ANAPLAN, INC.

PLAN
Real-time Estimate Quote. Real-time Estimate  - 08/05 11:52:01 am
45.12USD +0.51%

ANAPLAN : management's discussion and analysis of financial condition and results of operations (form 10-Q)

06/04/2020 | 04:23pm

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our condensed consolidated
financial statements and related notes included elsewhere in this Quarterly
Report on Form 10-Q and our Annual Report on Form 10-K for the year ended
January 31, 2020, filed with the SEC on March 30, 2020. This discussion contains
forward-looking statements that involve risks and uncertainties as discussed in
"Cautionary Note Regarding Forward-Looking Statements" included in this
Quarterly Report on Form 10-Q. Our actual results could differ materially from
those discussed below. Factors that could cause or contribute to such
differences include, but are not limited to, impacts on our business and general
economic conditions due to the current COVID-19 pandemic, those identified below
and those discussed in "Risk Factors" under Part II, Item 1A in this Quarterly
Report on Form 10-Q. Our fiscal year ends January 31.




Overview


Anaplan is pioneering the category of Connected Planning. Our platform enables
organizations to make better decisions and to plan and execute their ongoing
digital transformation to compete in today's digital economy. We believe
Connected Planning is an essential cloud category. It fundamentally transforms
planning by connecting all of the people, data, and plans needed to accelerate
business value and enable real-time planning and decision-making in rapidly
changing business environments. Connected Planning accelerates business value by
transforming the way organizations make decisions and placing the power of
planning in the hands of every individual at every level within and between
organizations. We continue to see the growth in the strategic value of the
Connected Planning platform as a foundation for companies to drive digital
transformation.



Connected Planning represents a fundamental shift from the legacy approach to
planning, which is typically confined to the finance department and uses a
patchwork of outdated and disconnected tools and manual processes that are often
overly complex, slow, inefficient, and static. Connected Planning enables
dynamic, collaborative, and intelligent planning across all areas of an
organization, including finance, sales, and supply chain, and other corporate
functions such as marketing, human resources, and operations. It enables
organizations to manage their people, products and customers with agility.



We sell subscriptions to our cloud-based planning platform primarily through our
direct sales team. We also have strategic partnerships that provide us with a
significant source of lead generation and implementation leverage. Our global
partners, including global strategic consulting and advisory firms, global
systems integrators and technology firms, often promote our platform as their
clients examine how to plan more effectively or seek digital transformation
through organizational change or improved business processes. We also partner
with leading regional consulting firms and implementation partners. These highly
skilled regional partners not only provide subject-matter expertise in the
implementation of specific use cases, but they also act as an extension of our
direct sales force by identifying and referring opportunities to us. We and our
partners create templatized solution offerings to further accelerate the
implementation, adoption and expansion of our platform.



We focus our selling efforts on executives of large enterprises, who are often
making a strategic purchase of our platform with the potential for broad use
throughout their organizations. We use a "land and expand" sales strategy to
capitalize on this potential. Our platform is often initially adopted within a
specific line of business, including in finance, sales, and supply chain, and
other corporate functions such as marketing, human resources, and operations,
for one or more planning use cases. Once customers see the benefits of our
platform for their initial use cases, they often increase the number of users,
add new use cases, and expand to additional lines of business, divisions, and
geographies. We call this the Honeycomb™ effect. This expansion often generates
a natural network effect in which the value of our platform increases as more
use cases are adopted, more users are connected, and greater amounts of data are
incorporated in our platform delivering exponential value to our customers.



We see a greenfield opportunity to help over 70 million knowledge workers around
the world plan more efficiently using Anaplan's platform.



We derive the substantial majority of our revenue from subscriptions for users
on our platform. Our initial subscription term is typically two to three years,
although some customers commit for shorter periods. We generally bill our
customers annually in advance. We also offer professional services, including
consulting, implementation, and training, but are increasingly leveraging our
partners to provide these services. During the three months ended April 30, 2020
and 2019, subscription revenue was $93.8 million and $65.1 million,
respectively, representing a year-over-year subscription revenue growth rate of
44%. During the three months ended April 30, 2020 and 2019, services revenue was




19


--------------------------------------------------------------------------------



Table of Contents



$10.0 million and $10.7 million, respectively. Our subscription revenue as a
percentage of total revenue was 90% and 86% in the three months ended April 30,
2020
and 2019, respectively.



During the three months ended April 30, 2020 and 2019, our total revenue was
$103.8 million and $75.8 million, respectively. Approximately 44% and 43% of our
total revenue was generated from outside of the United States in the three
months ended April 30, 2020 and 2019, respectively. Our net loss was $39.6
million
and $37.2 million in the three months ended April 30, 2020 and 2019,
respectively.



We believe that our focus on customer success allows us to retain and expand the
subscription revenue generated from our existing customers, and is an indicator
of the long-term value of our customer relationships for Anaplan as a whole. We
track our performance in this area by measuring our dollar-based net expansion
rate, which compares our annual recurring revenue from the same set of customers
across comparable periods. The dollar-based net expansion rate was 117% and 122%
as of April 30, 2020, and January 31, 2020, respectively.



Our dollar-based net expansion rate equals the annual recurring revenue at the
end of a period for a base set of customers from which we generated annual
recurring revenue in the year prior to the date of calculation, divided by the
annual recurring revenue one year prior to the date of the calculation for that
same set of customers. Annual recurring revenue is calculated as subscription
revenue already booked and in backlog that will be recorded over the next 12
months, assuming any contract expiring in those 12 months is renewed and
continues on its existing terms and at its prevailing rate of utilization.



The number of customers with greater than $250,000 of annual recurring revenue
was 367 and 353 as of April 30, 2020, and January 31, 2020, respectively. While
achieving and maintaining incremental sales to existing customers requires
increasingly sophisticated and costly sales efforts, we believe the introduction
of new solutions, features and functionality to our platform, and customers
realizing benefits through their initial adoption of our platform, means we have
significant opportunities to further expand the use of our platform by our
existing customers as well as to attract additional large customers.



We regularly evaluate acquisitions or investment opportunities in complementary
businesses, services and technologies and intellectual property rights as a
means to expand our offerings through a disciplined and strategic acquisition
process. For example, on October 3, 2019 we completed the acquisition of Mintigo
Limited
, an Israel-based artificial intelligence/machine learning company, to
enhance the predictive capabilities of our solutions. We may continue to make
such acquisitions and investments in the future, and we plan to reinvest a
significant portion of our incremental revenue in future periods to grow our
business and continue our leadership role in the Connected Planning category.




COVID-19 Update


In March 2020, the World Health Organization declared the COVID-19 outbreak a
pandemic. As the impact of the COVID-19 outbreak continues to unfold around the
world, many governments have implemented measures to address the outbreak,
including travel restrictions, quarantines and shelter-in-place orders, and
business limitations and shutdowns.



In response to the COVID-19 pandemic, we have taken several immediate steps
including shifting our training courses to an online only format, and moving our
global Connected Planning Xperience (CPX) to an online only format. To support
the health of our employees, in March 2020, we took steps to enable our global
workforce to work remotely, and we implemented our business continuity plan with
the goal of providing uninterrupted service to our customers. Our plan is to
slowly move toward normal operations on a market by market basis in accordance
with local authority guidelines, and to ensure that our return to work is
thoughtful, prudent, and handled with an abundance of caution with the health of
our employees being the top priority. The impact, if any, of these and any
additional operational changes we may implement is uncertain, but we currently
believe the changes we have implemented have not materially affected, and are
not expected to have a material and adverse effect on, our ability to maintain
financial reporting systems, internal control over financial reporting and
disclosure controls and procedures.



While the broader implications of the COVID-19 pandemic on our employees, our
results of operations, and overall financial performance remain uncertain, at
least for the immediate future, we expect our financial performance to be
impacted by the economic crisis arising from the COVID-19. We are starting to
see certain of our customers and prospective customers deferring or delaying
buying decisions and project implementations, prolonged sales cycles, and an
increase in requests for extended payment terms due to uncertain economic
conditions including those caused by the COVID-19 pandemic. We expect these
deferrals and delays to impact our new business pipeline and large deals,
including delays in deals arising out of our strategic relationships with our
global partners. We may also experience a contraction in our existing customer
base. These and other changes in customer demand for our solutions could
materially and adversely impact our business, results of operations, and overall
financial performance in future periods.




20


--------------------------------------------------------------------------------



Table of Contents



While we have developed and continue to develop plans to help mitigate the
negative impact of the pandemic on our business, these efforts may not be
effective and any protracted economic downturn may limit the effectiveness of
our mitigation efforts. In addition, even after the immediate impacts of the
pandemic on the global economy and our business subside, the residual effects of
the pandemic may present additional challenges to our business that are
currently difficult to predict. Furthermore, we generally recognize subscription
revenue from our customer contracts ratably over the term of the contract.
Therefore, changes in our contracting activity in the near term may not be
apparent as a change to our reported revenue until future periods. See the "Risk
Factors" section for further discussion of the possible impact of the COVID-19
pandemic on our business.




Factors Affecting Our Performance


We believe that our future performance will depend on many factors, including
those described below. While these areas present significant opportunity, they
also present risks that we must manage to achieve successful results. See the
section titled "Risk Factors". If we are unable to address these challenges, our
business and operating results could be adversely affected.



Market adoption of our platform. Even though we believe Connected Planning is a
strategic imperative for enterprises and that enables them to plan and execute
digital transformations in today's rapidly changing business environment, it is
at an early stage of adoption. Our long-term success will depend on widespread
adoption of Connected Planning by enterprises for numerous planning applications
with broad use of those applications within their organizations. While we
believe that we are still in the early stages of penetrating our addressable
market, we have benefited from rapid customer growth.



Customer First strategy. We put the success of our customers at the center of
our culture, strategy, and investments. We view our Customer First strategy as
core to capturing our Connected Planning vision and driving the continued
adoption and expansion in the use of our platform. By aligning our thought
leadership, worldwide development and delivery capabilities, and local sales and
service resources, our Customer First strategy drives exceptional value
throughout our customers' Connected Planning and digital transformation
journeys. Our continued success depends in part on our ability to continue to
put customers at the center of our strategy.



Expansion of existing customers. We employ a "land and expand" approach, with
many of our customers initially deploying our product for a specific use case
and group of users, and, once they realize the benefits and wide applicability
of our platform, subsequently renewing subscriptions and expanding the number of
users or use cases within and across lines of business and geographies as they
continue unlocking the agile enterprise planning and operating model across
functional boundaries. As a result, we are able to generate a significant
increase in revenue from the expanded use of our platform across the enterprise.
Going forward we are focused on our large customers where the opportunity for
expansion and need for our planning solutions are greatest. Our future revenue
growth and our ability to achieve and maintain profitability is dependent upon
our ability to maintain existing customer relationships and to continue to
expand our customers' use of our platform.



Scaling our sales team. Our ability to achieve significant growth in revenue in
the future will depend, in large part, upon the effectiveness of our sales
leadership and sales efforts, both domestically and internationally. We have
invested and intend to continue to strategically invest in expanding and
retaining our sales leadership, direct sales force, particularly in attracting
and retaining sales personnel with experience selling to larger enterprises. Our
ability to increase our revenue will depend on the new members of our sales
force becoming fully productive and executing expeditiously and effective sales
leadership. In the enterprise market, a customer's decision to use our platform
may be an enterprise-wide decision. These types of sales require us to provide
greater levels of education regarding the use and benefits of our platform,
which involves substantial time, effort, and costs.



International sales. Our total revenue generated outside of the United States
during the three months ended April 30, 2020 and 2019, was approximately 44% and
43%, respectively, of our total revenue. We believe global demand for our
platform will continue to develop as organizations experience the benefits that
our platform can provide to international enterprises with complex planning
needs spanning multiple geographies. Accordingly, we believe there is
significant opportunity to grow our international business. We have invested,
and plan to strategically invest, ahead of this potential demand in personnel,
marketing, and access to data center capacity to support our international
growth.



Partner ecosystem. Our partner ecosystem extends our geographic coverage,
accelerates the usage and adoption of our platform, and enables more efficient
delivery of service solutions. We intend to augment and deepen our partnerships
with global and regional partners, including strategic and advisory consulting,
systems integration, and technology firms. We believe our partners' scale and
route to market can significantly contribute to our ability to penetrate our
addressable market, extend our geographic coverage, and extend usage and
adoption of our platform.



Product velocity. We have invested and intend to continue to invest
significantly in research and development in an effort to enhance and expand the
functionality of our platform, to attract and retain development personnel, and
to




21


--------------------------------------------------------------------------------



Table of Contents



protect our market-leading technology advantage. We have a well-defined
technology roadmap to introduce new features and functionality to our platform
that we believe will improve our ability to generate revenue by broadening the
appeal of our platform to potential new customers as well as increasing the
opportunities for further expanding the use of our platform by existing
customers. We are also investing to further enhance the user interface,
functionality, and usability of our platform, including in machine learning and
other artificial intelligence technologies, to further enhance the predictive
capabilities of our platform. We will need to continue to focus on bringing
cutting-edge technology to market in order to remain competitive.




Components of Results of Operations


Revenue



We offer subscriptions to our cloud-based planning platform. We derive our
revenue primarily from subscription fees and, to a lesser degree, from
professional services fees. Subscription revenue consists primarily of fees to
provide our customers access to our cloud-based platform. Professional services
revenue includes fees from assisting customers in implementing and optimizing
the use of our cloud-based platform. These services include implementation,
consulting, and training.



Subscription Revenue



Subscription revenue accounted for 90% and 86% of our total revenue for the
three months ended April 30, 2020 and 2019, respectively. Subscription revenue
is driven primarily by the number of customers, the number of users at each
customer, the price of user subscriptions, and renewal rates.



Subscription fees are recognized ratably as revenue over the contract term
beginning on the date the platform is made available to the customer. Our new
business subscriptions typically have a term of two to three years. We generally
invoice our customers in annual installments at the beginning of each year
within the subscription period. Amounts that have been invoiced are initially
recorded as deferred revenue and are recognized ratably over the subscription
period.



Most of our contracts are non-cancellable over the contract term. We had
remaining performance obligations, or backlog, in the amount of $646.8 million
and $656.2 million as of April 30, 2020 and January 31, 2020, respectively,
consisting of both billed and unbilled consideration.



Because we recognize revenue from subscription fees ratably over the term of the
contract, changes in our contracting activity in the near term, including as a
result of the COVID-19 pandemic, may not impact our reported revenue until
future periods.



Professional Services Revenue



Professional services revenue is generally recognized as the services are
rendered for time and material contracts, or on a proportional performance basis
for fixed price contracts. The substantial majority of our professional service
contracts are on a time and materials basis. Implementations generally take one
to six months to complete depending upon the scope of engagement with the
customer. Our professional services revenue fluctuates from quarter to quarter
as a result of the requirements, complexity, and timing of our customers'
implementation projects.




Cost of Revenue

Cost of Subscription Revenue


Cost of subscription revenue primarily consists of costs related to providing
cloud applications, compensation and other employee-related expenses for data
center staff, payments to outside service providers, customer service, data
center and networking expenses, depreciation expenses, and amortization of
capitalized software development costs.



Cost of Professional Services Revenue



Cost of professional services revenue primarily consists of costs related to
providing implementation and configuration services, optimization services and
training services, personnel-related costs directly associated with our
professional services and training departments, including salaries and bonuses,
benefits, and stock-based compensation, the costs of
contracted third-party vendors, and travel.



Professional services associated with the implementation and configuration of
our subscription platform are performed directly by our services team, as well
as by contracted third-party vendors. When third-party vendors invoice us for
services performed for our customers, those fees are recognized as expense over
the requisite service period.




22


--------------------------------------------------------------------------------



Table of Contents



Operating Expenses

Research and Development



Research and development expenses consist primarily of personnel-related costs
for our development team, including salaries and bonuses, benefits,
stock-based compensation expense, and allocated overhead costs. We have
invested, and intend to continue to invest, in developing technology to support
our growth. We capitalize certain software development costs that are
attributable to developing new features and adding incremental functionality to
our platform, and amortize such costs as costs of subscription revenue over the
estimated life of the new incremental functionality, which is generally two to
three years. We plan to increase our investment in research and development for
the foreseeable future as we focus on further developing our platform and
enhancing its use cases. However, we expect our research and development
expenses to decrease as a percentage of our total revenue over time, although
they may fluctuate as a percentage of our total revenue from period to period.



Sales and Marketing



Sales and marketing expenses consist primarily of personnel-related costs
directly associated with our sales and marketing staff, including salaries and
bonuses, benefits, commissions, and stock-based compensation. Other sales and
marketing costs include promotional events to promote our brand, including our
Anaplan Connected Planning Xperience (CPX) user conferences, advertising, and
allocated overhead. We plan to increase our investment in sales and marketing
over the foreseeable future, primarily stemming from increased headcount in
sales and marketing, and investment in brand- and product-marketing efforts.
However, we expect our sales and marketing expenses to decrease as a percentage
of our total revenue over time, although they may fluctuate as a percentage of
our total revenue from period to period.



General and Administrative



General and administrative expenses consist primarily of personnel-related costs
associated with our executive, finance, legal, and human resources personnel,
including salaries and bonuses, benefits, and stock-based compensation expense,
professional fees for external legal, accounting and other consulting services,
and allocated overhead costs. We expect to strategically increase the size of
our general and administrative function to support the growth of our business
and to take advantage of the large opportunity we see in front of us. We
continue to incur additional expenses as a result of operating as a public
company, including costs to comply with the rules and regulations applicable to
companies listed on a U.S. securities exchange and costs related to compliance
and reporting obligations pursuant to the rules and regulations of the SEC. As a
result, we expect the dollar amount of our general and administrative expenses
to increase for the foreseeable future. However, we expect our general and
administrative expenses to decrease as a percentage of our total revenue over
time, although they may fluctuate as a percentage of our total revenue from
period to period.



Interest Income, Net



Interest income, net consists primarily of interest income earned on our cash
and cash equivalents.



Other Income (Expense), Net



Other income (expense), net consists primarily of foreign exchange gains and
losses.



Provision for Income Taxes



Provision for income taxes consists primarily of income taxes related to foreign
and state jurisdictions in which we conduct business. We maintain a full
valuation allowance on our federal, state, U.K. and Israel deferred tax assets
as we have concluded that it is not more likely than not that the deferred
assets will be utilized.




23


--------------------------------------------------------------------------------



Table of Contents



Results of Operations



The following tables set forth selected condensed consolidated statements of
operations data for each of the periods indicated:






Three Months Ended April 30,
2020 2019
(In thousands)
Revenue:
Subscription revenue $ 93,824 $ 65,085
Professional services revenue 10,020 10,745
Total revenue 103,844 75,830
Cost of revenue:
Cost of subscription revenue (1) 15,185 11,091
Cost of professional services revenue (1) 9,555 10,486
Total cost of revenue 24,740 21,577
Gross profit 79,104 54,253
Operating expenses:
Research and development (1) 23,762 15,059
Sales and marketing (1) 71,674 56,290
General and administrative (1) 22,428 20,013
Total operating expenses 117,864 91,362
Loss from operations (38,760 ) (37,109 )
Interest income, net 511 1,251
Other income (expense), net (331 ) (246 )
Loss before income taxes (38,580 ) (36,104 )
Provision for income taxes (1,022 ) (1,087 )
Net loss $ (39,602 ) $ (37,191 )



(1) Includes stock-based compensation expense as follows:
Cost of subscription revenue


$ 708 $ 491
Cost of professional services revenue 508 492
Research and development 3,646 1,836
Sales and marketing 10,031 6,617
General and administrative 7,600 6,866


Total stock-based compensation expense $ 22,493 $ 16,302







Three Months Ended April 30, 2020 and 2019

Revenue



Three Months Ended April 30,
2020 2019 % Change
(In thousands, except percentage data)
Subscription revenue $ 93,824 $ 65,085 44 %
Professional services revenue 10,020 10,745 (7 )
Total revenue $ 103,844 $ 75,830 37





Total revenue was $103.8 million in the three months ended April 30, 2020,
compared to $75.8 million in the three months ended April 30, 2019, an increase
of $28.0 million, or 37%.



Subscription revenue was $93.8 million, or 90% of total revenue, in the three
months ended April 30, 2020, compared to $65.1 million, or 86% of total revenue,
in the three months ended April 30, 2019. The increase of $28.7 million, or 44%,
in subscription revenue was primarily driven by existing customers expanding
their use of our




24


--------------------------------------------------------------------------------



Table of Contents



platform, which accounted for 64% of the increase, and acquisition of new
customers, which accounted for approximately 36% of the increase.



Professional services revenue was $10.0 million in the three months ended April
30, 2020
, compared to $10.7 million in the three months ended April 30, 2019, a
decrease of $0.7 million, or 7%. The decrease in professional services revenue
was primarily driven by lower sales of our professional services due to timing
of our customers' implementation projects. This also represents a continued
decline in professional services revenue as a percentage of total revenue from
14% to 10% primarily due to our strategy of shifting professional services
revenue to the members of our growing partner ecosystem.




Cost of Revenue



Three Months Ended April 30,
2020 2019 % Change
(In thousands, except percentage data)
Cost of subscription revenue $ 15,185 $ 11,091 37 %


Cost of professional services



revenue 9,555 10,486 (9 )
Total cost of revenue $ 24,740 $ 21,577 15





Total cost of revenue was $24.7 million in the three months ended April 30,
2020
, compared to $21.6 million in the three months ended April 30, 2019, an
increase of $3.1 million, or 15%.



Cost of subscription revenue was $15.2 million in the three months ended April
30, 2020
, compared to $11.1 million in the three months ended April 30, 2019, an
increase of $4.1 million, or 37%. The increase in cost of subscription revenue
was primarily due to an increase in amortization of our equipment leases and
capitalized software development costs of $1.3 million, an increase in salary
and bonuses, and benefits costs related to an increase in headcount of $1.1
million
, including stock-based compensation, and an increase in hosting and
consulting costs of $1.0 million.



Cost of professional services revenue was $9.6 million in the three months ended
April 30, 2020, compared to $10.5 million in the three months ended April 30,
2019
, a decrease of $0.9 million, or 9%. The decrease in cost of professional
services revenue was primarily due to a decrease in the partner implementation
costs related to a decrease in partner activity of $1.2 million, partially
offset by an increase in salary and bonuses, and benefits costs of $0.5 million,
including stock-based compensation.



Gross Profit and Gross Margin






Three Months Ended April 30,
2020 2019 % Change
(In thousands, except percentage data)
Subscription gross profit $ 78,639 $ 53,994 46 %
Professional services
gross profit 465 259 80
Total gross profit $ 79,104 $ 54,253 46
Subscription gross margin 84 % 83 %
Professional services
gross margin 5 % 2 %
Total gross margin 76 % 72 %





Gross profit was $79.1 million in the three months ended April 30, 2020,
compared to $54.3 million in the three months ended April 30, 2019, an increase
of $24.8 million, or 46%. The increase in gross profit was the result of the
increases in our subscription revenue primarily driven by existing customers
expanding their use of our platform and acquisition of new customers in the
three months ended April 30, 2020.




25


--------------------------------------------------------------------------------



Table of Contents



Gross margin was 76% in the three months ended April 30, 2020 compared to 72% in
the three months ended April 30, 2019 . The increase in gross margin
year-over-year was primarily due to the increase in subscription revenue, which
generates a significantly higher gross margin than our professional services
revenue, as a percentage of total revenue. Our gross margins can fluctuate from
quarter to quarter as a result of the requirements, complexity, and timing of
our customers' implementation projects that can vary significantly.




Operating Expenses



Three Months Ended April 30,
2020 2019 % Change
(In thousands, except percentage data)
Operating expense:
Research and development $ 23,762 $ 15,059 58 %
Sales and marketing 71,674 56,290 27
General and administrative 22,428 20,013 12
Total operating expenses $ 117,864 $ 91,362 29




Research and Development



Research and development expenses were $23.8 million in the three months ended
April 30, 2020, compared to $15.1 million in the three months ended April 30,
2019
, an increase of $8.7 million, or 58%. The increase was primarily due to an
increase in salary and bonuses, and benefits costs related to an increase in
headcount of $6.4 million, including an increase in stock-based compensation and
related taxes of $1.9 million, and an increase in consulting costs of $1.8
million
, partially offset by an increase in capitalized software development
costs of $1.4 million.



Sales and Marketing



Sales and marketing expenses were $71.7 million in the three months ended April
30, 2020
, compared to $56.3 million in the three months ended April 30, 2019, an
increase of $15.4 million, or 27%. The increase was primarily due to an increase
in salary and bonuses and benefits costs related to an increase in headcount of
$16.8 million, including an increase in stock-based compensation and related
taxes of $4.1 million and an increase in commission expenses of $2.8 million,
partially offset by a decrease of $1.8 million in expenses due to cancellation
of conferences or events.



General and Administrative



General and administrative expenses were $22.4 million in the three months ended
April 30, 2020, compared to $20.0 million in the three months ended April 30,
2019
, an increase of $2.4 million, or 12%. The increase was primarily due to an
increase in salary and bonuses, and benefits costs related to an increase in
headcount of $2.5 million, including an increase in stock-based compensation and
related taxes of $0.7 million, and an increase in allowance for credit losses of
$0.6 million driven by customer collections concerns primarily stemming from the
COVID-19 pandemic, partially offset by a decrease in other general expenses.



Other Income (Expense), Net






Three Months Ended April 30,
2020 2019 % Change
(In thousands, except percentage data)
Interest income, net $ 511 $ 1,251 (59 ) %
Other income (expense), net (331 ) (246 ) 35




Interest Income, net



Interest income, net decreased by $0.7 million in the three months ended April
30, 2020
. The decrease in interest income, net was primarily due to lower
interest rates in the three months ended April 30, 2020 compared to the three
months ended April 30, 2019.




26


--------------------------------------------------------------------------------



Table of Contents



Other Income (Expense), net



Other income (expense), net was a loss of $0.3 million in the three months ended
April 30, 2020, compared to a loss of $0.2 million in the three months ended
April 30, 2019, an increase in expense of $0.1 million, or 35%. The change was
primarily due to currency fluctuations and the related remeasurements during the
periods, primarily related to our U.K. operations and an intercompany loan
denominated in a non-functional currency.




Provision for Income Taxes



Three Months Ended April 30,
2020 2019 % Change
(In thousands, except percentage data)
Provision for income taxes $ 1,022 $ 1,087 (6 ) %





The provision for income taxes was $1.0 million in the three months ended April
30, 2020
, compared to $1.1 million in the three months ended April 30, 2019, a
decrease of $0.1 million, or 6%. The decrease in provision for income taxes was
primarily related to decreased income generated from intercompany cost-plus
arrangements in certain European and Asian countries.




Liquidity and Capital Resources


As of April 30, 2020, our principal sources of liquidity were cash and cash
equivalents totaling $303.1 million, which were held for working capital
purposes and strategic initiatives. Our cash equivalents are comprised primarily
of bank deposits.



Cash from operations could be affected by various risks and uncertainties,
including but not limited to, the effects of the COVID-19 pandemic, such as
timing of cash collections from our customers and other risks detailed in "Risk
Factors". We believe our existing cash and cash equivalents will be sufficient
to meet our projected operating requirements for at least the next 12 months.
Our future capital requirements will depend on many factors, including our pace
of growth, subscription renewal activity, the timing and extent of spend to
support research and development efforts, the expansion of sales and marketing
activities, the introduction of new and enhanced platform offerings, and the
continuing market acceptance of the platform. We may in the future enter into
arrangements to acquire or invest in complementary businesses, services and
technologies, and intellectual property rights. We may be required to seek
additional equity or debt financing. In the event that additional financing is
required from outside sources, we may not be able to raise it on terms
acceptable to us or at all. If we are unable to raise additional capital when
desired, our business, operating results, and financial condition would be
adversely affected.



Loan and Credit Facility Agreements



In April 2020, we entered into the Third Amendment to Credit Agreement and First
Amendment to Collateral Agreement with Wells Fargo as administrative agent and a
lender (the "Third Amendment"). Among other things, the Third Amendment further
amends the Credit Agreement entered into with Wells Fargo in April 2018, as
amended in September 2018 and October 2019 (the "Credit Agreement") in order to
(1) increase the aggregate revolving credit commitment amount by $20.0 million,
so that we may borrow up to $60.0 million under a secured revolving credit
facility, subject to the terms of the Credit Agreement including the accounts
receivable borrowing base, for general corporate purposes, and (2) extend the
maturity date of the revolving credit facility until April 23, 2022. Also,
pursuant to the Third Amendment, any loans drawn on the credit facility will
incur interest at a rate equal to the highest of (A) the prime rate, (B) the
federal funds rate plus 0.5%, and (C) the one-month LIBOR plus 1%. Interest is
payable monthly in arrears with the principal and any accrued and unpaid
interest due on April 23, 2022. As of April 30, 2020 and January 31, 2020, we
had not drawn down any amounts under this agreement.



As part of the Credit Agreement, we granted Wells Fargo a first priority lien in
our accounts receivable, all of the issued shares of capital stock and equity
interests in certain of our subsidiaries, and other corporate assets and agreed
not to pledge our intellectual property to other parties. The Credit Agreement,
as amended by the Third Amendment, includes affirmative and negative covenants,
including financial covenants requiring the maintenance of: (1) minimum tangible
net worth (defined as assets, excluding intangible assets, less liabilities) as
of the last day of any fiscal quarter of not less than $150.0 million for any
fiscal quarter ending on or prior to January 31, 2021 and $125.0 million for any
fiscal quarter ending thereafter, and (2) minimum billings for the most recent
twelve months ending as of the last day of any fiscal quarter of not less than
$350.0 million. As of April 30, 2020, we were in compliance with the financial
covenants contained in the agreement.




27


--------------------------------------------------------------------------------



Table of Contents



Cash Flows



The following table summarizes our cash flows for the periods presented:






Three Months Ended April 30,
2020
2019
(In thousands)



Net cash used in operating activities $ (1,504 ) $ (1,900 )
Net cash used in investing activities


(4,463 ) (3,083 )
Net cash provided by financing activities 2,064 11,196




Operating Activities



Net cash used in operating activities of $1.5 million for the three months ended
April 30, 2020, was primarily due to a net loss of $39.6 million, partially
offset by non-cash charges for stock-based compensation of $22.5 million,
depreciation and amortization of $6.1 million, amortization of deferred
commissions of $7.7 million, and amortization of operating lease right-of-use
assets and accretion of operating lease liabilities of $2.9 million. Changes in
working capital were unfavorable to cash flows from operations by $2.1 million
primarily due to an increase in deferred commissions of $10.1 million related to
commissions capitalized on our sales, a decrease in deferred revenue balance of
$3.2 million due to lower billings, a decrease in accounts payable and accrued
expenses of $2.5 million due to timing of payments, and payments for operating
lease liabilities of $2.8 million, partially offset by a decrease in accounts
receivable of $12.8 million due to lower billings, an increase in other
noncurrent liabilities of $2.0 million and a decrease in prepaid expenses and
other current assets of $1.5 million.



Net cash used in operating activities of $1.9 million for the three months ended
April 30, 2019 was primarily due to a net loss of $37.2 million, partially
offset by non-cash charges for stock-based compensation of $16.3 million,
depreciation and amortization of $4.4 million, amortization of deferred
commissions of $4.1 million, and amortization of operating
lease right-of-use assets and accretion of operating lease liabilities of
$2.4 million. Changes in working capital were favorable to cash flows from
operations by $8.5 million primarily due to an increase in the deferred revenue
balance of $12.1 million due to increases in sales, an increase in accounts
payable and accrued expenses of $6.5 million due to our growth, partially offset
by an increase in deferred commissions of $8.2 million, and payments for
operating lease liabilities of $2.4 million.



Investing Activities



Net cash used in investing activities for the three months ended April 30, 2020
of $4.5 million was related to the capitalization of internal-use software of
$2.9 million as we expanded our platform and increased our development efforts,
and purchases of property and equipment of $1.6 million related to our growth.



Net cash used in investing activities for the three months ended April 30, 2019
of $3.1 million was related to the capitalization of internal-use software of
$2.2 million as we expanded our platform and increased our development efforts,
and purchases of property and equipment of $0.9 million related to our growth.



Financing Activities



Net cash provided by financing activities for the three months ended April 30,
2020
of $2.1 million consisted primarily of $3.8 million in proceeds from the
exercise of stock options, partially offset by $1.7 million principal payment on
finance lease obligations.



Net cash provided by financing activities for the three months ended April 30,
2019
of $11.2 million consisted primarily of proceeds of $9.3 million from the
repayment of promissory notes, and $3.0 million in proceeds from the exercise of
stock options, partially offset by $1.1 million principal payment on finance
lease obligations.




28


--------------------------------------------------------------------------------



Table of Contents



Commitments and Contractual Obligations



There were no material changes outside of the ordinary course of business in our
contractual obligations and commitments during the three months ended April 30,
2020
from the contractual obligations and commitments disclosed in our Annual
Report on Form 10-K for the fiscal year ended January 31, 2020 filed with the
SEC on March 30, 2020.




Off-Balance Sheet Arrangements


Through April 30, 2020, we did not have any relationships with unconsolidated
organizations or financial partnerships, such as structured finance or special
purpose entities that would have been established for the purpose of
facilitating off-balance sheet arrangements or other contractually narrow or
limited purposes.




Critical Accounting Policies and Estimates


Our condensed consolidated financial statements have been prepared in accordance
with U.S. GAAP. The preparation of these condensed consolidated financial
statements requires us to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue and expenses, and related
disclosures. We base our estimates on historical experience and on various other
assumptions that we believe are reasonable under the circumstances. We evaluate
our estimates and assumptions on an ongoing basis. Actual results may differ
from these estimates. To the extent that there are material differences between
these estimates and our actual results, our future financial statements will be
affected.



During the three months ended April 30, 2020, there were no significant changes
to our critical accounting policies and estimates as described in the financial
statements contained in the Annual Report on Form 10-K for the year ended
January 31, 2020 filed with the SEC on March 30, 2020.




Recent Accounting Pronouncements


See "Summary of Business and Significant Accounting Policies" in Note 1 of the
notes to our unaudited condensed consolidated financial statements included in
Part I, Item 1 of this Form 10-Q.




29


--------------------------------------------------------------------------------



Table of Contents

© Edgar Online, source Glimpses

Acquiremedia 2020
Copier lien
Latest news on ANAPLAN, INC.
06/09
06/04
05/26
05/26
05/26