Appian Corp (APPN) 2018 Q1 法說會逐字稿

Greetings, and welcome to Appian Corporation First Quarter 2018 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, [Kevin Brogan.] Please go ahead.

Thank you, operator. Good afternoon, and thank you for joining us today to review Appian's first quarter 2018 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 up 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 first quarter and full year 2018, the benefits of our platform, industry and market trends, our go-to-market and growth strategy, our market opportunity and ability to expand our leadership position, our ability to maintain and upsell 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 subsequent date. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations.

For a discussion on the material risks and other important factors that could affect our actual results, please refer to those contained in our 2017 10-K filing and our other periodic filings with the SEC. These documents and the earnings call presentation are available in the Investor 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 and the Investor Relations portion of our website for a reconciliation of these measures to their most directly comparable GAAP financial measure.

With that, I'd like to turn the call over to our CEO, Matt Calkins. Matt?

Thank you, Kevin, and thank you all for joining us today.

In the first quarter of 2018, Appian's subscription revenue grew 36% year-over-year to $25.5 million. Our subscription revenue retention remained high at 119%. These results exceeded our guidance.

We're all just back from Appian World, our annual conference held last week in Miami. We had a big turnout, with 55% more customer attendees and 55% more partner attendees than last year. Also, Steve Wozniak was there.

At Appian World, we made 2 major platform announcements, one regarding artificial intelligence and the other, a new product. Both will be generally available next month.

AI is now a native part of the Appian cloud. We provide real-time sentiment analysis on any tech stream. So give us a bunch of words, and we tell you from 1 to 100 how happy is the author of those words using artificial intelligence. This is great for knowing whether your customers are satisfied, when they write you e-mails, letters, texts, tweets and the like. You can also analyze call transcripts. It's good for managing a call center. It's good for knowing what makes customers happy, what products, which employees. Most of all, it furthers Appian's goal of making AI practical and easy.

In my opinion, the hype-to-value ratio on AI is really high right now. And here at Appian, we have an opportunity to make AI not just cool but useful. Built-in sentiment analysis makes it easy to get value from AI.

We also announced native integration with 3 leading AI platforms so that customers can run their own AI algorithms. In true low-code fashion with a minimum of clicks and keystrokes, our customers can connect Appian processes with any fit-for-purpose AI algorithm they've made on Amazon, Google or Microsoft Azure.

The fact that we did this for all 3 at once is in keeping with our commitment to agnosticism between clouds and stacks. We figured those clouds might diverge or get stickier someday and then our customers will appreciate Appian's portability.

For a long time, Appian has resisted building an application on our own platform. We finally launched one last week, our new Intelligent Contact Center. Today, it's a framework, a bundle of best practices and communications components. In the future, it will be an application. Our competitors can sell call center seats at a high price -- higher price than regular seats. Our competitors sell call center seats at a higher price than regular seats, so there is a precedent for how to monetize this.

As the first application, this is a very safe choice, and we can follow a well-trod path to market as we learn how to manage the new approach to development, marketing and sales.

We are partnering with some great firms, like Genesys, Twilio and Temasys to co-sell and provide communication services.

We are not new to the call center market. We are already competitive at the highest levels, and we're in production at call centers for some of the world's leading institutions today. That track record and the solid customer references that come from it constitutes the first reason to build a call center app.

In addition to that, we see an industry in change and an opportunity to build something unique. We have 3 essential advantages. First, Appian offers a 360-degree review of the customer in real time. This is one of Appian's greatest competitive advantages in the BPM and low-code markets. By bringing to bear data from around the enterprise, we can help the call center treat each customer personally so that each moment of connection feels like part of a continuous dialogue.

If you've ever had a call center forget you in between the first person you talk to and the next or maybe between when they ask for your credit card the first time and when they ask for it again afterwards, Appian is the opposite of that.

Call centers -- number two now. Number two. Call centers are fundamentally about case management. A customer calls, they have an issue, that issue is a case and you have to resolve it. Surprisingly, this process resolution is a big deficiency in many call centers today. Appian is the recognized leader in dynamic case management according to a report last month by Forrester. So we have something essential to add that most call centers lack.

Third, AI is a major inflection point in the call center market. In a few years, AI will talk to you, text replies to your questions, recommend actions, set prices. In some cases, this is already happening. Appian has a unique approach to AI, powerful and open and practical. AI will change call centers and it will also scramble the provider landscape, and so it creates an opportune moment for entry.

As I was saying, we're not new to this market. Attendees at previous Appian Worlds know this because they've heard presentations by Appian customers like Goldman Sachs and Aviva talking about their Appian-based call centers. This year, at Appian World, HCSC, the fourth largest health insurer in the U.S., spoke about how they use Appian in their call center to authorize procedures for their 15 million members. With our platform, they respond to their members 15% faster and reduce medical costs by $10 million per year through increased quality.

Another customer, Barclays, one of the world's largest banks, uses Appian in their call centers to serve their global customer base. We handle fraud management, billing disputes and balance transfer errors. With Appian, agents identify, diagnose and resolve these cases in real time. Barclays customers get faster and more accurate service, improving customer satisfaction by 64%.

We continue to sign up new call center customers. This quarter, we won a 7-figure deal with a top 50 global bank. Their Appian call center will consolidate many systems to process claims, starting first in their fraud call center and eventually expanding to the rest of their contact centers. They aim to deliver better customer experiences with increased satisfaction and reduced response times.

Most of our Appian presentations -- most of our presentations at Appian World were from customers and partners. 30 of our customers spoke about their Appian journeys, including KKR, a Fortune 500 private equity firm. KKR spoke on the main stage to describe their 3-year Appian journey from a very small start, a single compliance process, to more than 65 processes touching every deal that they do.

We announced a couple more big features, and I'll cover these briefly. Interface design in Appian is now low-code drag and drop. We also announced new Robotic Process Automation, or RPA, orchestration functionality. You can now manage and communicate with a layer of bots better than before. Here, we continued our partnership with Blue Prism.

We mentioned in a previous call that Appian's professional services team is now dedicated to the customer above all and the customer's success. In service of that objective, we introduced in Q1 a new role, the Customer Success Manager, and moved several of our top PS experts into it. This new role is a strategic adviser, generally unbilled, evaluated by net subscription revenue retention rather than anything to do with services revenue.

Our goal is to stop using services to sell services and start using services to sell software. The introduction of this new role and the reallocation of talent into it will affect our service revenue and margins.

Two weeks ago, we announced our selection of a new headquarters building in Tysons Corner, Virginia. We had a nice ceremony with the Governor of Virginia at the new facility. We look forward to unifying the company in one place, being the primary tenant, putting our name on the building, that sort of thing. We plan for the move to happen next spring.

With that, I'll turn the call over to Mark for a deeper discussion of our financials. Mark?

Thanks, Matt.

This was another solid quarter for Appian. I'll review the financial highlights of the quarter and then provide details on our Q2 and full year 2018 guidance.

Subscription revenue was $25.5 million, an increase of 36% year-over-year and above our expectations. Our total subscription software and support revenue was $27 million, an increase of 26% year-over-year.

Professional services revenue was $24.7 million, up from $16.9 million in the prior year period but down from $25.2 million in the prior quarter.

Customers often spend more on services in their first years compared to later years, and the surge in new customers was met by a surge in professional services work. As we continue to work with our partners, we expect services growth to moderate.

Total revenue in the first quarter was $51.7 million, up 35% year-over-year and ahead of our expectations. Our subscription revenue retention rate was 119% as of March 31, 2018, which was at the high end of the 110% to 120% range that we target on a quarterly basis. We are pleased with our customers' expanded use of our platform.

Our international operations contributed 33% of total revenue for Q1 compared with 23% in the prior year, reflecting the investments that we are making to grow our business globally. We are pleased with the traction that we're gaining internationally.

Now I'll turn to our profitability metrics. Our non-GAAP gross profit margin was 60% compared to 67% margin in the same period last year. Subscription, software and support non-GAAP gross profit margin was 91% in the first quarter compared to 90% in the first quarter of 2017.

Our non-GAAP professional services gross margin was 26% in the first quarter compared to 37% in the first quarter of 2017. We expect our services gross margins to remain around these levels for the remainder of 2018 as we continue to deploy top resources as unbilled customer success managers.

Total non-GAAP operating expenses were $39 million, an increase of 34% from $29.2 million in the year ago period. This is in line with our stated strategy to invest for growth to capture the long-term opportunity and build on our momentum. Given our high gross margins on subscription revenue along with our powerful LTV to CAC metric, we think it makes sense to continue to invest in the business to capture new customers and capitalize on the big upsell opportunity.

Sales and marketing was 44% of revenue in the first quarter compared with 44% of revenue in the prior year period and increased 35% on a dollar basis. We continue to make investments to grow our direct sales headcount both in the U.S. and internationally to support our technology and channel partners and to continue marketing initiatives to drive awareness and adoption.

R&D was 19% of revenue in the first quarter compared with 19% in the prior year period. On a dollar basis, R&D remains a key area of investment, further differentiating the platform and adding vertical-specific functionality. In particular, our R&D investments led to new platform features like the AI-based sentiment analysis and the new Intelligent Contact Center that Matt mentioned earlier.

G&A as a percentage of revenue was 16% in the first quarter compared to 13% in the prior year period, reflective of the investments in our infrastructure to operate as a public company.

Non-GAAP loss from operations was $8 million in the first quarter, ahead of our guidance and compared to a non-GAAP loss from operations of $3.5 million in the year ago period.

As you know, foreign exchange gains and losses can fluctuate. During the quarter, we had $767,000 of foreign exchange gains compared to $533,000 in Q1 2017. 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 do not estimate movements in foreign currency exchange rates.

Turning to our balance sheet. As of March 31, we had cash and cash equivalents of $60.9 million compared with $73.8 million as of December 31, 2017. Total deferred revenue was $85.8 million, up 20% year-over-year.

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. As such, we will continue to remind investors that changes in our deferred revenue are not always indicative of the momentum in the business.

For the first quarter, we used $13.8 million in cash flow from operations as compared with $3.7 million generated in the prior year period. This was principally due to the timing of collections, and in the month of April, our cash collections were strong.

Before turning to guidance, I wanted to take a moment to provide some additional detail on our new corporate headquarters. We signed a 12-year lease on a space that is large enough to accommodate all of our Metro DC area employees in one building with plenty of room to grow. We expect to take delivery of our space in early Q4 this year with a target of moving next spring.

We will see financial benefits of this move, including a lower cost per square foot than our current space and meaningful tenant improvement benefits which will offset a portion of our expected CapEx.

We project that there will be a $1.5 million noncash expense in Q4 of 2018 when the lease begins in the new facility and some CapEx in fiscal 2019 that we will provide details on when plans are finalized.

Now turning to guidance. For the second quarter of 2018, subscription revenue is expected to be in the range of $25.8 million and $26 million, representing year-over-year growth of 30% to 31%. Total revenue is expected to be in the range of $50.2 million and $50.4 million. Non-GAAP loss from operations is expected to be in the range of $10.5 million and $10.1 million, with a non-GAAP net loss per share of $0.18 and $0.17. This assumes 61.4 million basic and diluted common shares outstanding.

For the full year 2018, we are raising our guidance. Subscription revenue is now expected to be in the range of $107.6 million and $108.6 million, representing year-over-year growth of 30% to 31%. Total revenue is now expected to be in the range of $202 million and $205 million. Non-GAAP loss from operations is now expected to be in the range of $38.9 million and $36.9 million, with a non-GAAP net loss per share of $0.64 and $0.61. This assumes 61.6 million basic and diluted common shares outstanding.

This guidance is inclusive of the $1.5 million noncash expense in Q4 of 2018 related to the lease beginning on the new facilities that I just mentioned.

Overall, Q1 was a good start to the year as we continue to build on the momentum from 2017.

We'll now turn it over to questions.

(Operator Instructions) Our first question comes from Terry Tillman with SunTrust Robinson.

Congrats on the solid start to the year. I guess, Matt, the first question just relates to talking about native AI in the platform. Could you maybe help us with -- a lot of companies are talking about AI, machine learning, et cetera. How will you differentiate and how will you cut through the clutter and the noise out there in the market?

And secondly, as AI comes into general availability, is this one of the reasons why you slightly raised the prices -- the list prices, for your products?

Okay. First of all, Terry, thank you for that question. I'm going to start with AI and then I'll get to the prices. We believe that though everybody realizes how important AI is and, therefore, it's hard to out-AI the rest of them, they don't all realize that AI has to be practical. I see a lot of features and a lot of talking about AI that's just sizzle-related.

Whereas, at Appian, we're focused on practicality. Our intention is to make it a useful part of your customer experience. And so by bundling it in, by making it a low-code experience whereas, in most cases, it's anything but, and by -- the other reason -- the other way we're differentiating is being agnostic across many AI platforms.

Rather than aligning with just one of them, we allow you to take your favorite. So we respect the choices that our customers make. Our customers tend to be best-of-breed deciders, and that's what led them to Appian in the first place. So we want to respect that habit.

And also, we're a bridge across different AI services in case that customer should wish to create or change allegiances as they evolve. So I would say, those are 2 primary differentiators in AI, our emphasis on practicality and our agnosticism.

We mean to be the easiest way to use AI toward the creation of real value. That -- in a nutshell, that's what we're trying to go for here. As for raising our prices, it had actually nothing to do with AI. Nothing at all.

Okay. I guess maybe, Mark or Matt, my second question relates to sales and marketing. You guys talked about that on the last quarterly call. And given the market opportunity and why you felt these investments were worthwhile, I don't know if maybe I just mismodeled, but you actually came in several million below my sales and marketing. So maybe it was just shame on me and I didn't know how to model it in the quarter. I don't know.

But is there anything to think about these growth investments? Are they more back-end loaded in the year? Or -- and/or did you actually hire to kind of -- and spend to the level you were thinking about spending in the quarter? Thanks, and again, nice job.

Yes. I can say that our hiring and our spending is roughly in line with our intentions. Maybe that's what I can say to that question. We do have these investment plans and we are in line with our expectations.

Our next question comes from Raimo Lenschow with Barclays.

This is Mohit Gogia, actually, on for Raimo. My question is around the professional services plan, which I guess you can justify based on an easier comp from last year. But also, as you have been pointing out, it was driven by just a robust growth in customers, and the customers tend to spend more in the first year rather than later years.

But I guess my question is as to given the new role you mentioned that you introduced in Q1, how do you see that growth trending? And as to how do you sort of like manage that professional services business going forward in light of the new role and then the growth you're trying to manage in that business? And I have a follow-up question to that.

Okay. We understand that we've made some changes to the way professional services is oriented and run, and that introduced, to some degree, a volatility. We don't expect to see more volatility. We want, actually, to settle down a little bit and get into a pattern.

So Q1 was rather different from what we've seen in the past in terms of the introduction of these new customer success managers. And I think you'll see us not changing the ratio of customer success managers to line consultants or the ratio of billable to unbillable staff in the professional services department in any meaningful way in the quarters to follow. We're going to digest this change and see how it works, see how effective it is in getting follow-on sales. So that's what I'd say to that.

Yes. Plus, if you look at professional services revenue, Q1 versus Q4 was sequentially down. And so we're starting to work with more partners and pushing more work off to them as well, even though we did, as we said, had -- we did have a surge in the upfront services from the 85 net new customers that we added last year.

Understood. The follow-up question I have is on the contact center solution. So I mean, it's a competitive market. It's not only the pure-play contact center vendors play in there, but also some high-profile CRM vendors are in that market. So I guess you guys laid out your differentiation in that market versus the competitive field.

But also, I was wondering as to how -- this is your first out-of-the-box solution based on the Appian platform. How do you see this strategy evolving going forward? Do you think it's -- we can expect more horizontal or maybe vertical out-of-the-box solutions coming out from you guys? Or is this just contact center was such an obvious choice that this had to be done?

Thank you for the question. I believe it was an obvious choice, and it did have to be done. I think this is a good beginning. And I want to reiterate Appian's general philosophy toward launching new initiatives.

Instead of launching several at once, we launch one, and we watch it really closely. And we learn from it, and we put our best behind it. And then based on that, we can make decisions going forward about whether to do it again, whether to do it 5x, 0x, that sort of thing. But a lot depends and a lot is focused on the effort at hand. So no further plans. Just -- we'll do our best with this.

And our next question comes from Jesse Hulsing with Goldman Sachs.

This is Kevin on for Jesse. Did GDPR have a positive impact during the quarter at all? And if so, how long do you think that will last?

Kevin, thank you for the question. I would say that GDPR had no impact -- no or nearly no impact on our results in Q1. It's really just in the early stages right now, and I believe it to be a wonderful opportunity. We've got partnerships lined up to focus on GDPR, but I don't believe you're seeing the results of that in the first quarter.

Got it. And do you see any particular strength in any specific verticals during the quarter? Anything to call out there?

I would say that we saw continuation in the strength of the verticals that are already the strongest for us, particularly financial services, which has for years now, been our #1. That was our #1 again. Yes, I'd call out financial services, not that, that would surprise you, but that was our top.

Our next question comes from Sanjit Singh with Morgan Stanley.

Congrats on a nice start to the year. Matt, maybe -- I had a question, maybe a higher-level question in terms of how customers think about using the Appian platform versus some of the alternatives out in the market.

So given your profile and sort of large enterprise customers, how do believe that your customers think about using some of these platform-as-a-service container-orchestration-type platforms, like a Red Hat, OpenShift or a Pivotal versus using a platform like Appian? Do they run them side-by-side? Or do you see most of your customers like making a choice between 1 of the 2?

Yes, we wouldn't want them to make a choice. I'm going to use your question as an excuse to talk about containerization, which I love, and which we are focused on a lot this year.

We did announce at Appian World, though I didn't put it into my remarks, our initial containerization functionality. So now Appian can be run containerized, and we're leveraging Docker and Kubernetes. This is a wonderful thing for us, partly because it makes it easy and fast to install and get going with our software. And as you know, we emphasize simplicity and ease-of-use and instantiation as one of our primary virtues, so we love that about it.

And we love the ability to adjust the presence of different parts of the application. You need more of this, more of that. With containerization, we're able to scale and conform to usage patterns as they arise, so that's terrific.

But the bonus advantage that Appian gets out of containerization that specifically means more to us than it means to anybody else is the new path to agnosticism, the new path to multi-cloud availability. That is really terrific for us, and I love the way Kubernetes unlocks that and makes it so simple. We're a big believer in that, and we will continue to ride this wave in order to get the most out of it.

And circling back to your first question. I don't know to what degree our customers may be using Red Hat's approach versus us, but I will say that I don't consider them substitutes. And what you can develop in Appian and the rate at which you can develop it is very different from what you might be able to DevOps with containers and other technologies. We regard ourselves as being in a very different race, a different contest than those technical solutions.

Our intention is to allow for the creation of an application in maybe 5% to 10% the time that it would have otherwise taken, because you're drawing it instead of writing it. And then that application is pre-configured in many ways, so it already runs on every cloud. It already runs on every device. You can already have your data any place. It's already integrated with other applications, and it upgrades on its own and it stays fresh forever.

That's a really different experience. It's like escalator versus stairs. And so we don't consider ourselves in a horse race against these component players like Red Hat.

I appreciate your comments on the containerization. That was going to be one of my follow-up questions. But maybe I have a follow-up question for Mark, actually.

And it sort of relates to guidance and how maybe we should think about cash flow or operating cash flow for the year given that your cash balance is just north of $60 million and you definitely had some cash for this quarter. How should we think about the trends in operating cash flow for this year?

We generally don't guide to cash flow because it's lumpy. But I would say that the Q1 cash flow, like the collections -- as I mentioned in my prepared remarks, the collections in April were strong. And basically, we had some delays in some of the collections, so it was a little bit delayed. And the cash flow would have been better if we had collected earlier.

Our next question comes from Gregg Moskowitz with Cowen and Company.

This is Matt Broome on for Gregg. So you saw a nice uptick in new logos in Europe in 2017. Just curious if that momentum continued into the first quarter.

Matt, thanks for the question. We are not going to discuss logo acquisition on a quarterly basis, sorry. We're only going to discuss it on an annual basis. So I can't answer that one.

Okay. And I know that the sales cycles can be fairly long, but I'm curious how you'd characterize sales productivity at this time from the folks that sort of came aboard in early 2017.

Well, I would say it's too early to reach any conclusion about them. This would be their year. Generally, we expect a sales rep's first year to be a learning experience, and then they're supposed to break out in the second year. But I have not drawn any conclusions and wouldn't feel comfortable representing any to you.

Okay. And then I guess finally, I guess just on the new professional services sort of model, I guess. It's obviously very early, but I mean, what's the initial feedback been from customers?

That's been great. I have been out there -- this idea has been a pet thing for me for a few quarters, and so I've probably told more customers about this program than anybody else at Appian. And invariably, they love it. They love the idea of strategic advice and guidance.

I liken it to sending out a tugboat when a giant containership has arrived in an unfamiliar harbor, and we're just going to send tugboats out for all the biggest ships that come to us. I think customers find it immensely reassuring.

And this is before they even meet the person. They just love the idea, and they love the comfort that they get of knowing that we would do that for our customers. And so it's already a win in that regards. And I am hopeful that it'll soon become a quantifiable win as we get some good follow-on business from satisfied customers.

Our next question comes from Richard Davis with Canaccord.

It's DJ Hynes on for Richard. Matt, you said in your prepared remarks that you guys have always resisted building applications. So I guess I'll ask a high-level question. I mean, did you always see Appian pursuing this type of strategy? And if not, what drove the change? And I guess, more importantly, why now?

Yes. Okay. Our commitment to platform buildout, I think, was somewhat unusual historically. If you look across the tech industry, this is not generally how it's done.

We had limited resources. We were largely self-funded. And so we chose to deploy our resources to create a platform that would be useful for many things. And you can see in the customer profile that we acquired prior to our IPO that, that's exactly what they did with it, many things, many industries, many places. We had a true and remarkable diversity of customer behaviors on our platform.

But we reached a point, however, where I think we had the sophistication and the profile to execute an application on top of that platform at the same time as we can maintain that platform to world-leading standards. And that realization came along more or less roughly at the same time as this call center opportunity, which I think is just too good to pass up.

There's a number of reasons why Appian belongs in this market. And briefly, that is our leadership in case management, confirmed again by this Forrester report. But #1 in case management according to that report. And our ability to bring data to bear so that you have this continuous conversation feel, and then this being such a natural change point.

And on top of that, we see our competitors doing this exact thing, having a call center and charging higher prices for it. It is, as applications go, an exceptionally safe play for us.

Yes, makes sense. And then the follow-up question. I think the most common question that we get about you guys is tied to services as a percent of revenue mix. You've talked about how customers kind of wean away from your services organization as they grow with you.

I guess the question is, is there any way that you can quantify what percent of services come from customers maybe in their first or second year of their relationship with you?

Well, historically, we have revealed numbers like that. We did so at the IPO and at the secondary offering. While I don't have fresh statistics to share with you, I can say that anecdotally, customers spend far more in their initial year on Appian than they spend in years after that. We're also doing strange and unusual acts to encourage partners to take over some of the service demand and to offload some of our top service personnel into customer success management positions.

We've been amused by the kind of strong wave of services demand, which has come to us over last year, and we don't want to turn it away. We want those customers to be well served and happy, but we're also interested in using that demand to cultivate a great partner ecosystem. And so we are performing that balancing act as best we can.

Sure. Yes, I mean, it's a good business. You guys run a nicely profitable services organization.

(Operator Instructions) Our next question comes from Bhavan Suri with William Blair.

I guess one tactical one first and then maybe one that's a little broader. But just first on customer penetration. I know you guys have had a great sort of expansion rate, and that's been a powerful sort of growth driver for you guys in the last few years.

If you'd think about some of the most mature customers and think about penetration and think about the applications that they have today that they could rebuild for the mobile world, for mobile first, for better processes, for better automation, what sort of penetration rate do you think you'd have within those customers?

Well, I thank you for bringing up mobile, first of all. Appian doesn't consider itself mobile first, but rather, to coin a phrase, mobile always. Every application that's built on Appian automatically runs on all the leading mobile platforms, and it runs natively as if it had been designed for that operating system, that device and even that orientation on that device.

And so we love to see new mobile adoption. We believe that every mobile device should be a window onto the enterprise and should not be for separately created mobile apps, usable only in mobile circumstances. We think the best thing you can do with a mobile application is to unite your mobile and your non-mobile users in one kind of single consciousness so that they can react to each other, share data, continue their work between the 2 platforms, just to bring people together rather than to create a parallel universe.

So our market share could be substantial in the mobile side. And particularly if customers were to think about mobile our way in a kind of a stitching-together objective instead of a parallel universe objective, I think that we would have very nice market share and they would be reinforcing each other.

The fact that we were strong on-premise would make them want to use us more mobile-y and the fact that we're strong on mobile devices would be -- get more use on-premise.

I guess to that point -- before I get to my sort of high-level strategic question. I guess, how many of your customers do you think have got that sort of approach that it's everywhere as opposed to running it as a parallel to some on-premise system? Is anyone really there, or are we still sort of so early that maybe it's 1 or 2 guys that really get it from a customer perspective?

Oh no. No, no, it's not 1 or 2. There are absolutely customers who have done this in a big way and who unify mobile and not mobile seamlessly and usefully.

Dallas-Fort Worth Airport comes to mind, where half the users are in a back office and many of the other users are walking around the terminals as terminal managers and ambassadors, essentially making things right as they walk around. And they've all got windows back onto the same enterprise and the same application set, and they're sharing awareness and responding in real time. That's one of many, many examples.

So no, this is not an isolated thing. I think businesses are coming around to our way thinking about it, and the results speak for themselves. We've got a lot of productivity to show from this approach to mobile.

Yes, that's helpful. And then one sort of just broader question here, especially in relation to your comment about Kubernetes and containers.

Orchestration will be a critical part of this, right? So orchestration across platforms, between on-premise, orchestration between your apps and integrated apps or APIs integrated to the rest of APIs, or something like that.

How do you guys think about the orchestration? And is that functionality that's just naturally built into the platform, the Appian platform? Or is that something you're working on? Or is that something that's still partially done? How should we think about sort of the orchestration?

Because that's going to be obviously critical given sort of what containers can do for automatic provisioning and automatic movement of workloads across totally disparate platforms.

Yes, this is a great question. We made an emphasis of this at Appian World last week. Appian is becoming more and more an orchestration platform. The more callouts you do in your enterprise to specialized technologies, be that an artificial intelligence algorithm or an RPA bot or something else, the more you need one layer that coordinates all those inputs and makes it cohesive and binds it to a purpose, and Appian is becoming that.

Years ago, you could have assumed that any delegation from the Appian process would go to a human being, and you can't assume that anymore. So we've been rising into the role of orchestration layer already. Now that's not to say that we aspire to be a Kubernetes-style orchestration layer, right? We're happy to just be compatible and benefit from that.

I think, overall, we're assuming a lot more orchestration responsibilities and facilitating that for our clients who find themselves inundated with great technologies they want to make use of but without the capacity to pay the overhead cost for the management and the integration of each one of those technologies.

There are no further questions at this time. I would like to turn the floor over to Matt for closing comments.

We appreciate your time. We feel we had a solid quarter, and we look forward to taking your questions in one-on-one calls. Thank you all.

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