Co-Managers: KeyBanc Capital Markets, Canaccord Genuity, Evercore ISI, JPM Securities, Needham, Piper Jaffray, SunTrust

As many IPO investors surely know, there is no "sure-thing" in the IPO market. Conditions can change on a dime as sentiment swings with the broader markets. However, Anaplan (PLAN) is an IPO that might come as close as there is to a sure-thing. To clarify, what we particularly mean by that is, we believe that the odds of PLAN pricing at least at the high end of its range and opening for trading with a substantial pop are very high. How PLAN trades after that is another story, as the valuation could look drastically different once its trading on the open market.

Even without considering its healthy growth, there are a few reasons why we are so confident. First, PLAN is a cloud software developer and investors' appetite for cloud software IPOs has been quite healthy. Just a few notable examples over the past few months include Tenable (TENB, +63%), Avalara (AVLR, +46%), Pluralsight (PS, +79%), and Docusign (DOCU, +58%).

But, even more specific to PLAN, there was an acquisition from this past June that could bode very well for PLAN. Specifically, HR and back office cloud platform Workday (WDAY) bought Adaptive Insights -- a direct peer and competitor of PLAN's -- for $1.55 billion. With Adaptive Insights generating $106.5 million in revenue in FY18 (ending Jan. 31, 2018), WDAY paid more than 14.5x trailing revenue. For the sake of comparison, PLAN would have a trailing P/S of about 10x at the mid-point of the expected price range. So, right off the bat, PLAN looks relatively cheap when compared against its closest competitor. 

Another positive indicator for PLAN is that the company had a very successful financing round last December when it raised $60 million in a Series F funding round. PLAN's CEO, Frank Calderoni, is on record stating that the funding round was over-subscribed with very strong interest from investors -- both current, and new. 

And, lastly, this is a mid-sized deal with 15.5 million shares involved, led by a team of tier one underwriters including Goldman Sachs, Morgan Stanley, and Barclays. The combination of a lower supply of stock, high quality underwriters, and high growth company often translates into strong demand for that IPO.


Overview

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.

Like many cloud software companies, PLAN employs a "land and expand" strategy to net new customers. Businesses will oftentimes adopt the software for a single line of business, or business function, such as for financial planning or marketing purposes. Then, once they see the value and benefits from the platform, businesses will add to the number of users as they expand it to new areas within the organization. PLAN has been very successful implementing this strategy, as evidenced by its very impressive dollar-based net expansion rate, as seen below.


Market & Growth Potential

There is no shortage of growth potential for PLAN, which will undoubtedly attract growth-oriented investors towards its IPO. To put the opportunity into perspective, the company estimates that its total addressable market for performance and management application software will jump from $15 billion last year to over $21 billion in 2021. And that is not including the $20 billion opportunity that resides in replacing Excel, which is still widely used today for planning purposes.

In order to capitalize on this fast growing market, PLAN has outlined a few different growth strategies. They are the same strategies employed by virtually every other cloud software developer, including:

• Expanding Customer Base: While it is grown its customer base at a rapid clip (as shown below), PLAN believes it is still in the very early stages of penetrating its addressable market.

• Growing Business With Existing Customers: The company has been very effective in up-selling its product to new departments and divisions within an existing customers' business. It is confident that it can continue to derive increased business from its existing customer base.

• Expand Internationally: As of July 31, 2018, PLAN derived 43% of its revenue from customers located outside of the U.S. It believes it has a significant opportunity to further grow its business in international markets.

Financials

*6-months ended June 30, 2018

Allogene Therapeutics (ALLO) is a clinical stage immuno-oncology company pioneering the development of genetically engineered allogeneic T cell therapies for the treatment of cancer. It's developing a pipeline of off-the-shelf T cell product candidates that are designed to target and kill cancer cells. The key point is that its engineered T cells are allogeneic, meaning they are derived from healthy donors for intended use in any patient, rather than from an individual patient for only that patient's use, as in the case of autologous T cells.

• ALLO believes this key difference (allogenic as opposed to autologous) will enable the company to deliver readily available treatments faster, more reliably, at greater scale, and to more patients. In addition, ALLO believes its management team's experience in immuno-oncology and specifically in chimeric antigen receptor (CAR) T cell therapy will help drive the rapid development and, if approved, the commercialization of these potentially curative therapies for patients with aggressive cancer.
• In collaboration with Servier (second largest pharma company in France), Allogene Therapeutics is developing UCART19, a CAR T cell product candidate targeting CD19. UCART19 is being studied in clinical trials in patients with relapsed or refractory (R/R) B-cell precursor acute lymphoblastic leukemia (ALL), and ALLO expects UCART19 will be advanced to potential registrational trials in 2H19. ALLO also plans to submit an investigational new drug application (IND) in 1H19 for its second allogeneic anti-CD19 CAR T cell product candidate, ALLO-501, for the treatment of R/R non-Hodgkin lymphoma (NHL). In addition, ALLO says it has a deep pipeline of allogeneic CAR T cell product candidates targeting multiple promising antigens in a host of hematological malignancies and solid tumors.
• CAR T cell therapy, a form of cancer immunotherapy, has recently emerged as a revolutionary and potentially curative therapy for patients with hematologic (blood) cancers, including refractory cancers. In 2017, two autologous anti-CD19 CAR T cell therapies, Kymriah, developed by Novartis (NVS) and Yescarta, developed by Kite Pharma, were approved by the FDA for the treatment of R/R B-cell precursor ALL (Kymriah) and R/R large B-cell lymphoma (Yescarta).
• Autologous CAR T cell therapies are manufactured individually for the patient's use by modifying the patient's own T cells to express CARs. The entire manufacturing process is dependent on the viability of each patient's T cells and takes approximately 2-4 weeks. As seen in the registrational trials for Kymriah and Yescarta, up to 31% of intended patients ultimately did not receive treatment primarily due to interval complications from the underlying disease during manufacturing or manufacturing failures.
• ALLO believes its allogeneic platform has the potential to be the next revolution in cancer treatment for several reasons: Supply (Off-the-shelf product enables creation of inventory, Potential to treat more patients than autologous cell therapies, Readily available supply for retreatment); Delivery Time (On demand product delivery from inventory, Faster time to treatment may improve patient outcomes); Potency (More uniform starting materials sourced from healthy donors, Potential for more predictable safety and efficacy); and Cost (Potential for ~100 doses from a single manufacturing run, Ability to scale production to further reduce cost).
• In sum, Allogene's technology strikes us as a potentially revolutionary cancer treatment option if it ultimately gets approved. It also has a major collaboration partner in Servier. Another positive is that ALLO has a fairly small offering size (16 mln shares) coupled with Tier-one underwriters (Goldman, JP Morgan). This combination tends to cause investors to view the deal as a quality IPO. It also tends to produce a good amount of investor interest.

 *Six Months Ended June 30, 2018

Livent (LTHM) is a fully-integrated lithium company developing battery-grade lithium hydroxide, butyllithium, and high purity lithium metal. Its primary focus is to supply high-performance lithium compounds for the electric vehicle battery market, while also maintaining its leadership position as a producer of butyllithium and lithium metal. The company believes that the strong expected growth in electric vehicles, along with its leadership position and low-cost structure, will continue to fuel its growth. LTHM also is diversified a bit as its products are also used in pharmaceutical products, as well as in aerospace applications.

• The company believes it has a few significant competitive advantages. One such competitive advantage is that it operates one of the lowest cost lithium deposits in the world. Specifically, it has been extracting lithium brine at its operations at the Salar del Hombre Muerto in Argentina for more than 20 years, and has been producing lithium compounds for over 60 years. LTHM's operations in Argentina are expandable, giving it the ability to increase lithium carbonate and lithium chloride production to meet increasing demand. It also has the operational flexibility to procure lithium carbonate from third party suppliers as raw materials. This strategy allows it to manage its production requirements and raw material cost, creating opportunities to optimize profitability.

• LTHM is actually one of the few lithium compound producers that has global manufacturing capabilities, also operating a lithium hydroxide facility in North Carolina, and adding capacity in China last year. In addition to its lithium production, LTHM operates butyllithium facilities in the United States, the United Kingdom, China and India. Given the challenges in handling, transporting and using butyllithium products, this close proximity to customer manufacturing facilities is a critical factor in the customer’s choice of supplier.

• In recent years, the company has been ramping up its production in order to meet rising demand. Specifically, in May 2016, LTHM announced plans to increase its lithium hydroxide capacity to 30 kMT by the end of 2019. In addition, to support its lithium hydroxide expansion, it has announced plans to expand lithium carbonate production in Argentina from 15 kMT in 2017 to at least 60 kMT by the end of 2025, in four separate stages. These expansions should ensure the company has the capacity to meet customer demands globally, as they expand their own production networks around the globe.

• As noted above, LTHM's primary focus will be on the electric vehicle market due to the strong growth characteristics in that industry. To put the opportunity into context, EV sales are expected to reach 60.2 million units in 2040, representing a penetration rate of 55% of all vehicles sold, according to Bloomberg. Automotive original equipment manufacturers have announced plans to introduce longer-range EV models using higher energy density batteries, and are increasingly doing so by moving to high nickel content cathode materials. This shift will increasingly require battery-grade lithium hydroxide in the production of cathode materials.

• As a result of its focus on supplying performance lithium compounds for use in the EV market, the company expects the shares of lithium hydroxide, energy storage and Asia as percentages of total revenue by product, application and geography, respectively, to increase. In FY17, lithium hydroxide accounted for 45% of total revenue, energy storage represented 35% of revenue, and Asia represented 59% of revenue.

• Another positive regarding its business model is that a good portion of its revenue is generated from customers which have long-term agreements with LTHM. In fact, in 2017 and for the six months ended June 30, 2018, more than 60% and approximately 58%, respectively, of its revenue was generated from customers which have agreements with terms ranging from two to more than five years in length. Going forward, as its production of lithium hydroxide increases, LTHM expects the portion of its total revenue generated under multi-year agreements to increase. Further, LTHM expects that all of its capacity expansions will be contracted with customers before it commences production.

• Taking a look at its financials, for the six months ended June 30, 2018, revenue jumped by 51% to $210.7 million. This was due to both higher volumes of lithium hydroxide in China driven by the increased production capacity as well as increased pricing. On a regional basis, sales in North America increased 6%, sales in Asia increased 80% and sales in Europe, Middle East and Africa (EMEA) increased by 42%, while sales in Latin America decreased by 9%.
  
  Gross margin as a percent of revenue was approximately 50% versus 41% in the six months ended June 30, 2017. The increase in gross margin was primarily driven by prices, product mix and improved operating leverage.
  
  As a result of the above, net income soared by 154% to $70.2 million, and Adjusted EBITDA rocketed to $94.5 million from $45.7 million.
  
  
  
  

*6-months ended June 30, 2018

In this section of our weekly column, we provide a rolling list of each IPO to price over the past few months. Additionally, performance measures will be included in the table, as well as our grade or sentiment reading, if applicable.