Appian Corp at Berenberg American Innovation Seminar (Virtual) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : To start off, I think we'll go with just a high-level question. Maybe, Scott, if you want to answer this. For investors maybe new to the story, it would be great if you can introduce yourselves, provide an overview of Appian's history and maybe a brief explanation of what low-code is?

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Helpful. And then when you say you're building complex applications, is that -- can you just walk me through like how the actual developers are using Appian? Is there like a dashboard they're using at their desk? And I guess what tools do they have in the Appian application or platform that allows them to make these applications super quick?

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : I mean that's a helpful overview. And then maybe just broadly, what stage of adoption do you think low-code is? I know you guys have been around for a while, a couple of decades. But it seems like over the last, call it, 12, 18 months, we've really seen an inflection point in terms of just number of people talking about it and even in your business. So interested to hear your view on that.

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Perfect. And then I think you guys have also kind of moved into the RPA space, which is also, I guess, very hot with an acquisition about a year ago. Now you have your own kind of Appian RPA, but you also integrated with much of the more well-known RPA platforms like Blue Prism and REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2021 / 2:00PM, APPN.OQ - Appian Corp at Berenberg American Innovation Seminar (Virtual) Automation Anywhere. So I guess, how much we think of Appian as maybe an RPA product? Or is it just like one feature of it? Maybe what are your broader strategies within RPA going forward?

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : And I guess maybe just when you think of, like, developers that are using your products, I guess, what is their view of Appian in terms of how does that affect their day-to-day job from not using Appian into now using Appian? Does it make it much easier? Is it kind of addictive? I guess any comments on that?

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Okay. Maybe switching gears a bit to the partnerships. You have a very established partner network with KPMG, Accenture, Deloitte, PwC. Could you just talk a bit about your partner strategy and how they're building their own services around your product? And maybe where that partnership strategy has gone from like a year ago to where you think it's going to be in 3 or 4 years?

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : And I guess for the partners, it seems like they're building a practice solely around Appian. Is it more so that? Or are they more so lumping Appian into maybe a digital transformation practice? Or is it like an Appian-owned practice?

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : And from the partner perspective, kind of developing that own solution, I would assume that's much higher margin for them than maybe more professional services-oriented, right? So this is kind of an incentive for them to go that route.

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Got it. And that, I think, is a good segue into pricing. I guess, how has pricing evolved over the years? I guess in my understanding that the customer has a choice to pay on a per-user basis or a per-application basis. I guess what causes one to sway in one direction over the other? And I guess what has been the general trend been kind of over the last couple of years? And I guess where do you expect it going to be? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2021 / 2:00PM, APPN.OQ - Appian Corp at Berenberg American Innovation Seminar (Virtual)

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : It's been then -- how does that kind of -- if you're comparing the 2 different pricing models from an upsell or a contract expansion point of view, is there any similarities or differences between what you might expect from customer A doing a per user and customer B doing a, I guess, an application model?

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Got you. And then maybe your customer base, could you maybe provide like an overview, just breaking down concentration by vertical? And then of that, I guess, what's SMB, what's enterprise and where you expect that to go?

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Makes sense. And then your sales force, I guess, what's the type of investments are you making there? How should we think about headcount? What would new quota carriers, I guess, you might be planning on bringing on be focusing on in terms of vertical or customer size? And then how should we think about sales force productivity as well?

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : And is that the -- I guess, with the 14-day free trials also helping to do try to get brand awareness out there?

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst :

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : No, that really makes sense. Maybe switching gears to the solutions business. I know this was a focal point, maybe not so much on the last call, but definitely the few before that. How should we think about the solutions business kind of going forward? It seems like you're really riding a line between the platform business and then the application company with the solution side. So I guess how should we think about this evolving? Is this more of the bigger growth drivers, I guess, driving that cloud subscription growth over the next 3 to 5 years?

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : And then I guess what influences you guys in terms of, we should make a solution focused on procurement or HR or legal? I guess is it hearing what your customers are saying? Yes, that would be great.

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Do you think going forward, you are going to be making more solutions on yourself? Or do you think it's going to be more partner-led from a solution perspective?

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Perfect. And then maybe just touching on the, I guess, the market and the competitive landscape. It seems like Appian is really in a ton of different sub-verticals of a lot of big markets. How should we think about the market size? How fast is that growing? And how can we kind of tie that into your cloud subscription revenue growth rate, which was phenomenal at 40% this year? But yes, I guess, maybe anything on that?

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : And how difficult for these other vendors would it be for them to kind of move up in complexity to become bigger competitors? Is it a matter of just integrating? Is it a user base issue? Is it a trust issue with customers?

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : And when you... REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2021 / 2:00PM, APPN.OQ - Appian Corp at Berenberg American Innovation Seminar (Virtual)

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : If you had to quantify maybe your lead from a platform competitive position, I guess, how many years would you say it would take for somebody to kind of catch up to you? Or is that not a good way to think about it?

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Yes. No, that's a good point. And your customer retention is 99%. Is that similar with other low-code platform that's out there? Is that kind of unique to you guys? Is it very difficult to rip and replace maybe competitor solutions or -- and yourself as well? How should we think about that rate going forward? Because obviously, you're powering a lot of these mission-critical applications. And once they're built, they're not going to get rid of it. So it seems like your platform is extremely sticky. I was just curious if it's also as sticky for other competitors as well?

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Would you say that's pretty frequent where these Global 2000 companies are using you and, I guess, another vendor, and then there's maybe wallet share gains kind of as you guys progress?

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : I think the greenfield aspect is interesting because I think there's a lot of technology out there that enterprises are maybe just starting to realize that they could use, but they're not diving head first in the deep end. They're going to the shallow end and kind of learning how to swim per se. Would say that's pretty similar to what you're seeing, it's a slow start, and then once they realize the benefits, then they really ramp up their use and reliance on the platform?

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : And that was a good uptick the last quarter. Is that something we should expect to kind of continue to trend up? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2021 / 2:00PM, APPN.OQ - Appian Corp at Berenberg American Innovation Seminar (Virtual)

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : You guys long said that you want to be a 30% subscription grower. That's roughly about where you're guiding to this year, which is a bit of a deceleration compared to what you guys did in 2020. As we look at that kind of growth target over the next 3 to 5 years, what do you guys need to do on your end to kind of hit that level from a maybe a partner capacity, a sales force capacity, customer expansion? I guess what's embedded in that target?

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : And then, I guess, maybe on the services side, what's your ideal mix? Is that going to be something as partners do more, it's obviously further better from the cloud subscription revenues, the services will be impacted? If we're looking out, should we think this is going to be like a 80-20 mix?

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Got you. And then maybe just one last question for me. Just on the growth versus profitability question, how should we expect that going forward? Obviously, the end of the year, the last couple of quarters, you've made some good strides on the profitability front. It seems like the gross margin expansion is really dropping through. Should we expect you to kind of reinvest that gross margin expansion, just driven by the mix shift into OpEx to drive growth, given the opportunity is so big? But how should we think about that dynamic? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2021 / 2:00PM, APPN.OQ - Appian Corp at Berenberg American Innovation Seminar (Virtual)

Question: Brett Anthony Knoblauch - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Understood. Thank you guys so much. I really appreciate you guys taking the time to speak with us today. I really look forward to speaking shortly. I don't know if you have any closing remarks, but I really appreciate it.