Wednesday, Sep 1st 2021

PLAN had a lot to prove—and proved it


After reporting lackluster earnings results over the past two quarters, Titan Opportunities holding Anaplan (PLAN) had a lot to prove.

In today’s earnings, the company delivered. Anaplan “proved it,” as strong demand for the company's product suite showed up in accelerated billings and backlog metrics. It seems that new leadership on the sales team, in addition to expanding platform capabilities, are driving favorable results, especially within PLAN’s existing customer base.

We see three key drivers at play with PLAN:

1) We believe PLAN’s strong pipeline and accelerating performance metrics are driving the stock higher.

Billings and RPO (remaining performance obligation) are very important to track for companies like Anaplan with elongated sales cycles, as strong growth here reveals a robust pipeline and oncoming revenue growth to be recognized.

Today, PLAN’s billings are strong, and strong guidance indicates a long runway: Q2 billings were $148MM (+36% YoY) with RPO of $906MM (+29% YoY) and cRPO of $475MM (+33% YoY). Billings growth accelerated YoY from 32% in Q1, while also showing a larger sequential growth compared to FY Q2 2021 (+16.5% vs. +13.5%).

The growth in Anaplan’s cRPO is indicative of existing customer spend, and gives investors insight into the magnitude of billings over the next year.

2) We believe PLAN is accelerating its expansion and wallet capture, including three straight quarters of DBNER improvement, coming in at 119% in Q2.

One driving force at play seems to be the work done with the sales org by Chief Revenue Officer Bill Schuh, since joining Anaplan 8 months ago.

Notably, this demonstrates PLAN's ability to upsell across the installed base as 71% of new annual contract value (ACV) came from the existing customer base. Additionally, this strength validates customer demand for operational planning to other areas beyond finance. Specifically, sales and supply chain planning have experienced strong growth.

As a final point of emphasis, Anaplan's top 25 customers’ average ARR is approaching $5 million, resulting from expansion. 50% of those top 25 had 3+ buying centers and ~1/3 had ~2+ buying centers. The company now has 505 customers with ARR +$250K (+29% YoY), while the number of customers with +$500K and +$1MM ARR increased 33% and 53% YoY, respectively.

3) Lastly, we’re excited by Anaplan’s partnership with Google Cloud Platform (GCP), and its opportunities for similar partnerships with other cloud leaders.

Anaplan launched on GCP in July, the first time Anaplan was made available on a public cloud. We believe this has a few important implications:

  • Having access to cloud allows PLAN to expand its opportunity set, as GCP inherently solves for data residency and other regulatory requirements.

  • The partnership can serve as a vehicle to expand further partnerships and Anaplan's go-to market ("GTM") sales motion. Anaplan should now benefit from the GCP GTM engine, as the GCP sales team starts to sell Anaplan on GCP, to go after new opportunities. (In other words: this could be a source of CAC-free new customers for Anaplan.)

  • While management didn't elaborate, Google's technology can enable joint customers to leverage more capabilities on the Anaplan platform. It seems likely to us that Microsoft and Amazon will follow suit, which we believe could be a near-term catalyst.

The bottom line: Anaplan was a fringe SaaS holding in our Opportunities portfolio, coming into the print. But the company’s accelerating performance metrics and strong backlog, coupled with secular tailwinds, drives our view of the potential for further upside here.

We will be holding PLAN given what we view to be the clear momentum and tailwinds at its back, its apparently conservative guidance, and its attractive valuation relative to SaaS peers. We’ll continue to hold PLAN to an extremely high bar of execution given the broader SaaS opportunity set.

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