Appian Corporation

and welcome to Appian Fourth Quarter and Fiscal Year 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Stacey Mortenson, Investor Relations.

Thank you. Good afternoon and thank you for joining us today to review Appian's fourth quarter and full year 2018 financial results. With me on the call today are Matt Calkins, Chairman and Chief Executive Officer, and Mark Lynch, Chief Financial Officer. After prepared remarks, we will open up 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 Private Securities Litigation Reform Act of 1995, including statements related to our financial results, Trends and guidance for the first quarter and full year 2019. The benefit of our platform industry and market trends are 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 words anticipate, 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 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 discussion of the material risks and other important factors that could affect our actual results, please refer to those contained in our 2018 10-K filing and other periodic filings with the SEC. These documents in the earning call presentation are available on the investor relations section of our website at www.appian.com. Additionally, non-GAAP financial measures will be discussed on this conference call. Please refer to the tables in our earnings release and the investor relations portion of our website for a reconciliation of these measures to the most directly comparable GAAP financial measures. With that, I'd like to turn the call over to our CEO, Matt Calkins. Matt.

Thanks, Stacey, and thank you all for joining us today. In the fourth quarter of 2018, Appian's subscription revenue grew 44% year-over-year to $33.8 million. Our subscription revenue retention remained high at 117% as of December 31, 2018. For the full year, subscription revenue grew by 40% to $115.7 million. These results exceeded our guidance. Our growth in 2018 demonstrates the increasing value we obtain on a per customer basis. Of 87 net new subscription customers last year, 10 purchased a million dollars or more of software on a TCV basis. While adding more new logos than ever, we also increased total annual revenue per client to a high of $520,000. We ended the year with 38 seven-figure ARR customers. I'll say that again, 38 seven-figure ARR customers, up 58% from 2017. Appian is the first and only company to go public as a low-code vendor so far. A low-code platform enables users to quickly and intuitively draw their idea for a new application, and then the platform translates their drawings into software. There are two natural consequences of the low-code idea. First, it's fast. Everyone understands that. Second, the applications are more powerful because they are effectively written by the low-code product. Here's what I mean. If you write an application on the Appian platform, basically you tell us what the application should do, and then we give you an application that does that thing. We are translating. We're writing the application, really. And if we're going to write it automatically, we might as well write it with a degree of advanced functionality that you wouldn't have had the time to implement yourself. For example, the application is going to run natively on every mobile device and every cloud. It'll be extremely scalable, meet the highest security standards. It'll have outstanding integration capabilities, automated testing, failover if you want it, and a lot more. You won't have to specify that you want these features in order to get them. They won't take any more time, and for the most part, they don't cost any more money. They're what I call free power. The natural result of having a platform write your application for you is that the application can be arbitrarily powerful. So, while in the past the quality of an application would be a function of the developer, now the quality is a function of the platform. This is a profound shift and it augurs well for Appian because Appian has proven for years that it can automate the most mission critical processes and applications. We signed a major manufacturing company as a new customer in the fourth quarter. This Fortune 100 firm picked us over a major competitor because the customer specifically wanted a recognized leader in low code. They needed to replace the legacy system for managing premium freight requests, which are triggered when products or components need to be shipped outside their standard operating procedures. An Appian partner successfully built this application in six weeks to support a 4,000 person division. including executives who will approve requests using their mobile devices. The customer expects the application to save them $9 to $10 million in the first year. We also added a top five global credit card company this quarter. They needed to automate the process used to collaborate with businesses to create branded credit cards from account onboarding to card management. Before Appian, their business partners would have to complete a series of paper forms which would then be manually processed. With Appian, the company digitized these forms for roughly 100,000 submissions per year. One of the customer's employees learned how to use Appian after watching our sales consultants build a custom demo on site. He extended that demo into a free cloud trial. And by the way, our free trial experience is much improved lately. This firm finished their branded credit card onboarding application in just eight weeks. A top five global insurance broker also became a new customer this quarter. They needed to replace their legacy system for tracking commissions within their health and benefits division. Their legacy system has been expensive and complicated to implement and did not keep pace with the company's growth. The company estimated that an internal build would take up to a year, but in only two weeks, a single Appian sales consultant built a custom demo that included the primary features needed in their application. Our speed was critical to them because they have an executive mandate to move off of their legacy system by the end of the first quarter. We also won at the Federal Motor Carrier Safety Administration, which is responsible for regulating and providing safety oversight for commercial motor vehicles and their drivers in the United States. The agency became a new customer because they needed to replace a hard to maintain legacy system that was used to track medical examiner certifications and commercial driver medical exam results. In the new application based on Appian, tens of thousands of medical examiners will be able to submit the results of their medical exams for agency review. We were selected over a major competitor because the agency can deploy onto our secure FedRAMP-approved cloud platform while retaining the flexibility to migrate to a different cloud if desired. Our European business produced solid results in 2018. The team increased subscription revenue by 74%, grew total revenue by 52%, and closed deals with 38 new customers. For example, a big four accounting firm expanded their use of Appian in the UK by purchasing millions of dollars of additional licenses in Q4. They needed to deliver a managed due diligence service for their customers. In the past, they provided these services through a tool built on one of our major competitors. They switched to Appian and they'll use our platform now for up to 300,000 know your customer verifications per year. We also won a seven figure deal with one of the largest companies in Italy. This new customer provides postal, logistics, communications, and financial services. Their IT team needed a platform to modernize their businesses, including 35 back office processes. They'll first use Appian within their financial services division to manage fraud investigations. Before Appian, thousands of agents had to log into several systems to investigate a fraud report, but when they complete their implementation, agents will be able to fully investigate and act on fraud reports without leaving Appian. Our UK team won a seven-figure deal with a top 10 global investment bank this quarter. The new customer wanted to manage deal life cycles within their global transaction banking business. Before Appian, managing a deal required users to access up to seven legacy systems. Now, all knowledge gathering and client servicing for 80,000 clients will happen in a single Appian interface. We also won a seven-figure expansion with the UK division of a top five European bank. They turned Appian to enhance their compliance and business banking operations. The bank will use Appian to unify data about their customers to improve customer service, track and manage 50,000 suspicious activity reports per year, and improve underwriting operations for small to medium businesses. We won due to our focus on customer outcomes and our platform's quick time to value. Partners are increasingly influencing more of our business. They helped us obtain about half of our new customers last year. They also influenced about a third of the customers who ordered more than a million dollars of software in 2018. As we do more business with our partners, we have introduced new programs to ensure customer and partner success. First, in 2018, we improved and relaunched our A-scores program. We grade every Appian practitioner's skill with an A-score. It's what we call it, an A-score from one to three. This helps customers hire the right team and rewards partners who staff projects with real experts. The point is to ensure good outcomes on Appian deployments. Second, we launched a new program called Appian Architect Services. It's an advisory service to provide additional support to our customers and partners. We successfully tested this program in Q4, so this year we'll roll it out globally. AScores and Architect Services will improve our already strong customer outcomes. which have been the engine of Appian's growth since we started the company. Now, I'll turn the call over to Mark for a deeper discussion of our financials.