Appian Corporation

Good day and thank you for standing by. Welcome to the Appian's third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Sri Anantha, Vice President, Finance and Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon, and thank you for joining us to review Appian's third quarter 2023 financial results. With me today are Matt Calkins, Chairman and Chief Executive Officer, and Mark Mateos, Chief Financial Officer. After prepared remarks, we'll open the call for questions. Today, you'll 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 fourth quarter and full year 2023, 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 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 2022 10-K our 10Q filings for 2023, our 8K filings, 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 directly comparable GAAP financial measures. With that, I would like to turn the call to our CEO, Matt Calkins. Matt.

Thanks, Sri. Thank you, everyone, for joining us today. In the third quarter of 2023, Appian's cloud subscription revenue grew 27% year over year to $77.2 million. Subscriptions revenue grew by 20% to $103.8 million. Total revenue grew 16% year over year to $137.1 million. Our cloud subscription revenue retention rate was 117% as of September 30th. Our adjusted EBITDA was a loss of $5.3 million. A couple of financial call-outs. Appian's non-GAAP gross margin was 75% this quarter, the highest it's been since our IPO. Our adjusted EBITDA was well above guidance. Don't read too much into this dramatic sequential improvement. It's largely due to the timing of our expenses. The takeaway should be that we delivered on last year's commitment to reduce adjusted EBITDA loss below 10%. We will continue on our path to positive EBITDA, and I want to emphasize that this transition will not come at the expense of growth. Last earnings call, I spoke about Appian's approach to AI. As you may recall, we're pursuing something we call private AI. I don't believe that most customers will allow their data to be sent over the Internet to a public AI service. nor do I think they wish to train an AI algorithm they do not own. Under private AI, data stays entirely private. And we also achieve better compliance, auditability, and security levels. Our private AI offering depends upon our data fabric functionality, which is itself highly differentiated in the market. We have a data-centric approach to AI, and we think the data side of things has been somewhat under-recognized, under-appreciated, in all the hype around generative models. In private AI, we feel we have a defensible and advantaged offering. Over 100 customers used Appian AI in Q3. Here's an example. An Australian wealth fund manager processes inbound portfolio requests with tens of thousands of customers and brokers on our platform. The group receives requests through email before Appian Employees handled these emails, routed them to relevant parties, opened cases to process the requests. In Q3, this firm trained a private AI model for Mapion with its own data. The model ingests emails, classifies them, routes them to the appropriate person for follow-up. AI automates the intake to resolution process and eliminates the need for manual triaging. Now the customer can resolve cases faster. The AI market is still developing. Too early to say which ideas and vendors will prevail. We're advocating this private, data-centric approach to AI because we believe in it, and also because we're getting strong support from buyers. AI won't be a winner-take-all game. Scores of different approaches will succeed by finding and satisfying specific markets. And it might yet be better to be agile than to be big. There's plenty of room for Appian. I'm optimistic about our future in AI. Turning to our earnings presentation. You'll see our series of special metrics that provide additional transparency on how macroeconomic factors are impacting our business. These numbers, again, indicate that there continue to be some effects. I hope these extra reports have been useful in 2023. For next year, we will consolidate them and probably add some more. My favorite fact from the report packet is that Appian's count of seven-figure ARR customers has crossed 100 for the first time. This uptick coincided with some large deals in the U.S. public sector. Here's some combined examples. My first case is a federal agency that manages procurement processes for the Department of Defense. The agency selected Appian two years ago to unify disparate contract writing systems. This quarter, it signed a seven-figure software deal to license thousands more users. Now, Appian will manage end-to-end contract writing processes for tens of billions of dollars in contracts annually. Another DoD group signed a seven-figure software deal in Q3 and became a new Appian customer. the group will manage law enforcement investigations in a secure Impact Level 5 environment on Appian Government Cloud. Before, the agency manually conducted investigations using paperwork and offline chats. Now, over 1,000 field agents and back office employees will create cases, review evidence, and dispatch law enforcement support within a single Appian app. As you know, if you've heard this call in the past, I like the solutions business. I like it because the sales cycles are shorter, competition narrower, pricing power higher, the addressable market in total larger. We're making progress on solutions this year. Here's an example. A leading global investment manager increased its annual recurring spend on Appian software by 40% in Q3. The firm purchased our customer lifecycle management solutions a few quarters ago when it became a new Appian customer. Our solutions automated manual processes so the company can onboard and manage clients faster. In Q3, it decided to add its legal department to the process and purchased additional platform licenses to build new workflows. For example, it will automate legal agreement processes so Lawyers can readily collaborate on tasks, and the company has real-time visibility on the contract's status. Let me offer you a few marketing updates, two to be precise. First, Randy Gard joined Appian as our new Chief Marketing Officer. Randy brings decades of experience leading marketing, product strategy, and technology teams. Second, we were named a leader in the Gartner Magic Quadrant for enterprise low-code application platforms two weeks ago. Before I hand the call over to Mark for a deeper look at our financials, I want to mention something. Looking past the numbers for a moment, the company is boiling with activity at the surface. Appian has made substantial investments in our platform over the past few years and introduced new features and solutions. we are realizing a data-centric AI offering. We are evolving our go-to-market activities and driving a new set of sales plays that will open new opportunity. Out of sight of the news and the numbers, we're working hard to prepare Appian for a strong future. With that, I'll hand the call over to Mark.