Anaplan's (NYSE:PLAN) Q3 Sales Top Estimates But Stock Drops 12.6%

Jabin Bastian /
2021/11/23 4:14 pm EST
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Financial planning software company Anaplan (NYSE:PLAN) reported strong growth in the Q3 FY2022 earnings announcement, with revenue up 35.2% year on year to $155.3 million. Guidance for next quarter's revenue was $154.5 million at the midpoint, which is 1.04% above the analyst consensus. Anaplan made a GAAP loss of $40.9 million, down on its loss of $36.7 million, in the same quarter last year.

Is now the time to buy Anaplan? Access our full analysis of the earnings results here, it's free.

Anaplan (PLAN) Q3 FY2022 Highlights:

  • Revenue: $155.3 million vs analyst estimates of $146.3 million (6.17% beat)
  • EPS (non-GAAP): -$0.05 vs analyst estimates of -$0.11
  • Revenue guidance for Q4 2022 is $154.5 million at the midpoint, above analyst estimates of $152.9 million
  • Free cash flow was negative $833 thousand, compared to negative free cash flow of $23.9 million in previous quarter
  • Net Revenue Retention Rate: 119%, in line with previous quarter
  • Gross Margin (GAAP): 72.8%, down from 74.4% same quarter last year

“With a constantly changing environment, we solve our customers’ complex challenges. I am excited about our innovation with the Anaplan Autonomous Enterprise, which provides a real-time, scalable, and intelligent approach to plan, analyze and act,” said Frank Calderoni, chief executive officer of Anaplan.

Founded by Michael Gould in 2006 in a stone barn in Yorkshire, England, Anaplan (NYSE:PLAN) is a financial modelling software that helps large enterprises with complex decision-making around budgets and financial forecasts.

With the growing complexity of operations and supply chains of many corporations, there is a growing market for cloud-based software solutions that enable collaborative finance reporting and planning.

Sales Growth

As you can see below, Anaplan's revenue growth has been very strong over the last year, growing from quarterly revenue of $114.8 million, to $155.3 million.

Anaplan Total Revenue

And unsurprisingly, this was another great quarter for Anaplan with revenue up 35.2% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $11 million in Q3, compared to $14.4 million in Q2 2022. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Analysts covering the company are expecting the revenues to grow 22.4% over the next twelve months, although estimates are likely to change post earnings.

There are others doing even better than Anaplan. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.

Product Success

One of the best things about software as a service businesses (and a reason why they trade at such high multiples) is that customers tend to spend more with the company over time.

Anaplan Net Revenue Retention Rate

Anaplan's net revenue retention rate, an important measure of how much customers from a year ago were spending at the end of the quarter, was at 119% in Q3. That means even if they didn't win any new customers, Anaplan would have grown its revenue 19% year on year. Trending up over the last year, this is a good retention rate and a proof that Anaplan's customers are satisfied with their software and are getting more value from it over time. That is good to see.

Key Takeaways from Anaplan's Q3 Results

With a market capitalization of $7.89 billion Anaplan is among smaller companies, but its more than $312.3 million in cash and the fact it is operating close to free cash flow break-even put it in a robust financial position to invest in growth.

We liked to see that Anaplan beat analysts’ revenue expectations pretty strongly this quarter. And we were also excited to see the really strong revenue growth. On the other hand, it was less good to see the pretty significant deterioration in gross margin. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. But the market was likely expecting more and the company is down 12.6% on the results and currently trades at $45.5 per share.

Should you invest in Anaplan right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.