Appian at Morgan Stanley TMT Conference: Strategic Shifts and Growth Plans

On Tuesday, March 4, 2025, Appian Corp (NASDAQ: APPN) participated in the Morgan Stanley Technology, Media & Telecom Conference, shedding light on its strategic direction amid a challenging macroeconomic landscape. The company reported improved operational efficiency and outlined ambitious growth plans, while acknowledging external pressures such as foreign exchange headwinds.

Key Takeaways

• Appian’s operating margins improved by 1,200 basis points, achieving 2% profitability in 2024.
• A strategic shift towards software, now over 80% of the business, has bolstered gross margins.
• Appian anticipates a 10% top-line growth in 2025, with cloud services expected to grow by 15%.
• The introduction of a new CRO, Mark Dorsey, aims to enhance the go-to-market strategy.
• Nearly half of new customers in Q4 opted for the advanced pricing tier, showcasing demand for AI capabilities.

Financial Results

• Appian’s operating margins increased significantly, leading to a 2% profitability last year.
• Cloud margins are robust at 90%, while professional services margins stand at 30%.
• The company boasts a gross renewal rate of 99% and a net revenue retention rate of 116%.
• Appian projects a doubling of its adjusted EBITDA from 2024 to 2025.
• Foreign exchange headwinds are anticipated to impact 2024 by a few million dollars.

Operational Updates

• The go-to-market function has been streamlined under the leadership of new CRO Mark Dorsey.
• New appointments include a Head of North American Sales and a Head of Sales Ops.
• A renewals team has been created, focusing on AI-driven value conversations and price uplift.
• The partner strategy is evolving to empower partners and drive growth, with a focus on shortening sales cycles.

Future Outlook

• Appian aims to stabilize and increase its cloud growth rate.
• The long-term model targets gross margins of 80%-85%, with sales and marketing spend of 38%-40%.
• Appian plans to explore consumption-based pricing models to maximize value.
• A growth rate of 20% is considered achievable, supported by strategic initiatives.

Q&A Highlights

• The federal sector presents both risks and opportunities, with potential spending cuts and efficiency initiatives.
• Appian’s international business, contributing 36% of revenue in 2024, offers growth opportunities in Europe, Australia, Japan, and South America.
• Commercial North America underperformed, highlighting an area for potential growth.
• The company focuses on regulatory compliance, onboarding, offboarding, and procurement.

For more detailed insights, please refer to the full transcript below.

Full transcript - Morgan Stanley Technology, Media & Telecom Conference:

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: Right. Good afternoon. I’m Sanjit Singh. I run the infrastructure software coverage at Morgan Stanley. I’m super pleased to have the returning CFO of Appian, Mark Lynch.

Mark, welcome back to the Morgan Stanley TMT Conference.

Mark Lynch, CFO, Appian: Thanks. It’s great to be here. Good seeing you, Sanjay.

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: It’s really good seeing you as well. Mark and I are interested in Mark at the when we did the IPO back in 2017. Yes, 2017, exactly. And then he had a great run and then wanted to retire and then he came back to step up for the team, it looks like. So really good to see you.

You’re like Lula Alpatino, so Exactly. Let we quickly get to disclosures for important disclosures. We see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. So Mark, let’s just like kind of level set 2024 and just sort of from like 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 and spending from your customers? And where do you think things have improved?

Mark Lynch, CFO, Appian: Yes. So the so I said the macroeconomic environment for ball software companies in 2024 was a little bit difficult, a little challenging. Didn’t really change one way or another positively and negatively throughout the entire year. But we did notice that when we led with ROI and demonstrated ROI and value and we identified the key decision makers early on in the sales process, we were successful in closing a lot of business. And we ended up the year 2024 really, really solid.

So we were really pleased with how we ended up the year.

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

Mark Lynch, CFO, Appian: Yes. So we went through during the summer, Matt did a deep dive into the go to market function, our CEO, and identified certain areas that we needed to streamline. We needed to go through and trim up some Deadwood and we went through and made some tough decisions, but I think we made the sales organization better for it. And then we were lucky to have brought in a new CRO this fall, Mark Dorsey, who’s starting to really take things up a notch, which is great. He’s taking what Matt had initially set off and he’s operationalizing it.

And he’s also brought in Head of North American sales and then Head of sales ops. And so we like what he’s doing so far and he had his first full quarter in Q4 and that he did well.

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: Yes. No, I definitely wanted 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% software and less than 20% of services. With the high gross retention, right, essentially, it’s a sort of terminal margin kind of unit economics question is 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?

Mark Lynch, CFO, Appian: I mean, it could very well be. So if you look at those unit economics you’re talking about, we’ve got cloud margins of 90%, which are best in class. We’ve got professional services margins, 30%, which are great. You’ve got a gross renewal rate of 99% net revenue retention of 116%. So these are great unit economics.

Even our LTV to CAC has been in excess of 7% over the past seven years. And so those all are great metrics ultimately when you get to scale. And so we’re still in growth mode, but we’re also committed to improving our bottom line, our margins. You just saw in our initial guide, we’re looking to double our adjusted EBITDA that from what we did in 2024 to 2025. And so we’re looking to grow, but we’re also looking to grow our margins as well.

So it’s something we’re committed to doing.

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: Yes. When we think about the guidance assumptions for 2025, you’re targeting total top line growth of about 10%, which is a couple of points lower than 2024. Underpinning that is about 15% growth in cloud. Can you walk us through the foundational assumptions behind the 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?

So,

Mark Lynch, CFO, Appian: first and foremost, we had there’s some FX headwinds, which every software company talked about. So we called that out as a few million dollars of FX headwinds for 2024 for the full year and obviously a portion of that is for the Q1. You also had the leap year dynamic from last year to this year, which was minimal. But we also had a certain element of conservatism. As you know, Sanjay, I generally a little bit probably a little bit more conservative than other CFOs.

And what we wanted to do is set up the new CFO when and if they start in a successful situation, so they can basically be in a situation where they can beat race throughout the entire year. And so that’s that was what was embedded not only into Q1 guidance, but also the full year guidance as well.

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: One of the big topics in the sector and probably across tech and the broader economy is just some of the impact of these government efficiency initiatives, right? So 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 Opium can ultimately become a beneficiary of some of these government’s government officials?

Mark Lynch, CFO, Appian: We could be. Right now, it’s chaotic though. I mean, we’ve been selling to the federal government, the entire existence of the company. We’re in Northern Virginia. We basically created the world at the time, the world’s largest intranet, which is AKO, Army Knowledge Online.

We also helped save the Affordable Care Act when the websites crashed and all that stuff. So we’ve been working with the federal government for a long time. But we’re at the end of the day, we’re an ROI play, we’re value added player. For example, one of our big procurement systems was with or is with the U. S.

Air Force, where $10,000,000,000 worth of federal spending goes through or of U. S. Air Force spend goes through that procurement system on an annual basis. And it modernized 100 at the time, 100 different legacy systems and was able to save $83,000,000 Are they going to shut that down? Probably not, right?

So there’s certain projects that we’ve got that are just critical, very complex and candidly they’re generate massive ROI. Like another story we talked about in our earnings call was the military branch that was a relatively new customer that wanted to modernize three of their ERP systems that they’ve got, like logistics, finances and supply chain. And so they use Appian to layer on top of these legacy systems and allowed hundreds of thousands of users to access it. And they’re on the record saying that they’re going to save tens of millions of dollars. So are we going to be immune to what’s happening within the program with Doge?

No, probably not. But our CEO has a good analogy. He’s like, there’s a hurricane going on in the federal government right now and we’re in the basement. So we’re kind of protected, but we’re still not immune to it. So could there be tailwinds from it?

Could there be opportunities? Right. Absolutely. I mean, we’ve got great, great credible stories that we’ve proven time and time again. We can save money for the federal government.

We just hopefully they’re these guys are rational when they’re in there. Yes.

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: 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 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 like commercial part of the business, your non large enterprise part of the business?

Mark Lynch, CFO, Appian: It’s too early to tell, right? I think it’s too early to tell. I think the markets were excited, right, when we saw that and then the markets kind of swung back. So it’s too early and we’re optimistic, but

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: 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 in these higher subscription tiers. How is adoption of Advance and the premium tier going through the lens of existing customers and then maybe look at through the lens of your new logo lens?

Mark Lynch, CFO, Appian: Okay. So we rolled this out about ten months ago. And through the lens of the existing customers, we’re going to basically make a considered effort to start upselling them in 2025. I think 2024 was for a lot of business and a lot of companies out there a year of experimentation with AI. And so people are just kind of playing around with it, not really sure what to do with it.

But I think in 2025, people are going to start deploying it more and more. And I think that’s when we’re going to have those conversations with the existing customers. With the net new customers in Q4, we talked about the fact that almost half of the net new customers that signed on with Appian during the quarter signed on at the advanced pricing tier level, which means they wanted some of those AI capabilities and or the multi source for the data fabric. So data fabric on the standard pricing tier is for one data source. And then for the advanced tier, it’s multiple data sources.

And most of our customers are candidly using it for multiple data sources. And that’s where you get the value of the data fabric itself.

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: It’s quite impressive for relatively new set of capabilities to have 50% of new logos coming through Advance. Can you remind me like what sort of like the deal size uplift when they come online through Advance versus coming online through Standard? Like?

Mark Lynch, CFO, Appian: So the list price, it’s a 25% uplift, right? So in list price is negotiable, but it’s definitely the average sales, the ASPs for those lands were higher than they had been historically, which is great. And we actually we had a lot of people are talking about AgenTek AI and proof of concepts and talking about the capabilities it might have. But we talked about one of our customers, a large mortgage lending company that actually bought software from Appian earlier in the year and then deployed it. And what they wanted to do is they wanted to automate audit processes over their loans that they are originating.

So it was like about 10,000 loans. They wanted to make sure that the data, etcetera, within the loans is accurate before they package them up and sold them in the market. And so they automated the entire audit process and they put in agents in there to review hundreds of documents, hundreds of different forms in the original loan origination. And it basically came back with 90% accuracy, which was really good. And then you only needed intervention of 2% human to basically do it.

And at the end of the day, it was ended up being 4x as efficient than the previous processes. So it’s real life story, real life ROI during 2024. So we’re pretty excited about that.

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: Yes, it’s awesome. Just to follow-up on like the existing customer side and we’re going to plan for 2025. Anything like what’s sort of the essential hook or the strategy to get these customers and to nudge them to upgrade to the premium advanced tiers? So we’ve got we’ve created a renewals team. Two things, one is, during 2024,

Mark Lynch, CFO, Appian: we created renewals team, so they can be focused on doing that. And they’re going to be basically compensated for price uplift, right? So AI is a great conversation for that price uplift. It gives them a reason, instead of CPI, you’ve got actually true value that you can talk about. We also have created a department, a group of people value engineering that are helping the sales force demonstrate ROI, not just within the existing customer base, but the external customer base as well.

So we’re going to use those two levers to go in there. And are we going to get 100%? No, but I think what’s really going to happen is as other companies adopt AI and they’re no longer afraid of what AI could or can and cannot do, and they also understand the strength and the power of AI versus some of its limitations, I think that will be a pulling factor from our existing customer base as well. They kind of

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: build that referenceable customer base. Yes.

Mark Lynch, CFO, Appian: They won’t be as afraid like, we have these are very sophisticated clients that are risk averse, right? So AI sounds a little scary, AgenTek AI running a mock in my enterprise sounds a little scary. So I think once they see real life use cases and they understand what the ROI is, that will make those conversations even more interesting.

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: Yes, 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 in overall growth?

Mark Lynch, CFO, Appian: Yes. So I think, like I said earlier, Matt had our CEO done a deep dive into the go to market function. And the good news is when Mark came on board, he looked at what Matt was starting to implement and he totally agreed with all of it. And what he’d said is like, my job is not to take this and operationalize it throughout the enterprise. And so he’s starting to do that.

He’s brought in some executives as well, which is really exciting. Matt talked about on our earnings call that the sales kickoff that we had in January was the best one we’ve had in five years. It was really because it was all focusing on blocking attacking, tackling fundamentals, building pipeline. But also you’re taking there are certain areas within the sales organization, which have been very successful and other areas that were not as successful. And what we’re doing is cross sharing all of the best practices and basically investing in the entire sales force and getting that information, getting them enabled as quickly as possible.

I think everybody really appreciated that. So I think it’s really taking that playbook and then basically spreading it out. And Mark has seen the kind of the growth path of a 600,000,000 to a $2,000,000,000 company in the past or division. And so far so good.

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: Yes. You’ve definitely done this before. Is there when we’re thinking about the plan for 2025 and the outlook, just the magnitude of change in the sales force, do you foresee any sort of disruption risk versus maybe that’s versus the prior year in terms of what you guys were doing on the

Mark Lynch, CFO, Appian: We were afraid when after the after it happened, and in fact, on the earnings call in Q2, we talked about potential disruption and basically brought down the guidance a little bit just in case. And we ended up beating the guidance pretty handily. So we were surprised candidly that there wasn’t as much disruption. It was hardly any actually. And so I think the that’s behind us.

And Mark feels like he has a sales force capacity to hit his goals that he needs to hit this year. So, our job is just to get out of his way and hopefully he does well.

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: So this year more evolution than revolution is probably

Mark Lynch, CFO, Appian: Yes, exactly. I don’t think there’s he’s not making huge changes that would be deemed disruptive.

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: So One of the themes on the earnings call over the years is sort of the role of partners and 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? Yes.

Mark Lynch, CFO, Appian: I mean, we’re continuing like what we’ve noticed is when partners are involved in sales cycles, they’re shorter, because they have the credibility, they have the contacts, they know what the pain problems and they know that our technology is best suited for that particular problem. So we want to empower more partners to bring us in these opportunities. And the way the partners benefit is they get the services business and that’s you see that mix shift from fiftyfifty to eightytwenty partners are getting all that revenue. And we I don’t have a problem with that at all. So what we wanted is be more strategic with these partners.

And because the way candidly, you can hire a bunch of salespeople, train them up and it’s just a huge slog or you could basically enable the partners to go out and sell on your behalf and you can grow exponentially that way. So

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

Mark Lynch, CFO, Appian: Yes, it’s not a huge number right now, but it’s something that could definitely grow over time. So we’re focused on it. It’s one of those the legs in the stool, if you will, for Mark as far as leveraging and getting ramped up and hitting his targets is to leverage that partner channel and new logos, right? Like once we you see our unit economics, we get a logo, we’re sticky, we grow, we expand, we have great NRR. And so we just need more logos.

And so that’s partners are a good way to get new logos.

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: Awesome. I think maybe we could put our strategy hats on for a couple of minutes and look at the category and how the categories evolved. I remember three, four years ago, if we think about the space where you play is 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 theme or did it largely remain a best of breed market?

Mark Lynch, CFO, Appian: I think the answer is it depended, right? So some customers like to have one throat to choke, right? And so go to Appian, we’ve got our own RPA, we’ve got our own process mining, we’ve got everything you need and it’s fully integrated. But some of the customers had relationships with an Automation Anywhere, UiPath or whomever, and they wanted to plug that RPA into the platform. And we were agnostic as far as it related to those technologies.

And we’re agnostic as it relates to, for example, AI technologies in the future. We have our own AI skill sets, we have our own AI agents, but we can also accommodate our customers that they wanted to plug in certain other types of AI going forward. And so we look at AI is going to be really powerful within the process itself. Obviously, we’re a process company, we’re a full company. And so having guardrails around the AI, having the data being brought to bear to the AI and then having the analytics to make sure that the AI is behaving properly, I think are all powerful things that will make the AI even more valuable.

Yes. That’s our vision.

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: That was actually my question just around like every software company is talking about agents and their agent strategy. And in terms of like 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 in the processes? What’s sort of the reason why customers should choose Appian for some of their AgenTek automation initiatives versus some of the some of your competitors?

Mark Lynch, CFO, Appian: Yes, but I think it’s what they’re looking to do is there’s the Agentiq AI, my analogy is like that’s almost like RPA and steroids, right? So it’s just a much more powerful RPA kind of thing that just does tasks quicker and easier and less human intervention, right? And so it’s not going to be a win or lose or it’s my AgenTek AI is better than your AgenTek AI. It’s basically, I’ve got problems, I’ve got processes, I’ve got workflow that I’ve got to do. Yeah.

And I want to do it the most efficient way possible. And how am I going to do that? And so we feel that by plugging it into a process, you’re going to leverage a lot of the benefits of AI. Now you could have AI agents, Gen Tech AI kind of running them up throughout the enterprise and doing things if you can control it. But I think that’s going to take a while before customers want that to happen, right?

So really you have to watch that and see what happens. So we’re taking the cautious, not even cautious, it’s really it’s kind of the measured approach that we’ve been doing all along and it’s this is a very sophisticated and powerful technology that we can leverage within our processes and we’re excited about the value that it could bring to our customers.

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: Yes. I think if Matt was straight, we used the word practical or pragmatic. Yes. Prudent. That’s typically like a hitchhike.

A question on pricing, which I think has also been a favorite math 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?

Mark Lynch, CFO, Appian: So right now, it’s right now, our step in that direction is the tiered pricing that we talked about on a year or so basis. So it’s an uplift if you use the AI. And then we had actually at the last board meeting, we had a fairly interesting conversation about the pros and cons of consumption based pricing. Our new board member, Beau Hartman, who is a former CIO of Goldman Sachs likes purchasing on a consumption basis versus per user. And so there’s pros and cons to both of those pricing mechanisms.

So I can see us testing pricing models in the future. And so we’re not wed one way or another and we’ll see how the market evolves as well. But what we want to do is capture the most value. And if that’s through consumption, then we’ll figure that out. And if it’s through user base, we’ll just keep on doing that.

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: With the just as a follow-up with the current sort of subscription tiers offering, is there like capacity limits in each tier in terms of the amount of entitled usage that they have to some degree?

Mark Lynch, CFO, Appian: There is, and we haven’t even come close to those yet. But there is a token minimum token threshold on a monthly basis, that’s baked in so that we give you the benefit to go or the opportunity to go back and say, okay, you guys are using this big time and we want to basically get some value for it. So I guess, this is a

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: question on just competition from your perspective. It was there’s a lot of the system of record companies like SAP and others are including process automation capabilities as part of their product offerings. How does like AP like I guess competitively, how is Appian sort of standing out versus like kind of your traditional competitors, whether it’s Pega, ServiceNow, the others, like what’s sort of the competitive mode, if you will, as we head into the next cycle of compute?

Mark Lynch, CFO, Appian: Yes. So I think we’ve always focused on the high end. So very complex, hardest problems, regulatory compliance, onboarding, off boarding, procurement. And so our mode has always been that we go after the high end, sophisticated customers. They need the best security, IL-five secondurity in the federal government, HIPAA compliance, so we have all of those.

We have guaranteed uptimes of five nines, etcetera. And so that’s our first and foremost moat, right? So some of these competitors just won’t go there and they don’t have to because there’s plenty of business out there and the TAM is big enough. And so we’re focusing on that and we’re focusing on serving our customers as it relates to the best leading edge technology. And that just happens to be kind of the AI wave right now that’s going in and deploy.

But as far as a competitive perspective, we see the same competition. First and foremost, it’s build it yourself still, right? So I got some software guys over here. I got this problem. I’m going to tackle it.

But then it’s like it’s going to take me two years and I don’t have two years to do it. So then it goes down to us and folks like Apega. So we still see them a lot. And then to a lesser degree, we see kind of the Salesforce ServiceNow and into even lesser degree Microsoft.

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: That’s a great way to frame it. Let’s talk about the international business. I think contributed about 36% of your revenue in 2024. 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?

Mark Lynch, CFO, Appian: Yes, I mean, there’s a lot of opportunity internationally. So we’ve got a pretty good base in Europe and our Australia office really crushed it this year. So they outperformed. We’ve got a foothold in Japan that we’re starting to take advantage of and we’re through partners kind of going after South America. So we’re and we’ve got a pretty good presence in Canada as well through the financial institutions up there.

So, there’s a lot of opportunity internationally.

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: You feel like from a sales capacity, partner capacity perspective, you feel like you have enough to address those opportunities? Yes.

Mark Lynch, CFO, Appian: For this year, I think we do. Yes. And I think the area that candidly underperformed was Commercial North America.

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: Commercial North America.

Mark Lynch, CFO, Appian: So we have new a new head of commercial North America that’s focused on turning that around. And if he’s able to turn around, that could be a big driver for us.

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: And you guys are alone in that. I have a number of the companies that I cover where the commercial segments of the business in calendar year 2024, that was kind of the area of underperformance. I saw in general, looking kind of aggregating my data points up, enterprise was a stronger portion of the business. So definitely that seems like an area of opportunity.

Mark Lynch, CFO, Appian: That’s low hanging fruit right there.

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: Yes. 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 as a percentage of revenue. We have a new CRO that’s going to hopefully drive more efficiency, more productivity.

Are you seeing any early signs of sales productivity? And how you’re balancing quota carrying expansion with more automation in the go to market motion?

Mark Lynch, CFO, Appian: Yes. So we’re we feel like we meaning Mark Dorsey and the executives and sales team feel that they have the sales capacity to hit their goals for 2025. So we don’t have to hire any additional people and they feel they’ve got the capacity to do that. And so we’re committed to growth first and foremost, but we’re also doing it in a way that margins improve. And so that’s what we’re going to do.

If we see things inflecting, we may lean into it a little bit, but we’re still committed to that margin expansion.

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: Right. So a pretty balanced view of growth in Palmsville, exactly,

Mark Lynch, CFO, Appian: with margins headed higher. We tried spending a lot of money to get growth and it didn’t work out too well. So we’re Part

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: of that is probably the environment changed frankly, right? Exactly. As we look to ’25, what are the most important themes and milestones investors should be tracking to measure Appian’s success?

Mark Lynch, CFO, Appian: I would basically watch our see if we can get the growth rate growing again. So if you look kind of the growth rate, especially cloud, it’s kind of been declining. And so I think if we can stabilize it and get it growing again, that would be a really successful year. And then longer term, what do

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: 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?

Mark Lynch, CFO, Appian: I think at the time of the IPO, we came out with a long term model and we updated it last year. So I’d say the long term model for us is gross margins of 80%, eighty five %, sales and marketing spend of 38% to 40%, R and D of 15% to 17% and then G and A of 6% to 7%. So it’s like a 20% margin. So that would be something that we’re definitely able to achieve. And if you can have a growth rate of 20%, then that’s not a bad looking business.

So we’ll see if we can get there.

Sanjit Singh, Infrastructure Software Coverage, Morgan Stanley: So why don’t we end there on that note. Thank you so much, Mark, for coming to the conference again, giving us your latest view on Appian. Really appreciate it.

Mark Lynch, CFO, Appian: Awesome. Thanks for the invite. Thank you.

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