Low code software development platform provider Appian (Nasdaq: APPN) beat analyst expectations in Q1 FY2023 quarter, with revenue up 18.4% year on year to $135.2 million. The company expects that next quarter's revenue would be around $124 million, which is the midpoint of the guidance range. That was roughly in line with analyst expectations. Appian made a GAAP loss of $36.8 million, down on its loss of $23.2 million, in the same quarter last year.
Is now the time to buy Appian? Access our full analysis of the earnings results here, it's free.
Appian (APPN) Q1 FY2023 Highlights:
- Revenue: $135.2 million vs analyst estimates of $131.4 million (2.96% beat)
- EPS (non-GAAP): -$0.27 vs analyst estimates of -$0.30
- Revenue guidance for Q2 2023 is $124 million at the midpoint, roughly in line with what analysts were expecting
- The company reconfirmed revenue guidance for the full year, at $535.5 million at the midpoint
- Free cash flow was negative $29.7 million, compared to negative free cash flow of $15.8 million in previous quarter
- Net Revenue Retention Rate: 115%, in line with previous quarter
- Gross Margin (GAAP): 73.3%, in line with same quarter last year
“Appian grew cloud subscription revenue 31% in the first quarter 2023. Organizations can manage their entire process lifecycle, optimize with automation tools in a single suite, and unite data silos with our patented Data Fabric technology,” said Matt Calkins, CEO & Founder.
Founded by Matt Calkins and his three friends out of an apartment in Northern Virginia, Appian (NASDAQ:APPN) sells a software platform that lets its users build applications without using much code, allowing them to create new software more quickly.
The whole purpose of software is to automate tasks to increase productivity. Today, innovative new software techniques, often involving AI and machine learning, are finally allowing automation that has graduated from simple one- or two-step workflows to more complex processes integral to enterprises. The result is surging demand for modern automation software.
Sales Growth
As you can see below, Appian's revenue growth has been strong over the last two years, growing from quarterly revenue of $88.9 million in Q1 FY2021, to $135.2 million.
This quarter, Appian's quarterly revenue was once again up 18.4% year on year. We can see that revenue increased by $9.45 million in Q1, up on $7.91 million in Q4 2022. While we've no doubt some investors are looking for higher growth, it's good to see that quarterly revenue growth is re-accelerating.
Guidance for the next quarter indicates Appian is expecting revenue to grow 12.7% year on year to $124 million, slowing down from the 32.6% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 12.6% over the next twelve months.
In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.
Product Success
One of the best things about software as a service businesses (and a reason why they trade at such high multiples) is that customers tend to spend more with the company over time.
Appian's net revenue retention rate, an important measure of how much customers from a year ago were spending at the end of the quarter, was at 115% in Q1. That means even if they didn't win any new customers, Appian would have grown its revenue 15% year on year. That is a good retention rate and a proof that Appian's customers are satisfied with their software and are getting more value from it over time. That is good to see.
Key Takeaways from Appian's Q1 Results
Since it has still been burning cash over the last twelve months it is worth keeping an eye on Appian’s balance sheet, but we note that with a market capitalization of $2.59 billion and more than $254.5 million in cash, the company has the capacity to continue to prioritise growth over profitability.
It was good to see Appian outperform Wall St’s revenue expectations this quarter. And we were also glad to see the improvement in gross margin. Zooming out, we think this was a decent quarter, showing the company is staying on target. The company is up 3.67% on the results and currently trades at $37 per share.
Should you invest in Appian right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.
The author has no position in any of the stocks mentioned.