How Anaplan Disrupts the Planning Industry

Jon Markman

Blowout earnings at Salesforce.com ((CRM) -Get Report) got a lot of attention last week but investors should be turning their focus to Anaplan ((PLAN) -Get Report), an emerging player in the digital transformation ecosystem.

On Wednesday the company reported its own blowout numbers, based on strong demand for its cloud-based business planning software. Managers have worked closely with Salesforce through the years.

Now the San Francisco, Calif.-based company is ready to step out of its big brother’s shadow.

It’s time. Digital transformation is in the early innings through most of the business world. Managers at enterprises large and small understand they must modernize their workflows to compete with companies born in the cloud era. Planning is a great place to start.

Anaplan makes a suite of software tools corporate managers use to plan where resources should be allocated across sales, finance, supply chain, information technology, marketing and workforce. Everything is connected and real-time. Managers get shared data that is charged by machine learning and some predictive analytics. The end result is better-informed and faster business decisions.

Making smarter choices is more important than ever. Managers at many digital-first businesses have no experience with traditional annual business planning. From the beginning, their digital businesses have been steered by data. It’s a huge advantage over their slower legacy competitors.

Cloud-based, connected planning is a step in the right direction. And it doesn’t hurt that Anaplan managers positioned its business tools as a tab on the Salesforce platform.

From Activision ((ATVI) -Get Report) and Autodesk ((ADSK) -Get Report), to Red Robin Gourmet Burgers ((RRGB) -Get Report) and Zillow ((ZG) -Get Report), companies big and small, new and old, have flocked to Anaplan. Its customer list is growing rapidly, and so too are business prospects.

Central to the company’s growth is a proprietary calculation engine called Hyperblock. The hybrid database lets users across the network update plans on-the-fly, resulting in more accurate, faster modelling. It has always been a nice business that customers love.

Frank Calderoni, became the chief executive officer in January 2017. Two years later he engineered a wildly successful initial public offering, surging 40% on the first day. I started recommending the stock in my MoneyShow presentations on IPOs not long after.

Business performance under Calderoni, a veteran executive at Redhat and Cisco ((CSCO) -Get Report), has been spectacular. Since fiscal 2017, annual subscription sales have grown 57%, 45% and 48% respectively. The number of customers with $250,000 of annual billings has risen from 181 in 2018, to 353 in 2020. Annual billings shot up to $417 million in 2020, up 44%.

During the second quarter, reported last week, subscription revenue was $97.1 million, up 32%, year-over-year. And Anaplan managers expect sales will be around $110 million during the third quarter, with total revenue for the year around $439 million.

The terrific financial results, according to Calderoni, reflect where the enterprise world is headed. Digital transformation is accelerating and Anaplan is finding new customers, while grabbing more sales from existing patrons. It’s a great position for the company.

However, the next phase of business growth is only getting started.

Starting Sept. 15, Anaplan will host a virtual Connected Planning Xperience conference. The goal of the 7-day confab is to outline new predictive analytics tools based on artificial intelligence. Combined with Hyperblock, these tools will help Anaplan transition from simple business planning software to true business modelling.

It’s a game-changing development. The tools will make Anaplan software indispensable for companies trying to stay on top of market trends, make key decisions sooner and decrease business risks. It should also bring a higher valuation.

Anaplan shares pushed to $62 last week to test the February highs. The stock is up 17% in 2020 and trades at 21.4x sales for an $8.5 billion market capitalization.

Investors should buy the stock into any weakness ahead of CPX in the middle of September. Shares should trade to a new high afterward.  

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