Following in the footsteps of Allogene's (ALLO) impressive
performance yesterday, cloud software company Anaplan (PLAN 23.42, +6.42, +37.76%) has also bucked
this slide in the market as its 15.5 mln share IPO priced at the high end of
expectations. That said, in more favorable conditions, it's possible -- if not
likely -- that its deal perhaps would have been up-sized, while also pricing
But the fact that demand was strong enough to price at the high end, in this currently adverse climate for IPOs, speaks well to the overall quality of the company. Also, similar to ALLO, which benefited from the strong ongoing interest for healthcare-related IPOs, PLAN also has the advantage of being a cloud software developer. While many recent cloud software IPOs have pulled back recently, along with tech stocks in general, it has remained a favored space in general for the IPO market. This was most recently on display last Friday when Elastic (ESTC) went public to rousing success.
Also, PLAN's growth has been very strong, and its gross margin has been on the rise, as highlighted below. With the price range not being lifted ahead of its pricing, PLAN's valuation remains reasonable with a P/S of about 9x estimated FY18 revenue.
As for the IPO itself, it generated total gross proceeds of $263.5 mln. The deal was led by Goldman Sachs, Morgan Stanley, and Barclays. Shares open for trading this morning on the NYSE at $24.25.
PLAN is a cloud software provider, developing what it calls a "Connected Planning" platform that aims to enable businesses to make better and faster decisions. Its Connected Planning software was built to replace legacy approaches to planning, which have traditionally been characterized by outdated tools (like Excel) with manual processes that are typically slow and inefficient. Also, planning has usually been confined to finance departments. PLAN's software has the capability to connect all people within an organization to data and plans, enabling a collaborative approach to business planning.
Behind its software is its modeling engine which is driven by its "Hyperblock" technology. This enables thousands of concurrent users to access a centralized source of information for planning purposes. Hyperblock also allows users to quickly run alternative scenarios to better understand the impact of changes in business projections. Consequently, users can assess the impact of assumptions on various business plans and key performance indicators in real time.
The company has also been investing in artificial intelligence, including machine learning, to further improve its predictive capabilities.
As you can probably imagine, there are an almost limitless number of possible uses for PLAN's software. Some of the more common uses among those are the management of sales performance and sales forecasting, budgeting and planning, supply chain and inventory, and workforce plans and performance as well as IT project budgeting.
Its customer base cuts across sectors, industries, and sizes. That said, PLAN primary focuses on larger enterprises, as that is where it sees its greatest opportunity. As of July 31, 2018, it had 979 customers. Of this total, 220 were members of the Global 2000, and they accounted for 56% of its total revenue for the six months ended July 31, 2018.
Taking a closer look at its results for the 3-months ended July 31, 2018, revenue was up 41% to $109.4 mln. Subscription revenue was $94.5 mln (86% of total revenue), up 48%, due to additional sales to existing customers, which accounted for approximately 60% of the increase, and a significant increase in sales to new customers, which accounted for approximately 40% of the increase.
Gross margin improved to 73% from 69%, due to the aforementioned increase in subscription revenue, which carries higher margins than professional services revenue.
PLAN's largest expense is Sales & Marketing, which is not unusual for an up-and-coming cloud software company. This expense soared by 84% to $77.9 mln as it added to its workforce and paid higher salaries and benefits.
Overall, the company's operating loss widened to ($45.3) mln from ($15.9) mln in the year ago period.