Conference Transcript - APPN 2026-09-09

Steve Enders, Analyst — Citi Global TMT Conference

All right. Well, thanks, everybody, for joining us in the last session of the day for day two of the Citi Global TMT Conference. And Steve Enders, part of the software research team here with us today or for the final session today, we have Serge from Appian. Serge, thank you so much for joining us.

Serge, CFO

Thank you for having me. Great to be here.

Steve Enders, Analyst — Citi Global TMT Conference

Great. Maybe just to start off, maybe we can talk a little bit about just the main use cases that Appian evolves and kind of run through the high-level story for Appian today.

Serge, CFO

Yeah, so Appian has been in business for 27 years, and what we do is we automate complex business processes. So that's a lot of words, so I'll give you some examples. We automate fraud prevention for financial institutions, mortgage or health insurance applications for health care and financial services companies, a variety of public sector use cases. One of my favorites is we run inventory of ammunition for one of the branches of the U.S. military, so that's as mission critical as it gets. And what these use cases have in common is a few things. Number one is they tend to be cross-functional. They tend to be mission critical and accuracy is very important they frequently involve the customer in addition to the company itself and accuracy is exceptionally important and the other question that usually comes with that is like okay well what does appian replace and the answer is uh there's always something in place uh sometimes it's just the paper process that becomes automated for the first time other times is a homegrown application that is now having trouble scaling or simply cannot keep the functionality, what the business needs, or it could be a rudimentary automation tool, third-party automation tool that, again, cannot meet regulatory requirements or security requirements or accuracy requirements, so then Appian steps in and replaces it. And the answer, whatever it is, is that customers use us in order to have greater flexibility, greater agility, lower cost, and in many cases, direct revenue outcomes for using us, and And that's been our story for the quarter century now.

Steve Enders, Analyst — Citi Global TMT Conference

No, that's great, too. That's great to hear. Maybe we can talk a little bit about just the demand environment and the business environment that you're seeing right now. I think the business has been accelerating for almost a year now in every quarter. Cloud's been accelerating in the past few quarters. Just what is driving that, and how do you think about those factors and sustainability of that moving forward?

Serge, CFO

Yeah, so we are seeing a very strong demand requirement. and it's really driven by our AI capabilities. So Appian has been out there for multiple years now talking about AI as this powerful technology. It has tremendous benefits, but it needs a framework to actually operate at scale. We talk about this as AI in process, and now you've heard a number of terms that have emerged for this idea, whether you talk about a harness, whether you talk about orchestration layer. It's this idea that AI needs something in order to be effective and accurate at scale. And so because we've been out there, you're consistently talking about AI in this context, and because our product actually delivers AI capabilities and functionalities and strong returns, while adhering to accuracy and performance requirement that our customers need, which are highly regulated industries in the public sector, we're seeing the demand grow. We're seeing strong pipeline that is converting, and I liken that to a wave. We have a wave of demand coming our way, and then it's our job to surf that wave, or rather convert that demand into actual revenue, and we're doing a great job. Happy with execution, continuous improvements in sales productivity, and you combine existence of demand with ability to close it, and that's been the story of Appian for the last couple of quarters and the story behind our acceleration that you mentioned on our cloud revenue in particular over the last couple of quarters.

Steve Enders, Analyst — Citi Global TMT Conference

Okay. You know, I think we hear a lot about, you know, people adopting AI, people adopting agents. Can you just maybe help, like, you know, crystallize it a little bit more fully? Like, what are kind of the use cases that your customers are using Appian AI for? And, you know, how do you think about, you know, the repeatability of some of those use cases to potentially, you know, spread more fully across the base? Yes.

Serge, CFO

So front and center for us right now is a use case or a functionality that we call DocCenter. So DocCenter is AI-enabled document processing at high accuracy and already a part of your process. So you're not separately processing your mortgage applications in one silo and then feeding it into some process. It's all integrated in a single process and with high accuracy and sort of ability of AI to reason and send for your next action, whatever it needs to be. The great thing about document processing is that it's a very horizontal use case. Every enterprise is drowning in documents of some sort. So it applies in every one of our verticals. It applies in every one of our geographies. And more importantly, everybody has more than one use case. So an example that comes to mind for me is a health insurance company here in the U.S. that implemented its first doc center use case in June. And they already need to buy incremental AI usage just to satisfy their use case. and they're talking to us about the next couple of use cases that will only further drive the need for their spending on our platform. And so I think about DocCenter as kind of the tip of our AI sphere, and that's probably a multi-year cycle because, again, doc processing is such a pervasive use case across enterprises and certainly in our geographies, sorry, in our industries. The next one behind it, I would say, is agents. So we GA'd our agentic capabilities last year, and we're seeing strong interest. It's obviously earlier on, but we're seeing kind of a very broad use cases from relatively straightforward, simple agentic deployments to very complicated ones and very sophisticated ones and sort of across the board. So we're working this year to continue hardening the product, to continue improving our ability to implement. And that's something that we're going to put more arrows and more focus on as we look into 2027. So I think Doc Center, number one, agent is kind of like the next and the overlapping kind of driver of demand. And then the third one is various products that make it easier to build applications with Appian. So Composer is the one that we talked about. We also have a functionality called DevMCP, which allows you to use your favorite Vibe coding tool and use that to connect to the Appian platform and build apps using natural language on the Appian platform. So what those products will do is they will just reduce the cost of building on Appian or rebuilding on Appian, and that will be an incremental driver of growth. Obviously, that one, in my opinion, is sort of the longest in terms of the duration and very, very large, but the one that's earliest on.

Steve Enders, Analyst — Citi Global TMT Conference

Okay. Maybe on the agent piece of it, I think that one's a little bit maybe earlier in terms of the adoption curve for you all. Well, you know, I think when we talk to CIOs and people, it seems like agents, in their view, is a little bit slower for adoption. But just maybe where are we in terms of that adoption curve? And are there certain agentic use cases that are starting to pop up today for you all?

Serge, CFO

So the challenge with agentic is that true agentic really requires the right use case. And what I mean by that is that it's a case in which you need adaptive reasoning. You have a sufficient amount of ambiguity that you both want and need to deploy AI more broadly. And you still do it because it is more cost-effective than applying a human, but you need to make sure that it's accurate and reliable. And again, like the agents, you want them behaving under the set of rules that you are operating. So that's sort of the sweet spot. But we see a lot of customers coming to us thinking that they have an agentic workflow, And we tell them that they're actually better off applying a more of a deterministic process with more narrow AI capabilities, which will be most more accurate and less expensive. And that ends up being the better outcome for the customer. So it's not a traditional agentic use case, but it's AI powered and it's very valuable to the customers. So, again, it comes down to ambiguity where a lot of context needs to be driven from multiple different places as opposed to one or two, where incremental pieces of information are needed to kind of involve in step-by-step reasoning. That's where Argentic is meant to be better used. If you apply it more broadly, which some have done, not with us, but in general, you end up probably in a place where you're either spending too much money, you're not getting the accuracy that you want it to get, and then you end up going back to the drawing Okay.

Steve Enders, Analyst — Citi Global TMT Conference

And when people come back to the, or go back to the drawing board, does it end up creating an opportunity for you to then step in and take on that use case?

Serge, CFO

Yes, absolutely. What I've generally seen is that a lot of the vendors that we run into, I feel like have over-promised on AI early on.

Steve Enders, Analyst — Citi Global TMT Conference

And this idea that AI can self-govern and, you know, just turn it over to AI and agents, it'll be fine. um and so they're backtracking a little bit on that message and it helps our credibility that we've been pretty consistent and that we can then back up that consistency of message with the quality of our products and that's what we're seeing the demand that we're seeing okay no that's great to uh that's great to hear um maybe kind of staying on this uh on the line of thinking but maybe turning more towards the the monetization opportunity with uh with ai just how do you think about how that kind of develops for you moving forward? Is it more about tiering? Is it about consumption? Is it about incremental SKUs? Just how do you kind of think about that adoption curve and how the levers kind of evolve from here?

Serge, CFO

So there's multiple levers. The first one I would say is actually the tiering. So just to take a step back, we introduced tier pricing at the beginning of 2024. So we're two and a half years into it. And basically we created a standard tier, but to get access to our latest functionality and most importantly, our AI functionality, you have to upgrade to what we call the advanced tier and that runs you roughly 25 to 35% more. So just to have access to our in-production capabilities, you got to pay us out of the gate. And we talked about nearly 40% of our customers having some portion of their ARR on the advanced tier. And in Q2, we also mentioned that 85% of our new logos in the quarter actually off the street came in and bought the advanced tier, where it speaks, again, to the quality and credibility of our AI message. And so our advanced tier AI has been building consistently and will continue to do so. So that's step one. Still plenty of room to go. Step two is usage. So our advanced tier and other ways you can buy AI come with what I would describe as a moderate amount of usage included, enough for a single use case. So, for example, the healthcare company that I talked about, but their first DocCenter implementation already depleted sort of what's included. So now they need to come back and buy more AI bundles from us, more usage. And as they implement the third and the fourth use case, then obviously all that is accretive. It's early days. Relatively few customers are at a point at which they need to buy AI usage. I think that sometimes in conferences like this, it's easy to forget that AI is still very, very early in terms of adoption, really in enterprise when it comes to mission-critical applications, particularly enterprises that we serve. So it's early days, but it's building, and we think that's another medium-term level of growth. And the third bucket is we're going to play this game again. So above advanced tier, there's something called premium tier. Very, very few customers are in that level now. But over time, we'll start to put more advanced AI features there, and we'll ask for another 25% or 35% uplift. So we think that there's plenty of opportunity. If you think about it both from the perspective of use cases and ability to monetize use cases were in early innings, no matter how you think about it.

Steve Enders, Analyst — Citi Global TMT Conference

And on the premium tier, I guess, what are the capabilities that you get incrementally from versus the advanced tier? And I know it's still early, but longer term potential, where could that potentially go in terms of the penetration within the base?

Serge, CFO

So right now it's a handful of features. Right now it's more included AI usage. And so we are very much still in the seeding market stage, which is what we're doing with the advanced tier, once we feel like that game is largely behind us, which I'm not suggesting it's this year or next year, but at some point we will start putting the incremental feature there and then it will be sort of the next chapter of that story. But the chapters one and two have a long way to go.

Steve Enders, Analyst — Citi Global TMT Conference

Okay, that makes sense. I want to ask a maybe high level question on, you know, AI and, you know, the opportunity set that you see here, you know, I think we still get the conversation or the questions around like build versus buy and what that means within the customer base that you serve and how they think about when it makes sense to use Appian, when does it make sense to use custom code and, you know, how does that kind of view evolve over the next kind of few years and it'd be great to kind of get your perspective on what that looks like.

Serge, CFO

So thank you for saying custom code, because I sometimes need to remind people that custom code has always existed. So it's not a new concept. It's not something that began with Vibe coding, right? So you can always go hire yourself a bunch of developers and $250,000 a pop and have them build something custom for you. That's always been competition for platforms like ours. So nothing is really changing from the perspective of like this competitive force always existing. Okay, so now comes vibe coding or ability to use natural language coding to accelerate the process of custom coding, and it's very powerful, obviously. We've heard the customer's position change, I would say, sort of in April, May of last year, in that what we were hearing before that is, well, these are interesting tools. We're learning what they're good for. We would never, ever, ever use them for something that is very mission critical and core to our process, but there's probably other things around that, you know, this would be an interesting alternative for. To now the conversation changing a little bit of as exciting as those tools are at the beginning, you start discovering costs associated with them down the road. And the word maintenance suddenly starts coming up. you know it's you know one of our partners talked to me about and this is a large systems integrator who built like a meaningful app using natural language processing in the hopes of demonstrating internally and externally that it can be done and then it becomes a business for them they soon found that this app requires a couple dozen people to be maintained so and by the way these are people who have far more technical expertise than an average enterprise so for them to be in that situation shows you that this might not be tenable anytime soon for a traditional enterprise, which is always struggling to get technical talent on board. So we see interest from customers. We see apprehension. If anything, the balance between apprehension and interest has switched, I would say, over the last four or five months more in the direction of apprehension. I'm sure they will have a role to play, but we don't see them impacting how our customers make decisions about processes that they would consider deploying on Appian.

Steve Enders, Analyst — Citi Global TMT Conference

Yeah. And at this point, it isn't having any impact in terms of like deal cycles or their decision making to move forward with an application on Appian versus them choosing to try to build something themselves?

Serge, CFO

Not at all. Demand is strong and like deals are continuing as they have been.

Steve Enders, Analyst — Citi Global TMT Conference

And pipeline looks good? Pipeline looks very good. Okay. All right. That's great to hear. Maybe shifting gears a little bit, you know, but this being. you know a big fed quarter uh and i think that's about third of the business something like that for for you all federal government 25 total government low 30s okay um just maybe we can talk a little bit about you know the demand trends that you're seeing within within that vertical um you know i know that there's been a lot of automation initiatives with doge over the past past couple of years there's the massive you know 500 million dollar ela with uh you know there as well just how do you kind of view that opportunity moving forward and you know any any kind of views for for what that means for this quarter and kind of like what you're assuming in the guide at this

Serge, CFO

time yeah so there's been a positive structural change in the federal sector for appian last year and what i mean by that is the government is focused on efficiency the government is focused on impact of its technology initiatives, ongoing never-ending projects are out of favor and dealing directly with vendors who are going to sell you software and implement that software so you can deliver flexibility, agility, cost savings, whatever it may be, to your use case is what the government wants. And that's simply put us in a better competitive position than we've been before. We are more frequently directly competing as opposed to resellers. There's greater focused on sort of the value of the software as opposed to just its price and that speaks to the strength that speaks to our strengths. We've had a very strong year across the board in federal last year including a strong closing Q3 and you know frankly to me the question was is this a one-time thing meaning the first year of the new administration or is this like an ongoing change and you know sitting here six to nine months later I can tell you that it feels like an ongoing change so that's why it's like not a one-time thing but but a secular demand driver we expect to have a very strong quarter in q3 in federal that's part of our guidance for the year and we expect to have a strong quarter a strong year in federal next year okay um and i guess the the army ela that you have you know how do you kind of view what that means and i guess the repeatability of that with other agencies within the within the federal government at this time so it was an important milestone for us because it sort of demonstrates sort of like like a physical manifestation of what i just talked about yeah like increased sort of visibility that appian has inside a major part of the of the u.s government so it's a framework agreement to spend 500 million dollars over the next decade i guess nine years at this point um with the army it's not a commitment, but it's sort of think of it as a purchasing vehicle that dramatically accelerates or simplifies ability to get new processes on top of Appian. And it does two things. One, it has the potential and has demonstrated so far that the benefits of specifically pursuing new business with the army. But more importantly, it also serves as sort of like a badge of distinction, if you will, with the rest of the, not just the military parts of the government, but also the civilian as well. So if a portion of the government views us as such an important partner to be willing to create this framework, it just opens our doors for us. And again, it speaks to the strength of the federal business over time.

Steve Enders, Analyst — Citi Global TMT Conference

Okay. No, that's great to hear. Maybe we can shift gears a little bit and talk a little bit about go-to-market. At this time, I think there's been a lot of focus on incremental hiring and headcount and investing in the go-to-market and trying to drive more ramp coverage? Where are we kind of in that investment cadence and turning that spigot back on? And where do you kind of view the biggest areas for kind of incremental opportunity to go invest behind?

Serge, CFO

Yeah. So let me take a step back and just talk about the chapter before the current chapter. So in 2024 and 2025, Appian was very focused on sharpening our focus at the high end of the market. So enterprises, large strategic deals, improving productivity of the sales org. And frankly, our sales org didn't grow in 24 and 25 because we were focused on improving our productivity and returns. And we've succeeded in that. We showed some data in this regard at our investor day, but we've improved our productivity and returns and paybacks to the point where I was saying internally and externally, we've earned the right to grow. And that's great because our sales force is tiny compared to the opportunity that we face, but you want to grow it once the return is warranted and then as you grow it you want to make sure the returns continue improving or at least remain stable so halfway through this year you feel very good about that we feel good about the performance that we showed in the first half we feel good about the pipeline and the forecast for the back half so we said to ourselves okay here's an opportunity to start hiring early for 2027 as we think about you know the back half of the year you're putting together your structure, your territories, your comp plans. So wouldn't it be great if we can get those people a few months earlier than otherwise in order to put them in a position to be ramping and to hit the ground running into 2027? And again, with the revenue of performance, there was room in the P&L to do that while still expanding margins. And that's what we decided to do. If you think about where all these heads are going, the same places. There's no need to put them anywhere else. We have plenty of coverage opportunities in our co-verticals. And so there's no need to anywhere near the need to try something new or dramatically different in order to grow the sales org. We can just keep doing what we're doing, serving the markets that we're serving for years to come and just keep growing our coverage in order to grow our revenue.

Steve Enders, Analyst — Citi Global TMT Conference

And I guess with these headcount additions, you know, what should we, I guess there's a way to kind of like dimensionalize like how much we're growing, you know, growing this. And I guess secondarily, you know, there's been a big focus on rep productivity for you all. And, you know, like that chart that you have in the investor deck showing that trend and show that increasing, like, should we start to expect that to, you know, level off and maybe decline as those reps, you know, get up to, you know, get ramped up? Or just how do you kind of think about what that means moving forward here?

Serge, CFO

So I think the key thing to think about is balance, right? So you want to grow the rep headcount, but you want to make sure that you are doing it in a way that they are as productive as the base and not dilutive. And so you don't want to do too much at once, because if you do that, then you will have lower productivity, you will have attrition, and you will have sort of the need to kind of reset, and you don't want to put yourself in that position. Instead, what we're hoping for is consistency of growth. So adding rep next year, adding rep this year after, and so on and so forth, while maintaining or improving average productivity over time. because, again, what we're trying to build is a consistent compounding return story that begins with revenue, goes down the margin, further down to net income, every metric per share, but it begins with consistency of revenue. So I think companies frequently make a mistake where they extend themselves for that incremental percentage point of revenue growth and take operational or execution risk. And instead, just given the size of the opportunity, we're going to grow at a healthy rate while at the same time maintaining our productivity and expanding No, that makes sense.

Steve Enders, Analyst — Citi Global TMT Conference

As you think about the partner opportunity, where do they kind of fit in into this investment cycle and kind of where are we in terms of them pulling you into incremental opportunities and I guess leaning into them a little bit more as a growth lover?

Serge, CFO

So there's a lot of opportunity to better with the partners. First of all, there's a lot of implementation works that our partners already do. And we're happy for that to be the case because it provides them incentives to be sort of engaged. We have rebuilt our partner org and increased focus on key partnerships because we want to invest in people who invest in us. So it's better to have a smaller number of very vibrant partnerships than kind of like a peanut butter approach to a larger number. Second, what we're seeing from our partner community is that they're interested in new ways of doing business with Appian, because their traditional implementation business, as you think about it in the world of AI, there's a lot of questions around what that looks like. However, if there's ways that we can go to market together, produce solutions together, figure out new ways to share revenues, and it's all incremental to us because, again, they carry the distribution. So there's a lot of early discussions and excitement, particularly when you marry that with our AI products, which are resonating very strongly with them. And so that's another sort of opportunity for us over time.

Steve Enders, Analyst — Citi Global TMT Conference

I want to ask on, you know, maybe the financials a little bit, shift gears. You know, it does seem like there's a little bit more balance today between investing and driving growth versus letting things flow down to the bottom line. So just, you know, how are you kind of thinking through that framework at this time? And, you know, what should we kind of, you know, expect moving forward here?

Serge, CFO

I would expect the balance to continue, and it's a key word for us. So we're in a fortunate position to be able to grow revenue while continuing to expand margins, and we want to do both over time. We don't want to invest aggressively and then put the risk in terms of our productivity profile or returns profile. and also we don't want to start the investment start the business from investment for like a continued improvement in margins a rapid improvement in margins but that reduces our ability to kind of drive long-term growth so this year for context we're going to grow revenue 17 percent at the midpoint of our latest guidance we're going to expand margins by 200 basis points that's up from 100 basis points original guidance while investing in the business we're starting some of that hiring earlier that we talked about, and we're happy that we can do that. And by the way, both of those things, meaning revenue growth and margin expansion, have a multi-year run one way for Appian, which I think is an appealing part of our kind of returns algorithm for our investors.

Steve Enders, Analyst — Citi Global TMT Conference

And I guess as a piece of that, is there a way to think through free cash flow versus EBITDA and driving that conversion to free cash flow?

Serge, CFO

Right. So if you think about what's between EBITDA and free cash flow, we have interest expense. We've done some work this year in terms of refinancing our debt in order to get better returns. So there's an ability to kind of dimensionalize that based on our financials. Very limited capex here and there. We'll open an office, so not a big deal there. We mostly get cash up from when we collect from customers. So that's to offset some of those elements of the contraction. So like roughly speaking, they're going to be growing in tandem with each other. And our most important sort of capital allocation commitment is to, over time, effectively return all of our free cash flow to shareholders in the form of share buybacks. And we are doing $100 million buyback this year, and we'll continue doing strong buybacks as we go forward. And that will more than offset the dilution that we have from stock-based call.

Steve Enders, Analyst — Citi Global TMT Conference

Okay. And then, you know, I know you're leveraging AI more into the product set, but what does that mean, I guess, for internal usage of AI? Where are kind of the core areas where you're deploying that across the, you know, the various teams and, you know, what that means for, you know, further expenses or where you can find more cost savings, you know, moving forward?

Serge, CFO

So the place where we're leading is with our R&D org. Credit to our engineering team. They're seeing great products, great improvements in productivity and more to come. They're, in fact, reimagining entire software development lifecycle around AI, and that will sort of continue improving our engineering productivity. And what that allows us to do is, for the same investment, put more innovation out in the market, which is great from the perspective of helping drive revenue growth, while at the same time driving operating leverage because, you know, if the expenses grow slower than revenues, then you get operating leverage. We're having early successes, mostly actually using Appian platform itself across our G&A line items, whether that is in finance, whether that is in people or your hiring process, our quoting processes all have Appian AI deployed. I'm starting to see benefit. And what that allows us to do is, as the business grows, we don't actually have to grow headcount dramatically to support the growth in the business and some of those support functions. So those are some of the areas. There's plenty more that we can be doing. But again, it's all in the context of generating leverage, showing margin expansion while at the same time revenue growth. And we have all the normal scaling tools, if you will, at our disposal, plus all the AI tools to kind of further cement that runway for us.

Steve Enders, Analyst — Citi Global TMT Conference

I want to ask a little bit on the competitive environment and what you're seeing there. I think there's a lot of organizations and companies in the space talking about agent orchestration or talking about, you know, this kind of like next phase of leveraging agents internally at enterprises, just maybe what do you kind of see there and how do you kind of, or what do you kind of view as like the differentiators of what Appian does versus, you know, others in the marketplace?

Serge, CFO

So first thing I would say is we don't see any significant changes in the competitive environment. Occasionally in conferences like this one, we get asked about the new players, about But the model providers, do we see any of them as competition? And the answer is no. And so it's the same competitive set that we kind of faced over the last few years with one distinction, which is our win rates are significantly higher when AI is a specific factor. So, you know, when we get the RFP, when we get into the competitive situation and customer really cares about AI, which isn't always, but when it is, our win rates are significantly higher than they are on average, which again speaks to the credibility of our AI offering and, frankly, the quality of the product. When it comes to, so we're still very much living in that stage, the stage of the first or the second use case, the stage of like getting a Gentic to work for the first time. So as you now try to imagine a world which to us does not feel like it's happening in the very near term at all, some world of like agents in one corner from one company from a different corner in a different company and then needing for all those agents to communicate with one another, we have a lot of wood to drop before we get to that world. When we get to that world, the benefit that we will bring to the table is the same benefit as when you deploy your first agent on our platform, which is guardrails and data access. So ability to operate in a framework and ability to access data across the enterprise without having to move it in ETL anywhere, which is our data fabric offering. So we have an MCP offering, which will allow other people's agents to access Data and processes exist on the Appian platform. We expect to monetize that over time. It's very, very early. Customers are trying it. But as I said, it will take a while. But in a world in which ultimately what AI, ours or anybody else's needs is framework and data, we provide growth and we expect to benefit.

Steve Enders, Analyst — Citi Global TMT Conference

When AI comes into the RFP, is the competitive set that you're going up against, is it any different?

Serge, CFO

No, so it's, you know, the large traditional competitors who are ServiceNow, Salesforce, Microsoft's of the world, and, you know, it's automation players, most notably Vega.

Steve Enders, Analyst — Citi Global TMT Conference

That makes sense. I do want to ask about, you know, some of the use cases that you drive. You know, I know we've talked in the past about, like, you know, ServiceNow had this great use case in ITSM. They started as a platform and then found this and started stamping that across the customer base. When you think about, you know, what Appian could do to find a repeatable use case, you know, are there areas where you feel like that, you know, that you feel like are better suited for Appian to do that and drive a similar level of success? Or just how do you kind of view that, you know, that ability moving forward?

Serge, CFO

So for better or worse, we are exceptionally versatile. And so that makes it very, very broad in terms of what we can implement, but it does make the sales cycle longer and you need to sort of find a use case that is complex enough and sophisticated enough that it warrants an Appian platform. And so the way that that plays out for us is that we have exceptional growth of our customers for many years after they get on our platform because we keep finding new use cases that we can deploy once we land in an enterprise. But again, every one of them needs to require flexibility and versatility as opposed to like a point solution that you can apply off the shelf. So that does mean that, you know, our sales cycles are long, but it also means that our gross retention rate is exceptionally high because customers love our product, and frankly, it becomes very sticky, and it builds this stable place over which we can grow over time. So the acceleration for us has not been that we figured out a way to run the flywheel faster. It's that we just focused on larger and larger deals. So the payback at the end of the sales cycle becomes bigger, and we think we can continue doing that, and that's going to continue being driver of the growth. As opposed to, you know, like productizing or focusing on specific features that kind of opens like a different angle that may come over time. But we think there's great benefits in selling the platform, even if it does mean that sometimes you have a more complicated sales to begin with.

Steve Enders, Analyst — Citi Global TMT Conference

Okay, last question here. You know, as you think about model adoption moving forward, and you think about, you know, what are the right use cases for, you know, embedding a frontier model with an Appian or utilizing open source models? You know, how do you think about what that mix looks like? And how do you optimize for some of the costs for, you know, benefit dynamics there?

Serge, CFO

So first, we provide a tremendous amount of flexibility to our customers, where you can choose your model, and not just for the entirety of the use case, but for the individual components of it. Historically so far, because it's early days, we haven't found customers really availing themselves of that capability very much. But they kind of go with whatever standard setting we give them for the most part. However, and you know this, the topic of AI expenses has definitely moved into the forefront for, you know, my colleagues sort of across the board. Sure. CFO cares what you spend your money on. And, you know, after a while, it's no longer just a side pocket of money. It becomes significant. So as we see that happen, and as we see customers having incentives to be more thoughtful, where do I really need the frontier model? Where can I go with an open source model or an early generation model? there will be another way for them to tweak value that they get from their use case and we benefit either way so we're happy to be sort of the agnostic layer that gets them picked the the underlying nlm and we benefit from the competition and innovation at that layer okay um no that's a that's great to uh it's great to hear um i know we're at time so serge want to thank you so much for uh for for joining us today and um great to uh great to hear from appian excellent thank you Thank you for having me again.

Steve Enders, Analyst — Citi Global TMT Conference

Thank you.