Appian Corporation

Good day and thank you for standing by. Welcome to the Appian Second Quarter 2024 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 speaker today, Jack Andrews. Please go ahead.

Thank you, operator. Good morning, and thank you for joining us. Today, we will review Appian's second quarter 2024 financial results. With me are Matt Calkins, Chairman and Chief Executive Officer, and Mark Matheos, 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 third quarter and full year 2024, 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 discussion of the material risks and other important factors that could affect our actual results, refer to our 2023 10-K, our Q2 2024 10-Q filing, and other periodic filings with the SEC. These documents are available on the Investors section of our website. Additionally, Non-GAAP financial measures will be discussed on this conference call. Refer to the tables in our earnings release for reconciliation of these measures to their most directly comparable GAAP financial measures. With that, I'd like to turn the call over to our CEO, Matt Calkins. Matt? Thanks, Jack.

In the second quarter of 2024, Appian's cloud subscription revenue grew 19% year-over-year to $88.4 million. Subscription's revenue grew 20% to $113 million. Total revenue grew 15% year-over-year to $146.5 million. Our cloud subscriptions revenue retention rate was 118% as of June 30. Adjusted EBITDA was a loss of $10.5 million. Appian is a growth company, and revenue growth continues to be our top priority. We are not indifferent to efficiency. We've applied more scrutiny to our investments and steadily improved our profitability. This quarter, we took action to reduce non-strategic go-to-market expenditures. With these moves, we now expect to break even on adjusted EBITDA for the full year 2024. Mark will provide more details in his prepared remarks. Recently, I've immersed myself in our sales and marketing functions. I've spoken extensively with hundreds of customers, prospects, partners, and Appian staff. Together, we've discovered ways we can better allocate resources and align energy behind our business strategy. We're leaning into areas where the return on investment is the strongest, specifically large transactions, and our best industry verticals. Appian's particular advantage is at the high end of our market, to where we've experienced our most success. Appian appeals to the C-suite, the large enterprise, and the mission-critical use case. Here we have some of our highest win rates, highest expansion rates, and highest retention rates. And for good reason. Our platform delivers the greatest impact to the most discerning customers. Our gross retention rate of 99%, best in class in enterprise software. Many of our largest customers save millions of dollars and thousands of labor hours every year with Appian. Our key verticals continue to be our growth engine. Over 70% of Appian's revenue comes from financial services, life sciences, and public sector. Roughly half of the world's largest companies and US agencies in these verticals are Appian customers. We have decades of specialized industry expertise and a proven track record of automating the most complex processes for these organizations. Public sector is one of our most successful verticals. We have momentum with our GAM suite, Government Acquisition Management GAM suite. Agencies use GAM to manage their detailed processes for procuring goods and services. We are broadening our investment in the suite because adoption has been strong. GAM bookings more than doubled in the first half of this year compared to the same period last year. To build on this momentum, we launched a service this spring to complement GAM. ProcureCite is an AI-driven website that consolidates major public procurement datasets. Government professionals can use it to synthesize past procurements and generate new procurement documents. Dozens of federal agencies use ProcureCite today. For example, One agency that manages emergency responses to natural disasters purchased a seven-figure software deal and became a new Appian customer in Q2. Given the rise in wildfires, the agency needs to respond to incidents faster. It'll use our full GAM suite to reduce the time it takes to procure firefighting resources. Before Appian, the agency ran procurement operations across a combination of disparate systems and physical paper forms. Now it'll manage billions of dollars of annual procurements. on Appian. Another federal agency that supports natural security and defense. National Security and Defense became an Appian customer this quarter. It wants to replace an inflexible procurement system that's costly to maintain. The agency has strict application hosting requirements because its data is sensitive. In Q2, it purchased a seven-figure software deal for GAM and will deploy it onto the Appian government cloud. As a reminder, Appian was one of the first dozen or so companies to receive a provisional authorization at impact level five. Now, the agency can securely deploy GAM to the cloud and maintain a low total cost of ownership for its Appian applications. Within Life Sciences, we signed a top global clinical research organization as a new customer this quarter. Our platform will manage the organization's process for selecting clinical study sites Appian Data Fabric will bring together data from many systems into a single application so site investigators and project managers can select locations based on the study's criteria, resource and capacity, and a country's regulations. The company used to manage this complex process manually across systems. Now it aims to make selections 80% faster using Appian. We continue to sign large expansion deals within Appian's financial services vertical. Earlier this year, we launched a new pricing structure to upsell our existing customers and monetize our latest features like Appian AI. Here is an example of this upsell strategy. In Q2, an international insurance company increased its annual Appian software spend by more than 50%. The insurer has been a customer for a few years and uses our platform to manage claims disputes. This quarter, it purchased a seven-figure software deal to upgrade to our new pricing and access our latest features. It will add thousands more users to the process and deploy Appian AI to categorize millions of claims. We won this deal because AI is a native feature of our platform and easy to adopt. Appian AI enhances worker productivity by, among other things, generating code based on a prompt, summarizing large amounts of data, and recommending user responses. Our AI is powerful. because it has the context of the customer's processes and data. It has the context. Our AI is also private because we use data fabric and retrieval augmented generation, or RAG, to avoid training an AI algorithm. We don't train them. This quarter, usage of Appian AI doubled compared to last quarter. Here's an example. In Q2, a medical transportation and emergency response company automated its claim dispute processes with Appian. Under new government regulations, the company has 20 days to appeal disputes. Now caseworkers respond more efficiently using our automation capabilities. First Appian AI classifies and ingests payer disputes, then Appian RPA bots retrieve data for the user from various systems about the medical incident. With Appian our customer expects to handle disputes faster, increasing revenue by tens of millions of dollars annually. Appian is a leading process automation platform. The completeness of our platform is appreciated by users and recognized by analysts. Analysts call us leaders in enterprise low-code application development, business workflow automation, digital process automation, and process orchestration. In Q2, Appian was named a leader in the Gartner Magic Quadrant for process mining platforms for the first time. We were included because of Appian Process HQ, which we just released in April. Process HQ is a real-time, actionable process mining tracking the health of processes, and using AI to recommend improvements. A top medical insurance provider manages claim disputes and payouts on Appian. This quarter, it analyzed the process with Process HQ because it wanted to be more efficient. The company discovered members were submitting tens of thousands of duplicate claims. Now it can work to optimize the process, eliminate unnecessary submissions, and save millions of hours annually. Earlier this week, the Court of Appeals of Virginia, the state's intermediate appellate court, rendered an opinion on our trade secrets case against Pegasystems. We look forward to appealing this week's decision and are hopeful that the state's highest court, the Virginia Supreme Court, will reinstate in full the jury's verdict, including its award of over $2 billion against Pegasystems for willfully and maliciously misappropriating Appian's trade secrets. Nothing in this week's opinion changes the fact that Pegasystems was found to have committed computer fraud in violation of the Virginia Computer Crimes Act. That unanimous finding by the jury was not disturbed by this week's decision, and Pegasystems did not even attempt to contest its violation of the Virginia Computer Crimes Act on appeal. For Appian's full perspective on this sordid affair, I refer you to a special page on our website, Appian.com slash Pega. I'm optimistic about Appian's future. We deliver our customers a great product and a great experience. Appian's commitment to efficient growth will allow us to continue innovating while delivering value to our stakeholders. Now, I'll hand the call over to Mark for a deeper discussion of the financials. Mark?