Anaplan IPO: Cloud analytics unicorn hopes for strong Wall Street debut Friday
October 10, 2018 | Blog

Anaplan IPO: Cloud analytics unicorn hopes for strong Wall Street debut Friday

Anaplan, an enterprise software maker focused on cloud-based planning tools, will go public on Nasdaq Friday under the aptly named ticker symbol PLAN. Privately valued at $1.41 billion, the company raised priced its IPO at $15 to $17 per share from $13 to $15 per share. The new IPO price values Anaplan at up to $2.06 billion, or 46 percent higher than its private valuation.

The boosted IPO price range suggests strong investor demand for Anaplan shares, even as the public markets have struggled over the past week. While big consumer unicorns attract most media attention, small-mid-cap SaaS companies like Anaplan are the companies that deliver consistent returns.

Anaplan counts Granite Ventures, Salesforce Ventures, and Baillie Gifford as its investors. Thanks to healthy fundamentals, Anaplan is well positioned to join the growing list of software unicorns that recently went public with strong IPOs.

Valuation Grinding Higher On IPO

The company distinguishes itself from competitors having built its cloud architecture from scratch, instead of stacking its code on existing platforms like Oracle. The technology, called Hyberblock, can collect, organize and analyze disparate sets of data - sales, operations, human resources and finance - from across the company.

In fiscal 2018, Anaplan exceeded $168 million in revenue, a 40 percent jump from the previous year, with subscriptions accounting for over 85 percent of the firm’s revenue. Fiscal 2017 saw a 68.5 percent growth over the previous year to $120.5 million from $71.5 million.

From a valuation standpoint, we expect the company to increase revenues at growth rates exceeding 30 percent. In other words, the company’s 2019 revenues could surpass $225 million. If we apply a healthy 10x EV/Revenue multiple on this estimated 2019 revenue, the company’s valuation on IPO could very well exceed $2.25 billion, or more than 50 percent above its private market valuation.

Anaplan Financials
Source: Anaplan S-1, SharesPost Research
The Upside Scenario:

Across the enterprise We believe a truly enterprise-wide product offers strong value to subscribers. The Anaplan platform helps companies make decisions on far reaching tasks ranging from human resources to sales and marketing.

Strong user growth Given the wide use cases provided by the Anaplan platform, the company will quickly attract more users. From Q1 2016 to Q3 2018, Anaplan more than doubled its customer base from 434 to 979 users, a 125.5 percent increase in just 31 months. In addition, Nucleus Research sees another potential 72 million workers who can benefit from the Anaplan platform. We feel comfortable predicting a significant increase in Anaplan’s valuation come IPO.

Market set to grow Not only is Anaplan growing at a robust rate, the market it serves is growing too. The company estimates its addressable market will increase 23.5 percent to $21 billion in 2021 from $17 billion this year.

The Downside Risk:

Will sales effort pay off? Over the last 3 years, Anaplan has nearly doubled its investment in sales and marketing to $100.65 million from $55.3 million. The company has already spent nearly $78 million in the first six months of this year. Despite Anaplan’s strong revenue growth, investors should note the company recognizes revenue over the course of the subscription, which means the expenditure increase in this space may not reward shareholders with future revenue gains.

Corporate culture clash Throughout its prospectus, Anaplan emphasizes its software creates a more decentralized way of making enterprise-wide decisions. However, this approach may run counter to how large organizations conduct their business top to down. If Anaplan cannot convince larger potential accounts they can mesh the software with their customers’ business model and culture, Anaplan faces big problems.

International dependency Anaplan is not immune from the global trade conflicts. The company said 43 percent of their revenue in the first six months of this year came from customers outside of the United States. Anaplan is also vulnerable to swings in emerging market currencies we’ve witnessed this past year. Over 30 percent of Anaplan’s revenue relies on foreign currencies, a problem made worse by the company’s decision not to hedge positions in the FX markets.

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Analyst compensation is based upon various factors, including the overall performance of SharesPost Inc. and its subsidiaries and the performance and productivity of such analyst, including (1) feedback from clients of the SharesPost Financial Corporation and other stakeholders in our ecosystem, (2) the quality of such analyst’s research, and (3) the analyst’s contribution to the growth and development of our overall research effort. Analyst compensation is derived from all revenue sources of SharesPost Inc., including brokerage sales.

DISCLAIMER: This report does not contain a complete analysis of every material fact regarding any issuer, industry, or security. The opinions expressed in this report reflect our judgment at this date and are subject to change. The information contained in this report has been obtained from sources we consider to be reliable; however, we cannot guarantee the accuracy of all such information.

Any securities offered are offered by SharesPost Financial Corporation, a member of FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost Inc. Certain affiliates of these entities may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative and involves a high degree of risk. It should only be considered as a long-term investment. You must be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid, and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks. You should complete your own independent due diligence regarding the investment, including obtaining additional company information, opinions, financial projections, and legal or other investment advice.

Investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.

SharesPost, the SharesPost logo, My SharesPost, the SharesPost Index, SharesPost Investment Management, the SharesPost 100 Fund, and the SharesPost 100 List are all registered trademarks of SharesPost Inc. All other trademarks are the property of their respective owners.

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Rohit Kulkarni

Rohit Kulkarni

Rohit is the Managing Director, Private Investment Research for SharesPost Research LLC. Prior to joining SharesPost, Rohit was a Vice President, Senior Analyst at RBC Capital Markets.
Please Read These Important Legal Notices and Disclosures

CONFLICTS: This report is being published by SharesPost Research LLC and distributed by SharesPost Financial Corporation, a member of FINRA/SIPC. SharesPost Research LLC, SharesPost Financial Corporation, and SP Investments Management LLC, an investment adviser registered with the Securities and Exchange Commission, are wholly owned subsidiaries of SharesPost Inc. SP Investments Management is the investment manager of the SharesPost 100 Fund, a registered investment company, and other funds.

Recipients who are not market professionals or clients of SharesPost Financial Corporation should seek the advice of their own personal financial advisors before making any investment decisions based on this report. None of the information contained in this report represents an offer to buy or sell, or a solicitation of an offer to buy or sell, any security, and no buy or sell recommendation should be implied, nor shall there be any sale of these securities in any state or governmental jurisdiction in which said offer, solicitation, or sale would be unlawful under the securities laws of any such jurisdiction. This report does not constitute an offer to provide investment advice or services. Registered representatives of SharesPost Financial Corporation do not (1) advise any member on the merits or advisability of a particular investment or transaction, (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services.

Information regarding companies in the SharesPost 100 List available on the website has been collected from or generated from publicly available sources. The availability of company information does not indicate that these companies have endorsed, supported, or otherwise participated with SharesPost. Company “thesis” is the opinion of SharesPost and is not a recommendation to buy, sell, or hold any security of such company.

Investors should be aware that, at any given point in time, the SharesPost 100 Fund (the “Fund”) may or may not have an ownership interest in any of the issuers discussed in the report. Accordingly, investors should not rely on the content of this report when deciding whether to buy, hold, or sell interests in the Fund. Instead, investors are encouraged to do their own independent research. Before investing in the Fund, investors are cautioned to carefully consider the investment objectives, risks, charges, and expenses before investing. For a prospectus containing more information about the Fund, please visit www.sharespost100fund.com. Read the prospectus carefully before investing.

ANALYST CERTIFICATION: The analyst(s) certifies that the views expressed in this report accurately reflect the personal views of such analyst(s) about any and all of the subject securities or issuers and that no part of such analyst compensation was, is, or will be, directly or indirectly related to the specific views contained in this report.

Analyst compensation is based upon various factors, including the overall performance of SharesPost Inc. and its subsidiaries and the performance and productivity of such analyst, including (1) feedback from clients of the SharesPost Financial Corporation and other stakeholders in our ecosystem, (2) the quality of such analyst’s research, and (3) the analyst’s contribution to the growth and development of our overall research effort. Analyst compensation is derived from all revenue sources of SharesPost Inc., including brokerage sales.

DISCLAIMER: This report does not contain a complete analysis of every material fact regarding any issuer, industry, or security. The opinions expressed in this report reflect our judgment at this date and are subject to change. The information contained in this report has been obtained from sources we consider to be reliable; however, we cannot guarantee the accuracy of all such information.

Any securities offered are offered by SharesPost Financial Corporation, a member of FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost Inc. Certain affiliates of these entities may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative and involves a high degree of risk. It should only be considered as a long-term investment. You must be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid, and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks. You should complete your own independent due diligence regarding the investment, including obtaining additional company information, opinions, financial projections, and legal or other investment advice.

Investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.

SharesPost, the SharesPost logo, My SharesPost, the SharesPost Index, SharesPost Investment Management, the SharesPost 100 Fund, and the SharesPost 100 List are all registered trademarks of SharesPost Inc. All other trademarks are the property of their respective owners.

Copyright © SharesPost, Inc. 2019. All rights reserved.