3811

Anaplan (NYSE:PLAN) Q2 Sales Beat Estimates, Stock Jumps 16.6%


Full Report / August 31, 2021
Add to Watchlist

Financial planning software company Anaplan (NYSE:PLAN) announced better-than-expected results in the Q2 FY2022 quarter, with revenue up 35.5% year on year to $144.3 million. Anaplan made a GAAP loss of $51.1 million, down on its loss of $35.5 million, in the same quarter last year.

Anaplan (PLAN) Q2 FY2022 Highlights:

  • Revenue: $144.3 million vs analyst estimates of $133.8 million (7.86% beat)
  • EPS (non-GAAP): -$0.09 vs analyst estimates of -$0.13
  • Revenue guidance for Q3 2022 is $146 million at the midpoint, above analyst estimates of $142.3 million
  • The company lifted revenue guidance for the full year, from $557.5 million to $572.5 million at the midpoint, a 2.69% increase
  • Free cash flow was negative -$23.99 million, down from positive free cash flow of $7.61 million in previous quarter
  • Net Revenue Retention Rate: 119%, in line with previous quarter
  • Gross Margin (GAAP): 74.8%, in line with previous quarter

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

Financial modelling for large companies is unsurprisingly very complex and many organisations still use siloed legacy systems that do not automatically update, and struggle with version control. The Anaplan platform stores all the information in the cloud and enables thousands of concurrent users to access a centralized single source of truth for their data, for anything from modelling to managing supply chains, sales planning, financial reporting or a combination of those.

Anaplan has experienced a lot of success due to its robust integration with other software platforms such as Salesforce.com and its customers range from heavy industries like airlines or food manufacturers to other software companies.

For example, a global foods company was using a mix of hundreds of large spreadsheets and legacy tools to manage their supply chain process and financial planning, and even simple scenarios required up to six hours to run. Adjusting plans to react to demand changes took a full week of reworks and to save time they were using averages and approximations, which led to misalignment in the inventory management and as a result excess inventories and lost sales opportunities. With Anaplan, they are able to collect precise data from across the organization in real time and running a planning scenario now takes less than five minutes.

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.

Anaplan faces competition from companies like Oracle (NYSE:ORCL), SAP (NYSE:SAP), IBM (NYSE:IBM), and Workday (NASDAQ:WDAY).

Sales Growth

As you can see below, Anaplan's revenue growth has been strong over the last year, growing from quarterly revenue of $106.5 million, to $144.3 million.

Anaplan Total Revenue

And unsurprisingly, this was another great quarter for Anaplan with revenue up an absolutely stunning 35.5% year on year. On top of that, revenue increased $14.4 million quarter on quarter, a very strong improvement on the $7.3 million increase in Q1 2022, and a sign of acceleration of growth.

Analysts covering the company are expecting the revenues to grow 21.6% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

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 Q2. That means even if they didn't win any new customers, Anaplan would have grown its revenue 19% year on year. That 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.

Profitability

What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Anaplan's gross profit margin, an important metric measuring how much money there is left after paying for servers, licences, technical support and other necessary running expenses was at 74.8% in Q2.

Anaplan Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.74 left to spend on developing new products, marketing & sales and the general administrative overhead. This is around the average of what we typically see in SaaS businesses, but it is good to see that the gross margin is staying stable which indicates that Anaplan is doing a good job controlling costs and is not under a pressure from competition to lower prices.

Key Takeaways from Anaplan's Q2 Results

With a market capitalization of $8.88 billion Anaplan is among smaller companies, but its more than $312.9 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 were impressed by how strongly Anaplan outperformed analysts’ revenue expectations this quarter. And we were also excited to see the really strong revenue growth. Overall, we think this was still a really good quarter, that should leave shareholders feeling very positive. The company is up 16.6% on the results and currently trades at $69.98 per share.

Is Now The Time?

When considering Anaplan, investors should take into account its valuation and business qualities, as well as what happened in the latest quarter. Although Anaplan is not a bad business, it probably wouldn't be one of our picks. Its revenue growth has been strong. But while its customers are increasing their spending quite quickly, suggesting that they love the product, unfortunately its customer acquisition is less efficient than many comparable companies.

Anaplan's price to sales ratio based on the next twelve months is 14.0, suggesting that the market has lower expectations of the business, relative to the high growth tech stocks. We don't really see a big opportunity in the stock at the moment, but in the end beauty is in the eye of the beholder. And if you like the company, it seems that Anaplan doesn't trade at a completely unreasonable price point.

To get the best start with StockStory check out our most recent Stock picks, and then sign up to our earnings alerts by adding companies to your watchlist here. We typically have the quarterly earnings results analyzed within seconds from the data being released, and especially for the companies reporting pre-market, this often gives investors the chance to react to the results before the market has fully absorbed the information.