Notes from a chat with Appian CEO Matt Calkins
Now that the great Y Combinator rush is behind us, we’re returning to a topic many of you really seem to care about: no-code and low-code apps and their development.
We’ve explored the theme a few times recently, once from a venture-capital perspective, and another time building from a chat with the CEO of Claris, an Apple subsidiary and an early proponent of low-code work.
Today we’re adding notes from a call with Appian CEO Matt Calkins that took place yesterday shortly after the company released its most recent earnings report.
Appian is built on low-code development. And, having gone public back in 2017, it is the first low-code IPO we can think of. With its Q2 results reported on August 6, we wanted to dig a bit more into what Calkins is seeing in today’s market so we can better understand what is driving demand for low, and no-code development specifically, and demand for business apps more generally in 2020.
As you can imagine, COVID-19 and the accelerating digital transformation are going to come up in our notes. But, first, let’s take a look at Appian’s quarter quickly before digging into how its low-code-focused CEO sees the world.
Appian had a pretty good Q2. The company reported $66.8 million in revenue for the three-month period, ahead of market expectations that it would report around $61 million, though collected analyst estimates varied. The low-code platform also beat on per-share profit, reporting a $0.12 per-share loss after adjustments. Analysts had expected a far worse $0.25 per-share deficit.
The period was better than expected, certainly, but it was not a quarter that showed sharp year-over-year growth. There’s a reason for that: Appian is currently shedding professional services revenue (lower-margin, human-powered stuff) for subscription incomes (higher-margin, software-powered stuff). So, as it exchanges one type of revenue for another with total subscription revenue rising a little over 12% in Q2 2020 compared to the year-ago quarter, and professional services revenue falling around 10%, the company’s growth will be slow but the resulting revenue mix improvement is material.
And most importantly, inside of its larger subscription result for the quarter ($41.4 million) were its cloud subscription revenues, worth $29.6 million for the quarter and up 30% compared to the year-ago period. Summing, the company’s least lucrative revenues are falling as its most lucrative accelerate at the fastest clip of any of its cohorts. That’s what you’d want to see if you are an Appian bull.
Shares in the technology company are up around 45% this year. And with that, we can get started.