Appian Corporation

Thank you for standing by and welcome to Appian's fourth 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 this session, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. Now I'd like to introduce your host for today's program, Sri Anantha, Vice President, Finance and Investor Relations.

Please go ahead. Thank you, Operator. Good morning and thank you for joining us to review Appian's fourth quarter and full year 2023 financial results. With me today are Matt Calkins, Chairman and Chief Executive Officer, and Mark Mateos, Chief Financial Officer. After prepared remarks, we will open the call for questions. You can follow along with our earnings presentation by downloading 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 2024, 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 subjected 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, please refer to our most recent annual report on Form 10-K, quarterly reports on Form 10-Q, and other 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 over to Matt. Thanks, Sri, and thanks, everyone, for joining us today.

In the fourth quarter of 2023, Appian's cloud subscription revenue grew 26% to $81.3 million. Subscriptions revenue grew by 24% to $115.8 million. Total revenue grew 16% to $145.3 million. Our cloud subscriptions revenue retention rate was 119%, and our adjusted EBITDA was a gain of $1.0 million. For the full year, Appian's cloud subscriptions revenue grew 29% to $304.5 million. Subscriptions revenue grew 21% to $412.3 million. Total revenue grew 17% to $545.4 million. Our adjusted EBITDA was a loss of $44.8 million. I want to mention two milestones at the top of this call. Last year, for the first time, our revenue exceeded half a billion dollars. Second, and an interesting compliment to the first observation, we achieved the highest non-GAAP gross margin in our public history last quarter at 78%. In our presentation deck, we've included one last time the special bonus metrics we tracked quarterly in 2023. We didn't get the recession I expected, but there were some macro complications, and you can see it all starting on page five. Last year was the year of AI talk. Now the conversation will shift to more tangible things, shift features, successful deployments, practical value. That change will be good for Appian. We have a distinctive approach to the AI market based on years of leadership and existing technology. We are focused specifically on the application of AI to data. We're leaders in data fabric, which is like a virtual database uniting the customer's enterprise. And we are leaders in AI, and now we will be leaders in the combination of these two things. I think everyone understands by now that AI is only as good as the data behind it. More data, better AI. Appian has an open data strategy that allows AI to benefit from information scattered across the enterprise. Ask a question, and your response will be informed by everything known to the business, not just the contents of one silo. Same for generating new content. The more data that supports the AI, the more sources you bring to bear, the better the output. Let's explore this with an example. The purpose of this example is to show you the advantage of having AI draw from multiple data sources, that AI is better that way. We work with a large U.S. state government entity that awards hundreds of millions of dollars in contracts every year using Appian. Its procurement processes are highly regulated and must comply with federal and local laws. In Q4, this organization deployed Appian AI to optimize its awards management process. As you know, contracting usually involves many data objects. of different types in different formats, typically in many different locations. Now, AI will understand thousands of regulatory and procedural policies from various sources, so employees don't have to manually search for information. Appian AI is embedded in the customer's workflow doing work and making the customer's data more usable than before. Chairman officers and supporting staff can ask AI questions in real time and get great answers. This allows them to advance their procurement with speed and accuracy. Our second advantage is simplicity. Appian takes a practical view towards technology. Our goal isn't just to make extraordinary software, but to make it accessible. Programming in Appian is done with a mouse, not a keyboard. We take the same approach to AI. One of the nation's largest universities uses Appian to improve graduation rates. recently deployed Appian AI to its student advisors. AI will recommend actions to take on student cases and propose meeting agendas to advisors before they meet with students. First, I want to emphasize how important it is that such a system draw on all the data in the enterprise. If you're trying to help a student complete a four-year degree, you need to know about all the threats to their progress. You need to know if they're failing any courses that's in one system. You need to know if they're late on tuition payments. That's in another system. You need to know if they're missing classes. That's in the attendance logs. You need to know if they have friends who recently dropped out. That's someplace else. You get the idea. These are different data sources. And AI needs them all to identify risks and make a good recommendation. My other point is that such a system must be easy to set up and use. Counselors just want to ask a chat bot some questions about their students, not become AI technologists themselves. We made it easy. And it was easy to deploy as well, going live in under two months. All this talk about drawing on the full enterprise of data sounds great until you consider the implications. Merging data sets within the enterprise, uploading massive amounts of data, and training AI algorithms you don't control. Appian requires none of that. We offer insights across the widest amount of data, but we do it while disclosing the least of it. We specialize in private AI. We use our data fabric to provide just the information that's pertinent for every question, rather than pre-training an algorithm on everything an organization knows. It's more cost-effective and much more respectful of our clients' architecture and privacy. Another example to make this point. A top pharmaceutical company manages several core processes with our platform, including ones related to clinical trials and manufacturing logistics. In Q4, the company named Appian its standard enterprise workflow tool. It'll now deploy our platform to over 50,000 employees. The company aims to bring new products to market faster. Our AI is privy to their confidential documents, their lab results, et cetera, This is sensitive work and needless to say, they take the privacy of their data very seriously. This global firm has decided to trust our technology to make the most of what they know while keeping the highest commitment to protecting it. Appian landed some of our largest seven-figure deals this quarter. The total contract value of our top 10 net new software deals increased by 70% in Q4 2023 compared to the same period last year. Here are some notable stories. A US military branch, wants to unify its operational systems so it can better mobilize its forces. Appian will integrate data from 14 legacy systems into a single modern platform. In Q4, it purchased a seven-figure software deal. 100,000 analysts will use Appian to help train, manage, and equip personnel globally. In another example, a financial services company managing hundreds of billions of dollars in assets became a new customer in Q4 with a seven-figure software deal. The company is growing quickly and wants to modernize legacy systems that are too costly to maintain. Appian's data fabric will unify data from over a dozen core systems into a single view, so it can run end-to-end workflows like customer onboarding and wire transfer. Appian will help the customer scale and process more than 4 million transactions annually. Next, a national police force recently adopted new strategic priorities to optimize operations and improve public safety. In Q4, it selected Appian as an enterprise-wide platform to improve productivity and unify the group's disparate systems, starting with an incident management app. Desk workers will triage inbound requests, open cases, and route them to field officers for investigation. This process had always been manual. Now, thousands of officers will be able to respond to incidents faster using Appian. Last example now. A top health insurance provider is running a company-wide initiative to modernize systems and save $1 billion. It selected our platform to aid this effort, starting with its enrollment process. The provider made a seven-figure software deal in Q4 and became a new customer. Appian's data fabric will consolidate Medicare and Medicaid requests into a single application so employees can do eligibility checks, fix discrepancies, approve applications, and initiate the billing process. The organization expects to process millions of requests annually on Appian. Now, a few final notes. Appian expanded our credit facility this quarter with participation from existing and new lenders. The aggregate principal amount of the term loan facility is now $200 million, up from $150 million, and the revolving credit facility is $100 million, up from $75 million. We welcome the additional financial strength. Appian has made progress in our intention to aim high in this market and sell more large deals. We've held to our financial discipline and done so without taking anything from growth. You'll hear more about our plans at our investor meeting on April 16th at Appian World in Washington, D.C. We'll talk strategy, results, technology, AI, and more. I hope to see you there. With that, I'll hand the call to Mark.