Great quarter in my opinion. Need to understand the context and the S-1 as the company has been public for less than a year. It’s a 6% position for me and I’m comfortable leaving it at that.
Q1 FY20 Review
First Quarter Subscription Revenue of $65.1million up 45% year-over-year
Dollar-Based Net Expansion Rate of 123%
Total Revenue was $75.8 million, up 47% yoy
GAAP loss 48.9% of total revenue compared to 49.1% last yr Non-GAAP loss 26.5% vs 45.2% last yr
Cash and cash equivalents $332.7million
Q2 FY20 Guidance from Q1FY20:
Total revenue is expected to be between $77.5 and $78.5 million.
Non-GAAP operating margin is expected to be between negative 25.5% and 26.5%.
Full year fiscal 2020 guidance from Q1 FY20:
Total revenue is now expected to be between $326 and $331 million (was between $310 and $314 million).
Non-GAAP operating margin is now expected to be between negative 22.5% and 23.5% (was between negative 26% and 27%).
Q2 FY20 Results
Total revenue was $84.5 million, an increase of 46% year-over-year. Subscription revenue was $73.6 million, an increase of 48% year-over-year.
Remaining Performance Obligation of $516 million, up 56% Year-Over-Year
Dollar-Based Net Expansion of 121% Continues to Track Above 120%
GAAP operating loss $41.2 million or 48.7% of total revenue, compared to $19.9 million in the second quarter of fiscal 2019 or 34.5% of total revenue. Non-GAAP operating loss was $16.6 million, or 19.7% of total revenue, compared to $17.0 million in the second quarter of fiscal 2019, or 29.3% of total revenue.
Q3 FY20 Guidance
Total revenue is expected to be between $85.5 and $86.5 million.
Non-GAAP operating margin is expected to be between negative 19.0% and 20.0%.
Updated Full year fiscal 2020 guidance
Total revenue is now expected to be between $339 and $343 million (was between $326 and $331 million).
Non-GAAP operating margin is now expected to be between negative 19.5% and 20.5% (was between negative 22.5% and 23.5%).
My earnings take
This was a great quarter. The company beat total revenue, subscription revenue, and Non-GAAP operating margin. More notably, management raised full-year total revenue guidance by about 4% from the guidance provided after Q1. FY guidance is now roughly 9% higher than the guidance provided at the end of FY 2019.
The Good:
Beat subscription and total revenue growth guidance
Total revenue up 11.5% quarter-over-quarter (QoQ) and subscription revenue up 13% QoQ
Beat GAAP and Non-GAAP operating margin guidance
Raised FY 2020 revenue guidance ~4%
Improved Non-GAAP operating margin expectations from a midpoint of negative 23% to a midpoint of negative 20%
The Bad:
Dollar-Based Net Expansion Rate was down 2% from Q1FY20 to 121%. If it ticks below 120% I will be very tempted to sell. There are many great businesses with DBNER above 120% and it is trending down from the last 3 years (see below)
Anaplan’s annual dollar-based net expansion rate was 135%, 123%, 122%, and 123% as of the end of FY’16, FY’17, FY’18 and as of July 31, 2018, respectively.
*See note in earnings calls notes on why this is a yellow flag to be watched, not necessarily a red flag.
Earnings Call Notes:
Because Anaplan has been public less than a year, the earnings call will be very important to help paint a complete picture. We will have to compare to numbers from their S-1. Here’s a link to a great review of their S-1 from Alex Clayton
DBNER would have been 125% if they could include people who upgrade within their first year of being a customer. Management expects DBNER to stay above 120%. As we saw with Alteryx, DBNER can trend lower as they target larger enterprises and larger initial deal sizes. This appears to be the case with Anaplan too.
RPO would have been 50% if not for some one-time FX effects. Management expects FX impacts to be minimal going forward and for revenue to track in line with RPO eventually.
I feel a lot better about the quarter after hearing the context which is exactly why it is important to understand our companies and not make knee-jerk reactions. The stock was initially down 10% but is now down 5% and back to where it was just a couple days ago.