Appian Corporation

Good day, everyone, and welcome to the Appian Corporation third quarter 2021 earnings call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Sri Anantha, Director of Investor Relations. Please go ahead, sir.

Thank you, operator. Good afternoon, and thank you for joining us to review Appian's third quarter 2021 financial results. With me today are Matt Hawkins, Chairman and Chief Executive Officer, and Mark Lynch, Chief Financial Officer. After prepared remarks, we will open the call for questions. During this call, we may make 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 1995. These include comments related to our financial results, trends and guidance for the fourth quarter and full year 2021, the impact of COVID-19 on our business, and on the global economy. the benefits of our platform, industry, and market trends, our go-to market and growth strategy, our market opportunity and ability to expand our leadership position, 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 beliefs only as of today. They do not represent our views as of any subsequent date. They are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For discussions of the material risks and other important factors that could affect our actual results, refer to our 2020 10-K and other periodic filings with the SEC. These documents and the earnings call presentation are available in the investor section of our website, www.appian.com. Additionally, non-GAAP financial measures will be discussed on this conference call. Refer to the tables in our earnings release and the investor section of our website for a reconciliation of these measures to their most directly compatible GAAP financial measures. With that, I would like to turn the call to our CEO, Matt Calkins. Matt.

Thanks, Sri, and thanks, everyone, for joining us today. Third quarter of 2021, cloud subscriptions revenue 36% year-over-year to $46.7 million. Subscriptions revenue grew 32% to $67.2 million. Total revenue grew 20% year-over-year to $92.4 million. Our cloud subscriptions revenue retention rate was 117% at quarter end, and our adjusted EBITDA was a loss of $12.0 million. Two years of global tumult have tested every business's ability to change. Agility is now a top priority for every organization. Companies are scrambling to adapt to new customer buying patterns, new health practices, and new regulations. This kind of change is done with software processes. The burden of facilitating change like this falls on the IT department, and expectations of IT have risen dramatically. You can see this in studies like the one that Appian sponsored with the Economist Intelligence Unit this autumn. The IT department has finally found the spotlight. When I was a consultant in the 90s, I visited a lot of IT departments to tune their databases, and they had the worst real estate, satellite buildings, low ceilings, basement floors. IT got the worst of it because it was considered less important. That is changing now. After two years of COVID, IT is a hero, important like marketing or finance. Without enterprise technology, we couldn't have been productive through the pandemic. Imagine if we'd approached the plague of 2020 with the technology of 2010, even. What a difference modern technology has made to enable dispersed productivity and adopt new processes. IT saved the economy these last two years. So that's the preamble, but here's my thesis. Organizations need the ability to change, above all. and they need IT to deliver. With that in mind, over the past two years, Appian has created exactly the product we think IT departments need now, a change engine. Our goal is to assemble a set of technologies that will enable businesses to create new processes the fastest. Workflow is the heart of it, of course, because that's, in my opinion, the world's fastest and most intuitive way to program. But we've gone way beyond workflow now. We have a suite. It begins in discovery, finding your next opportunity for process improvement, and it ends in automation, executing your new processes with a full complement of digital workers. Appian's change engine starts with process mining. Process mining is a new industry. It's like an X-ray, peering inside your business, to detect inefficiency and recommend improvements. Process mining by itself is just a diagnostic, but when coupled with workflow, it becomes actionable and powerful. Now the diagnosis can be followed automatically by the cure. The cure is creating a workflow to coordinate the inefficient processes you found. For all the excitement in this emerging consolidated market, few firms can claim to be strong in workflow. Appian has been a top leader in this technology for more than a decade. Workflow delegates. It sources data and routes work, but it doesn't do the work. What's not done by people these days is done by automation, which is to say by digital workers. Digital workers include RPA bots, AI, intelligent document processing, and business rules. And they work best in concert. each handling those jobs for which they are best suited. Appian has spent the last two years assembling a product suite that fits this moment. Our product is a change engine, getting clients from zero to 60 on a new process as fast as technology can enable. In the same platform with all native Appian technology, our clients can go from discovering a new process to designing it to automating it. I'd like to share some examples of how our customers use these tools together. Entirely by coincidence, my first two stories feature luxury automakers. First, a leading European car brand became a new Appian customer earlier this year. It's modernizing its business to save tens of millions of dollars annually. It uses Appian to digitize supply chain processes, including the movement of car parts across Europe under Brexit regulations. Our platform coordinates shipping agents and RPA bots to complete this work in collaboration. In Q3, it purchased thousands of new licenses to add third-party logistics providers to its workflow. While these projects are underway, the company will also mine processes in its financial and procurement groups to discover future Appian projects. This story has it all. The entire suite used together and synergies everywhere. Our next automotive manufacturer story involves an international luxury car brand that became a new customer this quarter. It selected our low code to quickly unify its business. Appian is consolidating enterprise systems so the company can assess inventory and launch promotions that incentivize dealerships to sell cars faster. Before Appian, the company was slow to deliver these incentives. Its incomplete systems required manual workarounds. We won this deal after proving our speed by building complex proof of concepts in just one week. We're seeing good international growth. I'll mention a few notable international deals. First, we landed a sizable expansion at a global elevator manufacturer and logistics provider, making it a multi-million dollar customer. The company uses our platform to manage customer installations. In Q3, it purchased more licenses to manage global installations and quality inspections. Field installers will use an Appian mobile app to report their progress, while corporate workers at desktops monitor their locations. Inspectors will later visit sites and use Appian to report on installation quality. Before, the company lacked visibility on dispatched workers and paid penalty fees for late projects. We won this deal because our low code allows the company to deliver timely projects and meet quality standards. Second, a top global bank. Second example. Top Global Bank, an existing Appian customer, purchased a seven-figure software deal in Q3. The group runs a large Appian center of excellence with hundreds of internal resources and partner developers. They've built dozens of applications to automate processes across their enterprise, including audit, compliance, customer management, and corporate operations. This quarter, they bought more licenses to deploy additional applications. Finally, a restaurant franchise and licensing chain needs to digitize its process for onboarding and managing international franchisees. It became an Appian customer in Q3. It bought Appian, including a solution written by an Appian partner, and I love it when that happens, to orchestrate its franchisee lifecycle. Before, the company managed franchise relationships manually because it couldn't unify its systems and data and employees into a single workflow. Now, With Appian, the company will run its processes 30% faster and open more than 10,000 new restaurants in the next decade. Our federal sector also performed well this quarter. Several customers made large software purchases for new applications. My first example is a US government organization that administers federal funding. This long-term Appian customer added licenses multiple times this year. In Q2, it bought licenses to process funding requests for constituent groups in accordance with a federal relief mandate. The app was delivered in just weeks, and tens of thousands of users have been approved for billions of dollars. Now, in Q3, it again purchased software to approve facilities-related funding requests for healthcare groups. We won this deal because our low-code is flexible and can deliver the customer's new project before the end of the year. Another federal organization that implements monetary policy, became a new Appian customer in Q2 of this year. It selected our platform to manage its mergers and acquisitions process for banks nationwide. A quarter later, it bought more software to modernize a legacy regulatory system. Appian will consolidate disparate systems and provide governance for thousands of users. In just two quarters, the group became a multi-million dollar Appian customer. Our federal vertical did well this quarter partly due to the popularity of one solution called Government Acquisition Management, or GAM, or GAM. It's actually a suite of four distinct solutions written by Appian on the Appian platform that manage the highly regulated federal procurement lifecycle. These solutions gather requirements, complete vendor evaluation and source selections, award contracts, and automate contract clause writing processes. Appian solutions, including GAM, are written to be used together. They're standardized, and they upgrade with our platform. They share common data definitions and common reports, and they feature built-in calls that talk to each other. It is traditional amongst our customers and our competitors to view these applications in silos, but Appian brings them together. Integration and compatibility is a theme for us. It was true for the components in our change engine, and it's true for our solutions. Customers love being able to run their end-to-end procurement cycle on one platform. It can give them faster throughput, better data visibility, and better decision making. Some Appian customers buy all four GAM solutions at once. Others start with just one and later expand by purchasing the remaining solutions. For example, a federal defense agency purchased our full-gam solution suite and became a new Appian customer in Q3. The agency chose Appian to modernize its costly and inflexible legacy system. It'll deploy Appian to over 1,000 users who will process billions of dollars in awards annually. We won this deal after automating the procurement lifecycle of other federal agencies who serve as happy references for us. Another federal defense command overseeing national cybersecurity needs, an enterprise-grade procurement system, it selected Appian and became a new customer last year. It started by purchasing one of our GAM solutions, requirements management. Now, in Q3, it purchased a second GAM solution, awards management, to automate the next phase of its build-out. Appian is a low-code pioneer. We were the first to go public as a low-code vendor several years ago. Now, we're realizing the next generation of this technology. It's more than just workflow now. It's a change engine with the power of process mining, workflow, and automation combined in a single platform. Now, I'll turn the call over to Mark for a deeper discussion of our financials. Mark.