Good day, and welcome to the Appian Corporation Second Quarter 2020 Earnings Conference Call. Please note that today's conference is being recorded. And at this time, I'd like to turn the conference over to Mr. Scott Walker, Investor Relations. Please go ahead, sir.
Thank you, operator. Good afternoon and thank you for joining us today to review Appian's 2nd quarter financial results. With me on the call today are Matt Calkins, Chairman and Chief Executive Officer and Martijn, 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 Q3, the impact of COVID-nineteen on our business and on the global economy, 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 of the material risks and other important factors that could affect our actual results, please refer to those contained in our Q2 2020 10 Q filing, our 2019 10 ks filing and our other periodic filings with the SEC. These documents and the earnings call presentation are available in the Investors 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 earnings 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, Scott.
Thank you all for joining us today. In the Q2 of 2020, Appian's cloud subscription revenue grew 30% year over year to $29,600,000 and our adjusted EBITDA was a loss of $7,000,000 Total revenue, including a decrease in professional services, grew 2% year over year to $66,800,000 Our cloud subscription revenue retention was 113% as of June 30, 2020, including a gross renewal rate of 98%. These results exceeded our guidance. Capyant has navigated the pandemic relatively well. Like a lot of companies, we've seen a dip in services revenue, but we have strong results elsewhere.
Some businesses have seen lower new customer acquisition and longer sales cycles, but Appian saw the opposite. We nearly doubled our new logo wins compared to Q2 last year, and our sales cycles in Q2 were actually faster than our historical average. COVID has forced every organization to reassess how they react to changing circumstances. Every business now understands the importance of agility. A lot of the change that organizations want to make is done through software.
So there's new emphasis on finding ways to create applications quickly. Naturally, low code stands to benefit from this trend. Analysts looking at the post COVID economy concluded that low code software will emerge as one of the winners. I generally agree with that, but I want to point out that most low code technology is not capable of creating powerful mission critical applications. And it's in these powerful core applications that change is needed most urgently in a crisis.
Companies need software that they can set their business on. Software, for example, that reconnects them with now virtual customers or automates new processes like applications for emergency loans or maximizes the productivity of their dispersed workforce or protects the safety of employees returning to the office. The most important use of low code is on the most important applications. A surge of interest in Norco was evident in the high attendance for virtual app and retrieval attendance among customers, prospects and partners versus last year. We heard lots of presentations from our clients about how they're successful and their fast deployments.
Here's an example. One organization, part of a Northern European Health Department, oversees COVID contact tracing. They became a new acting customer this quarter when they selected our low code automation platform to coordinate hundreds of field workers making house calls to COVID positive constituents. We won this deal because the organization needed to deploy quickly on mobile application to their dispatch teams to manage their contact tracing cases. Appian's case management capabilities and speed were highlighted when our partner deployed the app in less than 2 weeks.
Also, one of Europe's largest exam boards expanded their use of Appian due to COVID. The board provides education assessments for over 5,000,000 students globally. This year, the organization expects to receive tens of thousands of additional appeals to exam scores and needs an application to process them quickly and accurately. Appian will integrate the customer's existing systems and automate the end to end process. Reviewers will use Appian to determine the validity of the exam and submit their decision.
We won this expansion deal because the Board needed to quickly deploy the application before their August appeal due date. A recent poll of large enterprises showed that 53% of businesses already have people back at the workplace, but only 12% are using software to ensure employee health on-site. Without software, organizations cannot respond fast enough to health threats, and they cannot guarantee the security of the employee health data that they're collecting. In Q2, Appian launched 2 new solutions to meet this need, Workforce Safety and Campus Pass. Large enterprises and higher ed institutions are using these solutions on Appian's HIPAA compliant cloud to track the health of their people and to safely reopen their facilities during the pandemic.
These solutions have attracted new customers to Appian this year. 76% of organizations that thought these solutions are new Appian clients. For example, a top 10 global automaker and new Appian customer chose Workforce Safety, our new solution Workforce Safety to return thousands of employees back to their U. S. Locations.
Appian's easy to use solution, instant mobility, case management capabilities, quick configurability allowed the automaker to respond to changing circumstances and protect their employees from COVID. This solution was configured and deployed just 14 days. Additionally, 10 global sports brand and retailer bought Appian's workforce safety solution to bring thousands of employees safely back to their global stores, warehouses and offices during COVID crisis. This new Appian customer chose our solution because of its simple user experience, configurability to comply with regional regulations and ability to deploy to their entire organization in just weeks. Here's an example in Higher Ed.
A U. S. Institution with over 75,000 students and faculty became a new Appian customer last quarter. This college offers training certificates for hands on jobs such as nursing, mechanics and electricians. These types of degrees need in person practical exams.
So students need to be on campus to meet their degree requirements. This was especially important for the 2020 graduating seniors. Happy was deployed and thousands of faculty and students phased back to campus within 10 days of purchase. Our existing customers are also adopting these solutions to return to on-site work, including a top 10 global pharmaceutical company. This longtime customer expanded their use of Appian by purchasing workplace safety in Q2.
We'll use our solution to manage the return of tens of thousands of employees to worldwide locations, including manufacturing facilities. We selected Appian because we were able to deploy to their global workforce within the month of purchase. Let's talk about partners next. As I mentioned earlier, Appian nearly doubled its new logo deals this quarter compared to last Q2. 70% of those new customers were brought to us by partners.
Also, partner deals closed 22% faster last quarter than they did in 2019. For example, the partner helped us win a Q2 deal with a top 10 U. S. Cable company. This new customer will use Appian to consolidate its risk management systems into a single workflow and report on cybersecurity performance.
With Appian, the customer will gain visibility on security vulnerabilities because it can integrate data across disparate systems. We won this deal after our partner completed a complex proof of concept in just a few days. Our speed was also leveraged by another partner to win a deal with a Middle Eastern utilities company, making them a new customer in Q2. They bought Appian to replace its inflexible legacy software and will build applications for customer onboarding, managing contracts, maintenance and fleet management. We won this deal after the partner conducted a challenging proof of concept in 2 days.
In Q2, our key industries continued to perform well. Life Sciences, in particular, almost tripled software bookings versus Q2 last year. More than half of the world's 10 largest life sciences companies are Appian customers, making it our 3rd largest industry. 1 top 10 life sciences company runs more than a dozen Appian applications across various business segments, including corporate functions, medical devices, pharmaceutical and supply chain. In Q2, they purchased new license to coordinate the review and approval of custom medical products.
Tens of thousands of employees and independent surgeons will collaborate using this new act to ensure these designs fit individual patients. We won this deal because of our ability to successfully automate their mission critical processes. Additionally, we expanded at another top 10 life sciences company that uses our platform to automate all operational areas across the pharmaceutical division. For example, they use Appian to prepare and conduct patient visits in their clinical operations and they've reduced processing times from hours to minutes. In Q2, they purchased over $1,000,000 in Appian Software Licenses to add more users to their clinical operations, event planning and contract management applications.
A North American Federal Health Policy Department is our last example in Life Sciences today. This customer uses Appian for compliance applications that oversee international drug requests and supply shipments crossing their border at hundreds of checkpoints. In Q2, it more than doubled the Tatting investment for a medical device management application. This app will automate the registration and approval of new products launched into the market. We won this deal over an incumbent, because our platform is flexible and enables the organization to quickly adapt to changing regulations.
Complement to our software, we continue to evolve our customer success offerings. Our architect services offering provides customers with access to a team of Appian services experts. They establish best practices and they advise on application selection design and deployment. We doubled the number of Architect Services customers this quarter compared to last quarter. That helps us on the software side as well because participants in this program are more likely to make follow on license purchases.
For example, a top 10 global bank uses Appian in their global operations and commercial banking groups. Earlier this year, the bank abandoned a 2 year long project to build a risk management app using a different technology. They pivoted to Appian and with the help of Architect Services, the customer deployed the app in just 12 weeks. Following the success, the bank purchased 1,000,000 of dollars of new Appian licenses. One last example, a top 10 global asset management firm subscribes to Architect Services to complement their partner led implementation team.
In Q2, the firm increased its Appian investment with a multimillion dollar purchase to replace the entrenched legacy software in their mutual fund client services group. As businesses emerge from the pandemic, they will look to different technologies. They'll seek more automation or cloud, more digital transformation and more low code. There will be a new emphasis on agility, the ability to react quickly to change. Our low code automation platform will help businesses adapt to changing times.
Now I'll turn the call over to Mark for a deeper discussion of our financials.
Thanks, Matt. I'll review the financial highlights of the quarter and then we'll provide details on our guidance. Cloud subscription revenue for the Q2 was $29,600,000 an increase of 30% year over year and above the top end of our guidance. Our total subscriptions revenue was $41,400,000 an increase of 12% year over year. As we discussed last quarter when we provided our initial Q1 guidance, we had approximately $4,000,000 of on prem revenue that we had originally expected to close in Q2 2020, but instead was closed earlier as part of Q1 2020 deals.
Professional service revenue was $25,400,000 down 11% from $28,400,000 in both the prior year period and in the Q1. Partners continue to be a larger part of our ecosystem and are increasingly helping us sell more software. During the quarter, all of our PS engagements, both cloud and on prem, were performed remotely. Total revenue in the Q2 was $66,800,000 an increase of 2% year over year and also above our guidance range. Our cloud subscription revenue retention rate as of June 30 was 113%, within the 110% to 120% range that we target on a quarterly basis.
We remain pleased with our customers' expanded use of our platform. Our international operations contributed 37% of total revenue for Q2 compared with 33% in the prior year period, demonstrating the strength of our business both domestically and internationally. The increase as a percent of revenue was predominantly due to lower professional services revenue in the U. S. Now I'll turn to our profitability metrics.
For the Q2 of our non GAAP gross profit margin was 69%, an increase of 383 basis points compared to the same period last year. Subscriptions non GAAP gross profit margin was 89% in the 2nd quarter, consistent with the Q2 of 2019. Our non GAAP professional services gross profit margin was 36% in the 2nd quarter compared to 34% in the Q2 of 2019. The services gross profit margin was positively impacted by a decrease in the amount of services performed by subcontractors as opposed to our internal resources. Perspectively, we expect our non GAAP professional services gross margins to return to the upper 20s as we onboard our annual cohort of university hires during the Q3 of 2020.
Total non GAAP operating expenses were $54,600,000 an increase of 10% from $49,700,000 in the year ago period. Impacts from COVID-nineteen have naturally decreased certain expenses like travel and entertainment and office related expenses. However, we continue to aggressively hire mid level software engineers and quota carrying sales reps. Adjusted EBITDA loss was $7,000,000 in the 2nd quarter ahead of our guidance and compared to an adjusted EBITDA loss of $6,000,000 in the year ago period. In the second quarter, we had approximately $600,000 of foreign exchange gains compared to less than $100,000 of FX losses in Q2 2019.
Our guidance does not consider any additional potential impact to financial and other income and expenses associated with foreign exchange gains or losses as we don't estimate movements in foreign currency exchange rates. Non GAAP net loss was $8,200,000 for the Q2 2020 or a loss of $0.12 per basic and diluted share compared to non GAAP net loss of $7,200,000 or a loss of $0.11 per basic and diluted share for the Q2 of 2019. This is based on 68,400,000 64,800,000 basic and diluted shares outstanding for the Q2 of 2020 and the Q2 of 2019, respectively. We ended the 2nd quarter with 69,800,000 shares outstanding compared to 67,600,000 at the end of the first quarter, a majority of the difference in common shares relative to March 31, 2020, reflects the increase of 1,900,000 primary shares issued in our June follow on equity offering. Turning to our balance sheet.
As of June 30, 2020, we had cash and cash equivalents of $256,100,000 compared with $159,800,000 as of December 31, 2019. The cash increase primarily reflects the completion of our June equity offering, resulting in $107,900,000 of proceeds to the company after underwriting discounts, commissions and expenses. With this equity raise, we continued to strengthen our balance sheet. For the Q2, cash used in operations was $3,100,000 For the 6 months ended June 30, 2020, cash used in operations was $7,000,000 Total deferred revenue was $92,100,000 for the Q2. With respect to our billing terms, the majority of our customers are invoiced on an annual upfront basis, but we also have large customers that are billed quarterly or monthly.
Due to the variability of our billing terms, changes in our deferred revenue are generally not indicative of the momentum in our business. Now I'll turn to guidance. For the Q3 2020, cloud subscription revenue is expected to be in the range of $31,400,000 $31,900,000 representing year over year growth of between 28% 30%. Total revenue is expected to be in the range of $70,500,000 $71,500,000 As a reminder, the total revenue guide reflects some headwinds to our professional services business due to COVID-nineteen. Adjusted EBITDA loss is expected to be in the range of $11,000,000 $10,000,000 Non GAAP net loss per share is expected to be between $0.18 $0.16 This assumes 70,000,000 basic and diluted common shares outstanding.
For the full year 2020, due to the continued uncertainty surrounding the ongoing impact of COVID-nineteen, we will not provide a full year outlook. Qualitatively, we expect to see some headwinds to our professional services business and our ability to close new logos through the second half of the year. On the cost side, many of our expenses have been naturally adjusted. For example, travel and entertainment has been dramatically reduced and G and A hiring has decreased. With that, let's turn it over to questions.
We will take our first question and it comes from Sanjit Singh. Please go ahead.
Hi, this is Singh. Thanks for taking my question. I want to dig a little bit into the pipeline you're seeing for the back half of the year. Are these like new low code digital projects coming back into the pipeline or is the outlook still subdued? And maybe on top of that, are there any changes to pricing or incentives that you're doing to get customers to restart these projects if you know if there will be a shortage to get them going?
Yes. Let me take that. Okay. First of all, we had some successful solutions launches in the Q2, but I want to reassure you that that is not the driver behind our behind the increase that we've seen in logos and the strength of our pipeline. We are also succeeding on non solutions opportunities.
And so the answer to the second part of your question about whether we're offering a special deal is no, because in fact, the pipeline is strong and we are able to get new logos even outside of the solutions context. Got it. That was very helpful. And then maybe if I can sneak in one quick follow-up. On the Campus Pass solution and the Workforce Safety solution, like how should we be thinking about the lifetime value of these solutions in a post COVID world?
Just how should we be thinking about that customer lifetime value? That would be really helpful. Thank you so much. That's right. We think about this a lot.
These are solutions that address an emergency situation and we want to be sure that the relationship that we create with every buyer can be transitioned into a lasting relationship. We don't want to just be there for the emergency. Want to be their partner going into the future. And so we know we've got a window to impress them. And we are focused on that.
We realize it from the beginning. We see this as a like a dress rehearsal, right, for a real customer relationship and that we're already seeing success with. We've already seen focused on that we are focused on that conversion and we're already seeing success with it. The good news is Appian shows well. Appian works well.
When people adopt this software, they typically do like it. We've got an extremely high customer satisfaction often called out by the analysts for that. If only we could get more customers for whatever reason to just give this a serious try and see what they can do with it. I believe that we have an exceptionally strong retention rate on whatever sample would do that. So we know that's a challenge.
We do want to convert, and we're working on it, succeeding already. Got it. Thanks so much.
And our next question comes from Mohit Gagia.
Hey, guys. Thanks for taking
my question and congrats on the solid quarter. My first question is that I'm seeing you highlighted a really good traction in terms of new logo wins and sales cycles shortening this quarter. Seems to be that you were able to leverage the partner ecosystem, which contributed towards those positives. So wondering has anything changed in terms of the partner ecosystem, maybe the partner incentives or the playbook that basically drove a very healthy performance in that regard this quarter? And also, what sort of what are you seeing in terms of these partner led deals, right?
Are they in specific vertical? Are they geared towards certain initiatives? You mentioned obviously low code is becoming top of the mind during COVID. But just wondering if you can give us more color around that partner ecosystem and the partner updates? And then I have a follow-up question on the numbers.
Great. The 2 keys to our success with partners last quarter were being relevant in the midst of the COVID crisis and we were relevant through solutions and through low code because low code was just by its nature important because it allowed people, companies to react quickly to change. And secondly, to a long process of maturation of relationship building and outreach to these partners that have put us front of mind when they see a problem they think of us and that's just part of the fruits of a long investment. You put those two factors together and we've been stronger than we've ever been with them.
Understood. My follow-up question on the professional services business, right? So I mean, it's no surprise, obviously, there is some headwinds there. But can you help us unpack those headwinds, right? There is you're trying to leverage partners more for professional services.
So there is one. And then obviously, there is COVID, right? So if you think about a normalized run rate, then COVID subsides hopefully. How should we think about that business going forward? That's all for my end guys.
Thank you.
Yes, that's right. Okay. So going forward, I expect it still be a grower. We there's just some unique circumstances right now that shape that. I believe that we can grow our professional services at a very modest rate and still have partners enthusiastically growing and taking a good deal of the upside in the additional market space that we're creating with our software.
I think there's room for everybody to win here. And our individual services are still valuable because they demonstrate what can be done with our software. Our value proposition comes through very clearly. So I believe there's room for all. We don't mean to shrink our PS into non existence.
We instead expect it to coexist happily and grow slowly once we're out of the COVID situation.
And I think we talked about the Architect Services as well, coming in at the high end and helping customers solve very complex problems. And we worked with several of our customers that were basically partner led engagements, where the PS engagements were done by the partners. We came in kind of with the SWAT team, if you will, the Architect Services and helped them out. And so I would expect we're going to be offering continue to offer these high level, high margin offerings. So I think going forward, we'll be a grower.
But from that point, it'll be slower grind than it.
Did. Understood. Thanks a lot. It's really helpful.
And our next question comes from Arjun Bapia.
Hey, guys. Good job executing in the quarter here. It's been a tough environment, Securitas. Quick, Matt, for you, on the R and D side, it's been great to see some of the productivity of the product or You talked about some of the new solutions that you introduced this quarter. And I think you made some enhancements to the core platform as well along with the RPA and process mining integration.
Can you just maybe
give us an idea of as you're thinking forward in your R and D efforts, where you're deploying resources, whether it's on the productization front or further enhancements on the core platform?
Yes, I'm glad you asked about this because I'm also proud of the results that we had with our R and D side this past quarter. In the face of an emergency, we produced some applications and we produced them faster than anyone else in the market to my knowledge was able to produce them. A digital health strategy is something every business needs right now to protect their returning workers as they come back to the workplace. As I mentioned only about 10%, 12% of them actually have it. The others are using pen and paper or Excel or something like that, which really isn't responsible.
A digital health strategy has 3 core components and we put all three of these together and got to market faster than our competition. First of all, you got to collect a lot of data about your employees, the facilities, the places they went, the vulnerabilities, all that because the more you know, the more you protect people to collect all that. Number 2, you bring it to bear at the moment when there's a decision to be made. Let's say an employee has a test or has a symptom or they think they might be sick. At that moment, you got to make a quick decision.
So you got to have all that data brought to bear in the moment and accessible to the decision maker. And then that requires a lot of integration, of course. And then number 3, whatever decision you make, you got to act on it immediately. Do you want to tell this person not to come to
work this morning? Do you want
to tell that person that they got to get a quarantine or a test? Do you want to revoke those 10 people's badge? Right, it happens immediately. So knowing, deciding and acting has to happen quickly. And furthermore has to happen with the data stored securely like in a HIPAA certified cloud like we've got.
Having that product is going to save lives. It's going to help businesses improve their relationship with their employees and it's going to give us an edge because it demonstrates what you can do with a low code platform that's capable of building powerful applications. Then we rushed that to market and we got a whole bunch of business from being first with a complete solution. We didn't have the biggest brand name, right? And then we're not going for the lowest price, but we did get to market really quickly with an ironclad application.
And I think that made a big statement. I love challenges like this, moments where we've got to react quickly because it allows a product platform to shine. So we have this opportunity. We've demonstrated what the platform can do. Now we'll continue to innovate.
We're not done making solutions or adding to the solutions we've got. We've got some exciting new features coming up, which I can't talk about. But we do quarterly releases in our engineering department. We're very proud of the productivity, the innovation that comes out of that. This quarter was not the only quarter that we did something cool, but it's a quarter where the thing we did was particularly high profile.
So I'm glad it puts a spotlight on a great group of coders who are coming up with exciting features for us every quarter.
Thanks, Matt. That's helpful. And then a quick follow-up on the new customer and new logos that you talked about. I'm just curious whether you're seeing kind of an inflection in the awareness and CEO, CIO awareness of the low code category. Meaning, were these customers that were in the pipeline or was it the pandemic that kind of accelerated their low code roadmap relative to what they had maybe in January, February this year?
Yes.
I think that if that's happening, it's just beginning to happen. We I do believe that low code has caught on this year. Actually, I think low code would have caught on this year even without COVID. I think it's an idea whose time had arrived. I was saying at the end of last year, the beginning of this year that in this new decade, I thought the majority of the software written around the world be written in low code.
And that's sounding a lot less hyperbolic than it was a few months ago, because it really seems like, right, the circumstances change, we get addicted to speed, we decide everything should be fast. I think organizations are going to expect this and you can see it in the way low code is being used less as a noun and more as an adjective. It's often used now to describe anything the authorship of which should be quick in software as opposed to just one industry that exists in order to facilitate quick authorship.
Perfect. Thank you and congrats again on the quarter.
And our next question comes from Chris Merwin. Please go ahead.
Hi, this is Kevin on for Chris.
Thanks for taking my question. Matt, given the current environment, has
there
been any shift in the way customers are thinking about cloud versus on prem deployments?
All right. Thanks, Chris. I think that there is a continuing interest. I just see the same natural preference for the cloud that we have continued to see the same trends towards the cloud that there's been. I suppose there might be a little more urgency around cloud and I did.
This cloud is one of the things that I thought would be accentuated in the post COVID era because it does allow for that remote control that instant instantiation. It's a change facilitator. I think there's a lot of reasons why cloud will be exempt we called out as a positive part of the reaction to COVID. So I expect nothing but goodness for the cloud out of this experience. And I suppose we might have seen just a little bit of an additional preference.
But remember, we do almost all cloud anyway. So for us, we're already solidly in the cloud corner.
Great. That makes sense. And then maybe how is the federal pipeline progressing? Any additional color to call out there?
Sure. The federal pipeline is impressive right now. It's strong. We've got a solution that's specifically targeting the federal space. It's an acquisition management solution for writing contracts, which is something that every agency needs
to do and they put
a lot of focus on it, a lot of money behind it. Efficiency is extremely important and we have created a leading product in this market as a solution on top of our platform. We've demonstrated a couple of the highest profile cases in the federal government, including the Air Force, to them to show how confident this solution is at handling a procurement. And it comes out on top. It's done great.
It's differentiated itself against incumbents, against traditional methods. It's flexible. It's agile. It's It's flexible, it's agile, it's quick to deploy, it's user friendly, it's been doing really well. And both because of that and outside of that, our federal pipeline looks very strong.
Great. Thanks for taking my questions.
And our next question comes from Alec Kirk. Please go ahead.
Yes. Thanks. Good quarter, guys. Just wanted to I know you're not giving fiscal the full year guide, which I appreciate, but we're all going to take a stab at it, obviously. And with the good print here and the guide, just so we don't get maybe too ahead of ourselves on Q4 and what that means for the run rate into 'twenty one.
And Mark, is there some considerations that we should be making across the different revenue segments? I think you've already hinted at a few of them. But just to clarify, as we really dial in the Q4 numbers, that'd be helpful, just so we don't extrapolate too far into 'twenty one beyond.
Yes. Let me say just something about the full year guide. We still see that there's plenty of volatility left in COVID, right? There could be another wave. There's still an area of uncertainty.
And we see that most comparable companies are not giving a full year guide, which is why we decided not to. But I want to clarify that I remain optimistic, maybe even very optimistic about the business where it stands now, about the second half of this year. And so the lack of a full year guide is not to be taken as an expression of pessimism.
Noted. Mark, do you want to add to that?
Yes. I mean, I think if you're looking at kind of an extrapolation, you generally know how we like to give guidance. We like to be conservative. So I would encourage you and and everybody listening to the call to kind of follow an element of conservatism as it relates to the second half of the year.
We kind of mapped out Q3.
We can follow that same road map for Q4, and I think you'll land in a appropriate place.
Thank you.
And our next question comes from Derrick Wood.
Hey guys, this is Andrew on for Derrick next quarter. Now I wanted to touch on sales hiring in the quarter and what are your second plans for the second half versus first half and any challenges in hiring virtually?
Sure. We are full speed ahead on sales. Hiring has been all year, never turned it off. And yes, it is challenging. You see that our comparable companies are hiring as well.
So the market didn't really get easy at any point to hire good AEs. Luckily, we've got a great product, got happy customers. We have an edge in the market, but the market itself was never simple. As for hiring at a distance, that's actually not particularly difficult for us. I think virtual is a perfectly good way to do interviews.
We are practiced at it. I've done a lot of virtual interviews and so is the whole organization. I don't believe that is a stumbling block. If anything, it's an accelerator because in the past it was considered obligatory to meet in person or bring his candidate to the headquarters. And now it's perfectly understandable why you wouldn't do that if you move forward more rapidly.
Great. And then on the 76% on the workforce solutions for new customers, maybe just talk about how you can sub sell them later and are you seeing any signs of that so far? And Mark, what that might mean for expansion rates in the second half? Thanks.
It's absolutely happening. We're focused on it. We're already doing it. We understand that that's the order business when you get a solutions customer. And that's also why we're deploying our solutions in Familance.
By the way, every solution is going to have most of them anyway, going to have another solution that connects to us. It's a natural glide path for the customer journey to take. I think that those first few purchases are very confirming purchases and you've got to get the customer in the habit of consuming and buying and consuming more. So we're going to make this systematized and easy. We're absolutely putting our eye on that as we gather a new wave of solutions customers.
And I think, I mean, as you guys know, the way we generally land and then expand and it takes some time to get that expansion, These are Q2 deals that have happened. So from a modeling perspective, the earliest you probably see significant, especially the P and L, would be sometime in Q4 potentially from these. These are more going to be great opportunities for us for 2021 and beyond from a momentum perspective. Great. Thanks, guys.
And at this time, we have no additional questions. Ladies and gentlemen, this does conclude our call. We do appreciate your participation. At this time, you may disconnect.