Appian(APPN) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2023, Appian's cloud subscription revenue grew 27% year-over-year to $77.2 million, while total revenue increased 16% year-over-year to $137.1 million [7][18] - The adjusted EBITDA loss was $5.3 million, significantly better than the guidance of a loss between $16 million and $12 million [21] - Non-GAAP gross margin reached 75%, the highest since the IPO, with subscription non-GAAP gross margin at 89% [20][8] Business Line Data and Key Metrics Changes - Subscriptions revenue grew by 20% year-over-year to $103.8 million, with cloud subscription revenue retention rate at 117% [17][18] - Professional services revenue increased by 6% year-over-year to $33.3 million, but is expected to decline as a percentage of total revenue [18] - The count of seven-figure ARR customers surpassed 100 for the first time, driven by large deals in the U.S. Public Sector [12] Market Data and Key Metrics Changes - International operations contributed 35% of total revenue, up from 31% in the previous year, with healthy contributions from both APAC and EMEA regions [19] - Cloud software net new ACV bookings were approximately 80% of total net new software bookings during the nine months ending September 30, 2023 [19] Company Strategy and Development Direction - The company is focusing on a Private AI approach, emphasizing data privacy and compliance, which is expected to differentiate its offerings in the AI market [8][9] - Appian is investing in its platform and evolving its go-to-market strategies to prepare for future growth [16] - The company aims to maintain a balance between growth and the path to positive EBITDA [8] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the macroeconomic environment, noting deal slippage and elongation of sales cycles [24] - The company remains optimistic about the future of AI and its integration into existing processes, viewing it as a multi-year growth driver [39] - Management highlighted the importance of demonstrating practical value in AI to secure budgets from customers [29] Other Important Information - Appian obtained a Judgment Preservation Insurance policy, resulting in a one-time payment of $57.3 million, which will be amortized over three years [24] - The company was named a leader in the Gartner Magic Quadrant for Enterprise Low-code Applications platforms [15] Q&A Session Summary Question: Where is the budget for AI spend coming from? - Management indicated that AI spending is primarily coming from existing IT budgets and will need to demonstrate value to secure additional funds [29] Question: Any commentary on the linearity of demand throughout the quarter? - Management noted continued caution into Q4, with no significant improvement in the macro environment [31] Question: What does "bubbling under the surface" mean for the business? - Management emphasized ongoing activity and energy towards future growth, but did not want to quantify it in financial models [33] Question: Rationale for the insurance policy? - Management directed inquiries about the insurance policy to the 8-K filing for detailed information [37] Question: How is the government sector performing in terms of bookings? - Management reported strong growth in the public sector, particularly with the new case management solution [43] Question: What is driving the upsell strength among existing customers? - Management attributed upsell strength to customer satisfaction and value creation [49] Question: Any shifts in marketing strategy with the new CMO? - Management expects continuity in marketing strategy with an evolution towards new priorities under the new CMO [56]