Appian (NASDAQ:APPN) Q4: Beats On Revenue

Radek Strnad /
2023/02/16 4:07 pm EST

Low code software development platform provider Appian (Nasdaq: APPN) beat analyst expectations in Q4 FY2022 quarter, with revenue up 19.8% year on year to $125.8 million. The company expects that next quarter's revenue would be around $131 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. Appian made a GAAP loss of $34.4 million, down on its loss of $25.8 million, in the same quarter last year.

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Appian (APPN) Q4 FY2022 Highlights:

  • Revenue: $125.8 million vs analyst estimates of $122.8 million (2.45% beat)
  • EPS (non-GAAP): -$0.28 vs analyst estimates of -$0.40
  • Revenue guidance for Q1 2023 is $131 million at the midpoint, roughly in line with what analysts were expecting
  • Management's revenue guidance for upcoming financial year 2023 is $532.5 million at the midpoint, in line with analyst expectations and predicting 13.8% growth (vs 27.1% in FY2022)
  • Free cash flow was negative $15.8 million, compared to negative free cash flow of $44.9 million in previous quarter
  • Net Revenue Retention Rate: 115%, in line with previous quarter
  • Gross Margin (GAAP): 72%, down from 73.1% same quarter last year

“Appian grew cloud subscriptions revenue 32% for the full year. Our loyal customers and high gross margins provide a strong foundation as we enter 2023. Organizations are choosing Appian to increase productivity, time to value, and return on investment during uncertain times,” 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 $81.6 million in Q4 FY2020, to $125.8 million.

Appian Total Revenue

This quarter, Appian's quarterly revenue was once again up 19.8% year on year. We can see that revenue increased by $7.91 million in Q4, which was roughly the same as in Q3 2022. This steady quarter-on-quarter growth shows the company is able to maintain its paced growth trajectory.

Guidance for the next quarter indicates Appian is expecting revenue to grow 14.6% year on year to $131 million, slowing down from the 28.6% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $532.5 million at the midpoint, growing 13.8% compared to 26.7% increase in FY2022.

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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 115% in Q4. 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 Q4 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 $3.21 billion and more than $196 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. That feature of these results really stood out as a positive. On the other hand, the revenue guidance for next year indicates a significant slowdown and the revenue guidance for the next quarter slightly missed analysts' expectations. Overall, this quarter's results were not the best we've seen from Appian. The company is flat on the results and currently trades at $45 per share.

Appian may have had a tough quarter, but does that actually create an opportunity to invest 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.