Updated: Apr 27, 2021
"Priced to perfection" is something we talk about sometimes, and it looks like this was a name was priced to perfection, as I write this the stock is down roughly (13%) on their quarterly report. I think it is a long-term buying opportunity on a great business.
Fresh off the Press Release:
Fourth Quarter Subscription Revenue up 26% Year-Over-Year
Remaining Performance Obligation of $818 million, up 25% Year-Over-Year
Dollar-Based Net Expansion of 114%
“We are seeing a rising demand for rapid scenario-based planning as our customers are looking for the best way to plan for an uncertain and unpredictable future.” -Frank Calderoni
My initial thoughts are not what the market thinks (begin down 14% now as I write), couple with a global sell off in assets who cares that it was down 15%.. I thought it was a good quarter, not great, but for coming out of COVID for a company that was hit disproportionately by COVID I think it was okay and the run up to $83 was even bewildering to me. The stock is currently pulling back to its 150dma, I am a believer that all stocks eventually return to moving averages and I think those are sound buying opportunities, we cannot time the market so I use those as pivot points to add to key names. The market right now for growth names is sell the news, that is what we are seeing here. I am a net buyer of these dips, core names are 20, 25% off their highs. I believe it is acceptable to nibble.
Anaplan is satisfying the increasing need for rapid scenario-based planning especially in this new COVID environment. Management is happy with their execution in FY21 with solid execution in new customers, which is well over 1,600. 453 customers with ARR over $250,000, their billings grew 37% YoY, which is even up from last Q of 27%. An example of a new customer is one of the largest US suppliers of beverages, they were looking to modernize their financial planning along with their reporting systems. Moving away from legacy on-premise systems can be tough, given they are not very flexible and require structural changes, yet they still chose Anaplan. Why did they choose Anaplan? Because off their breadth and unique built-in flexibility to address BOTH FP&A (Financial Planning & Analysis), and other useful instances such as workforce planning and incentive compensation.
Anaplan has announced a strategic partnership with Amazon Web Services (AWS). The Anaplan platform is now on AWS and I believe this will lead to stronger scalability given how large the AWS platform is. The company can now serve a larger range of enterprise customers and grow the market. Anaplan has a product that helps make more accurate predictions, with the AWS strategic partnership this enables them to build on the PlanIQ with Amazon forecast. This product pulls in data from Anaplan by automatically testing several learning algorithms before selecting the model that is optimized to generate the strongest forecast for a customers individual case. Good bye human-error forecasting? Building off the AWS platform.
Against the pandemic backdrop, Anaplan increased their global talent by 19% while building a world-class ecosystem of certified Anaplan experts. At the end of the day, the need for modern planning capabilities is growing into a multiyear journey providing a fantastic runway for growth.
Financials from David Morton
Revenue for the fourth quarter jumped 25$ to $123m, of this, 92% was subscription revenue which was up 26%. Services revenue were $10m up 14% YoY. The total revenue for FY2021 was $448m, up 29% YoY. I fully expected reaccelerating revenue growth moving forward, if not, we will have to reevaluate the business. Billings for the fourth quarter were $173m, up 37% YoY and this was driven by strong sales execution and higher growth in their net bookings this quarter. There is also a 4 point foreign currency tailwind in this, and 3 points related to a large up front payment for a multiyear contract. If we exclude these, billings would have been 30% (which is WAY ahead of their guide of 20-21%).
"RPO exiting the fourth quarter was $818 million, up 25% over last year. The current portion of RPO that is expected to be recognized as revenue over the next 12 months is $420 million, up 29% year-over-year."
There has been no change in churn this quarter, NRR is at 114% in the fourth quarter.
Non-GAAP gross margin was 78%, up 1 point YoY. Subscription margins were 84%, flat YoY and services GMs were 7%, up 3 points YoY. Full FY margins were 77%, up 1 point YoY. Operating expenses were $105, up from $87m a year ago and this was primarily due to investments in go-to-market and product/engineering (OK). Operating expenses for the FY21 were $385m, up 21% YoY from $319m, leveraging Anaplan's financial model while they invest in key areas of growth in product development (OK).
Operating Margins were (8%), improvement of 350bps from (11%) last year, in the FY20 their operating margins were (9%) which is a big improvement from (16%) in the prior year. There is major progress here towards profitability coupled with productivity and investments. Free cash flow was $7m in the fourth quarter, there was solid working capital management here and the company ended the quarter with $321m in cash and cash equivalents.
1Q 2022 (they are in their 2022 Fiscal Year), Anaplan expects their revenue to be $126.5 to $127.5m, and services revenue to be $9.5 to $10.5m. Billings for 1Q to be in the range of $122 to $124m, implying a YoY increase of 27-29%. non-GAAP operating margin for 1Q to be in the range of negative 9.5% to 10.5%. For full year 2022 guidance, the business expects $550m to $555m, representing (at the midpoint) roughly 23% growth YoY. I do not take this at face value.
Overall, I think it was a good quarter. Guidance not what I was expecting but fully expect them to beat, and continue to raise each Q this year. A lot of stocks were priced to perfection heading into earnings and I have seen this so many times before. Buyers will step in eventually on good businesses. Let us own those good businesses.
You can reading the earnings call here.