Appian Corporation (APPN) Earnings Call Transcript & Summary

Greetings, and welcome to the Appian investor session. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Sri Anantha. Thank you. You may begin.

Thank you, Rob, and good morning. Welcome to Appian's investor session in conjunction with Appian World 2022. Our Founder and CEO, Matt Calkins, spoke of this session with open comments. This will be followed by a partner panel led by Marc Wilson, Chief Partner Officer and Founder. Participating in the partner panel are: David Steuer, Global Lead for Low-code Practice at Accenture; Himanshu Arora, AVP, Digital Process Automation at Infosys; Arjun Devadas, SVP, Professional Services and Operations at Vuram. Following the partner panel, we will bring back Matt Calkins; Mark Matheos, our new CFO; and Marc Wilson for the final Q&A. Before we kick off, please be mindful that some of the matters we will be discussing today include forward-looking statements regarding our strategies, operations or financial items that are based on the information we have as of today and our brand beliefs, respect to the future of our business. These statements are subject to risks, uncertainties and assumptions and our actual results and financial conditions may differ materially from those indicated in the forward-looking statements. Further information on the risks that could affect our results is included in our most recent filings with the SEC, which are available on our Investor Relations website. With that out of the way, it's my pleasure to introduce our CEO and Founder, Matt Calkins.

Well, I appreciate you all joining today. Great to have a live crowd. That's a big step-up from the [Audio Gap] quarter, of course, closed haven't closed [Audio Gap] market shaping up and what are [Audio Gap] All right. So anyway, let me tell you about where we think the market is going, right? We think that coming out of the pandemic, the major needs you see from our customers today is that they want agility. They want digital transformation, except this time they mean it, right. A couple of years ago, we were talking about digital transformation, but they were [Audio Gap] and those projects have to succeed. But in the pandemic, we saw how essential transformation literally happened up with your customers [Audio Gap] change become mandatory and all organizations now are prioritizing the [Audio Gap] This creates an opportunity. I think there's a market around that to be main provider, a main enabler. We've created a [Audio Gap] and we put together products, including our original workflow platform that together constitute what I call a [indiscernible] engine and speaks what I think is an emerging need what is a market of this impetus of market scale, right? So our goal is to start with the workflow, we've been good at for years, and then expand that, create a fleet of functionality as a single stop end-to-end process manufacturing factory. The idea being that organization, Appian customer can discover what processes they need to build in our environment and then proceed to design and then proceed to automate them and execute them without leaving gap in the environment, without having to buy any product, without having to go to all the headache of multiple pieces. Just in the current -- year past, the way to do this would have been to buy 1 product for process mining, another one for workflow and a third one for RPA and maybe a fourth for AI and perhaps one for document processing and get your business rules somewhere, stitch this all together and try to make a functional product. And I was just in an interview, just 30 minutes ago, I was sitting with an interviewer from Spain. And he said, "Why is it the digital transformation project so often fail?" And I said, "Well, of course, it's because of all these parts because it's too complicated." If the world takes this seriously, exchange series, digital transformation mandate seriously, it's going to start demanding it, no compromise approach. There's simply too many compromises now. While Appian is announcing [Audio Gap] last month, we're announcing here today [Audio Gap] got at no compromise approach. We've put together process mining, workflow, RPA, business document processing, all of it, same platform, same price tag, they're looking to fill same upgrade cycle every [Audio Gap] unified it. This is the turning point of the year for us but I think it's the turning point of multiple years for our industry as well. I think that our -- we've taken a turn now that our competitors are going to have to follow. You've seen a little kind of movement supported in the recent past, like ServiceNow and [ Salona's ] having a partnership, right? So there's recognition, these components belong together, but having a partnership is not the same as having them as a single SKU, a single contract, a single support line. And so I don't believe our industry is yet taking this is serious. We have taken it [Audio Gap] serious we're going to make them, right? So that's what we're doing right now, putting together the answer for the world's [Audio Gap] right? We had a couple of features that we announced recently. You may have heard about IL5, that's a new government security. The government, all right, they have a lot of scrutiny and they award certain security clearance levels. We've achieved IL5. This is really big. We got this before our largest competitor. ServiceNow didn't have it. Salesforce didn't have it. We are top of the heat for security. That means a lot to us, demonstrates our seriousness. Low-code data is probably my favorite feature that we released in years. The idea of being -- can treat the data integration as drag-and-drop objects. Data integration is incredibly difficult. I don't know if you've ever used, probably try to integrate the data into an application, but it's the hardest thing, making an application. We're making it really easy. We're bringing low-code to data, we called low-code data. The idea being that the same drag and drop, mouse-driven development approach that you can take toward building an application, now you can take it towards integrating data across your enterprise. And as a result, the amount of data requests that have gone through the Appian system are multiplied by 25x in the last 5 years. We now have more than 50 billion data requests going through Appian on an annual basis. So that's just on our cloud side because we can't measure the on-premise side, just incredible growth. And that Appian becoming a data hub. If you saw the keynote this morning, some more detail on that. But that's really exciting for us. When we put together the suite and we make it easy to use data from across the enterprise, we are pushing the Appian pyramid [Audio Gap] direction. If you think of Appian as a pyramid that we do some sales at the top of the pyramid, and then we do some sales down the side of the pyramid, and then there's some space below the pyramid that we don't bother with, right, the real, the low end. We are pushing the pyramid up and sideway. By up, I mean, we're appealing to the power demand. We're appealing to organizations that are so serious about change, they will tolerate and no compromise. We have put together a set of products that have no compromised answer to the need for change at the highest level. But the other thing we're doing is creating accessibility. If in the past, you would have had to buy 3 or 4 different products and stitch them together in order to create a digital transformation project. Well, that's hard, it's not very accessible. And so what we're doing is making it accessible. The idea is to bring more users -- more viable buyers into our sphere. We're growing our margins, right? So when we push the sides of that pyramid, we are inviting more buyers into our market. We're doing the same thing when we announced as we did today, the new connected know your customer component in our financial services [Audio Gap] This is another attempt that broadening our applicable market. So I just want to be clear, Appian is moving in 2 directions. We're satisfying the high-end need, right, and no compromises answer to the change man. And we are broadening our applicable market by emphasizing accessibility, taking away the friction that would have prevented customers from participating in our market. This is our 2 primary directions. I want to mention -- I'm running out of time, is that right? Okay. Let me wrap up then because I'll be here for Q&A. And so whatever is on your mind, I'll be able to answer it. But I want to say that I think this is a key moment in our industry when it makes the transition from being focused on what it does being focused on what it's for. And I think in any industry in software that has grown to substantial size there is such a moment. Stop worrying about whether you're this component company or you're a that component company, you start worrying about whether you're providing the net effect that your customers want. They didn't want to [Audio Gap] There's no fundamental human need workflow, right? It's the thing that workflow delivers. The thing that low-code leads to. We're not really about the components anymore. We're about the effect. And that's a really big change that we've made recently. We're about change. We're a change engine, and we do that with low-code, with workflow, with process mining, with RPA, with AI, with document process business rules, but the effect [indiscernible]. And when you start speaking to customers' needs, rather than saying this is what I'm selling, right, we're not about lemonade anymore, we're about [Audio Gap] You see what I'm saying? We're making that switch. And I think that every substantial industry has to make that switch and this is our moment to do that. I want to wrap up by introducing you, our new CFO. He's sitting right here. His name is Mark Matheos. Please join me in welcoming Mark. Mark has been the Comptroller for Appian. He's been the Chief Accounting Officer for Appian, and we are proud to say he's now the Chief Financial Officer for Appian. And he's going to do a great job. It's a pleasure working with him. And I also want to say that Mark Lynch, who has been with us for more than a dozen years and done a spectacular job is not leaving. Mark has been invited to join our Board, nominated to join the Appian Board this summer. And I look forward to working with him for many years in the future. Congratulations. Thank you, Mark and Mark. And now I'm going to hand the microphone over to our panel.

[Audio Gap] Tell you that we have a big problem in our company, too many [indiscernible], is the one room I can be in where there's any Mark. Makes me feel good actually on some levels. So good morning. I've had an opportunity to meet many of you. My name is Marc Wilson. Along with Matt, I'm 1 of the 4 founders of Appian. I'm happy to be a partner officer and have been driving our partner strategy for many years, and I'm able to join this morning by 3 key partners of Appian. So David, Himanshu, Arjun, if you would like to come up, we're going to get going. These gentlemen represent, with David here representing Accenture, Arjun representing Vuram, and Himanshu representing Infosys. These 3 companies have all expanded their practices in Appian significantly. All three of these organizations work with Appian globally. Two of these companies, of course, are massive. Vuram probably has a higher growth percentage than the other two, but we welcome them all here. I have a few questions prepared for them, but this more than anything is your opportunity to talk directly to some of those partners in the forum. So if you ask a question? We'll see if there are others, we'll go from there.

Really to start off, my first question. I'd start off with you, David, on the end, if Himanshu gets ready. If you could introduce yourself and tell us a little bit about your perspective on low code, your perspective on [indiscernible] low code.

Yes. No. First of all, great to be here today in person. Thanks for having me. So as Marc said, I'm David Steuer. I run the low-code practice for Accenture globally. And maybe just I'll start off with one of the things we're seeing. Accenture did a recent study in the marketplace. And we found that close to 90% of C-level executives said that their employees and their customers are changing fast than their business, right? So to Matt's point, agility is a necessity. It is not an option, especially post-pandemic, right? So what we did is we've accelerated what was driving digital. And if you look at the -- so if you look at agility and you look at technology and how you have to use technology to drive ability, what are your choices? Well, you could go and you could buy yourself a package solution, right? But a package solution is really just going to be good enough for a commodity product like finance, accounting, payroll, point, payroll, right? But essentially, payroll is stable, right? And you could solve that with a package. The challenge is there are very few things you can solve anymore to repack it. [indiscernible] the management that will [indiscernible] you can't help back. So what's your other solution? Solution #2 is, well, let's go and let's custom develop, right? And that's certainly something that we're seeing. There's a lot of custom development that's going on. But a platform like Appian, a low-code platform, what it allows you to do is it allows you to accelerate that custom development. It gives you a platform that you don't have to recreate work automation. It's there for you. It's providing the level of data integration. And that's what we're seeing in the marketplace, starting to take off. We're considering low code -- and emerging market, but we're also considering it's going to be a key area.

Arjun?

I think I'll kind of start from there. Let's [indiscernible] introduction. Arjun Devadas, I run the [indiscernible] operations of Vuram. We are a global hyperautomation services provider, predominantly worked with Appian, been an Appian partner for 11 years now and grew and evolved with that company. So our perspective, actually, what pandemic has done is kind of access the [indiscernible]. Low code had been there. And -- but pandemic has really act as a catalyst and increased the urge of companies and our customers to go digital, but it showed us data has to be in cloud. We needed a unified platform, and we all had to work from a workplace remote as well as get the work done with minimum workforce. So all this together kind of act as a catalyst. And we are seeing an increased demand in the last few years. And one more change, which we have started seeing recently is low-code automation cannot be solved by one piece of technology. There are multiple components which needed to come together, business, low-code platform, RPA, AI. And what are customers is kind of expecting from a partner like us and all of us sitting here is kind of being the advocate to select the platform. And they don't want to worry about what technology they use. They want us to solve the problem. And how a technology like Appian is helping us is we don't have to depend on these multiple technology stacks when we have a unified platform, which can solve multiple of these technology problems and kind of tackle the hyperautomation as a holistic system. So we are seeing an increased spend, and especially with the unified platform rather than siloed technology stack.

[indiscernible] My name is Himanshu, and I run the [Audio Gap] We've been also an Appian partner for quite a number of years and [Audio Gap] We also did a research with a couple of firms [indiscernible] into some of our customers and asked them [indiscernible] to question now entire fundamental [Audio Gap] We figured out that more than 42% of the customers already adopted [Audio Gap] But on top of it, 53% incremental customers have been doing a lot of trials that cater to 95% of the market. There's hardly some 5% who were saying, "Yes, I don't need low code. 95% today [Audio Gap] And then we ask him some fundamental questions around why do you [Audio Gap] and so forth. We realized 45% of that market said, "I want low code [Audio Gap] just transform for not just to the innovation but modernize [Audio Gap] And the rest of 40% came back and said, "I need it, go ahead and [Audio Gap] So when we started putting this all together, we realized the importance of -- by low code [indiscernible], then how could Appian be the right tool or platform, which could help us, thanks for the [indiscernible] mining part, not just solve problems, more importantly also help find the right [Audio Gap] We put it all together with all our [indiscernible] space, exactly where we thought of [Audio Gap]

As I mentioned, I have other questions for them, but this is your time. So brought 3 of my partners here, there are particular questions that you have for them. Great, okay. No problem. Go ahead.

Guys. I'm Jeff Nevins. I work for Silvercrest. So the question I had is low code 4 years ago was only a term kind of you guys [Audio Gap] Now, everybody uses it. [indiscernible] talks about it. Smartsheet talks about it. ServiceNow has something and then they do process mining with. [ Salona's ] obviously, Microsoft has something and I can't [Audio Gap] the product. But -- so how is we -- as investors, can we distinguish what you're doing from what they're saying they're doing? There's always this Wall Street versus Main Street thing that always uses everybody. So I don't know how to really ask it other than that, but it gets confusing, but it feels like you're doing something different. We just want to [Audio Gap] I'd like to understand how -- why you're doing that's different. And maybe a good question for the partner.

Dave.

Sure. Yes, I think you're right. It sort of reminds me of automation, right? Because everybody says [Audio Gap] automation as well. And so every software company that they [indiscernible] low code. The way I would differentiate it as, from an investment perspective, there are companies -- software companies that will use low code to enable how they do development. Pick your favorite one, whether it's SAP, whether it's Salesforce, they're all using low code as a way to enable what they do [Audio Gap] Salesforce Automation, that's [indiscernible] But then there are a group of solutions that are showing up within the hyperscalers, right? AWS has a Honeycode, Google has [Audio Gap] Microsoft has platform as their power platforms. Those -- most of those platforms are focused really around accelerating a lot of what the citizens can do, but citizens meaning you and I. I know it's almost like [indiscernible], right? And it's going to get better and better. It's going to advance more and more. But instead of me using an Excel spreadsheet on a small amount of data, we use -- Google Sheets as an example, then you'll be using a Google Sheet on [indiscernible] fantastic, right? But where -- the third area where the low-code pure plays like Appian come in is they are providing a way to do development that crosses across all [ boundaries ], right? So it's enabling you to use a GUI type interface to build all sorts of different processes, all sorts of different innovations. So it's low code in and of itself to really helps drive that custom [Audio Gap]

Just building on top of what David said, a lot of existing [Audio Gap] are all getting [Audio Gap] But what we [Audio Gap] with Appian is what it was [Audio Gap] and hence, the maturity curve of what customers see comfortable with kind of app. Here also, as an example, just to answer that question. We also -- ServiceNow [indiscernible] but I have -- ServiceNow is now sort of smaller [indiscernible]. I would still play with ServiceNow maybe, HR onboarding here. But would I do customer onboarding for a critical application? I would [Audio Gap] again, building on top of why would I need to use admin for that just because of all the stuff that is having put together, a product architecture taken the way it was architected and bonded versus the rest of the ecosystem players adding on that capability. And I think they still have more [Audio Gap]

Jimmy [indiscernible] from Credit Suisse. Could you talk a little bit about the zone that you're losing Appian from a developer perspective and how that's shifting over time? In particular, I could think about a developer. You could be way more powerful rather than like a python library building something in Appian and having the developer -- development time speed up. I could see it coming from the other side from someone who maybe has experienced logic or philosophy. So has that kind thinking tool set, but not a coding tool set, going down? Or you could just be kind of native Appian. So kind of curious what you're seeing there and how you're seeing that shift.

Arjun?

So 10 years ago, I was doing maybe 7 years doing Java development cycles, right, coming to a world of Appian at that time because again, that's [Audio Gap] right? Still, I start -- yes, we needed some programming, sales [indiscernible]. But sitting here today with the latest launch of low code for all [indiscernible], I think I'm seeing the evolution of the whole platform and how it has gone from kind of a little bit of programming needed to [indiscernible] now with all the drag and drops, integrations drag and drops [indiscernible] company. We don't mandate any computer degrees [indiscernible] hire. We are going across hiring. We are certainly seeing much success across the verticals where we are hiring with the minimum training that we are doing. So people are able to pick up development in Appian pretty quick. And not only from our side, even from our customer side, most of the customers who use Appian these days want to be self-sufficient at some point in time and start building applications on their own, not depending too much on IT, but with some COE and IT governance, but that's another change we are able to see that we are able to still upskill our customers pretty tremendously with a very short time frame, picking up [indiscernible]

This is Jacob Roberge from William Blair. Just curious, so they've obviously -- Appian has pieced together this puzzle of workflow over the last few years on RPA and process mining and low code. I'm just curious how initial customer reception has been for that unified platform. Are they understanding the value proposition of combining those 3 technologies. I'm just really trying to get at how evangelistic is that sale still for you to educate those customers that they need all 3 of these different resources.

[indiscernible]

Yes. Sure, Marc. I think more than the technology is, the question of what problem [Audio Gap] the size of a huge [indiscernible] helping them understand right, so -- right? [Audio Gap] and the right benefits that they'll get out of [indiscernible]. Once you give that lens to the customers, technology pieces behind, say, I would [Audio Gap] And that's where [indiscernible] fairly quickly some of the proof of tally. Our customers, help them understand why our certain technology, much [Audio Gap] finance all the right problems. That's how we [Audio Gap]

And I'll just add that there are 2 types of buyers, right? There are some buyers out there that are that are buying low code, right? But there are a lot of buyers out there, and I actually think the majority that aren't necessarily buying low code, they are buying an answer to a business problem. They're trying to run a -- create a business solution. When they're looking at creating that business solution back to how do I solve that, where I think Appian differentiates themselves in the marketplace finds the other low-code platforms, it comes in and it elevates the ability to quickly build that work orchestration [indiscernible] but also having the ability to do RPA and the ability to do process mining is something that, that combination is something that the other low-code vendors haven't yet stopped [indiscernible] app, but they haven't yet gone in that [Audio Gap] So I think those 3 things to differentiate together, differentiate Appian marketplace to enable the building of a [Audio Gap]

Great. Steve Enders with Citi. I guess kind of following up on that last point there. When your customers are thinking about the automation space broadly, are they thinking about it as they want a best grade kind of solution? Or are they thinking about it, they want their platform or [indiscernible] really do every [Audio Gap] I guess, how are your customers thinking about that? And secondarily, how much training is needed to get customers up and running on using the platform approach? Or are they thinking about it as you're really looking for [Audio Gap] and are less concerned around building on top of the cloud?

Do you want me to start? I wasn't sure if you're directing it back. So I do have some clients who are -- who have built automation COE and those automation COEs have started off with RPA. And RPA was a hot area. It's still a hot area. But it was very good at getting at low-hanging fruit and a lot of that fruit was kind of near the ground. You can take it. So they solve out getting at that low-hanging fruit. Now they're starting to realize, well, in order to go beyond that, it's about -- it is really about automating the work that needs to go across that. So folks that have that mindset around kind of expanding my automation COE into low code, that is out there, and that is expanding. But I think that is the minority. I think the majority of what we're seeing in the Appian space -- and when I say majority, maybe it's like a 30-70 split at the stack, right? But -- and it's growing in that -- I think more and more companies will expand their automation COEs to lock in on low code. But the majority I see is it's just solving the solution for a business problem because that was for. Now your question on training and building up the training, that's where I see that what Appian does is it's not a question of low code or pro code, you could do both, right? And what low code allows you to do is it allows you to better leverage your pro-code developers, which we all know, I mean, it's hard to find them, right -- years and it's difficult to find folks who are very skilled in Python as [Audio Gap] So if you can have low code, enable you to kind of jump-start that, enable you to build up you just have some initial training, I like the video that Matt [Audio Gap] code during the initial keynote session where they showed kind of these university folks who were of different background learning Appian or using Appian as low-code platform. And I think low code is an enabler to really create coding to be more inclusive, right, more pervasive, not [indiscernible], not just the weak technical folks that [indiscernible].

[indiscernible] on the question, Arjun, Vuram has done quite a good job of pipeline developing for [Audio Gap]

As I said, we do have internally [Audio Gap] servicing [indiscernible] products. So I think compared with few other technologies, what we have done at [Audio Gap] the turnaround time for people to be up and running [Audio Gap] where we can deploy the team with a growing demand. And -- so that kind of answers that. And to come to one of your earlier points about how we are kind of getting the customers, I think they want us to solve the problem. They [Audio Gap] a lot about what we use and how a unified platform like Appian is helping for a consulting companies like us is we don't have to go back and say that, oh, we need this to solve this problem. We need another one to solve this problem, right? So we have this unified platform, which can talk to each other very well. And one more [indiscernible] point we've seen with a platform like Appian, it's a LEGO piece, which will fit into any shape. So you don't have to kind of shake the waters for adopting Appian into any organization. You don't have to ask them to tremendously change how they're working. It is more about improving how they are working. So that's been a value add for us on kind of deploying Appian in existing environment where they have multiple technologies.

I'd just add to that. In the last, I think, 2 to 3 years, there's another change starting to happen [indiscernible] what you're seeing in customers from Appian being used primarily for workflows and automation and so on and so forth in the past to Appian being used as an application development platform has really accelerated. When you have to develop full-blown apps, you would need a lot of things to come together, and that's exactly where the platform abilities have started to evolve more and more in the last few years. And thankfully, Appian has stood up on the product side and stitching it together in a unified view and that has been really helping. So we think that Appian would program by do well moving forward as well as a full-blown application development platform not just workflow [indiscernible].

A bit of a follow-up here. We've heard quite a bit about kind of growing the overall Appian community and [indiscernible] those initiatives. I was hoping could each of you kind of help us quantify the growth of your Appian practices? So maybe how many practitioners did you have a year ago? How many do you have today? We just heard the 750 to 800 number? And how many do you think you'll have in a year? And then once you kind of give us a sense of the kind of growth rate there, what are kind of your strategies for continuing to make sure you can hit that target for the number of practitioners you'd like to have in a year because we know it is tough out there to get as many heads as you would like.

Sure. So we have almost kind of doubled our Appian practice in the last 14 months, close to around 1,200 people within process working on Appian today. and we are aiming to get to 2,500 people before the end of next year, calendar year. So that's been the growth trajectory, just keeping up with all the demand and as well as positioning Appian as a platform for what we want it to be for our customers in this entire space.

Yes, I think [indiscernible] is very similar -- being a company that actually grew involved around Appian. So our company size is just 1,000 people, out of which 750 to 800 is Appian. And so we have kind of doubled in the recent years pretty much. I think we had about maybe 600 to 500 last year, and we had a tremendous growth in the last 2 years, which is during pandemic, which we are really well proud about. And the growth pattern, what we are seeing is we are planning to double up again. We have an aggressive growth path. And we have also invested quite a bit a lot in the go-to-market solutions on Appian recently, right? That's been a very good [indiscernible] to a lot of our customers where we can build go-to-market solutions on Appian. So that's an investment we have done. And that team is also going to grow in the next year or coming months.

Yes. Just to round it off. So we've tripled the size of our practice in the last 14 months or so and looking to continue to grow at a multiple level. The way we are -- besides just obviously training -- getting people trained up on Appian, we also are building business solutions as accelerators to bring up the market. So we're very good at repeating solutions that work in one place and bringing it to the next client.

Can you give a [indiscernible]

Yes. Yes. For example, we did this in the LIBOR space, right? So we created a business solution for LIBOR that can be used at other banks.

I think a very similar example if I may add. When the payroll protection program was launched in the U.S., especially the SMB space, smaller banks who did not have a lot of technology in-house were struggling to service the number of customers they can because it had a set of time and a lot of customers. So one of our key customers wanted to bring up a solution like 3 weeks of time to automating the entire process of payroll protection program. And using a platform like Appian, which included almost all the capabilities you need, including IDP, we've been able to deploy that in 3 weeks and kind of not double even tripled up the amount of application they could process in the payroll protection program. So that is one of the example of go-to-market solution that we could build much quicker in a platform like Appian.

I think we have time for one more question. Anyone want to take the bait?

[indiscernible]

We're running out of time. All right. Himanshu, Arjun, David, thank you so much for your time. Appreciate it.

Thank you.

Thank you.

Thank you