Company Reports

No moat Appian’s first-quarter 2024 results met our top-line expectations but exceeded our adjusted EBITDA forecast. Appian foreshadowed this result by providing preliminary results at its annual customer conference in April. Despite the firm delivering a reasonable quarter, shares crumbled around 20% after release as foreign exchange losses weighed on net income and resulted in an earnings per share miss relative to FactSet consensus. We believe Appian is executing well on a path to future profitability supported by solid retention metrics, and that the market has overreacted to this near-term nonoperating headwind. Appian does not hedge foreign exchange risk, so is expected to report fluctuations in net earnings as result of gains or losses on remeasurement.

Appian is a leading provider of low-code enterprise software for business process management, or BPM, specializing in process automation. We expect digitization tailwinds to fuel demand for low-code BPM software over the coming decade, as businesses seek to drive operating efficiencies and automate manual processes. However, while we’re encouraged by the firm’s ongoing investments to support top-line growth, we expect this will be at the expense of profitability for the foreseeable future.

No-moat Appian announced preliminary first-quarter 2024 results at the firm’s annual customer conference, Appian World, which met our top-line expectations and slightly exceeded our non-GAAP adjusted EBITDA forecasts. Based on this announcement, we make no changes to our $42 fair value estimate and will update our valuation model once full results come out around early May. On a risk-adjusted basis, Appian shares continue to screen as fairly valued.

Appian is a leading provider of low-code enterprise software for business process management, or BPM, specializing in process automation. We expect digitization tailwinds to fuel demand for low-code BPM software over the coming decade, as businesses seek to drive operating efficiencies and automate manual processes. However, while we’re encouraged by the firm’s ongoing investments to support top-line growth, we expect this will be at the expense of profitability for the foreseeable future.

No-moat Appian reported fourth-quarter results above our expectations for revenue and profitability. The firm’s main growth driver, cloud subscriptions, increased 26% with near-100% gross retention, while cloud net retention ticked up to 119% as the firm demonstrated its ability to cross-sell and upsell existing customers while attracting new business. Appian continues to demonstrate its prowess in artificial intelligence and within the sticky government sector and figures to benefit from both over the long term. Considering the firm’s ability to attract and retain customers coupled with an improving margin profile, we have raised our fair value estimate to $42 per share, from $37. Shares traded significantly higher upon results and screen as slightly undervalued relative to our updated valuation.

We are launching coverage of Appian with a $37 fair value estimate, a no-moat rating, and a Very High Uncertainty Rating. The business process management firm specializes in process automation and is a leader in low-code enterprise software enabling organizations to have more efficient processes and achieve cost savings. We expect digitization tailwinds to fuel demand for low-code BPM software over the coming decade, as businesses seek to drive operating efficiencies and automate manual processes. However, while we’re encouraged by the firm’s ongoing investments to support top-line growth, we expect this will be at the expense of profitability for the foreseeable future.

Appian is a leading provider of low-code enterprise software for business process management, or BPM, specializing in process automation. We expect digitization tailwinds to fuel demand for low-code BPM software over the coming decade, as businesses seek to drive operating efficiencies and automate manual processes. However, while we’re encouraged by the firm’s ongoing investments to support top-line growth, we expect this will be at the expense of profitability for the foreseeable future.