Appian Corporation

Greetings. Welcome to the Appian Fourth Quarter 2019 Earnings Conference Call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note, this conference is being recorded. At this time, I'll turn the conference over to William Mena from Investor Relations. Please go ahead.

Thank you, Rob. Good afternoon, and thank you for joining us to review Appian's fourth quarter and full year 2019 financial results. With me on the call today are Matt Calkins, Chairman and Chief Executive Officer, Mark Lynch, Chief Financial Officer. After our prepared remarks, we'll open up the call for a Q&A session. During this call, we may make statements related to our business that are forward-looking statements under the federal security 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 2020, 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, ability to maintain and upsell existing customers, and our ability to acquire new customers. The words anticipate, continue, expect, estimate, intend, will, and similar expressions are intended to identify forward-looking statements were similar indications of future expectations. These statements reflect our views only as of today and should not be reflected upon as representing our views of any subsequent date. These statements are subject to a variety of risks and uncertainties that could cause our 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 2019 10-K, followed with our other Thank you very much.

Thanks, Will, and thank you all for joining us today. Under ASC 605, in the fourth quarter of 2019, Appian's subscription revenue grew 28% year-over-year to $43.1 million, and our non-GAAP operating loss was $8.7 million. For the full year, subscription revenue grew by 34% to $155.1 million. and our non-GAAP operating loss was $32.7 million. Our subscription revenue retention remained strong at 116% as of December 31st, 2019. These results exceeded our guidance. Also, we don't guide to this, but at 68%, Q4 has the highest gross margin we've ever announced. We added 109 net new subscription customers last year. At the same time, we maintained a total annual revenue per client of about half a million dollars. We finished the year with 48 seven-figure ARR customers and doubled the number of customers producing at least $3 million of ARR. Last month, we acquired Novire, the producer of Judoka Robotic Process Automation, or RPA. It's the highest-rated RPA product. on Gartner Peer Insights of those above a minimum threshold of reviews. It's Java-based, built for the cloud, and highly regarded by customers, making it a perfect fit for our platform and our enterprise customer base. Adding RPA to our platform makes Appian a one-stop shop for automation, capable of natively orchestrating humans, bots, and artificial intelligence within a workflow. Appian has built strong partnerships with the leaders of the RPA market, like Blue Prism, Automation Anywhere, and UiPath. We're planning to keep and even strengthen these relationships to the degree that our partners will facilitate. That's because of the way I think this market is going to mature. RPA is sold in a decentralized fashion to the bottom of the enterprise, so what's likely to happen is that the typical enterprise will own multiple RPA tools. If so, that puts value on the orchestration layer to manage and monitor all those bots. And here Appian has a unique advantage. We are already in the market of orchestrating bots. So we're a reputable firm. We're happy customers. We have a commitment to openness. So that's our priority as we approach RPA. It's openness. According to Forrester's Q2 2019 Robotic Process Automation Survey, 79% of enterprises have deployed two or more RPA vendors and 55% of them expect to deploy even more vendors three years from now. So you see, we're not the only ones saying it. Automation, as we're calling this market, is a combination of workflow and new workers. New workers like RPA and artificial intelligence and rules. This merger of markets brings Appian and our RPA partners into a state of coopetition but we're going to emphasize cooperation. We're already a leader in the part of this market we want to win, using workflow to bring together bots from multiple vendors. We'll enhance the experience of our customers that our customers have with each of our partners, no matter if they're working with Blue Prism, UiPath, Automation Anywhere, or any combination of the three. And of course, if our customers want, they can use our bots as well. Back to the Forrester survey for a second. Forrester also found that 69% of respondents ranked security and robot governance among their primary technical concerns with RPA. These two areas are happy and straight. We believe RPA purchase decisions will come to be made at higher levels in the organization and more often involve the CIO. That's convenient for us because we customarily sell to the CIO. At the high end, the purchase will be made less for convenience and more for reliability, scalability, security, and governance. These are Appian strengths. These are the reasons we've been successful in workflow and low code, so we're well positioned for the way I expect automation to evolve. An example of our ability to coordinate work between RPA, AI, and people is a governmental agency that became a new Appian customer in Q4. The agency registers, processes, and adjudicates veteran benefits. They purchased Appian to process almost 2 million disability compensation forms per year. Employees used to manually sort, mail, and type information into their claims management system. With Appian, they'll digitize forms using intelligent document scanning technology, that's the AI. deploy Blue Prism bots to populate data into the system, that's the RPA, and create cases for employees to adjudicate, that's the humans. Appian will orchestrate this entire workflow, coordinating bots, AI, and people. Another notable example is a Fortune 500 analytics provider and longtime Appian customer. The firm uses Appian to coordinate bots, AI, and people to publish news articles. Blue Prism bots gather data from market information sources. Proprietary AI finds trends in the data, and then the firm's analysts draw insights to finalize the articles. This entire process was automated in just six weeks with Appian, boosting employee efficiency by 50% to publish tens of thousands of news articles per week. In Q4, This firm purchased over a quarter million dollars of Appian licenses to expand this application to new users in another department. Our partners continue to be a large part of our success. In Q4, they doubled their new logo contribution compared to Q4 2018. In 2019 overall, they contributed 70% more new logos than they did in 2018. Notably, partners used our platform's speed to their advantage in 2019. For example, a partner helped us win a quarter million dollar deal with a top regulatory agency in the United States, making them a new customer in Q4. Appian will replace the legacy constituent case management system in a major division. Our competitor requested one month to complete their demo, while our partner delivered an Appian demo in just three days. Our partner won this deal by leveraging the speed and flexibility of our platform. Speed was also instrumental for a partner who won a Q4 deal with a faith-based health insurance organization. The firm became a new customer with a half million dollar purchase to replace their legacy benefits and claims software. Appian will consolidate medical data and make it available on mobile devices for hundreds of traveling missionaries around the world. Our partner won this deal because they completed an Appian proof of concept in just three days. Our patented low-code technology allowed them to build the application once and easily deploy it to all required devices. In 2019, a partner's quick deployment helped us expand at one of the largest buyers of secondary market mortgages. Partner was engaged to build an operations command center and financial management application in Q2 2019. Because our partner delivered that Appian project ahead of schedule, the customer purchased another half a million dollars of software in Q4. They'll add more users to their command center and build a new enterprise-wide risk management application. Our speed also helped us win direct deals. For example, a top five global elevator manufacturer became a new Appian customer in the fourth quarter by purchasing almost a million dollars of software. Their first application will be a global billing management system. We won this deal because just one of our sales consultants accomplished more in a three-day proof of concept than had been produced by the incumbents project team in four months. We sold an expansion at a Fortune 500 bank financial institution leveraging our eight-week Appian guarantee. The bank became a new Appian customer just two quarters ago when they purchased a license to build a lending application for their wealth management and commercial lending divisions. The Appian Guarantee Project demonstrated the speed and flexibility of the platform, giving the bank confidence to make an additional multi-million dollar purchase in Q4. They will use the new licenses to build 30 new applications. They increased their Appian investment by 500% just months after becoming a customer. Appian Cloud is a differentiator, especially with new logo customers. In 2019, 93% of TCV for new logo customers was related to Appian Cloud. This is a significant increase compared to 79% and 66% in 2018 and 2017, respectively. Our customer growth in the cloud supports our belief that our cloud offering is the most robust among our competition. We keep our edge by constantly enhancing our offering and making it easier for our customers to run their applications. With the addition of five regions in 2019, Appian Cloud now operates in 19 regions across 14 countries. We also added three new cloud certifications in 2019. High trust for our healthcare clients. ISO 27001 for our global customers and NIST cybersecurity to demonstrate our ability to manage cybersecurity. Additionally, we established a partnership with Smartronics to deliver Impact Level 4, also known as IL4, cloud security for defense agencies. These additional features helped attract new customers and expand within our existing customer base. In Q4, a top 15 global biotechnology firm became a new Appian customer. At this point, about half of those leading biotech companies are Appian customers. This new customer purchased almost a million dollars of Appian licenses to replace its inflexible research grants system. For Appian, researchers submitted grant applications online, and the system notified its award panel to review. However, the panelists could not collaborate in the system, so they retreated to email and offline channels. Now, they will run the entire process in Appian Cloud, providing real-time visibility and allowing grants to be awarded faster. We won this deal after proving our platform's flexibility with a feature-rich custom demo and passing IT's stringent cloud requirements. In Q4, a governmental agency overseeing employment regulations expanded their use of Appian Cloud by purchasing over a million dollars of licenses. Three years ago, the customer selected Appian to replace 39 disparate case management systems, agency-wide. With this purchase, our customer will expand the use of Appian to almost half of their sub-agencies. They chose our platform because of its ability to securely automate their unique workflows in the cloud. Finally, last example. A top five oil and gas services provider became a new Appian customer in 2018. In Q4 2019, it doubled its Appian investment with a multi-million dollar software purchase that uses our software to mobilize resources to service remote oil rigs. With this new purchase, It will expand Appian into nine new business units, increasing its deployment to tens of thousands of employees. They chose our platform because Appian Cloud allowed them to quickly deploy scalable applications. Our growth last year demonstrates that companies increasingly choose our low-code automation platform to write and run unique applications. Appian enables them to fully automate any process, integrate with the data anywhere it resides, and build their apps up to 20 times faster than with traditional methods. Our strong customer outcomes and newly augmented automation platform capabilities will allow us to address a larger market and expand within our base in the new year. Now I'll turn the call over to Mark for a deeper discussion of our finances.