Anaplan, Inc.

Thank you for standing by, and welcome to the Anaplan Fourth Quarter Fiscal 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone keypad. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. Thank you. I would now like to hand the conference over to Edelida Pichepko. Vice President of Investor Relations for Anaplan. Mr. Chepko, please go ahead.

Good morning. Thank you for joining us on today's conference call to discuss Anaplan's fourth quarter fiscal year 2021 financial results. Joining me on the call are Frank Calderoni, our Chief Executive Officer, and Dave Morton, our Chief Financial Officer. On this call, we will be making forward-looking statements, including financial guidance and expectations for first quarter and fiscal year 2022 anticipated future operating and financial performance, strategies, customer demand, product and technology. These statements reflect our best judgment based on factors currently known to us and actual events or results may differ materially. Please refer to documents we file with the SEC, including the form 8K filed with today's press release. Those documents contain risks and other factors that may cause our actual results to differ from those contained in our forward-looking statements. These forward-looking statements are being made as of today, and we disclaim any obligation to update or revise these statements. If this call is reviewed after today, the information presented during this call may not be kind or accurate. We will also discuss non-GAAP financial measures which are not prepared in accordance with generally accepted accounting principles. Unless otherwise stated during the call, all references to our gross margin, expenses, and operating results are on a non-GAAP basis. For historical periods, a reconciliation of GAAP and non-GAAP results is provided in the press release and in supplemental financial information on our website. And with that, I will turn the call over to Client Calderoni.

Client Calderoni Good morning, and thank you for joining us today. We demonstrated linear progression throughout the year, and this improvement continued into the fourth quarter. We focused on steady execution by helping our customers address their key challenges on how to best plan for an uncertain and unpredictable future. There is a growing need for rapid scenario-based planning in this new environment where disruption has become the new normal and pivoting, course correcting, and transforming are now an ongoing everyday part of business. We finished this past fiscal year with solid execution and with healthy new customer growth this quarter. We now have over 1,600 customers And we also continue to deliver value to them with approximately 70% of new bookings coming from expand deals. We also have 453 customers with ARR over $250,000. Billings grew 37% year over year. And we exited the fourth quarter with a remaining performance obligation or RPO balance of $818 million, up 25% over the last year. As an example of an impressive new customer land, one of the largest U.S. suppliers of beverages was looking to modernize their financial planning and reporting systems. They wanted to move away from their legacy on-premise solution that lacks the level of flexibility required to accommodate structural changes to the business. They chose Anaplan for the breadth of our platform, which was unique in its built-in flexibility to address both the FP&A core requirements as well as other use cases such as workforce planning and incentive compensation. This highlights what we continue to see with our customers, where there is a need to connect financial implications to the ultimate business outcomes. This is a good example of the extension of planning beyond finance into adjacent operational areas within a business, an emerging trend that has been highlighted by Gartner XP&A. Another example of a new large enterprise customer is a European-based global leader in materials and chemical solutions. This company generates over $11 billion in revenues. focused on addressing critical industrial and environmental challenges by developing products supporting advancements in transportation, batteries, smart and medical devices, water and air treatment. This customer was embarking on a digital transformation effort by moving from a product-based approach to being more customer-centric. The finance team developed a multi-year initiative while sustaining and protecting revenue growth. Zero-based budgeting was selected as the vehicle to achieve those objectives. They chose our platform because they needed a very short time to market with flexibility and usability since many users were not in finance. They also appreciated the scalability we offered as they expected more than 1,500 users who manage high-volume, detailed, complex data. We see great potential for this customer to embrace connected planning as they anticipate other areas that require similar capabilities. Another deal I'd like to highlight this quarter is with an existing customer who has over 15,000 employees and revenue at scale. They needed to expand their use of our platform to include integrated planning across HR, finance, R&D, and their business units. so they could focus on improving their profitability and operational efficiency of their business as they plan for their IPO. Our platform has been their planning foundation, and they have now been able to seamlessly integrate this with their existing ERP and other core systems. From an innovation perspective, this past year has been productive, and I'm excited to share that we continue to deliver capabilities on our platform this quarter. Today, we announced our strategic relationship with Amazon Web Services to provide our Anaplan platform on AWS. This expanded relationship will help us serve a wider range of enterprise customers and grow our overall market opportunity. This collaboration will also allow customers to leverage integrated cloud services, extending our Anaplan platform by embedding data storage and analytics tools from AWS. This builds upon Anaplan's PlanIQ with Amazon forecast, which we announced at our CPX user conference last fall. As a reminder, this product delivers more accurate predictions to our customers by pulling in data from Anaplan and by automatically testing several learning algorithms before selecting the model optimized to generate the strongest forecast for a customer's unique use case. Now with Anaplan on AWS, It will allow PlanIQ customers to leverage first- and third-party data in their forecasting and scenario analysis. This product has been available for the past several months through our early access program, and we have been working closely with several major customers and partners in healthcare, mining, consumer goods, and e-commerce and have received positive customer feedback. We are building a strong ecosystem of technology partnerships to increase value and choice to our customers. During this past year, we also announced Anaplan on Google Cloud and CloudWorks, demonstrating our commitment to opening up the platform. Today's announcement of Anaplan on AWS is a part of that continued innovation. From a go-to-market perspective, our relationships with AWS and Google Cloud will also diversify our selling motions, providing the necessary scale to address the large market opportunity ahead of us. Our joint go-to-market with AWS will be supported by their sales team. Our SI partner ecosystem is a cornerstone of Anaplan's go-to-market strategy and is critical in delivering lasting value to our customers. This quarter, 10 of our top 20 deals were sourced by partners. I'm also pleased to announce that McKinsey has now named Anaplan their official partner for corporate performance management. At our sales kickoff last week, we announced the launch of our brand-new partner solution showcase, the destination for our partners to showcase their Anaplan solutions to customers and prospects, which has been designed to support our customers' key planning needs by function and by industry. This new portal will help prospects access innovative partner solutions from a single catalog and allow existing customers to see the possibilities for extending their existing use of Anaplan across business functions and geographies. We continue to be the leading choice for customers looking to digitally transform their planning capabilities. Anaplan is already recognized by Gartner as a leader in three out of four magic quadrants. Adding to this recognition this quarter, Anaplan was also named a cloud EPM leader by IDC Marketscape. In fiscal year 2021, against the pandemic backdrop, we grew our global employee talent by 19%. We also continued building a world-class ecosystem of certified Anaplan experts. expanding our community across a variety of functional backgrounds. The total number of professionals that completed one of Anaplan's certification levels grew in excess of 100% over the prior year. This includes Anaplan talent at our customers, partners, as well as our own employees. The people and talent element of connected planning is vital to the longevity and sustainability Anaplan delivers to our customers. As we have also discussed in the past, customers have increasingly implemented a recommended center of excellence or COE. These are customers' internal teams dedicated to deploying Anaplan with the purpose to ensure that transformational business planning is fully realized and self-sustaining. This in turn drives greater customer adoption and broader use of our platform, which are key drivers of our net expansion rate, and the customer penetration over the longer term. I'm excited to share that the number of customers with a COE doubled during this past year. Within our leadership team, last month we welcomed Bill Hsu as Chief Revenue Officer to manage the company's go-to-market organization and global growth engine, where he will be focused on driving operational discipline and scaling our go-to-market capabilities. Prior to joining us, Bill led the global industry sales business for another SaaS company. He is well known as an effective, thoughtful, and skillful go-to-market leader with an impressive track record of delivering growth and operational performance. Bill understands the importance of continuing to drive stability while scaling our go-to-market strategy to help take Anaplan to the next level. Reflecting back on this past year, as we have navigated through the challenging environment, Our priority in the first half of the fiscal 21 was to focus on strong sales execution, optimizing pipeline around deal opportunities and customers who have the highest propensity to buy in an uncertain environment. We have been successful on building a healthy pipeline and driving expansion opportunities with existing customers, and we drove tighter collaboration in our joint account planning processes, leveraging our partners, to connect Anaplan into the digital transformation efforts they are driving with their largest customers. As a result of these efforts, we delivered steady sequential improvement in billing's growth as we progressed through the fiscal year. As a true testament to our Anaplan values, we worked together as a community, both with one another and with our customers. We quickly implemented Anaplan helps, to aid organizations in navigating the impact of COVID-19. We received over 300 free trial requests for our connected planning platform for hospitals, pharmaceuticals, and nonprofit organizations. I'm also excited to announce our new vaccine distribution planning solution to help government agencies, public health organizations, and healthcare systems manage and control every aspect of COVID-19 vaccine distribution. This new solution, which has now been adopted in the marketplace, is available through our partners. Looking ahead, we continue to execute in an environment impacted by the ongoing COVID-19 pandemic by delivering value to our customers to help them achieve their digital transformation goals. With that backdrop, I remain optimistic for fiscal year 2022. As I said before, we have incredible opportunities ahead and the need for modern planning capabilities being a multi-year journey for most companies are being prioritized. All of this provides a tremendous runway for growth. In closing, I'd like to thank our employees, customers, partners, investors, and other key stakeholders as we value their trust and strategic partnerships. Now let me turn over the call to Dave, who will discuss our fourth quarter and full-year financials and provide our outlook for the first quarter and fiscal year 2022. Dave? Thank you, Frank, and good morning, everyone. Total revenue for the fourth quarter was $123 million, up 25% year-over-year. Within this, subscription revenues grew 26% and comprised 92% of total revenue. Service revenues were $10 million, up 14 percent from the fourth quarter last year. Total revenue for fiscal 2021 was $448 million, up 29 percent year-over-year. Fourth quarter billings growth rate improved year-over-year and sequentially. Calculated billings for the fourth quarter were $173 million, up 37 percent year-over-year, driven by strong sales execution and higher growth in net new bookings this quarter. Billings also reflects a four-point foreign currency tailwind and approximately three points related to a large upfront payment for a multi-year contract. Excluding these impacts, billings growth rate would have been approximately 30%, which is still well ahead of our guidance of 20% to 21%. For the full fiscal year, billings were $523 million, reflecting growth of 25% compared to the prior year. RPO exiting the fourth quarter was $818 million, of 25% over last year. The current portion of RPO that is expected to be recognized as revenue over the next 12 months is $420 million, of 29% year-over-year. We demonstrated healthy new enterprise growth and ended the quarter with over 1,600 customers. A dollar-based net expansion rate, or NRR, is 114% this quarter. We delivered year-over-year growth in the volume of expand deals as a result of broadening Anaplan's platform within existing customers. There has been no change in churn this quarter, and our overall customer retention rate is in line with historical levels. As a reminder, NRR reflects the cumulative impact of lower deal volume for the past several quarters. As we continue growth in expand deals, we will begin to see improvement in our NRR through the fiscal year. Turning to our profitability metrics, total non-GAAP gross margin was 78 percent, up approximately one percentage point year-over-year. Within this, subscription gross margins were 84 percent, roughly flat year-over-year, and services gross margins were approximately 7 percent, up roughly three percentage points year-over-year. For the year, total non-GAAP gross margin was 77 percent, up approximately one percentage point year-over-year. For the fourth quarter, total non-GAAP operating expenses were $105 million, up from $87 million in the prior year, primarily due to investments in go-to-market and product and engineering. Operating expenses for the year were $385 million, up 21 percent year-over-year from $319 million. We continue to drive leverage in Anaplan's financial model while investing in key areas within go-to-market and product development. operating margins were negative 8%, an improvement of 350 basis points compared to negative 11% in the same period last year. For the full fiscal year, operating margins were negative 9%, representing substantial improvement from negative 16% in the prior year and demonstrating progress towards our financial objectives of improved productivity and profitability. Net loss per share in the fourth quarter was 7 cents. based on 143 million weighted average shares. Free cash flow for the fourth quarter was 7 million. We demonstrated good working capital management. We executed the quarter with 321 million in cash and cash equivalents. While there may be continued economic uncertainty, broad-based digital transformation investments remain a top priority across industries and around the world creating significant opportunities for Anaplan to continue building a healthy pipeline of new customers and drive an expansion of our platform within existing customers. Looking ahead for the first quarter of fiscal 2022, we anticipate revenue to be in the range of $126.5 million to $127.5 million. Within this, we expect services revenue to be in the range of $9.5 million to $10.5 million. Billings for the first quarter are expected to be in the range of $122 million to $124 million. This implies a year-over-year growth rate in a range of 27 percent to 29 percent. Non-GAAP operating margin for the first quarter is expected to be in the range of negative 9.5 percent to 10.5 percent. Weighted average share count is expected to be approximately 144 million shares. For the full fiscal 2022, We are raising our guidance of expected revenue to be in the range of $550 million to $555 million. We expect non-GAAP operating margin to be in the range of negative 8% to 9%, approximately flat year-to-year. Weighted average share count is expected to be approximately 147 million shares. In closing, our runway for growth and large market opportunity remain intact. We will continue to scale our business through strategic investments extend our leadership in this market, and drive towards profitable growth. I'll now turn it over to the operator for questions.