Appian Corporation
02/19/2026 | Press release | Distributed by Public on 02/19/2026 13:25
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those contained in or implied by any forward-looking statements. Factors that could cause or contribute to these differences include those under "Risk Factors" included in Part I, Item 1A or in other parts of this Annual Report on Form 10-K.
Overview
Appian provides process automation technology. For over 25 years, our highly reliable and scalable platform has been leveraged by large enterprises and governments. Combining leading edge process orchestration, automation, and intelligence, we provide everything an organization needs to design, automate, and optimize critical processes, facilitating continuous adaptation in changing environments.
We have generated the majority of our revenue from sales of subscriptions, which include (1) cloud subscriptions bundled with maintenance and support and hosting services and (2) license subscriptions, and (3) maintenance and support for license subscriptions. Our subscription contracts are priced based on the number of users who access and utilize the applications built on our platform, non-user-based single application licenses, or consumption-based pricing. Our subscription contract terms generally vary from one to three years with most providing for payment in advance on an annual, quarterly, or monthly basis.
We have invested in our professional services organization to help ensure customers are able to build and deploy applications on our platform. We also have several strategic partnerships, including with Accenture, Capgemini, Deloitte, Indra Group, KPMG, and PwC, which allow them to refer customers to us in order to purchase software subscriptions. Our partners then provide professional services directly to the customers using our software. Additionally, they often go to market with their own pre-built solutions using our platform, delivering software license revenue to us. We intend to continue to invest in both our professional services group and strategic partnerships to drive increased adoption of our platform. We believe our investment in professional services, including strategic partners building their practices around Appian, will drive increased adoption of our platform.
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 $2.0 billion in annual revenue. Revenue from U.S. federal government agencies represented 25.3%, 23.9%, and 21.3% of our total revenue in 2025, 2024, and 2023, respectively. No
single end-customer accounted for more than 10% of our total revenue in 2025, 2024, and 2023.
We offer our platform globally. Our platform supports multiple languages to facilitate collaboration and address challenges in multinational organizations. In 2025, 2024, and 2023, 37.6%, 36.6%, and 35.8%, respectively, of our total revenue was generated from customers outside of the United States. As of December 31, 2025, we operated in 16 countries. We believe we have a significant opportunity to continue to grow our international footprint, and we are investing in new geographies, including through investment in direct and indirect sales channels, professional services, and customer support and implementation partners.
We have experienced strong revenue growth, with revenue of $726.9 million, $617.0 million, and $545.4 million in 2025, 2024, and 2023, respectively. Our subscriptions revenue was $576.5 million, $490.6 million, and $412.3 million in 2025, 2024, and 2023, respectively, and includes sales of our cloud subscriptions, license subscriptions, and maintenance and support. Our cloud subscriptions revenue was $437.4 million, $368.0 million, and $304.5 million in 2025, 2024, and 2023, 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. In 2025, we
recorded net income of $1.2 million while in 2024 and 2023, we incurred net losses of $92.3 million and $111.4 million, respectively. Furthermore, in 2025 and 2024, cash provided by operations was $62.9 million and $6.9 million, respectively, while cash used by operations totaled $110.4 million in 2023. We intend to continue to invest in our business to take advantage of our market opportunity.
Our Business Model
Our business model focuses on maximizing the lifetime value of customer relationships, which is a function of the duration of a customer's deployment of our platform as well as the price and number of subscriptions of our platform a customer purchases. 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, sales commissions, and marketing costs, all of which, with the exception of certain types of sales commissions, are expensed as incurred.
At the same time, we believe the costs we incur to retain customers and drive additional purchases of software are lower than our customer acquisition costs on a relative basis. Over time, we expect a large portion of our customers to renew their subscriptions and purchase additional subscriptions as they continue to build more applications and add more users to our platform.
Key Factors Affecting Our Performance
The following are several key factors that affect our performance:
•Market Adoption of Our Platform -Our ability to grow our customer base and drive market adoption of our platform is affected by the pace at which organizations automate processes. We expect our revenue growth will be primarily driven by the pace of adoption and penetration of our platform. We offer a leading process automation platform and intend to continue to invest to expand our customer base. The degree to which prospective customers recognize the need for our software platform and its ability to enable their organizations to automate processes, 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. We have 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. In 2025, we generated approximately 80% of our subscriptions revenue from customers in these verticals. In addition, we have established relationships with strategic partners who work with organizations undergoing process automations. Our ability to continue to grow our customer base is dependent, in part, upon our ability to differentiate ourselves within the increasingly competitive markets in which we participate.
•Further Penetration of Existing Customers -Our sales team seeks to generate additional revenue from existing customers by adding new users or application licenses. In addition, we encourage our customers to upgrade to higher service tiers in order to take advantage of incremental functionality. We offer three service tiers ranging from a standard package with entry level features to our premium offering that includes access to features such as process mining and full AI integration. Many of our customers begin by building a single application and then grow to build dozens of applications on our platform. Generally, the development of new applications on our platform results in the expansion of our user base within an organization and a corresponding increase in revenue. As a result of this "land and expand" strategy, we have generated significant additional revenue from our customer base. Our ability to increase sales to existing customers will depend on a number of factors, including the size of our sales and professional services teams, customers' level of satisfaction with our platform and professional services, pricing, economic conditions, and our customers' overall spending levels.
•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. 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. We typically enter into a significantly higher percentage of agreements with new customers, as well as renewal agreements with existing customers, in the fourth quarter. The increase in customer agreements for the fourth quarter is attributable to large enterprise account-buying patterns typical in the software industry. 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. As a result, a substantial portion of the subscriptions revenue we report in each period will be derived from the recognition of deferred revenue relating to agreements entered into during previous periods. Consequently, an increase or decline in new sales or renewals in any one period may not be immediately reflected in our revenue results for that period. Such changes, however, will 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.
While we will continue to recognize the majority of our subscriptions revenue ratably over the terms of our subscription agreements, we may experience greater variability and reduced comparability of our quarterly revenue and results with respect to the timing and nature of our license subscription agreements due to the upfront revenue recognition. See Note 3 to the consolidated financial statements for further details on our revenue recognition policies.
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.
Cloud Subscriptions Revenue
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
|
Cloud subscriptions revenue
|
$ | 437,361 | $ | 368,030 | $ | 304,481 | |||||||||||
Cloud subscriptions revenue includes cloud subscriptions bundled with maintenance and support and hosting services. In 2025, 2024, and 2023, 75.9%, 75.0%, and 73.8%, respectively, of subscriptions revenue was cloud subscriptions revenue. Our cloud subscriptions revenue for any customer is primarily determined by the number of users who access and utilize the applications built on our platform or by the number of application licenses purchased, as well as the price paid. We believe increasing cloud subscriptions revenue is an indicator of the demand for our platform, the pace at which the market for our solutions is growing, the productivity of our sales team and strategic relationships in growing our customer base, and our ability to further penetrate our existing customer base.
Cloud Net Annualized Recurring Revenue ("ARR") Expansion
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
|
Cloud net ARR expansion
|
114 | % | 113 | % | 116 | % | |||||||||||
Commencing in 2025, we are replacing our previously reported cloud subscriptions revenue retention rate with a new key metric called cloud net ARR expansion. We believe cloud net ARR expansion provides better real-time insight into the growth of our existing customer base and is more indicative of our success in the renewal and expansion of cloud subscription agreements with existing customers.
To calculate this metric, we define ARR on a customer level as monthly recurring cloud subscriptions revenue multiplied by 12. We then compare the period-end ARR of the previous year's customer cohort to their ARR at the end of the current period. The cloud net ARR expansion represents the ratio between these two periods. Note for purposes of the calculation, a customer is defined pursuant to our updated methodology, and the calculation is performed on a constant currency basis.
Key Components of Results of Operations
Revenue
We generate revenue primarily through sales of subscriptions to our platform as well as professional services. We typically sell our software on a per-user basis or through non-user-based single application licenses. We generally bill customers and collect payment for subscriptions to our platform in advance on an annual, quarterly, or monthly basis. In certain instances, we have had customers pay their entire contract value up front.
Our revenue is comprised of the following:
Subscriptions
Subscriptions revenue is primarily derived from cloud subscriptions bundled with maintenance and support and hosting services, license subscriptions, and maintenance and support for license subscriptions. 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. License subscriptions are offered when the customer prefers to self-manage the deployment of our platform within their own infrastructure. When our platform is delivered as a cloud subscription, we manage operational needs in third-party hosted data centers.
Professional Services
Our professional services revenue is comprised of fees for consulting services, including application development, deployment assistance, and training related to our platform.
Cost of Revenue
Subscriptions
Cost of subscriptions revenue consists primarily of fees paid to our third-party managed hosting providers and other third-party service providers, personnel costs, including payroll and benefits for our technology operations, customer support and information security teams, amortization of acquired technology, and allocated overhead costs. We expect cost of revenue to continue to increase in absolute dollars for the foreseeable future as our customer base grows.
Professional Services
Cost of professional services revenue includes all direct and indirect costs to deliver our professional services and training, including employee compensation for our global professional services and training personnel, third-party contractor costs, allocated overhead costs, and the costs of billable expenses such as travel and lodging. The unpredictability of the timing of providing services related to significant professional services agreements sold on a standalone basis may cause significant fluctuations in our cost of professional services which, in turn, may impact our financial results.
Gross Profit and Gross Margin
Gross profit and gross margin (defined as gross profit as a percentage of total revenue), have been, and will continue to be, affected by various factors, including the mix of cloud subscriptions and license subscriptions, the mix of total subscriptions revenue and professional services revenue, subscription pricing, the costs associated with third-party hosting providers, and the extent to which we expand or reduce our professional services to support future changes in our growth. Our gross margin may fluctuate from period to period based on the aforementioned factors.
Subscriptions Gross Margin
Subscriptions gross margin is primarily affected by the growth in our subscriptions revenue as compared to the growth in, and timing of, costs to support such revenue. We expect to continue to invest in customer support and cloud operations to support growth in our business, and the timing of those investments is expected to cause subscriptions gross margin to fluctuate on a quarterly basis.
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 professional services organization as we continue to invest in the growth of our business as well as by consultant utilization rates. Professional services gross margin is also impacted by the amount of services performed by subcontractors and partners as opposed to internal resources. The professional services margins are 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. 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, contractors, and cloud computing services. In addition, operating expenses include allocated overhead costs, which are primarily comprised of facility costs such as rent, employee medical benefits, employee relations expense, and information technology costs.
In general, our operating expenses are expected to continue to increase in absolute dollars as we invest resources in enhancing our product and growing our business, although such growth is expected to be at a more measured rate than prior years.
Sales and Marketing Expense
Sales and marketing expense primarily includes personnel costs, including salaries, bonuses, commissions, stock-based compensation, and other personnel costs related to sales teams. Additional major expenses in this category include travel and entertainment, marketing activities and promotional events, subcontracting fees, and allocated overhead costs. We are focused on increasing the efficiency of our sales force and marketing activities by enhancing account targeting, messaging, field sales operations, and sales training in order to accelerate the adoption of our platform.
We expect sales and marketing expense to increase in absolute dollars as we continue to invest in acquiring new customers, further expand usage of our platform within our existing customer base, and broaden our efforts to build on our brand reputation as well as increase market awareness of our platform.
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, cloud computing and software expenses, and allocated overhead costs.
Our research and development efforts are focused on enhancing the capabilities, speed, and power of our software platform. In 2022, we opened a new product development center in India. 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.
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, human resources, finance, and accounting teams as well as our senior executives. Additional expenses included in this category are non-personnel costs such as travel-related expenses, information security costs related to the protection of our internal systems, 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.
Other Non-Operating (Income) Expense
Other (Income) Expense, 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
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.
Results of Operations
The following table sets forth our consolidated statements of operations (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Revenue | |||||||||||||||||
| Subscriptions | $ | 576,462 | $ | 490,568 | $ | 412,337 | |||||||||||
| Professional services | 150,475 | 126,454 | 133,026 | ||||||||||||||
| Total revenue | 726,937 | 617,022 | 545,363 | ||||||||||||||
| Cost of revenue | |||||||||||||||||
|
Subscriptions
|
83,988 | 65,680 | 54,900 | ||||||||||||||
|
Professional services
|
115,611 | 102,560 | 105,442 | ||||||||||||||
|
Total cost of revenue(1)
|
199,599 | 168,240 | 160,342 | ||||||||||||||
| Gross profit | 527,338 | 448,782 | 385,021 | ||||||||||||||
| Operating expenses | |||||||||||||||||
|
Sales and marketing
|
241,186 | 238,454 | 249,968 | ||||||||||||||
|
Research and development
|
172,188 | 163,400 | 160,420 | ||||||||||||||
|
General and administrative
|
113,355 | 107,781 | 82,606 | ||||||||||||||
|
Total operating expenses (1)
|
526,729 | 509,635 | 492,994 | ||||||||||||||
| Operating income (loss) | 609 | (60,853) | (107,973) | ||||||||||||||
| Other non-operating (income) expense | |||||||||||||||||
| Other (income) expense, net | (26,685) | 6,773 | (17,603) | ||||||||||||||
| Interest expense | 20,850 | 23,582 | 17,862 | ||||||||||||||
| Total other non-operating (income) expense | (5,835) | 30,355 | 259 | ||||||||||||||
| Income (loss) before income taxes | 6,444 | (91,208) | (108,232) | ||||||||||||||
| Income tax expense | 5,211 | 1,054 | 3,209 | ||||||||||||||
| Net income (loss) | $ | 1,233 | $ | (92,262) | $ | (111,441) | |||||||||||
(1)Certain prior period operating expenses have been reclassified to conform to the current period presentation. These changes have been reflected in the table above as well as within our results from operation discussion below. For further information, refer to Note 2 of our consolidated financial statements.
The following table sets forth our consolidated statements of operations data expressed as a percentage of total revenue:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Revenue | |||||||||||||||||
| Subscriptions | 79.3 | % | 79.5 | % | 75.6 | % | |||||||||||
| Professional services | 20.7 | 20.5 | 24.4 | ||||||||||||||
| Total revenue | 100.0 | 100.0 | 100.0 | ||||||||||||||
| Cost of revenue | |||||||||||||||||
| Subscriptions | 11.6 | 10.6 | 10.1 | ||||||||||||||
| Professional services | 15.9 | 16.6 | 19.3 | ||||||||||||||
|
Total cost of revenue*
|
27.5 | 27.3 | 29.4 | ||||||||||||||
| Gross profit | 72.5 | 72.7 | 70.6 | ||||||||||||||
| Operating expenses | |||||||||||||||||
| Sales and marketing | 33.2 | 38.6 | 45.8 | ||||||||||||||
| Research and development | 23.7 | 26.5 | 29.4 | ||||||||||||||
| General and administrative | 15.6 | 17.5 | 15.1 | ||||||||||||||
|
Total operating expenses*
|
72.5 | 82.6 | 90.4 | ||||||||||||||
| Operating income (loss) | - | (9.9) | (19.8) | ||||||||||||||
| Other non-operating (income) expense | |||||||||||||||||
| Other (income) expense, net | (3.7) | 1.1 | (3.2) | ||||||||||||||
| Interest expense | 2.9 | 3.8 | 3.3 | ||||||||||||||
| Total other non-operating (income) expense | (0.8) | 4.9 | 0.1 | ||||||||||||||
|
Income (loss) before income taxes*
|
0.9 | (14.8) | (19.9) | ||||||||||||||
| Income tax expense | 0.7 | 0.2 | 0.6 | ||||||||||||||
| Net income (loss) | 0.2 | % | (15.0) | % | (20.5) | % | |||||||||||
Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024
Revenue
| Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Subscriptions | $ | 576,462 | $ | 490,568 | $ | 85,894 | 17.5% | ||||||||||||||||
| Professional services | 150,475 | 126,454 | 24,021 | 19.0% | |||||||||||||||||||
| Total revenue | $ | 726,937 | $ | 617,022 | $ | 109,915 | 17.8% | ||||||||||||||||
Total revenue increased $109.9 million, or 17.8%, in 2025 compared to 2024 due to an increase in our subscriptions revenue of $85.9 million and a $24.0 million increase in our professional services revenue. The increase in subscriptions revenue was driven by a $69.3 million increase in cloud subscriptions revenue, a $13.7 million increase in license subscriptions revenue, and a $2.9 million increase in maintenance and support revenue. With respect to new versus existing customers, $77.0 million of the increase in subscriptions revenue was derived from expanded deployments and corresponding sales of additional subscriptions to existing customers while $8.9 million was driven from sales of subscriptions to new customers. The increase in professional services revenue was
due to a $12.9 million increase in revenue from existing customers and an $11.1 million increase in sales to new customers.
Cost of Revenue
| Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Subscriptions | $ | 83,988 | $ | 65,680 | $ | 18,308 | 27.9% | ||||||||||||||||
| Professional services | 115,611 | 102,560 | 13,051 | 12.7% | |||||||||||||||||||
| Total cost of revenue | $ | 199,599 | $ | 168,240 | $ | 31,359 | 18.6% | ||||||||||||||||
|
Gross profit:
|
|||||||||||||||||||||||
|
Subscriptions
|
492,474 | 424,888 | |||||||||||||||||||||
|
Professional services
|
34,864 | 23,894 | |||||||||||||||||||||
|
Total gross profit
|
527,338 | 448,782 | |||||||||||||||||||||
| Subscriptions gross margin | 85.4 | % | 86.6 | % | |||||||||||||||||||
| Professional services gross margin | 23.2 | % | 18.9 | % | |||||||||||||||||||
| Total gross margin | 72.5 | % | 72.7 | % | |||||||||||||||||||
Cost of revenue increased $31.4 million, or 18.6%, in 2025 compared to 2024, primarily due to a $13.0 million increase in hosting costs, an $8.3 million increase in contractor costs, and a $7.1 million increase in professional services and product support personnel costs. Hosting costs increased due to an increase in sales of our cloud offering during 2025. Contractor costs increased in 2025 compared to 2024 due to an increase in the usage of subcontractors for professional service engagements. Professional services and product support personnel costs increased due to an 11.5% increase in headcount and a $5.0 million increase in bonus expense from December 31, 2024 to December 31, 2025, both of which were partially offset by a $1.1 million decrease in severance costs.
Sales and Marketing Expense
| Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Sales and marketing | $ | 241,186 | $ | 238,454 | $ | 2,732 | 1.1% | ||||||||||||||||
| % of revenue | 33.2 | % | 38.6 | % | |||||||||||||||||||
Sales and marketing expense increased $2.7 million, or 1.1%, in 2025 compared to 2024, primarily due to a $2.8 million increase in marketing costs, a $1.9 million increase in sales and marketing personnel costs, and a $1.7 million increase in travel and entertainment expenses. These increases were partially offset by a $1.7 million decrease in cloud computing costs. Marketing costs increased due to higher spending on marketing materials and advertising, both of which were partially offset by lower spending on marketing events. Although sales and marketing headcount was flat, personnel costs increased due to a $4.0 million increase in sales commissions and a $2.4 million increase in bonus expense. Travel and entertainment expenses increased due to increases in airfare and lodging associated with a higher number of in-person events and engagements relative to the prior year.
Research and Development Expense
| Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Research and development | $ | 172,188 | $ | 163,400 | $ | 8,788 | 5.4% | ||||||||||||||||
| % of revenue | 23.7 | % | 26.5 | % | |||||||||||||||||||
Research and development expense increased $8.8 million, or 5.4%, in 2025 compared to 2024, primarily due to a $5.7 million increase in personnel costs and a $1.3 million increase in cloud computing costs. Although research and development headcount was relatively flat from December 31, 2024 to December 31, 2025, personnel costs increased due to a $4.8 million increase in bonus expense and a $0.3 million increase in stock compensation expense.
General and Administrative Expense
| Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| General and administrative expense | $ | 113,355 | $ | 107,781 | $ | 5,574 | 5.2% | ||||||||||||||||
| % of revenue | 15.6 | % | 17.5 | % | |||||||||||||||||||
General and administrative expense increased $5.6 million, or 5.2%, in 2025 compared to 2024, primarily due to a $5.6 million increase in professional fees and a $5.0 million increase in general and administrative personnel costs. These increases were partially offset by a $3.7 million decrease in insurance expense and a $3.5 million decrease in rent expense. The increase in professional fees was the result of a net $5.8 million increase in legal fees associated with our litigation against Pegasystems. Personnel costs increased largely due to an 11.0% increase in general and administrative headcount from December 31, 2024 to December 31, 2025, a $1.8 million increase in bonus expense, and a $2.3 million increase in stock compensation expense. Insurance expense decreased due to a $3.3 million decline in amortization expense related to our judgment preservation insurance policy due to a change in the estimated amortization period. Rent expense decreased due to $5.5 million of lease impairment charges in 2024 as compared to $0.8 million of lease impairment charges in 2025.
Other (Income) Expense, Net
| Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
|
Other (income) expense, net
|
$ | (26,685) | $ | 6,773 | $ | (33,458) | *** | ||||||||||||||||
| % of revenue | (3.7) | % | 1.1 | % | |||||||||||||||||||
*** Indicates a percentage change that is not meaningful
Other income, net was $26.7 million in 2025 compared to other expense, net of $6.8 million in 2024. There were $19.8 million in foreign exchange gains in 2025 compared to $16.8 million in foreign exchange losses in 2024. This increase was partially offset by a $3.2 million decrease in other income related to a non-recurring local government incentive payment and short-swing profit disgorgement payments to us from a public stockholder of our Class A common stock that were both recognized in the prior year.
Interest Expense
| Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Interest expense | $ | 20,850 | $ | 23,582 | $ | (2,732) | (11.6)% | ||||||||||||||||
| % of revenue | 2.9 | % | 3.8 | % | |||||||||||||||||||
Interest expense decreased $2.7 million in 2025 as compared to the corresponding period in 2024, primarily due to a lower effective interest rate and lower outstanding principal compared to the prior year period.
Income Tax Expense
| Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
|
Income tax expense
|
$ | 5,211 | $ | 1,054 | $ | 4,157 | *** | ||||||||||||||||
| % of revenue | 0.7 | % | 0.2 | % | |||||||||||||||||||
Income tax expense increased by $4.2 million in 2025 as compared to the corresponding period in 2024. This change was primarily driven by increased pre-tax book income in certain international subsidiaries in 2025. The change in pre-tax book income was primarily attributable to increases in unrealized foreign exchange gains.
Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023
For a discussion and analysis of changes in financial condition and results of operations for the year ended December 31, 2024 as compared to the year ended December 31, 2023, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 19, 2025.
Backlog
Backlog represents non-cancellable future amounts to be recognized under cloud and license subscription agreements and is representative of our remaining performance obligations. As of December 31, 2025 and 2024, we had backlog of $661.8 million and $546.0 million, respectively. Approximately 33% of our backlog as of December 31, 2025 is not expected to be recognized in 2026. Additionally, we expect backlog to continue to increase in absolute dollars as we continue to increase the number of cloud agreements we enter into. 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 license subscription agreements with large customers, the specific timing of customer renewals, changes in customer financial circumstances, and foreign currency fluctuations. Additionally, we often sign multiple-year subscription agreements, and backlog may vary based on changes in the average non-cancellable term of our cloud and 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 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. We believe both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to historical performance as well as comparisons to competitors' operating results. We believe these non-GAAP financial
measures are useful to investors both because (1) they allow for greater transparency with respect to measures used by management in its financial and operational decision-making and (2) they are used by institutional investors and the analyst community to help them analyze the health of our business.
Our non-GAAP financial performance measures include the following: non-GAAP subscriptions cost of revenue, non-GAAP professional services cost of revenue, non-GAAP total cost of revenue, non-GAAP total operating expense, non-GAAP operating income (loss), non-GAAP income tax expense, non-GAAP net income (loss), and non-GAAP net income (loss) per share, basic and diluted. These non-GAAP financial performance measures exclude the effect of stock-based compensation expense, unrealized foreign exchange rate gains and losses, certain non-ordinary litigation-related expenses consisting of legal and other professional fees associated with the Pegasystems cases (net of insurance reimbursements), or Litigation Expense, amortization of the judgment preservation insurance policy, or JPI Amortization, severance costs related to involuntary reductions in our workforce, or Severance Costs, lease impairments and lease-related charges associated with actions taken to reduce the footprint of our leased office spaces, or Lease Impairment and Lease-Related Charges, and a short-swing profit disgorgement paid to us by an investor, or Short-Swing Profit Payment. While some of these items may be recurring in nature and should not be disregarded in the evaluation of our earnings performance, it is useful to exclude such items when analyzing current results and trends compared to other periods as these items can vary significantly from period to period depending on specific underlying transactions or events that may occur. Therefore, while we may incur or recognize these types of expenses in the future, we believe removing these items for purposes of calculating our non-GAAP financial measures provides investors with a more focused presentation of our ongoing operating performance.
We also discuss adjusted EBITDA, a non-GAAP financial performance measure we believe offers a useful view of the overall operation of our business. We define adjusted EBITDA as net income (loss) before (1) other (income) expense, net, (2) interest expense, (3) income tax expense, (4) depreciation expense and amortization of intangible assets, (5) stock-based compensation expense, (6) Litigation Expense, (7) JPI Amortization, (8) Severance Costs, and (9) Lease Impairment and Lease-Related Charges. The most directly comparable GAAP financial measure to adjusted EBITDA is net income (loss). Users should consider the limitations of using adjusted EBITDA, including the fact this measure does not provide a complete depiction of our operating performance. Adjusted EBITDA is not intended to purport to be an alternative to net income (loss) as a measure of operating performance or to cash flows from operating activities as a measure of liquidity.
The 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.
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 | Lease Impairment and Lease-Related Charges |
Unrealized Foreign Exchange Rate Gains and Losses
|
Non-GAAP Measure | |||||||||||||||||||||||||||||||||||
| Year Ended December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||
| Subscriptions cost of revenue | $ | 83,988 | $ | (1,810) | $ | - | $ | - | $ | - | $ | - | $ | 82,178 | |||||||||||||||||||||||||||
| Professional services cost of revenue | 115,611 | (5,787) | - | - | - | - | 109,824 | ||||||||||||||||||||||||||||||||||
| Total cost of revenue | 199,599 | (7,597) | - | - | - | - | 192,002 | ||||||||||||||||||||||||||||||||||
| Sales and marketing expense | 241,186 | (8,434) | - | - | - | - | 232,752 | ||||||||||||||||||||||||||||||||||
|
Research and development expense
|
172,188 | (12,407) | - | - | - | - | 159,781 | ||||||||||||||||||||||||||||||||||
|
General and administrative expense
|
113,355 | (13,102) | (10,407) | (12,508) | (2,032) | - | 75,306 | ||||||||||||||||||||||||||||||||||
| Total operating expense | 526,729 | (33,943) | (10,407) | (12,508) | (2,032) | - | 467,839 | ||||||||||||||||||||||||||||||||||
|
Operating income
|
609 | 41,540 | 10,407 | 12,508 | 2,032 | - | 67,096 | ||||||||||||||||||||||||||||||||||
|
Non-operating (income) expense
|
(5,835) | - | - | - | - | 21,939 | 16,104 | ||||||||||||||||||||||||||||||||||
|
Income tax impact of above items
|
5,211 | 1,308 | - | - | - | (1,114) | 5,405 | ||||||||||||||||||||||||||||||||||
|
Net income (loss)
|
1,233 | 40,232 | 10,407 | 12,508 | 2,032 | (20,825) | 45,587 | ||||||||||||||||||||||||||||||||||
|
Net income (loss) per share, basic
|
$ | 0.02 | $ | 0.54 | $ | 0.14 | $ | 0.17 | $ | 0.03 | $ | (0.28) | $ | 0.62 | |||||||||||||||||||||||||||
|
Net income (loss) per share, diluted(a),(b)
|
$ | 0.02 | $ | 0.54 | $ | 0.14 | $ | 0.17 | $ | 0.03 | $ | (0.28) | $ | 0.61 | |||||||||||||||||||||||||||
(a)Accounts for the impact of 0.6 million shares of dilutive securities.
(b) Per share amounts do not foot due to rounding.
| GAAP Measure | Stock-Based Compensation | Litigation Expense | JPI Amortization | Severance Costs | Lease Impairment and Lease-Related Charges | Short-Swing Profit Payment |
Unrealized Foreign Exchange Rate Gains and Losses
|
Non-GAAP Measure | |||||||||||||||||||||||||||||||||||||||||||||
| Year Ended December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subscriptions cost of revenue | $ | 65,680 | $ | (1,638) | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 64,042 | |||||||||||||||||||||||||||||||||||
| Professional services cost of revenue | 102,560 | (5,925) | - | - | (1,398) | - | - | - | 95,237 | ||||||||||||||||||||||||||||||||||||||||||||
| Total cost of revenue | 168,240 | (7,563) | - | - | (1,398) | - | - | - | 159,279 | ||||||||||||||||||||||||||||||||||||||||||||
| Sales and marketing expense | 238,454 | (8,526) | - | - | (3,937) | - | - | - | 225,991 | ||||||||||||||||||||||||||||||||||||||||||||
|
Research and development expense
|
163,400 | (12,077) | - | - | (5) | - | - | - | 151,318 | ||||||||||||||||||||||||||||||||||||||||||||
|
General and administrative expense
|
107,781 | (10,879) | (4,602) | (15,795) | (194) | (6,104) | - | - | 70,207 | ||||||||||||||||||||||||||||||||||||||||||||
| Total operating expense | 509,635 | (31,482) | (4,602) | (15,795) | (4,136) | (6,104) | - | - | 447,516 | ||||||||||||||||||||||||||||||||||||||||||||
| Operating (loss) income | (60,853) | 39,045 | 4,602 | 15,795 | 5,534 | 6,104 | - | - | 10,227 | ||||||||||||||||||||||||||||||||||||||||||||
|
Non-operating expense (income)
|
30,355 | - | - | - | - | 1,799 | (16,697) | 15,457 | |||||||||||||||||||||||||||||||||||||||||||||
| Income tax impact of above items | 1,054 | 1,499 | - | - | 1,096 | - | - | 479 | 4,128 | ||||||||||||||||||||||||||||||||||||||||||||
| Net (loss) income | (92,262) | 37,546 | 4,602 | 15,795 | 4,438 | 6,104 | (1,799) | 16,218 | (9,358) | ||||||||||||||||||||||||||||||||||||||||||||
| Net (loss) income per share, basic and diluted | $ | (1.26) | $ | 0.51 | $ | 0.06 | $ | 0.22 | $ | 0.06 | $ | 0.08 | $ | (0.02) | $ | 0.22 | $ | (0.13) | |||||||||||||||||||||||||||||||||||
| GAAP Measure | Stock-Based Compensation | Litigation Expense | JPI Amortization | Severance Costs |
Unrealized Foreign Exchange Rate Gains and Losses
|
Non-GAAP Measure | |||||||||||||||||||||||||||||||||||
| Year Ended December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||
| Subscriptions cost of revenue | $ | 54,900 | $ | (1,690) | $ | - | $ | - | $ | (30) | $ | - | $ | 53,180 | |||||||||||||||||||||||||||
| Professional services cost of revenue | 105,442 | (6,354) | - | - | (158) | - | 98,930 | ||||||||||||||||||||||||||||||||||
| Total cost of revenue | 160,342 | (8,044) | - | - | (188) | - | 152,110 | ||||||||||||||||||||||||||||||||||
| Sales and marketing expense | 249,968 | (11,247) | - | - | (4,737) | - | 233,984 | ||||||||||||||||||||||||||||||||||
| Research and development expense | 160,420 | (12,864) | - | - | (1,022) | - | 146,534 | ||||||||||||||||||||||||||||||||||
| General and administrative expense | 82,606 | (11,232) | 2,064 | (6,038) | (352) | - | 67,048 | ||||||||||||||||||||||||||||||||||
| Total operating expense | 492,994 | (35,343) | 2,064 | (6,038) | (6,111) | - | 447,566 | ||||||||||||||||||||||||||||||||||
| Operating (loss) income | (107,973) | 43,387 | (2,064) | 6,038 | 6,299 | - | (54,313) | ||||||||||||||||||||||||||||||||||
|
Non-operating expense (income)
|
259 | - | - | - | - | 12,267 | 12,526 | ||||||||||||||||||||||||||||||||||
| Income tax impact of above items | 3,209 | 1,302 | - | - | 139 | (812) | 3,838 | ||||||||||||||||||||||||||||||||||
| Net (loss) income | (111,441) | 42,085 | (2,064) | 6,038 | 6,160 | (11,455) | (70,677) | ||||||||||||||||||||||||||||||||||
|
Net (loss) income per share, basic and diluted
|
$ | (1.52) | $ | 0.58 | $ | (0.03) | $ | 0.08 | $ | 0.08 | $ | (0.16) | $ | (0.97) | |||||||||||||||||||||||||||
The following table reconciles GAAP net income (loss) to adjusted EBITDA for the years ended December 31, 2025, 2024, and 2023 (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
|
GAAP net income (loss)
|
$ | 1,233 | $ | (92,262) | $ | (111,441) | |||||||||||
| Other (income) expense, net | (26,685) | 6,773 | (17,603) | ||||||||||||||
| Interest expense | 20,850 | 23,582 | 17,862 | ||||||||||||||
| Income tax expense | 5,211 | 1,054 | 3,209 | ||||||||||||||
|
Depreciation expense and amortization of intangible assets
|
9,706 | 10,030 | 9,473 | ||||||||||||||
| Stock-based compensation expense | 41,540 | 39,045 | 43,387 | ||||||||||||||
|
Litigation Expense
|
10,407 | 4,602 | (2,064) | ||||||||||||||
|
JPI Amortization
|
12,508 | 15,795 | 6,038 | ||||||||||||||
|
Severance Costs
|
- | 5,534 | 6,299 | ||||||||||||||
|
Lease Impairment and Lease-Related Charges
|
2,032 | 6,104 | - | ||||||||||||||
| Adjusted EBITDA | $ | 76,802 | $ | 20,257 | $ | (44,840) | |||||||||||
Liquidity and Capital Resources
The following table presents selected financial information and statistics pertaining to liquidity and capital resources as of December 31, 2025 and 2024 (in thousands):
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Cash and cash equivalents | $ | 135,810 | $ | 118,552 | |||||||
| Short-term investments and marketable securities | 51,415 | 41,308 | |||||||||
| Property and equipment, net | 32,087 | 37,109 | |||||||||
|
Working capital
|
67,317 | 80,787 | |||||||||
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 revolving credit facility, will be sufficient to support working capital and capital expenditure requirements for at least the next twelve months.
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. Through these public offerings, we received net proceeds of $344.8 million.
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, as amended to date, provides for a five-year term loan facility in an aggregate principal amount of $200.0 million and, in addition, up to $100.0 million for a revolving credit facility, including a letter of credit sub-facility in the aggregate availability amount of $20.0 million and a swingline sub-facility in the aggregate availability amount of $10.0 million (as a sublimit of the revolving loan facility).
The Credit Agreement matures on November 3, 2027. We have been using the proceeds to fund the growth of our business and support our working capital requirements. We are currently in compliance with all covenants, had used borrowing capacity of $62.0 million under our $100.0 million revolving credit facility, and had outstanding letters of credit totaling $14.7 million in connection with securing our leased office space.
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 entering into new debt financing arrangements or conducting additional public offerings. Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support research and development efforts, the expansion of sales and marketing activities, particularly internationally, the introduction of new and enhanced products and functions as well as platform enhancements and professional services offerings, and the level of market acceptance of our product.
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. Over the past several years, revenue has increased significantly from year to year and, as a result, cash flows from customer collections have also grown. However, as we continue to invest in growing our business, operating expenses have also increased.
In 2023, we entered into a Judgment Preservation Insurance policy in connection with our $2.036 billion judgment against Pegasystems. See Note 13 to the consolidated financial statements for additional details. The total cost of the policy was $57.3 million, which we paid with cash on hand.
Over the past two years, we have also initiated several share repurchase programs as follows:
•In February 2024, our Board of Directors authorized a share repurchase program, under which we repurchased approximately 1.3 million shares of our common stock for approximately $50.0 million during the first quarter of 2024.
•In May 2025, our Board of Directors authorized a second program to repurchase up to $10.0 million of our common stock from May 2025 to December 2025. In the second quarter of 2025, we repurchased 0.3 million shares of our common stock for approximately $10.0 million.
•In August 2025, our Board of Directors authorized a third program to repurchase up to $10.0 million of our common stock from August 2025 to August 2027. In the third quarter of 2025, we repurchased 0.3 million shares of our common stock for approximately $10.0 million.
•In February 2026, our Board of Directors authorized a program to repurchase up to $50.0 million of our common stock from February 2026 through February 2028.
Outside of the above items and cash used by operations, other uses of cash in 2025 to date have included capital expenditures related to the expansion of new leased facilities and principal repayments of our term loan debt.
Furthermore, we have a non-cancellable cloud hosting arrangement with Amazon Web Services that contains provisions for minimum purchase commitments. Specifically, purchase commitments under the agreement total $220.0 million over five years. The agreement, which was originated in July 2021 and amended in October 2024, currently contains minimum annual spending requirements of $44.0 million from November 2024 to October 2029. Spending under this agreement for the years ended December 31, 2025, 2024, and 2023 totaled $53.3 million, $41.2 million, and $36.6 million, respectively. We expect to meet our minimum annual spending requirement during the term of the arrangement.
Historical Cash Flows
|
Year Ended December 31,
|
|||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
|
Beginning cash and cash equivalents
|
$ | 118,552 | $ | 149,351 | $ | (30,799) | (20.6) | % | |||||||||||||||
| Operating activities: | |||||||||||||||||||||||
|
Net income (loss)
|
1,233 | (92,262) | 93,495 | *** | |||||||||||||||||||
| Stock-based compensation and other non-cash adjustments | 31,776 | 72,732 | (40,956) | (56.3) | |||||||||||||||||||
| Changes in working capital | 29,865 | 26,408 | 3,457 | 13.1 | |||||||||||||||||||
|
Net cash provided by operating activities
|
62,874 | 6,878 | 55,996 | *** | |||||||||||||||||||
| Investing activities: | |||||||||||||||||||||||
|
Net cash used by investing activities
|
(12,826) | (35,390) | 22,564 | (63.8) | |||||||||||||||||||
| Financing activities: | |||||||||||||||||||||||
|
Net cash used by financing activities
|
(36,278) | (258) | (36,020) | *** | |||||||||||||||||||
| Effect of exchange rates | 3,488 | (2,029) | 5,517 | *** | |||||||||||||||||||
|
Net increase (decrease) in cash and cash equivalents
|
17,258 | (30,799) | 48,057 | *** | |||||||||||||||||||
|
Ending cash and cash equivalents
|
$ | 135,810 | $ | 118,552 | $ | 17,258 | 14.6 | % | |||||||||||||||
*** Indicates a percentage that is not meaningful.
Operating Activities
Net cash provided by operating activities was $62.9 million for 2025 as compared to $6.9 million for 2024. The increase in net cash provided by operating activities was primarily driven by increased cash collections stemming from strong contract bookings in fourth quarter of 2024 and throughout 2025, as well as our continuing cost management activities.
Investing Activities
Net cash used by investing activities was $12.8 million for 2025 as compared to $35.4 million in net cash used by investing activities for 2024. This change was primarily driven by an increase of $32.5 million in proceeds from the maturity of investments, partially offset by a $10.4 million increase in purchases of short-term investments.
Financing Activities
Net cash used by financing activities was $36.3 million for 2025 as compared to $0.3 million in net cash used by financing activities for 2024. The increase in net cash used by financing activities was primarily due to a $50.0 million decrease in proceeds from borrowings and a $13.3 million decrease in proceeds received from the exercise of stock options which were partially offset by a $30.0 million decrease in repurchases of common stock, and a $3.8 million increase in debt repayments.
For a discussion and analysis of net cash used by or provided by operating, investing, and financing activities for the year ended December 31, 2023, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 19, 2025.
Critical Accounting Estimates
The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires us to make estimates and judgments that affect the amounts reported in those financial statements and accompanying notes. 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 judgment and complexity. 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.
Revenue Recognition
We generate subscriptions revenue primarily through the sale of cloud subscriptions bundled with maintenance and support and hosting services, license subscriptions, and maintenance and support for license subscriptions. We generate professional services revenue from fees for our consulting services, including application development and deployment assistance and training related to our platform. Significant judgments and estimates inherent in our revenue recognition are as follows:
Determining the Transaction Price
The transaction price, or the amount of consideration we expect to be entitled to receive in exchange for transferring services to our customers, includes both fixed and variable components. The variable components of our contracts, which have been nominal to date, include performance penalties, extended payment terms or implied price concessions, and warranty refunds. Variable consideration is included in the transaction price to the extent it is probable a significant reversal will not occur and is subject to subsequent true-up adjustments, although such true-up adjustments are not expected to be material.
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 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.Cloud subscriptions - Given the highly variable selling price of our cloud subscriptions and the related maintenance and support, we establish the SSP of our cloud subscriptions using a residual approach after first determining the SSP of consulting and training services.
2.License subscriptions - Given the highly variable selling price of our license subscriptions, we have established the SSP of license subscriptions using a residual approach after first determining the SSP of the related maintenance and support. Maintenance and support for license subscriptions is sold on a standalone basis with renewals of our legacy perpetual software licenses and within a narrow range of the net license fee, resulting in a defined economic relationship existing between the license and maintenance and support.
3.Maintenance and support - We establish the SSP of maintenance and support for license subscriptions as a percentage of the stated net subscription fee based on observable pricing of maintenance and support renewals from our legacy perpetual software licenses.
4.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.
Appian Corporation published this content on February 19, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on February 19, 2026 at 19:25 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]