Q2 2022 Appian Corp Earnings Call

August 4, 2022

[music].

Thank you for standing by and at this time I'd like to welcome everyone to the Appian second quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again star one thank you Sri and naphtha.

Senior Director Finance and Investor Relations you May begin your conference.

Thank you operator, good afternoon, and thank you for joining us to review <unk> second quarter 2022 financial results with me today are Matt Hawkins, Chairman and Chief Executive Officer, and Mark Matos, Chief Financial Officer. After prepared remarks, we will open the call for questions. During this call we may have.

Statements related to our business that are forward looking under federal Securities laws and are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1095. These include comments related to our financial results trends and guidance for the third quarter and full year 2022.

The impact of macroeconomic changes 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, our ability to maintain and upsell existing customers and our ability to acquire new customers the word and.

Dissipate continue estimate expect intend will and similar expressions are intended to identify forward looking statements or similar indications of future expectations. These statements reflect our views only as of today. They do not represent our views as of any subsequent date there are subjects.

To a variety of risks and uncertainties that cost.

Actual results to differ materially from expectations for a discussion of the material risks and other important factors that could affect our actual results referred to our 2021 10-K and other periodic filings with the SEC. These documents are available on our investors section of our website. Additionally, non-GAAP financial.

Results will be discussed on this conference call refer to the tables in our earnings release and Investor section of our website for a reconciliation of these measures to their directly comparable GAAP financial results with that I would like to turn the call to our CEO , Matt Calkins, Matt.

Thanks, Sri and thank you everyone for joining us today.

In the second quarter of 2022, Appian cloud subscription revenue grew 34% year over year to $57 1 million.

Subscriptions revenue grew by 35% $76 7 million.

Total revenue grew 33% year over year to $110 1 million or.

Our cloud subscription revenue retention rate was 116% as of June 30th.

And our adjusted EBITDA was a loss of $25 million.

And as a unified platform, we combined process mining workflow and automation and a single low code suite.

This natural synergy between these technologies together they are more powerful more predictable faster and more affordable in terms of total operating cost.

These strengths fueled the demand for our software and they are even more important in times of economic uncertainty.

Okay.

<unk> is leading the convergence of the low code market, we believe that in a year or two buying process mining separate from workflow will be unthinkable and the same for automation.

These formerly separate industries belong together.

We are pioneering the convergence.

Appian is officially bearish on the economy I'm bearish.

I think inflation will persist and economy wide demand will slow.

In the U S will probably end up accommodating an unhealthy level of inflation, while suffering the penalties are reduced growth as well.

Essentially the opposite of the soft landing theory.

I say this upfront because I want to be clear.

While my forecast informs Abience plans it stands apart from Abience experience.

Happy and is not seeing any evidence of a downturn.

None of the symptoms I just described are visible from the perspective of our business.

We saw some deals slip out of the second quarter.

Which could be taken as a sign that deal cycles are lengthening, but we always see a few deals slip in Q2 wasn't unusual.

Of course, we're still affected by FX rates as Youll note in our results and forecast.

If there is a downturn we plan to grow carefully.

Cautiously and steadily through it.

We will keep hiring and.

And opening new offices and acquiring new customers.

And when the economy turns back up we'll have gained ground relative to our competition.

If the selling climate darkens, we have some advantages most importantly customers value what we provide we have a 99% gross renewal rates and customers. Obviously appreciate our software since they keep voting us customers choice in this industry and the Gartner report.

Also.

Our pitch can easily pivot to focus on efficiency and optimization.

The same virtues that a year ago, we would have sold for agility.

Ken equally well be touted next year for cost efficiency.

Process mining in particular is designed for efficiency optimization and offers a quick and healthy return on investment.

That's especially true when it's linked with workflow.

As the discoveries of process mining become instantly actionable.

A quick example.

There is a top global elevator manufacturer that has been an appian customer for a few years get automated some customer billing workflows with us.

It wants to become more cost effective by discovering areas of inefficiency.

In Q2.

In process mining analyze the companys credit and rebuilding process, we discovered branch managers spend thousands of human hours annually verifying low value requests now the group has the insights it needs to change business rules adapt its appian applications and save money.

This shows how an organization can discover design and automate processes with.

With our unified platform.

Discover design and automate just like our slogan lately. It's one of the first things we explain to a new.

Aspect we.

We say that with Appian, you can discover design and automate all in the same product that expresses the unification that we're pioneering.

Alright. So other recent innovations will also help us broaden our appeal.

In the first quarter of this year, you may recall launched Appian.

Appian portals as a public facing front door to applications. It enables high volumes of external users to use appian without a logging.

Portals opens new use cases and user groups for our platform and we're seeing quick adoption briefly some examples.

First a large state agency overseeing unemployment benefits and job placement services became a new customer in Q2 it.

It's determined to reduce costs updated system and consolidate legacy applications to start it will deploy an appian portal that connects constituents and small businesses to training resources.

Happy and RP box will fetch course registration data from legacy systems.

And consolidate the information into central interface.

Thousands of unemployed workers will use an appian portal to enroll in classes and gained new skills. The.

The customers first half will be built in 10 weeks by a joint team of internal developers and expert advisers from Appian.

A second example, one of the worlds most prominent media and entertainment companies.

Also licensed IP and portals in Q2.

The group became a new customer last year and uses our low code platform to manage the lifecycle of its consumer products.

It runs market assessments select manufacturers and finalizes licensing and retailing rights all on Appian.

Now the company will extend this app with an appian portal to onboard thousands of third party distributors. It's a dramatic simplification of what used to be a pretty manual process and it consolidates legacy systems.

There's one more product enhancements I want to talk about.

In Q2, we launched a new solution to our government acquisition management, our Gam suite happens Gam suite manages the complex procurement process. The government groups follow when they acquire goods and services.

Our newest solution a part of the growing <unk> suite is called vendor management.

It creates a central Appian hub that allows agencies and outside vendors to manage correspondence over contracts and proposals.

We sold several gam solutions, including vendor management to the procurement group of U S military branch in Q2.

Thousands of contracting officers back office employees and outside vendors will use appian to process billions of dollars in contracts annually.

We won this deal because we've successfully modernised acquisition processes for multiple branches of the military since 2005.

Solutions are a gateway for expansions within our customer base.

Federal Public Health Agency offers an example, it became a customer a few years ago and uses several appian Gan solutions to process billions of dollars in annual funding in.

In Q2, the agency purchased a seven figure deal for additional Appian licenses to replace the legacy budget management system.

The agency will use appian to formulate plant and reconcile all fiscal year budgeting for congressional approval.

Partners continue to bring us new business build their own solutions on our platform and train more appian practitioners at the same time happy and professional services revenue is strong this.

There's two reasons for this.

First we are selling more premium packaged offerings with a fixed or a subscription pricing model.

We're approaching customers alongside a partner and positioning our services as a supplement to theirs.

In this model both parties see additional revenue the customer has ensured a good outcome and our partner can gain expertise faster.

Here's an example.

Civilian Federal agency became a new Appian customer in Q2. It has selected our low code platform to automate its core business processes.

And we will unify disparate systems and create a single App that manages employee performance reviews. The first project will be delivered by our partner with technical guidance from our professional services team through a packaged offering called happy and boost.

Partners also helped US land a seven figure software deal with a top Canadian research University, making them, a new appian customer in Q2.

It selected our platform to unify systems and build new workflows that connect students administrators and staff to one another for example, tens of thousands of students will use a centralized appian portal to register for courses in excess students services like requesting a transcript contract congratulation milestones.

Before wrapping the university lacked a way to integrate their siloed applications.

One last partner example.

Our north American fuel supplier and distributor as a new customer this quarter. The Companys leadership wants to innovate in Q2 had purchased a partner solution prebuilt on.

This solution will replace their incomplete customer engagement system, the customer will use appian to run customer onboarding usage billing and relationship management processes.

We won this deal because our platform will drive enterprise wide efficiencies, including reducing customer onboarding from two weeks to just one day.

Finally.

I'd like to make two announcements.

First as.

We welcome Chris Jones, as <unk>, New Chief revenue Officer.

Chris joined this Monday August one.

He comes to us with decades of experience running sales organizations for global software companies like click technologies.

He also has it starts a strong partner background.

And we all look forward to working with them.

Second announcement Appian, just opened our new product development Center in Chennai, India.

This expansion gives us access to a broader pool top engineering talent.

We expect to run our engineering department with enhanced operational efficiency.

Our product team allows <unk> to expand our low code platform and launched new offerings to pioneer our market.

Now I'll turn the call over to Mark for a deeper discussion of our financials Mark.

Thanks, Matt I'll review the financial highlights for the quarter and then we'll provide guidance for Q3 and the full year 2022.

We delivered another strong quarter, driven by subscription revenue growth of more than 30% year over year.

We also saw strong growth in key industry verticals at each of our geographical regions.

Let's go into the details.

Cloud subscription revenue was $57 1 million, an increase of 34% year over year and above the top end of our guidance.

As discussed on our last earnings call foreign currency changes had an unfavorable impact of approximately two percentage points on our cloud subscription revenue when compared to our initial guidance on February 17th.

Our total subscriptions revenue was $76 7 million, an increase of 35% year over year.

Professional services revenue was $33 4 million, an increase of 28% year over year the.

The strength in professional services was driven by the U S public sector U S commercial and APAC.

As previously noted <unk> professional services are complementary to partner offerings and in certain cases support large programs that are run by our partners.

While still early we are seeing a healthy uptake of abience accelerate consulting offering in particular.

This offering allows customers and partners to engage appian architect and customer success managers.

Importantly, customers, who buy accelerate and up more than doubling their spend on new software purchases in year, two and year three.

Long term, we continue to believe partners will be a larger part of our growth strategy over time, we expect professional services revenue will continue to decline as a percentage of total revenue.

Subscriptions revenue was 70% of total revenue as compared to 69% in the prior year period, 73% in the prior quarter.

The sequential decline in subscriptions revenue Mips is partly due to the seasonality associated with term license revenue.

Total revenue was $110 1 million, an increase of 33% year over year and above our guidance range.

Our cloud subscription revenue retention rate as of June 32022 was 116% as compared to 117% last quarter.

As a reminder, we continue to target a cloud subscription revenue retention rate of 110% to 120% on a quarterly basis.

Our international operations contributed 35% of total revenue consistent with a year ago period. The growth in international revenue was driven by continued healthy performance in both the APAC and EMEA regions.

Our cloud software net new ACD bookings were approximately 80% of the total net new software bookings during the first half of 2022 versus 79% in the first half of 2021% and 77% for the full year 2021.

Now I'll turn to our profitability metrics.

non-GAAP gross margin was 71% compared to 70% in the year ago period subs.

Subscription non-GAAP gross profit margin was 89% compared to 88% in the year ago period.

<unk> services non-GAAP gross margin was 30% consistent with the year ago period, we continue to expect professional services non-GAAP gross margin to decrease to the mid to low 20% range in 2022 and beyond as we dedicate more customer success resources to support partners.

Total non-GAAP operating expenses were $105 8 million, an increase of 39% from $75 9 million in the year ago period.

Leasing expenses was driven by higher personnel costs go to market expansion and return to one person events, including our annual user conference Appian World.

Adjusted EBITDA loss was $25 million in line with our guidance range and compared to an adjusted EBITDA loss of $15 3 million in fiscal period.

In the second quarter, we had approximately $6 $5 million of foreign exchange losses, compared to $1 million in foreign exchange gains in the same period a year ago.

We don't forecast movements in FX rates, therefore, they arent considered in our guidance.

non-GAAP net loss was $33 4 million or <unk> 46 per basic and diluted share compared to non-GAAP net loss of $16 9 million or <unk> 24 per basic and diluted share for the second quarter of 2021.

This is based on $72 4 million basic and diluted shares outstanding for the second quarter of 2022, and $70 7 million basic diluted basic and diluted shares outstanding for the second quarter of 2021.

As noted above second quarter 2022 of non-GAAP net loss was negatively impacted by $6 5 million in foreign exchange losses, or a loss of <unk> <unk> per share, which was not included in our original guidance.

Turning to our balance sheet.

As of June 32022, cash and cash equivalents and investments were $138 million compared to $168 million as of December 31 2021.

For the second quarter cash used by operations was $29 7 million versus $6 6 million for the same period last year.

Compared to the year ago period operating cash flow was negatively impacted by higher litigation expenses higher sales commissions wage increases and increased marketing spend.

Total deferred revenue was $151 3 million as of June 32022, an increase of 33% from a year ago period. As we have stated on past calls 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 in our deferred revenue are generally not indicative of the momentum in our business.

We continue to believe cloud subscription revenue is a better indicator of our business momentum than billings or remaining performance obligations or RPM.

Later metrics can fluctuate based on the timing of invoicing seasonality of term license revenue and the duration of customer contracts.

Scale of the business is represented by total subscriptions revenue, which includes support in our software subscription revenue, regardless of whether the customer deploys appian in the cloud or on Prem.

Now I will turn to guidance.

For the third quarter of 2022 cloud subscription revenue is expected to be between $60 8 million and $61 3 million representing year over year growth of 30% and 31%.

Total revenue is expected to be between $115 million and $117 million representing year over year growth of 24% and 27%.

Adjusted EBITDA loss for the third quarter of 2022 is expected to be between $15 million and $13 million.

non-GAAP net loss per share is expected to be 23.

To be between 'twenty, three and 'twenty.

This assumes $72 5 million basic and diluted weighted average common shares outstanding.

For the full year 2022 cloud subscription revenue is expected to be between $236 million and $238 million representing year over year growth of 32% 33%.

Cloud subscription revenue guidance factors in year to date currency headwinds of approximately two percentage points.

The revenue is expected.

Total revenue is expected to be between $466 million and $470 million representing year over year growth of 26% 27%.

Adjusted EBITDA loss is expected to be between $53 million and $50 million.

non-GAAP net loss per share is expected to be between 91 and <unk> 86.

This assumes $72 5 million basic and diluted weighted average common shares outstanding.

Our guidance assumes the following first a mid single digit percentage decline in professional services revenue on a sequential basis, we continue to expect partners to perform our services.

In situations, where they help us close the new logos partners generally lead the projects.

Second greater expenses related to employee wages in person marketing events and <unk>.

We're closely watching any discretionary related expenses in the current macro environment.

Third capital expenditures between approximately $4 5 million in the second half of 2022, primarily related to a build out of additional office space.

Finally, our guidance assumes FX rates as of August 4th 2022.

In summary, we're excited about the growth opportunities ahead of us, we're making disciplined strategic investments to accelerate go to market success and continue to expand our platform to address the large and growing market opportunity.

We remain confident about the operating leverage in the business model.

With that let's turn it over to questions.

Yeah.

To ask a question please press star one.

First question is from Sanjay sang of Morgan Stanley . Please go ahead. Your line is open.

Yeah.

Thank you Sheng.

Your line is open.

Thank you can you hear me.

Yes, yes.

Perfect. Thank you thanks, guys.

Matt I wanted to.

Pick up on your comments on the economy and then.

<unk> ability to execute another colony and when I look at sort of the guidance.

Coming off a very strong quarter, the guidance I'll sort of reiterate it and so I wanted to better understand.

In terms of Youre, not seeing an impact why that we can see a little bit more of a raise on the guidance without sort of FX.

And Mark if you could give us maybe some context on the guidance in terms of what you're sort of assuming in terms of.

Sales cycle conversion rates on your pipeline.

Going into Q3, and Q4 versus what you may have seen.

In the June quarter, any context around the assumptions on those on those factories would be super helpful. In sort of understanding how you guys are positioning for the second half.

That's great.

So we figured FX into the projections for Qs three and four and we left a higher range of possible variance because we are in a moment of economic uncertainty whether or not there is a downturn there is uncertainty.

And as you know we prefer to be on the cautious side and so that is why we issued the guidance that we did I can tell you five deadline preempt your answer that our sales cycles didn't show any difference.

From this quarter to a year ago quarter or for that matter serially.

So the signs for us are not there.

I believe we've got a solid product that is deeply appreciated by our customers and is thus insulated from some of the effects that we might have seen otherwise.

I believe that we are able to pivot.

Our messaging, particularly with an efficiency product by process mining in the floor in order to be relevant in the downturn and I would like to remind the audience that we have been through several downturns as a bootstrap and so we know exactly how it would be prudent.

In economic strife, if it comes to that.

I like our position very much.

And in spite of my pessimism.

The economist.

As a business person.

We are right to keep growing.

We're not seeing the symptoms and if other companies choose to pullback this as an opportunity to grow past them.

Mark did you want to add anything to that I think Matt.

So a little bit of my Thunder, but it's pretty much on point I would just sum it up on the guidance piece by saying, we're normally conservative and there is an extra layer of conservatism. That's warranted by the current economic uncertainty that's kind of baked into our guide.

That's super helpful. And then one follow up if I may as you think about sort of vertical and industry concentration I think it's a lot of business.

Some pretty stable industries financial services government healthcare and I think correct me if I'm wrong your major verticals.

What do you see the trends in those kind of core vertical and I don't think you guys sort of discussed this before but your exposure to sort of SMB customers, who may be more prone to churn and your exposure to.

Younger Tech startups, who may have to.

<unk>.

Run more efficiently and optimize their spend your exposure to that to that vertical. If you have any sort of color on on those on those customer cohorts that would be that'd be helpful as well.

Yes, well you're right about our primary industries.

Do you want to note that our churn is as always exceptionally low in fact.

At the low end of low with a 99% gross renewal rate, we're just not seeing much churn.

Which could be attributed to the solidity of our industries, but I would prefer to attribute it to the appeal of our value proposition and I think thats, primarily why customers of all stripes stick with us.

Yes, with regard to exposure to SMB.

And.

I think you mentioned startups.

There isn't any significant exposure to those areas.

Great perfect. Thank you for all the context.

Your next question comes from the line of Kevin Kumar from Goldman Sachs. Your line is open.

Alright, Thanks for taking my question I wanted to ask about a recent deal with in the capacity of the line can you talk a bit about the broader opportunity for international government entities.

Largely from that market is how important our partners, bringing these capital.

I Love. This question because Appian has long been very strong within the U S government.

And yet bide, our time before approaching other layers of government be they international or state and local within the U S.

And we're finally branching out.

So youll see some public sector deals outside of federal U S. I believe it's an extraordinary growth potential sector for us and I think that Youll hear a lot more about it.

In years ahead.

This is just one example, but.

Our expertise here.

There is a.

Theres a whole special handshake, you got to do to do business with public entity and where we're long used to it and our calls are terrific based on the scale. The criticality of the applications we have deployed.

And it's high time that we branched out from U S. Federal So we're doing that now.

And Youll see Youll hear more.

Yes.

Got it Thats helpful. And then curious if theres any changes to how the sales force is growing and going to market in a more volatile macro environment is there is there a shift in terms of the types of use cases retrofits in the.

The customer would help thank you.

Right now I'd say there is not a shift in the use cases and the assembly of a conservative.

Value propositions centered around efficiency ROI cost optimization.

As a speculative offering to be deployed as necessary.

I believe right now, it's not hardly being deployed but I want our team to be ready for.

Conservative buying patterns in case they emerge.

Okay.

Got it thanks for taking my questions.

Your next question comes from the line of Joseph <unk> with Truest. Your line is open.

Great. Thanks for taking my questions guys and congrats on the 99%.

Gross retention in this environment.

I'm just curious on the federal side with the public sector in general.

Is the IL five certification that you received in the first quarter led to any new business or are there any conversations that could potentially lead to additional pipeline through the rest of the year.

Alright.

That was a major.

Certification for us that IL five.

I am not aware of any business that had led to within this short period and as you know the public sector sales cycles are long and so we wouldn't expect to qualify for a deal last quarter and then two when it already.

But it's going to be telling.

And it's a barrier to entry against a lot of our competition and it's a testament to <unk> high end credentials that we could get it and get it. So quickly. So I think it's going to have an impact.

Don't believe it's had an impact yet.

Okay. That's helpful.

And then I think also on the once you call management you guys noted that there were 75 partner written switches in total.

And I think you said I think you called out in the prepared remarks that that North American fuel supplier had purchased solution I'm just curious.

Number of solutions has grown and where you see that volume.

Yes.

Yes, the number of partner authored solutions is growing all the time there was a lot of enthusiasm a months amongst our partners at the latest Appian World.

And they were demo ing their own solutions and some of them had many solutions to show running on different monitors at their booth.

There's a lot of enthusiasm around this so absolutely the number is growing.

And.

Even better the ones that are most successful are becoming more successful and thats going to be the inspiration for the broadening of the community most of all so.

The answer is yes.

Thanks.

Okay.

Your next question comes from comes from the line of Jacob Roberto <unk> from William Blair.

Your line is open.

Hey, guys Hey.

Hey, guys. Thanks for taking my questions. So we've talked about product has been on the platform for a while.

You've introduced new solutions over the past year, how is the strength that we're seeing and what you called out.

With customer demand for new products like portals elevated the awareness of the rest of the <unk> platform within customers.

Yes, it's something like portals is wonderful for elevating awareness because it appeals to so many more users are traditionally appian has done.

Intra applications, which are used only by members of an organization now there may be a lot of members, but there arent as many members as they are our customers or vendors or suppliers or partners and so if you can create an application that appeals externally you suddenly get a lot more interaction and then.

I love that for raising our profile it really broadens the user count now of course, we're not getting the same.

Dollars per user for external users that were getting for internal.

But it's very good for raising awareness as you as you mentioned.

Yeah, and then seems like the partner activity was really strong in the quarter.

Seen any increase in partner resources as a result of some of the headwinds that some of your other local competitors are seeing in our businesses as well as just throughout this macro environment.

Yes, definitely yes, we have partners, saying that they are converting more of their practice over to happen. They are training more of their converting recently, they're converting people who used to be dedicated to a different system. The training them on Appian Theres definitely.

Definitely evidence of that.

Great. Thanks for taking my questions and congrats on the solid quarter. Thank.

Thank you.

Your next line comes from that.

I'm sorry. Your next question comes from the line of.

Derrick wood with Cowen.

Your line is open.

Oh, great it's Andrew on for Derik, Thanks, guys.

That in the past you've talked about shorter sales cycles helped by value selling methodologies and newer pricing model did this have you seen that helped this quarter and is this helping overall in this environment given the pressures seen on sales cycles in general I know you called out.

A little bit of longer cycle, but.

Is it helping relative to past cycles Murray.

Yeah overall, I would say our business.

Is experiencing equal cycles over time that they have not increased nor decreased.

The factors that I expect to lead a decrease.

Partners, because the partner could eliminate some options expedited customers decision introduced Saffian I'd expect a shorter sales cycle a partner deal and I will also a solution should shorten the sales cycle, because theres less speculation less proof of concept you can see it prebuilt I think either one of those factors could be a shortening agent.

Right now I would say that our sales cycles are instead.

Consistent.

Great and was wondering if you saw any impact from the.

From the peg a lawsuit in the quarter that helped you competitively at all or.

Early feedback from from customers on that.

Yeah.

I have a little bit of feedback from customer and it's just.

It's just the occasional comment about how maybe they're dialing back in.

Hi.

I can't say for sure that there is an impact yet.

I've got a few circumstantial observations I can't be sure.

But with regards to the verdict itself I can tell you that we believe the verdict is supported by the evidence and the law and we're confident it's going to be upheld.

Great reminder, jewelry did not award as punitive damages, which would be overturned relatively we didnt even ask for punitive damages. Instead, we were awarded unjust enrichment damages.

And as for the timeline, we can't be sure when all the appeals resolved, but two to three years is a reasonable estimate.

Great. Thanks, guys.

Okay.

Your next question comes from the line of Fred <unk> with Macquarie. Your line is open.

Hi, Thank you.

What I think I wanted to begin with Matt and Mark is around the lines of profitability no matter as youre discussing potentially a more.

Adverse macroeconomic condition and backdrop and positioning Appian defensively youre mentioning how youre thinking about profitable growth I believe earlier too so with this year being another year, where happiness guiding to you as you just guided to.

Adjusted EBITDA usage and negative adjusted EBITDA.

Do you think about driving towards profitable growth in the future and how do you find that balance of growth and profitability potentially against the backdrop of an adverse.

Really a recession.

Yes.

That's right and I want to emphasize that our strategy of growth to say cautious and careful and prudent strategy of growth and we're going to measure all of these expenditures.

Against the.

The increase in revenue that they will give us and the time that we expect that increase to take this as a very careful growth strategy, but I do believe that a moment like this even if it becomes a recession a moment like this could be an opportunity for our business with an exceptionally loyal customer base and a.

High revenue retention to make investments.

Okay.

Your new business at a time when our rivals may not be as forceful and acquiring net new business.

And as you can tell from our revenue retention rate like we've got when we acquire a new customer that's a long stream of revenue that we've brought on board expected revenue mind, you right on that.

That is that's a long string of very likely payments and growth that we will probably experience and so that.

That new customer is worth making an investment on because of the long tail that follows. It. So we're going to be extremely cautious about this but and then we will only make expenditures where I believe that the return is worth the investment, but I think this may be an environment in which a company with our strengths could still make some wise investments.

<unk>.

Yes.

Sure.

Thank you and then.

I would like to ask also about traction that you might be seeing with limited or generally how youre seeing the.

Mix of uptake across some of your different pricing options evolving I know that we've discussed in the past unlimited and what that brings to the table. So if you could provide any update about <unk>.

Trends, there or ways in which customers are choosing appian pricing it would be quite helpful. Thank you.

Sure Unlimited remains a minority pricing option, which is to say most customers don't choose it.

I wish every customer would choose it I love It I think it's good for them and good for us, but it is unusual and so most of the time, we need to conform to the pricing preferences of the buyer.

And in an industry that is complicated enough already we choose not to force our preferred model on the customer instead will allow them to buy by the seat by the App.

We will give them options and we will conform to their preference most of the time, but thanks for bringing it up I love unlimited and I think it oriented it aligns our interests really well so if I had my way they don't they don't price that way.

Yeah.

Thank you.

Your next question comes from the line of Vienot Srinivasan, Sara <unk> from Barclays. Your line is open.

Alright, Thanks for taking my question.

And I'm just like earlier this year, you had talked about how the amounts of data to create transparency <unk> platform was really much higher and how that indicated how many of your platform you said with a much broader can you just talk about how that's trended throughout the year and especially into June and July and then can you also speak to you.

Maybe some of the bundling and pricing leverage that you can.

Hold on that will help you better monetize the platform. Thanks.

First of all I am very excited about the trends in.

Data usage.

On the Appian platform I can't get into the numbers here, we're not disclosing it this quarter, but the trend has been spectacular and it shows that <unk> low code data functionality from last year has been adopted strongly the point of that was to take the hardest part.

Of the application creation process, which has always been the data integrating to it be having it in real time right aggregating. It has always been the toughest part and it's often required people to be a data expert before they could even build an application.

And we simplified it radically so it's now drag and drop it's easy data is now just one more object that you can deploy with your mouse onto a process model.

And that has been.

<unk>.

In great amounts and we have multiplied the amount of data coming through Appian speaking and somewhat vague terms here, but multiplied it.

And momentum is tremendous the trajectory is tremendous and it shows that we're becoming an integral part of the way organizations Digest and process their own information, which was the goal of that feature in the first place. So I believe that has a lot to do with our staying power in our value proposition and fulfilling our goal to be low code, which is to say truly easy.

To use despite being very powerful at the same time. So it's one of the features I'm personally most excited about don't have a number for you today, but the momentum is terrific.

Thanks appreciate that and then just can you just maybe comment on new logo growth. It seems like your existing expansion is fine with your cloud retention rate at 116, I think you said, but can you just talk about new logo grab how does that kind of.

All throughout the quarter.

That is another thing that we are not disclosing.

Other than to say that new customers for several stories about it one big deals right. We won great customers. We are proud of the large world leading institutions that continue to choose Appian.

And rely on us for mission critical projects, that's what we're about fundamentally more than any other market segment, we appeal to large organizations doing important things and wanting to be able to change and pivot the way. They do those important thing so while I don't have numbers around that I want to say that we continue.

New to hold that placed in the market has.

Frequent choice of the largest business is doing the most important things.

Got it so youre, saying that you didn't really see a change in June or even in July compared to the prior trends.

Our partner trends did you say like partner Onboarding maybe.

Partners still touch about 80% of our new logos and Thats been consistent.

So theyre very influential and we mean to work with them because of that and we know they are influential and we want their alliance.

In order to reassure.

The strategic customers that depend on them.

<unk>.

That we and they make a good team to handle their big issues.

Okay. Thank you.

There are no further questions at this time I would like to turn the call over back to the presenters.

Alright, well, we're just going to wrap it up then we appreciate your interest and we look forward to speaking to you in individual sessions.

Thank you.

Okay.

This concludes today's conference call you may now disconnect.

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Thank you for standing by and at this time I would like to welcome everyone to the <unk> second quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

I would like to ask a question during this time simply.

Star followed by the number one on your telephone keypad.

I would like to withdraw your question again.

Thank you Sri NFL.

Senior Director Finance and Investor Relations you May begin your conference.

Thank you operator, good afternoon, and thank you for joining us to review <unk> second quarter 2022 financial results with me today are Matt Calkins, Chairman and Chief Executive Officer, and Mark Matos, Chief Financial Officer. After prepared remarks, we will open the call for questions. During this call we may.

Impact of macroeconomic changes 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, our ability to maintain and upsell existing customers and our ability to acquire new customers the word and.

To a variety of risks and uncertainties that cost.

Actual results could differ materially from expectations for a discussion of the material risks and other important factors that could affect our actual results referred to our 2021 10-K and other periodic filings with the SEC. These documents are available on our investors section of our website. Additionally, non-GAAP financial.

<unk> will be discussed on this conference call refer to the tables in our earnings release and Investor section of our website for a reconciliation of these measures to their directly comparable GAAP financial results with that I would like to turn the call to our CEO , Matt Calkins, Matt.

Thanks, Sri and thank you everyone for joining us today.

In the second quarter of 2022, Appian cloud subscription revenue grew 34% year over year to $57 1 million.

Subscriptions revenue grew by 35% to $76 7 million.

Total revenue grew 33% year over year to $110 1 million a.

Our cloud subscription revenue retention rate was 116% as of June 30.

And our adjusted EBITDA was a loss of $25 million.

Appian is a unified platform, we combined process mining workflow and automation and a single low code suite.

This natural synergy between these technologies together theyre more powerful more predictable faster and more affordable in terms of total operating cost.

These strengths fueled the demand for our software and they are even more important in times of economic uncertainty.

Appian is leading the convergence of the low code market, we believe that in a year or two buying process mining separate from workflow will be unthinkable and the same for automation.

This formerly separate industries belong together.

We are pioneering the convergence.

Appian is officially bearish on the economy.

Paresh.

I think inflation will persist and economy wide demand will slow.

In the U S will probably end up accommodating an unhealthy level of inflation, while suffering the penalties are reduced growth as well.

Essentially the opposite of the soft landing theory.

I say this upfront because I want to be clear.

While my forecast informs happens plans it stands apart from <unk> experience.

Happy and is not seeing any evidence of a downturn.

None of the symptoms I just described are visible from the perspective of our business.

We saw some deals slip out of the second quarter.

Which could be taken as a sign that deal cycles are lengthening, but we always see a few deals slip in Q2 wasn't unusual.

Of course, we're still affected by FX rates as Youll note in our results and forecast.

If there is a downturn we plan to grow carefully.

Cautiously and steadily through it.

We will keep hiring and.

And opening new offices and acquiring new customers.

And when the economy turns back up we will have gained ground relative to our competition.

Also.

Our pitch can easily pivot to focus on efficiency and optimization.

The same virtues that a year ago, we would have sold for agility.

Can equally well be touted next year for cost efficiency.

Okay process mining in particular is designed for efficiency optimization and offers a quick and healthy return on investment.

That's especially true when it's linked with workflow.

As the discoveries of process mining become instantly actionable.

A quick example.

There is a top global elevator manufacturer that has been an appian customer for a few years it automated some customer billing workflows with us.

To become more cost effective by discovering areas of inefficiency.

In Q2, Appian process mining analyze the companys credit and rebuilding process.

We discovered branch managers spend thousands of human hours annually verifying low value requests now the group has the insights it needs to change business rules adapt its appian applications and save money.

This shows how an organization can discover design and automate processes.

With our unified platform.

Discover design and automate is like our slogan lately. It's one of the first things we explain to a new prospect we.

We say that with Appian, you can discover design and automate all in the same product that expresses the unification that we're pioneering.

Alright. So other recent innovations will also help us broaden our appeal.

In the first quarter of this year, you may recall launched Appian.

Appian portals as a public facing front door to applications. It enables high volumes with external users to use appian without a logging.

Portals opens new use cases and user groups for our platform and we're seeing quick adoption briefly some examples.

First a large state agency overseeing unemployment benefits and job placement services became a new customer in Q2 it.

It's determined to reduce costs updated system and consolidate legacy applications to start it will deploy an appian portal that connects constituents and small businesses to training resources.

Happy and RP box will fetch course registration data from legacy systems.

And consolidate the information in the central interface.

Thousands of unemployed workers, we use an appian portal two.

To enroll in classes and gained new skills.

The customers first app will be built in 10 weeks by a joint team of internal developers and expert advisers for Matthew.

A second example, one of the worlds most prominent media and entertainment companies.

Also licensed Appian portals in Q2.

The group became a new customer last year and uses our low code platform to manage the lifecycle of its consumer products.

It runs market assessments select manufacturers and finalizes licensing and retailing rights all on Appian.

There's one more product enhancement I want to talk about.

In Q2, we launched a new solution to our government acquisition management suite.

Sweet happens Gam suite manages the complex procurement process the government groups follow when they acquire goods and services.

Our newest solution a part of the growing <unk> suite is called vendor management.

It creates a central Appian hub that allows agencies and outside vendors to manage correspondence over contracts and proposals.

We sold several gam solutions, including vendor management to the procurement group of U S military branch in Q2.

Thousands of contracting officers back office employees and outside vendors will use appian to process billions of dollars in contracts annually.

We won this deal because we have still a successfully modernised acquisition processes for multiple branches of the military since 2005.

Yes.

Solutions are a gateway for expansions within our customer base.

Our federal Public Health Agency offers an example, it became a customer a few years ago and uses several appian Gan solutions to process billions of dollars in annual funding.

In Q2, the agency purchased a seven figure deal for additional Appian licenses to replace the legacy budget management system.

The agency will use appian to formulate plant and reconcile all fiscal year budgeting for congressional approval.

Partners continue to bring us new business build their own solutions on our platform and train more appian practitioners at the same time happy and professional services revenue is strong.

There's two reasons for this.

First we are selling more premium packaged offerings with a fixed or a subscription pricing model.

We're approaching customers alongside a partner and positioning our services as a supplement to theirs.

In this model both parties see additional revenue the customers ensured a good outcome and our partner can gain expertise faster.

Here's an example.

Civilian Federal agency became a new Appian customer in Q2. It has selected our low code platform to automate its core business processes.

And we'll unified disparate systems and create a single App that manages employee performance reviews. The first project will be delivered by our partner with technical guidance from our professional services team through a packaged offering called happy and boost.

Partners also helped US land a seven figure software deal with a top Canadian research University, making them, a new appian customer in Q2.

It selected our platform to unify systems and build new workflows that connect students administrators and staff to one another for example, tens of thousands of students will use a centralized appian portal to register for courses access student services like requesting a transcript contract congratulation milestones.

Before wrapping the university lack the way to integrate their siloed applications.

One last partner example.

On North American fuel supplier and distributor as a new customer this quarter. The Companys leadership wants to innovate in Q2 had purchased a partner solution prebuilt on Appian.

This solution will replace their incomplete customer engagement system, the customer will use appian to run customer onboarding usage billing and relationship management processes.

We won this deal because our platform will drive enterprise wide efficiencies, including reducing customer onboarding from two weeks to just one day.

Finally.

I'd like to make two announcements.

The first.

We welcome Chris Jones, as <unk>, New Chief revenue Officer.

Chris joined this Monday August one.

He comes to us with decades of experience running sales organizations for global software companies like click technologies.

He also has it starts a strong partner background.

And we all look forward to working with them.

Second announcement Appian, just opened our new product development Center in Chennai, India.

This expansion gives us access to a broader pool top engineering talent we.

We expect to run our engineering department with enhanced operational efficiency.

Our product team allows app into expand our low code platform and launched new offerings to pioneer our market.

Now I'll turn the call over to Mark for a deeper discussion of our financials Mark.

Thanks, Matt I'll review the financial highlights for the quarter and then we'll provide guidance for Q3 and the full year 2022.

We delivered another strong quarter, driven by subscription revenue growth of more than 30% year over year.

We also saw strong growth in key industry verticals and each of our geographical regions.

Let's go into the details.

Cloud subscription revenue was $57 1 million, an increase of 34% year over year and above the top end of our guidance.

Our total subscriptions revenue was $76 7 million, an increase of 35% year over year.

Professional services revenue was $33 4 million, an increase of 28% year over year.

The strength in professional services was driven by the U S public sector U S commercial and APAC.

As previously noted <unk> professional services are complementary to partner offerings and in certain cases support large programs that are run by our partners.

While still early we're seeing a healthy uptake of abience accelerate consulting offering in particular.

This offering allows customers and partners to engage Appian architects and customer success managers.

Importantly, customers, who buy accelerate and up more than doubling their spend on new software purchases in year, two and year three.

Long term, we continue to believe partners will be a larger part of our growth strategy over time, we expect professional services revenue will continue to decline as a percentage of total revenue.

Subscriptions revenue was 70% of total revenue as compared to 69% in the prior year period, 73% in the prior quarter.

The sequential decline in subscriptions revenue mix is partly due to the seasonality associated with term license revenue.

Total revenue was $110 1 million, an increase of 33% year over year and above our guidance range.

Our cloud subscription revenue retention rate as of June 32022 was 116% as compared to 117% last quarter.

As a reminder, we continue to target a cloud subscription revenue retention rate of 110% to 120% on a quarterly basis.

Our international operations contributed 35% of total revenue consistent with the year ago period. The growth in international revenue was driven by continued healthy performance in both APAC and EMEA regions.

Now I'll turn to our profitability metrics.

non-GAAP gross margin was 71% compared to 70% in the year ago period.

Prescriptions non-GAAP gross profit margin was 89% compared to 88% in the year ago period professional services non-GAAP gross margin was 30% consistent with the year ago period. We continue to expect professional services non-GAAP gross margin to decrease to the mid to low 20% range in 2022 and beyond as we dedicate more customers.

Excess resources to support partners.

Total non-GAAP operating expenses were $105 8 million, an increase of 39% from $75 9 million in the year ago period. The increase in expenses was driven by higher personnel costs, So auto market expansion and return to in person events, including our annual user conference Appian World.

Adjusted EBITDA loss was $25 million in line with our guidance range and compared to an adjusted EBITDA loss of $15 3 million in the fourth period.

In the second quarter, we had approximately $6 $5 million of foreign exchange losses, compared to $1 million in foreign exchange gains in the same period a year ago.

We don't forecast movements in FX rates, therefore, they arent considered in our guidance.

non-GAAP net loss was $33 4 million or 46 per basic and diluted share compared to non-GAAP net loss of $16 9 million or <unk> 24 per basic and diluted share for the second quarter of 2021.

As noted above second quarter 2022, non-GAAP net loss was negatively impacted by $6 5 million in foreign exchange losses, or a loss of <unk> <unk> per share, which was not included in our original guidance.

Turning to our balance sheet.

As of June 32022, cash and cash equivalents and investments were $138 million compared to $168 million as of December 31 2021.

For the second quarter cash used by operations was $29 7 million.

<unk> was $6 6 million for the same period last year.

Compared to the year ago period operating cash flow was negatively impacted by higher litigation expenses higher sales commissions wage increases and increased marketing spend.

Due to the variability of our billing terms changes in our deferred revenue are generally not indicative of the momentum in our business.

We continue to believe cloud subscription revenue is a better indicator of our business momentum than billings or remaining performance obligations or RPM.

The latter metrics can fluctuate based on the timing of invoicing seasonality of term license revenue and the duration of customer contracts.

<unk> of the business is represented by total subscriptions revenue, which includes support in our software subscription revenue, regardless of whether the customer deploys appian in a cloud or on Prem.

Now I will turn to guidance.

For the third quarter of 2022 cloud subscription revenue is expected to be between $60 8 million and $61 3 million representing year over year growth of 30% and 31%.

Total revenue is expected to be between $115 million and $117 million representing year over year growth of 24% and 27%.

Adjusted EBITDA loss for the third quarter of 2022 is expected to be between $15 million and $13 million.

non-GAAP net loss per share is expected to be 23.

To be between 23 and 2000.

This assumes $72 5 million basic and diluted weighted average common shares outstanding.

For the full year 2022 cloud subscription revenue is expected to be between $236 million and $238 million representing year over year growth of 32% 33%.

Cloud subscription revenue guidance factors in year to date currency headwinds of approximately two percentage points.

Although revenue is expected.

Total revenue is expected to be between $466 million and $470 million representing year over year growth of 26% 27%.

Adjusted EBITDA loss is expected to be between $53 million and $50 million noncash.

non-GAAP net loss per share is expected to be between 91 and <unk> 86.

This assumes $72 5 million basic and diluted weighted average common shares outstanding.

Our guidance assumes the following first a mid single digit percentage decline in professional services revenue on a sequential basis.

We continue to expect partners to perform more services.

In situations, where they help us close the new logo partners generally lead the project.

Second greater expenses related to employee wages in person marketing events and Tammy.

Closely watching any discretionary related expenses in the current macro environment.

Third capital expenditures between approximately $4 5 million in the second half of 2022, primarily related to a build out of additional office space.

Finally, our guidance assumes FX rates as of August 4th 2022.

We remain confident about the operating leverage in the business model.

With that let's turn it over to questions.

To ask a question. Please press star one your first question is from Sanjay sang of Morgan Stanley . Please go ahead. Your line is open.

Thank you can you hear me.

Yes, yes.

Perfect. Thanks, guys.

Matt I wanted to pick up on your comments on the economy and then.

<unk> ability to execute in that economy, and when I look at sort of the guidance.

Off a very strong quarter.

Just sort of reiterate it and so I wanted to better understand.

In terms of Youre, not seeing an impact while that we can see a little bit more of a raise on the guidance without sort of FX.

And Mark if you could give us maybe some context on the guidance in terms of what you're sort of assuming in terms of.

Sales cycle conversion rates on your pipeline going into Q3, and Q4 versus what you may have seen.

And in the June quarter, any context around the assumptions on those on those factories would be super helpful. In sort of understanding how you guys are positioning for the second half.

Yes, that's great well of course, we figured FX into the projections for Qs three and four.

And we left a higher range of possible variance because we are in a moment of economic uncertainty whether or not there is a downturn. There is uncertainty and as you know we prefer to be on the cautious side and so that is why we issued the guidance that we did I can tell you.

Deadline preempt your answer that our sales cycles didn't show any difference.

From this quarter to a year ago quarter or for that matter serially.

So the signs for us are not there.

I believe we've got a solid product that is deeply appreciated by our customers and is thus insulated from some of the effects that we might have seen otherwise.

I believe that we are able to pivot.

Our messaging, particularly with an efficiency products like process mining in the floor in order to be relevant in the downturn and I'd like to remind the audience that we have been through several downturns as a bootstrap and so we know exactly how it would be prudent.

In economic strife, if it comes to that.

So I like our position very much.

And in spite of my pessimism.

Economists.

As a business person.

We are right to keep growing.

<unk>, we're not seeing the symptoms and if other companies choose to pullback this as an opportunity to grow past it.

Mark did you want to add anything to that I think Matt.

Still a little bit of my Thunder, but it's pretty much on point I would just sum it up on the guidance piece by saying, we're normally conservative and there is an extra layer of conservatism. That's warranted by the current economic uncertainty that's kind of baked into our guide.

That's super helpful. And then one follow up if I may as we think about sort of vertical and industry concentration I think it's a lot of business.

Some pretty stable industries financial services government healthcare and I think correct me if I'm wrong your major vertical.

Younger Tech start ups, you may have to.

<unk> run more efficiently and optimize their spend your exposure to that to that vertical. If you have any sort of color on on those on those customer cohorts that would be that would be helpful as well.

Yes, well you're right about our primary industries.

I do want to note that our churn is as always exceptionally low in fact, it's at the low end of low with a 99% gross renewal rate, we're just not seeing much churn.

Yes, with regard to exposure to SMB.

And.

I think you mentioned startups that there isn't any significant exposure to those areas.

Great perfect. Thank you for all the context.

Your next question comes from the line of Kevin Kumar from Goldman Sachs. Your line is open.

Yeah.

Hi, Thanks for taking my question I wanted to ask about your recent deal within municipalities. Milan can you talk a bit about the broader opportunity for international government entities are largely from that market is how important our partners, bringing these type of deal.

I Love. This question because Appian has long been very strong within the U S government.

And yet bide, our time before approaching other layers of government be they international or state and local within the U S.

And we're finally branching out.

And so youll see some public sector deals outside of federal U S. I believe it's an extraordinary growth potential sector for us and I think that Youll hear a lot more about it in years ahead.

This is just one example, but.

Our expertise here.

There is a.

Theres a whole special handshake, you got to do to do business with public entity, where we're long used to it and our quality of terrific based on the scale. The criticality of the applications we have deployed.

And it's high time that we branched out from U S. Federal So we're doing that now.

Youll see youll hear more.

Yes.

The customer would help thank you.

Right now I'd say, there's not a shift in the use cases and the assembly of a conservative.

Value proposition centered around efficiency ROI cost optimization.

As a speculative offering to be deployed as necessary.

I believe right now, it's not hardly being deployed but I want our team to be ready for.

Conservative buying patterns in case they emerge.

Okay.

Got it thanks for taking my questions.

Your next question comes from the line of Joseph Mirrors with Truest. Your line is open.

Great. Thanks for taking my questions guys.

That's on the 99%.

Gross retention in this environment.

I'm just curious on the federal side with the public sector in general.

Alright.

That was a major.

Certification for us that IL five.

I'm not aware of any business that had led to within this short period and as you know the public sector sales cycles are long and so we wouldn't expect to qualify for a deal last quarter and then two when it already.

But it's going to be telling.

It's a barrier to entry against a lot of our competition and it's a testament to <unk> high end credentials.

We could get it and get it so quickly so I think it's going to have an impact.

Don't believe it's had an impact yet.

Okay. That's helpful.

And then I think also on the once you call management you guys noted that there were 75 partner written solutions in total.

And I think you said I think you called out in the prepared remarks that that North American fuel supplier had purchased the solution I'm just curious it's.

The number of solutions has grown.

Where do you see that volume.

Thank you.

Yes, the number of partner authored solutions is growing all the time there was a lot of enthusiasm a months amongst our partners at the latest Appian World.

And they were demoing their own solutions and some of them had many solutions to show running on different monitors at their booth.

There is a lot of enthusiasm around this so absolutely the number is growing.

<unk>.

Even better the ones that are most successful are becoming more successful and thats going to be the inspiration for the broadening of the community most of all so.

The answer is yes.

Thanks.

Your next question comes from comes from the line of Jacob Robert <unk> from William Blair.

Your line is open.

Hey, guys.

Thanks for taking my questions. So we've talked about product plasma on the platform for a while now.

You've introduced new solutions over the past year, how is the strength that youre seeing and what you called out.

With customer demand for new new products like portals elevated the awareness of the rest of the Abbvie this platform within customers.

Yes, it's something like portals is wonderful for elevating awareness because it appeals to so many more users are traditionally appian has done in.

Applications, which are used only by members of an organization now there may be a lot of members, but there arent as many members as they're our customers or vendors or suppliers or partners and so if you can create an application that appeals externally you suddenly get a lot more interaction and then.

I love that for raising our profile it really broadens the user count now of course, we're not getting the same dollar.

Per user for external users that we're getting for internal.

But it's very good for raising awareness.

As you mentioned.

Yes, and then seems like the partner activity was really strong in the quarter.

I mean any increase in partner resources as a result of some of the headwinds that some of your other local competitors are seeing in our business as well as just throughout this macro environment.

Yes, definitely yes, we have partners, saying that theyre converting more of their practice over to happen. They are training more of their converting recently, they're converting people who used to be dedicated to a different system the training them on appian.

There is definitely.

Definitely evidence of that.

Great. Thanks for taking my questions and congrats on the solid quarter. Thank.

Thank you.

Your next line comes from.

I'm sorry. Your next question comes from the line of.

Derrick wood with Cowen.

Your line is open.

Oh, great it's Andrew on for Derik, Thanks, guys.

Matt in the past you've talked about shorter sales cycles.

By value selling methodologies and newer pricing model.

Have you seen that helped this quarter and is this helping overall in this environment given the pressures seen on sales cycles in general I know you called out.

A little bit of longer cycle, but it is.

Is it helping relative to past cycles maybe.

Yeah overall, I would say our business.

Is experiencing equals cycles over time that they have not increased nor decreased.

The factors that I expect to lead a decrease wood.

It would be.

Partners, because the partner could eliminate some options expedite a customers decision introduced appian.

I'd expect a shorter sales cycle, a partner deal and I'll also a solution should shorten the sales cycle because there is less speculation less proof of concept you can see it prebuilt I think either one of those factors could be a shortening agent, but right now I would say that our sales cycles are instead.

Consistent.

Great.

I was wondering if you saw any impact from the.

From the peg a lawsuit in the quarter that helped you competitively at all or.

Any feedback from from customers on that.

Yeah.

I have a little bit of feedback from customer and it's just.

It's just the occasional comment about how maybe they're dialing back in.

I can't say for sure that there is an impact yet.

I've got a few circumstantial observations I can't be sure.

But with regards to the verdict itself I can tell you that we believe the verdict is supported by the evidence and the law and we're confident it's going to be upheld.

Great reminder, jewelry did not award as punitive damages, which would be overturned relatively we didnt even ask for punitive damages. Instead, we were awarded unjust enrichment damages.

And as for the timeline, we can't be sure when all the appeals resolved, but two to three years is a reasonable estimate.

Great. Thanks, guys.

Okay.

Your next question comes from the line of Fred <unk> with Macquarie. Your line is open.

Hi, Thank you.

What are the things I wanted to begin with Matt and Mark is around the lines of profitability no matter as youre discussing potentially a more.

Adverse macroeconomic condition and backdrop and positioning Appian defensively you were mentioning how you were thinking about profitable growth I believe earlier too so with this year being another year, where appian is guiding to you as you just guided to.

Adjusted EBITDA usage and negative adjusted EBITDA, how do you think about driving towards profitable growth in the future and how do you find that balance of growth and profitability potentially against the backdrop of an adverse.

Really a recession.

Yes.

That's right and I want to emphasize that our strategy of growth to say cautious and careful and prudent strategy of growth and we're going to measure all of these expenditures.

Against that the.

High revenue retention to make investments.

Okay.

Your new business at a time when our rivals may not be as forceful and acquiring that new business.

And as you can tell from our revenue retention rate like we've got when we acquire a new customer that's a long stream of revenue that we've brought onboard expected revenue might be around that.

That is that's a long string of very likely payments and growth that we will probably experience and so that.

That new customer is worth making an investment on because of the long tail that follows that so we're going to be extremely cautious about this but and then we will only make expenditures where I believe that the return is worth the investment, but I think this may be an environment in which a company with our strengths could still make some wise investments.

<unk>.

Yes.

Sure.

Thank you and then.

I'd like to ask also about traction that you might be seeing with limited or generally how youre seeing the.

Our mix of uptake across some of your different pricing options evolving I know that we've discussed in the past unlimited and what that brings to the table. So if you could provide any update about <unk>.

Trends, there or ways in which customers are choosing appian pricing it would be quite helpful. Thank you.

Yes, sure unlimited remains a minority pricing option, which is to say most customers don't choose it.

I wish every customer would choose it I love It I think it's good for them and good for us, but it is unusual and so most of the time, we need to conform to the pricing preferences of the buyer.

And in an industry that is complicated enough already we choose not to force our preferred model on the customer instead will allow them to buy by the seat by the App.

Yeah.

Thank you.

Your next question comes from the line of Vienot Srinivasan, Sara <unk> from Barclays. Your line is open.

Alright, Thanks for taking my question.

And I just point earlier. This year, you had talked about how the amount of data transfer bursting with Europeans platform was really much higher and how that indicated.

Your platform you said it was a much broader can you just talk about how that's trended throughout the year and especially into June and July and then can you also speak to maybe some of the bundling and pricing leverage that you can.

Hold on that will help you better monetize the platform. Thanks.

First of all I am very excited about the trends in.

Data usage.

The application creation process, which has always been the data integrating to it be having it in real time right aggregating. It has always been the toughest part and it's often required people to be a data expert before they could even build an application and.

And we simplified it radically so it's now drag and drop it's easy data is now just one more object that you can deploy with your mouse onto a process model.

And that has been.

<unk>.

In great amounts and we have multiplied the amount of data coming through Appian speaking at somewhat vague terms here, but multiplied it.

And that momentum is tremendous the trajectory is tremendous and it shows that we're becoming an integral part of the way organizations Digest and process their own information, which was the goal of that feature in the first place. So I believe that has a lot to do with our staying power in our value proposition and fulfilling our goal to be low code, which is to say truly easy.

To use despite being very powerful at the same time. So it's one of the features I'm personally most excited about don't have a number for you today, but the momentum is terrific.

Okay. Thanks appreciate that and then.

Can you just maybe comment on new logo growth. It seems like existing expansion is fine with your cloud retention rate at once at Keene I think you said, but can you just talk about new logo grab how does that kind of evolved throughout the quarter.

That is another thing that we are not disclosing.

Other than to say that new customers I mean, I heard for several stories about it we won big deals right. We won great customers. We are proud of the large world leading institutions that continue to choose Appian.

New to hold that placed in the market has a frequent choice.

The largest business is doing the most important things.

Got it so youre, saying that you didn't really see a change in June or even in July compared to prior trends.

Our partner trends did you say like partner Onboarding maybe.

Partners still touch about 80% of our new logos and Thats been consistent.

So theyre very influential and we mean to work with them because of that and we know they're influential and we want their alliance.

In order to reassure.

The strategic customers that depend on them.

That.

That we and they make a good team to handle their big issues.

Okay. Thank you.

There are no further questions at this time I would like to turn the call over back to the presenters.

Alright, well, we're just going to wrap it up then we appreciate your interest and we look forward to speaking to you in individual sessions.

This concludes today's conference call you may now disconnect.

Q2 2022 Appian Corp Earnings Call

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