Appian Corp

NASDAQ:APPN

Earnings Call Transcript 2021-Q2

[Operator]

Good day! And welcome to Appian Corporation’s Second Quarter 2021 Earnings Conference Call. Today’s conference is being recorded.

At this time, I’d like to turn the conference over to Srinivas Anantha, Director of Investor Relations. Please go ahead, sir.

[Srinivas Anantha, Director of Investor Relations]

Thank you, operator. Good afternoon, and thank you for joining us to review Appian’s second quarter 2021 financial results. With me today are Matt Calkins, Chairman and Chief Executive Officer; and Mark Lynch, Chief Financial Officer. After prepared remarks, we will open the call for questions.

During this call, we may make statements related to our business that are forward-looking under Federal Securities Laws and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These includes comments related to our financial results, trends and guidance for the third quarter and full-year 2021, the impact of COVID-19 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. They do not represent our views as of any subsequent date. They 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, refer to our 2020 10-K and other periodic filings with the SEC. These documents and the earnings call presentation are available in the investors section of our website www.appian.com.

Additionally, non-GAAP financial measures will be discussed on this conference call. Refer to the tables in our earnings release and the Investor section of our website for a reconciliation of these measures to their most directly comparable GAAP financial measures.

With that, I would like to turn the call to our CEO, Matt Calkins. Matt.

[Matt Calkins, Chairman, Chief Executive Officer]

Thanks Sri, and thank you all for joining us today. In the second quarter of 2021, Appian’s cloud subscription revenue grew 44% year-over-year, to $42.5 million. Subscriptions revenue grew 37%, to $56.9 million. Total revenue grew 24% year-over-year, to $83.0 million. Our cloud subscription revenue retention rate was 121% at quarter end, and our adjusted EBITDA was a loss of $16.3 million, that’s pretty good numbers for us.

In addition to some good results, though, we’re also announcing an acquisition of Lana Labs, a leading process mining firm. We expect the transaction to close next week. Process mining is the technology that examines the usage logs to discover what work people are actively doing, and see the patterns in network and find processes that have not yet been automated. Those processes can then be automated, in Appian using workflow technology.

So, process mining is a great complement to workflow. Process mining discovers processes, workflow, automates them. Combining them in one product may create new business opportunities, help substantiate the return of investment in Appian, and accelerate our expansion within our existing customer base.

This acquisition also signals for Appian, believes the Low-code automation market is growing. We believe the heart of this evolving and consolidated industry is workflow. Workflow is about doing, as our automation technologies like RPA. Process mining by contrast is about knowing, knowing and doing are natural compliments. When used together that create greater value, and either component could have conveyed alone.

Here’s an example of the synergy between process mining and low-code automation. This is from a leading insurer, who is also an Appian customer. They bought Appian late last year and built a few processes. They saw how quickly Appian could automate the processes they knew they had to improve. At the same time, they were using process mining to discover and map thousands of their existing processes. This quarter, they brought it all together. They multiplied their Appian investment to automate the many processes they discovered with process mining.

Lana Labs is a strong firm in its own right, in the most recent Analyst Report on process mining they are listed as a major contender. Like Appian they focus on complex enterprise processes, they run natively in the cloud, they are recognized for ease of use and they have many happy customers.

Some of Appian’s top partners already have Lana practices, including KPMG and PwC. They’ve got a great staff, very smart, good people. They’re based in Berlin, and we are going to keep the operation there and grow it. Culture is a very important factor in Appian acquisitions, and we think we are fortunate with this one. We hope to keep every member from the Lana team.

When Appian makes a technological acquisition, we followed a three point playbook. There are three things that we prioritize when we combine technologies and these are things our customers can count on, as we expand our platform.

The first is synergy. We’re not just creating a portfolio of technologies. We’re integrating them deeply. We think process mining and low-code automation are better together, so we combining them. We think both are improved by intimate access to the other. Appian offers one product, and after this acquisition is processed, we will still offer one unified product.

The second thing is reliability. We automate important processes for prominent organizations, everything Appian offers has to be enterprise grade. Third, is Low-code; Appian makes powerful technology that is still easy to use. For us, low-code is an adjective, and it represents a new standard in usability. We are pioneers in the concept of low-code, allowing our users to program machines in simple terms. Whatever functionality Appian sells, will feature an intuitive low-code interface. So, that’s it, that’s our game plant, synergy, reliability and low-code.

We have done it before. Last year, we acquired an RPA vendor. Within a year of that acquisition, we fused our functionality to invent low-code automation. We made RPA secure, certifying it with all our existing credentials. We made a low-cold, easy to use and integrate. We bundle it into our product. RPA is now a native feature in the Appian platform.

An example, will help show what I mean. A top international grocery retailer has been an Appian customer for two years. The company uses our low-code automation platform to investigate issues with its supply chain, to file claims and to manage the logistics of its fleet drivers who deliver supplies to stores.

In Q2, the retailer purchased additional licenses and will deploy Appian RPA to help automate its distribution centers. For example, Appian bots will carry data across systems and assign truckload to drivers. The company appreciates having RPA and low-code in the same platform, and expects to save seven figures annually using Appian.

For a while now, I’ve been explaining our industry to new commerce with what I call the low-code promise. It’s a statement of what you can expect from our industry, an introduction for those who are familiar with it. It goes like this, and you’ve probably heard it before. With low-code automation, you can build apps 10 times faster, cut development costs by half and still enjoy better functionality.

So, I’ve been saying this for a while, based on internal data. But, this quarter, an independent study was released by Forrester Research, and it validates the benefits I’ve been talking about. They found Appian Low-code automation platform accelerated app development by 17 times, better than 10, and reduces customer costs, including operating and maintenance costs by 50%.

Additionally, Appian improves the time to value of our customers apps by half, reduces thousands of hours of manual work annually and produces a 389% ROI on average with a payback period under six months.

Here are a few examples of customers choosing Appian because we can deliver the low-code promise. A Fortune 500 insurance company became a new Appian customer early last year and has expanded its use of Appian with additional license purchases almost every quarter since. Our platform orchestrates the work between third party RPA bots and employees, as it onboard insurance policy resellers. In Q2 it purchased more licenses to deploy Appian RPA and build additional workflows, automating the end-to-end process of creating, processing and shipping documents to customers. We won this deal because the company can cut its operational costs in half using Appian.

A domiciliary care provider in the U.K. purchased over $1 million in Appian Software Licenses in Q2 and became a new customer. The company will use our platform to orchestrate patient care and replace two legacy systems. All center agents will use Appian to respond to care inquiries and request site visits, while back office workers will assess staffing resources, schedule visits and dispatch a healthcare provider. Then dispatched providers will record the services rendered on an Appian App, so invoicing teams know how much to bill clients. We won this deal after proving our platform speed and flexibility during a competitive proof-of-concept.

The partners have increased their involvement in our software business, bringing roughly twice the software bookings in the first half of this year, compared to the same period last year. This has raised our commission payments above expectations and reduced our services revenue. Both of which effects, we feel are generally positive.

Speaking of partners. A partner helped us win a Global Humanitarian and Agency responsible for supporting international public health as a new customer. This agency purchased a seven figure software deal in Q2 making Appian its new enterprise low-code standard. To start, we’ll automate core financial and global fund resource planning processes. We won this deal after proving our speed and flexibility with multiple demos built in just days.

We saw strong performance this quarter in our key industries, there is several examples. Our top global medical devices company became a new Appian customer in Q2. It selected our low-code automation platform to oversee its manufacturing to installation process for a specialized medical device.

Before Appian, the company lacked unified tools to coordinate its manufacturing timelines, customer deliveries and enablement training of these devices. These inefficiencies caused delays in their revenue recognition. We won this deal because our platform will unify these processes and improve overall efficiency by over 30%. That customer’s first project will be delivered in weeks [ph] with the Appian Guarantee.

Also, a U.S. Government Group that administers Federal Funding is another existing Appian customer that purchased a seven figure deal for software licenses in Q2. The group selected our platform to manage the end-to-end processing of constituents funding requests. We won this deal because our platform allows the organization to quickly build and deploy a new application. Within weeks, they’ll be able to distribute billions of dollars in accordance with a federal release mandate.

Our mission is to build the world’s best, low-code automation platform. We’re doing this by bringing together complementary technologies that provide the greatest benefits to our customer. In this quarter, we unified process mining and low-code automation. Process mining will allow companies to understand their processes so they can automate them on our platform.

Now, I’ll turn the call over to Mark, for a deeper discussion of our financials.

[Mark Lynch, Chief Financial Officer]

Thanks, Matt. I’ll review the financial highlights for the quarter and then we’ll provide details on our Q3 and full year 2021 guidance. Cloud subscription revenue for the second quarter was 42.5% an increase of 44% year-over-year, and above the top-end of our guidance.

Our total subscriptions revenue was $56.9 million, an increase of 37% year-over-year. Professional services revenue was $26.1 million up 3% from the $25.4 million in the prior year period and up 4% from $25.1 million in the prior quarter. Partners continue to be a larger part of our ecosystem. They help us sell software and they performed the professional services work with respect to any new service contracts they sign. As the usage of partners expands, we expect a proportion of our total revenue from subscriptions to increase over time, relative to professional services.

Subscriptions revenue was 69% of total revenue in the second quarter and 70% for the first half of 2021 as compared to 62% and 63% respectively in the prior year periods. Total revenue in the second quarter was $83 million, an increase of 24% year-over-year and also above our guidance range. Our cloud subscription revenue retention rate as of June 30 was 121% as compared to 113% in the year ago period and 118% in the prior quarter. We are pleased with our customer’s expanded use of our platform. As a reminder, we continue to target cloud subscription revenue retention rate of 110% to 120% on a quarterly basis.

Our international operations contributed 35% of total revenue for Q2, compared with 37% in the prior year period, demonstrating the balance of our business both domestically and internationally. Our cloud software bookings were approximately 80% of total software ECB bookings in the first half of 2021 consistent with the full year 2020.

Now, I’ll turn to our profitability metrics. For the second quarter, our non-GAAP gross profit margin was 70% compared to 69% for the same period in 2020. Subscriptions, non GAAP gross profit margin was 88% in the second quarter, compared to 89% in the same quarter of 2020. Our non-GAAP professional services gross profit margin was 30% in the second quarter, compared to 36% in the same quarter for 2020. For the second half of 2021, we expect our services gross margins to decrease to the mid-to-low 20% range as we dedicate more customer success resources to support our partners.

Total non-GAAP operating expenses in the second quarter were $75.9 million, an increase of 39% from $54.6 million in the year ago period. Adjusted EBITDA loss was $16.3 million in the second quarter, slightly above the high-end of our guidance and compared to an adjusted-EBITDA loss of $7 million in the year ago period. The higher adjusted EBITDA loss was due to higher than forecasted sales commission expenses during the quarter.

Adjusted EBITDA for Q1, 2021 was $369,000 versus a loss of $16.3 million in Q2, predominantly due to the seasonality of the on-prem revenue. In Q1 we recognized $19.9 million dollars of on-prem revenue, versus $9.3 million in Q2, 2021. In the second quarter, we had approximately $1 million of foreign exchange gains, compared to $625,000 in gains in Q2, 2020.

We do not estimate movements and FX rates, therefore they aren’t considered in our guidance.

Non-GAAP net loss was $16.9 million for the second quarter of 2021 or a loss $0.24 per basic and diluted share, compared to non-GAAP net loss of $8.2 million or a loss of $0.12 per basic and diluted share for the second quarter of 2020. This is based on 71 million basic and diluted shares outstanding for the second quarter of 2021 and 68.4 million basic and diluted shares outstanding for the second quarter of 2020.

Turning to our balance sheet, as of June 30, 2021 our cash and cash equivalents and investments, were $249.7 million compared with $258.4 million as of December 31, 2020. For the second quarter, cash used by operations was $6.6 million, versus $3.1 million for the same period last year.

For the six months ended June 30, 2021 cash used in operations was $9.4 million versus $7 million for the same period last year. As we return to the office, we will need to build out additional office space. Capital expenditures will be approximately $8 million to $10 million over the next six months. In addition, we will be paying $31 million in cash for the Lana Labs acquisition at the time of closing along with an equity component that will invest over time.

Total deferred revenue was $116.7 million as of June 30, 2021. As we have stated on past calls, 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. As a reminder, we believe cloud subscription revenue measures to growth of our subscription business. The true scale of the business is represented by total subscription revenue, which includes support in all subscription revenue regardless of whether the customer deploys Appian in the cloud or on-prem.

For the third quarter 2021, cloud subscription revenue is expected to be in the range of $45 million and $45.5 million representing year-over-year growth of 31% and 33%. Total revenues is expected to be in the range of $90.5 million and $91 million. Implicit in the total revenue guide is, that we expect professional services to decline from Q2, 2021 as our partners continue to perform more of the services work, in the situations where they help us close a new logo, partners generally perform the services.

Adjusted EBITDA loss is expected be in the range of $13 million and $11 million, non-GAAP net loss per share is expected to be between $0.20 and $0.17. This assumes 71.3 million basis and diluted common shares outstanding. Included in the quarter’s guidance is approximately $1 million of net operating expenses from Lana Labs acquisition.

For the full year 2021, cloud subscription revenue is expected to be in the range of $174 million to $175 million representing year-over-year growth of approximately 35%. This compares to prior guidance of $171 million to $172 million. Total revenue is expected to be in the range of $355 million to $357 million versus prior guidance of $353 million to $355 million.

Adjusted EBITDA loss is expected to be in the range of $40 million and $38 million. Non-GAAP net loss per share is expected to be between $0.68 and $0.65, this assumes 71.3 million of basic and diluted common shares outstanding, including in the full year adjusted EBITDA guidance, is approximately $3 million of net operating expenses from Lana Labs acquisition.

On a separate note, we’re excited to announce that we will be hosting our first Investor Day, here at McLean Headquarters on October 4th. We will be issuing a press release with more details within the next couple of days.

So in summary, we are pleased with our Q2 results and are excited about the growth opportunities ahead of us. We’re making disciplined investments to accelerate go-to-market success and continue to expand our platform to address the large and expanding market opportunity.

With that, let’s turn it over to questions.

[Operator]

Thank you. [Operator Instructions]. We’ll take our first question from Sanjit Singh with Morgan Stanley. Please go ahead.

[Sanjit Singh, Morgan Stanley]

Thank you for taking the questions, and congrats on the 44% cloud revenue growth. Matt, I want to talk about the acquisition a little bit. So when I look at the platform capabilities, low-code, plus RPA, plus process mining, you’re really starting to build out that automation platform, and I guess the question is that, should we think that this will allow you to target a different segment market, different types of customers, and from a competitive environment, competitive standpoint rather, does this allow you to go after a different set of competitors, now that you’re bringing these adjacent technologies together in a unified platform.

[Matt Calkins, Chairman, Chief Executive Officer]

I appreciate that question. I think that these features coming together allows us to satisfy a larger market. I believe that this new market is going to be bigger than some of its components and that Appian by assembling these components and doing so tightly with real synergistic integration is going to be a leader in the provision of this new bundle of goods.

So I see this as a very strategic move by us. We’re reaching beyond just low-code. As I mentioned the notes were going beyond our legacy of action. Appian has always been about taking actions, structuring action, executing action. We’re moving beyond that now, into knowing what you should take action upon.

I think it’s a great complement to what we do. It’s going to allow us to expand inside of our existing customer base. It’s also going to allow us to discover a great deal more demand than we would have discovered otherwise. And, I believe over time that these components are so naturally complementary, that they are going to be perceived as the same market by buyers. So we’re just getting there first.

[Sanjit Singh, Morgan Stanley]

Understood. And then on the cloud expansion rate, that hit 121% this quarter and Mark you mentioned that, that the rate is going to fluctuate between 110% to 120%. I wanted to sort of sanity check that, in the sense that you know cloud is now 80% of bookings and so if you compare the expansion rates that you were seeing, an earlier part of the cloud story.

So when more of the business was coming from kind of term subscriptions and if you look at the expansion rate on premise versus the expansion that you’re seeing in the cloud. Would it – it should be – the expansion rate will be structurally higher in the cloud, and so that these 120% type expansion rates could potentially be more durable going forward. Any thoughts on that in terms of this comparative expense rates between these two sides of the business?

[Mark Lynch, Chief Financial Officer]

Candidly Sanjit, I would think that the expansion rates are going to be very similar for the on-prem and the cloud. We land with solving one particular problem and then we expand through other applications that the customer wants to deploy throughout the enterprise. And so like really, certain customers are just super paranoid about having their deployments on-prem behind their firewall. But, the sales motion is very similar regardless of where the software is located. So, I don’t think there’s a material difference between cloud deployment to where on-prem as it relates to the expansion rates.

[Sanjit Singh, Morgan Stanley]

Got it! Very interesting. Congrats on the quarter.

[Operator]

Thank you. We’ll take our next question from Arjun Bhatia from William Blair.

[Arjun Bhatia, William Blair]

Perfect. Thank you very much. And I’ll echo my congrats on closing the acquisition. Certainly a very interesting space and one that’s seeing a lot of demand. Matt, maybe for you, what can you just about Lana Labs, what about Lana Labs made it a good fit for Appian? We know there’s quite a few players in the space. What’s stuck out to you? And then when you look at your customer base, from a process-mining perspective, are there other vendors that your customers are all using to address the process-mining use case or do you see this as more of a Greenfield opportunity.

[Matt Calkins, Chairman, Chief Executive Officer]

Alright, I think that there are other vendors, but this is still probably more Greenfield than the RPA move was a year and a half ago. I’m excited about the potential of this move. I think that we’re hitting the market at the right time, and the natural synergy between knowing and doing is so strong that we’re going to make a splash with this capability.

So, I’m excited about where we’re going here. I think that it’s going to – it’s going to have a big effect on our existing customers. But then I also think that once this technology is well understood, it will be clear to the broader market, how valuable it is to go through this natural discovery process. Now your first part of the question was about how we selected Lana and I want to address that as well.

We don’t look for market impact in an acquisition, we look for technology because our goal is to create value. And so, we’re not trying to buy customers, buy revenue, we’re trying to put together a set of technologies that has great value. So, we’re looking for a solid team, good culture, good morale and a winning piece of technology, and that’s what we found.

And so we’re going to double down on what we’ve discovered here. It’s a great little operation. I think we’re really fortunate to come across it. They use the kind of technologies we use, the philosophy we have, that put the customers first like we do, it’s cloud, it’s very compatible with what we do and that to us is by far the most important consideration. I’d rather have that and have scale or have them have more customers, we’ll earn the customers. We put together great technologies, we show the synergy, we’ll earn the customers. We need to start with compatible technology built by great people.

[Arjun Bhatia, William Blair]

Very helpful. And maybe I sensed a bit of a – in your prepared remarks a bit of an inflection in the partner motion, right. Even as we look at the back half of the year, Mark talked about professional services being down sequentially from where we are today. Is there anything that you can think that’s driving that inflection in the partners now? Certainly it’s been a journey over the last couple of years, but is there – would you attribute that to something, maybe your platform vision as you add these different components or just a general increase in the awareness of low-code automation, we just love to get your thoughts there?

[Matt Calkins, Chairman, Chief Executive Officer]

Well, I want to echo and agree with your observation, that something is fundamentally changing about the way our product when it gets to the market. I think partners are stepping up and taking a greater role and that it’s even happening faster than we anticipated, which is for the best, right. The side effects of this, the higher commissions, the lower CytoSorb, these are things that we’re happy to accommodate.

The key strategic move is that partners are driving the adoption of our software, and we see partner practices multiplying versus last year, given really impressive growth; commitments being made by partners, staffing up experts to playing them, pitching our product, building solutions on our product. This is a very important step, strategically for us in our intended direction.

[Arjun Bhatia, William Blair]

Perfect! Thank you, and congrats again on the quarter.

[Matt Calkins, Chairman, Chief Executive Officer]

Thank you.

[Mark Lynch, Chief Financial Officer]

Thanks.

[Operator]

Thank you. We’ll take our next question from Steven Enders with KeyBanc.

[Steven Enders, KeyBanc]

Great! Thanks for taking my questions. I just want to touch on the acquisition again, just wondering how you’re thinking about the monetization of Lana here. Is there something that you’re expecting to directly monetize or is this more about utilizing a process mining to figure out where the next place is to deploy RPA or your own low-code technologies within a customer?

[Matt Calkins, Chairman, Chief Executive Officer]

Thank you for the question. We’re not going to directly monetize it, which is to say, we’re not going to have a price on this technology in the near term. We’re instead going to monetize it indirectly, which is to say by expanding within existing customers and discovering more business and differentiating from the competition that has not achieved the total perimeter of modern low-code automation as quickly as we have. So, that is our monetization strategy.

[Steven Enders, KeyBanc]

Okay, perfect! Great! It’s great to here. And then maybe for Mark. I just want to get a better sense for some of the puts and takes on the guide here. EBITDA was guided down a little bit from, I think primarily from the quarter and the impact from higher commissions. But I guess, how should we think about the upside that we did see on the service line and the impact from that going forward? And then also the EBITDA component of that, and your commissions there?

[Mark Lynch, Chief Financial Officer]

Yes, so the – you know what’s going into the guide, one is the Lana, the additional expenses from Lana, it’s about $1 million in Q3 and for the full half of the year it’s approximately $3 million, so its implied and basically baked into the adjusted EBITDA guide.

The subscription, the total revenue guide basically has implicit in it a reduction in PS right? So PS continues to reduce a little bit based on the partner activity that Matt just talked about. And then the cloud subscription revenue guide, we actually – you know we have flowed through the deed and raised it nicely to 35% growth rate for the year. So, we feel good about the guide. It’s typical acting guides. Candidly we’re fairly conservative on our guides. It pains Matt when we put it together, but that’s where we’re at.

[Steven Enders, KeyBanc]

Okay, perfect! Thank you.

[Operator]

Thank you. We’ll take our next question from Fred Havemeyer with Macquarie.

[Fred Havemeyer, Macquarie]

Hey, thank you for this. So you noted in your deck that partners is roughly double bookings, year-to-year, which is notable here. Could you describe the types of use cases that you’re seeing your partners developing, Appi and [inaudible] as they are building up their practices?

[Matt Calkins, Chairman, Chief Executive Officer]

There’s a myriad of them. Let me describe one, just to give you an idea. We’ve been approaching the state and local business here in the U.S., state and local government with the leadership and in tight coordination with a partner, a large, large firm one of the world’s largest and they’ve been -- they had the context, they’ve steered us in the right direction, they’re creating IP, they are making the best. They are carrying the deals for a lot of the – they are doing a lot of the heavy lifting and the results are so promising that I now consider this to be one of our best up and coming verticals.

That’s an example of the kind of help we’re getting today from partners, the kind of win-win they’re seeing working with us. It’s on a different league than we saw even 12 months ago.

[Fred Havemeyer, Macquarie]

Thank you, for that. Then a question also about Lana. So, you mentioned the costs that were coming online from this acquisition a little bit earlier. I wanted to ask, are you embedding any anticipated revenue contribution in 2021 from the acquisition?

[Matt Calkins, Chairman, Chief Executive Officer]

Nothing important. It will be a negligible revenue.

[Mark Lynch, Chief Financial Officer]

Deminimis?

[Fred Havemeyer, Macquarie]

Got it.

[Operator]

Thank you. [Operator Instructions] We’ll take our next question from Derrick Wood with Cowen and Company.

[Andrew Sherman, Cowen and Company]

Great! Thanks. It’s Andrew on for Derrick. Was wondering on sales rep productivity in the quarter versus your expectations and maybe just talk about some of Eric’s new initiatives that have improved that, and then also how was sales rep hiring track versus your expectations?

[Matt Calkins, Chairman, Chief Executive Officer]

Alright, well we don’t speak to hiring, but I can tell you that productivity is in really good shape. On the board, batting average so to speak is, well I don’t remember it being higher. We don’t disclose this, but it’s in a good place we’re seeing a lot more productivity. So, I’d say that those initiatives are moving in the right direction strongly so.

[Andrew Sherman, Cowen and Company]

Thanks. And then government revenue looked like it was up a solid 30% year-over-year. Any color on the software growth within that? Maybe just talk about how the Q3 pipeline is trending?

[Matt Calkins, Chairman, Chief Executive Officer]

Well, I can’t say too much about the pipeline. I can tell you that I feel we’ve got a great value proposition, and there are some promising opportunities in the government right now that I can tell you that I’m excited about. The Government Acquisition Management Solution now has four separate components, each of which purchasable has its own product and I’m excited about that. We just launched the fourth recently, and the uptake. The reception has been terrific, we’re seeing good uptake, good pipeline on that concept.

I’m also excited about the state and local initiative that we spoke about recently. So without getting too specific about the pipeline, let me tell you that I’m bullish about the potential.

[Andrew Sherman, Cowen and Company]

Great! Thanks guys.

[Operator]

Thank you. That does conclude today’s question-and-answer session and that does conclude today’s conference. We do thank you for your participation, and you may now disconnect!