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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from          to         
Commission File Number: 001-38098 
APPIAN CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware54-1956084
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
7950 Jones Branch Drive
McLean, VA
22102
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (703) 442-8844
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolName of each exchange on which registered
Class A Common StockAPPNThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes     No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filerAccelerated filer
Non-accelerated filer
Small reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes       No  

As of August 2, 2021, there were 39,582,947 shares of the registrant’s Class A common stock and 31,499,516 shares of the registrant’s Class B common stock, each with a par value of $0.0001 per share, outstanding.





Table of Contents
Page
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2


PART I—FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
APPIAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data) 
As of
June 30, 2021December 31, 2020
(unaudited)
Assets
Current assets
Cash and cash equivalents$131,279 $112,462 
Short-term investments and marketable securities111,324 109,826 
Accounts receivable, net of allowance of $1,400 as of each of June 30, 2021 and December 31, 2020
82,301 97,278 
Deferred commissions, current20,162 17,899 
Prepaid expenses and other current assets28,074 27,955 
Total current assets373,140 365,420 
Property and equipment, net34,064 35,404 
Long-term investments7,048 36,120 
Goodwill4,707 4,862 
Intangible assets, net of accumulated amortization of $623 and $429 as of June 30, 2021 and December 31, 2020, respectively
1,480 1,744 
Operating right-of-use assets30,528 30,659 
Deferred commissions, net of current portion39,275 34,198 
Deferred tax assets607 489 
Other assets3,066 3,625 
Total assets$493,915 $512,521 
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable$5,020 $2,967 
Accrued expenses7,276 5,821 
Accrued compensation and related benefits25,699 22,981 
Deferred revenue, current113,805 116,256 
Operating lease liabilities, current7,854 6,923 
Other current liabilities6 940 
Total current liabilities159,660 155,888 
Operating lease liabilities, net of current portion50,185 51,194 
Deferred revenue, net of current portion2,905 3,886 
Deferred tax liabilities35 70 
Other non-current liabilities4,784 4,878 
Total liabilities217,569 215,916 
Stockholders’ equity
Class A common stock—par value $0.0001; 500,000,000 shares authorized and 39,581,079 shares issued and outstanding as of June 30, 2021; 500,000,000 shares authorized and 38,971,324 shares issued and outstanding as of December 31, 2020
4 4 
Class B common stock—par value $0.0001; 100,000,000 shares authorized and 31,499,516 shares issued and outstanding as of June 30, 2021; 100,000,000 shares authorized and 31,707,866 shares issued and outstanding as of December 31, 2020
3 3 
Additional paid-in capital485,079 470,498 
Accumulated other comprehensive loss(2,438)(5,010)
Accumulated deficit(206,302)(168,890)
Total stockholders’ equity276,346 296,605 
Total liabilities and stockholders’ equity$493,915 $512,521 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3


APPIAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except share and per share data)

Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Revenue
Subscriptions$56,946 $41,418 $120,712 $91,854 
Professional services26,053 25,357 51,142 53,785 
Total revenue82,999 66,775 171,854 145,639 
Cost of revenue
Subscriptions6,860 4,701 12,714 10,084 
Professional services18,975 16,455 36,650 35,191 
Total cost of revenue25,835 21,156 49,364 45,275 
Gross profit57,164 45,619 122,490 100,364 
Operating expenses
Sales and marketing40,520 29,086 76,504 63,258 
Research and development23,862 17,178 44,552 33,216 
General and administrative17,358 11,450 36,500 24,591 
Total operating expenses81,740 57,714 157,556 121,065 
Operating loss(24,576)(12,095)(35,066)(20,701)
Other (income) expense
Other (income) expense, net(1,081)(682)1,812 2,432 
Interest expense80 128 161 271 
Total other (income) expense(1,001)(554)1,973 2,703 
Loss before income taxes(23,575)(11,541)(37,039)(23,404)
Income tax expense250 274 373 80 
Net loss$(23,825)$(11,815)$(37,412)$(23,484)
Net loss per share:
Basic and diluted$(0.34)$(0.17)$(0.53)$(0.35)
Weighted average common shares outstanding:
Basic and diluted70,952,917 68,369,823 70,842,263 67,949,270 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



4


APPIAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited, in thousands)

Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Net loss$(23,825)$(11,815)$(37,412)$(23,484)
Comprehensive (loss) income, net of income taxes
Foreign currency translation adjustment(1,474)(214)2,541 (197)
Unrealized gains on available-for-sale securities23  31  
Total other comprehensive loss, net of income taxes$(25,276)$(12,029)$(34,840)$(23,681)
 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5


APPIAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(unaudited, in thousands, except share data)

Accumulated Other Comprehensive (Loss) IncomeTotal Stockholders' Equity
Common StockAdditional Paid-In CapitalAccumulated Deficit
SharesAmount
Balance, January 1, 202170,679,190 $7 $470,498 $(5,010)$(168,890)$296,605 
Net loss— — — — (13,587)(13,587)
Issuance of common stock to directors960 — — — — — 
Vesting of restricted stock units56,326 — — — — — 
Exercise of stock options88,269 — 625 — — 625 
Stock-based compensation expense— — 7,894 — — 7,894 
Other comprehensive income— — — 4,023 — 4,023 
Balance, March 31, 202170,824,745 7 479,017 (987)(182,477)295,560 
Net loss— — — — (23,825)(23,825)
Issuance of common stock to directors1,175 — — — — — 
Vesting of restricted stock units43,024 — — — — — 
Exercise of stock options211,651 — 1,464 — — 1,464 
Stock-based compensation expense— — 4,598 — — 4,598 
Other comprehensive loss— — — (1,451)— (1,451)
Balance, June 30, 202171,080,595 $7 $485,079 $(2,438)$(206,302)$276,346 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

















6


APPIAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(unaudited, in thousands, except share data)

Accumulated Other Comprehensive (Loss) IncomeTotal Stockholders' Equity
Common StockAdditional Paid-In CapitalAccumulated Deficit
SharesAmount
Balance, January 1, 202067,468,022 $6 $340,929 $(285)$(135,413)$205,237 
Net loss— — — — (11,669)(11,669)
Issuance of common stock to directors1,946 — — — — — 
Vesting of restricted stock units46,031 — — — — — 
Exercise of stock options129,082 — 670 — — 670 
Stock-based compensation expense— — 3,476 — — 3,476 
Other comprehensive income— — — 17 — 17 
Balance, March 31, 202067,645,081 6 345,075 (268)(147,082)197,731 
Net loss— — — — (11,815)(11,815)
Issuance of common stock from public offering, net of issuance costs1,931,206 1 107,914 — — 107,915 
Issuance of common stock to directors2,296 — — — — — 
Vesting of restricted stock units13,567 — — — — — 
Exercise of stock options248,165 — 1,571 — — 1,571 
Stock-based compensation expense— — 3,614 — — 3,614 
Other comprehensive loss— — — (214)— (214)
Balance, June 30, 202069,840,315 $7 $458,174 $(482)$(158,897)$298,802 
7


APPIAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)

Six Months Ended June 30,
20212020
Cash flows from operating activities:
Net loss$(37,412)$(23,484)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization2,561 2,980 
Bad debt expense32 200 
Loss on disposal of property and equipment 22 
Change in fair value of available-for-sale securities(31) 
Deferred income taxes(144)(168)
Stock-based compensation12,492 7,090 
Changes in assets and liabilities:
Accounts receivable16,720 (2,084)
Prepaid expenses and other assets243 1,922 
Deferred commissions(7,340)(295)
Accounts payable and accrued expenses3,000 (1,674)
Accrued compensation and related benefits2,808 2,575 
Other current and non-current liabilities(563)1,271 
Deferred revenue(1,791)2,310 
Operating lease liabilities52 2,378 
Net cash used in operating activities(9,373)(6,957)
Cash flows from investing activities:
Proceeds from sale of investments27,604  
Payments for acquisitions, net of cash acquired (6,138)
Purchases of property and equipment(1,027)(686)
Net cash provided by (used in) investing activities26,577 (6,824)
Cash flows from financing activities:
Principal payments on finance leases (716)
Proceeds from public offering, net of underwriting discounts 108,260 
Payments of costs related to public offerings (18)
Proceeds from exercise of common stock options2,089 2,242 
Net cash provided by financing activities2,089 109,768 
Effect of foreign exchange rate changes on cash and cash equivalents(476)404 
Net increase in cash and cash equivalents18,817 96,391 
Cash and cash equivalents, beginning of period112,462 159,755 
Cash and cash equivalents, end of period$131,279 $256,146 
Supplemental disclosure of cash flow information:
Cash paid for interest$173 $88 
Cash paid for income taxes$806 $139 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8

APPIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. Organization and Description of Business

Appian Corporation (together with its subsidiaries, “Appian,” the “Company,” “we,” or “our”) helps organizations build applications and workflows rapidly, with a low-code automation platform. Combining people, technologies, and data in a single workflow, Appian can help companies maximize their resources and improve business results. Many of the world’s largest organizations use Appian applications to improve customer experience, achieve operational excellence, and simplify global risk management and compliance. We were incorporated in the state of Delaware in August 1999. We are headquartered in McLean, Virginia and operate in Canada, Switzerland, the United Kingdom, France, Germany, the Netherlands, Italy, Australia, Spain, Singapore, and Sweden.

2. Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and footnotes have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations, financial position, changes in stockholders’ equity, and cash flows. The results of operations for the current period are not necessarily indicative of the results for the full year or the results for any future periods. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (the “SEC”) on February 18, 2021.

Use of Estimates

The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect the amounts reported in these condensed consolidated financial statements and accompanying notes. Although we believe the estimates we use are reasonable, due to the inherent uncertainty involved in making these estimates, actual results reported in future periods could differ from those estimates.

Significant estimates embedded in the condensed consolidated financial statements include revenue recognition, income taxes and the related valuation allowance, the valuation of goodwill and intangible assets, leases, costs to obtain a contract with a customer, the valuation of financial instruments, and stock-based compensation.

The ongoing outbreak of the novel coronavirus disease ("COVID-19") has resulted in the declaration of a global pandemic and introduced a level of disruption and uncertainty into the financial markets and global economy. While we continue to monitor the developments surrounding the pandemic, as of the date of issuance of these financial statements, we are not aware of any specific events or circumstances that would require us to update our estimates, assumptions, and judgments or revise the carrying value of our assets or liabilities. We cannot estimate the impacts COVID-19 will have on our business going forward as such impacts will be largely dependent upon a number of factors outside of our control including the extent and duration of the outbreak as well as any mitigating actions which may be undertaken by global governments and the general public.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Appian and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Public Offering

In June 2020, we completed an underwritten public offering of 2,500,000 shares of our Class A common stock, of which 1,931,206 shares of Class A common stock were sold by us and 568,794 shares of Class A common stock were sold by existing stockholders. The underwriter purchased the shares from us and the selling stockholders at a price of $56.50 per share. Our net
9

APPIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
proceeds from the offering were $107.9 million, after deducting underwriting discounts and commissions and offering expenses. We did not receive any of the proceeds from the sale of shares by the selling stockholders.

Revenue Recognition

Refer to Note 3 for a detailed discussion on specific revenue recognition principles related to our major revenue streams.

Cost of Revenue

Subscriptions

Cost of subscriptions revenue consists primarily of fees paid to our third-party managed hosting providers and other third-party service providers, personnel costs such as payroll and benefits for our technology operations and customer support teams, and allocated facility costs and overhead.

Professional Services

Cost of professional services revenue includes all direct and indirect costs to deliver our professional services and training, including employee compensation for our global professional services and training personnel, third-party contractor costs, allocated facility costs and overhead, and the costs of billable expenses such as travel and lodging. The unpredictability of the timing of entering into significant professional services agreements sold on a standalone basis may cause significant fluctuations in our quarterly financial results and allocated facility costs and overhead.

Concentration of Credit and Customer Risk

Our financial instruments exposed to concentration of credit and customer risk consist primarily of cash and cash equivalents, trade accounts receivable, and our short- and long-term investments. Deposits held with banks may exceed the amount of insurance provided on such deposits. We believe the financial institutions holding our cash deposits are financially sound and, accordingly, minimal credit risk exists with respect to these balances.

With regard to our customers, credit evaluation and account monitoring procedures are used to minimize the risk of loss. We believe no additional credit risk beyond amounts provided for collection loss are inherent in accounts receivable. Revenue generated from government agencies represented 19.8% and 20.4% of our revenue for the three and six months ended June 30, 2021, respectively, of which the top three U.S. federal government agencies generated 6.5% of our revenue for each of the three and six months ended June 30, 2021. Additionally, 35.3% and 33.7% of our revenue during the three and six months ended June 30, 2021, respectively, was generated from foreign customers. Revenue generated from government agencies represented 19.0% and 16.8% of our revenue for the three and six months ended June 30, 2020, respectively, of which the top three U.S. federal government agencies generated 7.6% and 6.7% of our revenue for the three and six months ended June 30, 2020, respectively. Additionally, 36.8% and 35.0% of our revenue during the three and six months ended June 30, 2020, respectively, was generated from foreign customers.

Cash and Cash Equivalents

We consider all highly liquid investments with an original or remaining maturity of three months or less at the date of purchase, as well as overnight repurchase agreements, to be cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are stated at realizable value, net of an allowance for doubtful accounts. The allowance for doubtful accounts is based on our assessment of the collectability of accounts and incorporates an estimation of expected lifetime credit losses on our receivables. We regularly review the composition of the accounts receivable aging, historical bad debts, changes in payment patterns, customer creditworthiness, and current economic trends. If the financial condition of our customers were to deteriorate, resulting in their inability to make required payments, additional provisions for doubtful accounts would be required and would increase bad debt expense. There was no increase in the allowance for doubtful accounts from December 31, 2020 to June 30, 2021.
10

APPIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Assets Recognized from the Costs to Obtain a Contract with a Customer

We capitalize the incremental costs of obtaining a contract with a customer, including sales commissions paid to our direct sales force, that are incremental costs to obtaining customer contracts. These costs are recorded as deferred commissions in the condensed consolidated balance sheets. Costs to obtain a contract for a new customer or upsell are amortized over an estimated economic life of five years as sales commissions on initial sales are not commensurate with sales commissions on contract renewals. We determine the estimated economic life based on both qualitative and quantitative factors such as expected renewals, product life cycles, contractual terms, and customer attrition. We periodically review the carrying amount of deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the estimated economic life. Commissions paid relating to contract renewals are deferred and amortized over the related renewal period. We also capitalize the incremental fringe benefits associated with commission expenses paid to our direct sales force. Costs to obtain a contract for professional services arrangements are expensed as incurred as the contractual period of our professional services arrangements are one year or less.

Amortization associated with commission expense is recorded to sales and marketing costs in our condensed consolidated statements of operations. Commission expense was $7.5 million and $14.3 million for the three and six months ended June 30, 2021, respectively. Commission expense was $5.8 million and $11.1 million for the three and six months ended June 30, 2020, respectively.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Significant additions or improvements extending the useful life of an asset are capitalized, while repairs and maintenance costs which do not significantly improve the related assets or extend their useful lives are charged to expense as incurred.

The following table outlines the useful lives of our major asset categories:

Asset CategoryUseful Life (in years)
Computer software3
Computer hardware3
Equipment5
Office furniture and fixtures10
Leasehold improvements
(a)
(a) Leasehold improvements have an estimated useful life of the shorter of the useful life of the assets or the lease term.

Impairment of Long-Lived Assets

Long-lived assets and certain intangible assets are reviewed for impairment whenever events or circumstances indicate the carrying amount of an asset may not be recoverable through undiscounted cash flows from the use of the assets. If such assets are considered to be impaired, the assets are written down to their estimated fair value. No indicators of impairment were identified for the three and six months ended June 30, 2021 and 2020.

Investments and Fair Value of Financial Instruments

Refer to Note 14 for a detailed discussion on our policies specific to investments and determining fair value.

Stock-Based Compensation

We account for stock-based compensation expense related to stock-based awards based on the estimated fair value of the award on the grant date. We calculate the fair value of stock options containing only a service condition using the Black-Scholes option pricing model. The fair value of restricted stock units ("RSUs") is based on the closing market price of our
11

APPIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
common stock on the Nasdaq Global Market on the date of grant. For service-based awards such as RSUs, stock-based compensation expense is recognized on a straight-line basis over the requisite service period. For performance-based awards, stock-based compensation expense is recognized using the accelerated attribution method based on the probability of satisfying the performance condition. For awards that contain market conditions, compensation expense is measured using a Monte Carlo simulation and recognized using the accelerated attribution method over the derived service period based on the expected market performance as of the grant date. We account for forfeitures as they occur rather than estimating expected forfeitures.

Leases

Refer to Note 4 for a detailed discussion on our policies specific to leasing arrangements.

Recent Accounting Pronouncements

Adopted

In December 2019, the FASB issued Accounting Standards Update ("ASU") 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which amends and aims to simplify accounting disclosure requirements regarding a number of topics including, but not limited to, intraperiod tax allocations, accounting for deferred taxes when there are changes in the consolidation of certain investments, tax basis step ups in an acquisition, and the application of effective rate changes during interim periods. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The adoption of the new guidance did not have a material impact on our consolidated financial statements.

Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848), which provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates such as the Secured Overnight Financing Rate ("SOFR"). This guidance is effective upon issuance and generally can be applied through the end of calendar year 2022. We are currently evaluating the impact and applicability of this new standard.

3. Revenue

Revenue Recognition

We generate subscriptions revenue primarily through the sale of software as a service ("SaaS") subscriptions bundled with maintenance and support and hosting services as well as term license subscriptions bundled with maintenance and support. We generate professional services revenue from fees for our consulting services, including application development and deployment assistance as well as training related to our platform.

The following table summarizes revenue from contracts with customers for the three and six months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
SaaS subscriptions$42,486 $29,580 $81,539 $57,970 
Term license subscriptions9,323 7,379 29,176 25,172 
Maintenance and support5,137 4,459 9,997 8,712 
Professional services26,053 25,357 51,142 53,785 
Total revenue$82,999 $66,775 $171,854 $145,639 

Performance Obligations and Timing of Revenue Recognition

12

APPIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
We primarily sell products and services that fall into the categories discussed below. Each category contains one or more performance obligations that are either (1) capable of being distinct (i.e., the customer can benefit from the product or service on its own or together with readily available resources, including those purchased separately from us) and distinct within the context of the contract (i.e., separately identified from other promises in the contract) or (2) a series of distinct products or services that are substantially the same and have the same pattern of transfer to the customer. Our term license subscriptions are delivered at a point in time while our SaaS subscriptions, maintenance and support, and professional services are delivered over time.

Subscriptions Revenue

Subscriptions revenue is primarily related to (1) SaaS subscriptions bundled with maintenance and support and hosting services and (2) term license subscriptions bundled with maintenance and support. We generally charge subscription fees on a per-user basis or through non-user based single application licenses. We bill customers and collect payment for subscriptions to our platform in advance on an annual, quarterly, or monthly basis. In certain instances, our customers have paid their entire contract up front.

SaaS Subscriptions

We generate cloud-based subscriptions revenue primarily from the sales of subscriptions to access our cloud offering, together with related support services to our customers. We perform all required maintenance and support for our cloud offering. Revenue is recognized on a ratable basis over the contract term beginning on the date the service is made available to the customer. Our cloud-based subscription contracts generally have a term of one to three years in length. We bill customers and collect payment for subscriptions to our platform in advance, and they are non-cancellable.

Term License Subscriptions

Our term license subscriptions revenue is derived from customers with on-premises installations of our platform pursuant to contracts that were historically one to three years in length. The majority of recent contracts have been one year in length. Although term license subscriptions are sold with maintenance and support, the software is fully functional at the beginning of the subscription and is considered a distinct performance obligation. On rare occasions, a cloud-based subscription may include the right for the customer to take possession of the license and as such, the revenue is treated as a license. Revenue from term license subscriptions is recognized when control of the software license has transferred to the customer, which is the later of delivery or commencement of the contract term.

Maintenance and Support

Maintenance and support subscriptions include both technical support and when-and-if-available software upgrades, which are treated as a single performance obligation as they are considered a series of distinct services that are substantially the same and have the same duration and measure of progress. Revenue from maintenance and support is recognized ratably over the contract period, which is the period over which the customer has continuous access to maintenance and support.

Professional Services Revenue

Our professional services revenue is comprised of fees for consulting services, including application development and deployment assistance as well as training services related to our platform. Our professional services are considered distinct performance obligations when sold standalone or with other products.

Consulting Services

We sell consulting services to assist customers in planning and executing the deployment of our software. Customers are not required to use consulting services to fully benefit from the software. Consulting services are regularly sold on a standalone basis and either (1) under a fixed-fee arrangement or (2) on a time and materials basis. Consulting contracts are each considered separate performance obligations because they do not integrate with each other or with other products and services to deliver a combined output to the customer, do not modify or customize (or are not modified or customized by) each other or other products and services, and do not affect the customer's ability to use the other consulting offerings or other products and
13

APPIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
services. Revenue under consulting contracts is recognized over time as services are delivered. For time and materials-based consulting contracts, we have elected the practical expedient of recognizing revenue upon invoicing since the invoiced amount corresponds directly to the value of our service to date.

Training Services

We sell various training services to our customers. Training services are sold in the form of prepaid training credits that are redeemed based on a fixed rate per course. Training revenue is recognized when the associated training services are delivered.

Significant Judgments and Estimates

Determining the Transaction Price

The transaction price includes both fixed and variable consideration. Variable consideration is included in the transaction price to the extent it is probable a significant reversal will not occur. The amount of variable consideration excluded from the transaction price for the three and six months ended June 30, 2021 and 2020 was insignificant. Our estimates of variable consideration are also subject to subsequent true-up adjustments and may result in changes to transaction prices; however, such true-up adjustments are not expected to be material.

Allocating the Transaction Price Based on Standalone Selling Prices ("SSP")

We allocate the transaction price to each performance obligation in a contract based on its relative SSP. The SSP is the observable price at which we sell the product or service separately. In the absence of observable pricing, we estimate SSP using the residual approach. We establish SSP as follows:

1.SaaS subscriptions - Given the highly variable selling price of our SaaS subscriptions, we establish the SSP of our SaaS subscriptions using a residual approach after first determining the SSP of consulting and training services. We have concluded the residual approach to estimating SSP of our SaaS subscriptions is an appropriate allocation of the transaction price.

2.Term license subscriptions - Given the highly variable selling price of our term license subscriptions, we have established SSP of term license subscriptions using a residual approach after first determining the SSP of maintenance and support. Maintenance and support is sold on a standalone basis in conjunction with renewals of our legacy perpetual software licenses and within a narrow range of the net license fee. Because an economic relationship exists between the license and maintenance and support, we have concluded the residual approach to estimating SSP of term license subscriptions is an appropriate allocation of the transaction price.

3.Maintenance and support - We establish the SSP of maintenance and support as a percentage of the stated net subscription fee based on observable pricing of maintenance and support renewals from our legacy perpetual software licenses.

4.Consulting and training services - The SSP of consulting and training services is established based on the observable pricing of standalone sales within each geographic region where the services are sold.

Contract Balances

Timing may differ between the satisfaction of performance obligations and the invoicing and collection of amounts related to our contracts with customers. Contract assets primarily relate to unbilled amounts for contracts with customers for which the amount of revenue recognized exceeds the amount billed to the customer. Contract assets are transferred to accounts receivable when the right to invoice becomes unconditional. As of June 30, 2021 and December 31, 2020, contract assets of $16.2 million and $20.1 million, respectively, are included in the Prepaid expenses and other current assets and Other assets line items in our condensed consolidated balance sheets.

Contract liabilities consist of deferred revenue and include payments received in advance of the satisfaction of performance obligations. Deferred revenue is then recognized as the revenue recognition criteria are met. Deferred revenue that will be recognized during the succeeding 12-month period is recorded as current, and the remaining deferred revenue is recorded as
14

APPIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
non-current. For the six months ended June 30, 2021, we recognized $81.1 million of revenue that was included in the deferred revenue balance as of December 31, 2020.

Transaction Price Allocated to the Remaining Performance Obligations

As of June 30, 2021, we had an aggregate transaction price of $223.8 million allocated to unsatisfied performance obligations. We expect to recognize $201.3 million of this balance as revenue over the next 24 months with the remaining amount recognized thereafter.

4. Leases

At the inception of an arrangement, we determine whether the arrangement is or contains a lease based on the unique facts and circumstances present and the classification of the lease. Operating leases with a term greater than one year are recognized on the balance sheet as right-of-use ("ROU") assets, lease liabilities, and, if applicable, long-term lease liabilities. ROU assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. We have elected not to recognize on our condensed consolidated balance sheets leases with a term of one year or less. For contracts with lease and non-lease components, we have elected not to allocate the contract consideration but rather to account for the lease and non-lease components as a single lease component.

Lease liabilities and their corresponding ROU assets are recorded based on the present value of lease payments over the expected lease term. The implicit rates within most of our leases are generally not determinable; therefore, we use the incremental borrowing rate at the lease commencement date to determine the present value of lease payments. The determination of our incremental borrowing rate requires judgment and is estimated for each lease based on the rate we would have to pay for a collateralized loan with the same term and payments as the lease. We consider various factors, including our level of collateralization, estimated credit rating, and the currency in which the lease is denominated. Operating lease ROU assets also include any lease prepayments, offset by lease incentives. Certain of our leases include options to extend or terminate the lease. An option to extend the lease is considered in connection with determining the ROU asset and lease liability when it is reasonably certain we will exercise that option while an option to terminate is considered unless it is reasonably certain we will not exercise the option. For certain equipment leases, we apply a portfolio approach to effectively account for the operating lease ROU assets and liabilities.

Expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense while the expense for finance leases is recognized as depreciation expense and interest expense. We have lease agreements which require payments for lease and non-lease components (i.e., common area maintenance) that are accounted for as a single lease component. Variable lease payment amounts that cannot be determined at the commencement of the lease, such as maintenance costs based on future obligations, are not included in ROU assets or lease liabilities but rather are expensed as incurred and recorded as variable lease expense.

As of June 30, 2021, we have operating leases for corporate offices. Our operating leases have remaining lease terms of 1 year to 11 years, some of which include options to extend the leases for up to 10 years.

In April 2018, we entered into a lease agreement with respect to 176,222 square feet of office space in McLean, Virginia for a new corporate headquarters. The initial term of the lease was 150 months. We took initial possession of the first phase of the new headquarters in October 2018 and began to recognize rent expense as of that date. In February 2019, we took possession of an additional 28,805 square feet of adjacent office space.

In January 2020, we entered into an amendment which adjusted the original terms of the headquarters lease. Under this amendment, we exercised an option to expand occupancy, adding 34,158 square feet of office space. Occupancy of the added space commenced on October 14, 2020. Pursuant to the guidance of ASC 842, Leases, the amendment is considered a modification to the original lease and is accounted for as a separate contract because it represents a new ROU asset and the lease costs on the new space are charged at prevailing market rates. Effective July 1, 2020, we took possession of the space, began to recognize rent expense, and recorded a $7.9 million ROU asset and lease liability on our condensed consolidated balance sheets.

15

APPIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In October 2020, we paid the full $2.7 million principal balances outstanding under our finance leases pursuant to an option permitting us to pay such balances in full at any time. As of the date of the paydown, the titles to the assets were transferred to us, the associated lease liabilities were retired, the carrying values of the purchased assets were adjusted, and the assets were reclassified from finance leases to property and equipment, net on the condensed consolidated balance sheets.

The following table sets forth the components of lease expense for the three and six months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Operating lease cost$1,695 $1,408 $3,325 $3,276 
Finance lease costs:
Amortization of right-of-use assets 372  745 
Interest on lease liabilities 46  97 
Short-term lease cost13 195 54 380 
Variable lease cost772 34 797 217 
Total$2,480 $2,055 $4,176 $4,715 

Supplemental balance sheet information related to operating leases as of June 30, 2021 and December 31, 2020 was as follows (in thousands, except for lease term and discount rate):

As of
June 30, 2021December 31, 2020
Operating right-of-use assets$30,528$30,659
Operating lease liabilities, current$7,854$6,923
Operating lease liabilities, net of current portion50,18551,194
Total operating lease liabilities$58,039$58,117
Weighted average remaining lease term (in years)10.010.6
Weighted average discount rate9.5 %9.6 %

For the three and six months ended June 30, 2021, amortization of operating ROU assets totaled $0.4 million and $0.7 million, respectively. For the three and six months ended June 30, 2020, amortization of operating ROU assets totaled $0.2 million and $0.9 million, respectively.

For the three and six months ended June 30, 2021, interest expense on operating lease liabilities totaled $0.5 million and $0.9 million, respectively. For the three and six months ended June 30, 2020, interest expense on operating lease liabilities totaled $1.0 million and $1.4 million, respectively.

Supplemental cash flow information related to leases for the six months ended June 30, 2021 and 2020 was as follows (in thousands):

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APPIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Six Months Ended June 30,
20212020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows for operating leases$3,503 $1,044 
Operating cash outflows for finance leases 97 
Financing cash outflows for finance leases 716 

A summary of our future minimum lease commitments under non-cancellable leases as of June 30, 2021 is as follows (in thousands):

Operating Leases
2021 (excluding the six months ended June 30, 2021)
$4,070 
20228,252 
20238,249 
20248,648 
20259,343 
20269,369 
Thereafter48,775 
Total lease payments96,706 
Less: imputed interest(38,667)
Total$58,039 

5. Property and Equipment, net

Property and equipment, net consisted of the following as of June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021December 31, 2020
Leasehold improvements$36,394 $36,263 
Office furniture and fixtures2,522 2,521 
Computer hardware5,399 4,535 
Computer software1,354 1,352 
Equipment58 49 
Property and equipment, gross45,727 44,720 
Less: accumulated depreciation(11,663)(9,316)
Property and equipment, net$34,064 $35,404 

Depreciation expense totaled $1.2 million and $2.4 million for the three and six months ended June 30, 2021, respectively. There were no disposals or retirements recorded during the three and six months ended June 30, 2021.

Depreciation expense totaled $1.4 million and $2.8 million for the three and six months ended June 30, 2020. There were nominal disposals recorded during the three months ended June 30, 2020. During the six months ended June 30, 2020, we retired $1.3 million of leasehold improvements, $0.1 million of computer hardware, and $0.1 million of office furniture and fixtures and equipment. Nominal losses on disposal were recorded for the three and six months ended June 30, 2020.

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APPIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. Accrued Expenses

Accrued expenses consisted of the following as of June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021December 31, 2020
Accrued hosting costs$2,093 $1,229 
Accrued legal costs1,112 760 
Accrued contract labor costs884 908 
Accrued taxes payable579 527 
Accrued audit and tax expenses345 370 
Accrued marketing and tradeshow expenses420 596 
Accrued third party license fees247 570 
Accrued reimbursable employee expenses291 231 
Other accrued expenses1,305 630 
Total$7,276 $5,821 

7. Debt

Line of Credit

In November 2017, we entered into a $20.0 million revolving line of credit with a lender. The facility matures in November 2022. We may elect whether amounts drawn on the revolving line of credit bear interest at a floating rate per annum equal to either LIBOR or the Prime rate plus an additional interest rate margin that is determined by the availability of the borrowings under the revolving line of credit. The additional interest rate margin will range from 2.00% to 2.50% in the case of LIBOR advances and from 1.00% to 1.50% in the case of Prime rate advances. The revolving line of credit contains an unused facility fee in an amount between 0.15% and 0.25% of the average unused portion of the revolving line of credit, which is payable quarterly. The agreement contains certain customary affirmative and negative covenants and requires us to maintain (i) an adjusted quick ratio of at least 1.35 to 1.00 and (ii) minimum adjusted EBITDA, in the amounts and for the periods set forth in the agreement. Any amounts borrowed under the credit facility are collateralized by substantially all of our assets. We were in compliance with all covenants as of June 30, 2021. As of June 30, 2021, we had no outstanding borrowings under this revolving line of credit, and we had outstanding letters of credit totaling $11.2 million in connection with securing our leased office space. We also continue to monitor the LIBOR to SOFR transition, which may result in modification or amendment of our existing revolving line of credit.

8. Income Taxes

The provision for income taxes is based upon the estimated annual effective tax rates for the year applied to the current period income before tax plus the tax effect of any significant or unusual items, discrete events, or changes in tax law. Our operating subsidiaries are exposed to statutory effective tax rates ranging from zero to approximately 32%. Fluctuations in the distribution of pre-tax income among our operating subsidiaries can lead to fluctuations of the effective tax rate in the condensed consolidated financial statements. For the three and six months ended June 30, 2021, the actual effective tax rates were (1.1)% and (1.0)%, respectively. For the three and six months ended June 30, 2020, the actual effective tax rates were (2.4)% and (0.3)%, respectively.

We assess uncertain tax positions in accordance with ASC 740-10, Accounting for Uncertainties in Income Taxes. As of June 30, 2021, our net unrecognized tax benefits totaled $2.3 million, which if recognized would result in no net effect on the effective tax rate due to a valuation allowance. The amount of reasonably possible unrecognized tax benefits that could decrease over the next 12 months due to the expiration of certain statutes of limitations or settlements of tax audits is not material to our condensed consolidated financial statements.

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APPIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
We file income tax returns in the United States federal jurisdiction and in many states and foreign jurisdictions. The tax years 2017 through 2020 remain open to examination by the major taxing jurisdictions to which we are subject. We are not currently under examination by the Internal Revenue Service for any open tax years.

In response to the COVID-19 pandemic, the United States passed the Coronavirus Aid, Relief, and Economic Security ("CARES") Act in March 2020. The CARES Act includes various income and payroll tax measures. Pursuant to these measures, we have elected the option to defer the deposit and payment of our share of social security taxes that would otherwise be due between March 27, 2020 and December 31, 2020. Under the CARES Act, half of these deferred payments are due by the end of fiscal year 2021 while the other half are due by the end of fiscal year 2022.

At this time, beyond the above deferral, the CARES Act is not expected to materially impact our financial statements, but we continue to evaluate potential impacts.

9. Stock-Based Compensation

Equity Incentive Plans

In May 2017, our Board of Directors adopted, and our stockholders approved, the 2017 Equity Incentive Plan (the “2017 Plan”), which became effective as of the date of the final prospectus for our initial public offering. The 2017 Plan provides for the grant of incentive stock options to employees and for the grant of nonstatutory stock options, restricted stock awards, RSUs, stock appreciation rights, performance-based stock awards, and other forms of equity compensation to employees, including officers, non-employee directors, and consultants. We initially reserved 6,421,442 shares of Class A common stock for issuance under the 2017 Plan, which included 421,442 shares that remained available for issuance under our 2007 Stock Option Plan (the “2007 Plan”) at the time the 2017 Plan became effective. The number of shares reserved under the 2017 Plan increases for any shares subject to outstanding awards originally granted under the 2007 Plan that expire or are forfeited prior to exercise. As a result of the adoption of the 2017 Plan, no further grants may be made under the 2007 Plan. As of June 30, 2021, there were 7,175,469 shares of Class A common stock reserved for issuance under the 2017 Plan, of which 4,223,260 were available to be issued.

Stock Options

We estimate the fair value of stock options containing only a service condition using the Black-Scholes option pricing model, which requires the use of subjective assumptions, including the expected term of the option, the current price of the underlying stock, the expected stock price volatility, expected dividend yield, and the risk-free interest rate for the expected term of the option. The expected term represents the period of time the stock options are expected to be outstanding. Due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to otherwise estimate the expected term of the stock options, we use the simplified method to estimate the expected term for our stock options. Under the simplified method, the expected term of an option is presumed to be the mid-point between the vesting date and the end of the contractual term. Expected volatility is based on historical volatilities for publicly traded stock of comparable companies over the estimated expected term of the stock options. We assume no dividend yield because dividends are not expected to be paid in the near future, which is consistent with our history of not paying dividends.

In May 2019, our Board of Directors granted a stock option to purchase 700,000 shares of our Class A common stock to our Chief Executive Officer (the "2019 CEO Grant") under the 2017 Plan with an exercise price of $33.98 per share. The 2019 CEO Grant is eligible to vest based on the achievement of a stock price appreciation target of our Class A common stock. Specifically, the 2019 CEO Grant vests when shares of our Class A common stock close at or above $84.63 per share for a period equal to or greater than 90 consecutive calendar days or upon the occurrence of a change in control in which the value of our Class A common stock is equal to or greater than $84.63 per share within five years of the grant date. The fair value of the 2019 CEO Grant was determined using a Monte Carlo simulation. The fair value of the award at the grant date was $9.5 million and is amortized over the derived service period of 2.6 years. Effective February 2021, the 2019 CEO Grant has satisfied all of the conditions required to be considered fully vested. As a result, we accelerated the recognition of approximately $3.3 million in stock-based compensation expense in the six months ended June 30, 2021.
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APPIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The following table summarizes stock option activity for the six months ended June 30, 2021:

Number of SharesWeighted Average Exercise PriceWeighted Average Remaining Contractual Term (Years)Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2021
3,399,240 $14.06 4.9$503,174 
Granted  — — 
Exercised(299,920)6.94 — 33,230 
Expired  — — 
Forfeited(10,060)11.62 — — 
Outstanding at June 30, 2021
3,089,260 $14.76 4.4$379,935 
Exercisable at June 30, 2021
2,850,280 $15.04 4.3$349,747 

There were no stock options granted during the six months ended June 30, 2021 and 2020. The total fair value of stock options that vested during the six months ended June 30, 2021 and 2020 was $10.5 million and $1.0 million, respectively. As of June 30, 2021, the total compensation cost related to unvested stock options not yet recognized was $0.2 million, which will be recognized over a weighted average period of 0.8 years.

Restricted Stock Units

The following table summarizes RSU activity for the six months ended June 30, 2021:

Number of SharesWeighted Average Grant Date Fair Value
Non-vested and outstanding at January 1, 2021
1,165,003 $46.04 
Granted110,008 139.17 
Vested(99,350)46.44 
Forfeited(48,965)63.20 
Non-vested and outstanding at June 30, 2021
1,126,696 54.35 

As of June 30, 2021, total unrecognized compensation cost related to unvested RSUs was approximately $51.8 million, which will be recognized over a weighted average period of 2.2 years.

20

APPIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table summarizes the components of our stock-based compensation expense by instrument type for the three and six months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
RSUs$4,403 $2,475 $8,408 $4,774 
Stock options40 1,047 3,773 2,131 
Common stock awards to Board of Directors155 92 311 185 
Total stock-based compensation expense$4,598 $3,614 $12,492 $7,090 

Stock-based compensation expense for RSUs, stock options, and issuances of common stock to the Board of Directors is included in the following line items in the accompanying condensed consolidated statements of operations for the three and six months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Cost of revenue
Subscriptions$295 $229 $592 $442 
Professional services865 317 1,506 529 
Operating expenses
Sales and marketing1,197 657 2,305 1,410 
Research and development1,069 619 2,084 1,172 
General and administrative1,172 1,792 6,005 3,537 
Total stock-based compensation expense$4,598 $3,614 $12,492 $7,090 

10. Stockholders' Equity

As of June 30, 2021, we had authorized 500,000,000 shares of Class A common stock and 100,000,000 shares of Class B common stock, each with a par value of $0.0001 per share, of which 39,581,079 shares of Class A common stock and 31,499,516 shares of Class B common stock were issued and outstanding. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion rights. The holders of Class A common stock are entitled to one vote per share, and the holders of Class B common stock are entitled to ten votes per share on all matters subject to stockholder vote. The holders of Class B common stock also have approval rights for certain corporate actions. Each share of Class B common stock may be converted into one share of Class A common stock at the option of its holder and will be automatically converted upon transfer thereof, subject to certain exceptions. In addition, upon the date on which the outstanding shares of Class B common stock represent less than 10% of the aggregate voting power of our capital stock, all outstanding shares of Class B common stock shall convert automatically into Class A common stock.

11. Basic and Diluted Loss per Common Share

The following outstanding securities, prior to the use of the treasury stock method or the if-converted method, have been excluded from the computation of diluted weighted-average shares outstanding for the respective periods below because they would have been antidilutive:

Three and Six Months Ended June 30,
20212020
Stock options3,089,260 4,046,544 
Non-vested restricted stock units1,126,696 1,116,127 

12. Commitments and Contingencies
21

APPIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Contractual Warranty and Indemnification Obligations

We provide limited product warranties. Historically, any payments made under these provisions have been immaterial. We also agree to standard indemnification provisions in the ordinary course of business. Pursuant to these provisions, we agree to indemnify, hold harmless, and reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally our customers, in connection with certain intellectual property infringement claims by any third party arising from the use of our products or services in accordance with the agreement. The term of our contractual indemnity provisions often survives termination or expiration of the applicable agreement. We carry insurance that covers certain third-party claims relating to our services and limits our exposure. We have never incurred costs to defend lawsuits or settle claims related to these indemnification provisions.

Minimum Purchase Commitments

Exclusive of the Amazon Web Services ("AWS") contract discussed in Note 15, we have other non-cancellable agreements for subscription software products that contain provisions stipulating minimum purchase commitments. However, the annual purchas