Appian Corporation

Greetings and welcome to the Appian Corporation first quarter 2022 earnings call. During the presentation, all participants will be in a listen-only mode. Afterwards, we'll conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, this conference is being recorded Thursday, May 5, 2022. I would now like to turn the conference over to Sri Ananta, Senior Director of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, and thank you for joining us to review Appian's first quarter 2022 financial results. With me today are Matt Calkins, Chairman and Chief Executive Officer, Mark Matthaus, Chief Financial Officer, and Mark Lynch, former 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 second quarter and full year 2022, the impact of COVID-19, including the emergence of new variant strains of COVID-19, on our business and on the global economy, the benefits of a 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 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 risk and other important factors that could affect our actual results, refer to our 2021 10-K and other periodic filings with the SEC. These documents are 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 recently comparable GAAP financial measures. With that, I would like to turn the call to our CEO, Matt Calkins.

Thanks, Sri, and thanks, everyone, for joining us today. In the first quarter of 2022, Aptos cloud subscription revenue grew 37% year-over-year to 53%. Subscriptions revenue grew by 31% to $83.7 million. Total revenue grew 29% year-over-year to $114.3 million. Our cloud subscriptions revenue retention rate was 117% as of March 31st, and our adjusted EBITDA was a loss of $3.4. Last week, we hosted our annual conference in person for the first time since 2019. It was hybrid, really, with equal registrants in person and remote. It's great to get back to personal meetings. I loved all the customer presentations. The on-stage hackathon was exciting, and I got to interview Malala. Seeing the enthusiasm in the halls reminds us that we have a great product, a market favorite product, and happy customers. No complaints all week. At least, I didn't hear any. These are the same customers that have just voted us a customer's choice in Gartner's low-code quadrant again this year. We've been a customer's choice every time since Gartner started doing this quadrant. In fact, we're the only customer's choice for large companies with more than a billion dollars in revenue two years in a row. We're also the only customer's choice for medium-sized businesses more than $50 million two years in a row. This is important because it shows our success in broadening our appeal to the mid-market. We're also the only customer's choice two years in a row for North America, Africa, Middle East, and Europe. Happy customers are the foundation of our company. There's another way to bootstrap a fast-growing software company without happy customers. I don't know it. They're the reason we're here as a public company and on the phone with you today. As a result of that customer commitment, our gross renewal rate is always elite. In Q1, it was 99%. Perhaps because of that high customer satisfaction, our community has been growing at record levels. Our community is all the buyers, users, and practitioners in the Appian ecosystem. This community has more than doubled year over year, 116% growth to be precise, and we've broken our monthly record of new community members six months in a row. We highlighted some important product advancements at Appian World. We released a Know Your Customer, KYC, financial services solution. This solution is usable standalone, but designed to be compatible with the rest of our financial services suite. When using all three parts of the suite, you have a really seamless series of applications that follows the customer lifecycle. Solutions allow us to attract new logos and expand within existing customers. For example, we sold the two customer lifecycle management solutions, the ones that were available at the time, to a leading global investment management firm, making them a new Appian customer in Q4. Appian will digitize the firm's manual processes, allowing them to reduce the time it takes to onboard and manage hundreds of institutional clients annually. When the firm is ready to extend Appian to verify new client identities, it will be easy to adopt our Know Your Customer solution. Appian gained a provisional authorization at impact level five, known as IL5, for Department of Defense customers in Q1. This is a major accomplishment, and it demonstrates our unusually strong security capability. As you may recall, we were one of the first 25 companies in the world to earn the government's earlier FedRAMP certification. IL5 goes well beyond FedRAMP. As far as we can tell, we are just the 15th company in the world to achieve IL5 authorization. It says something. about the industrial strength of our offering and the seriousness with which we take security. In achieving this distinction, we're ahead of every one of our competitors, unless you count Microsoft, and I don't. Appian's emphasis on security sets this apart. A U.S. intelligence agency became a new Appian customer in Q4 last year. It'll use our low-code platform to automate contract writing processes as it decommissions an outdated legacy system. We won this deal over a competitor because our platform is secure and its organizations build flexible apps. With our IL-5 authorization, agencies like this one will be able to quickly deploy apps that require the highest security standards. Let me tell you about another feature we just launched. Appian Portals and GA in Q1. Appian applications to external users in high volumes without requiring a login. Portals offers a public-facing front door to Appian applications. Portals are quick to deploy and to develop. They connect with all existing Appian applications, and they scale to handle extreme usage. Here's an Appian Portals example. A Fortune 500 oil and gas provider has been an Appian customer since 2018. Its operational excellence team uses our platform to oversee the resource management operations and compliance of its oil refinery projects. It has deployed several applications, including one that manages contractor visits. Four Appian back office employees used email. to collaborate with internal stakeholders and external contractors, to request field visits, complete paperwork, approve visits, and schedule onsites. Last year, Appian automated the internal review process with our low-code platform. Now, we're automating the front-end contractor submission process with Appian Portals. Tens of thousands of contractors will submit their forms through a portal, triggering the internal review process we already automated. Appian Portals opens our platform to new user groups. I'm going to share a few customer stories with you this quarter, especially since the format of last quarter's earnings call left no time for them. Many customers who purchased licenses in Q4 have already built and deployed applications by Q1. That's true for a leading Australian bank that became a new Appian customer late last year. The bank is modernizing the enterprise and wants to standardize its IT. It selected our low-code platform to replace a series of inflexible on-premises systems with Appian applications deployed in the cloud. Its first app was live within eight weeks and allows its retail banking group to refinance mortgages for individual customers. Next, a leading European automotive manufacturer became an Appian customer to modernize its business and improve efficiency. It uses Appian to automate supply operations. Its very first app manages the effective Brexit regulations on supply shipments from Europe. Since then, the company has quickly deployed several more apps to thousands of users. In Q1, it purchased a seven-figure software deal for a new app that will track supply chain risks in the wake of global shortages. Appian will alert the company when key automotive parts are unavailable so it can identify alternatives and escalate concerns to suppliers. This app will be delivered in eight weeks. We won this new project because Appian allows the manufacturer to quickly automate their complex work. We saw continued strength in our key verticals this quarter, particularly life sciences and financial services. A leading telehealth and insurance provider purchased a seven-figure deal for Appian licenses and became a new customer in Q1. It selected our low-code platform to digitize customer service processes, like managing patient claims and verifying the in-network status of local physicians. Appian will replace a costly, inflexible solution. Our platform will integrate with over a dozen systems and bring workers across departments together in a single workflow. A top global asset management company has been a customer for several years. It's built 80 Appian applications for over 10,000 employees across retail investing, investment management, data governance, and portfolio management. In Q1, it purchased more Appian licenses to replace an institutional investment system. Front office employees will use Appian to initiate customer requests like making an investment or reallocating funds and pass them to compliance reviewers. These reviewers will then verify the request and complete the transaction. A US insurance regulator bought a seven-figure deal in Q1. This group is replatforming its enterprise. It selected our low-code platform to replace a decades-old compliance filing system for private carriers and state regulators. Before Appian, the group experienced filing delays and manual workarounds because its on-premise system was too inflexible, too costly to maintain. Now it will deploy Appian to standardize its filings nationwide while accommodating regional requirements. The group expects to process filings 50% faster with Appian. We won this competitive deal after proving our power and speed during an extensive proof of concept. We appreciate the loyalty and enthusiasm of Appian buyers. The trust of our customers remains Appian's greatest asset. We've been in the news a few times lately over our policy towards Russia. I will briefly explain it. Appian has been in business for 23 years and we have never done business with Russia and we never will. We feel it's not possible to do deals in that country without supporting him, so we've stayed out. There are a lot of public companies that have declared temporary moratoriums on business in Russia. I'm not aware of any others that have made non-temporary decisions and have set that policy long before the Ukraine invasion. Finally, I'd like to formally introduce Mark Matheos as Appian's new chief financial officer. He's previously served as Appian's controller and chief accounting officer. He's taken up a new position with great confidence. I thank our outgoing CFO, Mark Lynch, for his work and friendship over more than a dozen years, for taking us public in 2017 for his outstanding capability, integrity, and wisdom. Such is our regard for Mark, and so reluctant are we to be without his good counsel that he's been nominated to be a director on the Appian board. You can find more information on our proxy statement filed with the SEC. Mark, is there anything you'd like to say before we hand the call to Mr. Mateos?

Yeah, thanks, Matt. It's been an amazing run. I'm incredibly appreciative to you, the board, and the founders for giving me the opportunity to join the company over 13 years ago. and to help grow it from 25 million in revenues in 2008 to over $450 million based on our updated guidance for 2022. I'm also excited to be nominated to the Appian's board and look forward to continuing our working relationship for years to come. I'd also like to take a moment and to thank everyone within our finance, HR facilities, IR, and admin functions. It's been an honor to work with such an amazing, dedicated group of professionals. I'm very excited with Mark Matheus' well-deserved promotion to CFO. He's a very talented professional with qualifications required to take the company to the next level. And with that, I'll turn the call over to Mark for a deeper discussion over financials.

Thanks, Matt and Mark. Good afternoon, everyone. It's great to be here. I'm looking forward to partnering with Matt, our executive team, and all of our employees to support our continued growth. I'll review the financial highlights for the quarter, and then we'll provide guidance for Q2 and full year 2022. We delivered another strong quarter driven by cloud subscription revenue growth of more than 30% year over year. We also saw healthy cloud subscription growth in key industry verticals in each of our geographical regions. Our investments in platform, sales and marketing, and go-to-market initiatives are beginning to bear fruit, and this gives us confidence to continue to drive 30% plus cloud subscription growth going forward. Let's get into the details. Cloud subscription revenue for the first quarter was $53.4 million, an increase of 37% year-over-year and above the top end of our guidance. Our total subscriptions revenue was $83.7 million, an increase of 31% year-over-year. Professional services revenue was $30.5 million, an increase of 22% from $25.1 million in the prior year period. Despite the growth in services revenue this quarter, partners will continue to be a larger part of our growth strategy. As you heard at Appian World, some of our partners are expected to double the number of Appian practitioners at their respective firms over the next 12 months. Appian partners not only help us sell software, but also perform professional services work for new services contracts that they sign. We continue to believe over time professional services revenue will decline as a percentage of total revenue. Subscriptions revenue was 73% of total revenue in the first quarter as compared to 74% in the prior year period and in the prior quarter. Total revenue in the first quarter was $114.3 million, an increase of 29% year-over-year and also above our guidance range. Our cloud subscription revenue retention rate as of March 31st was 117% as compared to 116% last quarter. We are pleased with our customers' expanded use of our platform. As a reminder, we continue to target a cloud subscription revenue retention rate of 110 to 120%. Our international operations contributed 33% of total revenue for Q1 2022 versus 32% a year ago. The growth in international revenue was driven by continued healthy growth of both APAC and EMEA regions and demonstrates the balance of our business both domestically and internationally. Our cloud software ACV bookings was approximately 73% of the total software bookings during the first quarter of 2022, which is similar to the cloud bookings as the percent of total software bookings during 2021. So now we'll turn to our profitability metrics. For the first quarter of 2022, our non-GAAP gross profit margin was 74% compared to 75% in the year-ago period. Subscription's non-GAAP gross profit margin was 90% in the first quarter of 2022, compared to 91% in the year-ago period. Our non-GAAP professional services gross profit margin was 29% in the first quarter compared to 32% in the same quarter of 2021. We continue to expect professional services non-GAAP gross margins to decrease to the mid-20% range in 2022 and beyond as we dedicate more customer success resources to support partners. Total non-GAAP operating expenses in the first quarter were $89.7 million, an increase of 34% from $67.2 million in the year-ago period. Adjusted EBITDA loss was $3.4 million in the first quarter, better than our guidance range, and compared to an adjusted EBITDA of approximately $400,000 in the year-ago period. In the first quarter, we had approximately $1.9 million of foreign exchange losses compared to $3 million in losses in the same period a year ago. We don't forecast movements in effects rates. Therefore, they aren't considered in our guidance. Non-GAAP net loss was $4.4 million for the first quarter of 2022 or a loss of $0.06 per basic and diluted share compared to non-GAAP net loss of $4 million or $0.06 per basic and diluted share for the first quarter of 2021. This is based on $72.2 million basic and diluted shares outstanding for the first quarter of 2022 and $70.7 million basic and diluted shares outstanding for the first quarter of 2021. Turning to our balance sheet, as of March 31st, cash and cash equivalents and investments were $168.4 million compared with $168 million as of December 31st, 2021. For the first quarter, cash used in operations was $20.6 million versus cash used in operations of $2.8 million in the same period last year. Compared to the year-ago period, operating cash flow was negatively impacted by higher litigation expenses and higher personnel expenses. Total deferred revenue was $148 million as of March 31st, an increase of 34% from the 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 trends than billing or remaining performance obligations, or RPO, as they can fluctuate relative to revenue based on the timing of invoicing, seasonality of term license revenue, and the duration of customer contracts. Now I'll turn to guidance. As a reminder, we believe cloud subscription revenue measures the growth of our subscription business. The true scale of the business is represented by total subscriptions revenue. which includes support and all subscription revenue, regardless of whether the customer deploys Appian in the cloud or on-prem. For the second quarter of 2022, cloud subscription revenue is expected to be in the range of $55.8 million to $56.3 million, representing year-over-year growth of 31% to 32%. Total revenue is expected to be in the range of $102.8 million to $104.8 million, representing year-over-year growth of 24% to 26%. Adjusted EBITDA loss for the second quarter is expected to be in the range of $25 million to $22 million. Non-GAAP net loss per share is expected to be between $0.37 and $0.33. This assumes 72.4 million basic and diluted common shares outstanding. For the full year 2022, we are increasing cloud subscription revenue to the range of $236 million to $238 million, representing year-over-year growth of 32% to 33%. We're increasing total revenue to the range of $453 million to $457 million, representing year-over-year growth of 23% to 24%. Adjusted EBITDA loss is expected to be in the range of $53 million to $50 million. Non-GAAP net loss per share is expected to be between $0.82 and $0.77. This assumes 72.5 million basic and diluted common shares outstanding. Our guidance assumes the following. First, based on current rates, we expect FX related headwinds of approximately 2% to cloud subscription revenue. Second, there will be a sequential decline in term license revenue, largely due to seasonality. Q2 is also expected to be the weakest quarter of the year, which is consistent with past performance. Third, we expect a decline in professional services revenue from Q1 to Q2 2022. as our partners continue to perform more of the services work. Fourth, there will be significantly higher adjusted EBITDA losses in Q2 compared to Q1. This is largely driven by the seasonality and term license revenue and higher expenses associated with in-person events and T&E. For example, our annual user conference was in-person this year, while the same event was held virtually for the past two years. Finally, our guidance assumes the build-out of additional office space as we return to the office. Capital expenditures will be approximately $2 to $3 million in Q2 2022. In summary, we're excited about the growth opportunities ahead of us. We're making disciplined investments to improve go-to-market success and continue to expand our platform to address the large and growing market opportunity. With that, let's turn it over to questions.

Thank you. If you'd like to register a question, please press the one followed by the four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you'd like to withdraw your registration, please press the one followed by the three. One moment please for the first question. Our first question comes from the line of Kevin Kumar with Goldman Sachs. Please go ahead.

Hi, thanks for taking my question. Matt, can you comment on what you're seeing from an overall demand environment perspective for low-code solutions, particularly in an inflationary environment? And also, can you comment on what you're hearing from customers in Europe? Thank you.

Yeah, I figured I'd get a question on inflation. Didn't know it would be the first one. But look, I think that the economy could be in for a rocky ride, and Appian has proven resilient. in previous economic turmoil. We've been around for 23 years, and we've seen how this business responds. And if there is a disruption, and let me say, I don't see it yet. I don't see any disruption. But if it develops into a disruption, if the inflation becomes a problem, if we run into a recession, I think Appian may prove to be more resilient because this business is about creating efficiencies, finding efficiencies, pivoting an organization according to circumstance and saving money. And so I believe that we may prove to be resilient.

That's great. And then I wanted to double-click on partners. The commentary from the conference has been very positive. A lot of partners are growing their practices fairly rapidly. I guess, has anything changed in terms of partner enablement to go to market that's driving that level of growth across the partner ecosystem?

There is. We have focused on making it easier than ever before to learn our platform. We do that partly so that the most demanding customers can have an absolutely no compromises experience and quickly achieve the changes they need in the patterns and processes that they run. But it has the intended side effect of broadening our market and inviting more participants to be Appian practitioners. We have encouraged that by creating free scholarships, by allowing free usage, creating an environment in which people can experiment with our product and build intellectual property that can then be ported into a paid GA environment. We've done all we can to make it easier to get our community larger. I think that's got a lot to do with the community growth. And one of the biggest takeaways that I had from our user conference last week was the enthusiasm of the partners. We've never made more money out of partner sponsorships. Even though this is not our largest in-person conference coming out of COVID, it's not the biggest, we still got more sponsorship money than we've ever gotten. And the plans that the partners have to grow the size of their Appian-trained workforce are particularly impressive. Thousands of new practitioners are being trained by partners this year. In some cases with Appian support, in some cases not. But they're responding to substantial market demand. I talk about it wherever I go with partners. And they see the demand and they're reacting to it. That's probably my favorite single takeaway from last week's conference, actually, was the tangible plans that I saw on our partners' behalf to increase their Appian-trained workforce.

That's great, and congrats on the quarter. Thank you.

Our next question comes from the line of Bob Huang with Morgan Stanley. Please go ahead.

Hi, this is Bob filling in for Sanjit. Just a similar line of question as the previous one. Assuming the macro condition remains volatile, can you maybe talk about the potential headwind that could impact your margin, especially in the second half? We do understand the second quarter will have some seasonality, but are there any potential weakness that you see that could potentially impact your margin on the second half? And also, are there any levers that you could pull to sort of offset that, assuming the macro condition remain the way it is?

All right. Now, I will talk about second after the second, but I first want to say, There's a little bit of macro turmoil right now, and yet we've delivered a typical solid Appian quarter. Our growth is over 30. The revenue is surprisingly strong at 29. We've got elite margins, conservative spend, conservative guide, right? This is just typical playbook Appian, and we're doing that even though you're seeing a little bit of a macro volatility. So I feel we're steady on, even though the wind's picked up a little bit. And in the second half of this year, I don't anticipate any disruption to our expectations. And, yeah, as for levers we can pull, Appian got here as a bootstrapped company. We know what it is to batten down the hatches. We had to grow on our own revenue. We were customer-funded, not investor-funded. And so we understand what it is like to run lean, and if we need to, we can do that. Okay, thanks.

That's very helpful. Second question, trying to have a better understanding of your customer base. In your prepared remarks, you mentioned about additional customer ads and especially some of the on-premise examples. In terms of your new logos, can you give us a sense of what percentage of that are cloud customers and what percentage of that are on-premise customers? Generally, Do you expect the on-premise customers to eventually shift to the cloud? And if so, what is the pace of that shift?

Got it. Our equilibrium at this point is roughly 4 to 1, which is to say 80% cloud, 20% on-prem. I'm not saying that's last quarter. I'm saying that's a broad consensus over quarters. That pattern has continued in the first quarter of 2022. and I expect that it will continue for all the other quarters in 22 also. We are not seeing a mix shift from on-premise to cloud, and I don't anticipate one. Once in a while, a business has a reason for a preference for on-premise. Appian encourages cloud, but customers have their choice. And if they do have such a preference, they're unlikely to unwind it. Furthermore, the remnant of our legacy customer base that is committed to on-premise If they were going to switch, they would have switched. And so I don't expect a migration.

Thank you. Congrats on a quarter. Thank you.

Our next question comes from the line of Jake Roberge with William Blair. Please go ahead.

Hey, guys. Thanks for taking my questions. So just wanted to touch on pricing. So customers are clearly seeing the value of the platform and which can be evidenced by 99% gross retention, which is best in class, strong NRR, and then also accelerating platform usage that you've disclosed over the last few quarters. So given these dynamics, I'm just curious how you're thinking about the potential pricing lever over the next few years.

Yeah, absolutely. We've got a lot of ways to capture higher prices, but that is our intention. As we add pieces to our suite, we raise the sweet price. Now, we do that while saying that RPA is free and process mining is free, but only a nominal amount of it is actually free. And if a customer becomes a serious user of one of those functionalities, also IDP, also portals, any one of those trigger cost increases if they use it in a substantial manner. So we have overall price raises, we have triggers on heavy usage for any of those nominally free components. So those would be the primary ways. But we're also using the leverage we get from the other components in the suite to upsize the existing customers that we have sold. So our other lever doesn't have anything to do with raising prices. It has to do with discovering new business and sparking new demand. Process mining in particular is great for that. But also just to be able to say, if you've got a system, why don't you add our RPA instead of someone else's? It's more convenient, right? It's already compatible. It'll upgrade together. I think we have a footprint expansion plan, even as we have a price increase plan. And we continue to see strong pricing power, and we watch for that.

Great, thanks. And then I'm just curious how initial customer conversations have been tracking for some of those new products you mentioned earlier, like portals and KYC. When we were at Appian World last week, there was so much buzz around portals. So I'd love to hear if you could dive into that a little deeper on how that differentiates your platform versus some of your other competitors.

I'm glad you felt the buzz around portals last week at our conference. I would say portals may be the most anticipated feature we've ever shipped, which is funny because I don't think it's the most amazing feature we've ever shipped. It's pretty straightforward, and yet it's exceptionally popular. It was a simple thing to create. It's a simple thing to deploy, and yet customers really want this in order to expose their applications to external users who don't have logons and who might all log on in the same five minutes one day. And so we put this together, and we've got We've got exceptional interest in it, which is why we've put a price on it. And, yeah, I think we're going to get a good deal of uptake on that product. It's not the only thing that people are excited about. There's interest around our growing solutions portfolio. There are now 75 solutions written by our partners in addition to the solutions written by Appian. And those partner-driven solutions are – Up in revenue, 265% year over year. So there's interest in other features as well. I'd say low-code data has seen extreme usage over the past year. We released that a year ago, and it was GA a year ago. But to have more than a third of our customers actually, or a third of our customers actually using it, right? 37% of our customers are using low-code data. That's an enormous uptake on a deployment feature. Not every customer is doing a deployment even. but they love this feature. It makes data integration intuitive, makes it low-code, you know, drag and drop with your mouse, the way we make workflow low-code. So we've got a few features that I feel like they're facing across the user base. There's a great deal of interest for these, and yeah.

Great. Thanks for taking my questions, and congrats on the great quarter. Thank you.

Our next question comes from the line of Joe Mears with Truist. Please go ahead.

Great. Thanks for taking the questions. Just to go back to the partners topic, it was great to hear at Appian World how much your partners are growing their practitioner base. Just curious if you have any quantitative numbers behind how partners were involved in the pipeline this quarter, and do you think that can accelerate through the year?

Anecdotally, I could say that I heard multiple partners saying that they planned to double their practitioner base in 22. But I want to emphasize that that is anecdotal, and I don't have official numbers. These are just promises and plans anyway. So take that with an asterisk. But I came away very encouraged about the commitments that partners are making. As for the partner contribution to our pipeline, I would say it is in line with the contribution to our pipeline that it has been percentage-wise. I mean, that's still a roughly equivalent ingate to our total pipeline contribution. I think it's been consistent quarter on quarter.

Got it. And then in breakout sessions at Appian World, I was surprised and pleasantly surprised to see how many customers were talking about adding products that they either didn't know about really yet or just had heard about from talks with partners. So I'm just curious, if you never added another logo, what's the revenue runway within the current install base? Like what's the current penetration of revenue you think within the current install base? Thanks so much.

Yeah, I actually think we have a fantastic runway ahead of us, even if we never added a new logo. But the real beauty of our position is we're going to add new logos. And every one of them will also have that beautiful runway ahead. It's one of my favorite things about this business that we generate so much value with each application that we put down. The customers are delighted. The usage grows faster than revenue grows. And our challenge is just to monetize all the value we're creating. I take care not to offer true enterprise licenses for this reason. because the value we can create keeps going up with every new application, with every new user. There's always more you can do with this platform. So I'm reluctant to sell the future at today's prices when it comes to usage licenses. So could we grow if we didn't add new logos? Yeah, we could, and we'd probably pretty well, too. But I think we're going to get the best of both worlds. We're going to radiate, and we have a lot of logos we haven't touched out there.

Great to hear. Thank you.

Our next question comes from the line of Derek Wood with Cohen & Company. Please go ahead.

Hey, guys. It's Andrew. I'm for Derek. Thanks for the question. I'll shift to Mark, actually, and congrats, Mark Lynch, on your retirement and best wishes. And congrats, Mark, on your promotion. Was there any impact to cloud sub-rev in Q1 from FX? And secondly, what drove the strength in PS revs? Was there anything one-time unusual in that?

So when we talked about the headwinds in our guide, it's really, you know, since our initial guidance that we made in Q1, I'm sorry, in February, you know, with our full year results, the movement in the currencies represents that headwind. So that's the only thing we're mentioning. I mean, there is no other kind of commentary on that in terms of impact to the guide. On the professional services piece, As you know, we have limited visibility on that, and we're kind of conservative with respect to what we want to forecast with respect to that visibility. And so we don't actually have any specific... We're not necessarily surprised when we see it tick up because of a large project or two that may have spilled over from Q4 to Q1. but it's not something that we necessarily expect to happen as 22 goes on.

If I could say just a little bit to that CS question as well. We note that it is a strong quarter for services, and I believe we can attribute that to our success in creating packaged services, which is to say a defined behavior set that is packaged to be complementary to our purpose. We've changed our services from Appian does all the deployment to Appian counsels and assists our partners in doing the deployment. And I think we've had some success in nailing that new model. And so I attribute our improved services picture to the fact that we are working hand in hand with our partners more successfully than we had in the past, which is also great for our customers because it ensures the best outcomes. That is not to say that we have any predictions. I just want to explain as best I can what the strength is in the first quarter.

Yeah, thanks. And then, Matt, for you, how is your sales rep hiring plan and trend versus that planned? Maybe give us a feel for what sales capacity growth could be this year and what overall productivity is. was like in the quarter?

That's right.

Well, you know, we never comment on our AE hiring except to say general things like we're hiring aggressively. And so I'm going to have to settle for that in response to your question about AEs. But with regards to productivity, it has been on the upswing. It was better last year than it had been the year before that. I'm feeling good about productivity, and that's not a mere tweak in the numbers. That's also the fact that we've instituted a new sales methodology last year with more formality and rigor than we ever did before, and I believe that that is driving the greater productivity.

Great. One more for you, Matt, if I can squeeze one in. How big of a lead generator event is Appian World, and how does this compare to with prior years and can that help accelerate your pipeline growth?

I think Appian World is a good lead generator in terms of expansion within existing accounts and a moderate to not impressive lead generator with regards to prospects. So I think it's great for inspiring our existing customers to meet each other, see what they're doing. But if you've got a prospect, that's already so excited about the company that they're willing to travel to go to our conference, then they were pretty much going to buy it anyway, is my experience.

Great. Thanks, guys.

As a reminder, to register for a question, please press the 1 followed by the 4 on your phone. Our next question comes from the line of Vinod Srinivasaragavan with Barclays. Please go ahead.

Hi, thanks for taking my question. I just want to go back to the cloud versus on-premise customers you mentioned earlier. What's the typical size of a cloud versus on-premise customer now versus maybe two years ago?

Yeah, okay. You mean the size relative to each other or just the – you see, our average size is not too far – down from what it was when we went public, despite the fact that we have many more logos and we brought on a batch of customers with a COVID health response solution that were on average smaller than our other customers. So I'd say our average revenue footprint has held up really well in light of the growth that we have been through. But the other dimension there of your question was is there a divergence or a change in trend between the cloud users and the cloud deployments and the on-premise deployments? And there I would say, no, not to my knowledge. Got it.

And, you know, you mentioned package services earlier. You know, do you plan on introducing more around maybe CL specializations and hiring people to kind of help with that to kind of complement the, you know, the product changes that you're making?

Well, around solutions, certainly, yes. And, of course, our hiring in sales has drifted more toward industry knowledge over the years, so we do feel that that is effective. Understanding the customer's problem majority sale. When you sell something as flexible as the Appian platform, as capable of adapting to different problems, you really need to understand the landscape and listen to the customer. And the more informed the representative is, the more capable they are of understanding what they hear and engaging in that conversation. So we have found increasing value in industry expertise, and particularly around solutions, it's been completely necessary.

Great. Thank you.

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

We don't have any further comments other than to say we appreciate your interest and your questions.

Thank you and good evening.

Thank you. That does conclude today's conference call. We thank you all for your participation and ask that you please disconnect your lines.