Appian is sharpening its focus on profitability.
Appian (APPN 0.96%) reported fourth-quarter results last Thursday, and the numbers were mostly in line with expectations.
Revenue at the low-code software company rose 20% to $125.8 million, which beat estimates of $123 million. Cloud subscription revenue, the company's primary focus, rose 29% to $65.8 million.
On the bottom line, Appian reported an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $24.8 million compared to $10 million in the quarter a year ago, a reflection of its having reached its hiring goals earlier than expected.
Its adjusted loss of $0.28 per share was worse than $0.16 in the quarter a year ago, but better than the analyst consensus at $0.40.
Appian stock moved higher on the news, closing up 2.5% on Friday, as the numbers seemed to convince investors that the company was handling the challenging macroeconomic climate well.
Management also called for solid cloud subscription revenue growth in 2023, at 24% to 25%, though it sees overall revenue growth slowing to 13% to 14%.
Like most of the software sector, Appian shares fell sharply last year as valuations compressed and the market grew skeptical of unprofitable growth stocks as interest rates rose.
While Appian has consistently delivered strong top-line growth, its bottom-line performance has lagged. It has reported an adjusted EBITDA loss in nearly every quarter since it went public, and that loss has mostly gotten wider, as the chart below shows.
Appian addressed those concerns on the recent earnings call, and investors should take a listen to what management had to say.
The profit picture
Management seems well aware that the market expects improvement on the bottom line after Appian's stock plunged on its third-quarter earnings report when the company reported a wider loss than expected.
The company promised that it would cut its adjusted EBITDA loss margins to less than 10% of revenue by the second half of this year, and management revisited the subject after the fourth-quarter report.