total revenue 545,363 467,991 369,259 Cost of revenue Subscriptions (1) 43,563 36,005 27,330 Professional services (1) 99,759 97,301 76,763 Total cost of revenue 143,322 133,306 104,093 Gross profit 402,041 334,685 265,166 Operating expenses Sales and marketing (1) 242,381 220,374 167,852 Research and development (1) 153,098 139,210 97,517 General and administrative (1) 114,535 120,111 83,704 Total operating expenses 510,014 479,695 349,073 Operating loss (107,973) (145,010) (83,907) Other non-operating expense Other (income) expense, net (17,603) 3,545 3,584 Interest expense 17,862 1,673 372 Total other non-operating expense 259 5,218 3,956 Loss before income taxes (108,232) (150,228) (87,863) Income tax expense 3,209 692 778 Net loss $ (111,441) $ (150,920) $ (88,641) (1) Stock-based compensation as a component of these line items is as follows: Year Ended December 31, 2023 2022 2021 (in thousands) Cost of revenue Subscriptions $ 925 $ 996 $ 1,199 Professional services 6,055 5,309 3,131 Operating expenses Sales and marketing 10,842 9,152 5,426 Research and development 12,486 12,523 5,224 General and administrative 13,079 10,850 8,864 Total stock-based compensation expense $ 43,387 $ 38,830 $ 23,844 52 The following table sets forth our consolidated statements of operations data expressed as a percentage of total revenue: Year Ended December 31, 2023 2022 2021 Revenue Subscriptions 75.6 % 72.7 % 71.4 % Professional services 24.4 27.3 28.6 Total revenue 100.0 100.0 100.0 Cost of revenue Subscriptions 8.0 7.7 7.4 Professional services 18.3 20.8 20.8 Total cost of revenue 26.3 28.5 28.2 Gross profit 73.7 71.5 71.8 Operating expenses Sales and marketing 44.4 47.1 45.5 Research and development 28.1 29.7 26.4 General and administrative 21.0 25.7 22.7 Total operating expenses 93.5 102.5 94.6 Operating loss (19.8) (31.0) (22.8) Other non-operating expense Other (income) expense, net (3.2) 0.8 1.0 Interest expense 3.3 0.4 0.1 Total other non-operating expense 0.1 1.2 1.1 Loss before income taxes (19.9) (32.2) (23.9) Income tax expense 0.6 0.1 0.2 Net loss (20.5) % (32.3) % (24.1) % Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Revenue Year Ended December 31, 2023 2022 $ Change % Change (dollars in thousands) Revenue: Subscriptions $ 412,337 $ 340,152 $ 72,185 21.2% Professional services 133,026 127,839 5,187 4.1% Total revenue $ 545,363 $ 467,991 $ 77,372 16.5% Total revenue increased $77.4 million, or 16.5%, in 2023 compared to 2022 due to an increase in our subscriptions revenue of $72.2 million and an increase in our professional services revenue of $5.2 million.
We have experienced strong revenue growth, with revenue of $468.0 million, $369.3 million, and $304.6 million in 2022, 2021, and 2020, respectively. Our subscriptions revenue was $340.2 million, $263.7 million, and $198.7 million in 2022, 2021, and 2020, respectively, and includes sales of our cloud subscriptions, on-premises term license subscriptions, and maintenance and support.
Our subscriptions revenue was $412.3 million, $340.2 million, and $263.7 million in 2023, 2022, and 2021, respectively, and includes sales of our cloud subscriptions, on-premises term license subscriptions, and maintenance and support.
As of December 31, 2022, we operated in 15 countries. We believe we have a significant opportunity to continue to grow our international footprint. We are investing in new geographies, including through investment in direct and indirect sales channels, professional services, and customer support and implementation partners.
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. We have experienced strong revenue growth, with revenue of $545.4 million, $468.0 million, and $369.3 million in 2023, 2022, and 2021, respectively.
Adjusted EBITDA is not intended to purport to be an alternate to net loss as a measure of operating performance or to cash flows from operating activities as a measure of liquidity.
Users should consider the limitations of using adjusted EBITDA, including the fact 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.
No single end-customer accounted for more than 10% of our total revenue in 2022, 2021, and 2020. We offer our platform globally. Our platform supports multiple languages to facilitate collaboration and address challenges in multinational organizations. In 2022, 2021, and 2020, 33.5%, 34.0%, and 33.8%, respectively, of our total revenue was generated from customers outside of the United States.
Revenue from government agencies represented 21.3%, 19.2%, and 19.6% of our total revenue in 2023, 2022, and 2021, respectively. No single end-customer accounted for more than 10% of our total revenue in 2023, 2022, and 2021. We offer our platform globally. Our platform supports multiple languages to facilitate collaboration and address challenges in multinational organizations.
Personnel costs increased due to an increase in professional services and product support personnel headcount of 14.0% from December 31, 2021 to December 31, 2022 in addition to increased wages and fringe benefits, coupled with a $2.0 million increase in stock-based compensation.
Personnel costs increased due to an increase in professional services and product support personnel headcount of 3.4% from December 31, 2022 to December 31, 2023 in addition to increased wages, coupled with a $0.7 million increase in stock-based compensation. The increase in overhead costs was driven by higher costs associated with employee medical benefits and information technology expenses.
In 2023, we expect general and administrative expense to decrease in absolute dollars largely due to an anticipated decline in legal costs. 45 Other Non-Operating Expense (Income) Other Expense (Income), Net Other expense (income), net, consists primarily of unrealized and realized gains and losses related to changes in foreign currency exchange rates, interest income on our cash and cash equivalents and investments, gains or losses on the disposal of property and equipment, and other sources of income or expense not related to our core business operations.
Other Non-Operating Expense Other Expense (Income), Net 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.
Interest Expense Year Ended December 31, 2022 2021 $ Change % Change (dollars in thousands) Interest expense $ 1,673 $ 372 $ 1,301 *** % of revenue 0.4 % 0.1 % *** - Indicates a percentage change that is not meaningful Interest expense increased $1.3 million in 2022 compared to the same period in 2021, primarily due to interest expense on the new term loan facility we entered into during the fourth quarter of 2022.
These increases were partially offset by a $1.2 million decrease in other income attributable to a payment received in 2022 from a local government as a result of achieving certain economic development criteria. 55 Interest Expense Year Ended December 31, 2023 2022 $ Change % Change (dollars in thousands) Interest expense $ 17,862 $ 1,673 $ 16,189 *** % of revenue 3.3 % 0.4 % *** - Indicates a percentage change that is not meaningful Interest expense increased $16.2 million in 2023 compared to the same period in 2022, primarily due to interest expense on the new term loan facility we entered into during the fourth quarter of 2022.
Sales and Marketing Expense 48 Year Ended December 31, 2022 2021 $ Change % Change (dollars in thousands) Sales and marketing $ 220,374 $ 167,852 $ 52,522 31.3% % of revenue 47.1 % 45.5 % Sales and marketing expense increased $52.5 million, or 31.3%, in 2022 compared to 2021, primarily due to a $33.3 million increase in sales and marketing personnel costs, a $13.7 million increase in overhead costs, and a $7.2 million increase in marketing costs.
Sales and Marketing Expense Year Ended December 31, 2023 2022 $ Change % Change (dollars in thousands) Sales and marketing $ 242,381 $ 220,374 $ 22,007 10.0% % of revenue 44.4 % 47.1 % Sales and marketing expense increased $22.0 million, or 10.0%, in 2023 compared to 2022, primarily due to a $25.1 million increase in sales and marketing personnel costs and a $1.0 million increase in overhead costs.
Consulting services and training services - The SSP of consulting services and training services is established based on the observable pricing of standalone sales within each geographic region where the services are sold.
Consulting services and training services - The SSP of consulting services and training services is established based on the observable pricing of standalone sales within each geographic region where the services are sold. Recent Accounting Pronouncements See Note 2 of our consolidated financial statements for information related to recently issued accounting standards.
General and Administrative Expense Year Ended December 31, 2022 2021 $ Change % Change (dollars in thousands) General and administrative expense $ 120,111 $ 83,704 $ 36,407 43.5% % of revenue 25.7 % 22.7 % General and administrative expense increased $36.4 million, or 43.5%, in 2022 compared to 2021, primarily due to a $15.4 million increase in general and administrative personnel costs, a $10.9 million increase in professional fees, and a $10.1 million increase in overhead costs.
General and Administrative Expense Year Ended December 31, 2023 2022 $ Change % Change (dollars in thousands) General and administrative expense $ 114,535 $ 120,111 $ (5,576) (4.6)% % of revenue 21.0 % 25.7 % General and administrative expense decreased $5.6 million, or 4.6%, in 2023 compared to 2022, primarily due to a $21.1 million decrease in professional fees.
These increases were partially offset by a $1.7 million decrease in professional fees.
These increases were partially offset by a $3.6 million decrease in marketing costs.
We also discuss adjusted EBITDA, a non-GAAP financial performance measure we believes offers a useful view of the overall operation of its businesses. We define adjusted EBITDA as net loss before (1) other expenses, net, (2) interest expense, (3) income tax expense, (4) depreciation and amortization, (5) stock-based compensation expense, and (6) litigation expenses directly associated with the Pegasystems cases.
We define adjusted EBITDA as net loss before (1) other non-operating (income) expenses, 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) Severance Costs. The most directly comparable GAAP financial measure to adjusted EBITDA is net loss.
The increase in net cash provided by financing activities was primarily due to $120.0 million in proceeds received from the new term loan facility and a $22.6 million increase in proceeds received from the exercise of stock options primarily resulting from the vesting of the 2019 CEO stock options during 2022.
The decrease in net cash provided by financing activities was primarily due to a $28.0 million decrease in proceeds from borrowings and a $24.7 million decrease in proceeds received from the exercise of stock options.
As a result of these factors, the proportion of total revenue for a customer associated with professional services is relatively high during the initial deployment period. Over time, as the need for professional services associated with user deployments decreases and the number of end users increases, we expect subscriptions revenue as a percentage of total revenue to increase.
Over time, as the need for professional services associated with user deployments decreases and the number of end users increases, we expect subscriptions revenue as a percentage of total revenue to increase. In addition, we continue to grow our base of strategic partners to provide broader customer coverage and solution delivery capabilities.
Personnel costs increased due to an increase in general and administrative personnel headcount of 41.1% from December 31, 2021 to December 31, 2022 in addition to increased wages and fringe benefits, coupled with a $2.0 million increase in stock compensation expense. Professional fees increased due largely to higher legal and consulting fees.
Although there was a decrease in general and administrative personnel headcount of 11.4% from December 31, 2022 to December 31, 2023, personnel costs increased due to increased wages, a $2.2 million increase in stock compensation expense, and a $0.4 million increase in severance expense.
The change in net cash provided by investing activities was primarily impacted by a $23.4 million increase in purchases of investments , a $3.0 million increase in capital expenditures stemming from spending on the expansion of our headquarters, and a $36.0 million decrease in proceeds from the sale of investments.
The increase in net cash provided by investing activities was primarily impacted by an $11.8 million decrease in purchases of investments and a $7.0 million increase in proceeds from the maturities of investments, both of which were partially offset by a $0.5 million increase in capital expenditures.
We intend to further grow our base of strategic partners to provide broader customer coverage and solution delivery capabilities. 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.
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. In addition, we continue to pursue strategic acquisitions that enhance our product offerings.
In 2023, 2022, and 2021, 75.6%, 72.7%, and 71.4% of our revenue, respectively, was derived from sales of subscriptions, while the remaining 24.4%, 27.3%, and 28.6%, 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIn addition, as of December 31, 2022, we held $47.9 million of fixed income securities such as U.S. treasury bonds, commercial paper, corporate bonds, agency bonds, and asset-backed securities. These securities are subject to market risk due to fluctuations in interest rates, which may affect our interest income and the fair value of our investments.
Biggest changeThese securities, which are not dependent on interest rate fluctuations that may cause principal amounts to fluctuate, are held for reinvestment and working capital purposes. In addition, as of December 31, 2023, we held $9.7 million of fixed income securities such as U.S. treasury bonds, commercial paper, corporate bonds, agency bonds, and asset-backed securities.
While we do not believe inflation has had a material impact on our results of operations to date, continued high rate of inflation in the future may have an adverse effect on our ability to maintain operating costs and adversely affect our gross profit margin. Foreign Currency Exchange Risk Our reporting currency is the U.S. dollar.
While we do not believe inflation has had a material impact on our results of operations to date, a continued high rate of inflation in the future may have an adverse effect on our ability to maintain operating costs and adversely affect our gross profit margin. Foreign Currency Exchange Risk Our reporting currency is the U.S. dollar.
A hypothetical 100 basis point change in interest rates would not have had a material effect on the fair market value of our investment portfolio as of December 31, 2022. To date, fluctuations in interest income have also not been significant. Our investments are made for the purpose of preserving capital, fulfilling liquidity needs, and maximizing total return.
A hypothetical 100 basis point change in interest rates would not have had a material effect on the fair market value of our investment portfolio as of December 31, 2023. To date, fluctuations in interest income have also not been significant. Our investments are made for the purpose of preserving capital, fulfilling liquidity needs, and maximizing total return.
Based on a sensitivity analysis, a 10% change in the foreign currency exchange rates would have impacted our total revenue by approximately 3% and our operating loss by approximately 2%. This calculation assumes all currencies change in the same direction and proportion relative to the U.S. dollar.
Based on a sensitivity analysis, a 10% change in the foreign currency exchange rates would have impacted our total revenue by approximately 4% and our operating loss by approximately 2%. This calculation assumes all currencies change in the same direction and proportion relative to the U.S. dollar.
We assessed our exposure to changes in interest rates by analyzing sensitivity to our operating results assuming various changes in market interest rates. A hypothetical increase of one percentage point in the interest rate as of December 31, 2022 would increase our interest expense by approximately $1.2 million annually.
We assessed our exposure to changes in interest rates by analyzing sensitivity to our operating results assuming various changes in market interest rates. A hypothetical increase of one percentage point in the interest rate as of December 31, 2023 would increase our interest expense by approximately $2.1 million annually.
We have not engaged in the hedging of foreign currency transactions to date, although we may choose to do so in the future. 58
We have not engaged in the hedging of foreign currency transactions to date, although we may choose to do so in the future. 64
Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates. 57 Interest Rate Risk We had cash and cash equivalents of $148.1 million as of December 31, 2022, which consisted of investments in a money market fund, cash in readily available checking accounts, and overnight repurchase investments.
Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates. Interest Rate Risk We had cash and cash equivalents of $149.4 million as of December 31, 2023, which consisted of investments in a money market fund, cash in readily available checking accounts, and overnight repurchase investments.
We do not enter into investments for trading or speculative purposes. As of December 31, 2022, we had outstanding debt of $119.4 million, which carries interest as defined in our Credit Agreement. Refer to Note 9 of the consolidated financial statements in this 2022 Annual Report for additional details.
We do not enter into investments for trading or speculative purposes. As of December 31, 2023, we had outstanding debt of $206.6 million, which carries interest as defined in our Credit Agreement. Refer to Note 8 of the consolidated financial statements in this 2023 Annual Report for additional details.
We classify investments as available-for-sale, including those with stated maturities beyond 12 months. As such, no gains or losses due to changes in interest rates are recognized in our consolidated statements of operations unless such securities are sold prior to maturity or due to expected credit losses.
As such, no gains or losses due to changes in interest rates are recognized in our consolidated statements of operations unless such securities are sold prior to maturity or due to expected credit losses.
If these inflation pressures continue or increase in severity, we may not be able to fully offset such higher costs through price increases and productivity initiatives.
Inflation Risk We are exposed to market risks related to inflation in personnel costs, third-party service providers, subcontracting costs, professional fees, and general overhead expenses. Although inflation has decreased from the 63 relative highs experienced in 2022, if inflation pressures increase in severity, we may not be able to fully offset such higher costs through price increases and productivity initiatives.
Removed
These securities, which are not dependent on interest rate fluctuations that may cause principal amounts to fluctuate, are held for reinvestment and working capital purposes or, in the case of restricted cash, to settle an escrow liability established pursuant to a business combination.
Added
These securities are subject to market risk due to fluctuations in interest rates, which may affect our interest income and the fair value of our investments. We classify investments as available-for-sale, including those with stated maturities beyond 12 months.
Removed
Inflation Risk We are exposed to market risks related to inflation in personnel costs, third-party service providers, subcontracting costs, professional fees, and general overhead expenses. During 2022, inflation has increased to rates beyond recent history, and as a result we have experienced rising costs.

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