Motley Fool Hidden Gems Investing - Bank Stocks, Groupon’s Latest Deal, and Cutting-Edge Software

Episode Date: July 13, 2018

JP Morgan Chase reports record profits. Wells Fargo disappoints. Pepsi rises. And Groupon looks for a buyer. Abi Malin, Jason Moser, and Jeff Fischer discuss those stories and share some stocks on their radar. Plus, Appian CEO Matt Calkins talks low-code software, investing, and board games. Learn more about your ad choices. Visit megaphone.fm/adchoices

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It's the Motley Fool Money Radio Show. I'm Ron Gross, sitting in for Chris Hill. Joining me in studio today are senior analysts Jason Moser, Jeff Fisher, and Abby Malin. Team, I hope you are hungry today because we're going to talk salty snacks, Polish dogs, and pancakes. But we begin with something a little less appealing, big banks. Some of the country's largest banks reported earnings on Friday, and it looked like somewhat of a mixed bag. J.P. Morgan reported record profits, and Wells Fargo failed to clear a relatively low bar, Jason. So, how is Wells doing with that whole earning our trust back thing? I'm having a hard time thinking about banks. You had me at salty snacks.

That's coming. This is the beginning of earnings season, we've been talking about Wells Fargo's problems for a while, trying to win back customers' trust, and it's not quite there yet. We were looking back in October of last year, and a metric that I've been paying attention to to see how that's going is total average deposits. For this quarter, total average deposits of $1.3 million were down a little bit from the same quarter a year ago. They've had trouble growing this number for obvious reasons. When you look at consumer lending, that's healthy. That's their bread and butter. That matters. Mortgage origination is up. Applications are up. The pipeline looks

relatively strong. But again, they are having challenges getting back to that original position of having consumers trust, being able to grow that deposits number, because that really gives them the opportunity to invest that cash in other ways. With Wells Fargo, there's still plenty of challenges out there. So, I famously have always said I've never been a bank investor, just not smart enough, quite frankly. Famously? Famously. Every chance I get, I say I'm not a bank investor. I know you have some alternative thinking with respect to financial services companies. Are you a bank guy? Are you investing here? Here and there. I mean, I tell you,

if I was going to invest in a bank, I would make it J.P. Morgan. I mean, if you look at these two earnings releases, I mean, it really is the tale of two banks. You've got strong leadership there in Jamie Dimon. Plenty of opportunity for them to grow the affluent and high net worth client base in the coming years. It was interesting to see with J.P. Morgan, average deposits were actually up 5% year over year. In mobile banking, active mobile customers were up 12%. I didn't even know J.P. Morgan had mobile banking, but there you go. For me, not the biggest bank investor. I like the companies that are facilitating where the money is going. And so, we talk about that war on cash basket all the time here.

I feel like MasterCard, Visa, PayPal, Square, these are the companies that they're bank agnostic, right? That money is going to have to go from point A to point B, and those are the companies that are usually facilitating it. Yeah. And I'd say I'm an opportunistic bank investor, multi-year opportunistic. When something happens like 2008 and 2009, that's when we stepped in and started to buy some- See, that's when I get most nervous. That's a good review. That's good. Buy when others are fearful, right?

In 2009, we bought some Wells Fargo, I believe, and some other banks as well, and held them for several years. But once the stocks looked more reasonably valued, we sold because, as we always talk about, they're very hard to analyze and to know what's actually going on with the financials. And these days, it's very hard for them to grow. J.P. Morgan did well overall, but their home lending department had a weak quarter. Wells Fargo lending as a whole is looking weak. It's so tied to housing, and then you have interest rates. It's very complex and not very dynamic. There's the reason I stay away.

Another way to get exposure to banking that probably a lot of people may not quite think about as often, if you own something like Berkshire Hathaway or Markel, Well, you're getting exposure to some of those big banks via their investment portfolios. That can be sort of a next-level way of getting that exposure without having to take that direct risk. Yeah, and there are so many financial technology companies, too, that are interesting and a way to play the financial economy as a whole. And I must admit, when I do want to participate in financial services, I do it through an ETF, so I get that diversification and don't have to make the individual calls.

All right. Surging fuel prices took a toll on airlines this week. Delta was still able to report better than expected earnings, but American cut guidance. So, Jeff, how do airlines look to you? Are higher ticket prices just around the corner? Sadly, yes. And that's what everybody does not want to hear. But it's very likely by this fall that ticket prices will go up and or routes will decline a little bit. Fuel costs have gone up 50% in the past year as oil prices have climbed. So it's an enormous jump. So it's pretty phenomenal that the airlines are still indeed making money, Delta included, of course, and American. So that still points to the fact that this is not your grandfather's airline industry. They're

doing better even as fuel prices go up. That said, if fuel prices go up another 50%, it would be ugly. So it's still a very difficult industry to have complete faith in because it's at the whim of commodity prices to some degree. But the good news is fuel costs have declined to about 17% to 22% of operating costs of the average major airline in our country. And that's down from a much higher percentage, 50% plus in prior decades. So it's less of a factor even as it rises, but it's still a big factor. And so the higher costs are going to be passed on to consumers most likely by this fall with higher rates and or fewer flights. If I had to force you to choose, do you have a favorite?

I know Southwest gets a lot of love, no pun intended, around Fulton here. Does one stand out? Delta is operating very well. I'd say they're definitely one of the best-run airlines in this country. So I'd say Delta and Southwest as well. But speaking of what's going on, Ron, the dynamics of supply and demand have played out once again. The strong economy and people wanting to fly has driven almost all the airlines to add capacity, to spend on new airlines and add new flights.

And eventually, in a recession, that's going to hurt on the way back down. It comes back to haunt you, for sure. And that's why I think airline stocks are still so inexpensive, like Delta trades at eight, nine times forward estimates. For good reason, right? In the conference call, there were complaints like, when will this change? It may not. And Delta says, well, maybe we have to see a recession to see how we hold up through that. But, you know, that's tough.

Groupon is holding, well, a Groupon for the entire company. The company currently has a market cap of about $2.6 billion, just a bit lower than the $6 billion that Google offered in 2010. So, Abby, do you think a deal gets done here? And if so, who are the potential buyers? Yeah, I think this is an interesting question. I think if we look backwards, so Groupon was launched in 2008, and it was really a darling of that startup world.

They did turn down a $6 billion offer from Google in 2010, which actually in the shorter term was a good idea. They IPO'd in November of 2011. By the end of the first day, they were at $16 billion. dollars. So it was the second largest ever tech IPO at the time. And then it's sort of just been a steady march downward. And I think, you know, a lot of this was Groupon's original offering was really access to local customers. So it was a attract and retain sort of opportunity for local deals or local businesses. But then we've seen Facebook, we've seen Google sort of take away

from that space and probably a little bit easier, obviously much more broad of an eye space, I guess. So I think now when we think about who's buying them out, obviously, you're not going to see that $6 billion valuation by any means. I would be surprised if they get a premium to what they're trading at right now. But my real front runner guess would be for Walmart. So we've seen them make a lot of acquisitions recently. They're really looking to expand that e-commerce space. And I think they probably have a little bit of maybe an overlapping customer base. So they have a budget conscious customer. They have a reputation for doing that, I would say, arguably well. and I think Walmart is a lot more goods-based

where Groupon has made that shift towards experience-based in the past year or so and I think that could be a nice complement to round out Walmart's offerings. And for two or three billion, an easy ask for Walmart. Easy ask for Walmart. Just a little tuck-in acquisition there. Completely.

All right, the Frito-Lay division helped Pepsi beat expectations on Tuesday, sending the shares up almost 5% and Jason, salty snacks strong, but beverages, not so much. What does Pepsi need to do to get back on track amid a lot of serious competition in the beverage space? That was a nice tongue twister. Salty Snacks Strong. Say that five times fast, right? No, thank you. I think given the market dynamics in soda, Pepsi's got to be feeling really good about

the fact that they own Frito-Lay right now, that Salty Snacks division is really helping the business. Now, with that said, this was a good quarter. It gets things back on track, I think, for Pepsi this year. Hasn't been the greatest year yet, but I think maybe this helps them turn a corner a little bit here. Organic growth is still fairly light with a company like this, 2.5%. I don't know that you would expect that number to really go up over the course of the next few quarters or so. But when you look at the other areas of focus, water, for example, that's now 12% of total volume. I expect that to continue to grow. Quaker is really bringing in some good business as well. Emerging markets

offered up 6% organic growth for the quarter. There are other levers there with the business that they can pull to keep this thing moving forward. Really, when you look back over the past five years, and we look at Coca-Cola and Pepsi, Pepsi has been the company that has outperformed. Coca-Cola is still a little bit bigger, but Pepsi is certainly catching up very quickly. I like how Pepsi is getting behind taking care of the planet here. They're one of the world's largest purchasers of recycled PET, which is a packaging material. And they've just launched a 100% compostable bag in test markets. That, I think, is great. So, encourage more of that kind of stuff. I think Pepsi is framed up here for a good rest of the year.

So, my family is crazy for Hint water. I don't know if you guys have that. We're like hoarding Hint Water over at the Gross Household. It just tastes really good. It's got just a hint of flavor. It's a great name. It made me think, it's a private company and could easily be an acquisition candidate for one of these larger folks. Do you think Pepsi and Coke, for that matter, grow through acquisition of brands like this, or are they going to build it themselves? I think that's something you have to expect. You see Coca-Cola with Honest Tea. You see Pepsi with Gatorade. They're tacking on all of these other facets of the business, so

it's not just soda anymore. Both companies are really, really trying to figure out how to diversify beyond soda because it's struggling so much. On Monday, J.M. Smucker announced that it would sell its U.S. baking business to private equity firm Brinwood Partners for about $375 million. That division includes Pillsbury and Hungry Jack. Abby, in the past, we saw food companies expanding through acquisition, really, like we said earlier, a little tuck on acquisitions to bolster their growth. But now it looks like that trend seems to be reversing. Is this coming from a desire to be more focused? Or are those companies looking for different types of acquisitions that are perhaps higher growth than a Hungry Jack brand? Yeah, I think that's a good

question. And I think the answer is really a combination of both. So their CEO, Mark Smucker, came out and said that the divestiture is a reflection to focus the portfolio, particularly on pet food, coffee, and snacking. So they bought Ainsworth Pet Nutrition in May for about $1.9 billion. And then they also own Folgers Coffee, which is a pretty well-known brand in sort of a lower-end coffee market that they have now entered a premium brand for in that product space that they're trying to build out. And I actually think that this move for Smuckers was a really commendable one. I think that they have a really great reputation for being able to take smaller brands, make them household names. We all know these companies. And for what it's worth, I mean,

everything that they're selling represented less than 5% of sales, and they were declining in sales rates. And Brynwood owns Sunny D, they own Juicy Juice. So they have a little bit of experience here in this food, maybe less wanted brand. So I think it's actually a good fit for both parties. And I think it'll be interesting to see, you mentioned the sort of dynamic of these buys and sells in this space. And I think, you know, the recent turn of events is really an interesting one just for that whole entire landscape and seeing how that all sort of shakes out. Jeff, lately, or I would say after over the last couple of years, companies like Kellogg's and Smucker's, Kraft, they've kind of been struggling, but it seems like the tide is

kind of turning. Are you interested in taking positions in those kinds of companies at these prices? General Mills as well. It's not my bag, so to speak. I'm much more interested in technology and software and the digital economy. I think the consumer tastes continue to change, and more importantly, maybe how consumers shop and what the consumer expectation is for the experience with the products they use. As Jason spoke to a moment ago, more and more consumers care about where the product comes from, how the manufacturer is treating the planet, et cetera, et cetera.

They want relationships. I think we all do. We just didn't realize it. We want relationships with our products that we feel good about. And I don't know that a lot of the legacy manufacturers are on the ball with that yet. Sounds good.

Coming up, petitions and protests. And we'll share some stocks on our radar. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. Ron Gross sitting in for Chris Hill. Earlier in the week, Costco reported strong comparable store sales of 9.7%, but that story was overshadowed by news that Costco would discontinue the sale of its Polish hot dog. I'm not exaggerating when I say the reaction has been explosive with talks of petitions and picket lines. I think it's a little overblown, quite frankly, because the $1.50

deal of a hot dog and a drink is the regular hot dog. The Polish hot dog is by no means as popular, but people like what they like. So, I put it to you. Is there one item that if they took away from you, whether it's your favorite store, your favorite retailer, that would cause you to go to the picket lines and sign that petition? Well, I know how Mac feels about Costco. I've never really eaten at a Costco, but I tell you, you know how I feel about the Jangler. If they take away the Cajun Filet biscuit, I mean, I have to question whether life's even worth living anymore. You'll be okay.

Abby? Yeah, I'm not a huge fast food person, but if I do indulge, it's Raisin Cane's. And if they took away the cane sauce, I'd be a little upset about that. All right. I'll keep my fingers crossed for you. All right, team. Time for stocks on our radar. And I'll bring in our man behind the glass to ask each of you a question.

Abby, you are up first. What do you got? So, recently, I spent some time working through International Flavors and Fragrance, New York Stock Exchange, ticker symbol IFF. So they manufacture flavors and fragrance ingredients for various consumer products. So this is food, beverage, perfume, beauty products, laundry detergent, soaps, pretty much anything you can think of. And I think it's interesting because the valuation is a little bit challenging. So they're a global company with four key geographic segments and two business segments, so flavors and fragrance in each location.

And so I'm just trying to think about the forward growth opportunities and whether they can continue to justify faster growth rates. Steve, you got a question about international flavors? How do I know if I'm wearing too much cologne? If someone is choking, I think that's a safe bet. Jason, what do you got? Well, as we were talking about not liking banks, I'm going to throw you a little tiny community bank, Ron. It's Chesapeake Financial Shares.

This is an over-the-counter stock. Ticker is CPKF. But this is really community banking, and it's fine. It's about a $120 million market cap. But they've got a good history of growing book value at attractive rates. Perhaps most importantly, it's well-capitalized. Very illiquid. Trading volume is extremely low. But this really reminds me a lot of Ameris Bank Corp., which I recommended back in 2010. Ask me how that stock's done, Ron. How's it done?

It's up over 400% since then. Well, Steve, could you possibly have a question about Chesapeake Financial? Should I have a safety deposit box? No, those are passe. Just put a safe in your house, man. Jeff, what do you got? DocuSign, the ticker is D-O-C-U. A company came public just a few months ago, and most of us have probably had some interaction with it. They do the e-signature solutions that basically automate the agreement process online. So, if you're buying a house, even these days, they're moving into that, where you can e-sign everything. So, DocuSign has more than $500 million in annual sales, about 400,000 paying customers, an $8 billion market value.

They were just non-GAAP profitable, and they have free cash flow. It's an interesting company, but it's a new IPO. It's volatile. Steve? Should they be able to change the font? It always is that cursive, sort of fake-looking, like I wrote it by hand, but I know it's digital. Such a great question. They are working to improve everything, including, I hope, the font. Steve, you got a favorite international flavors, Chesapeake Financial, or DocuSign? I think I'm going DocuSign.

Nice. We'll sign on that. All right. Thanks, team. Coming up, Appian CEO Matt Calkins talks low-code software, investing, and board games. Stay right here. You're listening to Motley Fool Money. Support for Motley Fool Money comes from our friends at Rocket Mortgage by Quicken Loans. Let's talk about buying a home for a minute, shall we? Sure.

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Appian is a leading provider of low-code software, and it's provided some nice returns for investors lately. Shares are up around 60% over the past year. At our Motley Fool member event in May, Motley Fool co-founder and CEO Tom Gardner talked with Appian founder and CEO Matt Calkins, who is also the creator of three board games. Calkins kicked things off by explaining what Appian does. All right, so Appian is a platform for building software applications, for building unique applications. And these days, every business in the world wants to be a software company, to have unique software, and to express the unique behaviors that make up their organization in software. And so there's an enormous worldwide demand for this.

Everybody wants to express themselves uniquely, and Appian makes it easy. Unlike in a typical scenario where you code your application line by line and Appian instead you draw it, it looks like a flowchart. You've got arrows and boxes. And when you're done making this, not only did you build it a lot faster. It takes about 5% to 10% as much time. But also, it's more powerful in many important ways. The application you just built is extremely scalable. It's hostable anywhere you want, in the cloud or on-premise, any cloud you pick.

It runs on every major mobile device automatically. It's already integrated with every other Appian application, and it's easy to integrate with every other application around your enterprise. And once you've created the integration, it works for every Appian application. You only have to do it once. it's also highly secure. We can use double-factor security. We're one of the first companies to get FedRAMP. We're on the cutting edge of security. And all that just comes for free with the application that you built in 5% to 10% of as much time as it would have taken otherwise.

So, we went public about a year ago. In fact, it was a year and a week ago. We just passed our anniversary. Went public a year ago. And we did this mostly for the publicity. We've actually been a bootstrap since founding the company. And we didn't do it for the money, we did it for the attention. We wanted the world to understand that now there's this easier way to build unique software. You could draw it, and it could be much faster. Can you talk about the strategy of financing the company? You're in a very unique position, very rare to have the founder CEO own nearly half the company, maybe about 45% or 46%, and have voting control of the company, maybe around 70% voting. How did that happen? What

choices did you make? You started the company around 20 years ago. One would think that a technology company that's hiring developers would be raising a lot more capital, diluting the shares a lot more. How did the financing strategy work? Okay. The shareholder balance, whereby I have about half, and if you count the other founders, we have almost two-thirds, actually, of the shares. that balance comes about because we funded our own growth over the course of the company's history and i i agree with you it's very difficult to do that as a software company because typically in a software firm you may have to make a series of investments all of which have a substantial lag before they they give you cash back so if you if you run an ad in a newspaper it's a while before

that closes a deal if you hire a salesperson it's a while before they get anything and if you build technology that doesn't monetize immediately so you have to fund these lags somehow the way we did it we could have gotten money we were offered money and we turned it down because we didn't like the valuation we felt that we wanted to realize our own possibility before we let somebody else tell us what we were worth so we we instead built a professional services division a very powerful professional services division and that has a short work to cash cycle so we were able to to to use that engine to to make the money that would fund the longer investment to cash cycles in other departments in the firm. And based on the strength of our professional services,

we were able to grow to a substantial size before we got any money at all. And even then, we only got $10 million. And by the time we went IPO, we had more than that in the bank. So, looking out across other public companies, I know you're an investor. We were talking before about how your dad is an investor. I wonder if you can compare what it's like. Of course, you're immersed in your company, so maybe you don't have the good comparisons outside. What is it like to have voting control in your hands or in your small founder group hands? And I say this because I know that there are some times we have a tendency to think these super voting shares, particularly when they're added afterwards, are a little bit

questionable maybe. And there's a natural tendency for us to want to feel like every stakeholder has a say and it's not just held by a few people. Then again, when you look at Facebook and when you see these companies that have the control, the center, and I'll just say I was watching a video or reading an article, I can't remember which, in the last week or two, where for the first time that I've seen, word is coming up now of the possibility of shareholder activists at Starbucks, because now Howard is not the CEO. He has a couple percentage points ownership of the company. So now it's tossed into that ring. So what is it like to have voting control? Why is it important to you? Does it matter? I'm not convinced that having super

voting shares is always a good idea. In fact, I think sometimes it is and sometimes it isn't. and I can see how it can help, and I'm going to try to make it good at Appian just by using that voting control wisely. There are certainly some technology companies that are benefited by having control in the hands of the founder. And so we're just going to steer straight and execute and not get carried away and have this concentration be an asset instead of a distraction or a detriment. Now, with regards to how it feels, let me talk about what it's like to be public. I mean, that was a big change for us. We've been private for a long time. We went public a year ago. And there's a number of good things and bad things that can happen to a company as it becomes

public. The bad things everybody knows about. You could become short-termist, right? You could start to think about next quarter more importantly than next year. You could be distracted by people becoming millionaires and losing their focus, right? The company could be whipsawed by incentive effects if your stock options are incredibly valuable and then worthless and then back again. there's a lot of distraction that can come from it. Oh, and you can worry about losing your job also, right? If you don't do well, the board might get rid of you or the shareholder activists might take you out or something like that. All those are potential negatives. My intention coming into the IPO was to try to avoid all of those, be sure that none of those mattered, and instead focus on

the positives. And there are some real positives about being a public company. My very favorite of which, I mean, there's, of course, access to a new kind of currency. There's attention. There's more relevance in the press, but probably my favorite is the scrutiny you get from very intelligent investors. I love that. Investors have great ideas, and I like being challenged by them. And I like to have to rethink my own assumptions and strategies based on what investors ask me. And then also, I have to kind of defend what my ideas are against a good question from an investor. And then also, investors have terrific proposals sometimes. I've been really impressed. Whenever I go to talk to investors, I bring a notepad because I'll think of great things as I have

that discussion. That outside scrutiny is really good for us. So, the goal is to focus on these good elements so we can get out of an IPO and avoid all the bad ones. And one of the ways we have been able to avoid the bad ones, like the distraction, the short-termism, the worry about losing your job, those can be avoided by having a consistency of control. So, in a way, I think that we have a buffer against some of the short-term-itis that Wall Street might bring to our stock. We are a long-term proposition. I always think long-term about Appian, and I always have. And this allows me the control, allows me not to get distracted, not to worry actually too much about what the street thinks about what I'm doing. Can you talk through a single customer

case study. You don't have to name them if you can't, but just what's the process? Somebody who's been with you maybe a few years, how did they start? What did they add? And what are they doing now? Okay. That sounds great. There's so many to start with. And do you have any kind of a preference, right? Do you have an industry, a size, anything? Okay. All right. I'll go with Dallas-Fort Worth Airport because I love talking about it and I love the speed that it shows. Dallas-Fort Worth Airport had a pioneering CIO a few years ago who decided that he wanted to build the airport of the future. He wanted to automate all these processes that made up the workings of the airport, the day-to-day, and really everything. This included the health of

the terminal, the stores along the terminal, problems they might have encountered, the throughput on the checkout lanes, inspections on the planes themselves, back office HR processes. They even had one that tracked whether a flock of birds was over the airport so they could stop flights for a minute until the birds cleared out. They're the only airport in the world that had Anyway, all these things, they figured, not only do they want to rewrite this and have them be for everybody simultaneously, every employee in the entire airport was going to run on Appian, going to walk around with an iPad running Appian, or they're going to be in the back office running Appian, but everybody was going to be unified on the Appian platform.

This was 40 different applications. Single login gets you everything, gets you real-time access. It was really a unifying thing for an organization which, in the case of this airport, is actually bigger than Manhattan. It sprawled out over an immense amount of space, and they wanted to unify people again. They wanted to do it quickly. So they wrote all 40 applications, got them into production in just 18 months. And this is my favorite part of the story. It's not just that they brought people together, but that they did it exceptionally quickly. This is a world top five airport. They can't just throw things into production. There's privacy issues, security issues, safety issues. This had to be done right, and it was done right. 40 applications in 18 months.

now for those of you who have built enterprise software for major organizations who have concerns like this you know that you don't do 40 in 18 months that's breaking some kind of a speed record right i mean i'm just really proud of the the facility with which our software gets used now they and as you may know our goal is to cut in half how much time it takes to build an application every two years i kind of like the moore's law so that's that's my mandate back to our engineering department every time I just ask, what are you doing? What next piece of inefficiency are you attacking to be sure that we cut in half the amount of time it takes to build an application by 24 months from now? And DFW, Dallas-Fort Worth, is a great example of

how fast we already are. At the opening session today, the conversation with David about the influence of games on his investment approach, and he was sharing some examples, I'm wondering to what extent, if economics is impacting the work you're doing in your studies at Dartmouth, what is the impact of playing games and creating games? Do you view Appian as a game? Do you think of it in the same way you do when you're creating a game? Or are there market differences? Well, if you play enough games, and if you write some games, then everything starts looking like a game. So it's not that Appian is more like a game than other things, but everything starts to feel like one. And you see patterns. And there are absolutely ways that gaming and what I've

learned from gaming are reflected in the way Appian runs. For example, I'll just pick one, unless you want to get into this more deeply. Just one would be, I tell people, build feedback loops. A game is a great feedback loop. If you play a game well, you win. You know you played well. If you play poorly, you lose. You know you played poorly. I love that about games. It's a quick feedback loop, and you can hone your skills. In business, the feedback loops are typically longer. Sometimes they're very long. And so I counsel our employees to build tight feedback loops. Stay close. Find a way that you can get the feedback and then rapidly revise your plans. And I suppose that's a gaming instinct. Coming up, Matt Calkins talks about some

software companies he admires. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. Ron Gross sitting in for Chris Hill this week. And now back to Motley Fool CEO Tom Gardner's conversation with Appian CEO Matt Calkins. I want to talk a little bit about the financials. But before that, let's go to some full questions out here. What are some of your favorite Appian apps? And well, you just named the DFW client. So what are some of your favorite apps that have been Yeah. Let me mention another. So many great customers, but maybe the best customer of all is ourselves. We use this software throughout the organization. Scores of apps

run Appian on Appian. One we just launched recently, which I love to talk about because we're using artificial intelligence. We've embedded artificial intelligence now in the product. We've got a built-in sentiment analysis function, whereby you just send any piece a text and we tell you how happy the author is based on artificial intelligence routine. So now, whenever we get a tech support request from any of our customers, they'll send us a message saying, you know, this feature doesn't work, or I've got this problem, or this and that is too slow, or something like that. We use artificial intelligence to route it to the right expert, because we know which

Appian employee is strong on which parts of the product. So we route it to the right person using artificial intelligence, and then we also prioritize it depending on how serious and upset they seem to be. So we've improved our efficiency a great deal with this, but I also like it just because it's incorporating some of our latest functionality, our new emphasis on artificial intelligence. I'm going to challenge for the fun of it low-code software as a term, only because I would associate that with low-priced, lower quality. The language that I have as a consumer or a buyer when I hear low something is not unique, high price point. Do you think low-code software is going to work as a term,

and why, if so? Okay. Low-code is my favorite out of several options, but I agree that it has the flaws you just mentioned, that many people, when hearing it, feel that if the application didn't take much code. If it's a low code, then maybe it's also low price, low complexity, low sophistication, low scalability, low anything else. Okay. So that's a problem and that's the flaw in the low code terminology. The good part, however, about low code versus the other names that you could have used to refer to what we do, like case management or business process management or some others, is that low code is made up of exceptionally simple words that mean what they say. And I love simplicity. I love that we've got two syllables, right? Low code. And furthermore,

it clearly says what I think is the most important factor in our industry. It is simplicity. Low code means simple. All the other vendors in the low code space are just what you said. They are low price and low functionality. And so we find ourselves trying to argue not just against people's natural reaction to that term, but also to what everybody else in the space is saying and what they're getting the analysts to say, which is this is for simplicity. This is for triviality, right? For unsophisticated applications. So in the long run, is low-code going to be the name for our space? I'm not sure. We will be benefited if we get a good name, but we kind of have to take what people give us. What's motivating you? I love the idea that this is changing

how businesses define themselves. I love that it's making an economic impact. I really think it is, by the way. I think we're going to change how businesses represent themselves and embody their virtues by making it easier for them to build their own software. And I also think this is going to lead to substantial economic growth. So that's really exciting to be having an impact like that.

I'm also motivated by the team that we're building at Appian. I think it's a really wonderful group. Culturally, it's terrific. and i'm proud of that very rapid fire lightning round three public small soft smallish software companies that you admire steve jobs said that he believes most of the great innovation is happening at small software companies said that at apple and so what are three smaller public software companies that you admire small and public okay i mean you know not i'm not google in other words sub sub 30 billion dollar market cap i can pick atlassian okay i i will pick atlassian uh that

That's a, I'm very impressed with how little they spend on sales and marketing, how much they've put into R&D, how they've appealed through just how well their software works. I think they've done a really fine job with that. I know you work with Twilio. Yeah, let me say Splunk. I know they're having, I think, a little rocky time with some issues lately, but I'm impressed with the way Splunk realized the possibility of its product. When Splunk first approached the public markets, or a year or two before,

they were a company that had an odd little real-time data monitoring thing. And they had to really rethink, not just their message, like Appian need to rethink, but they need to rethink how to position this and how to catch the digital transformation wave. And they did just such a good job with that. And also, they made enterprise software cool again. Because there was a time there where there weren't enterprise software companies that came out with a big profile and did something extraordinary. I'm going to say Workday.

Can I say Workday? Are they not? Small-ish. They're small-ish. I'm impressed with the way Workday prices. I think it must be a function to some degree of the credibility that they approached the market with. They were almost anointed the winner before they even had to win. But they were able to price by the enterprise size.

Now, I love thinking about pricing models, and I just envy what Workday was able to do. They would price by addressable company size, and so there was no taking a taste or a test size of Workday. You just committed to it, and they were able to make that sale happen, and that's remarkable. Tomorrow, there are 400 more Fools coming here, and I think I saw that there are 440 people sign up for game night tomorrow night. So what are two games that people should play if they want to become better as an entrepreneur in their professional career or as an investor? Oh, wow. You know, I don't think games feel like

business. And this has always rankled me. I love business games. And I'd recommend Power Grid or Acquire. There's some good business games that get you thinking about numbers. Maybe best of all would be Automobile. That's it. You should play Automobile. That's a fantastic game. And you take risks in that. And it does feel like business. It's heavy calculation. So not everyone's going of like it, but it takes about three hours. And generally though, business games feel like building a wonderful machine. It's just bigger and better and larger. And, and business doesn't feel like that. It, business is more of a white knuckle ride and you take a risk or you don't take a risk and you, you work on limited information and games don't often give you

limited information. So, uh, I would, uh, this is, this is what was going through my mind when I wrote my, my business game called 10 Goose about building an airline in the thirties, that it had to feel like balancing greed and fear and dealing with negative factors, some of which you knew about, others you had to guess about. So maybe throw that one in, but I tend not to recommend my own. That's it for this week. The show is mixed by Dan Boyd. Our producer is Matt Greer. I'm Ron Gross. Thanks for listening, and we'll see you next week. Thank you.