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Appian Announces Third Quarter 2022 Financial Results

Appian Corporation
Appian Corporation

Third quarter cloud subscription revenue increased 30% year-over-year to $60.6 million

MCLEAN, Va., Nov. 03, 2022 (GLOBE NEWSWIRE) -- Appian (Nasdaq: APPN) today announced financial results for the third quarter ended September 30, 2022.

“In Q3, total revenue exceeded guidance. On a constant currency basis, both cloud subscription revenue and total revenue grew more than 30% year-over-year. Adjusted EBITDA loss was higher due to pull forward hiring and a sharp drop in attrition. We have a plan to reduce losses to 10% of revenue by the second half of 2023,” said Matt Calkins, CEO & Founder.

Third Quarter 2022 Financial Highlights:

  • Revenue: Cloud subscription revenue was $60.6 million, up 30% compared to the third quarter of 2021. Total subscriptions revenue increased 29% year-over-year to $86.5 million. Professional services revenue was $31.4 million, an increase of 25% compared to the third quarter of 2021. Total revenue was $117.9 million, up 28% compared to the third quarter of 2021. Cloud subscription revenue retention rate was 115% as of September 30, 2022.

  • Operating loss and non-GAAP operating loss: GAAP operating loss was $(37.8) million, compared to $(22.9) million for the third quarter of 2021. Non-GAAP operating loss was $(24.6) million, compared to $(13.5) million for the third quarter of 2021.

  • Net loss and non-GAAP net loss: GAAP net loss was $(44.0) million, compared to $(25.4) million for the third quarter of 2021. GAAP net loss per share was $(0.61) for the third quarter of 2022, compared to $(0.36) for the third quarter of 2021. Non-GAAP net loss was $(30.9) million, compared to $(15.9) million for the third quarter of 2021. Non-GAAP net loss per share was $(0.43), compared to the $(0.22) net loss per share for the third quarter of 2021. GAAP and non-GAAP net loss for the third quarter of 2022 included $6.1 million, or $(0.08) per share, of foreign currency exchange losses. GAAP and non-GAAP net loss for the third quarter of 2021 included $2.3 million, or $(0.03) per share, of foreign currency exchange losses. We do not forecast foreign exchange rate movements.

  • Adjusted EBITDA: Adjusted EBITDA loss was $(22.9) million, compared to adjusted EBITDA loss of $(12.0) million for the third quarter of 2021.

  • Balance sheet and cash flows: As of September 30, 2022, Appian had total unencumbered cash and investments of $92.7 million. Net cash used in operating activities was $(43.7) million for the three months ended September 30, 2022 compared to $(25.1) million of net cash used in operating activities for the same period in 2021.

A reconciliation of GAAP to non-GAAP financial measures has been provided in the tables following the financial statements in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”

Recent Business Highlights:

Financial Outlook:

As of November 3, 2022, guidance for 2022 is as follows:

  • Fourth Quarter 2022 Guidance:

    • Cloud subscription revenue is expected to be between $63.5 million and $64.5 million, representing year-over-year growth of 24% to 26%.

    • Total revenue is expected to be between $121.5 million and $123.5 million, representing a year-over-year increase of 16% to 18%.

    • Adjusted EBITDA loss is expected to be between $(24.0) million and $(29.0) million.

    • Non-GAAP net loss per share is expected to be between $(0.36) and $(0.42), assuming weighted average common shares outstanding of 72.7 million.

  • Full Year 2022 Guidance:

    • Cloud subscription revenue is expected to be between $235.0 million and $236.0 million, representing year-over-year growth of 31% to 32%.

    • Total revenue is expected to be between $461.0 million and $466.0 million, representing a year-over-year increase of 25% to 26%.

    • Adjusted EBITDA loss is expected to be between $(75.0) million and $(80.0) million.

    • Non-GAAP net loss per share is expected to be between $(1.30) and $(1.36), assuming weighted average common shares outstanding of 72.5 million.

Conference Call Details:

Appian will host a conference call today, November 3, 2022, at 4:30 p.m. ET to discuss Appian's financial results for the third quarter ended September 30, 2022 and business outlook.

The live webcast of the conference call can be accessed on the Investor Relations page of Appian’s website at http://investors.appian.com. To access the call, please dial (800) 715-9871 in the U.S. or (646) 307-1963 internationally (Conference ID: 7718213). Following the call, an archived webcast will be available at the same location on the Investor Relations page. A telephone replay will be available for one week at (800) 770-2030 in the U.S. or (609) 800-9909 internationally with recording access code 7718213.

About Appian

Appian is the unified platform for change. We accelerate customers’ businesses by discovering, designing, and automating their most important processes. The Appian Low-Code Platform combines the key capabilities needed to get work done faster, Process Mining + Workflow + Automation, in a unified low-code platform. Appian is open, enterprise grade, and trusted by industry leaders. For more information, visit www.appian.com.

Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with GAAP, Appian provides investors with certain non-GAAP financial performance measures. Appian uses these non-GAAP financial performance measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Appian’s management believes these non-GAAP financial measures provide meaningful supplemental information regarding Appian’s performance by excluding certain expenses that may not be indicative of its recurring core business operating results. Appian believes both management and investors benefit from referring to these non-GAAP financial measures in assessing Appian’s performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to historical performance as well as comparisons to competitors’ operating results. Appian believes these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to measures used by management in its financial and operational decision-making and (2) they are used by Appian’s institutional investors and the analyst community to help them analyze the health of Appian’s business.

The non-GAAP financial performance measures include non-GAAP net loss, non-GAAP net loss per share, and non-GAAP operating loss. These non-GAAP financial performance measures exclude the effect of stock-based compensation expense and certain litigation-related expenses consisting of legal and other professional fees which are not indicative of our core operating performance and are not part of our normal course of business. While these items may be recurring in nature and should not be disregarded in evaluation of our earnings performance, it is useful to exclude such items when analyzing current results and trends compared to other periods as these items can vary significantly from period to period depending on specific underlying transactions or events that may occur. Therefore, while we may incur or recognize these types of expenses in the future, the company believes removing these items for purposes of calculating the non-GAAP financial measures provides investors with a more focused presentation of our ongoing operating performance.

Appian also discusses adjusted EBITDA, a non-GAAP financial performance measure it believes offers a useful view of the overall operation of its businesses. The company defines adjusted EBITDA as net loss before (1) Other expenses, net, (2) interest expense, (3) income tax expense (benefit), (4) depreciation and amortization, (5) stock-based compensation expense, and (6) litigation expenses. The most directly comparable GAAP financial measure to Adjusted EBITDA is net loss. Users should consider the limitations of using adjusted EBITDA, including the fact this measure does not provide a complete measure of our operating performance. Adjusted EBITDA is not intended to purport to be an alternate to net loss as a measure of operating performance or to cash flows from operating activities as a measure of liquidity.

The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as a substitute for, or superior to the financial information prepared and presented in accordance with GAAP, and Appian’s non-GAAP measures may be different from non-GAAP measures used by other companies. For more information on these non-GAAP financial measures, see the reconciliation of these non-GAAP financial measures to their nearest comparable GAAP measures at the end of this press release. Appian provides guidance ranges for non-GAAP net loss per share and adjusted EBITDA; however, we are not able to reconcile these amounts to their comparable GAAP financial measures without unreasonable efforts because certain information necessary to calculate such measures on a GAAP basis is unavailable, subject to high variability, dependent on future events outside of our control, and cannot be predicted. In addition, Appian believes such reconciliations could imply a degree of precision that might be confusing or misleading to investors. The actual effect of the reconciling items that Appian may exclude from these non-GAAP expense numbers, when determined, may be significant to the calculation of the comparable GAAP measures.

Forward-Looking Statements

This press release includes forward-looking statements. All statements contained in this press release other than statements of historical facts, including statements regarding Appian’s future financial and business performance for the fourth quarter and full year 2022 and 2023, future investment by Appian in its go-to-market initiatives, increased demand for the Appian platform, market opportunity and plans and objectives for future operations, including Appian’s ability to drive continued subscriptions revenue and total revenue growth, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “will,” "plan" and similar expressions are intended to identify forward-looking statements. Appian has based these forward-looking statements on its current expectations and projections about future events and financial trends that Appian believes may affect its financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks and uncertainties, including the risks and uncertainties associated with Appian’s ability to grow its business and manage its growth, Appian’s ability to sustain its revenue growth rate, continued market acceptance of Appian’s platform and adoption of low-code solutions to drive digital transformation, the fluctuation of Appian’s operating results due to the length and variability of its sales cycle, competition in the markets in which Appian operates, risks and uncertainties associated with the composition and concentration of Appian’s customer base and their demand for its platform and satisfaction with the services provided by Appian, the potential fluctuation of Appian’s future quarterly results of operations, Appian’s ability to shift its revenue towards subscriptions and away from professional services, Appian’s ability to operate in compliance with applicable laws and regulations, Appian’s strategic relationships with third parties and use of third-party licensed software and its platform’s compatibility with third-party applications, the timing of Appian’s recognition of subscriptions revenue which may delay the effect of near term changes in sales on its operating results, and the additional risks and uncertainties set forth in the “Risk Factors” section of Appian’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission on February 17, 2022 and other reports that Appian has filed with the Securities and Exchange Commission. Moreover, Appian operates in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for Appian’s management to predict all risks, nor can Appian assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements Appian may make. In light of these risks, uncertainties, and assumptions, Appian cannot guarantee future results, levels of activity, performance, achievements, or events and circumstances reflected in the forward-looking statements will occur. Appian is under no duty to update any of these forward-looking statements after the date of this press release to conform these statements to actual results or revised expectations, except as required by law.

Investor Contact
Srinivas Anantha, CFA
703-442-8844
investors@appian.com

Media Contact
Ben Farrell
703-442-1067
ben.farrell@appian.com

APPIAN CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and share data)

 

As of

 

September 30, 2022

 

December 31, 2021

 

(unaudited)

 

 

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

51,802

 

 

$

100,796

 

Short-term investments and marketable securities

 

40,885

 

 

 

55,179

 

Accounts receivable, net of allowance of $1,901 and $1,400, respectively

 

143,385

 

 

 

130,049

 

Deferred commissions, current

 

27,874

 

 

 

24,668

 

Prepaid expenses and other current assets

 

31,976

 

 

 

26,781

 

Restricted cash, current

 

2,053

 

 

 

791

 

Total current assets

 

297,975

 

 

 

338,264

 

Property and equipment, net of accumulated depreciation of $18,189 and $14,106, respectively

 

38,692

 

 

 

36,913

 

Long-term investments

 

 

 

 

12,044

 

Goodwill

 

24,045

 

 

 

27,795

 

Intangible assets, net of accumulated amortization of $2,131 and $1,260, respectively

 

5,139

 

 

 

7,144

 

Right-of-use assets for operating leases

 

31,841

 

 

 

27,897

 

Deferred commissions, net of current portion

 

51,526

 

 

 

49,017

 

Deferred tax assets

 

2,518

 

 

 

1,025

 

Restricted cash, net of current portion

 

 

 

 

2,373

 

Other assets

 

2,824

 

 

 

2,047

 

Total assets

$

454,560

 

 

$

504,519

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities

 

 

 

Accounts payable

$

5,082

 

 

$

5,766

 

Accrued expenses

 

12,710

 

 

 

15,483

 

Accrued compensation and related benefits

 

35,408

 

 

 

35,126

 

Deferred revenue, current

 

161,154

 

 

 

150,169

 

Operating lease liabilities, current

 

7,434

 

 

 

8,110

 

Other current liabilities

 

2,603

 

 

 

1,067

 

Total current liabilities

 

224,391

 

 

 

215,721

 

Operating lease liabilities, net of current portion

 

52,710

 

 

 

48,784

 

Deferred revenue, net of current portion

 

3,408

 

 

 

2,430

 

Deferred tax liabilities

 

153

 

 

 

209

 

Other non-current liabilities

 

956

 

 

 

3,458

 

Total liabilities

 

281,618

 

 

 

270,602

 

Stockholders’ equity

 

 

 

Class A common stock—par value $0.0001; 500,000,000 shares authorized and 41,043,099 shares issued and outstanding as of September 30, 2022; 500,000,000 shares authorized and 39,964,298 shares issued and outstanding as of December 31, 2021

 

4

 

 

 

4

 

Class B common stock—par value $0.0001; 100,000,000 shares authorized and 31,497,796 shares issued and outstanding as of September 30, 2022; 100,000,000 shares authorized and 31,497,796 shares issued and outstanding as of December 31, 2021

 

3

 

 

 

3

 

Additional paid-in capital

 

549,760

 

 

 

497,128

 

Accumulated other comprehensive loss

 

(2,790

)

 

 

(5,687

)

Accumulated deficit

 

(374,035

)

 

 

(257,531

)

Total stockholders’ equity

 

172,942

 

 

 

233,917

 

Total liabilities and stockholders’ equity

$

454,560

 

 

$

504,519

 

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

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenue

 

 

 

 

 

 

 

Subscriptions

$

86,520

 

 

$

67,240

 

 

$

246,908

 

 

$

187,952

 

Professional services

 

31,356

 

 

 

25,177

 

 

 

95,297

 

 

 

76,319

 

Total revenue

 

117,876

 

 

 

92,417

 

 

 

342,205

 

 

 

264,271

 

Cost of revenue

 

 

 

 

 

 

 

Subscriptions

 

9,313

 

 

 

7,092

 

 

 

26,065

 

 

 

19,806

 

Professional services

 

24,447

 

 

 

19,415

 

 

 

72,011

 

 

 

56,065

 

Total cost of revenue

 

33,760

 

 

 

26,507

 

 

 

98,076

 

 

 

75,871

 

Gross profit

 

84,116

 

 

 

65,910

 

 

 

244,129

 

 

 

188,400

 

Operating expenses

 

 

 

 

 

 

 

Sales and marketing

 

54,912

 

 

 

42,071

 

 

 

157,104

 

 

 

118,575

 

Research and development

 

37,623

 

 

 

26,510

 

 

 

101,401

 

 

 

71,062

 

General and administrative

 

29,357

 

 

 

20,226

 

 

 

90,014

 

 

 

56,726

 

Total operating expenses

 

121,892

 

 

 

88,807

 

 

 

348,519

 

 

 

246,363

 

Operating loss

 

(37,776

)

 

 

(22,897

)

 

 

(104,390

)

 

 

(57,963

)

Other non-operating expense

 

 

 

 

 

 

 

Other expense, net

 

5,876

 

 

 

2,329

 

 

 

12,815

 

 

 

4,141

 

Interest expense

 

89

 

 

 

72

 

 

 

222

 

 

 

233

 

Total other non-operating expense

 

5,965

 

 

 

2,401

 

 

 

13,037

 

 

 

4,374

 

Loss before income taxes

 

(43,741

)

 

 

(25,298

)

 

 

(117,427

)

 

 

(62,337

)

Income tax expense (benefit)

 

255

 

 

 

86

 

 

 

(924

)

 

 

459

 

Net loss

$

(43,996

)

 

$

(25,384

)

 

$

(116,503

)

 

$

(62,796

)

Net loss per share:

 

 

 

 

 

 

 

Basic and diluted

$

(0.61

)

 

$

(0.36

)

 

$

(1.61

)

 

$

(0.89

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic and diluted

 

72,503

 

 

 

71,119

 

 

 

72,372

 

 

 

70,936

 

APPIAN CORPORATION
STOCK-BASED COMPENSATION EXPENSE
(unaudited, in thousands)

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

Cost of revenue

 

 

 

 

 

 

 

Subscriptions

$

284

 

$

381

 

$

712

 

$

973

Professional services

 

1,401

 

 

777

 

 

3,788

 

 

2,283

Operating expenses

 

 

 

 

 

 

 

Sales and marketing

 

2,667

 

 

1,448

 

 

6,721

 

 

3,753

Research and development

 

3,454

 

 

1,263

 

 

8,831

 

 

3,347

General and administrative

 

3,530

 

 

1,331

 

 

7,375

 

 

7,336

Total stock-based compensation expense

$

11,336

 

$

5,200

 

$

27,427

 

$

17,692

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

 

Nine Months Ended September 30,

 

 

2022

 

 

 

2021

 

Cash flows from operating activities

 

 

 

Net loss

$

(116,503

)

 

$

(62,796

)

Adjustments to reconcile net loss to net cash used by operating activities

 

 

 

Stock-based compensation

 

27,427

 

 

 

17,692

 

Depreciation and amortization

 

5,332

 

 

 

4,071

 

Bad debt expense

 

561

 

 

 

61

 

Loss on disposal of property and equipment

 

 

 

 

78

 

Change in fair value of available-for-sale securities

 

 

 

 

(31

)

Deferred income taxes

 

(1,549

)

 

 

(522

)

Changes in assets and liabilities

 

 

 

Accounts receivable

 

(9,114

)

 

 

(10,005

)

Prepaid expenses and other assets

 

(6,723

)

 

 

2,734

 

Deferred commissions

 

(5,715

)

 

 

(11,570

)

Accounts payable and accrued expenses

 

(3,654

)

 

 

10,797

 

Accrued compensation and related benefits

 

1,634

 

 

 

5,782

 

Other current and non-current liabilities

 

(383

)

 

 

2,858

 

Deferred revenue

 

15,414

 

 

 

6,829

 

Operating lease liabilities

 

(685

)

 

 

(476

)

Net cash used by operating activities

 

(93,958

)

 

 

(34,498

)

Cash flows from investing activities

 

 

 

Purchases of investments

 

(31,214

)

 

 

 

Proceeds from investments

 

57,417

 

 

 

84,592

 

Payments for acquisitions, net of cash acquired

 

 

 

 

(30,729

)

Purchases of property and equipment

 

(5,861

)

 

 

(2,473

)

Net cash provided by investing activities

 

20,342

 

 

 

51,390

 

Cash flows from financing activities

 

 

 

Proceeds from exercise of common stock options

 

25,205

 

 

 

2,375

 

Net cash provided by financing activities

 

25,205

 

 

 

2,375

 

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash

 

(1,694

)

 

 

(1,367

)

Net (decrease) increase in cash, cash equivalents, and restricted cash

 

(50,105

)

 

 

17,900

 

Cash, cash equivalents, and restricted cash at beginning of period

 

103,960

 

 

 

112,462

 

Cash, cash equivalents, and restricted cash at end of period

$

53,855

 

 

$

130,362

 

Supplemental disclosure of cash flow information:

 

 

 

Cash paid for interest

$

243

 

 

$

240

 

Cash paid for income taxes

$

749

 

 

$

1,196

 

Supplemental disclosure of non-cash financing information:

 

 

 

Accrued capital expenditures

$

317

 

 

$

 

APPIAN CORPORATION
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES
(unaudited, in thousands, except per share data)

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Reconciliation of non-GAAP operating loss:

 

 

 

 

 

 

 

GAAP operating loss

$

(37,776

)

 

$

(22,897

)

 

$

(104,390

)

 

$

(57,963

)

Add back:

 

 

 

 

 

 

 

Stock-based compensation expense

 

11,336

 

 

 

5,200

 

 

 

27,427

 

 

 

17,692

 

Litigation expenses(1)

 

1,810

 

 

 

4,230

 

 

 

20,432

 

 

 

8,270

 

Non-GAAP operating loss

$

(24,630

)

 

$

(13,467

)

 

$

(56,531

)

 

$

(32,001

)

 

 

 

 

 

 

 

 

Reconciliation of non-GAAP net loss:

 

 

 

 

 

 

 

GAAP net loss

$

(43,996

)

 

$

(25,384

)

 

$

(116,503

)

 

$

(62,796

)

Add back:

 

 

 

 

 

 

 

Stock-based compensation expense

 

11,336

 

 

 

5,200

 

 

 

27,427

 

 

 

17,692

 

Litigation expenses(1)

 

1,810

 

 

 

4,230

 

 

 

20,432

 

 

 

8,270

 

Loss on disposal of property and equipment

 

 

 

 

78

 

 

 

 

 

 

78

 

Non-GAAP net loss

$

(30,850

)

 

$

(15,876

)

 

$

(68,644

)

 

$

(36,756

)

 

 

 

 

 

 

 

 

Non-GAAP earnings per share:

 

 

 

 

 

 

 

Non-GAAP net loss

$

(30,850

)

 

$

(15,876

)

 

$

(68,644

)

 

$

(36,756

)

Weighted average shares used to compute net loss per share, basic and diluted

 

72,503

 

 

 

71,119

 

 

 

72,372

 

 

 

70,936

 

Non-GAAP net loss per share, basic and diluted

$

(0.43

)

 

$

(0.22

)

 

$

(0.95

)

 

$

(0.52

)

 

 

 

 

 

 

 

 

Reconciliation of non-GAAP net loss per share, basic and diluted:

 

 

 

 

 

 

 

GAAP net loss per share, basic and diluted

$

(0.61

)

 

$

(0.36

)

 

$

(1.61

)

 

$

(0.89

)

Add back:

 

 

 

 

 

 

 

Non-GAAP adjustments to net loss per share

 

0.18

 

 

 

0.14

 

 

 

0.66

 

 

 

0.37

 

Non-GAAP net loss per share, basic and diluted

$

(0.43

)

 

$

(0.22

)

 

$

(0.95

)

 

$

(0.52

)

 

 

 

 

 

 

 

 

Reconciliation of adjusted EBITDA:

 

 

 

 

 

 

 

GAAP net loss

$

(43,996

)

 

$

(25,384

)

 

$

(116,503

)

 

$

(62,796

)

Other expense, net

 

5,876

 

 

 

2,329

 

 

 

12,815

 

 

 

4,141

 

Interest expense

 

89

 

 

 

72

 

 

 

222

 

 

 

233

 

Income tax expense (benefit)

 

255

 

 

 

86

 

 

 

(924

)

 

 

459

 

Depreciation and amortization

 

1,759

 

 

 

1,510

 

 

 

5,332

 

 

 

4,071

 

Stock-based compensation expense

 

11,336

 

 

 

5,200

 

 

 

27,427

 

 

 

17,692

 

Litigation expenses(1)

 

1,810

 

 

 

4,230

 

 

 

20,432

 

 

 

8,270

 

Adjusted EBITDA

$

(22,871

)

 

$

(11,957

)

 

$

(51,199

)

 

$

(27,930

)

(1) Consists of professional fees and other costs incurred in connection with two separate lawsuits, one involving an effort to enforce our intellectual property and the second related to reciprocal false advertising and related claims with a competitor.