Greetings and welcome to the Appian Corporation second quarter 2019 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Staci Mortenson, Investor Relations for Appian Corporation. Thank you. You may begin..

Thank you operator. Good afternoon and thank you for joining us today to review Appian's second quarter financial results. With me on the call today are Matt Calkins, Chairman and Chief Executive Officer and Mark Lynch, Chief Financial Officer. After prepared remarks, we will open the call to a question-and-answer session.

During this call, we may make statements related to our business that are forward-looking statements under federal securities laws and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 including statements related to our financial results, trends and guidance for the third quarter and full-year 2019, the benefit of our platform, industry and market trends, our go-to-market and growth strategy, our market opportunity and our ability to expand our leadership position, our ability to maintain and up-sell to existing customers and our ability to acquire new customers.

The words anticipate, continue, estimate, expect, intend, will and similar expressions are intended to identify forward-looking statements or similar indications of future expectations. These statements reflect our views only as of today and should not be reflected upon as representing our views as of any other subsequent date.

These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from our expectations. For a discussion of the material risks and other important factors that could affect our actual results, please refer to those contained in our 2018 10-K filing and our other periodic filings with the SEC.

These documents and the earnings call presentation are available on the Investors Relations section of our website at www.appian.com. Additionally, non-GAAP financial measures will be discussed on this conference call.

Please refer to the tables in our earnings release in the Investor Relations portion of our website for a reconciliation of these measures to their most directly comparable GAAP financial measures. With that, I would like to turn the call over to our CEO, Matt Calkins.

Matt?.

Thanks Staci and thank you all for joining us today. In the second quarter of 2019, Appian subscription revenue grew 41% year-over-year to $38.0 million and our non-GAAP operating loss was $6.6 million. Our subscription revenue retention remained strong at 117% as of June 30, 2019. These results exceeded our guidance.

In the second quarter, we held Appian World, our primary user conference. My theme for the conference was that low-code has arrived and I believe the attention we received for that out, 75% more reporters attended this year than last. They published 68 articles about us globally, including multiple articles in Forbes and ComputerWorld.

Appian is a leader in the low code market and we believe our platform is the fastest way to turn ideas into applications. We demonstrate our speed with the Appian Guarantee.

To remind you, the guarantee is our assurance that we can finish a customer's first application in just eight weeks for $150,000 and that anyone technical can learn Appian in two weeks. The Appian Guarantee is not just for small projects. In fact, our guarantee related software deals were on average larger than other software deals in Q2.

Guarantee projects are no less critical or complex than others. For example, we won a deal with the Canadian brokerage division of a top 10 global asset management firm. They became a new customer by buying a seven-figure software deal and the Appian Guarantee.

They will use Appian to build a customer on-boarding application for their 3,000 brokers aiming to reduced new client enrollment from six months to two weeks. They chose us over vendors because they believe our platform is the only one that can completely automate their complex process within their short timeline.

We also won a deal with a top five bank in the Netherlands for a global know your customer application this quarter.

They became a new Appian customer by purchasing almost $1 million of licenses to integrate with the bank's existing systems for three internal groups including their compliance team, their customer account teams and their executive managers.

The customer had attempted to build this application with an existing provider, but the unsuccessful project was abandoned after one year. We proved our speed over three competitors by building a proof of concept in just four days. We will deliver this project under the Appian Guarantee. The idea behind the Appian Guarantee is not new.

We have been fast and impactful all along. Just to clarify that, an IDC study conducted this quarter found that Appian customers breakeven on their investment in only seven months and they attain a 509% ROI over five years. These quick returns are key to fast expansion within our customer base.

For example, one of the top five global insurance brokers selected Appian to modernize their global reinsurance claims management process in Q1. Our competitor had estimated 6,000 person hours and up to a year to deliver this solution. The customer chose us because of the Appian Guarantee. They were pleased with their eight week deployment.

And they returned in Q2 to buy over $0.5 million of additional Appian licenses increasing their annual spend by 50%. This purchase will deliver a license compliance application for their contractors and day commission tracking system. Another fast expansion was with a top five clearing bank in the U.K.

that became an Appian customer just eight months ago. Based on the successful deployments in their business banking division, they tripled their annual Appian spend with a seven-figure license deal this quarter. They will deploy these to build a payment screening and sanctions application for their retail and business banking divisions.

They will use Appian to resolve suspicious trade and transaction activities. A second example of a large financial services expansion was with a top five global asset management firm which made a seven-figure license purchase in the second quarter.

Since becoming a customer about a year ago, they have deployed Appian in their customer service, operations, investment management and retail investment groups. This quarter, their CIO chose Appian to replace a legacy system that runs a variety of back-office applications.

We won this project because our platform is fast to deploy, fast to change and supports mobile capabilities without extra development effort. A top five crude oil refinery operator in the United States currently uses Appian management refinery turnarounds.

This application was launched in just six weeks and has saved the customer millions of dollars in refinery turnaround efficiency. This quarter, this refinery operator purchased $0.5 million of Appian software to move their product launch process off spreadsheets and email.

Soon, they will manage the ideation, specification, approval, testing and certification of new projects in Appian. Partners made a strong impact on our business this quarter. They brought us 67% of our new logo deals and these deals closed more than a third faster than the new logo deals we sold without partner systems.

For example, a partner referred us into a U.S. subsidiary of a top five Japanese bank and helped us gain them as a new customer. The subsidiary purchased $0.5 million of Appian licenses to automate 500 approval processes.

When an employee seeks approval for personal time offs, securities contracts or there daily profit and loss statements, they will do it on Appian. Our competitor estimated that it would take five developers and 15 weeks to complete this application. We finished our proof of concept in four days.

So the customer expects to complete the project now and we have just one developer in only six weeks on Appian. Another partner helped us win a Fortune 500 financial services institution as a new logo this quarter. They purchased over $0.5 million of Appian software to build a lending application.

They will use Appian to unify data from six legacy systems and automate the complex process for their wealth management and commercial lending groups. We plan to deliver their first project under the Appian Guarantee.

Partners were also instrumental in expansions, including a deal with one of the largest buyers of secondary market mortgages in the United States. We won a seven-figure deal to build an operations command center which will unify 15 work streams for 800 users. Before Appian, the processes were highly manual due to their silo-ed systems.

We won this deal over two competitors because of the superior proof of concepts delivered by our partner. A partner helped us win another large expansion with a Fortune 500 hospitality and cruise operator this quarter.

Two partner practitioners built a proof of concept for a capital planning application to replace the company's email and spreadsheet driven process. The POC, proof of concept, was so complete that the customer made only a few tweaks before deploying it. This purchase is worth more than $0.75 million and quadruples their annual Appian investment.

Now that low-code as a platform is established, prebuilt solutions are the next logical step for building application even more quickly. We have been a platform company since our inception. So our solutions approach is distinctive. First, every Appian solution is built on our platform using only our objects and our institutions.

So these solutions are fully standardized, upgradeable and compatible. That's the first difference. The second one is, we will go beyond compatibility. Our solutions will be proactively collaborative with each other. They will have common data definitions, shared reports, built-in call to talk to each other.

This out-of-the-box harmony is far from what you get with competitors' solutions which are generally billed as silos. For these two reasons, both of which are facilitated by our long-standing focus on the platform, our solutions approach is different and very likely superior to what is currently available.

In Q2, we deployed a contact center for a Fortune 500 analytics company. Their 20,000 employees worldwide needed help from their human resources team to resolve employment matters such as policy, procedure questions, benefits enrollment and tons of requests.

This customer wanted to enhance their employee experience and bring their outsourced service center in-house. Our solution simplifies contact center deployments by packaging the necessary integrations and Appian objects to give contact centers a head-start.

Our team of just three practitioners configured the intelligent contact center to the customer's unique needs and deployed it in only eight weeks. This timeframe is significantly faster than nine to 18 months that it takes to deploy contact centers with other providers.

This quarter, we launched a new solution called robotic workforce manager, which is being received with a great deal of enthusiasm. Robotic process automation, you have heard of it, has been popular. Many companies are running droves of RPA bots on automated tasks. There are two problems with these implementations. First, there are too many bots.

And it isn't easy to make them work efficiently together. Second, the bots cannot handle exceptions, only humans can do that today. Our solution manages these bots and coordinates their work with that of a human team to optimize for both automated throughput and human exception handling. So you can see why it seems like it might be popular.

We also have partners in on the act building their solutions on the Appian platform. KPMG, for example, released a solution to help customers move off LIBOR by scanning contracts for LIBOR references and using artificial intelligence to recommend replacement language. Well, here's another one.

PWC's healthcare provider engagement solution manages the complex interactions between pharmaceutical companies and healthcare providers. These partner solutions are just the beginning. Since our last call, we have relocated into new headquarters in Tysons, Virginia.

Appian has been emerging as one of the premier technology companies in the Washington DC region. You may remember that we were chosen as the best place to work last year by the Washington Post. And this location allows us to look the part. We are in a central location. We have a block of contiguous floors.

Our name is on the building and we did it while lowering our per square foot rent. Now with that said, I would like to turn the call to Mark Lynch, our CFO, for a deeper discussion of our financials.

Mark?.

Thanks Matt. I will review the financial highlights of the quarter and full year and then we will provide details on our Q3 and full year 2019 guidance. Subscription revenue was $38 million, an increase of 41% year-over-year and above the top end of our guidance.

Our total subscription, software and support revenue was $39.3 million, an increase of 19% year-over-year. As a reminder, Q2 2018 software revenue included a $4.4 million perpetual deal with U.S. Air Force. We no longer offer perpetual licenses on our price list and it's rare for us to execute a perpetual transaction.

Professional services revenue was $27.7 million, up slightly from $26.8 million in the prior year period and up from $24.7 million in the prior quarter. Partners continue to be a larger part of our ecosystem and are increasingly helping us sell more software.

Total revenue in the second quarter was $66.9 million, up 12% year-over-year and above our guidance. Our subscription revenue retention rate as of June 30 was 117%, within the 110% to 120% range that we target on a quarterly basis. We continue to be pleased with our customer's expanded use of our platform.

Our international operations contributed 31% of total revenue for Q2 compared with 28% in the prior year period. This reflects the strong growth we are experiencing both domestically and internationally.

As I noted last quarter, since we are an emerging growth company, we have elected to delay the adoption of ASC 606, which means that we won't have to adopt it until we publish our 2019 10-K. When we do adopt, we will do so on a modified retrospective basis. Under 606, revenue recognition on cloud subscriptions will remain materially unchanged.

The more business in the cloud, the less of an impact ASC 606 will have on our reported revenue. Our cloud subscription revenue for the first half of 2019 was about 67% of the total subscription revenue, an improvement from approximately 61% for the same period last year. Now I will turn to our profitability metrics.

For the second quarter, our non-GAAP gross profit margin was 66% compared to 64% in the same period last year and 63% in the prior quarter. Subscriptions, software and support non-GAAP gross profit margin was 90% in the second quarter compared to 92% in the second quarter of 2018.

Our non-GAAP professional services gross profit margin was 32% in the second quarter compared to 31% in the second quarter of 2018. Total non-GAAP operating expenses were $50.9 million, an increase of 14% from $44.7 million in the year ago period.

Non-GAAP loss from operations was $6.6 million in the second quarter, ahead of our guidance and compared to a non-GAAP loss from operations of $6.1 million in the year-ago period. As you know, foreign exchange gains and losses can fluctuate.

During the quarter, we had $100,000 of foreign exchange gains compared to $2.7 million of foreign exchange losses in Q2 2018. Our guidance does not consider any additional potential impact to financial and other income and expense associated with foreign exchange gains or losses as we don't estimate movements in foreign currency exchange rates.

Non-GAAP net loss was $6.6 million for the second quarter of 2019 or a loss of $0.10 per basic and diluted share, compared to non-GAAP net loss of $8.8 million or a loss of $0.14 per basic and diluted share for the second quarter of 2018.

This is based on 64.8 million and 61.4 million basic and diluted shares outstanding for the second quarter of 2019 and the second quarter of 2018, respectively. Turning to our balance sheet. As of June 30, 2019, we had cash and cash equivalents of $81.1 million compared with $75.4 million as of March 31, 2019.

For the second quarter, cash provided by operations was $16.1 million. Our cash flow provided by operations also included the reimbursement of $12.5 million in tenant improvement allowances. Excluding that, our cash from operations was still positive. As of June 30, 2019, all of the tenant improvement allowance has been received from the land.

In addition, we had $10.5 million of out-of-pocket capital expenditures related to our new headquarters. As a quick reminder, under GAAP, when we receive the tenant improvement reimbursement, they will be recorded as a source of cash in operating activities, whereas the capital expenditures is recorded as cash used in investing activities.

Upon completion of our headquarters build-up, we still expect to spend approximately $20 million above the tenant improvement allowance, of which approximately $5 million will be financed for the purchase of furniture and equipment.

Bottom line, based on what we have incurred through June 30, 2019, our remaining net out-of-pocket expenditures related to our headquarters should not exceed $5 million. Total deferred revenue was $112.2 million for the second quarter. With respect to our billing terms, the majority of our customers are invoiced on an annual upfront basis.

However, we also have some large customers that are billed quarterly and others that are billed monthly. We continue to remind investors that changes in our deferred revenue are generally not indicative of the momentum in the business. Now let me turn to guidance. For the full year 2019, we are raising our subscription and total revenue guidance.

Subscription revenue is now expected to be in the range of $153 million and $154 million, representing year-over-year growth between 32% and 33%. Total revenue is now expected to be in the range of $260.5 million and $262.5 million.

We now expect non-GAAP loss from operations to be in the range of $35 million and $33 million and non-GAAP net loss per share between $0.55 and $0.51. This assumes 65 million basic and diluted common shares outstanding.

For the third quarter of 2019, subscription revenue is expected to be in the range of $38.8 million and $39 million, representing year-over-year growth between 32% and 33%. Total revenue is expected to be in the range of $65 million and $65.5 million.

Non-GAAP loss from operations is expected to be in the range of $10 million and $9.5 million with a non-GAAP net loss per share between $0.16 and $0.15. This assumes 65 million basic and diluted common shares outstanding. With that, let's turn it over to questions..

[Operator Instructions]. Our first question comes from the line of Sanjit Singh with Morgan Stanley. Please proceed with your question..

Hi. Thank you for taking the questions and congrats on the very strong subscription revenue results this quarter. Matt, I wanted to talk a little bit about what you are seeing in the customer base.

So if we look at your largest customers, whether it's your top 25 or however you want to frame it, how many applications do they ultimately start to run on the Appian platform? As you sort of land your biggest customers from that initial application, what are your largest customers, how many applications are they running on average?.

Great. I appreciate this question because it speaks directly to a strategic point that's important to the way we want to expand inside of our customer base. The intention here is not to sell one application and it's not a typical land and expand. Either way, you sell a little one then it turns into a big one.

Our intention is to begin with one application, which will have a certain marginal cost of adoption and then create a technology and a provision such that every further application has a lower marginal cost of adoption.

The point here is that they should be able to get more benefit with each successive application at the same time as they actually pay less in terms of the cost of the software but also the difficulty of, say, setting it up or adapting people to it or acclimatizing a new interface or all this. The cost should continue to go down.

And this was brought up during my comments when I spoke about solutions and how we are kind of forcibly making them proactively compatible not just nominally compatible, but really proactively like they are woven together.

And if you have got one solution, then by all means, you should get the next one because they share a language and reports and so on.

So our intention explicitly is and this is really quite, I mean this is what you have to do, if you are starting platforms and you go toward solutions or toward applications, as the case may be, you have to leverage that platform advantage.

And I think this is how you do it by reducing the marginal cost, the net cost of adoption of each successive application. Our top customers do this in spades. They have not just a couple, but dozens of applications, 30, 50, right, 100 in some cases applications and these are centrally administered. They are probably upgraded altogether.

They might be sharing some definitions. They are certainly sharing single interfaces. They are sharing log-ons, right. So a user might use one log-on to log into an environment that includes 40 applications. This is the kind of synergies that underlie our value proposition. Our platform-led value proposition features this kind of a synergy.

So we are really focused on it. And thank you for a question that highlighted that..

Great.

And then in terms of the pre-built app strategy that you guys are beginning to roll out, can you give a sense of how you guys decide which pre-built apps to release? What sort of vertical market to target? And any sort of early kinds of adoption or traction whether it's the contact center application which you highlighted this quarter? But what do you see as the most promising opportunities with the pre-built application strategy? Thank you..

Great. Okay. So our solutions universe is going to include some solutions that we select and some which our partners select. So with regards to the partners, they will be making their own selections. We don't divvy up the opportunities in any way to them. Though we might notify them with another partner who are already working on the same thing.

With regards to the solutions that we create, we are looking for things where we have already established that it works. Not so much that our software can function in that task because we could be confident of that in the abstract without having done it.

But if a customer has spent their money on Appian for a certain purpose and this has happened, let's say, five or 10 times already, then we can conclude not merely that our software is suitable for that application, but that other people's software leaves something to be desired because why did they turn to us, right.

Why out of all the possibilities do they come to us and ask for something custom. It could be because the thing they are asking for is an exceptionally unique need from company to company. Or it could be because it's not very well served by existing providers. Either way, I prefer to follow evidence.

I don't want to get too lofty about our thinking here. We do a lot of applications more than once and we know which ones those are and we know which industries are the hungriest for what we are doing.

And I think it's going to be fairly simple for us to just follow the lead that's right in front of our face for the first few solutions and even series of solutions..

Thank you. Our next question comes from the line of Raimo Lenschow with Barclays. Please proceed with your question..

Thanks guys. Congrats on the quarter. This is Mohit Gogia on for Raimo. So just staying on the topic in terms of the pre-built solutions, I was just wondering as to, I mean, you have been out with a contact center solution for more than a year now.

So I was just wondering if you can share with us some perspectives as to what has worked really well? So based on the customer feedback adoption, land and expand motion.

So in regards to that product, what has worked well and what are some of the lessons that you will probably take as you sort of like come out with more of these pre-built solutions moving forward?.

Yes. If you don't mind me dodging your question to some degree, I want to say that I think we are still in a relatively experimental information gathering stage with regards to the format of solutions, both how we build them, how we price them, how we sell them. And I don't yet have conclusions to draw from our early experience.

We are using different pricing strategies. The intelligent contact center, we have largely not priced that separately. We have just bundled the features in as differentiated features. But take the robotic workforce manager solution, that is getting a separate price, different from just buying Appian. We are learning.

And we are just going to pay close attention and watch as the first few solutions meet the market and then adjust accordingly..

Understood. And now a question for Mark. So if I look at your professional, so obviously there was reset in professional services. My expectations last quarter are just based on the traction you were seeing building up the partner network.

I am just wondering, the sort of the numbers this quarter, has that changed your view in terms of the expectations from professional services? Or do you think you stand where you were at the end of Q1? Thank you..

I would follow the kind of what we talked about in Q1. Our margins this quarter improved a little bit, but largely because of some work that was done in Q1 that the revenue got recognized in Q2.

So kind of from a modeling perspective, I would basically use the kind of the modeling that you guys rolled out for the rest of the year in Q1 and as well as kind of the expectations. Obviously, in the total revenue you can kind of back into what we think PS will do for the year. So I just follow our guidance..

Thanks guys..

Thank you. Our next question comes from the line of Alex Kurtz with KeyBanc Capital Markets. Please proceed with your question..

Yes. Thanks for taking the questions and a great quarter here.

As you think about your direct sales organization and the investments that you have made over the last six months, how do you feel about the yield rate per rep and kind of the improvements in the cohort groups over that period? How are you seeing that trend inside the larger accounts in the commercial space versus the federal space? Just kind of any direction and context around the investments you are getting and kind of the ROI from that team and how that's driving the growth here?.

Yes. Well, I am not going to be able to speak to the contrast between commercial and federal because the test of federal really is Q3. And so I think that it would just be speaking out of turn to try to draw any conclusions about the relative efficiency of the sales force.

But I will say that I believe that we are achieving a higher degree of efficiency. I think that we have tightened our ship a little bit and we have got slightly better output per rep basis. And I see some of that statistically in terms of fulfillment and how long it takes a rep to get on the board. So I am seeing some good indicators.

It's certainly been an area of focus, I can tell you. And we prioritized that very high in the changeover in sales leadership recently. And I believe it's moving in the right direction..

Okay.

And just looking at the back half guidance for the remainder of the fiscal year, when you think about large deals and the impact in what you assume in Q3 and Q4, are there any things that we should be paying attention to as far as timing of deals between quarters and what that could mean for billings or any other context would be helpful?.

I mean, I think from a billings perspective, billings is not a great metric for us because of the fact that, one, we are lumpy, but two, basically the duration of invoicing is all over the map. Some customers are quarterly, some are annual, some are monthly.

So we generally point to looking at the subs revenue growth rate as a better leading indicator for how we are doing. Having said that, for the back half of the year, right now what we see in the pipeline looks healthy..

Okay..

We are feeling pretty good about it..

All right. Thank you..

Thank you. Our next question comes from the line of Chris Merwin with Goldman Sachs. Please proceed with your question..

Okay. Thanks very much for taking my questions. I just wanted to ask you about the partnership with UiPath. I mean, I think it's pretty interesting kind of a convergence which stays between RPA and low-code.

So maybe can you just talk a bit about technologically how that's going to work? And then, from a financial perspective, is there any sort of a joint go-to-market here? And how do we sort of think about the benefits of this partnership phasing in over time, whether it be through customers or revenue per customer? Just curious how we should think about that.

Thanks..

That's right. Okay. So this is just getting going. And I think that partly a partnership has to prove itself on the ground. And so I think the degree to which we are approaching customers together or that sort of thing is going to have to be earned. We will see how much value we are creating together.

Our first partner in the workforce manager solution is Blue Prism and UiPath is the second. And so I can tell you more about the Blue Prism partnership than I can tell you about UiPath. And I could say that the sharing of knowledge and kind of the co-pursuit of customers and the sense that we are building value together has been impressive.

And I think it's given us a good opportunity to show that we have got value. And then we will see how that turns out in the next few quarters..

Okay. Great. And then, just as it relates to the geographic mix, it looks like your domestic had been trending well ahead of international in terms of just you and your growth and that flipped this past quarter. Is that kind of one-time? I was just curious if you saw any divergence in trends by geography that caused that change? Thanks..

Not really. I think both geographies are growing nicely. You are going to have some lumpiness with PS surging or not surging in different areas. So that will give you a little bit of a misleading indication. But right now, both areas are growing nicely..

Okay. Thank you..

Thank you. Our next question comes from the line of Derrick Wood with Cowen and Company. Please proceed with your question..

Great. Thanks. It's Andrew Sherman, on for Derrick. Maybe one for Matt. It looks like the government revenue is down slightly year-over-year.

Could you just talk about that performance in the quarter? If anything was pushed into second half? And then could you talk about the impact from your new security features on your government business and when we should expect that to show up in the numbers?.

Okay. I am excited about those security features and I think it's going to make us very competitive and differentiated for some large and sensitive government contracts. You didn't see that in Q2 yet, but I am excited about it.

As for the decline year-over-year in government revenue, I do want you to note that we had that perpetual deal in the preceding Q2, the Air Force deal for $4.4 million. We don't do perpetual. So had that been a subscription deal, the ratio would look somewhat different. Yes, other than that, I wouldn't say that there's much of an indicator there.

Really the proof of federal isn't in Q2 anyway..

Okay. Thanks. And then the partner influence on deals was up from last quarter.

Could you maybe call out a few drivers of that? And then for your bigger customers, $1 million-plus ARR, what does that number look like?.

All right. I do not have I suppose --.

The customers greater than $1 million in ARR, we disclosed that on an annual any basis. So we don't do it on a quarterly basis.

And what was the other part of the question?.

Thanks. Yes.

Just the drivers of the uptick in partner involvement and should we expect that number to stay pretty consistent throughout the year or continue to increase?.

I don't believe that the current partner output is anomalous. That isn't a prediction. It's just a statement about where we are today. I think that that's the kind of way we are working with our partners and that's the teamwork that they are showing to us. I believe partner enthusiasm is something that has to be worked on for a long time.

It always seems to be just around the corner. And we have taken years to build it up. And it's exciting to see the momentum really happening. But I think what you see is where we are right now..

Great. Thanks..

[Operator Instructions]. Our next question comes from the line of Eric Lemus with SunTrust Robinson Humphrey. Please proceed with your question..

Thanks guys for taking the question. It's kind of a follow-up on the last one. That percentage of new logos influenced by partners has continued to tick up.

I guess, the way I think about it long term, what's the right mix of deals that our partner implements versus you guys going at it direct? Or is that more just a function of larger deals with larger customers typically accompany with a partner?.

Yes. I think it's an extremely good sign when partners source a lot of our new logos. This is really what we want partners for. So truly we want them for two things. We want them for their reach into boardrooms and influence and people with problems that could be solved with our low-code technology.

And then number two, we want them for all the practitioners they can bring to bear that they have already hired that they need only train, that could expand the workforce of deployment professionals who can bring Appian to the masses. Those are the two things that we want out of partners.

And so when you see a statistic that shows us getting them, then I am delighted with that progress. And I am sure that the partners are delighted also perhaps in the opposite order between those two factors. But it's just an indication that the strategy is working. I am happy with that.

Whenever you prioritize a percentage going one direction or another, you are really implicitly saying we hope that the other part of the pie falls. And I don't mean to be saying that and that's why I am reluctant to say I am cheering on a percentage, I am really not.

I am pursuing on an absolute count of partner-sourced new logos and the more that goes the better. But of course, that's not what we are reporting here. Still, it's a good sign to see a lot of partner-sourced new logos..

Great. That's really good cover, Matt.

And then on the per app pricing methodology, any sort of progress or update on how that's being adopted or feedback?.

It's steady on with that pricing methodology. It's working well for us. We are sticking with it. We do a lot of our pricing under that framework today and I am glad that we do..

Great. Thanks for taking my questions..

Yes..

Thank you. Our next question comes from the line of Bhavan Suri with William Blair. Please proceed with your question..

Hi gentlemen. Thanks for taking my question. And let me echo my congrats, nice job there. I am going to go back to the partners, Matt, for a second..

Hello..

Does it feel like you have --.

Bhavan, I can't hear you. Just hold on, Bhavan..

Can you hear me now?.

I can hear you now, but I missed a bunch of it.

So would you please begin the question?.

Sorry. Yes. And for some reason my phone is cutting out here. We have had some issues on our end. But anyway, partners, they are dramatically growing. They are seeing it from customers from a bottoms-up perspective.

I guess when you look at the partners you are talking to, does it feel like these partners are actually getting more mature, not from a headcount perspective but from a quality perspective, meaning on-boarding and time to productivity, is that improving across this partner channel? And where do you think you are for that? Thanks..

This is a great way to measure partners. You are right. We shouldn't just count the heads. We do have a head count and for a while we tracked it and after a while I concluded that at least the number of nominally happy and educated partner staff was no longer a very valid indicator of the degree of success of their programs.

Instead we look at other things like you are talking about, like the time of productivity. One of my favorite indicators lately is the quality of their solutions, not merely the volume of them, but how good are those solutions and have they sold them and our customers using them successfully.

That's a great indication of seriousness because they have got to develop the capacity, they have the will and the confidence to work with Appian. They are making an investment for the future and then they have to get it through their own sales channel and convince somebody to buy it.

So that, I suppose, will be the most complete test of partner maturity. But there's a number of ways we can measure it and I believe that really on all of them we are advancing..

And I guess, if I was to push back a little bit, you are welcome to dodge my question, but what innings you think we are with these partners because you have got a lot of numbers at the user conference?.

You are cutting out again. I can just start answering the question based on what I think you are asking. Which inning are we with regards to the relationship with the partners and the maturation levels that they will go through? I feel like I have been asked this question before and I have said some really early innings, like the third or something.

Yes, I think I am going to leave it around there. I think we are early in the game. There's a lot of upside in the relationship between Appian and its partners. And so this isn't the end of the game. This is the end of the beginning, right. This is where we are just getting started and we have achieved something.

But there's more left to achieve than has been achieved..

Got it. A quick RFP question for you as a follow-up.

As low-code becomes more obvious, I would love to understand how the RFP process works? How those initial conversations with customers are changing? I guess, when we look at RFP, are you seeing RFPs? Do you run into IT dept teams unwilling to give up control? Do you think we are pass that point where the conversation has shifted to more of show me the power of the platforms? So I guess I am trying to understand, when things get really material, you see RFPs coming out and the questions are standard, how are you seeing that? Has that happened? Or are we still pretty early on that?.

Okay. Well, certainly our implicit eternal competitor is build-it-yourself. And so there is some competition there, even at the same time by the way that we empower those same developers to be far more efficient, right. So we don't need to compete with them. We could be their partner.

But sometimes we do compete with internal development, platform-less development. And so, yes, that will be there forever. We do see RFPs that specify low-code. Yes, we do. We do see RFPs that specify the virtues that we can bring to bear and there are more than I feel like it's becoming more mainstream.

The value proposition that we are offering is something that is being asked for more frequently. So yes, that's definitely there. But it doesn't mean that developers don't do custom developments anymore.

It just means that more organizations have decided that they would prefer a more efficient way, a more uniform way, a more flexible way and in the end, a more powerful way to create unique software..

Got it. Thanks for taking my question, guys and congrats. I appreciate it..

Thanks Bhavan..

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I will turn the floor back to Mr. Calkins for any final comments..

Well, sure. I want to thank you all for your interest in Appian and your time on the call this evening. It's a pleasure to share our quarter with you. Thanks..

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation..