Given the enthusiasm and strong gains for these other recent cloud software IPOs, investors are likely gearing up and expecting similar results from PLAN's deal. However, there is a notable caveat, and that is, the stock market and technology stocks in particular have been struggling over the past week. Should this sell-off continue into Friday morning, investors may be in a more risk-averse mood. As IPO traders and investors are keenly aware, the IPO market is very fickle and sensitive to volatility in the overall market.
From a company-specific standpoint, though, there are some clear positives that should appeal to many growth-oriented investors. Namely, it has been growing the topline by solid double-digit rates, it has a long runway for growth, its revenue retention rate is very impressive, and its gross margin has been expanding.
As for its IPO, PLAN is offering 15.5 million shares, expected to price within a $13-$15 range. At the mid-point, the deal would generate $217 million in total gross proceeds. The IPO is led by Goldman Sachs, Morgan Stanley, and Barclays.
PLAN is a cloud software provider, developing what it calls a "Connected Planning" platform, enabling businesses to make better and faster decisions. Its Connected Planning software was built to replace legacy approaches to planning, which has traditionally been characterized by outdated tools (like Excel) with manual processes that are typically slow and inefficient.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's an almost limit-less amount of possible uses for PLAN's software. But, some of the more common uses are for managing sales performance and sales forecasting, managing budgeting and planning, supply chain and inventory management, managing workforce plans and performance, and IT project budgeting.
Its customer base cuts across sectors, industries, and size. 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 look at its results for the 3-months ended July 31, 2018, revenue was up 41% to $109.4 million. Subscription revenue was $94.5 million (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 that 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 million as it added to its workforce and paid higher salaries and benefits.
Overall, the company's operating loss widened to ($45.3) million from ($15.9) million in the year ago period.