Appian Corp (APPN) 2019 Q3 法說會逐字稿

Greetings. Welcome to the Appian Corporation Third Quarter 2019 Earnings Conference Call. (Operator Instructions) Please note, this conference is being recorded. I will now turn the conference over to your host, Will Maina, you may begin.

Thank you, Darryl. Good afternoon, and thank you for joining us today to review Appian's third quarter financial results. With me on the call today are Matt Calkins, Chairman and Chief Executive Officer; and Mark Lynch, Chief Financial Officer. After our prepared remarks, we will open the call for Q&A 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 fourth quarter and full year of 2019, 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 of any other 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 of the materials and other important factors that could affect our actual results, please refer to those contained in our 2018 10-K filed with -- and 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 press release, and the Investor Relations portion of our website for a reconciliation of these measures to their most directly comparable GAAP financial measures.

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

Thanks, Will, and thank you all for joining us today. In the third quarter 2019, Appian Subscription revenue grew 38% year-over-year to $40.4 million and our non-GAAP operating loss was $7.2 million. Our subscription revenue retention remained strong at 119% as of September 30. These results exceeded our guidance.

Key growth drivers this quarter were EMEA, our 3 strongest industries and partners. Let's start with EMEA. EMEA, including Europe, the U.K., the Middle East and Africa increased subscription revenue about 60% in both Q1 and Q2 of this year. In Q3, it was once again our fastest-growing territory with subscription revenue growth of 65% compared to the third quarter of 2018.

We signed a notable U.K. expansion deal with a top 10 global bank and an Appian customer since 2016. In Q1, this leading bank made a multimillion-dollar Appian purchase to manage regulatory changes and financial operations for its global services risk department. This quarter, the bank purchased another $0.5 million of software to expand our platform into its commercial bank. It will use the licenses to deploy a customer on-boarding and Know Your Customer application. We will also deliver this division's first project in 8 weeks under the Appian Guarantee.

Additionally, EMEA contributed 1/3 of our new logos this quarter, including a top 10 European superstore chain. This organization purchased Appian to replace portions of their legacy system and better coordinate its marketing, procurement and sales teams to execute its food and nonfood promotions. We won this deal over 2 competitors because we delivered a complex custom demo very quickly in just 3 days.

Financial services continues to be our largest and one of our fastest-growing industries. In Q3, subscription revenue for this industry grew 48% compared to the same quarter last year. I will mention a few notable expansions in financial services this quarter.

Top 5 global investment bank has been an Appian customer for 3 years. In Q3, it purchased millions of dollars of new Appian software. With this expansion, the bank will add 50% more users to its existing consumer banking app, bringing the bank closer to meeting its goal of standardizing customer case management in Appian.

Additionally, they'll develop a new asset servicing application to notify institutional clients when market events affect their portfolios. This application will allow the bank to inform clients up to 2x faster and will be delivered in 8 weeks -- and will be delivered in 8 weeks, excuse me, under the Appian Guarantee.

Additionally, a top 5 global asset management firm and existing Appian customer since 2018, purchased licenses in Q3 to build their 16th Appian application. They will use these licenses to replace the legacy system with Appian. Prior to this purchase, financial advisers would submit documents requesting changes to their clients' accounts and the firm's employees would manually enter the changes into multiple systems. With Appian, the information from the documents will be updated into those systems automatically. They did not evaluate any competitors for this project because of the proven impact of their existing Appian applications.

Our U.S. federal sector grew subscription revenue 50%, 5-0, compared to Q3 last year. And we closed deals at a few notable agencies this quarter. A Department of Defense command bought an additional $0.5 million in new software licenses in Q3. They'll build 2 new applications, one to manage procurement and another for HR onboarding. The group purchased Appian because of our ease of use, which they've experienced firsthand with our cloud trials and existing Appian projects.

A civilian federal agency and one of the largest researchers in the world became a new Appian customer this quarter. They'll build a recruitment management application with their purchase. Before Appian, it took days for research groups to understand the status of open jobs and their remaining staffing budget. With Appian, they'll be able to coordinate work across multiple teams to give instant visibility on the status of recruiting activities. Several vendors competed for this deal, but our reputation in the federal government set us apart. The customer selected Appian after receiving references from other agencies and viewing demos of their Appian applications.

Half of the world's 10 largest life sciences companies are Appian customers, making it our third largest industry. This quarter, we saw a couple of notable expansions in life sciences. A top 5 U.S. biotechnology firm has been an Appian customer for 2 years. In Q3, it doubled its total software purchases with a multimillion-dollar deal that expands our platform across its enterprise. The firm currently uses Appian in 3 of 5 business lines for customer onboarding, regulation management and external engagement tracking. We won this enterprise-wide deal because key decision makers across all business areas recognized our platform's flexibility.

Additionally, a top 5 global pharmaceutical company purchased over $1 million of Appian software this quarter. They'll use these licenses to expand their Foreign Corrupt Practices Act application into the Asia Pacific region. This app has already reduced their process cycle time in Latin America by 90%. Ultimately, the customer plans to deploy it to about half of its operational countries, reusing existing Appian components to standardize global compliance. They chose us because our platform is simple to scale across their company.

Partners also continue to play a strong role in capturing new logos. This quarter, they doubled their new customer contribution compared to Q3 last year. This list of new customers includes one of the top 10 U.S. oil and gas service providers. Before Appian, field engineers recorded usage information about oil and gas equipment on paper and spreadsheets, making it difficult to evaluate the quality of equipment vendors. They chose Appian for our built-in mobile functionality. Now hundreds of field engineers are using Appian on offline mobile devices to track equipment usage in remote locations.

Also this quarter, a partner helped us win a deal at one of the world's largest entertainment companies, making them a new Appian customer. The company chose Appian to standardize their human resources request process, which was managed using disjointed spreadsheets and hard-to-change applications. A single sales engineer met their requirements with a custom demo built in just 1 week, and our partner will deploy their first project in 8 weeks under the Appian Guarantee.

Across industries and regions, our ease of use and speed continue to differentiate us in sales cycles, allowing us to sell into new organizations and expand within our existing customers.

Now let's turn the call over to Mark for a discussion of our financials. Mark?

Thanks, Matt. I'll begin by reviewing the financial highlights of the quarter, and then we'll provide details on our Q4 and full year 2019 guidance.

Subscription revenue for the third quarter was $40.4 million, an increase of 38% year-over-year and above the high end of our guidance. Our total subscription software and support revenue was $41.6 million, an increase of 35% year-over-year. Professional services revenue was $27.8 million, up 16% from $24 million in the prior year period and consistent with $27.7 million in the second quarter. Our partner ecosystem and the Appian Guarantee continue to gain momentum, helping to sell more software.

Total revenue in the third quarter was $69.4 million, an increase of 26% year-over-year and also above our guidance range. Our subscription revenue retention rate as of September 30 was 119%, within the 110% to 120% range that we target on a quarterly basis and up from 117% in the prior quarter. Our consistently strong revenue retention rate is reflective of our value proposition and the mission-critical nature of our offerings. And we continue to be pleased with our customers' expanded use of our platform.

Our international operations contributed 32% of total revenue for Q3 compared with 29% in the prior year period, reflecting continued strong growth, both domestically and internationally.

As a reminder, we will adopt ASC 606 on a modified retrospective basis when we publish our 2019 10-K. As a result, Q4 2019 will be the first time we report under ASC 606. As we have noted, under 606, revenue recognition on cloud subscriptions will remain materially unchanged. Our cloud subscription revenue was approximately 66% of total subscription revenue for both the third quarter and first 9 months of 2019, an improvement from approximately 63% and 62%, respectively, for the same periods last year.

Now I'll turn to our profitability metrics. For the third quarter, our non-GAAP gross profit margin was 66% compared to 64% in the same period last year and 66% in the prior quarter. Subscription software and support non-GAAP gross profit margin was 90% in the third quarter, consistent with the third quarter of 2018. Our non-GAAP professional services gross profit margin was 31% in the third quarter, consistent with the third quarter of 2018. Total non-GAAP operating expenses were $53 million, an increase of 22% from $43.3 million in the year-ago period. Non-GAAP loss from operations was $7.2 million in the third quarter, ahead of our guidance and compared to a non-GAAP loss from operations of $8.1 million in the year-ago period.

In the third quarter, we had $2.2 million of foreign exchange losses compared to $200,000 of foreign exchange losses in Q3 2018. Our guidance does not consider any additional impact, potential impact to financial and other income and expense associated with foreign exchange gains or losses as we don't estimate movements in foreign currency exchange rates. Non-GAAP net loss was $9.3 million for the third quarter of 2019 or a loss of $0.14 per basic and diluted share compared to non-GAAP net loss of $8.2 million or a loss of $0.13 per basic and diluted share for the third quarter of 2018. This is based on 65.5 million and 62.5 million basic and diluted shares outstanding for the third quarter of 2019 and the third quarter of 2018, respectively. We ended the quarter with 67.1 million shares outstanding compared to 64.8 million at the end of the second quarter. The majority of the difference in common share is relative to June 30, 2019, reflects the increase of 1.8 million primary shares issued in our September follow-on offering.

Turning to our balance sheet. As of September 30, 2019, we had cash and cash equivalents of $165.6 million compared with $81.1 million as of June 30, 2019. This cash increase primarily reflects the completion of our follow-on equity offering in September, which resulted in approximately $101.3 million of proceeds to the company after underwriting discounts, commissions and expenses. For the third quarter, cash used in operations was $14.9 million. For the 9 months ended September 30, 2019, cash used in operations was $3 million, which also included the reimbursement of $17 million in tenant improvement allowances. Excluding that, our cash used in operations was $20 million.

I'm happy to announce that our headquarters build-out was completed during the third quarter, so we are not expecting any material capital expenditures for the remainder of the year.

Total deferred revenue was $114.1 million for the third quarter. With respect to our billing terms, the majority of our customers are invoiced on an annual upfront basis. However, as we have discussed, we also have had some large customers that are billed quarterly and others that are billed monthly. As a result, changes in our deferred revenue are generally not indicative of the momentum in our business.

Now I'll turn to guidance. First, let me clarify that this guidance is under ASC 605. Second, I'd like to remind you that we recorded approximately $1 million of onetime subscription revenue in the fourth quarter of 2018 from a customer cancellation, which accelerated the recognition of the balance of that customer's contract revenue into Q4 2018.

For the full year, 2019 subscription revenue is expected to be in the range of $154 million and $154.5 million, representing year-over-year growth of between 33% and 34%. Excluding the acceleration, the year-over-year subscription growth will be between 34% and 35%.

Total revenue is expected -- is expected to be in the range of $265 million and $266 million. We expect non-GAAP loss from operations to be in the range of $35 million and $33 million. Finally, we expect non-GAAP net loss per share between $0.57 and $0.54. This assumes 65.5 million basic and diluted common shares outstanding.

For the fourth quarter of 2019, subscription revenue is expected to be in the range of $42 million and $42.5 million, representing year-over-year growth between 24% and 26%. Including the acceleration, the year-over-year subscription growth would be between 28% and 30%. Total revenue is expected to be in the range of $69.1 million and $70.1 million; non-GAAP loss from operations is expected to be in the range of $10 million and $9.5 million, with a non-GAAP net loss per share between $0.15 and $0.14. This assumes 67.3 million basic and diluted common shares outstanding.

With that, let's turn it over to questions.

At this time, we will be conducting a question-and-answer session. (Operator Instructions) One moment please while we poll for questions. Our first question comes from the line of Raimo Lenschow of Barclays.

This is Mohit on for Raimo. One for Matt and one for Mark. So if I -- I mean, obviously, great performance in EMEA, and that actually contrasts with some of the other vendors who have pointed out that the Brexit position is creating some headwinds for numbers. So I just wanted to dig into -- like what are you guys seeing in EMEA? What is working for you guys? And have you seen any softness or like customer conversation is getting dragged out longer? Doesn't seem from the subscription growth numbers you're putting. We just wanted to get more color around that.

Yes. Well, I've been watching that carefully because I've heard some of the noise about potential disruptions. And I heard the other results, but I'll tell you, I have not seen that in my observations of our own European operation. I see a value proposition that's being welcomed. I see an operation that is well run, and I'm -- quarter-after-quarter, I'm pleased with the progress that we're seeing there.

And one for Mark. So I mean, obviously, we recognize the $1 million benefit last year, so that creates a tough comp for subscription revenue in Q4. But even if I just calculate an implied guidance from a full year number in 3Q, you seem to be guiding down, at least, on my math. So I'm just wondering if you can give us the puts and takes as to, is there something going on we should be aware of, apart from just the $1 million benefit loss last year?

You mind if I just cut in on the -- yes. Okay. So there's going to be some lumpiness probably. We do sell big deals to big customers. But big picture, we are very confident about the business, about our ability to win here. And that, therefore, that's the meta theme.

Our next question comes from the line of Chris Merwin of Goldman Sachs.

This is Kevin on for Chris. On the Appian Guarantee, KPMG has been the main partner for you on this program. And obviously, reception has been very positive. At what point would you consider expanding the program out to additional partners?

We have actually expanded the Appian Guarantee to additional partners already. However, we haven't expanded it broadly. And as always, when we work with partners, our primary consideration is do we believe that this partner can deliver to the customer the level of quality and excellence in experience that we have built the business on. And so we're not trying to over-democratize the Appian Guarantee. We're trying to keep it in safe hands. KPMG is safe hands, I believe. And where other partners are authorized to do it as well, it's because we believe in their delivery capability.

Got it. That makes sense. And then in the past, you've talked about focusing in on sales rep productivity. It sounds like you're making progress there. Sales and marketing spend was down quite a bit as a percentage of revenue. I think the lowest in several years. And could you talk a bit about progress you're having there?

Yes. Well, I'm always pleased to see progress here because I think it's a major growth opportunity for us. So I'm seeing what you're seeing. And I think that there's actually more we could do. I'm pleased with what we've begun to do. And I think that there'll be more, actually. We're in a difficult position trying to communicate the uniqueness of our product to a customer base that does not entirely understand these new terms and how companies fit in them. From my standpoint, what we do is so fundamental. We help organizations to create their own applications as quickly as possible and to change them and still have those applications to be powerful. So from my perspective, that's a very simple thing. But the customer is faced with confusion. They see BPM and low-code and case management and then maybe some other things. And we need to educate through that in order to make the connection and to make the sale. And so when we talk about sales force efficiency, we're talking about message efficiency, and drilling the message so that even our new reps understand how to convey that message and demonstrate the value proposition behind it. So it's kind of a challenge in conveying an idea, more than just educating a person. So I believe we've made really good progress this year on streamlining and conveying the idea. I think it's more powerful than it's ever been. And I also think that there's more to grow.

Our next question comes from the line of Bhavan Suri of William Blair.

I guess I wanted to first touch on a little bit more about the partners. You've had the partners develop some of their own applications, KPMG with a LIBOR application. I guess, a, are you seeing more of that, Matt? And then, b, sort of are you sort of actively encouraging that? And how are you actually incentivizing or actively encouraging them to do that? I'd love to get some color around sort of the actual partners developing their own applications for which they charge subscription, and obviously, that's a nice flywheel on the platform.

That's right. And I want to differentiate here. What we're really looking to encourage with our partner solutions, is a solution that's got sufficient force behind it to break through and succeed. I don't want them merely to create some marketing material or to claim that they've got a solution that's based on Appian or to have in a database somewhere that this exists that nobody's ever going to sell or buy. Instead, the intention is to create maybe fewer solutions but more potent ones so that they're capable of breaking into the consciousness of the partner, the mind share of the partner executives that bring new solutions to their clients. And it actually gets sold, I'll say. So what I'm trying to do is focus our efforts around causing these early solutions to break through. And I believe that we've got a few of them that have -- and I don't want to get into too much detail here, but we got a few that have exceptionally compelling cases of value propositions. And so I'm trying to put our energies primarily on a top view, not soliciting a broad portfolio of solutions now, but focusing on a few that we feel have real upside. So it's not so much of a recruitment effort as it is a momentum play where we have to throw our shoulder behind the same application that our client and at our partner shoulder is behind. And then together, let's see if we can push this forward. That's what I'd like to do. It's more focused and less just volume.

Got it. And then just another product one for me. You didn't cover too much on the ICC side, but love to understand sort of the traction. I know it's still relatively early, the product hasn't been around that long, but what are you seeing on the ICC side in terms of adoption, and scale wins would be helpful or pipeline would be helpful.

Yes, that's right. Well, we have essentially bundled the ICC features into the product. So we considered having it as a separate thing in reporting separate sales and having a separate sales force. But we felt that given our existing success in the call center, in the contact center market, that it would be better to just enhance our ability. So we're not treating it as a separate thing. However, I can tell you that the features are compelling, that we've developed even more -- we used to talk about as a separate thing. We've been developing more. It is more impressive than it used to be. It is exciting. I speak about it frequently at the CIO level because they've all got this issue. They've all got call centers that are divergent technologically that aren't sharing data and that aren't relating to the customers as humans. And so they're looking for a way to put this together, streamline the process, connect the customer-facing apparatus to the case-processing apparatus. They're looking for that golden spike that brings the 2 together and nobody does that like we do. So I wouldn't say it's all that different from what we were doing before. We just have a more potent product that it's capable of winning bigger and more deals. But we have kept up our success in contact centers.

Our next question comes from the line of Terry Tillman of Raymond James.

Hey, gentlemen, can you hear me okay?

Yes.

Yes.

So I'll just echo the nice job comments. Nice job on the quarter. My first question just relates to is you're seeing the strong traction with partners, really driving the business. Any kind of pattern recognition in terms of when a partner is driving the deal, like what are the deal sizes? Do they vary notably from -- as opposed to a direct sales rep driving a new deal? And then secondly, that land-and-expand motion? How's the velocity than when a partner drove the initial deals, then getting the next app project as opposed to direct? I just would love some perspective. And again, I know it's early days, but any kind of commentary you could provide?

Yes. The thing that impresses me about the partner deal sourcing is that it's not just small deals. It's not small companies, and it's not small deals. Now in some cases, it may be. But what we're seeing, at least from our most substantial partners, is that they can bring in a deal from a top company for a serious project. They're capable of sourcing us just where we want to go with our own sales reps, which is my intention with the partner channel. It's not meant to be for cats and dogs and for deals that we wouldn't have wanted to focus on ourselves. It's supposed to be an augmentation of our ability to get to the market, augmentation and credibility in access and in deployment capability. And that's what we're cultivating from our top partners. We want just as big a deal from those partners as we're getting from our own sales reps, and we are getting that. We are seeing that from our partners now.

Yes, great. And then just maybe a follow-up question, and this kind of a tough one because I'm sure you love all your industries you're attacking, but you have top 3 industries that have been large and successful for a long while now, and you gave some commentary on it. But Matt, do you see any kind of break out other industries that could start to kind of rival the top three? Or just anything you could provide on some other interesting vertical market scenarios.

Yes, that's funny. What I saw this quarter was mostly a doubling down on the things that were already working. Europe was already great guns, and it did even better. Partners were already strong, and they got stronger. Our top industries, at this point, our top 3 are further ahead of the rest of them than they were before this quarter. So what we're seeing is that success really follows success. And then once we get a winning model, there's a long runway ahead. And I believe that has been the case ever since we've been a public company, at least. And we knew that going out. We knew that we had a very compelling value proposition and that our greatest challenge was making the connection to new customers and showing them that value proposition, whether that be because of the newness of the industry or the general unclarity of the nomenclature that guides people to a market and to a selection. There's still a lot of early-stage chaos out there. But once we cut through that early-stage chaos, whether it's with a customer or with an industry or with a partner, we've got a very compelling message and value proposition. And so where we've broken through, you see a really meaningful breakthrough. That's how I read our recent results.

But to kind of add on, a couple of the verticals that are showing a lot of promise for us are energy, and we talked about one of the case studies, and Matt talked about with our off-line capabilities, mobile capabilities and allowing workers out in the oilfields or whatever to use Appian. And then manufacturing is kind of the old late adopter, but if you think about issues that they've got all over the place, a couple of our -- a couple of big wins we had last quarter were in manufacturing. And we're starting to expand within those 2 enterprises. So those are 2 verticals that could be ripe for expansion over time.

Our next question comes from the line of Sanjit Singh of Morgan Stanley.

Matt, I think you signed a partnership with another one of the RPA vendors on UiPath this quarter. And just what is your take on what you might be looking from this partnership relative to your past partnerships with Blue Prism. And more generally, where are the areas do you think that Appian can be driving efficiency as the sort of workflow automation, application development process versus partnering with other capabilities. How do you think about the partner versus opportunities that you want to go after yourself?

That's a great question. I'm happy to speak to it. We see an emerging world of automation in which not just humans but humans, bots and AI will together be a combined workforce to solve problems for organizations. Those 3 primary groups of agents that are going to come together to work are going to need an orchestrator to rationalize, organize, manage and analyze their combined efforts. And so to oversee that diverse workforce, we propose Appian. We see Appian as the manager. And we think that the challenges of managing and orchestrating are going to be substantial. Not only do you have humans, bots and AI, but in most organizations, you're going to have multiple vendors worth of bots. So I wouldn't be at all surprised to see an organization that has invested in UiPath bots and also in Blue Prism bots. In fact, I think recent studies have shown that, that's the norm, not the exception, to have multiple bot companies at the same time. And so it's just all the more proof that there's going to have to be an orchestration and management layer to add coherence. And furthermore, there's a lot to be gained from rationalizing all of these work factors that you have invested in, bringing each to their best light and using them for their best purpose and detecting them when they are under or misutilized. So I think we've got a vibrant role to play in this emerging automation market. I am pleased with our partnership with UiPath and we are continuing, of course, vibrantly with our partnership with Blue Prism. And in fact, we continue to resell Blue Prism bots and have done so for many customers. So that's what we expect out of that. And I understand these are dynamic changing companies in a dynamic changing space. But I think that we have an enduring part to play in the emerging automation market.

Great. That's very interesting. And then I had one follow-up for Mark. As we sort of turn to 606, which having been through a lot of companies that have 606 -- 606 accounting could certainly be a headache. And I wanted to get your admissions on, Mark, how do you see the message to the growth of the business going into next year, when you may have 605, 2019 results and 606 2020 results. Are you going to sort of provide a bridge in terms of how to assess growth on a like-for-like basis? Or any high-level thoughts on how we should expect to think about the underlying growth of the business as we turn on the business side. Any comments there?

I just can't wait until 606 starts happening. So yes, in all seriousness, like the last guide, 605 will be for Q4. And then Q1 of next year, we're going to guide on a 606 basis. So in the K, you'll have the quarters under 605 and 606 provided, and so that way you'll have a comparative basis to analyze Q1 of 2019 to then the Q1 2020 guide that we provide. And we're still kind of mulling with which things we're going to guide to. But with -- as you know, with 606, the on-prem subscription licenses get recognized upfront. And so I can see us guiding to probably a cloud metric, subscription revenue for kind of that gives you a flavor of the growth of the company. But then to a total software number, which includes that upfront component as well, because you'll get the sense of the total totality of the software license of the business. So these are things we're kind of mulling with right now. The good news is about 2/3 to 70% of our subscription revenue is cloud. So there will be some lumpiness, but it won't be anything like some of the other companies that you've had to go through that were not only transitioning to 606, but they're also transitioning from perpetual licensing to subscription licensing as well, and you had a lot of noise there. So it will be a little lumpy, a little noisy, but not -- I don't think it will be terrible.

(Operator Instructions) Our next question comes from the line of Alex Kurtz of KeyBanc Capital Markets.

I just wanted to have you guys maybe address retention rate. It's been very strong year-over-year, quarter-over-quarter. And maybe just revisit the time of the IPO and what you thought the upside case was in retention rate and kind of where that stands now relative to all the different initiatives that you have put in place since then. Just sort of maybe a reset on what that number could look like over time. Or maybe at least at a minimum, talk about what drove in the quarter.

Well, I don't want to reset expectations because I feel we've been pretty consistent about what we expect, and we've been in that bracket every quarter. So it's one of the rare predictive successes. I don't want to get in the way of it. However, I'm really pleased that as we have scaled as an organization, as we've put down some fairly strong growth numbers and put in some more clients and grown our organization to more employees, that we haven't seen the wheels come off, so to speak, in any way. Instead, we've got the same kind of customer loyalty that we used to, the same kind of strong value proposition. And I think it takes a lot of care to be sure that, that conveys at scale. And it gives me confidence that it could convey at scale in the future as well. A lot of effort goes into this. But did you want to add anything to that? Or...

No. I mean as you can imagine, Matt would always love it to be higher. But I think the bracket that we have out there is reasonable. And to Matt's point, we've been within it since we've been a public company. The good news is we're at the high end of it. So we're pleased with where we're at right now.

Okay. So no dreaming the dream on what a new bracket could look like at this point?

You can dream all you want, but I wouldn't -- I wouldn't hold us accountable to it.

I keep that into private meeting.

Our final question comes from the line of Derrick Wood of Cowen & Company.

Great. It's Andrew on for Derrick. Matt, clearly, the government had a strong quarter, any other commentary on that? And maybe just your outlook on that federal business for the next year or so? And any early positive signs from your new IL4 certification?

Well, I'm glad you brought that up because we are at -- we do take pains to be sure that our certifications are ahead of the curve. And we like to be early. And we like to remind our federal buyers that we take their priorities, including those certifications, very seriously. And they can count on us to take it seriously in the future. It's not that we happen to have some things, they're indicative of our approach to serving the federal customer. So I think that, that's good for us. I also believe we've got good momentum in federal. I don't believe this marks any kind of a long term high. I think it's just one more step upward. I see our potential as greater next year than it was this year. And I think that we're already starting on a positive footing. I think there's a strong business to be built here.

Great. And then, Matt, maybe just touch on head-count growth directionally and kind of where you're adding people? And if you've had any change in the difficulty of attracting talent versus the past 6 to 12 months? Or is that pretty steady?

All right. So it's always a challenge to attract the caliber of people that we seek to hire. Appian is unusually focused on hiring terrific people. And I've been over-involved in the interviewing and the recruiting for that reason because I think it's foundational to our success in the skill-led industry. We also look for people who have the character to represent us in the field, that's very important. It's not just capabilities filter that we apply. So it's never easy to find those people. It got a little easier last year when The Washington Post named us the Best Place to Work in the Washington area. We appreciated that, and it drove some interest and it raised our profile amongst the people who are looking for something extraordinary in their career. We continue to grow our recruiting function, and I'm pleased with both our ability to recruit this year and our ability to hold on to the talent we've got. Appian has an unusually low employee attrition rate. I think that's part of the secret to keeping a great team together is to not lose the talent you've got. So on both sides, we're doing well.

We have reached the end of the question-and-answer session. I will now turn the call over to Matt Calkins for any closing remarks.

Hey, we appreciate very much your interest in Appian and your time listening to us this evening. With that, I'm going to close the call.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful evening.