Question-and-Answer SessionMaybe for those who might be a little bit newer to Appian, can you just give a little background on the company and what is it that Appian does?Srdjan TanjgaChief Financial Officer Excellent. It's no better place to start. So Appian is a platform that allows customers to automate and orchestrate their most important enterprise processes. So that's a mouthful. So maybe the best way to explain that is through a few examples. So for example, one of our largest customers is a global p ...

Appian (APPN) 2025 Conference September 03, 2025 12:50 PM ET Company ParticipantsSerge Tanjga - CFOConference Call ParticipantsSteve Enders - Equity Research AnalystSteve EndersAlright. Awesome. Well, thanks everybody for for being here today. Welcome back from from lunch. Day one of the Citi's Global TMT Conference.I'm Steve Enders, part of the software research team here at Citi. And with us for this session, have Serge from from Appian. Serge, thank you so much for being here.Serge TanjgaSteve, thanks fo ...

Financial Data and Key Metrics Changes - Appian's cloud subscriptions revenue grew 21% to $106.9 million, while subscriptions revenue increased 17% to $132.7 million, and total revenue rose 17% to $170.6 million [5][21][24] - Adjusted EBITDA was $8.1 million, significantly better than the guidance of a loss between $5 million and $2 million, and compared to a loss of $10.5 million in the previous year [24][25] - Net income was $300,000 or breakeven per diluted share, compared to a net loss of $18.2 million or $0.25 per share for the previous year [25] Business Line Data and Key Metrics Changes - Professional services revenue was $38 million, up 13% year-over-year, while subscription revenue represented 78% of total revenue, compared to 77% in the previous year [21][24] - The cloud subscription revenue retention rate was 111%, down from 118% a year ago [21] Market Data and Key Metrics Changes - International operations contributed 38% of total revenue, unchanged from the previous year [21] - The U.S. public sector outperformed the global business in cloud revenue, new bookings, and software pipeline [11] Company Strategy and Development Direction - Appian's upmarket strategy is yielding results, with a focus on high-value transactions and leveraging AI to enhance its platform [6][7] - The company is optimistic about the modernization of legacy applications, driven by AI, which is expected to create significant market opportunities [13][14][18] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the federal business, noting a shift towards direct engagement with software providers [13][64] - The company anticipates continued growth in cloud subscription revenue and total revenue for the full year 2025, with adjusted EBITDA expected to range between $49 million and $55 million [26] Other Important Information - David Crozier was appointed as the new Chief Marketing Officer, bringing extensive experience in enterprise software and AI [20] - The company is transitioning to a consumption-based pricing model, moving away from user-based pricing [67][69] Q&A Session Summary Question: App modernization journey and vendor contributions - Management acknowledged that app modernization is complex and emphasized their leadership in the market, with AI playing a crucial role in both extraction and instantiation processes [29][30] Question: NRR rate and its implications - Management explained that the NRR rate's decline to 111% is due to past downsells and highlighted the strength in acquiring new customers [34][36] Question: Competitive advantages against AI and other vendors - Management detailed that Appian's built-in functionalities and robust platform provide advantages that AI alone cannot replicate, emphasizing the importance of a comprehensive application environment [40][41][42] Question: Federal pipeline dynamics and AI's role - Management noted a positive shift in government purchasing behavior, with increased interest in efficiency and direct engagement with Appian [64][65] Question: Guidance changes and FX impact - Management clarified that the guidance increase is primarily due to fundamental business strength rather than changes in guidance philosophy or FX rates [60][61] Question: New sales leaders and go-to-market strategy - Management indicated that new hires are aligned with ongoing transformation efforts to enhance discipline and best practices across the organization [72] Question: Efficiency improvements and AI's impact - Management highlighted ongoing efforts to improve sales productivity and the potential for AI to drive further efficiencies across various functions [49][80]

Financial Data and Key Metrics Changes - In Q2 2025, Appian's cloud subscriptions revenue grew 21% to $106.9 million, total subscriptions revenue increased 17% to $132.7 million, and total revenue rose 17% to $170.6 million [5][24] - Adjusted EBITDA was $8.1 million, a significant improvement from a loss of $10.5 million in the previous year [24] - The cloud subscription revenue retention rate was 111%, down from 118% a year ago [24] Business Line Data and Key Metrics Changes - Professional services revenue was $38 million, up 13% compared to the previous year [24] - Subscription revenue represented 78% of total revenue, compared to 77% in the year-ago period [24] Market Data and Key Metrics Changes - International operations contributed 38% of total revenue, unchanged from the previous year [24] - The company noted strong performance in the U.S. public sector, with federal business outpacing global business in cloud revenue and new bookings [11] Company Strategy and Development Direction - Appian's upmarket strategy is proving effective, with a focus on high-value transactions [6] - The company is leveraging AI to enhance its platform, allowing for higher pricing and new industry opportunities [7][8] - Appian is positioned to capitalize on the modernization of legacy applications, which is expected to grow significantly as AI reduces costs [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the federal business, validating their expectations with strong results [13] - The company anticipates continued growth driven by AI and modernization trends, with a focus on efficiency and customer satisfaction [22][66] Other Important Information - A new Chief Marketing Officer, David Crozier, has joined the company, bringing extensive experience in enterprise software and AI [20] - The company is shifting towards a consumption-based pricing model while maintaining flexibility in its pricing strategies [68] Q&A Session Summary Question: Status of app modernization journey and vendor reliance - Management indicated that app modernization is complex and will require both services and software solutions, with confidence in their leadership position in this market [29][30] Question: Explanation of the NRR decline - The decline to 111% was attributed to previous downsells and a higher percentage of new business coming from new customers, indicating strength in acquiring new logos [32][33] Question: Competitive advantages against AI and other vendors - Appian's platform offers built-in functionality that AI cannot replicate, such as security and scalability, providing a durable competitive advantage [40][41] Question: Impact of AI on customer conversations and pipeline - AI has significantly enhanced the value proposition, changing customer perceptions and driving pipeline growth [56][58] Question: Guidance changes and FX impact - The increase in guidance is primarily due to fundamental business strength rather than changes in guidance philosophy or FX rates [60][61] Question: Federal pipeline dynamics and AI's role - The federal market is shifting towards direct relationships with software providers, which is favorable for Appian, and AI is expected to enhance efficiency in government operations [65][66] Question: New sales leaders' impact on go-to-market strategy - New leadership appointments are aimed at enhancing alignment and best practices across the organization, continuing the ongoing transformation [73] Question: Details on expense shifts affecting EBITDA - The outperformance in EBITDA was due to the tactical movement of marketing and consulting expenses to the second half of the year [75]