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spk01: at that time. If you require assistance during the conference, please press star zero on your national telephone. As a reminder, this conference call is being recorded. I would like to turn the conference over to your host, Ms. Adelita Pichepko, Vice President, Finance and Investor Relations. Please go ahead.
spk00: Good afternoon. Thank you for joining us in today's conference call to discuss Anaplan's second quarter fiscal year 2022 financial results. Joining me on the call are Frank Calderoni, our Chief Executive Officer, and Vikas Mehta, our Chief Financial Officer. Second quarter fiscal year 2022 financial results and discuss our financial guidance for the third quarter and fiscal year 2022. Please note that some of the information discussed on the call, particularly our guidance, is based on information as of August 31st, 2021, and contains forward-looking statements that involve risks, uncertainties, and assumptions including those related to the continued impact of COVID-19 on our business and global economic conditions. The guidance we will provide today is based on our assumptions as to the macroeconomic environment in which we will be operating. Those assumptions are based on the facts that we know today. Many of these assumptions relate to matters that are beyond our control and changing rapidly, including but not limited to the scope and effectiveness of precautionary measures designed to contain and prevent the spread of COVID-19. the continued impact of COVID-19 on customers' purchasing decisions, and the length of our sales cycle, particularly for customers in certain geographies. Please refer to the documents we filed 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 current 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 margins, 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 Frank Calderoni.
spk08: Frank Calderoni Thank you, Adelita. Good afternoon, everyone, and thank you for joining us today. We delivered a strong quarter with year-over-year revenue growth of 36%, the highest growth in the last four quarters. This quarter was a record performance in ACV and expand deal volume as a result of the focus on driving platform expansion into other use cases and functional areas. We had several large deals, over a million dollars, as the demand for enterprise-wide planning is growing. This is evidenced by the strong expansions we saw, with 71% of new bookings coming from our existing customer base. Our global footprint is also making an impact across the board, and the increase of use cases going beyond just finance is a clear indication of how pervasive connected planning has become. We now have over 1,750 customers. Some of our new customers include Ford Motor Credit, a leading provider of automotive financial products and services, Yamaha, a multinational corporation of musical equipment, SoftwareOne, a global provider of end-to-end software and cloud technology solutions, and Discovery, a global mass media company. From a go-to-market perspective, as businesses continue to recover globally, we are taking advantage of the improving demand environment. Under Bill Hsu's leadership, we've seen steady progress on our execution across areas such as pipeline generation and moving into larger, higher-quality deals, improving sales linearity, and elevating the story to resonate with the customer's most significant challenges. Focus in these areas drove higher ASPs and AE productivity. Across our geographies, we had strong growth in all regions. In the Americas, we had great traction in sales and marketing planning solutions deals as customers prioritized the acceleration of revenue growth. This quarter, four of the top six deals in the Americas were in sales planning. In our international business outside of the Americas, Amita delivered strong growth and a healthy mix of new logos such as Morrison's, one of the largest grocery retailers in the UK. Asia Pacific delivered the highest year-over-year and sequential growth in net new ACD. I want to congratulate our Asia Pacific leader, Karen Clark, for her stellar leadership. A key expand deal in Asia Pacific was with Tata Motors, a global automotive company with over $30 billion in revenue. This customer has built upon their existing S&OP use case and intends to expand their use of Anaplan beyond operations into other critical areas such as finance, sales, and workforce planning. I'm also pleased with the momentum we're seeing in our partner ecosystem. This quarter, the majority of our greater than $1 million deals were sourced or co-sold with partners. Our partners continue to invest in and hire Anaplan skilled resources, which is a testament to the level of customer interest they're seeing in the market for enterprise-grade planning solutions. Key GSI partners are staffing additional Anaplan-dedicated alliance development resources as they continue to grow. It's exciting to see our partners scale their practices across newer territories, including our first wins in Switzerland with Deloitte and two large wins in Asia Pacific, showcasing our strength with partners Quinet and Deloitte in that region. A great example of how our partner ecosystem helps drive the vision and implementation process is with our alliance partner, EY, and a leading US life insurance company to modernize their financial forecasting by offering the scale, accuracy, and real-time data needed to make better decisions. EY worked closely with Anaplan and the customer to help craft the strategy, identify necessary capabilities, and launch the initial use case within five months. EY offered the customer a diverse team of industry professionals and master Anaplanners with a deep understanding of the Anaplan platform. Our cloud partnership with Google Cloud, announced late last year, allows us to further build on our partner ecosystem. As you know, Google has been a great customer of Anaplan, and now this partnership will expand the reach of our platform to new geographies and provide opportunities for collaboration with the GCP go-to-market teams. In July, we launched Anaplan on Google Cloud in the United States. This marks the first time Anaplan is available on public cloud. We have already signed our first two customers as part of our GCP partnership, including Ford Motocredit, who is now using Anaplan on Google Cloud, which brings a wide variety of critical information about business operations into an automated and scalable environment. Our success in expansion selling this quarter was across many industries, including technology organizations such as Freshworks, who leverage Anaplan to meet their planning needs. We are also seeing significant traction with long-time customers such as ServiceNow, who has expanded their use of Anaplan to drive improvements in sales productivity. In addition, they will use Anaplan's predictive insights with AI ML capabilities to inform and prioritize day-to-day sales activities and support the success of their sellers. We also saw traction under our healthcare vertical, including Arden and GEM, a UK provider of health and social care system support. Arden and GEM deployed Anaplan to better manage the demand and supply chain planning of personal protective equipment. Given this successful partnership, Arden and GEM is looking forward to delivering even more Anaplan solutions to their national health service clients. Our leadership position in the Office of the CFO helps us to further expand into other critical functional areas. A key indicator of the broad impact of our solution is the increase in use cases across the enterprise. S&P Global, with over 23,000 employees and $7 billion in revenue, is an early-stage connected planning customer. They were already using Anaplan for revenue, expense, and workforce planning. They have now added sales forecasting, quota, and territory planning as a solution to transform the go-to-market organization. S&P Global extended the use of Anaplan to increase sales productivity and provide a real-time single source of truth for sales leaders. Supply chain planning use cases have also gained traction. A new customer this quarter was Accolade Wines, one of the biggest wine companies in the world with brands including Hardee's, St. Hallett, Rand Burge, and House of Eris. This customer needed to accelerate their planning cycles to standardize production and plan commercial spend in conjunction with increasing sales volume. Accolade Wines chose Anaplan as the only vendor to provide a complete end-to-end solution. Our customers see the critical need for powerful decision-making within both finance and operations. The pandemic has highlighted that sophisticated scenario planning capabilities are essential. We created a new category with Connected Planning a few years ago, and I'm pleased to announce that Gartner has validated our enterprise planning strategy in their first-ever Market Guide for Cloud Extended Planning and Analysis Solutions. which was just released earlier this month. They have recognized Anaplan as the only vendor who qualifies in all five additional planning functions with an XP&A turnkey ability. As we continue to build in our market leadership, I'd like to share some of the progress we've made with our platform. I am proud of our engineering and product team, led by Ana Pinzik. Under her leadership, this team continues to innovate, adding new features and capabilities to deliver even more value to our customers. In June, we announced the availability of PlanIQ as another monetizable feature of our platform. Since its launch, we have closed several new PlanIQ customers across various industries and regions. This capability delivers higher value and ROI for customers, and as a result, we are seeing growing demand and interest. The power of PlanIQ has helped our customers with increased time savings, operational efficiencies, and new levels of forecast accuracy. Our UK customer, South Central Ambulance Service, noted that PlanIQ makes generating precise forecasts easy. taking only two and a half weeks to get up and running, and delivering quick time to value. In July, we announced the availability of new management reporting capabilities, further extending and enriching Anaplan's existing set of reporting features. These new capabilities went live after running an early access program with select customers, and we've already seen strong adoption post-launch. Customers using this capability include Zillow, a leading online real estate marketplace, and StenaLine, a shipping line company and one of the largest ferry operators in the world. In summary, Q2 results reflect healthy momentum in our business. As we close the first half of fiscal 2022, I'm proud of our team and what we have accomplished. We have all come together navigating the pandemic, focusing on the future growth, and maintaining a strong, upstanding culture. We have seen continued recovery with both the improvement in the macro environment and our execution against the fast-growing market opportunities for digital transformation. With the post-pandemic economy emerging, we are now focused on the second half and beyond, and we are confident in our ability to seize this opportunity. To help us take Anaplan to the next level, I am personally very excited to welcome Vikas Mehta, our Chief Financial Officer. His active engagement across the company with his enthusiasm for our customers and partners have been impressive. I look forward to partnering with Vikas and the rest of my leadership team. With our dedicated employees and partners, we couldn't be better positioned to take advantage of this great opportunity. Now let me turn the call over to Vikas, who will discuss our second quarter financials and provide our outlook for the third quarter and fiscal year 2022. Vikas?
spk05: Thank you, Frank. I'm thrilled to be part of the Anaplan team. I believe that in the next decade, business applications will become even more intelligent, integrated, real-time, and we have a massive opportunity to make an impact. It has been great getting to know the team here, and I also look forward to working closely with the investment community. Moving on to business performance, I'm pleased to report our second quarter results. We beat the high end of our revenue, billing, and operating margin guidance metrics, driven by solid execution and improving global trends. Total revenue was $144 million above the high end of our guidance range and up 36% year-over-year. Within this, subscription revenue grew 35% and comprised 91% of total revenue. Service revenue was $14 million, up 44% year-over-year, representing 9% of total revenue, which is in the range of prior and expected levels of around 10%. Our revenue results reflect improvement in bookings linearity. From a geographic perspective, we are pleased with the results from our continued investments in expansion of field coverage and capacity. International operations, which we define as our EMEA and Asia-Pacific geographic businesses, represented approximately 45% of total revenue. This compares to 43% of total revenue in the same quarter last year and 40% in the second quarter fiscal year 2020. As you can see, global demand remains strong for enterprise solutions targeted at delivering true digital transformation across their business. This is highlighted by healthy growth of new customers in the quarter, bringing our total customer count to over 1,750. We now have 505 customers with ARR over 250,000, representing 29% growth year-over-year. Additionally, the number of customers with ARR over 500,000 and 1 million increased 33% and 53% year-over-year, respectively. As Frank mentioned earlier, we saw significant strength in expansions this quarter as customers continued to find additional value in the Anaplan platform. More than 70% of our net new ACV came from existing customers. This performance resulted in dollar-based net expansion rate, or NRR, of 119%, representing the third consecutive quarter of improvement. This is a testament to upsell success in the install base, as well as market validation of the need to extend planning to other areas beyond finance. In addition to continued success in delivering year-over-year growth in the volume of expand deals, our overall customer retention rate remains healthy and in line with historical levels. Looking at our performance metrics, calculated billing for the second quarter was $148 million, up 36% year-over-year. Remaining performance obligations, or RPO, exiting the second quarter was $906 million, up 29% over last year. The current portion of RPO that is expected to be recognized as revenue over the next 12 months is $475 million, up 33% year-over-year. Looking at Q2, CRPO bookings growth of 33% reflects acceleration in net new ACV growth. As a modeling note, we expect to see continued variability in calculated billings and CRPO bookings growth rates. based on differences in the timing of billing versus booking, early renewals and off-cycle renewals. We recommend looking at both billings and CRPO bookings metrics on a trailing 12-month basis, which will help normalize for these timing differences. On a trailing 12-month basis, billings grew 33% and CRPO bookings grew 30% year-over-year and is a clearer indicator of the underlying growth in our business. Turning to margins, total non-GAAP gross margin was 77%, less than 1% lower year-over-year, driven by higher services revenue mix and investments in our data centers and public cloud. Within this, subscription gross margin was 84%, and services gross margin was approximately 8%. Over the near term, our gross margin will include the impact of a gradual increase in the cost of hosted services to reflect the impact of ramping our public cloud usage. Non-GAAP operating margin for the second quarter was negative 7.6%. over 1% improvement compared to negative 9% in the same period last year. Operating margin beat our expectations, reflecting strong revenue results and a shift in the timing of hiring and marketing expenses, which are now expected to shift to Q3. Net loss per share in the second quarter was negative 9 cents, based on 145 million weighted average shares. Turning to the balance sheet and cash flow, free cash flow for the second quarter was negative 24 million, and we exited the quarter with 313 million in cash and cash equivalents. Looking ahead, we are closely watching the impact of the Delta variant on the improving global recovery and how factors such as rising labor costs or production challenges could affect our customers. For the second half of the year, we expect third quarter fiscal 2022 revenue in the range of 145.5 million to 146.5 million. Within this, we expect services revenue to be in the range of 11 million to 12 million. As we mentioned last quarter, we remain focused on investments to expand our go-to market and product enhancements to drive further growth in the next year. That said, non-GAAP operating margin for the third quarter is expected to be in the range of negative 10 to negative 11% as the timing of incremental investments in hiring and marketing costs shift from Q2 to Q3. Billings for the third quarter are expected to be in the range of $179 million to $181 million. This implies a year-over-year growth rate in the range of 23% to 25%. Looking at billings from a trailing 12-month basis, the midpoint of our Q3 billings guidance would represent 32% year-over-year growth. Rated average share count for the third quarter is expected to be approximately 147 million shares. With our first half performance and expected performance in the second half, we are raising our full fiscal 2022 revenue guidance to be in the range of 571.5 million to 573.5 million, up from 555 million to 560 million. We expect non-GAAP operating margin for the full year to be in the range of negative 8 to negative 9%, consistent with our prior expectations and also reflective of our continued investment strategy in our platform, go-to-market, and our overall global scale. Weighted average share count for the full fiscal year is expected to be approximately 146 million shares. In closing, Q2 was a strong quarter, and we are very pleased with our first-half performance. We are looking forward to expanding our field and platform capabilities and continuing to deliver great customer success. With that, let's now open it up for questions.
spk01: Thank you. Ladies and gentlemen, if you have a question at this time, please press star, then the number one key on your touch-tone telephone. We also ask that you limit yourself to one question only, and if your question has been answered or you wish to remove yourself from the queue, please press the pound key. Your first question comes from the line of Raimo Lancho from Barclays. Your line is open.
spk06: Thank you and congrats on a great quarter. Frank, my question is around what you're seeing in terms of customer engagement. We saw this quarter very good numbers around the installed base and you really have done a great job over the last few quarters to focus there. As we're coming out of the pandemic and digital transformation projects are picking up again, what do you see in terms of new customer interest picking up? And, you know, given the longer sales cycle you guys have, it's probably showing up more in the pipeline than in numbers. But what are you seeing there in general? Thank you.
spk08: Thanks, Remo. Good question. You know, the first thing I would say is we're seeing, first of all, that the macro trends are improving, signs of a pandemic recovery. I think that's over the last couple of months. It's been up and down a little bit, but I think it's trending in the right direction. I think many companies are realizing, as they've gone through the pandemic, that there's a need for digital transformation, and specifically from a planning perspective, the importance of agility and scenario planning. I know we've talked now for a while about digital transformation, but I think what I'm seeing, especially in the last six months, is an acceleration of that. And I think those trends are sustainable longer term. I say that because of the magnitude of the opportunities that have come up. You saw that we mentioned that this past quarter we had over six deals which were over $1 million. That's an indication of transformational opportunities that have been opening up. So I think that's continuing and specifically around planning. I think it's further validation. with some of the information that Gartner came out with earlier this month with their market guide, really talking about the importance of operational planning. They gave out some statistics in that report that there's only 5% of companies today that are actually leveraging operational planning. They made a prediction that by 2024, 30% of organizations will be doing operational planning, and by 2024, they feel like 50% will actually be developing roadmaps to get to operational planning. So I think all those macro trends, pandemic, digital transformation, the importance of planning, and really the attention of all those at the executive level, from what I've seen, especially over this past quarter, has heightened the importance of what companies are doing now, but also as they look out over the next six months and over the next few years. Thank you.
spk01: Thank you. And your next question comes from the line of Brent Hill from Jeffries. Your line is open.
spk10: Good afternoon. Frank, maybe if you can talk to some of the use cases you're seeing, you know, beyond finance. You mentioned sales. A lot of the work we've done, we've heard a lot of supply chain adoption. Can you walk through, you know, new areas that you're seeing and exciting kind of maybe greenfields that you hadn't seen pre-pandemic? Thank you.
spk08: Sure. You know, again, this kind of highlights what I just mentioned as far as the importance of operational planning and what Gardner mentioned in their market guide. You know, we've been working on that for the last few years, really setting the stage for operational planning and really leading the way in what we're doing and what we offer in our platform plus the innovation that we're having. So clearly, you know, we've been in that 50%, 55% of our businesses. originates in finance, but we are seeing acceleration, as you just pointed out, in supply chain as well as in sales performance management. I think if you look at some of the critical things that was mentioned even this morning on CNBC as far as businesses, they're looking at supply chain shortages. They're looking at hiring dynamics in the environment that we're in right now. They're looking at interest rate volatility. All of those point to the need for operational planning. And from our pipeline, even though we had a strong second quarter with some of those metrics that we mentioned earlier on the call, the pipeline as we see it right now continues that strength going forward, looking at sales performance management, supply chain, as far as some key indicators. First of all, I would say from a use case standpoint, we're seeing increased interest in that supply chain and sales planning. as these opportunities become more multifunction and also demonstrating the capability that Anaplan has to address these capabilities. We're also seeing, as far as industry, growth in pipeline deals for financial services, technology companies, manufacturing companies, life sciences, healthcare. And also, and I know we've talked about this in the past, We're seeing some early signs of some travel and hospitality deals, companies kind of coming back into the pipeline. So that doesn't minimize the importance of finance. I just want to emphasize that as well because operational planning begins and ends in the office of CFO, which I think is important. And it also showcases, again, the structure of our platform to be able to do that.
spk09: Thank you.
spk01: Next up we have Dan Church from Goldman Sachs. Your line is open.
spk04: Great. This is Dan Church on for Cashrung, and thanks for taking the question. I guess just a quick one for me, and you talked a little bit about it on the call, but now that Bill's had a couple quarters with the sales and marketing org, just any kind of incremental changes and improvements driving efficiency or any low-hanging fruit? And then you talked a little about investments and hiring pushing into the back half. So if you could just give a little color on how hiring is trended relative to plan and some of those investments you're looking to make, that would be really helpful. Thank you.
spk08: Sure. So Bill's coming up on his eighth month's anniversary with Anaplan, and so it's great to have him as part of the leadership team. You know, I would say under Bill's leadership, we've seen steady progress in our go-to-market execution. I think the second quarter was a good indication of that. Bill's been focused on prioritizing out foundational performance, really focusing on the basics of pipeline generation to opportunity progression and the stages of that pipeline. I think as a result of that, what we saw this quarter, and similar to what I just mentioned as far as a pipeline for the second half, we're moving into larger, higher-quality deals, resulting in, as I said, this quarter we had six deals, large deals that were over a million dollars, which is great to see. We're also seeing improving sales linearity more consistently across the quarter or throughout the quarter, which has driven improved bookings linearity in Q2, and we expect that to continue. We're seeing increasing, through Bill's leadership, executive engagement, driving higher expands and larger AFPs as we get more of our customers at the C-suite engaged in our transactions. And I think as part of that, Bill has been getting the team to really elevate the story to resonate with customers and their most significant challenges. Go back to what I was saying before. If we can get in there and we can talk about some of the problems that they're dealing with and offer solutions that are able to meet those challenges in the near term, And that's the beauty of Anaplan, that we're able to go in there and deliver results, ROI, results of improvement in a short period of time. I think that goes a long way. And I think the momentum that we saw this past quarter in our expand deals would not have been possible without the support of our customer success team, which is part of Bill's organization. I have to say that they've done an excellent job really supporting, I would say, best-in-class expansion selling. driving that greater customer adoption and making sure that we can get the realization of that value becoming a top priority for our customers. And I know I've discussed this previously, but one of the factors that influences greater adoption is the number of customers who have implemented a COE or a center of excellence. We've mentioned that in previous calls. We continued even this quarter, and I'm excited about this, the number of customers with a COE grew again this quarter over 100% year over year. And this is now the third consecutive quarter where the COEs are now approximately one-third of our customer base, which is great to see. So a lot of great success. Really want to thank Bill and the go-to-market team for that success over the past two quarters.
spk04: Really helpful. Thank you.
spk01: Thank you. And your next question comes from the line of Kirk Maturin from Avercore Ice. Our line is open.
spk11: Yes, thanks very much. Frank, I was wondering if you could expand a little bit more on your comments around some of the wins you've had with the bigger GSIs recently. I think you mentioned a couple of deals with Deloitte. Are those deals, when you go in there with them, really sort of enterprise planning at a higher level, or are they still sort of going after operational planning and then they can expand from there? I'm just trying to get a sense on how they're positioning you as a platform for planning, or is it more sort of precise, you know, solving one issue and then, you know, grow from there? I'm just trying to get a sense on where that is today and maybe where it could be, you know, six, 12 months from now. Thanks. Thanks.
spk08: So, you know, at the highest level, I'd say it's both. But, again, when you start seeing transactions, larger transactions, more transformational transactions as part of an overall digital transformation of specifically what some customers call revolutionizing planning, and that goes into that whole operational approach, that's really happening at the executive level, at the C-suite, at the CFO level, and so forth. And we're seeing more of those opportunities come forward. You know, there's one I just this morning came up, which I can't mention the name, but I want to bring it up as an example. This happened in Q1 of last year. We talked about a healthcare company that was really looking to, as they call, revolutionize their planning in finance, but really kind of looking at it from an operational standpoint. We got the deal in Q1 of last year. We've been working with them and one of our strategic partners over this past year implementing that planning, that is a strategic planning. And actually this month they just went live, and it's the first phase of a multi-year transformation for them. And the comments that came back today as they were celebrating their go live really are phenomenal as far as taking a whole new approach to planning and talking about it from a finance outlook. into the business and really kind of addressing some of the critical strategic needs that they have in their business. And so we're seeing more of those examples. I think we saw more in Q2. Looking at the pipeline in the second half, I feel good about those types of transactions. And the team, as I said before, with Bill and the rest of the go-to-market team, and I would say even across Anaplan, are rising to the occasion. With our partners, I have to use this also as a vehicle to say, that I want to thank our partners. The partner ecosystem that I think we've built allows us to jointly go after these opportunities, solve some of these challenges that these businesses are having, and begin a multi-year engagement. That's great.
spk11: Thanks, Ray. Congrats.
spk01: Thank you. Next up, we have Michael Turin from Wells Fargo Securities. Your line is open, sir.
spk02: Hey there. Thanks. Good afternoon. Welcome, Vickis. Billings up 36%. You saw a big snapback in subscription revenue, which really stands out, too. So just want to make sure, is there anything one time or unexpected to call out that drove the more pronounced strength in Q2? And then you're guiding for mid-20s billings growth here in Q3. Is that just a more patient path towards recovery? You've talked about that you're assuming for the rest of the year is there are Anything else for us to be mindful of just as we work through our models from here? Thank you.
spk05: Michael, thank you for the warm welcome. And I'd start by saying that I'm really pleased with the second quarter results that we had. We had strong Q2 with, you know, highest growth that we have seen in the last four quarters. We had a strong NRR at 119 percent. And as you also saw, we raised our full-year guidance. For the quarters specifically, I'd say two things important. The first one was we saw strong bookings linearity here, and I'd credit the sales team and Bill for the strong execution there. The second is in terms of services. And this is also an area where we did really well with 44% growth. And what our chief customer officer, Aaron, has been driving has been fantastic. Frank highlighted that in an earlier question as well. So overall, we saw good strength across the board, both in the subscriptions through our bookings linearity as well as in our subscriptions and services. In terms of execution, we specifically saw strength in expansions, and as we highlighted, 71% of our net new mix came from expansions. As we look forward, we feel we have a very healthy and robust pipeline, and that is the reason why we raised our full fiscal year guidance. Also, what I stated earlier in the script as well as prepared remarks was looking at trailing 12 months in terms of our billings as well as bookings, which were both 33% and 30% respectively. And as you look forward, you know, for the next quarter, the billings guide would be 32% if you take a trailing 12-month basis. Overall, we feel confident in our ability to execute, and we see a healthy and robust pipeline.
spk02: Thank you. Nice job to the team.
spk01: Thank you. Next up we have Siti Panigrahi from Missouri. Your line is open.
spk07: Thank you. And because congratulations, I also extend my warm welcome. Frank, I wanted to ask a little bit on that Google partnership you talked about, mainly the cloud partnership. Help us understand a little bit, is your strategy more encouraging your GCPs, your partners to close deals on these partners on cloud and as well as on their books? And how does it help you in the long run in terms of your margin or even deal cycle close?
spk08: So let me just step back and just go through the strategy that we put in place or we announced back in the fall of last year with GCP and a similar strategy with AWS. First, as I mentioned, Google has been a great customer of Anaplan, and they've leveraged Anaplan in various areas within Google. We saw it and they saw it as an opportunity for us to bring that performance of Anaplan on their cloud to our customers. So that was the first initiative that we were looking for. As we think about expanding on the global footprint, having more access to cloud when you start thinking about data residency and various other requirements from that perspective, the partnership with Google Cloud allows us to really expand our opportunities and go after different opportunities from that standpoint. So that was the first. Second, we have also been working with GCP to look at this as a vehicle to expand our further partnership in the go-to-market. And so beginning now in the United States, as we went live on Google Cloud in July, We're now able for GCP sales team to start to sell Anaplan on GCP to go after new opportunities, new customers from that perspective. One of those opportunities clearly that we talked about on GCP is Ford Credit, one that we just mounted. So it's great that we have that partnership between Ford Credit as well as GCP and Anaplan. And then the third part of the partnership with Google and specifically GCP is on technology. Are there things that Google technology can bring to Anaplan for our customers, our joint customers, to be able to leverage more capabilities on the Anaplan platform? That's great.
spk07: Thanks, Frank.
spk01: Thank you. Next up we have Alex Zuckin from Wolf. Your line is open.
spk13: Thanks so much. Frank, maybe the first one for you, if you think about the pipeline from the construct of how much of it will you classify as being, you know, kind of in any of the quarter itself, pent-up demand from customers that were maybe waiting to see more consistency in the macroeconomy before making a decision. How much do you feel is pent-up demand? How sustainable is some of the demand? And then I've got a quick follow-up for the guests.
spk08: So, Alex, I think I got most of that. You were breaking up a bit. But as far as the demand that we're seeing, you know, I'd go back to some of the comments I mentioned before. I see it from a macro trends standpoint kind of improving. First, I think it's a result of the pandemic recovery. Second, I would say it's the digital transformation accelerating. especially with some of the challenges I mentioned before within companies dealing with the pandemic, bringing that front and center. And I think those projects are now accelerating, and I think that's more of a longer-term trend for us. And then third, I just think the emphasis on planning and the need for scenario-based planning, focusing on agility, making changes within organizations and operations plays well to our platform and the capability that we have. So I see that as the primary driver of the business trend that we saw in Q2 and that which we're continuing to see as we look at the forecast for the second half.
spk14: Understood. Because maybe you guys talked about seeing some really strong expansion dynamics inside of your customer base, can you talk to how we should think about the trend line for NRR or DB&E in the back half of the year? Is this 119 the right way to think about it? Is it potentially higher than that? How should we think about that in the guidance?
spk05: Hi, Alex, and thank you for the question. Look, if you step back and look at our business model, I think it's a pretty simple business model with land, expand, and customer success. Land more and larger deals, you know, drive great expedience for those customers and then extend it further into other use cases. And what is interesting is our product is inherently built to drive that virality as well as extensibility. And this was evidenced, as you mentioned, in our mix of customers with net new ACV being 70% plus, as well as, as Frank mentioned, several 1 million deals, as well as our strong NRR at 119%. So this is all evidence that the business model, as we are looking at it, is working really well in terms of land expand and customer success. And specifically for NRR, If you look at it, we had early expands this quarter, and if you include those, in fact, the NRR would be greater than 120%. As we look beyond, we'll not guide specifically to what it is, and we don't, but we will continue to aspire for steady improvement there.
spk08: One thing I'll just jump in, Vikas, I just want to add to that. Really pleased with the the amount of expansion that we had with existing customers. And I know we've talked about this on previous calls, especially during the pandemic, the focus on current customers and working with them as to meeting their needs. And I think this shows how it's playing out. And just as a further validation of as you continue to focus on current customers and expansion, the top 25 customers, we were just looking at this the other day as we were prepping for this call, The top 25 customers, on average, their ARR is approaching $5 million, with several higher than that. And it just shows that those customers are clearly seeing continued need for Anaplan. The other thing which I think is also of note, which we did some analysis on, is those top 25 customers, the 50 percent, over 50 percent of those top 25 had three or more buying centers, and approximately a third represented had about two or more buying centers. So it shows that of those 25, they're not just in one use case or in one functional area. They've seen the value of operational planning, and it goes back to what we said before about the validation of what Gartner said in their market guide as far as that importance and where it is right now versus where it's going to continue to go in the next several years.
spk14: Perfect. Thanks, Vikas. Congrats on a great first quarter of CFO. Thank you, Alex.
spk01: Thank you. Next up, we have Brent Braston from Pipers, and their line is open.
spk12: Thank you. Good afternoon, and a warm welcome to the guests on the first call. Frank, the highest subscription in RPO growth in the past few years is certainly encouraging here. My question is on the composition of the second half pipeline. Do you expect existing customer mix to drive the recovery here? I think it was, what, 70% in the quarter? Or are there signs that new customers are also starting to rebound here? And then, two, if you look at the breadth of the pipeline, I think there were, what, $6 million deals in Q2. Do you see broader breadth in the pipeline for the second half, or do you still see a larger contribution of $1 million-plus deals? Thanks. Thanks.
spk08: I would answer that question both. I feel really good about the new business, the new lands that we've seen in the first half, and especially in the second quarter, and also how that will continue in our pipeline going forward, and then continued success with the expansion that the CASA and I just talked about. If I look at, from a new perspective, In the second quarter, we had some impressive new customers, some of which we highlighted. We were able to mention some of their names. But we also had a large global financial institution, which was very close to a million-dollar deal as a new customer. This customer had a need for rapidly modeling different macroeconomic scenarios to have a potential impact on their capital requirements. They're deploying Anaplan, or will be deploying Anaplan, for several hundred users across finance And being that they are a large global financial institution, they decided to come with Anaplan, not only just for this transaction, but to really kind of start to transform on the Anaplan platform for years to come. So I feel good about those type of opportunities that we saw in the second quarter and further opportunities as we look at the pipeline in the second half and even beyond that. And then the continued focus. for the expansion, the whole focus on a customer adoption, working with our customers to solve more of their challenges as they see value and get leverage in Anaplan. So it's a combination of both.
spk12: Helpful. Thank you.
spk01: Thank you. And your next question comes from the line of Scott Berg from Needham. Your line is open, sir.
spk03: Hey, guys. This is Josh. I'm for Scott. Thanks for taking my question. How should we think about the source of new logos, whether from direct sales or partner-driven? And has there been any change in this mix post-COVID in following some of the internal sales changes that you've made? And then secondly, quickly, just along that front, are you seeing any difference in sales cycle recovery domestically versus in international markets? Anything to highlight there? Thanks, guys.
spk08: So there are a couple of questions there. I'll take the first, really kind of talking about the land business. I'll ask to talk about the international, if you're okay with that. So as far as the new customer business, I would say that if I step back and look at both the new and the expand business, what we're seeing is a continuation of some of the trends I mentioned earlier. as things have been progressing through the pandemic and the need for digital transformation as well as the enhanced need for planning and scenario planning. That's had the most impact as far as the amount of business that we have from land and expand. And I would, again, suggest that it's a good mix, a good focus for us. I think if I look at back what I was saying before about Bill and the go-to-market team, the way that we go after those opportunities, we go after them through our account executives seeking out new deals, which they work on their own as well as in partnership with partners. We have an FDR, basically a call center that goes after transactions. And then we also develop expansion opportunities from our customer success team. That has not changed throughout the pandemic. But going back to some of the points that I mentioned earlier that Bill has been emphasizing across the team, as well as with our partner ecosystem, to focus on the customer business outcomes to make sure that we're going after some of the opportunities and challenges that they have. Going higher in the organization, I think, are enabling us to work all of those in a more effective way and getting better at the execution.
spk05: Let me jump in with the geographic perspective here. Look, we had a very good broad-based growth across all the three geographies. Growth was north of 30% across each of the North America EMEA as well as APAC. And specifically, as you look at our Q2 productivity, we also saw our deal velocity improve, especially as we were driving more expand sales here. Sales productivity increased and improved in general, both sequentially as well as year over year. As we look specifically at international, both EMEA and APAC did really well, and we called out APAC specifically as they had a very strong net new ACV quarter. So overall, from a geographic perspective, we feel that there's a very balanced growth. At the same time, we are watchful of the uneven recovery that we see through the sort of pandemic. But overall, we remain confident.
spk01: Thank you. And our last question for today is from Pat Wall Ravens from JMP. Your line is open.
spk09: Oh, great. Thank you, and congratulations. So, Vikas, we're going to make the last one about you, if that's okay. I mean, you have a great – you joined relatively recently. You have a great background, you know, 10 years at Microsoft, time at Walmart and Nike. What made you want to take this job?
spk05: That's a great question and thank you for asking me that. Listen, I'll highlight three things that really first make me feel that I made the right decision and also highlight why I made the decision. The first and most important thing was Enaplan is a value-first company. It's a value-driven company through and through. And how the employees behave, how integrity is foremost comes through in the value-driven discussions. The six values we have, openness, authenticity, inclusiveness, collaboration, creativity, tenacity come through in everyday business that we have within the company. The second thing, what was very impressive for me, is the product. Look, Anaplan runs on Anaplan internally, and I see that on a day-to-day basis. But even when I was outside and talking to customers, partners, as well as being a customer, I saw just the potential the product had as well as what it could do in terms of solving customer challenges and complexities. And the last one I'd say, you know, similar to the collaboration point I made earlier, I felt the leadership team is very cohesive. In my discussions with Bill, Marilyn, Anna, Frank, one thing came through very clearly. There was a shared vision, shared purpose. and a deep ownership mindset. So those were the things that I was looking for in addition to, of course, a massive opportunity that is ahead of us. So it's always people first when I think about opportunities, and I feel I made the right choice.
spk09: That's super. Thank you.
spk08: I have to say it's great to have you here. The first month has been a great one. I've enjoyed the partnership, and I see so much opportunity going forward. So welcome again. Thank you, Frank. I want to thank everyone for joining us on today's call. We appreciate your continued support, and we look forward to speaking to you again next quarter. Have a great evening.
spk01: Thank you, ladies and gentlemen. This concludes today's conference call. Thank you all for joining Human Others Connect.
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