Appian (NASDAQ:APPN) Q2: Beats On Revenue, Provides Optimistic Full Year Guidance

Kayode Omotosho /
2022/08/04 4:09 pm EDT

Low code software development platform provider Appian (Nasdaq: APPN) reported Q2 FY2022 results topping analyst expectations, with revenue up 32.6% year on year to $110 million. Guidance for next quarter's revenue was $116 million at the midpoint, 2.67% above the average of analyst estimates. Appian made a GAAP loss of $49.3 million, down on its loss of $23.8 million, in the same quarter last year.

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Appian (APPN) Q2 FY2022 Highlights:

  • Revenue: $110 million vs analyst estimates of $103.9 million (5.85% beat)
  • EPS (non-GAAP): -$0.46 vs analyst estimates of -$0.34
  • Revenue guidance for Q3 2022 is $116 million at the midpoint, above analyst estimates of $112.9 million
  • The company lifted revenue guidance for the full year, from $455 million to $468 million at the midpoint, a 2.85% increase
  • Free cash flow was negative $30.9 million, compared to negative free cash flow of $23.9 million in previous quarter
  • Net Revenue Retention Rate: 116%, in line with previous quarter
  • Gross Margin (GAAP): 69.7%, up from 68.8% same quarter last year

"Appian grew cloud subscription revenue 34% in Q2, exceeding our guidance. Appian's loyal customers, broad partner ecosystem, and efficiency-centric platform give us advantages in times of economic uncertainty," 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.

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Sales Growth

As you can see below, Appian's revenue growth has been strong over the last year, growing from quarterly revenue of $82.9 million, to $110 million.

Appian Total Revenue

This was a standout quarter for Appian, with the quarterly revenue up 32.6% year on year, which is above average for the company. But the revenue actually decreased by $4.2 million in Q2, compared to $9.27 million increase in Q1 2022. However, Appian's sales do seem to have a seasonal pattern to them, and since management is guiding for revenue to rebound in the coming quarter we wouldn't be too concerned.

Guidance for the next quarter indicates Appian is expecting revenue to grow 25.5% year on year to $116 million, improving on the 19.5% 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 15.7% over the next twelve months.

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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 Net Revenue Retention Rate

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 116% in Q2. That means even if they didn't win any new customers, Appian would have grown its revenue 16% year on year. Despite it going down over the last year this is still 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 Q2 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 $3.99 billion and more than $135.9 million in cash, the company has the capacity to continue to prioritise growth over profitability.

We liked to see that Appian beat analysts’ revenue expectations pretty strongly this quarter. And we were also glad that the revenue guidance for the rest of the year exceeded expectations. On the other hand, it was less good to see the pretty significant deterioration in gross margin. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is up 0.68% on the results and currently trades at $55.8 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.

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The author has no position in any of the stocks mentioned.