APPN - Earnings call transcript Q3 2017

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Operator

Greetings and welcome to the Appian Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Staci Mortenson with Investor Relations. ahead. go Please

Staci Mortenson

and afternoon, will to Good With you joining a After Calkins, for on Lynch, session. and Thank Financial question-and-answer up Chief Appian's and the third today Officer. Chairman Matt are review call remarks, results. Executive quarter us Officer, the Mark we you. prepared today thank Chief open XXXX me to financial call

go-to-market our and acquire identify forward-looking and intend, of expressions views to intended of a materially statements existing from only be upon today our and maintain under Reform are actual continue, reflect ability views differ the to and position, Private to call, pursuant benefits new our cause are date. statements results of reflected business statements will, and or federal we fourth securities our related forward-looking and as to financial are market and XXXX, ability similar expect, These uncertainties subsequent anticipate, Securities to XXXX, this for our industry, the Safe words customers, laws ability During future guidance statements indications estimate, expectations. of year trends, up-sell the our results, as statements related statements quarter made risks the our The are similar as expand to and should our any and Harbor Act variety may that customers. of to leadership including make our provision representing growth expectations. opportunity of to not and These subject strategy, that and of full to platform, could trends, market Litigation

our website www.appian.com. initial These in that please risks important offering of factors SEC. our actual relations to our and the contained to other final prospectus documents the at and For those with public are a filings the investor could of the section material in results, our periodic discussion related refer other affect available

non-GAAP refer to the on reconciliation Calkins. discussed in financial CEO, like over directly that, conference the this Please our release measures Additionally, turn relations to these of and website to most a financial their investor of Matt? tables call. With the measure. earnings to GAAP comparable I'd call portion will our measures be our for Matt

Matthew Calkins

Thank year-over-year of Thank you, to Staci. In for revenue us you subscription joining all XX% million. third Appian today. $XX.X the grew XXXX, quarter

Our in from million loss quarter. an from was year the loss non-GAAP operations million, of $X.X improvement prior a $X.X

was QX All it again ahead retention revenue this of are subscription in year. our figures three of increasing guidance. these XXX% as Our each quarter has

was Appian non-GAAP Our have about as expertise tripled vertical sectors resulting subscription XXXX. to named we fashion. enhance Year-to-date $XX prior we a our growth pharmaceuticals did we’ve and been are in government. as new services, of much versus investments professional margin services invested more these business healthcare new other the revenue In X% our sales and million, as was gross services primary XX%. in sold an our platform federal financial Consequently that and years, horizontal we sequential verticals increasingly recent professional and marketing year of customers. financial closed in all in Through revenue services quarter, revenue industries. making the business third nearly in period. in increased name healthcare Lately,

pre-authorization agreement doctors get healthcare payer. multimillion which top pre-approval management patients. replace behalf of medical in average accelerated QX, pharma line and five to healthcare growth allows the In in signing sizes solution, by we Appian’s financial new deal Additionally, dollar size their a for to services sectors. produced deal new rivals, our strongest payers, for healthcare with it five procedures organization This year on putting

implementation Deciding factors speed, saving filing, annual integration as we similar of win life As to included savings with a procedures, market reports In customer, million end-to-end top them strategy. ROI. operations new products of signed demonstrates use to Appian our the approving in IPO payers automating three industry our management five healthcare than strength million expertise more healthcare land $XX customers, expansion quarter, and of the With After another for now capabilities Appian discussed course application. demonstrated to such and our recent members. functions, perform and HCSC business expense their this and the third a on payer, leading follow in new combined deals clinical our for new our introducing medical XX value gain coupled we helped care purchases. platform of the core

in mission critical major wealth hours three Appian commercial removing than by the used retail and their XX% by across to Over bank tasks of efficiency the divisions. in the build to obsolete past each bank increased unnecessary additional these reducing more expand licenses made to They identity applications the know-your-customer of division. allows which States year United Western areas investment their dozen of thousands customers open Appian years, market a work dollar year. five the support accounts. verify QX, before These expanded bank the In application an multimillion middle they the will and across

out of ensure $X.X their together Ecosystem regulatory million initial legacy our requirements. biotechnology They in of with which after process globally will to only quarters has one them new Appian systems purchase with from customer the application initial world’s running. partners add-on. engagement to their their a adopted this stakeholder five been about allow data Secondly, March compliance top brings firms Appian’s technology months including their external to automate roll half QX. This new broadly. deals only Their six extended for last many licenses more true influenced purchased partner buy

one acquisition of year-over-year. the in of three period value times compared the sourced to logo times quarters one same two deals and partner half XXXX and in the grew XXXX, new first and four half Additionally, grew

technology MuleSoft key in with through and Microsoft, Our partnerships goes Prism QX. fruit all Blue

be legacy because integration close platform deal Prism Appian MuleSoft, the RPA $X us it the companies million after important to wish want and along run allows Appian a specific remain Appian equipment. a provides build critical physical business Two Blue Blue platform customers platform for in be cloud the our on customers MuleSoft give locked now want who applications. with months one many existing future to our combination be in This agnosticism to manufacturer partner Appian do Azure. robotic customer chose to and but the automatic to RPA that with flexible HHS’s because the need service announced one replace they vendor desired into to Cloud faster help happens process of BPM their a called Prism’s This department an we for the cloud center acquisitions. our and global platform quarter, integration can our allows not new shared They to with with run Prism, largest now to sold implementation. or vendor. modern Microsoft it capability to new effective. months automation Appian’s first with that to which processes our could of program our largest Blue services. multifunction the systems competitors human MuleSoft powerful a infrastructure more since support provider procurement announcing wanted to and government. of users be reconcile finalize of is time technology, take of health the existing quickly with to Their is they used mutual information

group to technology. number led banking through program overseas Mark two particularly reinventing marquee deals. a biggest In just our are successful. other top that PwC of customers QX into me and dollar one give and evolve of the international Notably, the Australian Federal results We of with in [Ph] financials. a areas new customs With Appian’s to proportionate walk with Partners IT customer base influenced our the Austrian and continue us over brought spend expand further and us significant we call you five steady, Spain, add our we was Mark? million turn within customers. partner banks Agency. and of software. the disrupting Our expansion partners deals QX that, conclusion, that we let to evidence an new

Mark Lynch

our financial revenue the of strong I quarter Thanks, full subscription $XX.X QX was then gains. guidance. for for relevant revenue revenue review momentum our on of when was most is our evaluating of market P&L growth details Appian. and ahead the third the and representing metric provide the believe share the growth and quarter year and our We XX% XXXX year-over-year. highlights Matt. of business another guidance Subscription on million our This will quarter

was total in Our quarter the was services million. growth software X% compare in million, year-over-year QX, the for compared up XXXX. low abnormally the was $XX.X revenue The quarter due the year-over-year. million Professional subscription $XX revenue up significant and $XX.X to Total to XXXX. services quarter XX% QX, third in is third support in revenue

and second we use XXXX. from at the It the the our expand realize our software. XXXX was to that was rate of quarterly on target customers as XXX% XXX% basis. a XXX% quarter their our value in range for overall retention This XXX% metric platform the demonstrates of subscription Our quarter, from up also the which XXX% QX revenue that they third above for was fact

to turn I’ll Now profitability our metrics.

third last margin, you the compared elite. XX% non-GAAP Our non-GAAP margin we gross the quarter was our quarter software XXXX. look to two both year. Subscription of third gross XX% XX% they the If XX% support same of will in that the in in components compared at period margin different was to of are gross see for

Our period. with our of the million, the third $XX.X programs. the non-GAAP year some year-ago the XX%. an of professional third expenses was primarily services non-GAAP was for million were in the timing at due Total operating to quarter remained quarter period and XX% XX% XX% compared than from $XX.X typical in lower than margin slightly gross revenue marketing of of and higher Sales in increase marketing revenue expectations prior

growth We our expect in future of revenue sales the from our XX% our revenue subscription success continue retention, was quarter should in of powerful you to see ago down revenue economics continued good sales in R&D strong and third investments XX% year the support with and have to hiring of functions. in people marketing customer period.

a in of we operations million as continue $X.X in $X.X non-GAAP million a extending on a and increase XX% continually invest year our power quarter the maintaining the of well innovation from on ahead percentage as to our from Non-GAAP and of of our ago period. our to in expect loss was to XX% third a the period, be prior the year $X.X million focussed as infrastructure you a from leadership to million, operations in G&A company. of to highly revenue basis $X.X should and but to public are cost dollar speed loss compared platform. of loss quick increasing guidance We declined

and As you losses exchange foreign know fluctuate. gains can

million of QX $X.X million exchange During we $X.X of compared gains XXXX. gains quarter, in to foreign than had exchange the foreign less of

share of based on $XX.X $XX.X $X.XX net loss XXXX guidance rates. movements do diluted and basic exchange loss foreign third the quarter million $X.XX impact a and diluted million the for for not of share basic consider as XXXX potential XXXX. and any XXXX does loss diluted third other not the financial Our third gains in Non-GAAP or million compared per per of a with and the currency quarter or $X.X estimate exchange basic and to is foreign additional of quarter were of of associated million and shares of we income loss for of respectively. quarter outstanding and net was third $X.X expense non-GAAP losses This

the are basis, are had our sheet, our balance however, of was June as $XX.X also we Total cash monthly. with of customers that respect as revenue of year-over-year up cash have million majority our quarterly upfront invoiced to $XX.X on to XX% annual XX, are others million of that with terms $XX.X deferred and billed some an large September XX, we compared and customers XXXX. Turning equivalents billed billing million

As such, that continue not the indicative and to of quarter last business. are remind deferred we’ll changes shared the investors always our revenue in in we momentum

period. year cash we operations flow months in used as the compared million During XXXX, from with of the $XX.X used million nine in $X.X prior first

Now full year XXXX. guidance, are raising our we guidance turning to for

This is revenue be For to $XXX.X range to is range $XXX.X now $XX.X expected and full expected million million $XX.X subscription the expected million in $X.XX a non-GAAP from assumes million now representing $XX.X and operations share revenue of is a $X.XX. of of to growth in shares and million. now common XXXX $XX.X net and year-over-year of be range million be per Total year outstanding. basic million with the in diluted XX%. loss of a Non-GAAP XX.X and loss

per of and $XX.X operations be million, be $XX.X Total range non-GAAP to in to of be range of $XX.X million quarter a to XX% expected open representing strong and million $X.X and and loss we assumes year-over-year is basic million fourth up and $X.XX non-GAAP and XX%. a is traction subscription outstanding. In of with range $XX.Xmillion $X.X million shares in This place. this was the common revenue the the $X.XX. share your the to diluted of questions. quarter in For now XXXX, million is net gaining expected in loss to are $XX.X the We’ll for Appian line expected the revenue summary, market growth from of

Operator

from [Operator Stanley. you. Please your Singh Sanjit Thank Morgan comes proceed question. Our Instructions] first with question with

Unidentified Analyst

the but of in was quarter. versus customer of historical? A Hi. acquisition, This Singh. is quarter new guys on any how A you numbers, Sanjit in very nice for customer think of [Indiscernible] new just filling I acquisition couple sort sort questions mentioned

Matthew Calkins

And report new along I in We our plans call, just conference customer to numbers adding acquisitions the is new proceeding mentioned for that comfortable that customers is one quarter. the appropriately. those don’t is on with plan as you progress. we call. know, don’t and putting strategy the And are moving plan every every our us. right our feel on prior we we’re on feel a We that and priority But as

Unidentified Analyst

easily that you to Got to the you Sanjit, for low-code application enabling versus we’re an dump you. opportunity every to through using by to help I’m the Can me pretending saying, what be customers understand for our it. creating RPA going just differences Since listen, question platform? that and between automate going process a

Matthew Calkins

through work. something way with integrate which could that that allows would is not we analytics we expecting integrated as with We product but keystrokes, a data, that through say, RPA that be APIs. integrate application a Okay. old Appian distinct to do. in ways do find human not were, through and could It does of automation setup were standard stimulated APIs. to an that if to with The aren’t simple movements Appian services. does other That work things entries process integration. integrate. RPA as platform be you it screen integrates, -- was mouse and be problematic integrate keystrokes. as a interface words, a the to complicated web Robotic it the instead integrates the to through it’s to In

be would The alone. screen Prism. would approach through the Blue have approach not integration have been approach Appian simply approach. and the do through the that So partnership an that we API-based RPA carry functionality with We do

are appeal different it us. there different they So That’s approaches very of to applications. so important kinds to and why

Unidentified Analyst

difference of much sort versus be of types the backend automate automate? around a of more there the there processes to difference is seems in you -- of trying the you’re Will a in processes terms try that it to of

Matthew Calkins

are more the the means automate. difficult. It control It does It reach span affect the of legacy of enterprise. we the of try old Appian’s reaching applications, the that periphery of to generally widens our up in more application to does types processes extend obscure,

Unidentified Analyst

one Got it. it. And for then Got Mark.

be this ramping more taken is an about going sort to it services period what very basis? at we to new very indicative of growth look two time guys the that IPO. of noted over over this of of comp a professional kind services Or originally like levels high work You on period, projects professional versus over you Is that of of had the forward was easy the just but doing? been the due last quarters rate thinking services if strong from past growth in elevated the two year professional up? impact quarters Is durable it need ago seems a XX% like the just largely

Mark Lynch

to in then We there. we that make can quarter I think as we throughout first, a in successful, do the about acquired. the we the like we for – applications want significant last had land-and-expand customers we those to the amount customers talked a huge, that be And you basically new of so want those go that know sure applications we our are enterprise. new

of QX. you’re so And professional surge our QX, some seeing in in services that

You Thanksgiving, in, Christmas, tapering a built some there’s – so – should out. that a QX is see have also all stuff, but also saw seasonality you you

of new Matt it’s think couple think I well. I And add else. So wants anything a chime the logo phenomenon in a points as than to of

Matthew Calkins

love to be say I perfect, in of your more. There’s bit the little answer, services. it's course will going but I a volatility

directions. for Appian all services, in professional because basis we earn of that but software PS indication are versus by year logos customers last revenue in chain first and to things contributing the that year new of more by to dollar every nice the is for $X.XX caused link QX very second On of They’re – services $X.XX logos for in a revenue working lead customer. see, a median year exceptionally who you the that healthy a means year expected As good down, and services grows software. that can third follow-on, customer that's dollar $X.XX professional there’s us. favorable, mean in they’re by is They compares of that services and the they But be so $X And software. in caused well. a of of new is the use

very virtuous there’s cycle So directions. in both

business strength, services. a a So, is I up it when about but do don't own we like I services. on as it see software thing, Its like I it as our strength expectations see volatile our

Unidentified Analyst

– get take that terms portion there in in mentioned get to doesn’t increasing for deal. is of overall contributing it from subscription you of new sort good follow-on Or when the – you get that given years? not are to and make they sense contribution and the to sort do better services? partners a since get partners the multiple business good for you any of increasing or those implementations in you bringing that you these initial Does ramp able And partnerships such oversee of follow-on just

Matthew Calkins

to is And and in in I've we a Europe last designed Appian It’s good our up apartment that I handle software feel because we the up absolutely nor week I stepping Appian's our the is opportunities I’m very is before. be increase and over of never business. step excitement staff more not about services to take acquisition staff determination need There's meeting that to -- capable services was just them our there. there’s partners revenue. seen partners and necessary our logo with to

Unidentified Analyst

Excellent. Thank you, guys. Very quarter. nice

Matthew Calkins

Thank you.

Mark Lynch

Sanjit. Thanks,

Operator

[Operator Instructions].

question next Richard Genuity. Davis from comes question. Canaccord Please with Our with proceed your

Richard Davis

of of very One, you that to World things focused, I are the on Thanks of, seems you inning one that's that that to upgrade then there? And do but I just me just segment was that cycle you this questions. think is, keep kind things. on of noticed from the to finished, for prepared the the much. quick no these analogy to or I Series do guys of that's you also for And second see remarks, something. as but say kind the it you kind sponsors guys have low-code, guess right you is we a us industry what question an firm so it in have kind Two touch see the were CEO space InsurTech

some how defer you and are this had Thanks. that? things to that what of about year you’ve do kind so And other think

Matthew Calkins

regards we our low-code maturity future our think past the in as general, curve. first weighted but are say we’re industry the of toward the to insurance and growth I to in to in compare future. to I it's potential, specifically where the insurance outreach, With to isn't inning, lack on which much in a regards the indicate so With to

just insurance, in you We’ve referenced, in today. It's one that and one our experts verticalized kind invest retail and like can't education going of but energy, We attention that marketing start the five that received everything. insurance pharmaceuticals we are force got investment get sure be much we’re on we We vertical can't industries wait not gathering enough that insurance past is services, in is -- specifically sales for and to verticalized, behind true have are to to more those focused continues as like – receiving so the Lately, government. to But things to receiving from get places becoming escape that have that as and into put we the shows of transportation them. energy we insurance financial the higher making I that them focus velocity. the and the of and apace. terrific initial and is and sales put none we

Richard Davis

Great. Thank you very much.

Operator

question. Please next Jesse Sachs. from Our question comes proceed with with Goldman your Hulsing

Jesse Hulsing

verticals focused on Thank practices. you. I you're and be at growth to are And Yes. and services most verticals these you five government Matt, to I three or you're are on been you the big built for looking and number want you forward guys. what focused do is that Where follow-up incremental which that hi, going where financial if wondering seeing I'm think Richard’s guess, out you question. the of look you? But on? so the

Matthew Calkins

that second Jesse. has close Okay. our a know is almost what be. for done quite I number clear three number alluding government, Pharmaceuticals four. there. instead is it’s four. We going remarks to becoming been really Financial Its and there's Thanks the would see big there. That so services Government healthcare tie stepping – one. to might I'm good pharmaceuticals. already prepared maybe it now the and in have of a healthcare number may be up, momentum pharmaceuticals some here three, big

of of to their build a software these So, world potential to and medium prediction feel easy and just for a one. looking needs is, to be in it. processes and to so customize the These organization every behaviors to every large that procedures fertile. and change is that it to needs there’s my they company, way the with I software verticals everywhere. make some exceptionally organizations, will you I next emphasis much to be The leave with real one want for

ones a if be are feel I breakout, in yet. one had verticals. I like who will haven't that and next the winning ones got The we've these But one healthcare. in pick every the it of be we investing will position So to

Jesse Hulsing

That in demand more feel a is One, two kind of increasing sense. like do are kind makes the category Yes. about gets I attention. related low-code of you funnel. have inbound questions as

Forrester I a about you out, what around were also Is stuff guys think report trials guys a metrics had and of building direction things. sort and you funnel talking in the quarter And your that the publishing if last top excites track? and this pricing that of you the free some it. did to look Is moving at you? funnel that

Matthew Calkins

Okay.

First success. of of funnel believe for of IPO. It’s been for actually in all, things us I’d say top good the the good us. a have I number

So for I that helped. public being publicity receive degree firm we think of the greater a has

our that The activity partners, exposures. refer helped, think leads the because partner has more to I more. they IPO to partners leads

-- you're we top I even of the time and outreach touches is forms. all time to at this say, if the an do, the it say by you the a thing those about can't counts that doing the same over particularly or new equivalence were we think assumptions you the helping. qualify connections in of to make collect, when not quantifiable exceptionally verticalization of the I saying want I is funnel

from make can't come that and the has I think so, the to it a But see energy is statement the want scientifically energy And or like top another I that. -- recently used funnel be. quantitatively I of we’ve taken. I better say number steps of don't to than

Jesse Hulsing

Thank you.

Operator

with question from Our Lenschow comes with Barclays. Please your question. next proceed Raimo

Unidentified Analyst

following customer been wondering vertical as or those and want verticals, Is This guys. – that just my [ph], you Hey, taking to reference but that? Mohit there to land-and-expand that to on question. you changes strategy sort you for to verticals just that about the that also X, I’m penetrating vertical market build X has only verticals? go try X need look or playbook happen that play those outside Top think you the base say Top on will Thanks in is any focus and the Matt, do the motion Raimo. sales referencable non-core up outside discussed, of for maybe not think and I as

Matthew Calkins

It’s the There a right. That’s depending slightly undoubtedly motion is vertical. different good a question. on

if I students different have charge example, imagine it, with going the more institution can could approaching for So, and imagine you of license right. ways an the educational within in correlated might an I that different after vertical verticals. and then uses organizations education for to be

However, I Appian them our want the we way purpose there's thing say that I’d go one a after. We after go end -- to – serially, think of at set that time. after go does

and And our so the from to pull experiments relay we first those that end on more have most end lessons and plus back that learnings you’re the the But begin. relays probe and the yet -- to features learning and you and affects us. advanced project experiment, plus is like that second, probe from faster we that as add more

to a more financial don’t moment. But So, first of of one of perceptive if being it about attuned all in the learn secondly, order you’re reason approach those teaching as a numbers each limitations. for set all, an we very simultaneously do you and you

by from So of received we thing And do that that's lessons the trying see the way offices. draw we’ve territory touched haven't We we a on right. way one yet. when time at previous the we’re this lot that And it. you office same had we there's geographically, to move and

it of the stay we a set that's yet. because with have whenever approaching apt set in just into a then very office were areas got and of is member This mean not We that's important in the to distinctively possibilities. no approach. We

Unidentified Analyst

Thank you.

Operator

And the of call have end the I would for remarks. to gentlemen, closing turn answer reached the we to Ladies and question and session. management back like

Matthew Calkins

from very to third results a evening. I have It’s night. add. much share time to else our And We of nothing XXXX. you you. appreciate Thank with the this you pleasure Good quarter

Operator

This concludes tonight’s conference.

You may disconnect your Thank you your this time. participation. for lines at

Appian (APPN) 5 Nov 172017 Q3 Earnings call transcript