While a slew of enterprise software firms have posted disappointing earnings reports in recent weeks, Anaplan (PLAN) blasted off to new post-IPO highs two weeks ago after easily beating estimates and issuing strong quarterly and full-year guidance. Shares have added to their gains since, and now trade at a lofty valuation of about 15 times Anaplan's expected fiscal 2020 (ends in Jan. 2020) billings.
Anaplan, for those wondering, is a top provider for cloud-based business planning software for large enterprises; the company now claims over 1,100 clients, including 279 with annual recurring revenue (ARR) of more than $250,000. Last quarter, Anaplan's revenue grew 47% to $75.8 million, while its billings grew 57% to $87 million.
I recently talked with Frank Calderoni, who has been Anaplan's CEO since 2017 and has previously served as Red Hat and Cisco Systems' CFOs. Here's a recap of notable things mentioned.
- Of the six business areas that Anaplan groups its various use cases into -- finance, sales, marketing, supply chain, workforce and IT -- Calderoni says about 60% of Anaplan's business still involves finance (the field it originally targeted), where its software is used for planning, budgeting and forecasting work. Of the other five, he says the company is seeing particularly strong growth in supply chain, where its software is used for activities such as merchandise planning, demand planning and trade promotion.
- Echoing comments from business intelligence/analytics software firms such as Tableau Software (DATA) and Domo Technologies (DOMO) , Calderoni asserts Anaplan isn't merely competing against rival business planning software firms, but also against the extensive use of spreadsheets to handle planning tasks its software can do a better job of. That's part of the reason he pegs Anaplan's total addressable market (TAM) as being in the range of $60 billion to $70 billion if one looks at all potential use cases, as compared with a TAM of about $20 billion if one views the market more conservatively.
- Outside of spreadsheets, Calderoni grouped Anaplan's rivals into two categories: Planning software from traditional ERP software vendors such as Oracle (ORCL) and SAP (SAP) , which is typically used by finance departments, and providers of "point solutions" targeting one of the six aforementioned fields.
- Larger enterprises, Calderoni argued, tend to want "the bigger solutions that provides them the flexibility, the capability, the scalability that [Anaplan has] versus point solutions." That appears to be a reference to players such as private Host Analytics and Workday's (WDAY) Adaptive Insights unit. Adaptive Insights was acquired last year for $1.55 billion, offers products meant specifically for finance, sales and workforce planning and has historically had a strong presence with mid-sized businesses.
- Calderoni, who on Anaplan's last earnings call noted the company saw especially strong growth in the Asia-Pac region, says about 40% of his firm's revenue now comes from international markets. He made a point of noting that Anaplan, which like many fast-growing software firms has been making giant sales/marketing investments, hasn't yet expanded into some major international markets. In Asia-Pac, for example, most of its revenue comes from Japan, Australia, Singapore and Southeast Asia.
- At a time when cloud software firms such as Workday and Salesforce.com (CRM) rely on hosting deals with public cloud giants such as Amazon Web Services (AWS) to (among other things) address the data sovereignty and compliance needs of international clients, Anaplan is still hosting its software solely on its own infrastructure. However, Calderoni says the company is open to working with public cloud providers in the future.
- Interestingly, Calderoni said Anaplan is working with "a few other technology partners" on joint solutions that it's not able to disclose yet. The comments come ahead of Anaplan's Connected Planning Xperience conference, which runs from June 10th to 12th and will see new product announcements.
- When asked about Anaplan's R&D priorities, Calderoni suggested using AI/machine learning to enhance the predictive and "what if" capabilities of its software is a big one. He noted Anaplan's software is underpinned by an in-memory modeling/calculation engine known as Hyperblock, and that machine learning can be used to enhance the predictive abilities Hyperblock currently provides. "If I step back and look at planning...decision-making today is being much more predictive about what's possible and what things may occur in the future, and that's what a lot of our [customers] are talking about," he said.
- While many rivals have more comprehensive product lines that touch on various adjacent software fields, Calderoni says Anaplan isn't looking right now to expand outside of its core market. "There's so much opportunity in the broader [planning] space that we're looking at," while adding businesses have been getting very creative about how they use Anaplan's software. "That's where our focus is right now."