Hi. Thank you everyone for attending. I'm happy to to have, Appian with us today. We have their head of investor relations, Scott Walker, and their CFO, Mark Lynch. To to start off, you know, I think we'll go with a a you know, it's a high level question.
Maybe, Scott, if you wanna answer this. You know, you know, for investors maybe new to the story, it'd be great if you can introduce yourselves, provide an overview of Appian's history, and maybe a brief explanation of, you know, what low code is.
Sure. I can give a overview of the, of what low code is. So Appian is a low code automation platform that allows companies to build mission critical complex applications up very quickly, 10 times, quicker than with traditional, you know, high code manners. So that we allow customers we have global pharmaceutical companies that are building clinical trials on Appian. We we we have, you know, a lot of a variety of different complex use cases that allow allow companies to to connect to various legacy systems and and and data to service orchestration layers, and being able to really help them solve complex, problems.
And, I I kinda talk about the history. I've been I've been with the company for thirteen years. I've known three of the four founders from a previous life at another software company. The company was founded in 1999, and it was bootstrapped into 2008 where we just took on $10,000,000 of, you know, primary equity until the IPO. So we literally ran the business on the backs of our customers.
We started off kind of as a solutions, you know, consulting organization, and we got into BPM. And we actually one of the first things we built was the army knowledge online portal that basically serviced 3,500,000 military individuals and their families. And it basically allowed them to, you know, communicate with each other and find out where they were being transferred and when they were getting deployed and all that stuff. And so we ended up learning how to handle some of the toughest and most complex things in software. So we had to deal with scale.
We had to deal with concurrency. We had to deal with security because this was like federal government, you know, federal government, DOD. And so we you know, instead of starting from the low end and building simple workflows, we actually started at the high end and built some very complex applications. And we took what we learned with AKO and basically transferred that over into into the platform. So a lot of the the foundation of the platform came from the early days, of the company's history.
Helpful. And then when you say you're building complex applications, is that, can you just walk me through, like, how the actual developers are using Appian? You know, is there, like, a dashboard they're using at at their desk? And, you know, I guess, what tools do do they have in the app Appian application platform that allows them to make these, you know, applications super quick?
So there's there's a lot of different things. We have prebuilt user interface. So if you think about one of the more complex things to do, in software is to build the user interface and make it beautiful. So it's, like, 98%, modern looking. It's pre built right out of the box.
We have a ton of pre built wizards. We have a lot of integration. We have low zero code integrations with dozens of systems like, you know, Salesforce, SAP, Oracle, etcetera, NetSuite. So people can just plug in immediately with with those particular systems. You know, the ability like, basically, the way you build applications within Appian is, like, drawing a picture.
So you don't go in and code. We don't allow you to go in the code. Appian is built on Java. Right? But when you work it with it, you just literally draw drag and drop workflow pictures, and and that's how you build build all your applications out.
Every once in a while, the reason why it's low code versus no code, there was a while you have to actually write some code to integrate with a comp like a system that where we don't have pre built user interfaces. We also have the ability to write an application once and and have it be deployed natively on any device, any mobile device. So, you know, if you look at a software engineers are hard to come by and mobile software engineers are even harder. And so we take care of that problem for the CIO. Right once it is deployed natively on any device, regardless of what you're going on.
And we also we're we're zealots of security. So our our our system is all the all the security of that you would expect. So we're PCI compliant. We're HIPAA compliant. We're, you know, basically, IL four, which is the higher level security within the Department of Defense and federal government.
So we have all the all the securities certifications that you'd you'd need if you wanted to basically deploy this either commercially or within the federal government.
No. That's a a helpful overview. And then maybe just broadly, you know, what stage of adoption do you think low code is? I know you guys been around for for a while, a couple decades, but it seems like over the last, call it, eighteen months, we've really seen an inflection point, in terms of just number of people talking about it, and even even in your business. So interested to hear your view on that.
We were the first pure low code vendor to go public when when we IPO ed in 2017, and our CEO likes to say that he raised the curtain on low code. You know, I think you're exactly right. Our our the theme of our earnings call a couple weeks ago was that low code has gone mainstream. And in fact, the, the analyst Forrester estimates that by the 2021, this year, that 75% of companies will be using a low code platform. And I think a couple of things have happened, particularly in 2020, to help drive this is, you know, I think that with some of the impacts of the global pandemic, is that companies understand the importance of digital transformation and, you know, and the importance of software and needing to automate manual processes and then also change.
You know, companies went from working one way on a Tuesday to a a whole different way on a Thursday. And having a a you know, being nimble and being able to react to change became very important. And with a low code platform like Appian, we're able to be deployed quickly and even more importantly, be changed very quickly. And I think that's really a great tool for companies to be able to react to change.
Perfect. And then I think you guys, have also kinda moved into the RPA space, which is also, I guess, very hot with with an acquisition about a year ago. Now you have your own kind of Appian RPA, but you also integrate with much of the, you know, more well known RPA platforms like like Blue Prism and Automation Anywhere. So I guess, you know, how much do we think of Appian as maybe, you know, an RPA product, or is it just, like, one feature of it? Maybe what are your your broader strategies within RPA going forward?
I would think of RPA as a as a feature within the Appian platform. We're not selling on a stand alone basis. You know? But but you're right. We we purchased, Novire there early last year.
Their product, Judoka, was the number one rated RPA product on Gartner's peer insight reviews, and then we released Appian RPA, during the middle of last year. And, you know, one thing that really differentiates Appian is we have complete automation capabilities. So that's being able to combine people, combine RPA bots, AI, various technologies, within a workflow. So we think of RPA as an important part of that automation story. And we still do have the partnerships with the big three RPA firms.
And a big reason for that is most of these global enterprises, these large complex companies, have more than just one RPA vendor within them. So we wanna be able to work with these big three. If they're already within the enterprise, if the customer does not have RPA but within the use case needs RPA, then for convenience, we have RPA available to them. For example, one of our longtime customers last quarter, they were they they're at a Fortune 500 consumer products company that they, were were they purchased Appian, to do product approval life cycle. And they had the legacy, you know, systems that needed there was no API calls, so they purchased Appian RPA to be able to use to go and grab and fetch the data to be able to pull into the workflow.
So it's been a successful offering, and, you know, we're we're, you know, we're very happy with our Appian RPA product.
And I guess maybe just when you think of, like, developers, that are using your product, know, I guess, what is their view of Appian in terms of how does that affect their day to day job from, you know, not using Appian to now using Appian? Does it make it much easier? Is it kind of addictive? I guess, any comments on that?
It makes them far more productive. I mean, we with Appian, you can build an application 10 times faster than with, you know, traditional with Java. And there's customers that that and these companies have backlogs of of projects that they're working on. That with Appian, these technical these, you know, IT professionals are able to now solve more problems and build more applications than they would just under a, you know, just using existing high code measures.
Mhmm. Okay. Maybe switching gears a bit to the partnerships. You have a very established partner network with KPMG, Accenture, Deloitte, WC. Could you just talk a bit about your your partner strategy and, you know, how they're building their own services around your your product?
And maybe, you know, where that's that partnership strategy has gone from, like, a year ago to where you think it's gonna be in three or four years.
Yeah. I'd I'd say we're still in the early innings with the partner the partner ecosystem. You know, having said that, 70% of our new logos we got last year were partner influence. So that was great. We love to see love to see the traction we're getting with the partners.
The the the business relationship is that the partner will bring us into a customer as a technology that they feel can solve a particular problem that the customer is looking for. The partner is trusted with that customer. Have they generally have that c level relationship, and they get the the services business. So we go in, we sell the software to the customer, then the partner actually builds the application or applications depending on what the customer is looking for, on Appian on behalf of the customers, and they get that revenue. And that was one of the reasons, if you looked at our services revenue over the past two years, it's kind of flatlined, if not declined a little bit.
And that's predominantly due to the fact that partners are involved in more and more of these, deals. And we also had a little bit of COVID, headwinds during 2020 as well.
And I guess for the partners, it seems like they're they're building, you know, a practice solely around Appian. Is is it more so that, or are they more so lumping Appian into maybe a digital transformation practice? Or is it, like, an Appian owned practice?
It's it's both. Right? So, one partner has a digital transformation practice. We are one of the technologies featured within that practice. We are the low code provider if the customer is looking for that.
But other partners with, you know, in in the other partner within the partners, right, are literally building the practice, building an Appian practice within, for example, within KPMG. We have some international partners that are literally building practices, training their their employees up on Appian, and then they're going out and and basically getting deals. Right? So they're going out to their customers, pitching Appian and closing the deals, we go and sell the software, which is, you know, it's a great that's a great relationship. Partners are also more and more building applications on top of the platform and selling that application, selling that IP as well.
So we would get the sale, you know, basically, they build, for example, KPMG built a LIBOR application, and they've been selling that to to various customers. And the LIBOR application basically mirrors Appian and AI that allows them to read through all these contracts looking for LIBOR dependency language and then basically offering up a replacement language as LIBOR obviously no longer exists. And so when they when they go in, they sell it, they get, you know, a certain amount of money for that IP, and we obviously get money for the software and the platform because you need both to operate it. So we're starting to see more and more of that happening within within these partners. And the partners, you know, I I mentioned KPMG, they're they're our biggest partner, meaning that they've got more people trained and they're they're bringing us more opportunities.
Accenture is kind of the rising star within the ecosystem, and we also have good relationships with, Deloitte and PwC as well.
And from the partner perspective, of developing that own solution, I would assume that's much higher margin for them than maybe more professional services oriented. Right? So this is kind of an incentive for them to go that route.
Exactly. Exactly. And we we love it. Right? If they and it what happens is with these prebuilt solutions, it it makes that first sale easier.
Right? The customer because, you know, if you if you're trying to sell a horizontal platform, you're asking the customer to use their imagination on what we can do. Right? That's that's a tough sale. But if they have a particular problem and you have a solution, prebuilt solution that can solve that problem, they they they'll they'll they basically get it.
They'll buy it. But one once we land, then we basically pitch the the, the virtues of the horizontal platform, and that's how we expand.
Got it. And I think it's a good segue into into pricing. I guess, how has pricing evolved over the years? I guess, in my understanding, you know, the the customer has a choice to to pay on a per user basis or a a per application basis. You know, I guess, what causes one to sway in one direction over the other?
And I guess what has been the general trend been kind of over the last couple of years? And I guess where do expect it to today?
So historically, we did per user base pricing. That's pretty much what a lot of the cost a lot of software vendors did, and we didn't wanna, you know, come up with some maverick idea because we're a little, you know, a little unknown in Appian. And so I would say, you know, now even now, about 50% of our our our contracts are per use user based pricing. And and the beauty of that is you can basically, you know, go and build one application that they and they roll it out to a 100 people. You build another application in a different department, you roll out to another 100 people.
You get the you get the licenses for those. The thing the customer likes is they can build out applications and then roll roll additional applications out to the same users and not have to pay additional license fees. So our our CEOs and economists by by training came up with a different idea about two years ago, and that was an app specific license, flat apps is what we call it, and it's priced basically on a small, medium, large, extra large like t shirts. And really and the pricing depends on number of users, complexity of the application, the ROI, the derived ROI, etcetera. And all of that pricing is really done by a central group of people within Appian.
And so we rolled that out about two years ago, and that's the vast majority of the deals that we've closed since then are application specific licensing. The beauty of that is you sell an application, and you can you basically can have roll out you build one application, come up with another application. You get the same users using each application. They have to pay you know, the company the customer has to pay for for the license for each one. So that that's that's you know, I and what we do is we give the customers the opportunity.
If they rather buy in a per user base, we'll do that as well. So we're not gonna we're not gonna just do flat apps. Because some customers like me, for for example, when we roll up flat apps, I was skeptical. You know? I was thinking, like, from a budgeting perspective, I would say, like, we're gonna we're gonna deploy Appian to a thousand people.
I know what the price is. I'm gonna budget accordingly. I, you know, I have no idea what an app will cost me, and it's harder to budget. But it's it's taken off. A lot of I think the customers just reduced the friction in the sales cycle, and it's it's it's taken off.
It's been How does that kind of you know, if you're comparing the two different pricing models from a an upsell, or a contract expansion point of view, is there any similarities or differences between, you know, what you might expect from customer a doing a a per user, customer b doing a, I guess, an an application model?
It's generally they're similar. Right? So a lot of the expansion occurs when you build additional applications that are either deployed to additional users or, you know, those applications are just licensed by the customer. So that's our expansion is the exact same because that's where where you get the the expansion is the additional applications. And it's either licensed on a per user basis or licensed on an app specific basis.
Gotcha. And then maybe your customer base, could you maybe provide, like, an overview just breaking down concentration by vertical? And then of that, I guess, what's SMB? What's enterprise? And where you expect that to go?
Yeah. I think it's important to remember that we're vertically agnostic. You know, we've got great logos in in a lot of different verticals, manufacturing, universities, health care. But our top three verticals are financial services, the federal government, and, life sciences, which, you know, makes sense. So you have two heavily regulated, you know, heavily compliance driven verticals, and then the third is the regulator.
So, you know, with Appian being able to be deployed quickly, to be changed quickly, we can help these these, you know, companies in these verticals to stay up to date with changing, rules and and laws. You know? So from a from a, you know, SMB enterprise, we've got a very limited exposure to SMB. We, you know, we our our Salesforce targets the Global 2,000. You know, we we primarily have most of our customers are gonna be these large global enterprises.
Makes sense. And then your your Salesforce, I guess, what type of investments are you making there? How should we think about headcount? You know, what would a new quota carriers, I I guess, you might be planning on bringing on be be focusing on, in terms of a a vertical or customer size? And then, you know, how should we think about Salesforce productivity as well?
A lot of questions there. Let me, let me finish up. So, basically, we're we we talked about this on earnings call. We're we're basically ramping up headcount in sales. You know, it feels during the year, during 2020, we saw sales cycles compress, by 30%, which was great.
The sales force is getting more efficient. It's starting to feel a little bit like a flywheel, and it makes sense to invest, aggressively, I think, in this in this space. So we're ramping up sales headcount. We doubled our recruiting function to go get the the sales rep sales count, and we're looking for, you know, quota carrying reps, both internationally, domestically, looking for sales engineers, looking for business development reps, you know, all across the board. Because it's we're actually there's a ton of opportunity out there, and we're focusing strictly on the Fortune 2,000, you know, predominantly on the Fortune 2,000 or or large large businesses.
We're vertically basically, we have we're vertically aligned in three different verticals, federal, pharmaceutical slash health care, and financial services. Those are three larger verticals. So our sales force is basically you know, we vertically align them to those those three verticals. Some rise some verticals that look promising would be energy, education, manufacturing, but it's not to a point where we need to actually, you know, make the investments that that to to to go further there. But so, you know, basically, the headcount's coming in.
They're gonna be focused on large businesses that that are underrepresented right now. And and we also have a new chief marketing officer, and, you know, we'd be giving her a a pretty sizable budget, you know, from a digital marketing perspective to go out there and really build brand awareness. I still think that Appian's brand isn't well known. You know, it's our customers love us. But but when you think of a low code, you're starting to think of Appian, but I think we need to be top of mind.
And is that the, I guess, what the fourteen day free trials, you know, also helping to do, try to get, you know, brand awareness out there?
Yeah. The fourteen day free trials are working great. You know, 53% of the new logos that we got in 2020 went through the the free trials first. And and in fact, one of the an an interesting story, we talked about RPA a little bit earlier, but one of the one of Canada's largest cell phone and telecom providers basically went in and built 30 RPA bot processes in Appian free trial before they actually purchased Appian. And what they ended up doing is they ended up replacing 40 plus Blue Prism bots with the Appian RPA, and they selected us basically for lower total cost of ownership, the fact that we integrated, with overall platform, the image recognition quality, and then the fact that we integrated with Linux and SAP support as well.
So that was an interesting win story there, as related to RPA. But, you know, only 34% of the net new logos were met through the free trials in 2019. So it's, so it's definitely gaining traction.
Is it maybe becoming a bit more self-service y as well? Is that a decent way to think about it?
It I mean, it's a lot better than it used to be. Like, I I remember going in a couple years ago and playing around. I was like, man, this is embarrassing. Hopefully, nobody looks at this. So they've made it really good.
It's really and the fact that you can go on there and actually build stuff with it is is is really good. You know, Appian still it's not like a citizen it's not for citizen developers. Right? You gotta be technical, you know, IT developer kind of person to go in there and play around with it. But if you have that technical expertise, you can literally build stuff.
We have there's other stories out there that the customer like, I I I like, a a thirty thirty plus year old person went in there, you know, and built out the application that they ultimately wanted to have within the company in the free trial, showed it to his boss, and they end up buying Appian because of that. So it's it's a it's a useful experience. It's not like, you download and you immediately start using it, but, it gives people a sense of the power and, the ease of of development.
No. I believe it makes sense. Maybe switching gears to the solutions business. I know this was a focal point. Maybe not so much on the last call, but definitely the the few before that.
You know, how should we think about, the solution business kind of going forward? It seems like you're really riding a line between a platform business, and then the application company with the solution side. So I guess how should we think about this evolving? Is this one of the the big growth drivers, I guess, driving that cloud subscription growth over the next three, five years?
Yeah. I think solutions are is an important growth driver. I think in the short term, it's what it's really doing is helping to reduce sales cycles. It's also helping to bring us into, know, customers that maybe they didn't weren't comfortable making a platform purchase, but are, you know, but are are willing to make that point solution. And and we did have, as you kinda called out, 2020 was a was a really positive year for solutions.
We had COVID solutions, one being workforce safety, helping customers to safely return employees back to the workplace. They brought us, you know, dozens of new logos. We have a suite of solutions for the federal government, acquisitions requirement, award management that's around the procurement process. For example, actually, the the US Air Force, almost everything they buy, everything but the the complex missile systems are bought through ACCI. So we're able to then kind of, you know, productize that and sold that to a number of new customers as well.
So, you know, we'll always be a platform business, and the solutions are built on the platform, which we think is very important. That way, when the platform is upgraded, the solutions are upgraded. In terms of of building new applications or new solutions, you're able to use the reusable components in the solutions to build or or even transition into a platform purchase. But I think that that going forward, that will be, you know, an important part of the business.
And I guess what influences, you guys in terms of, you know, we should make a solution focused on procurement or HR or legal. I guess, is it, you know, hearing what your customers are saying? Yeah. That'd be great.
Yeah. Two main reasons. What are things we do really well? Like, our our first solution was, was was institutional onboarding for the financials, for financial services company. They're onboarding complex customers, hedge funds, things like that nature, which we have built out a number of those applications.
You know? So it's what we do well mixed with what what are what are pain points within these industries. You know, what what are the problems that customers are having, and we'll kinda marry those together, and that's what would would make a good solution.
Do you think going forward, you are gonna be making more solutions on yourself, or do you think it's gonna be more partner led from the solution perspective?
It's probably going to be more partner led. There's just more partners, and, you know, PWC has has solutions built. Mark had mentioned that the LIBOR solution for KPMG, and there's just more of them building solutions. But but we'll continue to build our own solutions. And and kinda one way of of how we'll build solutions is, it's it's almost as if we'll we'll have kind of a family of solutions like we've seen in in the federal government.
You know, we we release acquisition requirements management and award management. You know, it it probably will work similar in the financial services. You know, institutional onboarding can then lead to a KYC solution to an anti money laundering solution, and they can kinda click together and be these these family of solutions.
Perfect. And then maybe just touching on on the, I guess, the market and the competitive landscape. It seems like Appian's really in a ton of different sub verticals of a lot of big markets. How should we think about, you know, the market size? You know, how fast is that growing, and how can we kind of tie that into your cloud subscription revenue growth rate, which was phenomenal at 40% this year.
But, yeah, I guess, maybe any anything on that?
We look at the market or we look at the market size a few different ways. You know? So so we, you know, we take our core software categories, low code, intelligent process automation, you know, our RPA, you know, these, you know, these these areas where we're where we're a leader. And if we add up the the TAM for each of those markets, it comes to $70,000,000,000. You you can look at the custom software development, you know, market, which at the end of the day is what we're doing, and that's $230,000,000,000.
So and there's a really big runway out there. There's a lot of space. And I think it's important to keep in mind that, you know, where we sit at the high end of the market is a good place for you know, there while there's competitors there, most of these other low code, you know, vendors are are more at the low They're not building these complex, you know, applications, which I think gives us a little bit of, you know, some protection at the top.
And how difficult for for these, other vendors would it be for them to kind of move up in complexity, to become bigger competitors? Is it a matter of just integrating? Is it a user face issue? Is it a trust issue with customers?
I think it's a a couple of things. I mean, know, some of the companies that have come in at the lower end are the, you know, the the massive cloud providers. I mean, they're great companies with tons of resources. If they wanna spend the the investment on the technology, on the security, on the scalability to try and move up over time, you know, they they could do that. But I don't think they have to do that to still be successful.
And, you know, you know, it's a very fragmented market. There's not gonna be one winner take all. You know, I I think there's there can be multiple winners and multiple winners within different spaces.
And we've been at this like I said before, we've been at this for over twenty years. You know, we came up through BPM. So the workflow the key differentiator of us is the workflow. Nobody else has the ability to basically seamlessly integrate people, bots, AI, and other technologies that we can and build complex applications. And to Scott's point, you know, there's tons of opportunity out there to build simple little lightweight workflow within, you know, departments.
The way we look at it is if a customer wants to build out applications, a CIO needs if you look at their their backlog, they've got a three or four year backlog of stuff they need to do. Right? And they don't have enough software developers to do it all. And so we basically augment that that development for the CIO. And a lot of our customers now recognize the fact that they can build a lot of these these these projects that are backlog in Appian.
They can actually standardize a lot of their software development in Appian. And the fact that we can do mission critical stuff and almost anybody else out there can't, it allows them to standardize. So they can build that mission critical couple applications they got, but they can also build the simple lightweight workflow that that they could they could build in, a PowerApps or something like that. So it gives them the ability to standardize it. The fact that we have the security perimeter, you can have all of your applications behind one security perimeter.
You could be in cloud or on prem. You have the ability to toggle back and forth. So we make it make it you know, trying to make the CIOs life as as easy as possible so they could focus on getting these applications built for the for the business users.
Hey. If you had to quantify maybe your your lead from a a platform competitive position? I guess, how many years would would you say it would take for somebody to to kind of catch up with, to you, or is that not a a good way to think about it?
Yeah. I don't think that's a good way to think about it. Because as they are trying to catch up to us, we're making it easier and easier and easier to build applications. Right? Our sole focus is low code application development.
That's all we do. Whereas all of our other competitors focus on a whole bunch of things. Right? This is just one thing they're looking at. This is our sole focus.
You know, the goal, candidly, is every two years our c CEO's got a goal that every two years, I'm I wanna be able to build an application twice as fast, right, or, you know, or in half the time. And so if we can actually deliver on that, like Scott mentioned that right now, can build an application over 10 times as fast versus Java. You know, two years from now, if it's over 20 times, it's over 40 times, there's no one that's gonna be able to catch up to that.
Yeah. No. That's that's a good point. And, you know, your customer retention's, you know, 99. Is that similar with with other low code platforms out there?
Is that kind of unique to you guys? Is it very difficult difficult to rip and replace, maybe competitor solutions or and and yourself as well? You know, how should we think about that rate going forward? Because, obviously, you're powering a lot of these mission critical applications. And once they're built, they're not gonna get rid of it.
So it seems like, you know, your platform is extremely sticky. I was curious if it's also sticky for other competitors as well.
I I have no idea what other competitors' retention rates are. The fact that some of them don't talk about the retention rates may tell you what's going on there. You know, over the past three years, our gross renewal rate was 98%. Right? So it's not just a phenomenon during 2020.
And the fact that you're going through a pandemic and we have a gross renewal rate of 99% says a lot about the value that we're giving our customers because I know as as a CFO going to the pandemic, I look for everything possible to cut. Right? If I don't need it, I'm going to cut it because I don't know what this thing I don't know what this COVID thing is going to do to our business. And thank goodness nobody cut us. Right?
We basically renewed throughout the entire year.
And even in terms of the rip and replace, one of our largest customers is a is a is a bank in the South, you know, that that, they have been a a big customer of one of our competitors. They grew a little bit we were a little tired of them and ended up then, you know, having an RFP for a new application. We won that business, and they've built all future applications on Appian. They didn't have to rip out the the competitor. You know, these are you know, these large global these these, you know, Fortune 500 enterprises have, you know, a lot of complexity, a lot of different problems, but there's room for even multiple local platforms or or, you know, vendors to to sit within that enterprise.
Would you say that's pretty frequent where, you know, these global sales and companies are using you and, I guess, another vendor, and then there's maybe wallet share gains kind of, you know, as you guys progress?
I mean, I think
Oh, go ahead, Scott.
Go ahead. Okay. Go ahead, Mark.
I don't think it's very it's it's not super common. You know, it's it's generally one or the other. And and the fact that a lot of times we go in and it's it's a greenfield opportunity, so they haven't used low code to build it out on says a lot. But you we could be in situations where you think about it, Microsoft is ubiquitous. They're everywhere.
Right? So you could have a department within a large enterprise where they're playing around with PowerApps, and yet we're being deployed in another department building mission critical applications. So that could that could very well be happening today.
I think the the greenfield aspect's interesting because it I think there's a lot of technology out there that enterprises are maybe just starting to realize that they could use, but they're not, you know, diving headfirst in the deep end. They're they're going to the shallow and, and kind of learning how to swim per se. Would you say that's pretty similar to what what you're seeing? It's a a slow start, and then once they realize the benefits, then they really ramp up their use and, reliance on the platform.
We we see that a lot. I mean, that's that's how that's our expansion rate. You know, the one nineteen is is that expansion within the enterprise.
And that was a good uptake the last quarter. Is that something we should expect to kind of continue to trend up?
I mean, we've been saying since the IPO, we expect to be within one ten and one twenty. You know, it's gonna bounce up and down a little bit. You know, we do big deals, and so a big a few big deals can move it one way or another. Mhmm. So I would expect to stay within that range.
If it goes below one ten, that'll be concerning to us. If it goes above one twenty, our CEO will be happy, so we'll see what happens.
You you guys long said that you want to be a a 30% subscription grower. That's that's roughly about where where you're guiding to this year, which is a a bit of a deceleration compared to what you guys did in 2020. You know, as we look at that kind of growth target, you know, over the next three, five years, you know, what do you guys need to do on your end to kind of hit that level from a, you know, maybe a partner capacity, a Salesforce capacity, a a customer expansion? I guess, what's embedded in that target?
I mean, it's it's all all of those things. Right? It's a continued support by the partners, bringing us in additional opportunities. More new logos, we added 50%. We had a 50% increase in net new logos this year versus last year, the 167.
So more logos will help. You know, the investments in the sales and marketing will help. And, you know, 30% plus, that's that's, you know, that that's an elite growth rate. Right? So and we're not we've been saying, you know, your point, since the IPO, we've saying we're gonna we see ourselves as a 30% plus grower.
And, you know, we've done it consistently. And so we'll we'll hopefully be able to continue to do that.
And then, I guess, maybe on the the services side, you know, what's your your ideal mix? You know, is that gonna be something, you know, yeah, as partners do more, you know, it's obviously for the better from the cloud subscription revenues, the services we impacted. You know, if we're looking out, should we think this is gonna be, like, a eighty twenty mix?
Yeah. I think I think it's gonna continue to to shift more towards software. Either either services will continue to shrink like they have over the past couple years, or they'll or they'll grow, but they'll grow at a much slower rate. And it's hard to predict really. And and embedded in our implicit in our guidance for the year was the the the thinking that, you know, services may actually decline in 2021 similar to what they did in 2020.
But we don't know. We don't have great visibility on the services piece, And we don't apologize for services. Services, we get, know, hit 37% margins last year. Right? And we're talking about 30% margins, you know, this year.
It's it's profitable business. The fact that we're in there with the customers that helps the expansion rates within those customers and that revenue retention. And we also learn the the the pros and cons of the platform. We can basically, you know, get that information back to the engineering group so they can improve the platform. So there's a lot of benefits to it.
We're we don't apologize for the services.
Gotcha. And then maybe just one last question for me. You know, just a if on the growth first, you know, profitability question, You know, how should we expect that going forward? Obviously, you know, the end of the year, the last couple of quarters, you've made some good strides on the profitability front. It seems like the the gross margin expansion is really dropping through.
Should we expect you to kinda reinvest that gross margin expansion just driven by the mix shift, you know, into OpEx to to drive growth given the opportunity so big? But the how should we think about that dynamic?
Yeah. We're gonna and we did give a guy that showed that we're, you know, we're investing in sales and marketing in r and d. You know, we're we're, you know, the the both of those are very important. You know, to your point, we're there's a lot of large companies that are getting into the space. Low code is becoming a thing and, you know, continuing to improve the platform is is paramount to us continuing to succeed.
So we will we will continue to make those investments in the platform. I mean, if you think about it from a cash flow perspective, for the year, we only used 7,600,000. Right? And, actually, in q four, we were profitable from a cash flow perspective about $5,800,000. Right?
But we're we're gonna not we're not gonna have that drop to the bottom line in 2021. We're gonna try to continue to invest. You know? But the spend, you know, kinda gave it, you know, the the spend will be similar to what it was in 2019, which is around 26,000,000. That's kinda what we think we'll do, which isn't that much if you think about it.
We have over $250,000,000 in the balance sheet. So I think from a liquidity perspective, we're in good shape. But to not invest right now, I think, would be a disservice to our investors.
Understood. Alright. Well, thank you guys so much. Really appreciate you guys taking the time to to speak with us today. You know, really look forward to speaking shortly.
I don't if you have any closing remarks, but, you know, really appreciate it.
No. Thanks for inviting us as we always enjoy this conference.
Thanks, Brad.
Perfect. Thanks, guys.