After Appian (APPN) announced its earnings for the third quarter, shares of the cloud computing company sank by more than 20% -- the third-quarter EPS of 43 cents is below the 23 cents predicted by an analyst consensus while Appian also narrowed its FY22 guidance to $461M-$466M from $466M-$470M.
Loss per share is also now predicted at $1.30-$1.36 instead of 91 cents-86 cents.
But at the same time, Appian reported a revenue increase of 27.6% year-over-year to $117.9 million as well as, at $60.6 million, a 30% in cloud subscription revenue and a 115% cloud subscription revenue retention rate.
"When you come toward a recession, I think everybody's looking for roughly the same thing," Appian CEO Matt Calkins told TheStreet in an exclusive interview. "[...] Everyone's looking for greater efficiency and yet lower spend which plays perfectly into our identity as a process automation vendor."
Calkins, who founded cloud computing company Appian (APPN) alongside three other co-founders in 1999, talked to TheStreet about the latest quarter, a new Appian development center in India and what different types of clients expect out of automation software.
This interview has been edited for length and clarity.
TheStreet: In the earnings call, you mentioned that this was the quarter that Appian and other cloud companies started to feel an economic downturn. Does it contribute to current results?
Matt Calkins: I wanted to convey a bit of data about the moment we're in so that it can serve as a comparison in case the downturn becomes more severe. But I have to say that Appian is experiencing very little downturn. I'm an economist and want to talk about the economy whenever I can but [...] Appian is pretty well-positioned for any recession that happens.
I was pleased to see us collect our new financing terms. We got $150 million. We accelerated the opening of our office in Chennai, India. The new development center is a pretty big deal for us. We've opened a facility, staffed it and got a critical mass of staff that feels like a substantial office now.
I thought it would take us until the end of the year but we have a full cohort already. In fact, we're already expanding the office size because we exceeded our expectations for hiring. We got the team we needed for next year and are now bending the curve. It was deeper than I expected for a while and now it can be shallow again.
Another thing we didn't talk about enough last night was our profit margin, which is the sort of thing you would expect to be under pressure if there's an economic difficulty. And in fact, it leapt forward two points in the third quarter.
A governmental national security agency recently signed a seven-figure deal with Appian. What kinds of software is the government looking for right now?
About 40% of our revenue has come from the government this past quarter. It was the second-largest sector for us, behind financial services, and it grew the second-fastest. When you come toward a recession, I think everybody's looking for roughly the same thing. They all want to do more with less. Everyone's looking for greater efficiency and yet lower spend which plays perfectly into our identity as a process automation vendor. Automation generally is really just having software help you do the work. If software is doing the work for you, you're using automation. This is a natural thing that people in a recession would want so that they can use software to do more with less.
One of the things that I love about this deal is that it's for our new government Acquisition Management Suite. This is the most promising solution we've ever written and we're going to develop it powerfully and focus on it next year and see what we can accomplish with this with this set of technology. We've tried a lot of solutions but the Government Acquisition Management Suite is so popular that literally every account executive which touches the federal government has deals that feature this solution. It's responsible for some of our biggest wins in government in the last two years and some of the highest profile things like the US Air Force that just closed the year and allocated $20 billion using this technology in the course of the year.
Have customer expectations around what can be done with automation changed over the last few years?
The trend is convergence. In the past, the customer would have to buy one product for process mining, a different one for workflow and a third one for robotic process automation and maybe another one for using AI to read documents. That was all separate and hard to manage. And so the future is convergence. All of those will be the same vendor. You'll buy them together, they'll be made to work together and you'll be able to handle the entire lifecycle of your processes in the same environment.
