Appian Corporation

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

Thank you, operator. Good afternoon and thank you for joining us to review Appian's fourth quarter and full year 2021 financial results. With me today are Matt Calkins, Chairman and Chief Executive Officer, and Mark Klein, Chief Financial Officer. After prepared remarks, we will open the call for questions. Today, you will want to follow along with our earnings presentation. You can download it from the main page of our investor site at investors.appian.com. 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 first quarter and full year 2022. The impact of COVID 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 indication of future expectations. These statements reflect our views 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 a discussion of the material risks and other important factors that could affect our actual results, Refer to our 2021 10K and other periodic filings with the SEC. These documents are also available on our investor section of our website. 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 widely, most directly comparable GAAP financial measures. With that, I'll turn the call to our CEO, Matt Calkins. Matt.

Thanks, Sri, and thanks, everyone, for joining us today. In the fourth quarter of 2021, Appian's cloud subscription revenue grew 39% year over year to $51.2 million. Subscriptions revenue grew by 35% to $75.8 million. Total revenue grew 29% year over year to $105.0 million. $105 million makes Q4 our first $100 million quarter. Our cloud subscription revenue retention rate was 116% as of December 31st, 2021. And our adjusted EBITDA was a loss of $10.0 million. For the full year Appian's cloud subscription revenue also grew 39% year over year to $179.4 million. Subscriptions revenue grew 33% year over year to $263.7 million. Total revenue grew 21% year over year to $369.3 million. Our adjusted EBITDA was a loss of $37.9 million. These results exceeded our guidance. Appian's earnings typically follow a format. We open with a few headline metrics like the ones I just mentioned, and then we present a theme with some customer stories as validation. This time we'll do something completely different. I want to take you behind the curtain for a detailed numerical tour of our business. We will compare Appian today to Appian one year ago. You'll also see some multi-year history stretching back to our IPO in 2017. I'll be sharing some information we've never before disclosed. I encourage you to follow along with the slides in our earnings presentation, though it will not be necessary, as I will speak to all the key numbers. Let's begin on slide five, talking about Appian revenue over the five years since our IPO. There's a slight discontinuity At the 605-606 transition, of course, that's the vertical line down the middle of the chart, but the trend is still clear. Growth is strong and steady, and it's rising. Our total revenue growth is accelerating from a 17% rate in 2020 to a 21% rate in 2021. The subscriptions revenue chart on slide six, if you go forward, please, is very similar, except that the growth rates are steeper because services are excluded. Once again, we see an acceleration, this time from 31% growth in 2020 to 33% growth in 2021. And if we were looking at cloud subscriptions revenue, the growth rates would be even higher at 36% in 2020 and 39% in 2021. SUBS revenue is now above a quarter billion dollars per year versus less than 100 million when we went public. On slide seven, we examined total RPO or remaining performance obligations. Here we showed over three years to give you some perspective on a number that we rarely discuss. We added $79.3 million in new RPO during the year and a record $38.8 million in Q4. Total RPO accelerates to 39% growth in 2021. And on the next slide is another look at RPO. If you go to slide eight, in this case, it's current subscriptions RPO. And once again, it shows an acceleration, albeit a more modest one, from 33% growth in 2020 to 34% growth in 2021. Let's look next at our most substantial customers. See slide nine. Appian added 20 new customers with greater than a million dollars in ARR last year. We grew our total of those customers with more than a million dollars in ARR. Our total grew from 55 to 75. That is both the largest nominal increase and the largest percentage increase since our first full year as a public firm, and a sharp acceleration over the prior year. You'll see a similar pattern in the second chart on this page, which shows customers with greater than a quarter million dollars in ARR. Again, 2021 delivered both the largest nominal increase and the largest percentage increase since our first full year as a public firm. Please follow me to slide 10, where we chart revenue per customer over five years. When we did our IPO, we spoke a lot about our nearly half million dollar revenue per customer ratio. I felt it showed we were delivering a lot of value, and so I brought it up a lot in the investor meetings. This chart shows that we've not quite maintained that ratio, but we haven't fallen too far from it either. We're still at more than $450,000 per customer in 2021. And most importantly, the subscriptions revenue per customer is actually up over these five years. It's only the services revenue component that's declining, and you would expect that in light of our strategy to offer more of our services opportunities to our partners. Let's put a spotlight on that mix shift for a moment. Please flip to slide 11. We're a different company than we were at our IPO. Back then, the mix was nearly even between subscriptions and services, Now it's almost three quarters, one quarter. Our willingness to let services decline has weighed on the revenue growth rate, of course, but this was our strategy. We engage with the partner community to enable better subscriptions growth and deployment capability. Our platform became more powerful in 2021. You can see this on our simplified architecture slide, which is slide number 12. It shows the three major components of our suite, process mining, workflow at the center, and automation. We have evolved from a single offering at IPO to a suite today. We have an end-to-end low-code platform that takes customers from discovering new processes to designing them to automating them. It's done with native technology and a unified feature set purchased as a single item, delivered together, upgraded together, and used together. The final piece of this puzzle came last month when we released our process mining functionality based, of course, on last year's acquisition of Lana Labs. As our platform grows, so grows our customers' use of it. Let's look at slide 13. In 2021, customers ran 4.5 billion workflows on Appian Cloud, an increase of 81% over 2020. and an acceleration on the 77% growth between 2020 and 2019. Customers use Appian workflows to unify people, processes, and data. And the more technologies we integrate into Appian workflows, the more they use them. I think this is an essential slide. And there's an important connection between the prior slide that showed growing functionality and this one that shows growing usage. Since we're looking at usage growth, here's another angle. If you'll flip, please, to slide 14. Slide 14 charts the user logons on our cloud product. We're at 64 million last year, up 45% over the prior year. After two big growth years, we're running at 4x the volume we had in 2019. Changing gears now to customer experience, please go to slide 15 where you'll see we've depicted the growth in our elite support program. Our customers use the elite support services offering with benefits like high availability and 24 by seven by 365 support to ensure the success of their most important deployments. You can read it as a rough proxy for how much our product is being used in a mission critical way. Customers subscribing to this elite support program rose 39% last year. The revenue generated by this program rose even faster by 63%, indicating that elite support was purchased for larger deployments than before. Our cloud SLA uptime was 99.995%, very similar to the year prior, and once again, exceeding our commitments. Overall, our customers have demonstrated a high level of satisfaction with the Appian experience. You can see the stats on slide 16. Buyers rank us highly. The Gartner Pure Insights survey, based on customer reviews, ranked Appian above all of our top competitors. Appian was singled out in that study as the sole customer's choice in the low-code industry. for clients whose annual revenue exceeded $1 billion. Buyers also awarded us top rankings in surveys conducted by TrustRadius and G2. Our cloud subscription renewal rate was 98% in both 2020 and 2021, which ranks us among the elite of SaaS companies. We finished 2021 with 80% more partner practitioners than we started. And our overall community membership, the total Appian ecosystem, including developers and students and prospective customers, it more than doubled. It's not just our customers that are happy. Please look to slide 17 to see the situation amongst Appian employees. For the eighth year in a row, we were recognized as a top workplace by the Washington Post. Again, we were ranked the number one software company in the DC area. 92% of our employees rate us a great place to work, according to the survey by the same name. I'm told a typical U.S.-based company earns this recognition from 59% of their employees. Also, look at our employee retention rate over the past five years on the chart to the right, always unusually high and dipping only slightly to 85% during the great resignation. We put a lot of emphasis on our culture and values, and I believe we've created a workplace that's more than just a place to work. The rest of the deck is our typical quarterly data reporting, so I'm not going to talk through the remainder of the slides. I hope this glimpse behind the curtain has been useful and gives you a better sense of where our business stands relative to last year and relative to where we were at our IPO. I hope it also serves to explain why Appian chooses to make the investments that it makes in our business. We take the decision to invest very seriously. We challenge it on a regular basis. We feel confident, based on the dynamics of our industry and our business, that the investments are well warranted. I want to remind our investors that Appian grew to its IPO as a bootstrap, and we are well familiar with financial discipline and profitability. Now, I'll turn the call over to Mark for a deeper discussion of our financials. Mark?