Company: APPN
Filing Date: 2025-05-08
Form Type: 10-Q
Source: 0001441683-25-000041
Chunk: 87

Company: APPIAN CORP
Filing Date: 2025-05-08
Form: 10-Q
Item: Item 8
Chunk 87
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 invest in the growth of our business, as well as by consultant utilization rates. Professional services gross margin is also impacted by the amount of services performed by subcontractors and partners as opposed to internal resources. For the full year 2025, we expect professional services gross margin to be consistent with 2024; however, the margins for individual quarters remain subject to fluctuation based on the factors discussed above. 

Operating Expenses

Operating expenses consist of sales and marketing, research and development, and general and administrative expenses. Personnel-related costs such as salaries, bonuses, commissions, payroll tax payments, and stock-based compensation expense are the most significant components of each of these expense categories. Other components of each category include professional fees for third-party services such as legal, software development resources, contractors, and cloud computing services. In addition, operating expenses include allocated overhead costs, which are primarily comprised of facility costs such as rent, employee medical benefits, employee relations expense, and certain information technology costs. 

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In general, our operating expenses are expected to continue to increase in absolute dollars as we invest resources in enhancing our product and growing our business, although such growth is expected to be at a more measured rate than prior years.

Sales and Marketing Expense

Sales and marketing expense primarily includes personnel costs, including salaries, bonuses, commissions, stock-based compensation, and other personnel costs related to sales teams. Additional major expenses in this category include travel and entertainment, marketing activities and promotional events, subcontracting fees, and allocated overhead costs. We are focused on increasing the efficiency of our sales force and marketing activities by enhancing account targeting, messaging, field sales operations, and sales training in order to accelerate the adoption of our platform. 

We expect sales and marketing headcount to marginally increase from current levels in 2025 due to expected growth in our principal markets and strategic growth areas. Furthermore, we expect sales and marketing expense to increase in absolute dollars as we continue to invest in acquiring new customers, further expand usage of our platform within our existing customer base, and broaden our efforts to build on our brand reputation and increase market awareness of our platform.

Research and Development Expense

Research and development expense consists primarily of personnel costs for our employees who develop and enhance our platform, including salaries, bonuses, stock-based compensation, and other personnel costs. Also included are non-personnel costs such as subcontracting, consulting, professional fees to third party development resources, certain information technology expenses, and allocated overhead costs. 

Our research and development efforts are focused on enhancing the capabilities, speed,