APPIAN CORPAPPN
APPIAN CORP Income Taxes Disclosure
9. Income Taxes
For the years ended December 31, 2025, 2024, and 2023, our income (loss) before income taxes was comprised of the following (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | (17,496) | $ | (55,183) | $ | (89,925) | |||||||||||
| Foreign | 23,940 | (36,025) | (18,307) | ||||||||||||||
| Total | $ | 6,444 | $ | (91,208) | $ | (108,232) | |||||||||||
For the years ended December 31, 2025, 2024, and 2023, our income tax expense was comprised of the following (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 22 | $ | (10) | $ | 34 | |||||||||||
| State | 171 | 149 | 223 | ||||||||||||||
| Foreign | 5,360 | 1,864 | 4,523 | ||||||||||||||
| Total current expense | 5,553 | 2,003 | 4,780 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | — | — | — | ||||||||||||||
| State | — | — | — | ||||||||||||||
| Foreign | (342) | (949) | (1,571) | ||||||||||||||
| Total deferred benefit | (342) | (949) | (1,571) | ||||||||||||||
| Total income tax expense | $ | 5,211 | $ | 1,054 | $ | 3,209 | |||||||||||
For the year ended December 31, 2025, the provision for income taxes differs from the amount computed by applying the federal statutory income tax rates to our income before the provision for income taxes as follows:
Year Ended December 31, 2025 | |||||||||||
Total | % | ||||||||||
U.S. federal statutory tax rate | $ | 1,353 | 21.0 | % | |||||||
State income taxes, net of federal income tax effect(1) | 171 | 2.7 | |||||||||
Foreign tax effects | |||||||||||
Switzerland | |||||||||||
| Statutory income tax rate differential | (1,193) | (18.5) | |||||||||
| Net operating loss expiration | 2,185 | 33.9 | |||||||||
Unrealized currency translation gain | 1,873 | 29.1 | |||||||||
Changes in valuation allowances | (5,039) | (78.2) | |||||||||
Other | 199 | 3.1 | |||||||||
Other foreign jurisdictions | 2,008 | 31.2 | |||||||||
Effect of cross-border tax laws | |||||||||||
Global intangible low-taxed income | (2,283) | (35.4) | |||||||||
Other | 33 | 0.5 | |||||||||
Tax credits | |||||||||||
Research & development tax credits | (3,991) | (61.9) | |||||||||
Changes in valuation allowances | 5,937 | 92.1 | |||||||||
Non-taxable or Non-deductible Items | |||||||||||
Share-based compensation | 2,999 | 46.5 | |||||||||
Other | 937 | 14.5 | |||||||||
Changes to unrecognized tax benefits | 22 | 0.3 | |||||||||
Total tax provision and effective tax rate | $ | 5,211 | 80.9 | % | |||||||
(1) State taxes in Texas primarily make up this category. The largest state by apportionment percentage is Virginia.
For the years ended December 31, 2024 and 2023, the provision for income taxes differs from the amount computed by applying the federal statutory income tax rates to our income before the provision for income taxes as follows:
Percentage of Pretax Earnings | |||||||||||
| 2024 | 2023 | ||||||||||
| U.S. federal statutory tax rate | 21.0 | % | 21.0 | % | |||||||
State tax expense | 4.3 | 3.8 | |||||||||
Foreign rate differential | (4.0) | (3.1) | |||||||||
Nondeductible expenses | (1.0) | (0.7) | |||||||||
Foreign tax expense | 0.1 | (0.4) | |||||||||
Equity compensation | 3.7 | (2.4) | |||||||||
| Tax credits | 7.3 | 9.5 | |||||||||
Unrecognized tax benefits | (1.5) | (1.8) | |||||||||
Global intangible low-taxed income | (3.0) | — | |||||||||
Change in tax rate | 0.8 | (0.9) | |||||||||
Other | (0.5) | 0.2 | |||||||||
Return to provision | 3.3 | — | |||||||||
Deferred adjustments | (1.4) | (3.0) | |||||||||
Change in valuation allowance | (30.3) | (25.2) | |||||||||
Total | (1.2) | % | (3.0) | % | |||||||
The 2025 effective tax rate of 80.9% is detailed in the above table. The effective tax rate is driven by jurisdictional profitability mix; specifically, tax losses in the U.S. and Switzerland provided no tax benefit, while profits in other international jurisdictions remained subject to tax. In 2024, the effective tax rate of (1.2)% included $27.6 million of tax expense attributable to the change in the valuation allowances in the United States and Switzerland, partially offset by $6.7 million of favorable tax benefits for research credits. In 2023, the effective tax rate of (3.0)% included $27.3 million of tax expense attributable to the change in the valuation allowances in the United States and Switzerland, partially offset by $10.3 million of favorable tax benefits for research credits.
Deferred tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amount of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
As of December 31, 2025 and 2024, significant components of our deferred tax assets and liabilities were as follows (in thousands):
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating losses | $ | 114,153 | $ | 107,170 | |||||||
| Tax credits | 39,002 | 34,885 | |||||||||
| Deferred revenue | 310 | 521 | |||||||||
| Equity compensation | 5,024 | 3,994 | |||||||||
| Lease liabilities | 16,138 | 17,465 | |||||||||
| Accrued compensation | 5,864 | 3,225 | |||||||||
| Bad debt | 598 | 502 | |||||||||
| Other accrued expense | 663 | 318 | |||||||||
| Capitalized research and development costs | 36,186 | 45,820 | |||||||||
| Other | 3,855 | 4,033 | |||||||||
| Gross deferred tax assets | 221,793 | 217,933 | |||||||||
| Less: Valuation allowance | (191,198) | (187,969) | |||||||||
| Total deferred tax assets | 30,595 | 29,964 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Prepaid expenses | (11,518) | (13,298) | |||||||||
| Right-of-use assets | (7,809) | (8,406) | |||||||||
| Depreciation | (2,363) | (3,245) | |||||||||
| Intangible assets | (380) | (688) | |||||||||
| Other | (3,675) | (198) | |||||||||
| Total deferred tax liabilities | (25,745) | (25,835) | |||||||||
| Net deferred tax assets | $ | 4,850 | $ | 4,129 | |||||||
As of December 31, 2025 and 2024, we had $325.6 million and $287.5 million, respectively, of gross net operating loss (“NOL”) carryforwards for U.S. federal tax purposes. U.S. federal NOL carryforwards in the gross amount of $23.5 million and generated prior to 2018 will expire, if unused, in 2037. Under the Tax Cuts and Jobs Act of 2017 (the “TCJA”), as modified by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), federal NOL carryforwards generated in tax years beginning after December 31, 2017 may be carried forward indefinitely. As of December 31, 2025, we had $302.1 million of gross NOL carryforwards generated after 2017 for U.S. federal tax purposes, which may be used to offset up to 80% of our taxable income annually.
Section 382 of the Internal Revenue Code limits the utilization of NOL carryforwards when ownership changes occur, as defined by that section. A number of states have similar laws that limit utilization of state NOL carryforwards when ownership changes occur. We have performed an analysis of our Section 382 ownership changes and determined all U.S. federal and state NOL carryforwards are available for use as of December 31, 2025.
As of December 31, 2025 and 2024, we had $36.5 million and $32.5 million, respectively, of U.S. federal tax credit carryforwards which will expire, if unused, between 2031 and 2045.
As of December 31, 2025 and 2024, we had U.S. gross state NOL carryforwards of $325.6 million and $297.5 million, respectively. We had tax-effected state NOL carryforwards of $17.1 million and $17.8 million as of
December 31, 2025 and 2024, respectively. The rules regarding carryforwards vary from state to state, and the ability to utilize NOLs varies based on timing and amount. The majority of state NOL carryforwards generated prior to 2018 will expire, if unused, in 2037. Due to the TCJA, certain state NOL carryforwards generated after 2017 have an indefinite carryforward period.
As of December 31, 2025 and 2024, we had foreign gross NOL carryforwards of $231.6 million and $230.1 million, respectively, primarily attributable to our subsidiary in Switzerland. We had tax-effected foreign NOL carryforwards of $28.7 million and $29.0 million as of December 31, 2025 and 2024, respectively. In 2025, $3.0 million of tax-effected Swiss NOLs expired related to the 2018 tax year. An additional portion of those NOL carryforwards will expire each year, if unused, between 2026 and 2032.
As of December 31, 2025 and 2024 we had a total valuation allowance of $191.2 million and $188.0 million, respectively. The following table summarizes the activity related to our valuation allowances for the years ended December 31, 2025, 2024, and 2023 (in thousands):
Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Beginning balance | $ | 187,969 | $ | 161,966 | $ | 132,581 | |||||||||||
Charged to expense | (437) | 27,605 | 27,267 | ||||||||||||||
Foreign currency translation adjustments | 3,666 | (1,602) | 2,118 | ||||||||||||||
Deductions from reserve | — | — | — | ||||||||||||||
Ending balance | $ | 191,198 | $ | 187,969 | $ | 161,966 | |||||||||||
As of December 31, 2025, we continued to maintain a full valuation allowance against U.S. deferred tax assets based on our cumulative operating results as of December 31, 2025, three-year cumulative loss, and an assessment of our expected future results of operations. We have evaluated all evidence, both positive and negative, in assessing the likelihood of realizability, and we determined the negative evidence outweighed the positive evidence.
As of December 31, 2025, we have a valuation allowance of $22.6 million against foreign deferred tax assets at our subsidiary in Switzerland. Based on our cumulative operating results as of December 31, 2025 and an assessment of expected future results of operations, we determined it was not more likely than not we would be able to realize the deferred tax assets prior to expiration.
We plan to distribute previously undistributed earnings of our foreign subsidiaries back to the United States in future years. Upon repatriation of those earnings, if any, we may be subject to taxes, including withholding taxes, net of any applicable foreign tax credits. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable.
For the years ended December 31, 2025, 2024, and 2023, cash paid, net of refunds received, consisted of the following:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Federal | $ | — | $ | — | $ | — | |||||||||||
Aggregated state and local jurisdictions(1) | 162 | 115 | 154 | ||||||||||||||
| Disaggregated foreign jurisdictions: | |||||||||||||||||
| Australia | 829 | 298 | 664 | ||||||||||||||
| Canada | 389 | 84 | 447 | ||||||||||||||
| India | 524 | 766 | 212 | ||||||||||||||
| Italy | 684 | 359 | 586 | ||||||||||||||
Mexico | 31 | 204 | 162 | ||||||||||||||
Netherlands | 41 | 237 | 162 | ||||||||||||||
| Spain | 670 | 263 | 567 | ||||||||||||||
United Kingdom | 1,666 | 798 | 835 | ||||||||||||||
Other(1) | 124 | 210 | 210 | ||||||||||||||
Net cash paid for income taxes | 5,120 | 3,334 | 3,999 | ||||||||||||||
[1] No jurisdictions are individually above the threshold of 5% of total income taxes paid, net of refunds received, for the periods presented.
As of December 31, 2025 and 2024, we had unrecognized tax benefits of $8.8 million and $7.8 million, respectively, none of which would affect our effective tax rate if recognized due to the valuation allowance. The following table summarizes the activity related to our unrecognized tax benefit from December 31, 2022 to December 31, 2025 (in thousands):
Balance as of December 31, 2022 | $ | 4,488 | |||
| Additions for tax positions in current years | 1,740 | ||||
| Additions for tax positions in prior years | 256 | ||||
| Reductions due to lapse in statutes of limitations | — | ||||
| Settlements | — | ||||
Balance as of December 31, 2023 | 6,484 | ||||
| Additions for tax positions in current years | 1,374 | ||||
Reductions for tax positions in prior years | (18) | ||||
| Reductions due to lapse in statutes of limitations | — | ||||
| Settlements | — | ||||
Balance as of December 31, 2024 | 7,840 | ||||
| Additions for tax positions in current years | 1,001 | ||||
Additions for tax positions in prior years | 7 | ||||
| Reductions due to lapse in statutes of limitations | — | ||||
| Settlements | — | ||||
Balance as of December 31, 2025 | $ | 8,848 | |||
We recognize interest and penalties related to uncertain tax positions in income tax expense. Our uncertain tax positions primarily relate to U.S. federal research and development tax credits. During the years ended December 31, 2025, 2024, and 2023, we recognized nominal amounts in interest. The cumulative balances of interest and penalties as of December 31, 2025 and 2024 were immaterial.
We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. Due to NOL carryforwards, tax years 2016 through 2025 remain open to examination by the major taxing jurisdictions to which we are subject. There are no open examinations that would have a meaningful impact to our consolidated financial statements.
On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was enacted, which extends most expiring TCJA provisions and reforms certain international tax rules. The application of the OBBBA to the Company did not have a material impact on its financial statements during the year ended December 31, 2025.Free Sentinel
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 19, 2025 | |
| 2023 | Feb 15, 2024 | |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 17, 2022 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.