Q4 2020 Appian Corp Earnings Call
Greetings and welcome to up your fourth quarter and full year, 'twenty and 'twenty earnings Conference call.
All participants are in a listen only mode. A question and answer session will follow the formal presentation.
And it's require operator assistance during the conference. Please press Star Zero on your telephone keypad. Please note. This conference is being recorded I would now like to turn the conference over to your host Mr. Scott Walker Director of Investor Relations you may begin.
Thank you operator, good afternoon, and thank you for joining us today to review Appian <unk> fourth quarter, and full year 2000, Twenty's and financial results.
To me on the call today are Mark Hawkins, Chairman and Chief Executive Officer, and Mark Lynch Chief Financial Officer. After prepared remarks, we will open the call to a question and answer session. During this call. We may make statements related to our business that are forward looking statements under federal Securities laws and are made pursuant to the safe Harbor provisions of the per.
Private Securities Litigation Reform Act of 1995, including statements related to our financial results trends and guidance for the first quarter and full year 2021, and the impact of COVID-19 on our business and on the global economy, the benefits of our platform industry and market trends, our go to market and growth strategy.
Our market opportunity and ability to expand our leadership position and our ability to maintain and upsell existing customers and our ability to acquire new customers. The words anticipate continue estimate expect intend will and similar expressions are intended to identify forward looking statements are similar.
<unk> and future expectations.
These statements reflect our views only as of today and should not be reflected upon as representing our views as of any subsequent date. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations for a discussion of the material risks and other important factors that could affect our actual results.
Please refer to those contained in our 2020 10-K filing and our other periodic filings with the SEC. These documents and the earnings call presentation are available and the investors section of our website at www Dot Appian and Dot com. Additionally, non-GAAP financial measures will be discussed on this conference call.
Please refer to the tables and our earnings release and the Investor Relations portion of our website for a reconciliation of these measures to their most directly comparable GAAP financial measures with that I'd like to turn the call over to our CEO, Matt Hawkins Matt.
Thanks, Scott and thank you all for joining us today.
And the fourth quarter of 2020 happens cloud subscription revenue grew 40% year over year to $36 $9 million and our adjusted EBITDA was a loss of $3 $7 million subscriptions revenue grew by 33 per cent to $56 $1 million total revenue grew 19%.
Year over year to $81.6 million, a cloud subscription revenue retention rate was 119% as of December 31 2020.
For the full year Appian cloud subscription revenue grew 36% year over year to $129 $2 million and our adjusted EBITDA was a loss of $16.8 million.
Subscriptions revenue grew 31 per cent year over year to $198 $7 million total revenue grew 17% year over year to 304 $6 million.
Both our fourth quarter and full year, 'twenty and 'twenty results exceeded our guidance.
Our gross renewal rate.
It was 99% as of the end of December higher than 96% at the end of the previous year.
We also set our best Mark for gross profit margin at 74 per cent and Q4.
For the full year 2020, our gross profit margin was 72 per cent exceeding the previous year's margin by 639 basis points.
The profile of low code has risen substantially over the past year for reasons, we've discussed on previous calls.
Anecdotally I hear many more people talking about low code and when I say the term I find people are more likely to recognize it.
Popular publications and media, including the Wall Street Journal, Forbes and can see N. B C have written recently about low code and some <unk>.
Smaller news outlets are calling 'twenty 'twenty, one the year of low code.
Forrester predicts that 75 per cent of development shops will use low code platforms by the end of 2021.
Appian was the first company to go public and has the low code for our first annual report from 2017 and I've got it right here has a full page picture of an ascending rocket ship on the inside cover it and not subtle at all the headline says Appian launches the era of low code.
Now four years later, how low code really has taken off.
In addition to being first chronologically were a leader and over 10 and analysts quadrants, including gardeners enterprise low code platforms, and foresters digital process automation and buyers ranked us as the number one choice for enterprise low code. According to Gartner peer insights, notably where also the clear top selection for company.
That generate more than $10 billion and revenue.
Appian is a preferred choice for both analysts and buyers for a few reasons first.
Our platform is fast.
Happy and customers build applications by drawing a workflow, which is faster and more intuitive and coding.
We also accelerated customers' deployment.
By allowing them to keep their data anywhere and the enterprise and connect to that data through low code techniques.
Reducing sharply the difficulty of creating new applications.
Playing out B and accelerates the company's ability to ship new products meet regulatory deadlines and respond to their customers' speed is a common reason for us to win new logos and expand within our customer base.
For example.
We had a multimillion dollar expansion in Q4 with a top 10 global pharmaceutical company. It became a new appian customer and early 'twenty and 'twenty and manages the design of clinical trial protocols with our platform.
And Q4, the company purchased additional appian licenses to deploy multiple applications, including our clinical trials portal to improve communication with participate and health care professionals and I do know.
And visibility about the studies we won this follow on deal because of the speed we demonstrated.
When we deployed the customer's original application and just eight weeks.
With our eight week Appian guarantee.
Our speed also want us to deal with a fortune 500 insurance company and making them a new appian customer in Q4, the insurer will use our low code automation platform to manage its highly regulated online content and document creation processes.
And for Appian and lack the digital tool to coordinate work across hundreds of users before publishing content publicly.
We won this deal because that means low code enabled the insurer to quickly build two applications within our strict compliance deadline.
Each app will be launched within eight weeks.
Our second advantage is complete and automation.
And 2020, we acquired a leading robotic process automation company to make us a one stop shop for automation.
Our platform gives organizations everything they need to orchestrate their people.
Listing systems data bots, and AI and a single workflow.
Police automation allows organizations to make the most of their resources.
For example, a fortune 500 consumer products company has been an appian customer since 2016 and uses our low code automation platform to manage its end to end product lifecycle.
In Q4, it purchased more licenses to automate approvals and launch products to market faster.
Before the company lacked a centralized view of its product information because its data was siloed across many systems now happy and will orchestrate. The approval process is happy and R. P. A bot search and aggregate data. So employees can holistically review and approve products within a single tool.
We won this deal because our platform is the fastest way to unify the companys people data and technologies into a single workflow.
The third and final advantage is that our platform is enterprise ready the largest organizations trust Appian to run their core business applications with World class performance governance, Dev ops and security.
Our platform is open.
Allowing organizations to integrate their preferred best of breed technologies and.
In fact, we provide a simple no code integration designer or design or allows customers to connect with almost any modern external system, our commitment to openness and our enterprise grade cloud allows customers to scale their companies with our platform as they add new products grow their customer base and hire more employees.
For example, a fortune 500 electronics manufacturer and became a new Appian customer in Q4 and selected our low code automation platform to unify over a dozen disparate systems across its enterprise.
All employees and use appian to manage tens of thousands of approvals annually ranging from I T service requests to travel reimbursements. We won this deal because the customer will be able to deploy to mobile enabled applications mobile enabled application and just eight weeks under the Appian guarantee.
And this customer by the way, it's not alone and their demand for mobile Appian customers increased their mobile usage six fold in 2020.
Compared to 2019.
Appian gained 167 net new subscription customers in 2020, adding 50% more than we did in 2019.
These customers are high quality global organizations, and a variety of industries, including a top jewelry maker of top telecommunications company and a top publisher.
Existing customers also expanded their use of our platform in 2020 for example.
And 1% of our seven figure out of our customers from 2019 purchased more software in 2020.
81 per cent.
These customers include a U S Federal Health agency.
Elected Appian to automate its contract writing process and early 'twenty 'twenty.
This quarter it purchased our acquisition requirements management solution to completely replace gets acquisition system and modernize its end and procurement process with Appian.
And up five global automotive supplier also expanded in Q4, the German company has been an appian customer since 2018 and uses our low code automation platform to manage its global product design and process. This quarter. The company purchased over $1 million of new licenses to automate more than a dozen new manufacturing.
And processes.
Now factory workers will use appian to oversee the design and building of prototypes, reducing its designed the order time from weeks to price.
And I'd like to spot to spot like two areas that are performing particularly well first our EMEA region had a strong year doubling its new logo contribution in Q4, 'twenty and 'twenty compared to the prior year period. It also won twice as many seven figure deals in 'twenty and 'twenty as it did in 2019.
And one noteworthy new logo example, and Q4 as a top five bank in the U K.
It purchased over $1 million of Appian licenses to replace it and flexible and overly manual internal audit solution.
Our low code automation platform with fully digitize, the audit lifecycle and provide a comprehensive view of the bank's risk profile.
The bank selected Appian after and existing banking customer reported that gets save over $6 million annually and audit costs with their appian applications.
Another highlight in 'twenty and 'twenty with our partner ecosystem, which was again a leading growth driver.
Partners delivered more than 70 per cent of our new logos for the year. It's worth mentioning the partners alone contributed more new logos and 'twenty and 'twenty that our entire company and 2019.
For example, a partner helped us win a million dollar new logo deal with a leading European insurance company in Q4, the insurer will use our platform to fully manage its life insurance policies across Asia, including writing servicing policy termination Appian will replace three legacy applications and integrate with the insurer's existing customer management and.
And risk profiling systems.
We won this deal because our partner demonstrated the speed and power of our platform with a complex custom demo built and just days.
Partners also win new customers with solutions, they prebuilt oddly happier and platform.
For example, a fortune 500 global medical devices manufacturer became a new appian customer and Q4 by purchasing Pwc's interactions hub solution.
This partner solution manages the highly regulated and to end process and engaging health care professionals as speakers and spokespeople for medical device and pharmaceutical and events.
Happy and we'll manage tens of thousands of interactions annually.
Pwc is unique Appian solution won this deal over competitors.
Low code.
It's not a complicated idea.
Unlike other terms like digital transformation, it's meaning is not ambiguous. It means exactly what it says it's a new way to build applications with less code, resulting and productivity gains of 10 X or more.
Some people think it is just for citizen developers, but that's incorrect I T developers need tenex productivity gains just as much as citizen developers do in fact.
Because their applications are the most important and the enterprise.
Low code is frequently and increasingly used for mission critical applications.
Four years ago happens IPO launched the era of low code.
For three years, we advanced and what I would call a slow revolution.
Low code grew steadily and felt inevitable.
Driven by developer shortages and the booming demand for new applications, driven by frustration over enterprise fragmentation and the rising cost of technical depth.
But then our slow revolution was preempted by a faster evolution the.
And the disruptions of 'twenty and 'twenty focused every organization in the world on the necessity of agile change.
The events of last year will shape, the low code market profoundly.
Happy and now has an opportunity to be a leader and a leading market.
Now I'll turn the call over to Mark for a deeper discussion of our financials Mark.
Matt.
I'll review the financial highlights of the quarter and full year, and then will provide details on our Q1 and full year 2021 guidance.
Cloud subscription revenue for the fourth quarter was $336 $9 million and increase of 40% year over year and above the top end of our guidance. Our total subscriptions revenue was $56 1 million and increase of 33% year over year subscriptions revenue was 69% of total revenue in the fourth quarter and an increase.
From 61% and the prior year period.
Professional services revenue was $25 $5 million down, 4% from $26 5 million and in the prior year period and down from $26 5 million and the prior quarter.
Of our ecosystem.
[music].
Okay.
Sorry about that professional services revenue was $25 5 million down 4% from $26 5 million and the prior year period and down from $26 $5 million and the prior quarter.
Partners continue to be a larger part of our ecosystem and are increasingly helping us sell more software all of our services engagements, both cloud and on Prem and continue to be performed remotely.
Total revenue and the fourth quarter was $81 6 million and increase of 19% year over year and also above our guidance range.
Our cloud subscription revenue retention rate as of December 31 was 119% within the 110 to 120 per cent range that we target on a quarterly basis, we remain pleased with our customers' expanded use of our platform.
Our international operations contributed 33% of total revenue for Q4, compared with 34% and the prior year period demonstrated the balance of our business both domestically and internationally.
Now I'll turn to our profitability metrics for the fourth quarter. Our non-GAAP gross profit margin was 74% and increase of 7% compared to the same period in 2019 subscriptions non-GAAP gross profit margin was 90% in the fourth quarter compared to 89% and the same quarter of 2019.
Non-GAAP professional services gross profit margin was 38% and the fourth quarter compared to 34% and the same period of 2019. The services gross profit margin was positively impacted by a reduction and services performed by subcontractors and decreased travel and entertainment costs.
I continue to expect our non-GAAP professional services margins to be closer to 30%.
Total non-GAAP operating expenses were $65 $6 million and increase of 17% from 56 million in the prior year period.
Impacts from COVID-19, and naturally decrease certain expenditures like travel entertainment and office related expenses adjusted EBITDA loss was $3 7 million and the fourth quarter and of our guidance and compare it to and adjusted EBITDA loss of $8 2 million in the year ago period.
In the fourth quarter, we had approximately $3 $9 million of foreign exchange gains compared to $2 $3 million and Q4 2019.
We don't estimate movements in FX rates and therefore, they arent considered in our guidance non-GAAP net loss was $1 8 million for the fourth quarter of 'twenty and 'twenty or a loss of three cents per basic and diluted share compared to and I get net loss of $7 $4 million.
Were a loss of <unk> 11 per basic and diluted share for the fourth quarter of 2019. This is based on $70 4 million basic and diluted shares outstanding for the fourth quarter of 2020, and $67 3 million basic and diluted shares outstanding for the fourth quarter of 2019.
Turning to our balance sheet as of December 31, 2020, our cash and cash equivalents and investments were $258 $4 million compared with $251 1 million as of September 32020 for.
For the fourth quarter cash provided by operations was $5 $8 million.
Total deferred revenue was $120 1 million as of December 31, 2020 with respect to our billing terms. The majority of our customers are invoiced on an annual upfront basis, but we also have large customers that are billed quarterly or monthly due to the variability of our billing terms changes and our deferred revenue are generally not indicative of the momentum.
And our business.
Now I'll recap our full year 2020 results cloud subscription revenue was $129 2 million representing growth of 36% year over year. Our total subscriptions revenue for the year was $198 7 million and increase of 31% professional services revenue for 'twenty 2020 was $105 $9 million.
Down 3% compared to 2019 total revenue for 'twenty, and 'twenty was $304 $6 million up 17% compared to 2019.
Adjusted EBITDA loss was $16 8.002 million 20, compared to $29 3.002 million 19.
Non-GAAP net loss was $18 2.002 million 20, or a loss of 26 cents per basic and diluted share compared to non-GAAP net loss of $34 $1 million or a loss of 52 cents per basic and diluted share for 2019. This is based on $69 1 million and $65 5 million basic and diluted.
Shares outstanding for 2020, and 2019, respectively.
For the year ended December 31, 2020, cash use and operations with $7 $6 million for the year ended December 31, and 2019 cash used in operations was $8 $9 million, which also included the reimbursement of $17 million and tenant improvement allowances, excluding that our cashiers and operations.
<unk> was $25 $9 million.
Now I'll turn to guidance.
For the first quarter of 2021 cloud subscription revenue is expected to be and the range of $37 $7 million and $38 $2 million representing year over year growth of between 33, and 35% total revenue is expected to be and the range of $81 7 million and $82 $7 million.
I wanted to remind everyone that Q1 2020 is a difficult comparison for example, we closed a three year timeframe contract during the quarter, where the customer did not want the contract to auto renew on an annual basis. As a result, we recognized $2 $8 million and revenue upfront versus recognizing approximately $1 million.
Each year upon auto renewal.
Adjusted EBITDA loss is expected to be and the range of $9 million and $8 million non-GAAP net loss per share is expected to be between 15 and 13 cents.
And this assumes $70 8 million basic and diluted common shares outstanding.
For the full year 2021 cloud subscription revenue is expected to be and the range of $167 5 million and $169 $5 million representing year over year growth of between 30, and 31% total revenue is expected to be and the range of $353 million and $355 million adjusted EBITDA loss.
<unk> is expected to be and the range of 38 and $36 million non-GAAP net loss per share is expected to be between 64 and 60 sets.
This assumes 71 million basic and diluted common shares outstanding.
Our revenue guidance reflects expected ongoing headwinds to our professional services revenue from the impacts of Covid.
And from the continued growth and our partner ecosystem, we are increasingly implementing our software.
In addition, our adjusted EBITDA guidance reflects increased investments and sales and marketing and R&D throughout the year, along with expected Genie expenditures normalizing in the back half of the year.
For years, we've been saying that Appian has a 30% grower by which we mean that we expect our software revenue to grow at least 30% each year, we met that growth goal in 2020, and I'd like to reiterate that expectation for 2021.
With that let's turn it over to questions.
At this time, we'll be conducting a question and answer session.
I would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is and the question queue. You mean per start should you electro move your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys, one moment. Please as we poll for questions.
Our first question comes from the line of Sanjay <unk> with Morgan Stanley. Please proceed with your question.
And congrats on another year of 30%.
Description growth and mix.
Cloud has been doing really well.
And for several quarters now so congrats to the team that I have.
Two questions and they kind of longer term in nature, which is kind of what does the growth equation for Appian and look like over the next 2345 years I think you're up to by my Count 650, plus customers and so should we think about the growth equation is appian getting too.
And customers 1500 customers spending 5 million bucks or a million bucks over time or do you think it's going to be more on this longer tail because of sort of like anymore and your remarks cleaned out so to speak.
And more pervasive and so we're talking about I don't know 5000 or 10000 customers just wanted to get like a just get your latest view.
On the P times Q equation, if you will.
Yeah, No that's a great thing to ask about.
I think that we're capable of capturing more of a tail than we have so far and I want to emphasize that that is not our primary target, even though it's available to us and we're going after it and I do not want to trade the largest organizations the highest spending organizations for the tail, we won't do that we're going.
Emphasize our big deals, where and it continue to emphasize important high and mission critical deployments not lose sight of that we know that that's our edge and this market.
And being the best at that gives us a carryover advantage in competing for less essential less mission critical applications and perhaps for a less feature conscious consumers.
Becoming the standard that's adopted by the high and cases and customers. We we establish our capability to be how to handle all of the other cases. So we are absolutely not moving away from the at the high end and the customer who is willing to spend a half a million a million dollars per year on this.
Technology, but I believe that being strong with those customers will allow us to capture also a portion of the tail. So I think we're going to expand and both directions, but we won't lose track of the fact that our priority is the other large mission critical application.
That's great to hear and and the sort of second question along that dimension is high.
I think that goes back to the IPO back in 2017 your services mix was roughly half of the business and today I think and Q4, its and the low Thirty's I think it was 31% by my math.
And the question is is that is this 31% going into the mid twenties, 20%, which would put you guys at a at a pretty standard software versus services mix or is should we then expect to trend back up because of Covid. My suspicion is that it probably is sustainable because you've added.
So many new customers.
This year, so it didn't seem like services what day.
A headwind or necessarily impacted by COVID-19, but just wanted to double check on that that line of thinking.
Yeah, well I think your suspicion is correct that services will continue to shrink as a percentage of Appian and revenue and yeah, It's gone down and the Twenty's and and and I think that every year, it's going to be smaller than the year, where it was before and I'm not saying, it's going be twice this year I'm, saying that that's the direction it's going in.
The trend was probably exacerbated a little bit by Covid and by the fact that it was more difficult to deliver a service than it was to deliver a product in 2020, but the trend holds the trend will continue with what we expect and that's what we're managing the business toward because we want to elevate partners and <unk>.
Average their influence and major customers.
Got it and maybe if I could just sneak one in for Mark Mark as it relates to the guidance I know, we've been talking about a couple of different things.
Moving to one year auto renewals and the and.
And so it was $6 six headwind that potentially turns into a tailwind in 2021.
To what extent the guidance sort of reflects those impacts from like a higher a higher renewal base on the one year automobiles and then the impact on the headwind in 2020 and it turns into a tailwind because of the 606 accounting and was that sort of contemplated or embedded in your and your 2021 guidance framework.
So I think there there is not really the tailwind that you guys are talking about because those multiyear deals that haven't gone into the auto renewal and new auto renewal some of them are coming up for renewal and 2021, and some are coming in 'twenty and 'twenty. Two so it's not a material amount we've done a good job of migrating everybody over and so there's not really that a tailwind I would say thats implicit and.
And I think what's implicit in the guide which is important is that we expect right now that services will actually decline year over year and that's what's implied in the guide I think personally and Matt personally believes and that the services will actually grow but what we've got and implied right now and the guide is a reduction and services to be candidly, we don't know how long COVID-19 is going to last.
Our partners continue to bring and 70% of logos and Theyre going to get most of the services. So we're just trying to be.
As we have been since we've been public for four years now when we give guidance, we generally try to be conservative in particular, we generally try to be conservative on that line item because we don't have the visibility that we havent software.
Understood. Thank you Mark appreciate it appreciate the response.
Our next question comes from the line of Moshe <unk> with Barclays. Please proceed with your question.
Hey, guys. Thanks for taking my question and I look.
And my congrats.
And really strong and for the year.
So my question was around the expansion swipe slipped and Matthew.
Matthew mentioned that some of your even larger customers and a seven figure <unk> customers continue to expand and I was just wondering if you can give us some more color there is too and you guys.
Does have a pricing model around.
Either number of apps on number of users sway. So wondering if there is a sort of like.
A trend that you can see based on these expansions, where maybe it's the number of fabs.
And how you're driving these expansions or you also see customers going from wall to wall with and lines of business with the number of users. So any color on those two dimensions and.
Driving the expansion that would be very good.
And the non my question to you Mark.
Alright, we are pleased with the expansion I'm, particularly pleased with the expansion as it pertains to our customers who are already spending a lot with us they're seeing the value and they want more and the fact that 81% and the seven figure <unk> customers from last year and wanted to buy more and 2020 represents not only a great uptick, but a great turn.
And around time that they saw the value so quickly and they wanted to expand and I'm, particularly pleased with that.
The expansion happens along multiple dimensions, you mentioned that we price. According to application and also according to user both of those are primary routes for expansion generally our customer decides which of the two pricing vectors. They prefer to be on and then they stay with that vector and I would not say that one of the vectors.
He is a he is more conducive to growth than the other instead I would say that growth occurs no matter, which vector the customer chooses and.
Accordingly, they pay more for either more applications or more users depending on whichever way. They chose we're going to emphasize expansion even more in 2020 and I believe that.
There's a lot of potential there not just at our largest accounts, but not all of them.
Great.
My follow up question is for Mark and just along that dimension and weight. So we saw the pickup in cloud subscription retention rate this quarter and the higher end of the range you have been trained and you have been communicating where just also I mean and this is another quarter of 40% about subs growth and I think last time around you you were sort of like annuity too.
Some linearity and hoping it would obviously given the performance this quarter and I'm. Assuming this is this is becoming a more fundamental trend rather than something a one off. So can you help me unpack as to what the drivers. There are obviously the land and expand motion is working but just trying to figure out as to what is driving this 40.
And for some growth and how sustainable that is thanks, guys for taking my questions.
Yeah, So I'll take that.
You know as we said and in the prepared remarks, where we expect ourselves we are a 30% plus growth. That's how we viewed ourselves from the time of the IPO and we continue to see ourselves going forward.
Having said that there was no linearity.
Phenomenon and this quarter and it was pretty pretty.
And is pretty typical back end loaded quarter. So it was a lot of the momentum of the business.
A lot of it is expansion, we've got and expand.
50% more new logos this year right. So that's a big piece of it and the other big piece of it as we expansion and and Matt mentioned that <unk> 81 per cent of all of our and a seven figure <unk> customers bought more software and 2020, and obviously that goes right to that and our calculation. So we see both expansion and net new logos working to our benefit.
And I think going forward in 'twenty and 'twenty one.
Like as Matt was saying and low code the thing now and we're getting more and more inbound.
Interest and in a low code platform. So so we're hoping to take advantage of that momentum.
Great. Thanks for taking my questions.
Our next question comes from the line of book answering with William Blair. Please proceed with your question.
Hey, gents, thanks for taking my question.
I'll Echo my congrats nice job there.
And I wanted to touch a little bit on the customers that have adopted appian over the past year.
If you think about this cohort relative to past pre COVID-19 cohorts and and maybe add partners to the to the second vector I guess has there been any change and who's buying or use cases difference are landing ACB difference our deployment size different I guess have you seen a pattern with some of the new use cases, and new cohorts partially cause.
Locals and become more common maybe because of partners or has it been pretty consistent from say a year and a half two years ago pre COVID-19.
Alright, Yeah, let me talk about that.
First of all I want to say that they're largely the same they haven't changed all that much a few dozen of them bought into appian because they wanted our work force safety solution, but that's a that's a small portion of our sales.
And the dollars per customer is steady if youre talking about licenses and it decreases only on the services side. So if youre looking for any changes I would say.
It's that our services component per customer has decreased but our license has stayed equal almost exactly equal and our and the depth of their usage and the fact that they prefer platform and they come to us as a platform buyer that has remained constant.
Gotcha Gotcha Gotcha.
So I wanted to take that and marry that with the comment you made.
And said you know the large customers last year, which expanded came and 80% plus came in and bought again in 'twenty and 'twenty and Youre excited about the value they realize and how quickly they were able to realize that value.
And if we talked to and the core thesis here, which is it's a platform you get and you show the value off the low code environment.
They see how quick we can build and application and a shorter amount of time fewer.
Human resource and so to speak.
Shouldn't that flywheel continue to accelerate now it'll it'll it'll slow down at some point when you penetrate and organization, but we've got a ways to go for almost any customer of yours shouldn't that continue and maybe even accelerate as they begin to realize this is the best way to build new applications because they've got to feed the project list. They have from all the businesses to develop this so it should bat.
And I'm, not saying, you're guiding to it but but logically should that play out.
Okay, Let me address that and both are micro and macro dimensions on a micro dimension I think that yes. It should we should see acceleration as we prove the concept and we sell more we are not saturating our customers. There is more room to sell nearly everywhere and the more we prove our concept and more benefit they get from each.
Mental purchase and I believe the conclusion would be yes. This is a flywheel or we should expect to see further acceleration and some micro answer the macro answer is we're a 30% grower and I don't want to indicate and I expect anything other than that.
Fair enough fair enough and I'm going to squeeze one more quick one and here I noticed you launched a 14 day free trial version.
Which is not something typically and at least we are.
Associate with Appian and go to market given the enterprise focus can you just walk us through the strategic rationale behind this and kind of what are the objectives for that free trial.
Okay.
And there's good reasons why we would have a 14 day trial.
First of all even for enterprise software most of the sale is done before the customer contacts the vendor and so putting a good foot forward in that hidden part of the sale is essential seconds.
And secondly, happy and shows well I.
I would prefer the experience of Appian Spurt force 14 days to the experience of our competitors first 14 days. So I think that it does us good to allow the customer to explore and understand the difference.
And then Furthermore, with our product you can actually do something in 2014 days.
And and and so we would like to have them and experience the accomplishment and that's possible.
So I think for all these reasons, it's good for us to be out there selling and this matter and by the way it may appeal to a different kind of a buyer it up.
Hi.
I think it was a really good step and we've been working on this for a while and we are.
We've experienced some good pipeline development as a result of our free trial.
So yeah, I think it suits, our share situation pretty well, even though you might not have expected it from an enterprise software vendor.
Great I appreciate the color and the Gander gents. Thank you.
Our next question comes from the line of Chris Merwin with Goldman Sachs. Please share with your question.
Alright, thanks, very much for taking my question.
Wanted to ask about some of your solution based apps can you talk a bit about how does it been doing lately I think I saw that you can now connect and claims solution for insurance companies and so yeah, I imagine that may or may not actually compete with some of the vertical software vendors and maybe just at a higher level. If you could talk about are you trying to come in with net new solutions for.
Companies as opposed to competing with any of these dedicated vendors in that space and just overall just talking about the traction of this.
Solutions. Thanks, so much sure.
And as Appian is a platform company and generally when we sell we sell the platform I believe that there are a number of advantages that we could accrue from being more focused on solutions from cutting the cycle time of a sale to differentiate against competition to raising our price point, partly due to that differentiation.
I think that mostly however, we are still a platform company and what benefits. There are to be had from solutions are largely benefits that we might experience in the future right. Now our solutions are are not the primary thing that we're selling and most customers do not interact with and Appian solution.
But we understand this to be and advantageous route for future, which is why we keep working on it and and some customers of course are seeing terrific benefits, but I think mostly when they approach appian they approach us for what we're known for and that is the platform.
Down the road I look forward to to US being known also for solutions and I think there's a good potential for us.
Okay, great. Thank you and maybe just to follow up on investments this year and Mark you talked about investing more in R&D and Amsterdam.
Can you maybe just go into a little bit more detail about.
You know, how and why youre ramping that span and obviously, there's a very long term opportunity here, but just curious and anything else you can comment about the investments youre, making in 'twenty and 'twenty one yeah. I mean, we've made some investments there and during 2020 and its senior executives, we brought in a senior vice president and charge, a customer success and <unk> and new CMO.
And and thus.
Thus far and the new CRM has been here for nine months or so and we're starting to see good traction our sales cycles. One of the things is the length of our sales cycles, historically been long and painful and they're actually shrunk about 30%. This year, we've gotten better and more efficient and so we're seeing a lot of opportunities out there and we basically are.
And we want to hire sales reps pretty aggressively and the same time I think that we're still.
We're still like we're not really well known like we're not top of mind. When you think of things when it and so from a marketing perspective with new CMO, we're giving her.
Additional budget, Matt and has given a lot more budget and I wanted to but we're giving it to her.
And seriously we want to invest and we wanted to get.
Invest both in the marketing side as well as the sales the Tam as you guys know no matter how you slice. It is massive so we just wanted to take advantage of it and we're starting to see traction right now and and momentum. So we're pretty excited about where we're headed and then obviously, we're always looking to bring on.
Smart.
Software engineers to help out and.
And build the platform.
Yeah, Let me just add to that this is a really exciting moment and the history of this organization and we are of course, a careful and conservative organization and we are we don't like to spend too much, but but I'll I'll take the fall for wanting to spend more on marketing right now I think we should be expanding on all.
Franz I think we should be hiring more account reps, we should be spending more and.
Engineering.
And I'm more upset these days when we under spend and when we overspend our budget I want to be sure that all the money. We allocate is actually converting and then and we learned from it and we grow from it I think that we've reached a unique point in low code and when we want to take advantage of it.
Thanks, a lot of sense. Thank you.
Our next question comes from the line of George <unk> with Keybanc. Please share with your question.
Hi, guys. Thanks for taking my question and this is George on for Steve.
I had a question about something you mentioned in the prepared remarks about prebuilt partner solutions I was just curious if you could maybe unpack a little more what are some of the kind of typical use cases for that looks like and is it.
It fair to think about that kind of following up on a previous question as maybe like a stepping stone into more of the solution space. Thank you.
I do think that there are terrific stepping stone into the solution space and I believe that they are going to make our reputation as a platform on which solutions can easily efficiently and successfully be developed.
And as partner led solutions are typically industry specific they reflect something that a team within one of our partners has deep expertise in deploying their already subject matter experts they've already got the connection they know who the buyers are they know what the buyers problem is and they choose to build it once instead of and times for and buyers.
And this gives the buy of reassurance, both that others have done the same thing before that it's predictable and that the seller truly knows how to solve the problem. The buyer is experiencing its a high credibility way for us to deliver a solution maybe the most the highest credibility way.
I'm pleased with the progress so far.
Many of our partners have done this or are planning to do this and many solutions have been developed on the Appian platform by partners.
And I do believe that this is going to be a primary way that we are established as a solutions platform.
Great. Thank you very much just one quick follow up obviously, some really impressive results out of EMEA and anything.
Anything you would call out in terms of the drivers is that did it feel like that was kind of and improving demand environment or anything specific on your execution.
And that's it for me thank you.
Yeah, if I had to attribute that strong EMEA performance to one thing would be partners.
Partners really came through for us.
I think that we solve the need for them they needed to.
To deploy and agile solution to help their customers change here and a tempestuous year and they turned to appian because they knew it worked and.
And they drove us into many new opportunities so their trust in us our confidence and being able to solve problems together and the urgency of the problems that face to everybody last year.
This is what I would attribute that growth to above all the partners.
Our next question comes from the line of Jack Andrews with Needham Please share with your question.
Good afternoon, and thanks for taking my question and congratulations on the results I wanted to ask a little bit more about just given your comments about how the profile of low code platforms has risen substantially and the last year could you talk a little bit more about the changes youre seeing in terms of just deal. The deal processes, you mentioned a moment ago the deal cycles are.
Compressing, which is great I assume that relates to the fact that you need to spend less time educate educating people about the value proposition, but what else is happening behind the scenes because so many vendors. These days and say that they are and the low code market show should we think of more.
Head bake offs or what else is happening.
And this market and now that it's becoming more mainstream.
Mainstream.
Yeah, I believe mainstreaming low code will result in shorter sales cycles.
Although the interpretation of the definition of low code is still at issue and different vendors may call themselves low code, but really represent very different products and that's why I made a point of saying that in our opinion low code was not a citizen developer tool at least not exclusively we believe and low end low code for <unk>.
Mission critical applications, that's more difficult to more valuable and if you think that low codes reputation was made in 2020 when businesses needed to deal with change then you must believe low code belongs and mission critical applications. Because those are the applications that organizations needed to change. So we are satisfying the most valuable demand in the low code.
Industry and not everyone is not everyone and calls himself low code can do that or wants to do that so low code still something of an enigma and therefore there'll still be some explaining that goes into selling it still got explain what is low code in order to connect with the customer b share you're on the same page. However, it should be faster by the way the.
Acceleration, we saw last year, that's about 30% faster deal cycles and sales cycles.
I don't believe was very much affected by a a new mutual understanding or higher profile for low code I would say that happened for reasons of its own and.
And that whatever benefit we get from low code going household has yet to be seen.
Well that's great. Appreciate your perspective on that just as a follow up question.
When you think about the new the new logos that were delivered.
By your partner ecosystem and last year could you just.
Talk about are there characteristics of these new logos that are maybe different than appian was capturing historically through your direct sales force or our partners, helping you get into new verticals that you have guided to or how do we think about a potential changing mix over time given that contribution.
For the most part they are alike.
There are a few niche cases in which our partner has built a solution that appeals to a certain customer that we would not have been able to appeal to in the past and.
And and and that is that it's the minority of the cases for the most part the partners are sourcing exactly the kind of customers that appian and would like to source, but maybe it doesn't have a relationship with or it doesn't have the the the reputation and the established connection with so that the partners are really.
Emphasizing what we already found in our customers.
Great. Thanks for taking my questions.
Our next question comes from the line of Derrick Wood with Cowen Please share with your question.
Hey, guys, it's Andrew on for Derik, Thanks, and congrats to a strong finish to the year.
Just wanted to ask about the government performance and the corner versus your expectations and any color and the pipeline for for this year and given the strong logo growth there what type of expansion cadence should we expect out of that this year.
Well I'd like to say that I, our government performance was exceptionally strong in 2020.
That was more in Q3, then and the other quarters, but this was this is a really solid year for appian in the federal space.
And we advanced and areas that.
So we hadn't always advanced and so where are we.
We have a higher profile now we've got a building.
Mutation.
And we've got some terrific winning use cases that are leading to expansion and and good adoption and you know how the government works, where if you would if you.
<unk> value word gets out fast and.
So we've been fortunate enough to have the opportunity a few times over the past year to demonstrate value in a high profile example, and the government.
Sometimes and defense and we've done well with those opportunities and I think that we're sowing seeds that are going to do.
Turn into good things down the road by by providing real value and high profile federal opportunities.
Great and then Matt on the partner front and the new initiatives planned there for this year to keep that strong momentum.
Going and are you seeing and lean even more into their practices given.
Strong this year was yes, definitely I think 'twenty and 'twenty, we get more partner momentum and the federal space and I have ever seen.
And are we worried about programmatic institutional support we we were.
We were very pleased with the cooperation we got and winning leads to winning in situations like this so I believe that it sets the stage for 'twenty one.
Great. Thanks, guys.
Our next question comes from the line of Brett Knoblauch with <unk> capital markets. Please share with your question.
Hi, guys. Thanks for taking my question and congrats on the quarter I might've missed it but did you guys provide and update the number of customers that 1 million plus and a R. R.
And as you look at your 2021 guide what percentage of those customers will purchase more software do you think it would be.
Similar to the 81% you saw in 'twenty and 'twenty.
Alright, well I actually I don't have a number for you, but I will say that I am enthusiastic about our expansion prospects in the year ahead, because I'm enthusiastic about the value we're delivering right now not for nothing did appian come out and number one and the Gartner peer insights.
Poll that just shipped this month by the way that's absolutely fresh analyst update Appian comes out.
We had not only did we get top marks from our customers, but we were we got the number one count of responses also so you know some companies try to get a high average by having just a few customers respond happy and had not only the top marks but the top count of reviews.
And we were the only listed in the leader quadrant for companies over $10 billion or companies between one and $10 billion. So the entire big company side of of low code and we were left as the sole leader.
So I feel great about the value, we're delivering and the reception that we're getting from our customers today and I believe that there is no better predictor.
For expansion there.
And then customer satisfaction, so on that basis I feel good.
Got it and then maybe just one follow up when and when Youre talking about kind of increasing investment.
And.
And how is sales force productivity been obviously that the channel partners outperform and greatly.
And we your direct sales force and you know how that performed in 2020 compared to initial expectations.
Yep.
Say 2020 is better than 2019 in terms of a sales force efficiency I see it rising.
And I I.
And I feel good about 'twenty, one as well.
And a good position to continue to increase sales force efficiency.
Yes, you did.
And definitely proved in 'twenty and 'twenty, there's definitely more room for improvement, but the sales executive team is focused on that so we're looking at obviously squeeze out more efficiencies out of the current and the existing sales force, but we're also looking to aggressively ramp.
Headcount in the sales force as well.
Perfect. Thanks, guys.
And our final question comes from the line and Fred Hickman with Macquarie. Please share with your question.
Hi, Thank you so it looks like by my estimates here that subscription revenue per customer and remained about flat year over year, while you've accelerated customer ads and also expand your net retention rate.
Should I be interpreting this dynamic correctly as you're seeing more upsell among existing customers offset by some new customers landing lower asps.
Let me do the Asps go ahead, yes.
Asp's and state similar year over year right.
So it's really more subscription software both in the expansion side as well as the net new logos. So when we land, we generally land and and.
And the kind of a 100 $120000 ASB range, even higher and being told here. So.
The the the work force safety some of the solutions are a little bit lower but our asp's event had been basically very steady year over year and and so it's like I said like we ticked up to 119 from and our perspective have you seen it reflects expansion. It also reflects to Matt's point and he's talking about happy customer.
Our gross renewal rate was 99% which is really.
And I don't think it can get any higher rate so.
So we're happy with both of those metrics, but your point on the subscriptions revenue being steady year over years is a good one.
Okay. Thank you that's helpful color there and then just as a second follow up question I'd like to explore your platform effect and a little more depth.
I'm curious how frequently do you see your customers building apps on their own that are robust enough that if you know appian built them you'd be able to charge for them on say a per app basis.
Oh alright.
Customers build unique applications for the most part there are only a few examples of applications, which are the same for one customer to another.
Those are good candidates for reselling, but most of what customers build is suitable for their environment. Specifically so the first thing I would want to say to your question is because we are unique and because we allow customers to express their own uniqueness be it their strategic their enterprise their infrastructure whatever uniqueness.
There there wouldn't be a direct portability of and application from one customer to the others.
However, do they build things that are of a quality that other customers would want do they create IP that other customers would find a value I believe yes. The answer would be yes to those questions, which which is to say that expertise is being created out there and that that would have value but of course, it's not on the market and some.
And cases, the customer has even asked us if they could resell a solution that they have created.
And have yet to enter into an agreement like that but once and while it has floated by a customer who feels very strongly about the quality and the application that they have created on our platform.
Helpful color. Thank you.
Okay.
And with that this concludes today's question and answer session as well as today's conference call. You May now disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
Yes.
Yes.
Okay.
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