Looking at the pricing specifics, APPN's 6.3 million share IPO priced at $12, the mid-point of the $11-$13 expected price range, generating gross proceeds of $75.6 million. There were solid tier one underwriters behind the deal, with Morgan Stanley, Goldman Sachs, and Barclays acting as lead managers. Shares are set to open later this morning on the Nasdaq.
Appian (APPN) is a developer of a low-code software platform that allows businesses and organizations to easily and quickly develop their own unique applications. The company says that building an application on its platform can be "as simple as drawing a picture."
Using a visual interface, its customers can design, build, and launch enterprise-grade custom applications. This might include applications for new business lines, the automation of employee workflow, accelerating drug development, or managing trading systems.
APPN's platform automates the creation of forms, data flows, records, reports and other software elements that would otherwise need to be manually coded or configured. This functionality greatly reduces the development process, allowing for real-time application optimization and shortening the time from idea to deployment. Also, its Self-Assembling Interface Layer, or SAIL, technology ensures that applications developed on its platform can be immediately and natively deployed across a full range of mobile and desktop devices with no additional customization, including desktop web browsers, tablets and mobile phones.
As of December 31, 2016, it had 280 customers in a wide variety of industries, of which 225 customers were commercial and 55 customers were government or non-commercial entities. Its customers include financial services, healthcare, government, telecommunications, media, energy, manufacturing and transportation organizations.
Its sales strategy consists of a combination of direct sales, and, to a lesser extent, sales through strategic partners.
Taking a look at its March quarterly results, revenue was up a modest 7% year/year to $38.3 million. Quite frankly, that is a rather disappointing growth rate for a tech company that should be in the up-swing of its growth curve. Subscription revenue (56% of revenue) was up a healthier 37%, but, was offset by a 17% drop in Professional Services revenue.
On the positive side, gross margin improved sharply to 66.9% from 59.0% in the year ago period. This was due to a larger proportion of its revenue coming from subscriptions as compared to professional services.
In terms of expenses, Sales & Marketing is its most significant -- like many young tech companies -- representing 44% of revenue for the three months ended March 31, 2017. That is up considerably from 31% in the year ago quarter, which is not the most encouraging sign. On a growth basis, S&M was up 52% year/year to $17.0 million. Personnel costs increased due to the increase in sales and marketing personnel headcount by 46.9% and increased sales commissions driven by revenue growth.
The net result is, APPN had an operating loss of ($3.5) million for the quarter as compared to an operating profit of $1.2 million in the year ago period.