Appian Corporation

Good day, and thank you for standing by. Welcome to the Appian Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear automated messages like your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference will be recorded. I would like to hand the conference over to your first speaker today, Brian Daniels from ICR. Please go ahead.

Good morning, and thank you for joining us. Today, we'll review Appian's fourth quarter 2025 financial results. With me are Matt Calkins, Chairman and Chief Executive Officer, and Serge Tonga, Chief Financial Officer. After prepared remarks, we'll open the call for questions. During this call, we may make statements related to our business that are considered forward-looking. These include comments related to our financial results, trends, and guidance for the first quarter and full year 2026, 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. These statements reflect our views only as of today and don't represent our views as of any subsequent date. We won't update these statements as a result of new information unless required by law. Actual results may differ materially from expectations due to the risks and uncertainties described in our SSE filings. Additionally, non-GAAP financial measures will be discussed in this conference call. Reconciliations of GAAP to non-GAAP financial measures are provided in our earnings release. With that, I'd like to turn the call over to our CEO, Matt Calkins. Matt?

Thanks, Brian. Thanks, everyone, for joining us today. In the fourth quarter of 2025, Appian's cloud subscriptions revenue grew 18% to $117.0 million. Subscriptions revenue grew 19% to $162.3 million. Total revenue grew 22% to $202.9 million. Adjusted EBITDA was $19.7 million. For the full year, Appian's cloud subscriptions revenue grew 19% to $437.4 million. Subscriptions revenue grew 18% to $576.5 million. Total revenue grew 18% to $726.9 million. Adjusted EBITDA was $76.8 million. 2025 was a successful year for Appian for several reasons. We executed our strategy to sell big deals to leading organizations. The number of customers that purchased over a million dollars of software this year grew 50%, nearly doubling the value of our seven-figure transactions. I'll share two quick examples. A European pharmaceutical research organization purchased a seven-figure software deal to digitize its clinical trial site selection. Appian will accelerate its selection process with AI, improving patient selection efficiency and reducing trial costs. Separately, a North American aerospace manufacturer purchased a seven-figure software deal to automate a core manufacturing system and save the company nearly $60 million over the next three years. The second reason Appian had a successful 2025 is that our position within the U.S. public sector strengthened, partly due to structural changes. We closed big deals as the new administration emphasized efficiency and and changed how it purchases and implements technology. For example, a US military branch named Appian its cornerstone platform to modernize operations and increase efficiency. In Q4, it signed a seven-figure software deal to unify systems and deploy them to over 100,000 users. The federal government has shifted to partner more directly with software vendors and reduce its reliance on intermediaries. Appian stands to benefit as indicated by the enterprise agreement that the US Army awarded us this quarter. The Army is already an eight-figure ARR customer. This new framework allows it to purchase $500 million in Appian software and services over the next 10 years. This agreement shows the Army's ambition and commitment to use Appian to modernize systems and transform operations with process and AI. The third reason Appian had a successful year is that we continue to increase our operational efficiency. We've now increased our go-to-market efficiency in 10 sequential quarters. You know, this metric means a lot to me. I always mention it. Appian generated 11% adjusted EBITDA margin for the full year 2025 compared to just to negative 8% just two years before. We created $63 million in operating cash flow compared to a loss of $110 million two years ago. credit these efficiency improvements to tighter resource allocation in sales, global diversification, and back office AI enhancements. We're creating an operating model that's built to drive further margin expansion going forward. Appian's strong financial performance puts us in a position to start consistently returning capital to shareholders. Today, we're announcing a $50 million stock buyback. Finally, I'll tell you the best thing about 2025. The best thing is that it's become common knowledge over the past six months that AI needs process, also known as workflow. Without a process framework, AI cannot add value to complex work streams or collaborations. Market analysts and researchers like Gartner and MIT published papers on the topic. Customers, prospects, and partners have all confirmed the trend. Our competitors shifted their messaging, began talking about workflow and added rudimentary process technology. This trend validates Appian's longstanding position on the issue and recognizes the synergy between AI and process that we built our strategy around. I'll take a moment to explain why AI needs process. AI is probabilistic, which is to say it's slightly unpredictable. Most important work at the large organization's Appian targets requires total reliability. So AI needs a deterministic framework like our process layer. That deterministic layer provides direction and guardrails and certain functionality you wouldn't ask AI to write on its own. Code is becoming cheap, but mistakes aren't. So the more important the work, the more essential is the deterministic layer. In the coming years, AI will do a lot of work and write a lot of software, but it's not going to do it alone. Where AI goes, process must also go. Our technology is an essential enabler of AI. Appian has been a process leader for more than 20 years. We were a pioneer in this market back when they called it business process management. We led providing BPM in the cloud, We led in building a process-centric suite. Our unitary platform provides workflows, data fabric, process mining, and built-in security. We led again, embedding AI in our processes. We've earned trust at the largest firms and are executing mission-critical processes to the highest standards. Two-thirds of the world's top 10 life science firms, asset managers, and non-Chinese banks are Appian customers, as well as all 15 cabinet-level agencies and military branches in the U.S. government. These groups use our platform for complex mission-critical processes like customer onboarding, claims management, patient intake, regulatory compliance, and procurement. Exponential growth in our AI traffic shows that our platform is becoming an AI vehicle for large organizations. AI use on our platform grew 14 times year over year. AI use on our platform grew 14 times year over year, and we are monetizing that growth customers must upgrade to Appian's AI license tier, which comes with an average price increase of 25%. A meaningful number of customers make this upgrade every quarter, including this quarter. Much of our revenue, profit, and pipeline growth in 2025 is a result of our synergy with AI. Most of the seven-figure software deals we booked this year were driven by a desire to access our advanced features like AI. Here are three examples. First, A leading pharmaceutical company deployed Appian AI into an existing application this quarter. The application tracks interactions between the company's sales team and healthcare practitioners to ensure compliance with international regulations. We're deploying an Appian product called DocCenter that uses AI to parse incoming emails, documents, and other communications. DocCenter uploads data, pre-populates forms, triggers workflows, and accelerates response times, in this case, by 88%. Next. a top advocacy organization representing over 100 million Americans and seven-figure ARR customer, named Appian an enterprise standard this year. It recognized the importance of deploying AI within an Appian process after evaluating various AI vendors. In Q4, it purchased a large upgrade to access our latest AI features. The group will deploy Appian AI agents to reconcile tens of thousands of invoice payments annually Reconciliations used to take over an hour per invoice. Now the organization expects to complete tie-outs in just minutes. Finally, a network of European banks signed a seven-figure software deal this quarter to access our latest AI features. The group already runs Know Your Customer and Loan Overdraft processes on Appian. In Q4, they named our platform as an enterprise standard for modernizing core processes. The conglomerate will use Appian DocCenter to classify and extract data from dozens of documents to open cases for processing. The banks expect to save more than 20 million euros over three years as they scale operations. Recent market moves show investors are concerned that AI poses an existential threat to software firms, including Appian. There are two main worries. First, that AI will do all the work that software used to do. And second, that AI will write all the applications. I'll address each point. First, Appian leads in a technology that AI cannot thrive without. It's becoming understood now just how much AI needs process. AI is probabilistic technology, not reliable enough for the highest value use cases. Unpredictability is an indelible part of AI's identity. Years of improvement will not make it otherwise. Nor will enterprises ever decide to accept AI-level unreliability. A deterministic layer is essential, something to direct the work, something to detect and remediate the errors, something that can produce perfect outputs from imperfect efforts. Process and workflow is that technology. Long before AI, process orchestration was developed to best utilize that other unpredictable worker, the human being. As repeated studies attest, AI is not yet transformative in the enterprise. In PWC research last month, most CEOs report AI having no impact on revenue or cost. But impact is coming when AI is connected to valuable work streams and Appian is leading the way. With the help of a process layer, AI will be a very productive worker indeed and very widely deployed. Providing a framework so that AI can address the world's most important work is like selling pickaxes in a gold rush. Second, about AI writing code. We sell to our customers value and safety, not code. Approximately 80% of our revenue comes from highly regulated industries and the government sector. Customers buy Appian for performance, precision, and peace of mind. We sell compliance to regulations, reliable customer service, and accurate decisions. We sell the reassurance of a community of practitioners and 24-hour expert support. AI generated code cannot provide these things. Only with Appian's deterministic framework can AI create applications and perform work to meet the most exacting requirements. This is the reason why no Appian buyer has ever suggested to me that they would vibe code a critical system. They know better. This current concern about AI generated code reminds me of the open source scare years ago. Open source seemed to threaten the pricing power of the entire sector But in the end, it proved that code isn't the center of value in enterprise software. The value comes from the community and the support and the corporate commitment to reliability. Since open source became a popular term in the late 90s, the global software industry has grown by a factor of over 5x. Appian has faced open source competitors in our market. They appealed best to low-end buyers and had no impact on our growth. I expect AI-generated code to be adopted in mistake-tolerant and low-value use cases. To write enterprise code, AI needs a platform like ours that facilitates careful specification, developer collaboration, revision, and the strategic reuse of preexisting assets. In conclusion, the more organizations use AI, the more they need process orchestration. Process mitigates AI's shortcomings. Together, AI and process can address the world's most critical jobs, but AI cannot do it alone. Before I end my segment, I'd like to welcome Dave Link to Appian's Board of Directors. Dave is an expert in scaling enterprise software companies and applying AI to complex globally distributed systems. He is the CEO of ScienceLogic, an AI-driven observability and IT operations platform. I'm excited to welcome him to our team. I also want to thank Jack Biddle, for his exceptional contributions over the course of many years on the Appian board. And with that, I'll hand the call to Serge.