What happened
Shares of Appian (APPN +2.02%) were climbing on Friday morning after the software company reported a solid fourth-quarter earnings report last night and reassured investors that it was on a path to profitability.
As of 11:05 a.m. ET, the stock was up 3.9%.
NASDAQ: APPN
Key Data Points
So what
Appian, which provides a low-code software platform to help automate workflows, reported revenue growth of 20% to $125.8 million, ahead of analyst estimates at $123 million.
Cloud subscription revenue, the company's primary focus, rose 29% to $65.8 million, ahead of the company's guidance at 24% to 26% growth.
Appian posted another quarter of 99% gross renewal rates, showing high satisfaction with its software suite, and its dollar-based net retention rate was 115%, indicating that existing customers increased their spend by 15% over the last four quarters.
Subscription gross margin remained high at 90%, a sign that growing the software business allows the company to reinvest nearly all of that money back into its growth.
On the bottom line, its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss widened from $10 million to $24.8 million as management had said before that it hit its hiring targets earlier than expected, adding to costs. It also reported an adjusted loss per share of $0.28, compared to a $0.16 loss in the quarter a year ago, but that beat estimates at a $0.40 per-share loss.
CEO Matt Calkins said: "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."
Now what
Appian forecasts cloud subscription revenue growth of 24% to 25% for 2023 to between $294 million and $296 million, and sees total revenue of $530 million to $535 million, up 13% to 14% from 2022, which compares to the analyst consensus at $530.6 million.
It also expects an adjusted loss per share of $1.07 to $1.14, which was better than the consensus at a loss of $1.22.
The company said that it was anticipating a recession this year and the guidance seems to reflect that. It also announced a new goal of improving margins every year from 2023 onward, and said it believed investing in growth was the right move even if it meant reporting losses.
In a difficult environment for the software sector, the solid numbers were enough to earn a round of applause from Wall Street. If Appian can maintain its growth rate and move toward profitability, the stock should move higher.
