Appian Corp at Morgan Stanley Technology, Media & Telecom Conference Transcript

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

Question: Sanjit Singh - Morgan Stanley - Analyst : So, Mark, let's just like kind of level set 2024 and just sort of from your perspective, when you look at the results and how the year sort of progressed, where do you feel like the team executed well? Where do you still see kind of hesitation in spending from your customers? And where do you think things have improved? 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, 2025 / 11:20PM, APPN.OQ - Appian Corp at Morgan Stanley Technology, Media & Telecom Conference

Question: Sanjit Singh - Morgan Stanley - Analyst : Great. I think what stood out to me in 2024, along with the stability of the top line, particularly in the cloud business, was just greater efficiency. I think margins were up 1,200 basis points last year as you got to 2% profitability. When we think about that kind of leapfrog improvement on sort of the margin size equation, what were the initiatives that were put in place to drive that better margin expansion last year?

Question: Sanjit Singh - Morgan Stanley - Analyst : Yeah. Now I definitely want to dive into what sort of the plans the new CRO has in store for the company. Just taking a step back and actually going back to the time of the IPO back in 2017, if I look at the mix of the business, it was essentially 50% software and 50% services. And today, you are north of 80% of software and less than 20% of services. With the high gross retention, essentially it's a sort of terminal margin kind of unit economics question. It's like, given the profile of the business that you have now with really good gross margins, 80%-plus software, is there any reason why this can't be in a terminal margin, something that looks like 30%-plus?

Question: Sanjit Singh - Morgan Stanley - Analyst : Yeah. When we think about the guidance assumptions for 2025, you're targeting total top-line growth of about 10%, which is a couple points lower than 2024, underpinning that at about 15% growth in cloud. Can you walk us through the foundational assumptions behind that outlook, particularly with respect to the federal business, where historically that's represented about 20% of revenue? Where did you discount or embed more conservatism into the outlook for 2025?

Question: Sanjit Singh - Morgan Stanley - Analyst : One of the big topics in the sector and probably across tech and the broader economy is that some of the impact of these government efficiency initiatives is, in some sense, there's maybe a reason to be cautious near term. But then if we're trying to drive greater efficiency, we may need more software. Like what's the team's perspective on the federal opportunity going forward in a situation where the Fed needs to get more efficient? Do you think that can ultimately become a beneficiary of some of these government-efficient initiatives?

Question: Sanjit Singh - Morgan Stanley - Analyst : That's a great way to frame the risk and the opportunity on that front. Maybe one more question when it comes to the new administration. They came in with a sort of a view of an anti-regulatory posture. Has that sort of translated into greater spending intentions or changes in the spending environment, maybe from your commercial part of the business or non-large enterprise part of the business?

Question: Sanjit Singh - Morgan Stanley - Analyst : Awesome. Let's talk a little bit about some of the sales and go-to-market dynamics that are happening in the company. I wanted to start with advanced and premium adoption. And these are where you're putting kind of your net new capabilities, a lot of your data fabric, your AI capabilities, and the higher subscription tiers. How has adoption of advanced and the premium tier been going through the lens of existing customers? And then maybe look at through the lens of your new logo wins.

Question: Sanjit Singh - Morgan Stanley - Analyst : Quite impressive for a relatively new set of capabilities to have 50% of new logos coming through advanced. Like, you know what I mean? What sort of like the deal size up list when they come online through advanced versus coming online through standard. 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, 2025 / 11:20PM, APPN.OQ - Appian Corp at Morgan Stanley Technology, Media & Telecom Conference

Question: Sanjit Singh - Morgan Stanley - Analyst : Yeah, that's awesome. Just to follow up on the existing customer side and plan for 2025. Anything -- like what's sort of the essential hook or the strategy to get these customers and just nudge them to upgrade to the premium or advanced tiers?

Question: Sanjit Singh - Morgan Stanley - Analyst : Kind of build that referenceable customer base.

Question: Sanjit Singh - Morgan Stanley - Analyst : Yeah, definitely looking forward to that. Let's talk about your new Chief Revenue Officer, Mark Dorsey. Mark comes from a background at Oracle, IBM, most recently Alteryx. What are the types of changes Mark plans to implement? And what does he see as the key to unlocking more efficient customer acquisition and ultimately more expansion and overall growth?

Question: Sanjit Singh - Morgan Stanley - Analyst : Yeah, he's definitely done this before. Is there -- when we're thinking about the plan for '25 and the outlook, just the magnitude of change in the sales force, do you foresee any sort of disruption risk versus the prior year in terms of what you guys were doing on that?

Question: Sanjit Singh - Morgan Stanley - Analyst : So this year more evolution than revolutions probably.

Question: Sanjit Singh - Morgan Stanley - Analyst : One of the themes on the earnings call over the years is sort of the role of partners in helping Appian grow faster and drive more leverage. How has the partner strategy evolved in recent years? And who do you see as the important partners for Appian to get into new verticals, move further up market, and build better relationships with CIOs?

Question: Sanjit Singh - Morgan Stanley - Analyst : In terms of like, market to market, where you are, how much revenue do partners and the channel kind of generate or influence today? And where do you see this heading over the next one or three years?

Question: Sanjit Singh - Morgan Stanley - Analyst : Awesome. I was like, maybe we could put our strategy hats on for a couple of minutes and look at the category and how the category's evolved. I remember three, four years ago, if we think about the space where you play, the automation game, right? And you had workflow automation players like Appian, you had RPA players, you had process mining players. And it felt like there was a movement to bring these pieces together, like a sort of point solution market kind of coming into an integrated automation stack. And then you guys did some, I think, very timely acquisitions to build out that portfolio. Some of the other players in the space were doing the same thing. I guess my question is, Mark, when we look back, did customers kind of buy into the consolidation unification team? Or did it largely

Question: Sanjit Singh - Morgan Stanley - Analyst : That was actually my question just around every software company talking about agents and their agent strategy. And in terms of the question on what gives Appian the license to win, is there anything you want to expand on that, or is it really about you guys are integrated into processes? What's sort of the reason why customers should choose Appian for some of their agentic automation initiatives versus some of your competitors?

Question: Sanjit Singh - Morgan Stanley - Analyst : Yeah. I think if Matt was here to be using a word, practical or pragmatic.

Question: Sanjit Singh - Morgan Stanley - Analyst : Prudent. 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, 2025 / 11:20PM, APPN.OQ - Appian Corp at Morgan Stanley Technology, Media & Telecom Conference

Question: Sanjit Singh - Morgan Stanley - Analyst : A question on pricing, which I think has also been a favorite Matt topic. I'd love to get your take, Mark. And as you know, historically, Appian's priced on a per user, per app basis. In a future state where agents may be taking on the task of employees or humans, how is Appian evolving its pricing strategy so that the shift to agents in some sense will be accretive to the business and to your growth equation?

Question: Sanjit Singh - Morgan Stanley - Analyst : Just as a follow up with the current sort of subscription to your offering, is there like capacity limits in each tier in terms of the amount of entitled usage that they have to some degree?

Question: Sanjit Singh - Morgan Stanley - Analyst : I guess this is a question on just competition from your perspective. There's a lot of the system of record companies like SAP and others, including process automation capabilities as part of their product offerings. How does like AP -- I guess competitively, how is Appian sort of standing out versus that kind of your traditional competitors, whether it's APEGA, ServiceNow, the others, like what's sort of the competitive moat, if you will, as we head into the next cycle of compute?

Question: Sanjit Singh - Morgan Stanley - Analyst : That's a great way to frame it. Let's talk about the international business. If you contribute about 36% of your revenue in '24, that's up a couple of points over the last couple of years. Where do you think the international business goes in terms of a mix? And what are some of the growth opportunities that you guys see in the international?

Question: Sanjit Singh - Morgan Stanley - Analyst : You feel like from a sales capacity, partner capacity perspective, you feel like you have enough to address those opportunities?

Question: Sanjit Singh - Morgan Stanley - Analyst : You guys aren't alone in that. I have a number of the companies that I cover where there are commercial segments of the business. In calendar year 2024, that was kind of the area of underperformance. They saw in general, aggregating my data points up, enterprise was a stronger portion of the business. So definitely, that seems like an area of opportunity.

Question: Sanjit Singh - Morgan Stanley - Analyst : Yeah. Awesome, awesome. Let's kind of wrap up the questions on like, the model and some of closing thoughts as we head into next year. Sales and marketing expense, that's declining. It's a percentage of revenue. We have a new CRO that's going to hopefully drive more efficiency and more productivity. Are you seeing any early signs of sales productivity? And how are you balancing quota carrying -- co-quota carrying expansion with more automation

Question: Sanjit Singh - Morgan Stanley - Analyst : Right. So a pretty balanced view of growth in [public] with margins headed higher.

Question: Sanjit Singh - Morgan Stanley - Analyst : Part of that's probably the environment changed, frankly, right?

Question: Sanjit Singh - Morgan Stanley - Analyst : As we look to 25, what are the most important themes and milestones investors should be tracking to measure Appian's success?

Question: Sanjit Singh - Morgan Stanley - Analyst : And then longer term, what do you see as like -- if you took that three to five-year view, how would you define success for the company in that time horizon? 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, 2025 / 11:20PM, APPN.OQ - Appian Corp at Morgan Stanley Technology, Media & Telecom Conference

Question: Sanjit Singh - Morgan Stanley - Analyst : So why don't we end it there on that note? Thank you so much, Mark, for coming to the conference again, giving us your latest view on Appian. We really appreciate it. Awesome.