- Cloud Subscription Revenue: $88.4 million, an increase of 19% year over year.
- Solutions Revenue: $113 million, an increase of 20% year over year.
- Total Revenue: $146.5 million, an increase of 15% year over year.
- Cloud Subscription Revenue Retention Rate: 118% as of June 30th, 2024.
- Adjusted EBITDA: Loss of $10.5 million.
- Gross Retention Rate: 99%.
- Non-GAAP Gross Margin: 75%, compared to 73% in the year-ago period.
- Subscriptions Non-GAAP Gross Profit Margin: 89%, consistent with the year-ago period.
- Professional Services Non-GAAP Gross Margin: 30%, compared to 28% in the year-ago period.
- Total Non-GAAP Expenses: $123.2 million, up 3% from the year-ago period.
- Non-GAAP Net Loss: $19.1 million or $0.26 per share.
- Cash, Cash Equivalents, and Investments: $149.1 million as of June 30th, 2024.
- Total Deferred Revenue: $222.9 million, an increase of 14% from the year-ago period.
- Q3 2024 Cloud Subscription Revenue Guidance: $89 million to $91 million.
- Q3 2024 Total Revenue Guidance: $149 million to $153 million.
- Q3 2024 Adjusted EBITDA Guidance: Breakeven to positive $3 million.
- Full Year 2024 Cloud Subscription Revenue Guidance: $350 million to $360 million.
- Full Year 2024 Total Revenue Guidance: $610 million to $615 million.
- Full Year 2024 Adjusted EBITDA Guidance: Negative $3 million to positive $3 million.
- Full Year 2024 Non-GAAP Net Loss Per Share Guidance: $0.61 to $0.52.
Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cloud subscription revenue grew 19% year over year to $88.4 million.
- Solutions revenue increased by 20% to $113 million.
- Total revenue grew 15% year over year to $146.5 million.
- Cloud subscriptions revenue retention rate was 118%, indicating strong customer loyalty.
- Gross retention rate of 99% is best in class for enterprise software.
Negative Points
- Adjusted EBITDA was a loss of $10.5 million.
- Professional services revenue declined by 1% year over year.
- Total non-GAAP expenses increased by 3% from the previous year.
- Cash used by operating activities increased to $17.6 million from $11.9 million the previous year.
- Reduction in workforce by approximately 150 employees, indicating restructuring challenges.
Q & A Highlights
Q: What prompted the decision to accelerate the path to profitability?
A: Matthew Calkins, Chairman and CEO: We saw an opportunity by scrutinizing our cost structure. We didn't feel compelled to make this move but saw that we could do it without significantly impacting growth. This is not a pivot away from growth; it's about reallocating resources to more productive areas.
Q: How does the recent court decision impact the insurance policy related to the Pegasystems case?
A: Matthew Calkins, Chairman and CEO: For precise details, refer to the 8-K filed in September 2023. The insurance policy guarantees at least $500 million of the original $2 billion verdict.
Q: Is the guidance adjustment purely due to internal actions, or are there macroeconomic factors at play?
A: Matthew Calkins, Chairman and CEO: The adjustment is not a reaction to macroeconomic factors but rather a precautionary measure due to internal cost-reduction actions that could have temporary disruptive effects.
Q: Why is now the right time for go-to-market changes, and what led to this decision?
A: Matthew Calkins, Chairman and CEO: We've been scrutinizing our organization for a couple of years, revealing opportunities for strategic moves. We decided to act now to align our resources more effectively and accelerate our path to profitability.
Q: Can you provide more details on the restructuring efforts and their impact?
A: Mark Matheos, CFO: We reduced the workforce by approximately 150 employees and took a charge of around $5 million. The focus is on reallocating resources to more productive areas.
Q: Are you shifting focus away from the mid-market to prioritize larger enterprises?
A: Matthew Calkins, Chairman and CEO: We are not abandoning any markets but are emphasizing larger, more differentiated opportunities where Appian's unique advantages shine. Smaller transactions need to be executed rapidly with a clear path to differentiation.
Q: How is international growth performing compared to domestic growth?
A: Matthew Calkins, Chairman and CEO: The ratios between North America, Europe, and Asia remain consistent with previous periods. There are no notable changes this quarter.
Q: Can you discuss the traction and trends in your key vertical solutions like financial services and government?
A: Matthew Calkins, Chairman and CEO: We see strong growth in our key verticals, particularly in public sector and insurance. We are investing more in these areas and leveraging motivated partners to write and market solutions together.
Q: How long will the go-to-market changes take to focus on larger customers and key industries?
A: Matthew Calkins, Chairman and CEO: We are intensively attending to these changes in Q3 and Q4. Mike Meyer is taking more control, and we are working as a team to ensure a smooth transition.
Q: How should we think about the path to monetizing the increased usage of Appian AI?
A: Matthew Calkins, Chairman and CEO: We have introduced up-tier pricing for AI functionality, offering a small amount of free usage to encourage adoption. Customers will need to pay more for full AI capabilities, translating feature advantages into revenue.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
