According to Appian (APPN) announced its third-quarter earnings, shares of the cloud-computing company fell more than 20% — its 43-cent EPS for the third quarter is below the 23-cent forecast by an analyst consensus, while Appian also exceeded its FY22 -Forecast of $461M narrowed -$466M from $466M to $470M.
Loss per share is also now forecast at $1.30 to $1.36 instead of 91 to 86 cents.
At the same time, however, Appian reported a 27.6% year-over-year increase in revenue to $117.9 million, as well as a 30 percent cloud subscription revenue of $60.6 million and a 115 percent cloud subscription revenue retention rate.
“When you’re heading into a recession, everyone’s looking for pretty much the same thing,” Appian CEO Matt Calkins said in an exclusive interview with TheStreet. “[…] Everyone is looking for more efficiency yet lower expenses, which fits perfectly with our identity as a process automation provider.”
Calkins, who founded the cloud computing company Appian (APPN) spoke with TheStreet in 1999 along with three other co-founders about the latest quarter, a new Appian development center in India, and what different types of customers expect from automation software.
This interview has been edited for length and clarity.
TheStreet: In the earnings call, you mentioned that this was the quarter where Appian and other cloud companies started to feel an economic downturn. Does it contribute to current results?
Matt Calkins: I wanted to provide some data about the moment we are in so that it can be used as a comparison should the downturn intensify. But I have to say that Appian is seeing very little downside. I’m an economist and I like to talk about economics whenever I can […] Appian is pretty well positioned for any recession.
I was happy when we collected our new financing conditions. We have $150 million. We have accelerated the opening of our office in Chennai, India. The new development center is a pretty big deal for us. We opened a facility, staffed it, and built a critical mass of employees that now feels like a large office.
I thought we would need until the end of the year but we already have a full cohort. In fact, we’re already expanding the office size because we’ve exceeded our expectations for hiring. We have the team we need for next year and we are turning the curve now. 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 you would expect to come under pressure in economic troubles. And indeed, it made a two-point leap forward in the third quarter.
A state national security agency recently signed a seven-figure contract with Appian. What types of software is the government looking for right now?
About 40% of our revenue came from the government last quarter. It was our second largest sector after financial services and the second fastest growing. When you’re headed for a recession, everyone’s looking for pretty much the same thing. They all want to do more with less. Everyone is looking for more efficiency yet lower expenses, which fits perfectly with our identity as a process automation provider. Automation generally just means that software helps you do the work. When software does the work for you, use automation. This is a natural thing people would want in a recession so they can use software to do more with less.
One of the things I love about this deal is that it’s about our new Government Acquisition Management Suite. This is the most promising solution we have ever written and we will continue to develop it vigorously and focus on that next year and see what we can do with this technology. We’ve tried many solutions, but the Government Acquisition Management Suite is so popular that literally every account executive that comes into contact with the federal government has done business with this solution. It’s responsible for some of our biggest wins in government over the last two years and some of the most notable things like the US Air Force, which just wrapped up the year and deployed $20 billion over the course of the year using this technology.
Have customer expectations regarding the possibilities of automation changed in recent years?
The trend is convergence. In the past, the customer had to buy one product for process mining, another for workflow, and a third for robotic process automation, and maybe another for using AI to read documents. It was all separate and difficult to manage. So the future is convergence. All of this will be the same provider. You buy them together, they are designed to work together, and you can handle the entire lifecycle of your processes in the same environment.