Greetings, welcome to the Appian first 2019 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Stacey Mortensen. Thank you, Stacey. You may begin.
Thank you. Good afternoon, thank you for joining us today to review Appian's first quarter 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 second quarter and full year 2019, the benefits of our platform, industry and market trends, our go-to-market 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, 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 2018 10-K filing and our 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 in this conference call.
Please refer to the tables in our earnings release in the investor relations portion of our website for a reconciliation of these measures to the most directly comparable GAAP financials. With that, I'd like to turn the call over to our CEO, Matt Calkins. Matt.
Thanks, Stacey. Thank you all for joining us today. In the first quarter of 2019, Appian subscription revenue grew 32% year-over-year to $33.6 million. Our subscription revenue retention remains strong at 116% as of March 31, 2019. These results matched our guidance. There were a few notable highlights in the quarter. We expanded with seven-figure deals in eight of our existing customers. Partners increased their contribution by bringing us 75% more new logos this quarter than they did in the first quarter of 2018. The Appian Guarantee won us deals that we believe we would not have captured otherwise. Our large wins this quarter show that even the most mature Appian customers continued to buy more licenses for years after their first purchase. One of our seven-figure deals this quarter was with a top five U.S. health insurer.
Since becoming an Appian customer four years ago, they've saved more than $200 million, thanks to four mission-critical Appian applications built in managed care for at least 14 million plan participants. Following that success, they've increased their investment in each of the last three quarters. We also expanded with a multimillion-dollar deal at one of the world's 10 largest banks. They first bought Appian in 2016 with a small purchase and now use our software to run 10 regulatory applications for 9,000 users. One of their applications, built to meet foreign accounting standard requirements, was created in just one month and improved processing times from weeks to hours. This quarter, they licensed an additional 2,000 users in their risk department to deploy multiple applications. The first will allow the bank's hundreds of thousands of global employees to call into a central help desk to obtain advice on upcoming regulatory changes.
Another will use artificial intelligence to scan content from more than 350 regulatory agencies for upcoming changes so the bank can be prepared. We beat major competitors because of our speed and demonstrated impact. Another notable expansion was a deal with a top 10 global pharmaceutical company and Appian customer of seven years. Together with our partners, they've deployed more than 15 applications, including a mission-critical recovery application built in just two weeks during a crisis situation. This quarter, they added more than 10,000 users to support their drug labeling and patent management processes. They selected Appian over our major competitors for this new application because we've proven to them that they can build powerful applications quickly. We're doing well with expansions because clients see we can deliver value quickly and reliably. This is the reason we launched the Appian Guarantee last year.
As you may recall, the Guarantee states that a customer's first application will be finished in eight weeks. In Q1, we had some notable Appian Guarantee wins. One of the top five insurance brokers selected Appian to modernize their global reinsurance claims management process, for example. They needed to quickly replace a decades-old homegrown legacy application that manages 30,000 policies per year. As part of the sales cycle, our competitor estimated, our competitor now, that it would take 6,000 person-hours and up to a year to deliver this solution. Our services offer was the Appian Guarantee, eight weeks at $150K. We were selected for this million-dollar software deal because of the Guarantee and the efficiency it represents.
A major Canadian insurance provider with roughly 3 million customers and $11 billion in assets under management became a new customer in Q1. They purchased almost $1 million of software to modernize their system for onboarding and servicing their group insurance customers. The current system is heavily manual. Roughly 300,000 requests per year are made via email, mail, and phone, and are managed across email spreadsheets and legacy systems. As a result of these information silos, it takes 20 days for a customer request to be processed. The company will first build an application to handle email requests, intending to reduce processing times by half with us.
We won this new customer against five competitors because we were able to complete all their proof of concept requirements ahead of schedule in just a day and a half, and we used the Appian Guarantee to build their first application in just eight weeks. Our partners are increasingly bringing us more new logos and helping us expand in existing companies. In Q1, they sourced 61% more total contract value compared to the last quarter of 2018. Notably, 63% of new logos in the first quarter were partner deals. Partners who bring us deals deliver implementation services for them. Therefore, the recent acceleration of partner-related wins means partners are leading an increased share of Appian projects. Our long-term strategy is to engage partners to grow our software revenue, which will shift our revenue mix towards software, even as we continue to have a robust professional services organization.
A partner helped us win a top five law firm in the Asia-Pacific region with a deal worth more than half a million dollars. This new Appian customer needed to replace a legacy application for managing their legal workload, things like lawsuits and estate planning. They'll use Appian to replace the functionality of their existing tool to manage 100,000 cases per year. We beat a major competitor for this win based on the ease of use demonstrated during our proof of concept and our ability to provide actionable information to the right decision-maker at the right time. Another partner brought us a deal worth more than half a million dollars at a major U.S. commercial real estate developer. They became a new customer because they needed a platform to modernize more than 100 processes, from leasing case management to expense approvals for employees.
Currently, their processes are managed across a series of email spreadsheets and homegrown legacy applications. We won this deal based on speed because this client is committed to launching their first 10 applications in one year, and they believe Appian will enable them to do this. Partners also continue to help us expand in existing customers. For example, they brought us into a top five investment bank in 2016 to launch a new consumer line of business. They built that business from scratch on Appian in six months. Since then, our partner has driven expansion into five divisions inside the firm, and this quarter, the firm purchased licenses in a multi-million dollar deal to add 5,500 users to support their client servicing teams.
This application will allow the bank to digitize the process by which their client coverage teams request executive support, escalate critical issues, and submit product enhancements for their top institutional clients. You may recall that last quarter, a partner brought us the U.K. Home Office, which leads immigration and passports, drug policy, crime, fire, counter-terrorism, and police in the U.K. They turned to us to replace a system to track housing for asylum seekers entering the country. Their first application improved housing inspections. This quarter, they doubled their Appian investment to expand the application into new regions. 90% of their users will use Appian from their mobile devices to more easily inspect homes. With this application, they expect to improve their efficiency by the equivalent of 30 full-time workers, allowing their employees to better serve asylum seekers.
Our customers build their applications once and can run them natively across different browsers and mobile devices. We had some notable wins this quarter for our mobile functionality. For example, a top five bank in the U.S. became an Appian customer by purchasing Appian to replace their legacy security management system. Their 300-person team uses the system to manage 25,000 security incidents a year, including earthquakes and bank robberies. When an emergency strikes, the team needs to deploy quickly. In Appian, they'll be able to immediately pull data from 10 systems to get a complete view of the assets and people affected. With this application, they'll also have checklists available on mobile devices so that local resources can ensure safety procedures are followed. A similar system in the bank was built by a major competitor using a team of 50 consultants over three years. This is a competitor now.
With three Appian practitioners, we'll have the first project complete in eight weeks and expect to complete the entire system before the end of the year. We won this deal against four competitors due to our speed, which was proven when our sales consultant built a viable application on-site in a half-day session. Here's one more mobile use case. This quarter, we expanded at one of the world's largest oil field service providers. They purchased licenses for several thousand employees to manage field work within their wireline and perforation division. Our offline mobile capabilities were critical for their remote engineers and service coordinators. Before Appian, they had to rely on eight legacy systems and inefficient paper processes on work sites. With Appian, they will collect information in one offline interface and then immediately synchronize field data when the field worker is back online.
Every business is unique, Appian allows our customers to quickly express their uniqueness in software. More companies are choosing Appian to launch new systems that realize great customer service and differentiate themselves from their competition. I'll turn the call over to Mark for a deeper discussion of our financials. Mark?
Thanks, Matt. I'll review the financial highlights of the quarter and then provide details on our Q2 and full year 2019 guidance. Subscription revenue was $33.6 million, an increase of 32% year-over-year and in line with the top end of our guidance. Our total subscription software and support revenue was $34.9 million, an increase of 30% year-over-year. Professional services revenue was $24.7 million, equal to the prior year period and down slightly from $25.1 million in the prior quarter. Partners are becoming a larger part of our ecosystem and are increasingly helping us sell more software. Partners worked on more Appian projects during the quarter than we had originally planned. Although partner activity has accelerated faster than we expected, this growth is consistent with our long-term strategy. Total revenue in the first quarter was $59.6 million, up 15% year-over-year and within our guidance.
Our subscription revenue retention rate was again healthy at 116% as of March 31st, 2019, which was within the 110%-120% range that we target on a quarterly basis. We continue to be pleased with our customers' expanded use of our platform. Our international operations contributed 30% of total revenue for Q1, compared with 33% in the prior year period. This is reflective of the strong growth we are experiencing both domestically and internationally. As I noted last quarter, since we are an emerging growth company, we've elected to delay the adoption of ASC 606, which means that we will not have to adopt it until we publish our 2019 10-K. When we do adopt, we will do so on a modified retrospective basis. Under 606, revenue recognition on cloud subscriptions will remain materially unchanged.
The more business in the cloud, the less of an impact 606 will have on our reported revenue. Our cloud subscription revenue for Q1 2019 was about 70% of total subscription revenue, an improvement from approximately 60% in Q1 2018. Now I'll turn to our profitability metrics. For the first quarter, our non-GAAP gross profit margin was 63%, compared to 60% in the same period last year and 65% in the prior quarter. Subscription, software, and support non-GAAP gross profit margin was 90% in the first quarter, compared to 91% in the first quarter of 2018. Our non-GAAP professional services gross profit margin was 25% in the first quarter, compared to 26% in the first quarter of 2018. Total non-GAAP operating expenses were $47.8 million, an increase of 23% from $39 million in the year ago period.
Non-GAAP loss from operations was $10.2 million in the first quarter, within our guidance and compared to a non-GAAP loss from operations of $8 million in the year ago period. As you know, foreign exchange gains and losses can fluctuate. During the quarter, we had $308,000 of foreign exchange losses, compared to $767,000 of foreign exchange gains in Q1 2018. 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. Non-GAAP net loss was $10.3 million for the first quarter of 2019, or a loss of $0.16 per basic and diluted share, compared to non-GAAP net loss of $7.3 million, or a loss of $0.12 per basic and diluted share for the first quarter of 2018.
This is based on $64.3 million and $60.9 million basic and diluted shares outstanding for the first quarter of 2019 and the first quarter of 2018, respectively. Turning to our balance sheet. As of March 31st, 2019, we had cash and cash equivalents of $75.4 million compared with $94.9 million as of December 31st, 2018. For the first quarter, we used $4.1 million in cash flow from operations, reflective of improved collections, including those related to international customers mentioned last quarter. Our cash flow used in operations also included the reimbursement of $4.5 million in tenant improvement allowances. In addition, we had $16.2 million of out-of-pocket capital expenditures related to our new headquarters. As of March 31st, 2019, the landlord owed us $12.5 million in tenant improvements incurred. This receivable is recorded in our prepaid expenses and other current assets on the balance sheet.
Under GAAP, when the tenant improvement reimbursements are received, they will be recorded as a source of cash in operating activities, whereas the capital expenditures are recorded as cash used in investing activities. We are still targeting to spend approximately $20 million above the tenant improvement allowance on the build-out of our new headquarters, of which we expect approximately $5 million to be financed for the purchase of furniture and equipment. Bottom line, based on what we've incurred through March 31st, 2019, our remaining net out-of-pocket expenditures related to our headquarters should not exceed $5 million. Total deferred revenue was $115.1 million. 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.
We will continue to remind investors that changes in our deferred revenue are generally not indicative of the momentum in the business. Let me turn to guidance. For the full year 2019, we are raising our subscription revenue guidance. Subscription revenue is now expected to be in the range of $150.5 million and $152 million, representing year-over-year growth between 30% and 31%. Total revenue is expected to be in the range of $255 million-$258 million. We now expect our professional services revenue to be approximately flat year-over-year at about $100 million. This is reflective of our partners becoming a larger part of our ecosystem and consistent with our long-term strategy. We also currently expect our professional services gross margins for 2019 to be around 25%.
We now expect non-GAAP loss from operations to be in the range of $35.5 million and $32.5 million, with a non-GAAP net loss per share between $0.55 and $0.50. This assumes 65 million basic and diluted common shares outstanding. For the second quarter of 2019, subscription revenue is expected to be in the range of $36.5 million and $36.7 million, representing year-over-year growth between 35% and 36%. Total revenue is expected to be in the range of $63.3 million and $63.8 million. Non-GAAP loss from operations is expected to be in the range of $11.5 million and $11 million, with a non-GAAP net loss per share between $0.18 and $0.17. This assumes 64.8 million basic and diluted common shares outstanding.
In addition to the gross profit impact I noted earlier, I also want to remind everyone that we are hosting Appian World, our annual user conference, during the second quarter. As a result, there are additional Q2 sales and marketing costs associated with the event that should be accounted for in your financial models. Overall, Q1 was a good start to the year as we continue to build on the momentum from 2018. We'll now turn it over to questions.
Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we wait for questions. Your first question comes from Sanjit Singh with Morgan Stanley. Please go ahead.
Hi, thank you for taking the question. Congrats on the subscription revenue guide for this year. I had a question actually on the guidance, and this is more related to the operating income guidance. It sounds like there's a mix shift more to subscription, which from my perspective, would mean higher margin, yet margin guidance is coming down a little bit. I was wondering if you could, Mark, if you could walk me through why the margin guidance for the year, the operating income guidance for the year is coming down as much as it is, given that professional services will be flat and it's your lower-margin business. Thank you.
Yeah. Okay. The professional services revenue that we're expecting is about $5 million, less than the models that are out there. The margins were, I think, originally modeled at around 29%, basically, we're expecting the margins, the professional services margins themselves to be about 25%. Those are the two confluences that put pressure on the operating income.
As another way of stating it, if the professional services margins hadn't dropped, if they would've stayed at 29%, would operating income guidance have changed?
Not materially. Probably a little bit, just because of less revenue, less margin from it. It would've come down a little bit. Yeah, a little bit. It would've come down a little bit.
Got it. Maybe for Matt, it sounds like there's a lot of momentum both within the existing customer base as well as bringing on new logos, and it seems like the messaging and the story and the win rates are all seeing a lot of momentum. Are there any other verticals? I know the traditional verticals has been sort of financial services, government, and life sciences. Are you seeing the business starting to expand beyond those core verticals into new verticals that you haven't had traction before? I know you guys were targeting the telco vertical with a specific product offering last year. Just wanted to get an update on what other verticals you may be seeing some traction. Thank you.
Great. First of all, I want to say you're right about the messaging and how it's resonating. I don't believe our message has ever been as tight or as well-received as it is right now. A lot of effort has gone into that over the first quarter of the year, and I'm pleased. I think it's going to pay dividends. We're very clear, and we're getting the traction we want, and you can see that in customers, and I think it's a big deal for partners. Partners essentially being an organization that's got to understand you well enough to represent you, so comprehensibility is essential in working through partners. With regards to the telco, you referred to the telco offering. I do want to clarify that telco is the means to the end, not the intended market for the innovations that we came up with around contact centers.
We're excited about that, but we don't expect the audience, which by the way is growing, right? We didn't talk about it in the statement today, but we're getting attention for that, and we're more competitive, and we're winning on those new features. That's in any industry that has customers who call. That's all customers and not just telcos. As for whether there are any new industries that are seeing particular surges of attention, no, I can't identify any that jump out. We see strength in the traditional core areas for us, and we mentioned a lot of those in the prepared remarks. Financial services, very strong. We had some notable pharmaceutical wins, and I mean that both in terms of customers and partner development, partner specialization on pharmaceuticals. These are traditional areas of strength for us, so they've maintained their strength.
Understood. Appreciate it. Congrats on the momentum.
Thank you.
Thank you. Your next question comes from Raimo Lenschow with Barclays. Please go ahead.
Hey, this is Mike on for Raimo. Just a quick question for you. You had previously discussed kind of ramping up the new sales hires a little bit quicker with the verticalized sales motion and a refreshed training program. Can you give an update on the progress of some of those initiatives?
Yeah, absolutely. First of all, I want to confirm your premise, that we have been focusing on sales blocking and tackling preparation, AE enablement, increased scrutiny, and help along the way if they're stumbling, more materials, canned pitches, prepared outreach. We're definitely focusing on unit productivity in the sales department. While I don't have any numbers to back that up, I'll say that my perspective is that it's being quite successful. I will say that we got more salespeople in the game faster in Q1 than we generally do. From cohorts that are relatively recent, we saw productivity from salespeople who hadn't been on the team that long. We saw the success that we had divided across more salespeople than usual. I think the net picture is that we're succeeding in sales enablement, and insofar as that's true, that's a very good indicator.
Great. That's helpful. Just as a follow-up, when you think about the channel partner growth that you're seeing, as you kind of drift towards 63% of new logos were partner-led deals, what percentage do you think is the right balance there that you guys are going to move towards as you progress through this year and into next year?
Yeah, that's right. Fortunately, it's not a matter of balance. In other words, you don't trade one to get the other. As such, I want to maximize both. I think there's a place for both, but in the meantime, there's no amount of partner productivity that would totally satisfy me. I'd still want one more. So we just want to have the partner side as high as possible. The main reasons for that is we invest less in the partner sales cycle than we would if we were initiating and perpetrating the whole cycle by ourselves. The partner outreach has a higher hit rate, which is to say, a lead that comes from a partner moves more quickly through the sales cycle, and it achieves new levels of sales maturity with a higher probability.
It impresses the partner that they can make money with Appian, and as such, is mother to a lot of more outreaches and deals between Appian and that partner organization. We always want our partners to be succeeding in their efforts with Appian. For this reason, we can't be more encouraging or excited about the partner progress. Yeah, I just slipped that partner number in. I think it's a big deal. Even though I only dedicated a sentence or two in it in the prepared marks, I think it's one of the most important trends, and it could be the single most important trend for us in Q1, is the way we've got partners acting as the engine of outreach and deal sourcing and deal cultivation for Appian as they have never done before.
Great. Thanks for the question, guys.
Thank you. Your next question comes from Terry Tillman with SunTrust. Please go ahead.
Hey, guys. This is actually Nick on for Terry. Thanks for taking our questions. The first one is more in terms of international expansion. Do you guys find yourselves relying more on partners to expand internationally, or are you investing pretty evenly between direct selling and partners relative to domestic expansion?
Okay, great. It is true that there's a certain profile that comes with our headquarters and our locality. No doubt, say, after winning Washington Post's Best Place to Work mid last year, we're better known in the Washington, D.C., area than we are in other cities in the U.S. For that matter, we're better known in the U.S. than we are in Europe. The further you get away from our headquarters and the less you can rely in your outreach on the reputation of Appian itself, the more we, by necessity, must rely on the reputation and reach of our partners. It is the case that we are more partner-dependent in Europe than we are in the United States. That is working pretty well for us, and in some ways, it's like an experimental environment in which we can see the Appian of the near future.
Because the equilibrium that obtains in Europe today will probably obtain in the U.S. in a year or two because we're shifting more to partners everywhere. It's a good testing environment, and it's teaching us how to keep partners really close, how to inform them, how to arm them with materials, how to prepare go-to-market offerings together, and how to stay diplomatically really close to the decision-makers in major partner organizations. It's been a great exercise, and it's absolutely helping us in Europe.
Got it. Okay, thanks. Just our next question was more of an update on RPA or robotic process automation. Are you guys reselling or working with a broader set of vendors these days beyond Blue Prism? How much is RPA involved in your deals at this point?
RPA is a big thing out there. It's pretty ubiquitous. Customers are interested in it, and our relationship with Blue Prism has been a major help for us over the last few years. We understand that some of our customers are committed to other RPA vendors other than Blue Prism, and as you probably know, Appian has a long history, a commitment to openness and allowing our customers to select the best of breed, respecting our customers when they make their own selections. We are absolutely in support of our customers' ability to select, and we have good compatibility and partnerships with all RPA vendors.
Got it. Okay. Thanks, guys.
Thank you. Your next question comes from Chris Merwin with Goldman Sachs. Please go ahead.
All right, thanks for taking my questions. I guess just on R&D, this year's going to be a growth year where you're investing more in R&D across the business. Maybe can you just call out some of the areas where you're focused on in particular, and how we think about that line item, returning to leverage over time? Secondly, on net expansion rate, obviously still extremely healthy. It's ticked down a little bit in the last few quarters, but we've seen a big pickup in customer adds as well. Maybe you're landing larger in some cases. Just curious on some of the dynamics underneath that expansion rate if you wouldn't mind adding some more color there. Thank you.
That's right. With regards to the expansion rate, we are a seasonal business, and there's some lumpiness involved, and Q1 tends not to be the strongest quarter historically for us. I would just understand that with regards to the. You want to add something?
I think the other thing, the calculation's basically a relatively large trailing calculation, so it's 12 months over 12 months. Whatever happens this quarter isn't really reflected for a while. It's still healthy in the range of the 110, 120, and we're happy with it.
With regards to our take on the health of the business, I would direct people to the guidance.
The R&D? Want to talk some R&D?
You want to talk about R&D?
Yeah.
That's right. Okay. We have increased the R&D this year. We've done that because we have a few areas that we are extremely excited about. Artificial intelligence is probably the most obvious one. Integration is probably equally important, but not as popular or trendy to talk about. Integration is one of the things that slows down the ability to make applications. It's one of the biggest areas of friction, and it's one of the primary stumbling blocks in bringing your data together, having a single version of the truth, bringing together user communities. For us, a real frictionless integration would be an extraordinary accomplishment, and we've put a lot of work into that, and I think we have some great things to show from it. With regards to AI, it's in use.
We have some exciting announcements coming up next month. I can't open up the curtain at all on those right now. If you will stay tuned for Appian World, we have some good things to talk about with regards to artificial intelligence at our annual conference next month. Overall, our mission is always, in R&D, to continue to drive down the complexity and time it takes to build a new application. We're really relentless about that, and I think it differentiates us from anyone we compete with.
Okay, great. Thank you.
Thank you. Your next question comes from Derrick Wood with Cowen and Co. Please go ahead.
Great, thanks. It's Andrew Sherman on for Derrick. One for Matt. Could you talk about the government performance in the quarter, any particular agencies of strength, and any color in the pipeline for the rest of the year?
I can talk a little bit about the government. I can say that, I was on Cramer a couple months ago, and I was asked whether the shutdown was going to have any impact on Q1. I said something like, "It'll have an effect, but it'll be a small effect," was more or less what I said. It wouldn't be determinative on the quarter. I can report that it was not determinative. It had an effect. It was a small effect. It didn't define this quarter. As for the pipeline going forward, I'd say it's strong. I'd say it's what I'd hoped it would be, and that we've got a good shot at doing some very healthy business in the government this year.
Great. Maybe could you talk about the mix of your net new wins in the quarter that were greenfield versus displacements, and any change in the competitive environment over the past couple quarters? Thanks.
Okay. All right. The competitive environment has remained pretty static. We continue to compete with the firms that we have competed with for the last few years. In fact, I could say it's just the list that we went public on. Right? When we talked two years ago, when we did our IPO, we said who our competitors were. That's exactly who our competitors are today. We're holding steady there, and they're strong companies, but we can beat every one of them. We've got a great product, we've got a great way to sell, and most of all, we have happy customers, and we've proven our value proposition in a way that I don't believe our competitors would have an easy time matching.
I feel very good about our competitive positioning and how we can survive in this space, even as the space continues to draw more attention. By the way, when a space does get more attention, it tends to crowd the low end of the market, and Appian is not really a low-end player. Appian is distinguished by not only the power of the applications you can build on our platform, but the ease with which you can construct them. That's a hard value proposition for anyone to match, and certainly not the fashionable place to pile into the market if the market were to get buzzy and hot. What was the other part of your question, please?
Greenfield versus-
Mix of net new wins that were greenfield versus displacements. Any color there?
That is relatively consistent with past ratios, maybe a little bit more toward the greenfield. You could see the big dollar stuff. I chose to speak in the prepared remarks mostly about the large expansions because we really got some impressive upsells in our customer base. If you look at the balance, it's actually probably a little bit more greenfield than we've been in the recent past.
if you look at the different case studies that we talked about on the call, a lot of them are replacing emails, spreadsheets. Those are all greenfield applications and opportunities for us.
Great. Thanks.
Thank you. Your next question comes from Alex Kurtz with KeyBank. Please go ahead.
Thanks, guys, for taking the question. Just back on the partnership with Blue Prism and the RPA opportunity, it just seems like the low-code market and your platform is very well aligned with what's happening in that market, just the marriage between what RPA is trying to drive and your ability to really transform how people kind of operate internally. It really seems like a good marriage. When you think about deal size opportunities longer term, is RPA going to go right to the top, maybe, given the opportunity with some of these big global accounts? Or is it too early to know?
I think it is too early to know what the state of the RPA slice of the IT budget is going to be. I think there's a couple of challenges there. I think they've got to prove out the value proposition. I think they got to see whether they can spend a lot of money quickly to create a different and a greater depth of value. They've got some challenges, and they've been well-received. We're just watching, participating, supporting, and most importantly, orchestrating. You're right, there is a great marriage between these two concepts. We can smooth out some of the growing pains that RPA experiences. RPA is popular.
A client will buy maybe dozens of bots, maybe hundreds of bots, and those bots can get a little bit discoordinated and maybe a little bit decentralized, and Appian's orchestration layer could keep all the bots working toward the same goals, track their productivity, allocate jobs between bots and humans, and allow the company to plan how much money they wanted to spend on bots versus human staffing versus other things. I think that Appian and low-code technology make a terrific complement with RPA. We are enthusiastic about working with them. We don't know how the market will pan out, but we're prepared to be supportive and collaborative.
Thank you.
Thank you. Your next question comes from Bhavin Suri with William Blair. Please go ahead.
Hey, guys. Thanks for taking my question. I guess I want to start at a broader market question. I think, Matt, you touched on it a little bit, which was there's a ton of players entering the space. The attention around the broader low-code/no-code conversation has changed or certainly increased the number of private investors, et cetera. I guess, are you seeing the impact of that on sales and marketing? It feels like it's becoming really common from an investor perspective, and I guess I'm wondering, do CIOs and do companies begin to understand that ultimately, this is the way of thinking in the future? I have a quick follow-up on that.
Yeah. I love that low-code is catching on, like any term that catches on, it immediately becomes unclear what it means, because many businesses are.
Fair.
Right. I mean, this always happens, right? As soon as any terminology connects with the buyer, suddenly many companies and industries which were not well connected to the buyer try to latch themselves onto that terminology, you end up with another unclarity situation. We have one vision for low-code, that is not the same vision as everyone who wants to be in this space. It's important for us to be able to express our vision clearly, which is one of the reasons we focused so much on messaging in the first quarter of this year. Now we've got a video posted on our website that explains in two or three minutes exactly what Appian's vision of low-code is. I think that's important. We've got a new white paper that spells it out in a bit more detail.
We're trying to be really, really clear and direct, because this is a moment of confusion. It's a moment of resolution, too, clear voices are liable to turn out triumphant here. I think it's also important for us to say it through the customer's viewpoint. We like to put together a lot of videos talking about customers in their own words, how they've benefited from using Appian and what low-code means to them. It's a war of ideas, no doubt about it. In the end, it should help us. The good news is we're not depending on alignment with a term in order to make value. We are valuable.
The software is worth what people spend on it, and people are happy they bought it, and customers are delighted, and they're productive, and they're saving money, and they're becoming more efficient, and they're building better relationships with their customers. This is valuable, full stop. It's not just about latching a ride on some terms. There's going to be some words to describe what we are. They're going to be a thing that people want to buy. I think it's important for us to be clear about what we are and then deliver what we were clear about. I think a lot of the rest of it will take care of itself.
Got it. It's helpful. You touched on value. My follow-up question is really, and I may have one more after this, but my follow-up question is around pricing. You've sort of moved away a little bit from the per user per month pricing to per app pricing where it doesn't make sense. I guess when you look at that adoption, let's just use the quotes around the word barrier, but adoption barrier is removed. Are you seeing customer response change? I guess, is there a greater willingness that you're starting to see, either in the pipeline or in anecdotal conversations with customers, with a willingness to use Appian for these cases that might be priced by application vis-à-vis a user?
I'm absolutely seeing that. Let me begin by saying that I am excited about selling at a per app price in place of a per-user price. I think per app is actually a more efficient way to sell. You don't have to negotiate the final price that's going to pertain to the next 100 purchases. There's something final about selling a per-user price. It makes buyers tentative. It makes them try to negotiate everything up front. With the per-app price, that's not the case. In fact, you could cut a sweetheart deal on the first app. It doesn't hurt you in your sales of the next app.
That really makes sense, because if you think about the ideal price, if we could really just set our price as a software company, we would set it according to how much burdened we are by the uncertainty around the value proposition that the client holds. That burden is greatest at the beginning and lower later on. Ideally, the marginal price curve would start lower and end higher. All of us who follow enterprise software know that that's not how marginal price curves go for enterprise software. That would be the ideal. If a software company had their druthers, that's what they would prefer. You could come closer to approximating that with per-app price than you can with per-user price, partly because the per-user price really locks you into a precedent and a volume discussion from the beginning.
I prefer app pricing for that. I also prefer it because it allows us to charge less now before we establish our value proposition and shifts more of the pricing discussion and determination to after the moment where we establish the value. I love this way of pricing, and we want to continue with it. We have shifted, back to the beginning of your question, customers do like it. They also appreciate when we can take some of the friction out of the original negotiation, and they certainly appreciate if we can give them a sweetheart deal. They like the fact that it means that they can just do the negotiation rapidly.
They can constrain the variables and just say yes to a simple, straightforward, a customer win kind of a deal that we can give them, then we can all win together because we're establishing the value, and we move forward quickly. I do feel a bit that the beginning of the customer pricing relationship is a moment of vulnerability for any software company, and I'm favoring app pricing in order to get through that quickly. I think that customers have been very receptive, and we've seen a lot of app-centric pricing accepted by customers over the last six months. We're just going to keep our foot down on the pedal for that one.
Awesome. We're going to squeeze one more in here.
Yeah.
It's on TAM. This question doesn't come up that often in these conversations.
TAM.
You sell to software developers, right? So not you sell to them, but the user is a software developer, and then once it's built the application, it's every user. Given sort of how you're thinking about what someone might do in this, not today, but, and I'm forwarding a long time away, 10, 15, 20 years from now. When I look at the person who's using it, to me, given it's everybody and given they might modify workflow or automate things, and I think about the number of software developers, it feels like ultimately, not everybody, but of these 800 million knowledge workers, instead of 20 million developers, there's like 100 million what we'd call developers. Does that make sense as we think about sort of the applicability of what this might be in 10, 20, 30 years?
Is that sort of a little more simplistic way of thinking about it?
Are you proposing that our target audience would be no longer the users, but the developers, but that the number of developers would multiply? Did I hear you right?
No. What I'm proposing is that not only is the users and the developers the audience, but that users would become developers themselves, which then ends up becoming this sort of flywheel effect of everyone developing software that then is pushed out to more and more people who share it.
Okay. I get that. You're not saying that our addressable audience would shrink. You're just saying that they would do more with the software.
No, no.
Okay.
Today I might have 500 guys build an application, and then it rolls out to 10,000 people. Of those 10,000, at some point in the future, they'll actually develop stuff too, or improve it or automate a piece, and that will get rolled out to another five people for each one, and sort of that flywheel effect. Is that a way of thinking about this? I could be dead wrong. You're welcome to say that too.
I think someday we're going to get to the point where users become developers. Just consider the hurdles right now. I think it's a bit premature, and it's even dangerous sometimes to empower users to do their own development. They'll misdefine variables, or they'll develop things that work in their part of the organization but don't port elsewhere, so the data won't be comparable. They'll write scripts with infinite loops and bring down the system, or there's just a bunch of things that they could do wrong. I think it's important to empower them, but at the same time, save them from their own mistakes. We've got a careful balance in the way we do that, and we publish objects. They're allowed to assemble the objects but not write their own.
I do think that we're going to continue empowering end users to author more logic applications and objects over time. We're going to be really careful about how we do that and in a way that protects them from the kind of mistakes that someone would make if they don't think like a developer.
Got it. That's helpful. Thank you. Thanks for taking my questions, guys.
Thank you.
Thanks, everyone. See you.
Thank you. There are no further questions at this time. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.