Shares of Appian (APPN +0.38%), a cloud software focused on business process automation, were falling today, even as the company beat estimates in its second-quarter earnings report. It pulled forward guidance to reach break-even on an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) basis.
Despite that, investors seemed underwhelmed by weaker-than-expected revenue guidance for the third quarter and full year.
As a result, the stock was down 11.7% as of 11:05 a.m. ET.
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Appian is evolving
Appian had a number of positive updates to share in the earnings report. The company said usage of Appian AI, a comprehensive platform that includes generative AI, data fabric, and automation, doubled quarter-over-quarter in the period, and it saw bookings from a key government vertical double.
Cloud subscription revenue, the company's primary focus, rose 19% to $88.4 million, and overall revenue was up 15% to $146.5 million, beating the consensus at $143 million. Its gross renewal rate remained strong at 99%, and its subscription gross margin was 88.5%, showing that customers are highly profitable once the company lands them.
On the bottom line, the company narrowed its adjusted EBITDA loss from $24.7 million to $10.5 million, and it reported a per-share loss of $0.26, improving from a per-share loss of $0.39 and beating the consensus at a per-share loss of $0.31.
NASDAQ: APPN
Key Data Points
Appian takes a big step toward profitability
Following a little-publicized round of layoffs in July, which let go of 170 employees, Appian pulled its target for break-even adjusted EBITDA forward from 2025 to 2024.
For the third quarter, the company now sees adjusted EBITDA of break-even to $3 million and forecast total revenue of $149 million-$153 million, up 9%-12% from a year ago but below the consensus of $155.6 million.
For the full year, the company expects adjusted EBITDA of -$3 million to $3 million and total revenue up 12%-13% to $610 million-$615 million, compared to revenue estimates at $615.7 million. While the accelerated move to profitability is a positive sign, investors seem worried that the layoffs could lead to slower revenue growth.
