Investors interested in adding growth stocks to their portfolio will contact Appian Corporation (NASDAQ: APPN). With sales projected to grow by double-digits and a constantly improving bottom line, Appian shares are bound to move higher in 2020 if the wider markets continue to reach a record high.
Appian targets the automation room on the global enterprise technology market, offering a low-code framework for software development that helps companies to develop applications. Using the products from Appian, software developers can quickly drag and drop pre-built lines of code, speeding up the process of app development.
Shares in Appian became public in May 2017. The stock has since risen more than 350 percent in just under three years from an IPO price of $12. Appian shares, however, trad about 14 percent below their high record.
Over the past few months, several high-growth tech stocks have been trading lower, as investors were concerned about these companies ‘ high valuation metrics. Nevertheless, Appian made a strong start to 2020, returning 29 percent in January’s first half.
As with other business-facing companies, Appian is relying on a subscription-based model to drive revenue. It provides a steady source of recurring sales and helps companies get a buffer during a downturn in the economy.
Appian’s subscription sales rose 38 percent year-over-year to $40.4 million in the quarter that included September, while professional services revenue expanded to $27.8 million year-over-year by 27 percent. In the third quarter of 2019, subscription sales accounted for 60 percent of total sales.
In that period, the company’s revenue growth was driven primarily by the EMEA (Europe, Middle East, and Africa) region, where subscription revenue increased significantly by 65%. In fact, the subscription sales of EMEA also increased significantly in the first two quarters by 60 percent.
In the third quarter, the EMEA area accounted for more than 30 percent of Appian’s new logos. It involves one of the largest supermarket chains in Europe that purchased Appian goods to replace part of their legacy systems and boost communication between their marketing procurement and sales teams.
Appian has also signed an expansion contract in the United Kingdom with a top 10 global bank. In the first quarter of 2019, this customer also made a multi-million dollar Appian purchase to manage regulatory changes and financial operations for its global risk services department.
Vertical financial services remain the largest and fastest-growing segment in Appian. Subscription revenues from financial services grew 48 percent in the third quarter.
Another key driver of Appian’s subscription sales was its high subscription income retention rate of 119%.
The strong retention rate at Appian suggests that the organization has succeeded in cross-selling other offerings to its current customer base, increasing the average revenue per customer over the past few quarters.