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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2022
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from:                  to
Commission File Number 001-38698
ANAPLAN, INC.
(Exact name of registrant as specified in its charter)
Delaware
27-0897861
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
50 Hawthorne Street
San FranciscoCalifornia 94105
(Address of principal executive offices)
(415742-8199
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.0001 par value per sharePLANNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes þ  No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
þ
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  No þ
As of May 27, 2022, the number of shares of the registrant’s common stock, $0.0001 par value per share, outstanding was 150,527,991.


TABLE OF CONTENTS

2

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes forward-looking statements. All statements other than statements of historical facts contained in this report are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect,” “could,” “plan,” “potential,” “predict,” “seek,” “should,” “would,” or the negative version of these words and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements include these identifying words. We have based these forward-looking statements on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short- and long-term business operations and objectives, and financial needs. The forward-looking statements are contained principally in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.” Forward-looking statements contained in this report include, but are not limited to, statements about:
our expectations regarding the Agreement and Plan of Merger (the “Merger Agreement”), dated March 20, 2022, with Alpine Parent, LLC, a Delaware limited liability company (“Parent”) and Alpine Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (“Merger Sub”), providing for the merger of Merger Sub with and into our Company (the “Merger”), with our Company surviving the Merger as a wholly owned subsidiary of Parent;
the demand for and benefits from the use of our platform and solutions;
our ability to sell our platform to new customers;
our ability to retain, drive user adoption rates and expand use of our platform by our existing customers;
our ability to develop and maintain a pipeline of qualified and trained users of our platform for utilization with our customers and partners;
the impact of the ongoing COVID-19 pandemic and related health measures, geopolitical events, macroeconomic trends including changes in inflation or interest rates, or other events beyond our control on market conditions, our business, operating results and financial condition and the businesses of our customers, prospective customers and partners;
the sufficiency of our cash and cash equivalents to meet our projected operating requirements;
our ability to maintain the security of our platform, networks and systems and protect the data of our customers;
our ability to identify and address real or perceived errors, failures, bugs, service outages, or disruptions in our platform;
our ability to maintain the availability and functionality of our platform;
the development of our platform on the infrastructure of third-party public cloud partners;
our ability to achieve widespread market acceptance of our platform;
the provision of professional services by our partners, including the breadth and volume of such services;
our ability to successfully expand in our existing markets and into new markets;
our ability to broaden and deepen our partner ecosystem and successfully operationalize our partnerships;
the utilization of our partner ecosystem to help drive growth;
our ability to maintain, protect, and enhance our intellectual property;
our ability to enhance our platform, adapt to technological change and satisfy the cloud infrastructure priorities of our customers;
our ability to comply with laws, regulations and accounting rules applying to our business, including privacy regulations such as the General Data Protection Regulation;
anticipated income tax rates, tax estimates and tax standards;
the recruitment, hiring, training and retention of qualified employees and key personnel including direct sales, research and development and engineering personnel;
3

the rate of expansion and productivity of our sales force;
our ability to grow our international business and manage the risks inherent in global operations;
our ability to realize anticipated benefits from strategic transactions in a timely manner;
changes in the competitive environment in our industry and the markets in which we operate;
our ability to manage changes in foreign currency exchange rates and effectively hedge our foreign currency exposure;
the impact of geopolitical conditions, including wars, hostilities, acts of terrorism, economic sanctions; and
our ability to successfully defend litigation brought against us and any stakeholder activism.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this report.
These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. The forward-looking statements made in this report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this report to reflect events or circumstances after the date of this report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
You should read this report and the documents that we reference in this report and have filed with the Securities and Exchange Commission as exhibits to this report with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.
4

PART I
ITEM 1. FINANCIAL STATEMENTS
ANAPLAN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
As of
April 30, 2022January 31, 2022
ASSETS
Current assets:
Cash and cash equivalents
$304,021 $299,371 
Accounts receivable, net of allowances for credit losses of $3,090 and $3,224 as of April 30, 2022 and January 31, 2022, respectively
132,657 196,500 
Deferred commissions, current portion
50,636 49,124 
Prepaid expenses and other current assets
34,650 32,814 
Total current assets
521,964 577,809 
Property and equipment, net63,258 63,119 
Deferred commissions, net of current portion109,409 110,044 
Goodwill32,379 32,379 
Operating lease right-of-use assets28,736 31,287 
Other noncurrent assets20,226 17,997 
TOTAL ASSETS$775,972 $832,635 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$9,064 $9,294 
Accrued expenses
113,426 123,891 
Deferred revenue, current portion
352,121 378,882 
Operating lease liabilities, current portion
10,081 10,400 
Total current liabilities
484,692 522,467 
Deferred revenue, net of current portion2,226 3,271 
Operating lease liabilities, net of current portion23,628 26,046 
Other noncurrent liabilities19,039 18,150 
TOTAL LIABILITIES529,585 569,934 
Stockholders' equity:
Common stock, par value of $0.0001 per share; 1,750,000 shares authorized as of April 30, 2022 and January 31, 2022; 150,483 and 149,089 shares issued and outstanding as of April 30, 2022 and January 31, 2022
15 15 
Accumulated other comprehensive loss
(9,863)(7,696)
Additional paid-in capital
1,164,672 1,120,959 
Accumulated deficit
(908,437)(850,577)
TOTAL STOCKHOLDERS' EQUITY246,387 262,701 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$775,972 $832,635 
The information as of January 31, 2022, was derived from the Company’s audited Consolidated Balance Sheet as of January 31, 2022.
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

ANAPLAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands, except per share data)
(Unaudited)
Three Months Ended April 30,
20222021
Revenue:
Subscription revenue
$152,343 $118,343 
Professional services revenue
16,816 11,482 
Total revenue
169,159 129,825 
Cost of revenue:
Cost of subscription revenue
28,635 21,329 
Cost of professional services revenue
17,928 11,492 
Total cost of revenue
46,563 32,821 
Gross profit122,596 97,004 
Operating expenses:
Research and development
43,738 33,212 
Sales and marketing
98,387 88,470 
General and administrative
40,583 24,945 
Total operating expenses
182,708 146,627 
Loss from operations(60,112)(49,623)
Interest income (expense), net(31)(151)
Other income (expense), net2,566 (459)
Loss before income taxes(57,577)(50,233)
Provision for income taxes(283)(1,258)
Net loss(57,860)(51,491)
Comprehensive loss:
Foreign currency translation adjustments
(2,167)(1,275)
Comprehensive loss$(60,027)$(52,766)
Net loss per share attributable to common stockholders, basic and diluted
$(0.39)$(0.36)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
149,877 144,161 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6

ANAPLAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders’ Equity
SharesAmount
For the Three Months Ended April 30, 2022
Balance at January 31, 2022149,089 $15 $1,120,959 $(7,696)$(850,577)$262,701 
Stock-based compensation
— — 39,552 — — 39,552 
Exercise of stock options
549 — 4,161 — — 4,161 
Vesting of restricted stock units
845 — — — — — 
Net loss
— — — — (57,860)(57,860)
Foreign currency translation adjustments
— — — (2,167)— (2,167)
Balance at April 30, 2022150,483 $15 $1,164,672 $(9,863)$(908,437)$246,387 
For the Three Months Ended April 30, 2021
Balance at January 31, 2021143,502 $14 $932,505 $(7,528)$(646,978)$278,013 
Stock-based compensation
— — 35,352 — — 35,352 
Exercise of stock options, net of repurchases and early exercises
357 — 2,098 — — 2,098 
Vesting of restricted stock units
823 — — — — — 
Net loss
— — — — (51,491)(51,491)
Foreign currency translation adjustments
— — — (1,275)— (1,275)
Balance at April 30, 2021144,682 $14 $969,955 $(8,803)$(698,469)$262,697 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7

ANAPLAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended April 30,
20222021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss$(57,860)$(51,491)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization
7,181 6,970 
Amortization of deferred commissions
12,506 9,708 
Stock-based compensation
38,529 34,071 
Reduction of operating lease right-of-use assets and accretion of operating lease liabilities
2,495 2,434 
Foreign currency remeasurement gains(2,437)(554)
Other non-cash items
 230 
Changes in operating assets and liabilities:
Accounts receivable
61,317 43,939 
Prepaid expenses and other current assets
(2,577)(1,301)
Other noncurrent assets
298 (108)
Deferred commissions
(17,347)(12,547)
Accounts payable and accrued expenses
(7,233)(11,120)
Deferred revenue
(18,263)(4,845)
Payments for operating lease liabilities, net
(2,695)(2,293)
Other noncurrent liabilities
455 716 
Net cash provided by operating activities
14,369 13,809 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment
(878)(3,113)
Capitalized internal-use software
(3,629)(3,086)
Net cash used in investing activities
(4,507)(6,199)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options
4,161 2,092 
Principal payments on finance lease obligations
(2,156)(2,520)
Net cash provided by (used in) financing activities
2,005 (428)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(4,320)(656)
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH7,547 6,526 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH - Beginning of period299,371 320,990 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH - End of period$306,918 $327,516 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest
$99 $145 
Cash paid for income taxes
$316 $784 
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Decrease in purchases of property and equipment included in liabilities
$(910)$(482)
Finance leases for property and equipment
$3,719 $2,910 



8

ANAPLAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(In thousands)
(Unaudited)

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the unaudited condensed consolidated balance sheets that sum to the total of the amounts shown in the unaudited condensed consolidated statements of cash flows:
As of
April 30, 2022January 31, 2022
Cash and cash equivalents
$304,021 $299,371 
Restricted cash included in other noncurrent assets2,897  
     Total cash, cash equivalents, and restricted cash shown in the unaudited condensed consolidated statements of cash flows
$306,918 $299,371 
The accompanying notes are an integral part of these condensed consolidated financial statements.
9

ANAPLAN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1)Summary of Business and Significant Accounting Policies
Description of Business
Anaplan, Inc. (the Company, Anaplan, we, us, or our) was incorporated in Delaware on July 9, 2009 and is headquartered in San Francisco, California, with offices in multiple U.S. and international locations.
The Company provides a cloud-based Connected Planning platform that helps connect organizations and people to make better and faster decisions. The Company delivers its application over the Internet as a subscription service using a software-as-a-service (SaaS) model. The Company also offers professional services related to implementing and supporting its application.
Proposed Merger
On March 20, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Alpine Parent, LLC, a Delaware limited liability company (“Parent”) and Alpine Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), providing for, subject to the terms and conditions set forth in the Merger Agreement, the Company’s acquisition by affiliates of funds advised by private equity investment firm Thoma Bravo, L.P. (“Thoma Bravo”), in an all-cash transaction valued at approximately $10.7 billion (the “Transaction” or the “Merger”).
If the Transaction is completed, each share of the Company’s common stock issued and outstanding immediately prior to the effective time of the Merger (the “Effective Time”) will, at the Effective Time, automatically be converted into the right to receive $66.00 in cash, without interest, net of applicable withholding taxes.
The consummation of the Merger is subject to the satisfaction or waiver of customary closing conditions, including, without limitation, the absence of governmental orders resulting, directly or indirectly, in enjoining or otherwise prohibiting or making illegal the consummation of the Merger, the affirmative vote of the holders of a majority of the voting power of the outstanding shares of the Company’s common stock entitled to vote on the adoption of the Merger Agreement, and expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”). The Company made the necessary filings with the FTC and the Antitrust Division of the DOJ on April 1, 2022, and the 30-day waiting period with respect to which expired at 11:59 p.m. Eastern Time on Monday, May 2, 2022. The Transaction is expected to close in June 2022. Upon consummation of the Merger, the Company will cease to be a publicly traded company.
The Merger Agreement contains certain termination rights for the Company and Parent. Upon termination of the Merger Agreement under specified circumstances, including, without limitation, in connection with the Company entering into an agreement for a Superior Proposal, or due to the change or withdrawal of the Company Board’s recommendation in favor of the Merger, the Company will be required to pay Parent a termination fee of approximately $293.1 million. Upon termination of the Merger Agreement under other specified circumstances, including, without limitation, Parent breaching its representations, warranties or covenants in a manner that would cause the related closing conditions to not be met as well as Parent’s failure to consummate the Merger after the applicable closing conditions are met, Parent will be required to pay the Company a termination fee of approximately $586.2 million. In addition to the foregoing termination rights, and subject to certain limitations, either party may terminate the Merger Agreement if the Merger is not consummated by September 20, 2022.
Fiscal Year
The Company’s fiscal year ends on January 31. References to fiscal 2023, for example, refer to the fiscal year ending January 31, 2023.
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Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting and include the accounts of the Company and its wholly owned subsidiaries (collectively, the Company). All significant intercompany balances and transactions have been eliminated in consolidation. The unaudited condensed consolidated balance sheet as of January 31, 2022, included herein was derived from the audited financial statements as of that date, but does not include all disclosures including certain notes required by U.S. GAAP on an annual reporting basis. The unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the balance sheets, statements of comprehensive loss, statements of stockholders’ equity, and statements of cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year or any future period.
The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Form 10-K filed with the SEC on March 23, 2022.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates include, but are not limited to, the determination of revenue recognition, certain assumptions in the valuation of stock awards, the determination of the period of benefit for deferred commissions, the determination of the incremental borrowing rate used for operating lease liabilities, and the allowance for credit losses. Actual results could differ from those estimates.
As of the date of filing of these unaudited condensed consolidated financial statements, the Company is not aware of any specific event or circumstance that would require updating significant estimates or judgments or revising the carrying value of the Company's assets or liabilities as presented in the unaudited interim condensed consolidated financial statements. These estimates may change as new events occur and additional information is obtained. Actual results could differ from those estimates and any such differences may be material to our financial statements.
Cash and Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents are stated at fair value. Restricted cash represents cash held to collateralize lease obligations, presented within other noncurrent assets on the accompanying condensed consolidated balance sheet, was $2.9 million as of April 30, 2022.

Summary of Significant Accounting Policies
The Company’s significant accounting policies are discussed in Note 1 of the notes to the consolidated financial statements included in the Company’s Form 10-K filed with the SEC on March 23, 2022. There have been no significant changes to these policies during the three months ended April 30, 2022.
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Recently Issued Accounting Pronouncements
In October 2021, the Financial Accounting Standards Board issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which amends the accounting related to contract assets and liabilities acquired in business combinations. Under current GAAP, an entity generally recognizes assets and liabilities acquired in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date. ASU 2021-08 requires that entities recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and should be applied prospectively to businesses combinations occurring on or after the effective date of the amendment. Early adoption is permitted, including adoption in an interim period. We are currently evaluating the timing and overall impact of this standard on our condensed consolidated financial statements.
(2)Consolidated Balance Sheet Components
Property and Equipment, net
Property and equipment consisted of the following:
As of
April 30, 2022January 31, 2022
(In thousands)
Computer and office equipment$77,870 $74,031 
Leasehold improvements18,393 16,834 
Internal-use software50,381 50,680 
Construction in progress17,334 17,015 
Property and equipment, gross
163,978 158,560 
Less: accumulated depreciation(100,720)(95,441)
Property and equipment, net
$63,258 $63,119 
Depreciation expense was $6.8 million and $6.6 million for the three months ended April 30, 2022 and 2021, respectively.
The Company capitalized $5.1 million and $4.2 million in internal-use software in the three months ended April 30, 2022 and 2021, respectively, of which $1.5 million and $1.1 million was stock-based compensation expense for each respective period. Amortization of the capitalized internal-use software, included in total depreciation expense above, was $2.8 million and $2.6 million in the three months ended April 30, 2022 and 2021, respectively.
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Accrued Expenses
Accrued expenses consisted of the following:
As of
April 30, 2022January 31, 2022
(In thousands)
Vendor accruals$21,441 $14,781 
Accrued commission12,222 21,938 
Accrued bonuses8,309 14,616 
Accrued other payroll liabilities34,202 35,841 
Current portion of finance lease obligations7,727 7,386 
Accrued other29,525 29,329 
Accrued expenses
$113,426 $123,891 
Preferred Stock
As of April 30, 2022 and January 31, 2022, the authorized preferred stock of the Company consisted of 25 million shares with a par value of $0.0001 per share. There were no shares of preferred stock issued and outstanding as of April 30, 2022, and January 31, 2022.
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(3)Bank Borrowing
In April 2020, the Company entered into the Third Amendment to Credit Agreement and First Amendment to Collateral Agreement with Wells Fargo Bank, N.A. (“Wells Fargo”) as administrative agent and 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 the Company 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. This Credit Agreement expired on April 23, 2022. As of April 30, 2022 and January 31, 2022, there were no borrowings outstanding.
(4)Leases
The Company leases certain facilities under operating leases, and property and equipment under finance leases that expire from fiscal 2023 to 2028.
The components of lease expense were as follows:
Three Months Ended April 30,
20222021
(In thousands)
Operating lease costs$2,495 $2,434 
Finance lease costs
Amortization of assets
$2,178 $2,570 
Interest on lease liabilities
99 145 
Total finance lease costs
$2,277 $2,715 

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Supplemental balance sheet information related to leases is as follows:
As of
April 30, 2022January 31, 2022
(In thousands)
Operating leases:
Operating lease ROU assets
$28,736 $31,287 
Operating lease liabilities, current portion
$10,081 $10,400 
Operating lease liabilities, net of current portion
23,628 26,046 
Total operating lease liabilities
$33,709 $36,446 
Finance leases:
Property and equipment, gross
$42,973 $39,499 
Less: accumulated depreciation
(27,756)(25,653)
Property and equipment, net
$15,217 $13,846 
Accrued expenses
$7,727 $7,386 
Other noncurrent liabilities
7,836 6,923 
Total finance lease liabilities
$15,563 $14,309 
Weighted-average lease terms and discount rates are as follows:
As of April 30, 2022
Operating LeasesFinance Leases
Weighted-average remaining lease terms3.8 years2.2 years
Weighted-average discount rates5.3%3.3%
Future minimum lease payments under operating leases and finance leases as of April 30, 2022, are as follows:
As of April 30, 2022
Operating LeasesFinance Leases
(In thousands)
Years ending January 31,
2023 (remaining 9 months)$8,474 $6,594 
20249,653 6,172 
20258,157 3,267 
20267,743 331 
20271,493  
Thereafter
972  
Total lease payments
36,492 16,364 
Less: amount representing interest
(2,345)(801)
Less: leases less than 12 months
(438) 
Total lease liabilities
$33,709 $15,563 
The Company enters into commitments to lease computer and office equipment for which the timing of the lease payments is not determined until the date of commencement. As of April 30, 2022, the amounts related to these leases were approximately $19.0 million, which are to be paid over three years after the date of commencement.
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(5) Acquisition-Related Intangible Assets
The components of identifiable intangible assets included in other noncurrent assets are as follows:
As of
April 30, 2022January 31, 2022
(In thousands)
Developed technology$5,200 $5,200 
Customer relationships2,976 2,976 
   Intangible assets, gross
$8,176 $8,176 
Less: accumulated amortization(4,338)(4,003)
   Intangible assets, net
$3,838 $4,173 
Amortization expense of acquisition-related intangible assets was immaterial for the three months ended April 30, 2022 and 2021.
The expected future intangible assets amortization as of April 30, 2022 is as follows:
As of April 30, 2022
(In thousands)
Years ending January 31,
2023 (remaining 9 months)$1,005 
20241,340 
2025993 
2026300 
2027200 
Total future intangible assets amortization
$3,838 
(6) Employee Stock Plans
As of April 30, 2022 and January 31, 2022, the Company was authorized to issue 1,750,000,000 shares of common stock. Shares were reserved for future issuance as follows:
As of
April 30, 2022January 31, 2022
(In thousands)
Outstanding stock options4,425 4,987 
Outstanding restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”)9,188 8,331 
Shares available for future issuances under the 2018 Stock Plan
31,234 25,469 
Shares available for future issuances under the 2018 ESPP
6,166 4,675 
     Total
51,013 43,462 
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Stock Options
A summary of stock option activity for the three months ended April 30, 2022, was as follows:
Number of Shares
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
(In thousands)(In thousands)
Balance as of January 31, 20224,987 $11.79 $182,453 
Options exercised
(549)7.57 — 
Options forfeited
(13)51.75 — 
Balance as of April 30, 20224,425 $12.20 $233,598 
Exercisable as of April 30, 20223,987 $9.94 $219,467 
Vested and expected to vest as of April 30, 20224,398 $12.05 $232,832 
As of April 30, 2022, unrecognized stock-based compensation cost related to outstanding unvested stock options that are expected to vest was $3.5 million, which is expected to be recognized over a weighted-average period of 1.3 years.
RSUs and PSUs
A summary of RSUs and PSUs activities for the three months ended April 30, 2022, was as follows:
Number of Shares
Weighted-
Average
Grant Date
Fair Value
(In thousands)
Balance as of January 31, 20228,331 $50.10 
RSUs and PSUs granted
2,258 60.30 
RSUs and PSUs vested
(845)44.51 
RSUs and PSUs forfeited
(556)52.35 
Balance as of April 30, 20229,188 $52.99 
As of April 30, 2022, unrecognized stock-based compensation cost related to outstanding unvested RSUs that are expected to vest was $341.8 million, which is expected to be recognized over a weighted-average period of 3.3 years.
During fiscal 2022, the Company granted two types of PSUs to certain senior executive officers under the 2018 Stock Plan. Both types of PSUs are subject to service-based and market-based vesting conditions. Each type of PSU contains different market-based vesting conditions and the number of shares that could be earned is either 1) based on our total stockholder return as compared to the constituents of the S&P Software & Services Select Index over 1-year, 2-year and 3-year cumulative performance periods inclusive of our fiscal 2022 through the fiscal year ended January 31, 2024, or 2) based on specific share price target of the Company’s common stock. The number of shares that could be earned will range from 0% to 200% of the target number of shares. The fair value of the PSUs grant was determined using a Monte Carlo simulation approach. The compensation cost is recognized under the accelerated attribution method.
As of April 30, 2022, unrecognized stock-based compensation cost related to outstanding unvested PSUs that are expected to vest was $12.5 million, which is expected to be recognized over a weighted-average period of 1.8 years.
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Stock-Based Compensation
The stock-based compensation expense, net of estimated forfeitures, by line item in the accompanying condensed consolidated statements of comprehensive loss is summarized as follows:
Three Months Ended April 30,
20222021
(In thousands)
Cost of subscription revenue$2,000 $1,522 
Cost of professional services revenue1,347 831 
Research and development10,571 6,966 
Sales and marketing16,150 16,633 
General and administrative8,461 8,119 
  Total stock-based compensation expense
$38,529 $34,071 
The Company’s estimated forfeiture rate is based on accumulated historical forfeiture data.
(7) Fair Value Measurements
Cash and cash equivalents included investments in money market funds of $180.7 million and $196.7 million at April 30, 2022 and January 31, 2022, respectively. The fair value of the money market funds was determined using quoted prices for identical investments in active markets, which are considered to be Level 1 inputs under the fair value measurements and disclosure guidance.
Other than the money market funds, the Company did not hold any assets or liabilities that are measured at fair value on a recurring basis as of April 30, 2022, and January 31, 2022. There were no transfers into or out of Level 1, Level 2, or Level 3 during the three months ended April 30, 2022 and 2021.
(8) Revenue Recognition
The Company derives revenue primarily from sales of subscription services and, to a lesser degree, from professional services. Revenue is recognized when a customer obtains access to the platform and receives the related professional services. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to receive in exchange for these services.
Disaggregation of Revenue
The following table summarizes the revenue by region based on the shipping address of customers who have contracted to use the Company’s cloud-based application:
Three Months Ended April 30,
20222021
AmountPercentage
of Revenue
AmountPercentage
of Revenue
(In thousands, except percentage data)
Americas$94,122 56 %$71,254 55 %
EMEA54,855 32 43,658 34 
APAC20,182 12 14,913 11 
       Total$169,159 100 %$129,825 100 %
The United States and the U.K. were the only two countries that represented more than 10% of the Company’s total revenue in any period. Revenue in the United States and as a percentage of total revenue comprised of $89.7 million and 53%, and $68.0 million and 52% in the three months ended April 30, 2022 and 2021, respectively. Revenue in the U.K. comprised of $19.9 million and 12%, and $15.7 million and 12% in the three months ended April 30, 2022 and 2021, respectively.
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Contract Balances
Contract assets represent revenue recognized for contracts that have not yet been invoiced to customers, typically for multi-year arrangements. Total contract assets, which were included within prepaid expenses and other current assets and other noncurrent assets on the condensed consolidated balance sheets, were $0.2 million as of January 31, 2022. Total contract assets were immaterial as of April 30, 2022.
Contract liabilities consist of deferred revenue. Revenue is deferred when the Company has the right to invoice in advance of performance under a contract. The current portion of deferred revenue balances are recognized over the following 12-month period. The amount of revenue recognized in the three months ended April 30, 2022 and 2021 that was included in deferred revenue at the beginning of each period was $140.2 million and $107.3 million, respectively.
Remaining Performance Obligations
As of April 30, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $1,111.5 million, which consists of both billed consideration in the amount of $354.3 million and unbilled consideration in the amount of $757.2 million that the Company expects to recognize as revenue in the future periods. The Company expects to cumulatively recognize approximately 51% and 81% of this amount as revenue in the next 12 months and 24 months, respectively, with the remaining balance recognized thereafter.
As of January 31, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $1,092.5 million, which consists of both billed consideration in the amount of $382.2 million and unbilled consideration in the amount of $710.3 million that the Company expects to recognize as revenue in the future periods. The Company expects to recognize 50% and 82% of this amount as revenue in the next 12 months and 24 months, respectively, with the remaining balance recognized thereafter.
The Company applied a practical expedient allowing it not to disclose the amount of the transaction price allocated to the remaining performance obligations for contracts with an original expected duration of one year or less.
(9) Commitments and Contingencies
On August 24, 2020, a purported stockholder of the Company filed a putative securities class action complaint in the United States District Court for the Northern District of California, captioned Grobler v. Anaplan, Inc., et al., 3:20-cv-05959, against the Company and certain of the Company’s executive officers. The Court appointed a lead plaintiff on November 12, 2020, and on January 6, 2021, the lead plaintiff filed an amended complaint, captioned Sakkal v. Anaplan, Inc., et al. The amended complaint alleged violations of Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934, as amended, purportedly on behalf of all persons who purchased Anaplan, Inc. securities between November 21, 2019, and February 26, 2020, inclusive. The claims were based upon allegations that the defendants misrepresented and/or omitted material information in certain of the Company’s prior public filings regarding the business, operations and prospects of the Company. The Company filed a motion to dismiss the amended complaint on March 8, 2021. On August 31, 2021, the Court entered an order dismissing the amended complaint without prejudice. On September 21, 2021, the parties filed a stipulation of voluntary dismissal whereby the lead plaintiff agreed not to further litigate the case, and the Court subsequently terminated the case.
From time to time, the Company is party to litigation and subject to claims incident to the ordinary course of business. As the Company’s growth continues, the Company may become party to an increasing number of litigation matters and claims. The outcome of litigation and claims cannot be predicted with certainty, and the resolution of these matters could materially affect the Company’s future results of operations, cash flows, or financial position. The Company is not presently party to any legal proceedings that, in the opinion of management, if determined adversely to the Company, would individually or taken together have a material adverse effect on the Company’s business, operating results, financial condition, or cash flows.
(10) Income Taxes
The Company computed its interim provision using its estimated annual effective tax rate. The Company’s income tax expense was $0.3 million and $1.3 million during the three months ended April 30, 2022 and 2021, respectively.
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(11) Net Loss Per Share Attributable to Common Stockholders
The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders:
Three Months Ended
April 30,
20222021
(In thousands, except per share data)
Numerator:
Net loss$(57,860)$(51,491)
Denominator:
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
149,877 144,161 
Net loss per share attributable to common stockholders, basic and diluted
$(0.39)$(0.36)
The potential shares of common stock that were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been antidilutive are as follows:
As of April 30,
20222021
(In thousands)
Stock options4,425 6,236 
RSUs and PSUs9,188 9,789 
Total
13,613 16,025 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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, 2022, filed with the SEC on March 23, 2022. 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 a market-leading cloud-native enterprise SaaS company, transforming how enterprises across industries see, plan, and drive their business. Powered by our proprietary calculation engine and Hyperblock® technology, our platform lets customers model what-if scenarios, contextualize current performance in real time, and forecast future outcomes for faster, more confident decisions. Embracing constant change, our customers use Anaplan to rapidly pivot strategies, redeploy resources, and optimize plans for growth, efficiency, demand, and profitability. Anaplan equips teams to overcome obstacles and seize opportunities ahead of competitors.
Our customers often initially adopt our platform within a specific business function for one or more planning solutions, but also because our platform has the capacity to transform their enterprise-wide planning process through our integrated planning and forecasting tool and as part of a broader digital transformation initiative. We sell subscriptions to our cloud-based planning platform through our direct sales team and through our global partnership ecosystem that serves as an integral part of our go-to-market strategy and an extension of our direct sales force. Our strategic consulting and systems integration partners provide us with a significant source of lead generation and implementation leverage. These partners act as strategic advisors to senior executives in corporate, functional, and process transformation initiatives of organizations. They often promote our platform as their clients examine how to plan more effectively or seek organizational change through digital transformation or improved business processes. We also rely on partners with deep subject-matter expertise in the implementation of specific use cases who can facilitate implementations for our customers. Our partners also help to drive thought leadership in promoting connected planning and digital transformation.
Once our customers see the benefits and wide applicability of our platform, we use a “land and expand” sales strategy to encourage our existing customers to increase the number of users, add new use cases, and expand to additional lines of business, divisions, and geographies. This expansion often generates a natural network effect in which the value of our platform to customers 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 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, 2022 and 2021, subscription revenue was $152.3 million and $118.3 million, respectively, representing a year-over-year subscription revenue growth rate of 29%. During the three months ended April 30, 2022 and 2021, services revenue was $16.8 million and $11.5 million, respectively. Our subscription revenue as a percentage of total revenue was 90% and 91% in the three months ended April 30, 2022 and 2021, respectively.
During the three months ended April 30, 2022 and 2021, our total revenue was $169.2 million and $129.8 million, respectively. Approximately 47% and 48% of our total revenue was generated from outside of the United States in the three months ended April 30, 2022 and 2021, respectively. Our net loss was $57.9 million and $51.5 million in the three months ended April 30, 2022 and 2021, 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 116% and 118% as of April 30, 2022, and January 31, 2022, respectively.
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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 569 and 555 as of April 30, 2022, and January 31, 2022, respectively. We monitor this metric and believe it is a useful tool to investors, as an indicator of the scale of customer adoption and expansion of our platform.
Our remaining performance obligations (RPO) represents all future revenue under contract that has not yet recognized, which includes deferred revenue and non-cancelable amounts that will be invoiced and recognized as revenue in future periods. Our current remaining performance obligations (cRPO) represents RPO that is expected to be recognized as revenue in the next 12 months. As of April 30, 2022, our RPO was $1,111.5 million, of which 51% represented cRPO. cRPO increased by 27%, compared to April 30, 2021. Our RPO fluctuates due to a number of factors including the timing, duration and dollar amount of customer contracts.
Merger
On March 20, 2022, we entered into the Merger Agreement with Parent and Merger Sub, providing for the merger of Merger Sub with and into our Company, with our Company surviving the merger as a wholly owned subsidiary of Parent.

Under the terms of the agreement, our stockholders will receive $66.00 in cash for each share of common stock they hold on the transaction closing date. The obligation of the parties to consummate the acquisition is subject to the satisfaction or waiver of customary closing conditions, including, without limitation, the absence of governmental orders resulting, directly or indirectly, in enjoining or otherwise prohibiting or making illegal the consummation of the Merger, the affirmative vote of the holders of a majority of the voting power of the outstanding shares of the Company’s common stock entitled to vote on the adoption of the Merger Agreement. The 30-day waiting period under the HSR Act expired at 11:59 p.m. Eastern Time on Monday, May 2, 2022. We are subject to customary restrictions on our ability to solicit alternative acquisition proposals from third parties and to provide non-public information to, and participate in discussions and engage in negotiations with, third parties regarding alternative acquisition proposals, with customary exceptions for superior proposals. We expect that the Merger will close in June 2022. For a summary of the transaction, 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.
COVID-19 Update
The COVID-19 pandemic continues to persist. The broader implications of the COVID-19 pandemic on our business, results of operations, and overall financial performance remain uncertain. We have seen and may continue to see in certain geographies some of our customers and prospective customers defer or delay buying decisions and project implementations and prolonged sales cycles.
As the impact of the COVID-19 pandemic continues to unfold around the world, we remain focused on supporting our employees, customers, and partners. In response to the COVID-19 pandemic, we modified the manner in which we operate and we required our employees to work remotely, maintained business-related travel restrictions, and virtualized, postponed or cancelled our sales and marketing, employee or industry events. We are slowly reversing certain of these modifications to our operations on a market-by-market basis in accordance with local guidelines, but currently employ a hybrid work approach in most regions. Our approach may vary among geographies depending on local guidelines, and may change at any time, including in response to new or reimposed precautionary measures as the COVID-19 pandemic evolves. We may incorporate into our ongoing business operations certain business practice modifications implemented in response to the COVID-19 pandemic. 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.
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The extent to which the ongoing COVID-19 pandemic, and associated global economic uncertainty, may impact our business will depend on future developments, including the duration and spread of the pandemic and the prevalence and virulence of variants of COVID-19; the scope and effectiveness of precautionary measures designed to contain and prevent the spread of COVID-19; the availability and effectiveness of vaccines; and the impact on our current and prospective customers, employees, and partners; all of which are uncertain and cannot be predicted at this time. We are continuing to monitor the actual and potential effects of the COVID-19 pandemic on our business. See Part II, Item 1A, “Risk Factors” 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 Part II, Item 1A, “Risk Factors”. If we are unable to address these challenges, our business and operating results could be adversely affected.
New customer acquisition.    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.
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, talent ecosystem, worldwide development and delivery capabilities, customer success management and local sales and service resources, we believe 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 aim to drive integrated planning across the entire organization to help our customers benefit from the full value of our platform. We employ a “land and expand” approach, with many of our customers initially deploying our product for a specific planning use case. Once they realize the benefits and wide applicability of our platform, many of our customers subsequently renew their subscriptions, expand the number of users, add new use cases, and expand to additional lines of business, divisions, 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. 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 invest in expanding and retaining our sales leadership and direct sales force, particularly in attracting and retaining sales personnel with experience selling to complex 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. 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, 2022 and 2021, was approximately 47% and 48%, respectively, of our total revenue. We have invested, and plan to 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, promotes thought leadership, and enables more efficient delivery of service solutions. We intend to augment and deepen our partnerships with strategic and advisory consulting, systems integration, public cloud, and technology firms.
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Product velocity.    Our vision is to help customers swiftly and effectively plan, analyze, and act on initiatives across the enterprise. 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 protect our market-leading technology advantage. We are also investing to further enhance the functionality, intelligence, user experience, scale, extensibility and security 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 91% of our total revenue for the three months ended April 30, 2022 and 2021, 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-cancelable over the contract term. We had remaining performance obligations, or backlog, in the amount of $1,111.5 million and $1,092.5 million as of April 30, 2022 and January 31, 2022, respectively, consisting of both billed and unbilled consideration.
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, including salaries and bonuses, benefits, and stock-based compensation, 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 as incurred.
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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.
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 Live! customer experiences, advertising, and allocated overhead costs.
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.
Interest Income (Expense), Net
Interest income (expense), net consists primarily of interest income earned on our cash and cash equivalents, net of interest expense from our finance leases.
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, and U.K. deferred tax assets as we have concluded that it is not more likely than not that the deferred assets will be utilized.
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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,
20222021
(In thousands)
Revenue:
Subscription revenue
$152,343 $118,343 
Professional services revenue
16,816 11,482 
Total revenue
169,159 129,825 
Cost of revenue:
Cost of subscription revenue (1)
28,635 21,329 
Cost of professional services revenue (1)
17,928 11,492 
Total cost of revenue
46,563 32,821 
Gross profit122,596 97,004 
Operating expenses:
Research and development (1)
43,738 33,212 
Sales and marketing (1)
98,387 88,470 
General and administrative (1)
40,583 24,945 
Total operating expenses
182,708 146,627 
Loss from operations(60,112)(49,623)
Interest income (expense), net(31)(151)
Other income (expense), net2,566 (459)
Loss before income taxes(57,577)(50,233)
Provision for income taxes(283)(1,258)
Net loss$(57,860)$(51,491)
(1) Includes stock-based compensation expense as follows:
Cost of subscription revenue
$2,000 $1,522 
Cost of professional services revenue
1,347 831 
Research and development
10,571 6,966 
Sales and marketing
16,150 16,633 
General and administrative
8,461 8,119 
Total stock-based compensation expense
$38,529 $34,071 
Comparison of the Three Months Ended April 30, 2022 and 2021
Revenue
Three Months Ended
April 30,
20222021% Change
(In thousands, except percentage data)
Subscription revenue$152,343 $118,343 29 %
Professional services revenue16,816 11,482 46 
Total revenue
$169,159 $129,825 30 %
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Total revenue was $169.2 million in the three months ended April 30, 2022, compared to $129.8 million in the three months ended April 30, 2021, an increase of $39.4 million, or 30%.
Subscription revenue was $152.3 million, or 90% of total revenue, in the three months ended April 30, 2022, compared to $118.3 million, or 91% of total revenue, in the three months ended April 30, 2021, an increase of $34.0 million, or 29%. The increase in subscription revenue was primarily driven by existing customers expanding their use of our platform, which accounted for 73% of the increase, and acquisition of new customers, which accounted for approximately 27% of the increase.
Professional services revenue was $16.8 million in the three months ended April 30, 2022, compared to $11.5 million in the three months ended April 30, 2021, an increase of $5.3 million, or 46%. The increase in professional services revenue was primarily driven by sales of our professional services resulting from the growth of our customer base.
Cost of Revenue
Three Months Ended
April 30,
20222021% Change
(In thousands, except percentage data)
Cost of subscription revenue$28,635 $21,329 34 %
Cost of professional services revenue
17,928 11,492 56 
Total cost of revenue
$46,563 $32,821 42 %
Total cost of revenue was $46.6 million in the three months ended April 30, 2022, compared to $32.8 million in the three months ended April 30, 2021, an increase of $13.8 million, or 42%.
Cost of subscription revenue was $28.6 million in the three months ended April 30, 2022, compared to $21.3 million in the three months ended April 30, 2021, an increase of $7.3 million, or 34%. The increase in cost of subscription revenue was primarily due to an increase in salaries and bonuses, and benefits costs of $2.6 million, including stock-based compensation, an increase in hosting costs of $1.0 million, an increase in software licenses of $2.1 million, and an increase in amortization of our equipment leases and capitalized software development costs of $1.0 million.
Cost of professional services revenue was $17.9 million in the three months ended April 30, 2022, compared to $11.5 million in the three months ended April 30, 2021, an increase of $6.4 million, or 56%. The increase in cost of professional services revenue was primarily due to an increase in the partner implementation costs related to an increase in partner activity of $4.4 million, and an increase in salary and bonuses, and benefits costs of $1.9 million, including stock-based compensation.
Gross Profit and Gross Margin
Three Months Ended
April 30,
20222021% Change
(In thousands, except percentage data)
Subscription gross profit$123,708 $97,014 28 %
Professional services gross profit
(1,112)(10)11,020 
Total gross profit
$122,596 $97,004 26 %
Subscription gross margin81 %82 %
Professional services gross margin
(7)%— %
Total gross margin
72 %75 %
Gross profit was $122.6 million in the three months ended April 30, 2022, compared to $97.0 million in the three months ended April 30, 2021, an increase of $25.6 million, or 26%. 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, 2022.
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Gross margin was 72% in the three months ended April 30, 2022, compared to 75% in the three months ended April 30, 2021. The decrease in gross margin was primarily due to an increase in professional services revenue, which generates a significantly lower gross margin than our subscription revenue, as a percentage of total revenue, and higher hosting and partner implementation costs.
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,
20222021% Change
(In thousands, except percentage data)
Operating expense:
Research and development$43,738 $33,212 32 %
Sales and marketing98,387 88,470 11 
General and administrative40,583 24,945 63 
Total operating expenses$182,708 $146,627 25 %
Research and Development
Research and development expenses were $43.7 million in the three months ended April 30, 2022, compared to $33.2 million in the three months ended April 30, 2021, an increase of $10.5 million, or 32%. The increase includes an increase in salary and bonuses and benefits costs of $8.5 million (which included an increase in stock-based compensation of $3.7 million) primarily related to an increase in headcount, an increase in consulting expenses of $0.9 million, and an increase in hosting fees of $0.5 million, partially offset by a decrease in capitalized software development costs of $0.5 million.
Sales and Marketing
Sales and marketing expenses were $98.4 million in the three months ended April 30, 2022, compared to $88.5 million in the three months ended April 30, 2021, an increase of $9.9 million, or 11%. The increase was primarily due to an increase in salary and bonuses and benefits costs related to an increase in headcount of $5.3 million (which included an increase in commission expenses of $2.9 million, partially offset by a decrease in stock-based compensation of $0.7 million), an increase in partner-related fees of $1.1 million, an increase in consulting expenses of $1.0 million, an increase in travel related expenses of $0.8 million, and an increase in software licenses of $0.7 million.
General and Administrative
General and administrative expenses were $40.6 million in the three months ended April 30, 2022, compared to $24.9 million in the three months ended April 30, 2021, an increase of $15.7 million, or 63%. The increase was primarily due to an increase in merger related costs and other expenses of $12.5 million, and an increase in salary and bonuses and benefits costs related to an increase in headcount of $3.8 million, including stock-based compensation, partially offset by a decrease in professional services and contractor costs of $0.6 million.
Other Income (Expense), Net
Three Months Ended
April 30,
20222021% Change
(In thousands, except percentage data)
Interest income (expense), net$(31)$(151)(79)%
Other income (expense), net2,566 (459)(659)
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Interest income (expense), net
There was no material fluctuation in Interest income (expense), net for the three months ended April 30, 2022. Interest income (expense), net decreased by $0.1 million in the three months ended April 30, 2022. The decrease in interest income (expense), net was primarily due to lower interest income from our cash and cash equivalents as a result of lower interest rates in the three months ended April 30, 2022 compared to the three months ended April 30, 2021.
Other income (expense), net
Other income (expense), net was a gain of $2.6 million in the three months ended April 30, 2022, compared to a loss of $0.5 million in the three months ended April 30, 2021, an increase in income of $3.1 million, or 659%. The change was primarily due to currency fluctuations and the related remeasurements during the periods.
Provision for Income Taxes
Three Months Ended
April 30,
20222021% Change
(In thousands, except percentage data)
Provision for income taxes$(283)$(1,258)(78)%
The provision for income taxes was $0.3 million in the three months ended April 30, 2022, compared to $1.3 million in the three months ended April 30, 2021, a decrease of $1.0 million or 78%. The decrease in provision for income taxes was primarily due to a decrease in taxable income generated from intercompany cost-plus arrangements in certain European and Asian countries.
Liquidity and Capital Resources
As of April 30, 2022, our principal sources of liquidity were cash and cash equivalents totaling $304.0 million, which were held for working capital purposes and strategic initiatives. Our cash equivalents are comprised primarily of money market funds and bank deposits.
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, 2022 from the contractual obligations and commitments disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2022 filed with the SEC on March 23, 2022.
Cash from operations could be affected by various risks and uncertainties, including but not limited to, the effects of the COVID-19 pandemic and other risks detailed in Part II, Item 1A, “Risk Factors”.
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.
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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, 2022 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.
This Credit Agreement expired on April 23, 2022. As of April 30, 2022 and January 31, 2022, there were no borrowings outstanding.
Cash Flows
The following table summarizes our cash flows for the periods presented:
Three Months Ended
April 30,
20222021
(In thousands)
Net cash provided by operating activities$14,369 $13,809 
Net cash used in investing activities(4,507)(6,199)
Net cash provided by (used in) financing activities2,005 (428)
Operating Activities
Net cash provided by operating activities of $14.4 million for the three months ended April 30, 2022, reflecting a net loss of $57.9 million, adjusted by non-cash charges for stock-based compensation of $38.5 million, amortization of deferred commissions of $12.5 million, depreciation and amortization of $7.2 million, amortization of operating lease right-of-use assets and accretion of operating lease liabilities of $2.5 million, and non-cash foreign currency remeasurement gains of $2.4 million. Changes in working capital were favorable to cash flows from operations by $14.0 million primarily due to a decrease in accounts receivable of $61.3 million due to timing of customer billings and collections, and an increase in other noncurrent liabilities of $0.5 million, partially offset by an increase in deferred commissions of $17.3 million related to commissions capitalized on our sales, a decrease in accounts payable and accrued expenses of $7.2 million due to timing of payments, a decrease in deferred revenue balance of $18.3 million, net payments for operating lease liabilities of $2.7 million, and an increase in prepaid expenses and other current assets of $2.6 million.
Net cash provided by operating activities of $13.8 million for the three months ended April 30, 2021, reflecting a net loss of $51.5 million, adjusted by non-cash charges for stock-based compensation of $34.1 million, amortization of deferred commissions of $9.7 million, depreciation and amortization of $7.0 million, 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 $12.4 million primarily due to a decrease in accounts receivable of $43.9 million due to timing of customer billings and collections, and an increase in other noncurrent liabilities of $0.7 million, partially offset by an increase in deferred commissions of $12.5 million related to commissions capitalized on our sales, a decrease in accounts payable and accrued expenses of $11.1 million due to timing of payments, a decrease in deferred revenue balance of $4.8 million, net payments for operating lease liabilities of $2.3 million, and an increase in prepaid expenses and other current assets of $1.3 million.
Investing Activities
Net cash used in investing activities for the three months ended April 30, 2022 of $4.5 million was related to the capitalization of internal-use software of $3.6 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.
Net cash used in investing activities for the three months ended April 30, 2021 of $6.2 million was related to the capitalization of internal-use software of $3.1 million as we expanded our platform and increased our development efforts, and purchases of property and equipment of $3.1 million related to our growth.
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Financing Activities
Net cash provided by financing activities for the three months ended April 30, 2022 of $2.0 million consisted primarily of $4.2 million in proceeds from the exercise of stock options, offset by $2.2 million principal payment on finance lease obligations.
Net cash used in financing activities for the three months ended April 30, 2021 of $0.4 million consisted primarily of $2.5 million principal payment on finance lease obligations, offset by $2.1 million in proceeds from the exercise of stock options.
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, 2022, 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, 2022 filed with the SEC on March 23, 2022.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Exchange Risk
Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the British Pound Sterling, Euro, Swedish Krona and Singapore Dollar. Fluctuations in foreign currency exchange rates, including those resulting from COVID-19 pandemic, may cause variability in our results of operations. Impacts to our operations from changes in foreign currency have been fairly limited to date and thus we have not instituted a hedging program. We expect our international operations to continue to grow in the near term and we will monitor our foreign currency exposure to determine when we should begin a hedging program. A majority of our agreements have been and we expect will continue to be denominated in U.S. dollars. A hypothetical 10% increase or decrease in the relative value of the U.S. dollar to other currencies would not have had a material effect on operating results for the three months ended April 30, 2022 and 2021.
Interest Rate Sensitivity
We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities. As of April 30, 2022, we had cash and cash equivalents of $304.0 million, which consisted primarily of money market funds and bank deposits. The carrying amount of our cash equivalents reasonably approximates fair values. Due to the short-term nature of our money market funds, we believe that exposure to changes in interest rates will not have a material impact on the fair value of our cash equivalents. A hypothetical 10% change in interest rates would not have had a material effect on our operating results for the three months ended April 30, 2022 and 2021.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q.
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Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures are designed to, and are effective to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our principal executive officer and principal financial officer, do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II
ITEM 1. LEGAL PROCEEDINGS
The information set forth in Note 9, “Commitments and Contingencies” to the condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q is incorporated herein by reference.
ITEM 1A. RISK FACTORS
A description of the risks and uncertainties associated with our business and ownership of our common stock is set forth below. You should carefully consider the risks described below, as well as the other information in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the events or developments described below could materially and adversely affect our business, financial condition, results of operations, and growth prospects. In such an event, the market price of our common stock could decline. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. This Quarterly Report on Form 10-Q also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including the risks described below. See “Cautionary Note Regarding Forward-Looking Statements.”
Risk Factor Summary
Below is a summary of the principal factors that make an investment in our common stock speculative or subject to risk. This summary does not address all of the risks facing our business. You should consider the risks in this summary together with the detailed discussion of risks that immediately follows this summary in this section titled “Risk Factors,” as well as the other information in this Quarterly Report on Form 10-Q.
Failure to complete, or delays in completing, the potential Merger with Parent and Merger Sub announced on March 20, 2022 and disruptions in our business caused by the potential Merger could materially and adversely affect our results of operations, business, financial results and/or stock price.
We cannot be sure if or when the Merger will be completed.
The Merger Agreement contains provisions that limit our ability to pursue alternatives to the Merger, could discourage a potential competing acquirer of us from making an alternative transaction proposal and, in specified circumstances, could require us to pay a termination fee of $293.1 million.
Lawsuits may be filed against us and the members of our board of directors arising out of the proposed merger, which may delay or prevent the proposed Merger.
We have a limited history of operating at our current scale and under our current strategy, which makes it difficult to predict our future operating results, and we may not achieve our expected operating results in the future.
Our recent revenue growth rates may not be indicative of our future performance or growth.
We have a history of net losses, we anticipate increasing our operating expenses in the future, and we do not expect to be profitable for the near future.
Our quarterly results have fluctuated in the past and may fluctuate significantly in the future and may not fully reflect the underlying performance of our business.
We have experienced rapid growth and expect to continue to invest in our growth in the future. If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service, or adequately address competitive challenges and our business, financial condition and results of operations may be adversely affected.
The ongoing COVID-19 pandemic, and resulting global economic uncertainty, has impacted how we, our customers, and our partners are operating, and could result in a material adverse effect on our business, financial condition, operating results and cash flows.
We derive substantially all of our revenue from a single software platform and if our platform fails to satisfy customer demands or to achieve widespread market acceptance it would adversely affect our business, operating results, financial condition, and growth prospects.
If we are unable to attract new customers, both domestically and internationally, the growth of our revenue will be adversely affected and our business may be harmed.

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Our business depends substantially on our customers renewing their subscriptions and expanding their use of our platform. If our customers do not renew their subscriptions, if they renew on less favorable terms, or if they fail to add more users in more functional areas or upgrade to a higher level of functionality on our platform, our business and operating results will be adversely affected.
If we experience a security incident affecting our platform, networks, systems or data or the data of our customers, or are perceived to have experienced such a security incident, our platform may be perceived as not being secure, our reputation may be harmed, customers may reduce the use of or stop using our platform, we may incur significant liabilities, and our business could be materially adversely affected.
Failure to effectively expand our sales and marketing capabilities, including to hire and retain direct sales personnel, could harm our ability to increase our customer base and achieve broader market acceptance of our service.
Our growth depends in part on the success of our strategic relationships with third parties and their continued performance.
If our customers and partners do not have access to highly skilled and trained users of our platform, our customers may not be able to unlock the full potential of our platform, customer satisfaction may suffer, and our results of operations, financial condition and growth prospects may be adversely affected.
If we fail to continue to enhance our platform, satisfy the cloud infrastructure priorities of our clients or adapt to rapid technological change, our ability to remain competitive could be impaired.
Real or perceived errors, failures, bugs, service outages, or disruptions in our platform could adversely affect our reputation and harm our business.
We depend on the experience and expertise of our senior management team and certain key employees, especially engineering, research and development and sales personnel, and our inability to retain these executive officers and key employees or recruit them in a timely manner, could harm our business, operating results, and financial condition.
The markets in which we participate are intensely competitive, and if we do not compete effectively, our business and operating results could be adversely affected.
Because we collect, process and store personal information and furthermore, because our platform could be used by customers to do the same, evolving domestic and international privacy and security laws, regulations and other obligations could result in additional costs and liabilities to us or inhibit sales of our platform.
The stock price of our common stock may be volatile and may decline regardless of our operating performance and you may lose all or part of your investment.
If we are unable to adequately address these and other risks we face, our business, financial condition, operating results, and prospects may be adversely affected.
Risks Related to Our Merger with Parent
Failure to complete, or delays in completing, the potential Merger with Parent and Merger Sub announced on March 20, 2022 and disruptions in our business caused by the potential Merger could materially and adversely affect our results of operations, business, financial results and/or stock price.
On March 20, 2022, we entered into the Merger Agreement with Parent and Merger Sub pursuant to which, if all of the conditions to closing are satisfied or waived, we will become a wholly-owned subsidiary of Parent, pursuant to the Merger. Consummation of the Merger is subject to the satisfaction or waiver of customary closing conditions, including, without limitation, the absence of governmental orders resulting, directly or indirectly, in enjoining or otherwise prohibiting or making illegal the consummation of the Merger, the affirmative vote of the holders of a majority of the voting power of the outstanding shares of the Company’s common stock entitled to vote on the adoption of the Merger Agreement, and expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. We cannot predict with certainty whether or when any of the required closing conditions will be satisfied or if another uncertainty may arise and cannot assure you that we will be able to successfully consummate the proposed Merger as currently contemplated under the Merger Agreement or at all.
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Our efforts to complete the Merger could cause substantial disruptions in, and create uncertainty surrounding, our business, which may materially adversely affect our results of operation and our business. Uncertainty as to whether the Merger will be completed may affect our ability to recruit prospective employees and has affected our ability to retain and motivate existing employees. Since announcing the Merger, we have experienced the departure of certain key employees. Employee retention has been particularly challenging while the transaction is pending because employees may experience uncertainty about their roles following the transaction. Uncertainty as to our future could adversely affect our business and our relationship with customers, partners, vendors, regulators and other service providers. For example, potential customers may defer decisions about working with us or seek to change existing business relationships with us. Changes to, or termination of, existing business relationships could adversely affect our results of operations and financial condition, as well as the market price of our common stock. The adverse effects of the pendency of the transaction could be exacerbated by any delays in completion of the transaction or termination of the Merger Agreement.
Risks related to the failure of the proposed Merger to be consummated include, but are not limited to, the following:
under some circumstances, we may be required to pay a termination fee to Parent of $293.1 million;
we will remain liable for significant transaction costs, including legal, accounting, financial advisory and other costs relating to the Merger regardless of whether the Merger is consummated;
the trading price of our common stock may decline to the extent that the current market price for our stock reflects a market assumption that the Merger will be completed;
the attention of our management and employees may have been diverted to the Merger rather than to our own operations and the pursuit of other opportunities that could have been beneficial to us;
we could be subject to litigation related to the Merger and any failure to complete the Merger;
the potential loss of key personnel during the pendency of the Merger as employees and other service providers may experience uncertainty about their future roles with us following completion of the Merger; and
under the Merger Agreement, we are subject to certain restrictions on the conduct of our business prior to completing the Merger, which restrictions could adversely affect our ability to conduct our business as we otherwise would have done if we were not subject to these restrictions.
The occurrence of any of these events individually or in combination could materially and adversely affect our results of operations, business, and our stock price.
We cannot be sure if or when the Merger will be completed.
The consummation of the Merger is subject to the satisfaction or waiver of various conditions, including the authorization of the Merger by our stockholders. We cannot guarantee that the closing conditions set forth in the Merger Agreement will be satisfied. If we are unable to satisfy the closing conditions or if other mutual closing conditions are not satisfied, Parent and Merger Sub will not be obligated to complete the Merger. Under certain circumstances, we would be required to pay Parent a termination fee of $293.1 million.
If the Merger is not completed, our board of directors, in discharging its fiduciary obligations to our stockholders, will evaluate our strategic direction.
Until the Merger is completed, the Merger Agreement restricts us from taking specified actions without the consent of the other party, and, in regards to us, generally requires us to operate in the ordinary course of business consistent with past practice. These restrictions may prevent us from making appropriate changes to our respective businesses or pursuing attractive business opportunities that may arise prior to the completion of the Merger.
The Merger Agreement contains provisions that limit our ability to pursue alternatives to the Merger, could discourage a potential competing acquirer of us from making an alternative transaction proposal and, in specified circumstances, could require us to pay a termination fee of $293.1 million.
The Merger Agreement provides that we shall not, and requires us to instruct and cause our representatives not to, among other things, solicit, participate in negotiations with respect to or approve or recommend any third party proposal for an alternative transaction, subject to exceptions set forth in the Merger Agreement relating to the receipt of certain unsolicited proposals. Further, while our board of directors is permitted to make a recommendation change to our stockholders with respect to the Merger under certain circumstances, unless the Merger Agreement is terminated and a termination fee is paid per the requirements of the Merger Agreement, we will be required to submit the proposals to a stockholder vote at a special meeting.
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These provisions could discourage a potential third-party acquirer or merger partner that might have an interest in acquiring all or a significant portion of the Company or pursuing an alternative transaction from considering or proposing such a transaction, even if it were prepared to pay consideration with a higher per share cash or market value than the consideration in the Merger, or might result in a potential third-party acquirer or merger partner proposing to pay a lower price to our stockholders than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances.
If the Merger Agreement is terminated and we determine to seek another business combination, we may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the Merger.
Lawsuits arising out of the proposed Merger have been and may be continued to be filed against us and the members of our board of directors, which may delay or prevent the proposed Merger.
Putative stockholder complaints, including stockholder class action complaints, and other complaints have been and may continue to be filed against us, or our board of directors, and others in connection with the transactions contemplated by the Merger Agreement. On April 27, 2022, May 2, 2022, May 3, 2022, May 4, 2022, May 5, 2022, and May 20, 2022, lawsuits were filed alleging that the Preliminary Proxy Statement filed on April 21, 2022 and/or the Proxy Statement, each relating to the Merger, omitted material information that rendered those documents incomplete and misleading. The lawsuits, each filed by a purported stockholder of the Company in an individual capacity and/or on behalf of all others similarly situated, were filed in federal court and are captioned Ryan O’Dell v. Anaplan, Inc., et al., 1:22-cv-03427 (S.D.N.Y.), Donald Post v. Anaplan, Inc., et al., No.1:22-cv-03541 (S.D.N.Y.), Tim Custer v. Anaplan, Inc., et al., No. 1:22-cv-02535-DG-RLM (E.D.N.Y.), Matthew Whitfield v. Anaplan, Inc., et al., No. 1:22-cv-02551 (E.D.N.Y.), Marc Waterman v. Anaplan, Inc., et al., No. 2:22-cv-01753-CDJ (E.D.Pa.), and Catherine Coffman v. Anaplan, Inc., et al., No. 1:22-cv-04147 (S.D.N.Y.). As a result of the alleged omissions, the lawsuits seek to hold us and/or our directors liable for violating Sections 14(a) and 20(a) of the Exchange Act, including Rule 14a-9 promulgated thereunder, and for breaching their fiduciary duty. The lawsuits seek, among other relief, an order enjoining consummation of the Merger, rescission of the Merger in the event it is consummated, and damages. On May 13, 2022, May 19, 2022, May 20, 2022, and May 21, 2022, Gregory Crawford, Susan Finger, Anthony Morgan, David Morgan, and Paul Berger, purported stockholders of the Company, sent demand letters to the Company also alleging that the Proxy Statement omitted material information that rendered it false and misleading or otherwise had disclosure deficiencies (the “demand letters”). The demand letters demand corrective disclosure to the Proxy Statement. While we believe that the lawsuits and the demand letters are without merit, in order to avoid nuisance, potential expense, and delay from the lawsuits and the demand letters and to provide additional information to the stockholders of the Company and without admitting any liability or wrongdoing, the Company voluntarily supplemented the Proxy Statement with the disclosures set forth in a Current Report on Form 8-K filed on May 31, 2022. On May 31, 2022, the Company received a demand from a purported stockholder of the Company pursuant to 8 Del. C. § 220 (the “Section 220 demand letter”) to inspect books and records of the Company relating to, among other things, the Company's entry into the proposed Transaction with Thoma Bravo. The Company will respond to the Section 220 demand letter in due course, and cannot determine at this time if the books and records demand will lead to litigation. The outcome of litigation is uncertain, and we may not be successful in defending against such current claims and any future claims. Lawsuits filed against us, our board of directors, or against Parent or Merger Sub could delay or prevent the Merger, divert the attention of our management and employees from our day-to-day business and otherwise adversely affect us financially.
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Operational Risks
We have a limited history of operating at our current scale and under our current strategy, which makes it difficult to predict our future operating results, and we may not achieve our expected operating results in the future.
While we were originally formed as Anaplan, LLC in 2008 and first introduced our business planning platform in 2011, much of our growth has occurred in recent years. Over the last few years, we have substantially increased our headcount, shifted our sales strategy to increase our focus on driving the adoption and expansion of our platform by our customers and increased our reliance on partners to accelerate our sales process and provide implementation services, and invested in enhancing the features of our platform. As we have a limited history of operations at our current scale and under our current strategy, our ability to forecast our future operating results and plan for and model future growth is more limited than that of companies with longer operating histories and subject to a number of uncertainties, including those resulting from the COVID-19 pandemic and the associated economic disruptions and market volatility. In addition, we have encountered and will encounter risks, uncertainties and challenges frequently experienced by growing companies in rapidly changing markets, such as the risks, uncertainties and challenges described in this report. If our assumptions regarding these risks, uncertainties and challenges are incorrect or change, or if we do not execute on our strategy and manage these risks, uncertainties and challenges successfully, our operating results could differ materially from our expectations and those of securities analysts and investors, and our business could suffer and the trading price of our common stock could decline.
Our recent revenue growth rates may not be indicative of our future performance or growth.
From fiscal 2021 to fiscal 2022, our total revenue grew from $447.8 million to $592.2 million, an increase of 32%, and from fiscal 2020 to fiscal 2021, our total revenue grew from $348.0 million to $447.8 million, an increase of 29%. In future periods, we may not be able to sustain revenue growth consistent with recent history and/or that meets the expectations of securities analysts or investors. You should not consider our recent or historical revenue growth as indicative of our future performance or growth.
We have a history of net losses, we anticipate increasing our operating expenses in the future, and we do not expect to be profitable for the near future.
We have incurred significant losses in each period since inception, including net losses of $203.6 million, $154.0 million, $149.2 million, and $57.9 million, respectively, in fiscal 2022, 2021, 2020, and for the three months ended April 30, 2022. We had an accumulated deficit of $908.4 million at April 30, 2022. Our losses and accumulated deficit reflect the substantial investments we have made to acquire new customers and develop our platform. We expect our operating expenses to increase in the foreseeable future as we continue to make investments and implement initiatives designed to grow our business, including:
expanding our sales and marketing organization to increase our overall customer base, pursue larger transactions and expand sales within our current customer base;
expanding operations and headcount internationally as we seek to continue to penetrate international markets, provided appropriate economic conditions and opportunities are present;
investing in research and development to improve the capabilities, accessibility, features and functionality of our platform;
growing our partner ecosystem;
making additional investments to broaden and deepen our user community;
expanding our operations and infrastructure, both domestically and internationally, to support future growth; and
investing in legal, accounting, human resources and other administrative functions necessary to support our operating as a public company.
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These initiatives may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue, if at all, in an amount sufficient to offset these higher expenses and to achieve and sustain profitability. Growth of our revenue may slow or revenue may decline for a number of possible reasons, including a decrease in our ability to attract and retain customers, a failure to successfully implement our “land and expand” strategy, a failure to increase our number of partners, a decrease in the effectiveness of our partners, increasing competition, decreasing growth of our overall market, decreasing business spending by customers and prospective customers due to uncertain economic conditions including those caused by the COVID-19 pandemic, an increase in legal risk from the use of our products due to evolving laws, regulations or standards, an inability to timely and cost-effectively introduce new products and services that are favorably received by customers and partners, a security incident, or our failure, for any reason, to continue to capitalize on growth opportunities. Further, we have non-cancelable multi-year purchase commitments with respect to cloud partnership services with third-party public cloud partners, which require us to pay for such services irrespective of actual usage and may not be offset by increased revenue if we are unable to use these partnerships to attract new customers. To the extent we are successful in increasing our customer base, we will also initially incur increased losses because costs associated with acquiring customers are generally incurred up front. In contrast, subscription revenue is generally recognized ratably over the terms of the agreements that last typically two to three years, although some customers commit for shorter periods. Accordingly, we cannot assure you that we will achieve or maintain profitability in the future. Furthermore, any failure to achieve or maintain profitability, or the failure to do so on the timeline expected by investors or securities analysts, could adversely affect the value of our common stock.
Our quarterly results have fluctuated in the past and may fluctuate significantly in the future and may not fully reflect the underlying performance of our business.
Our quarterly results of operations, our key metrics discussed elsewhere in this report, including the levels of our revenue, gross margin, cash flow, remaining performance obligations and deferred revenue, as well as other metrics that analysts use to evaluate our business such as billings, current remaining performance obligations and dollar-based net expansion rate, have fluctuated in the past and may vary significantly in the future. Quarter-to-quarter comparisons of our operating results and other key metrics may not be meaningful. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. Our quarterly financial results and metrics may fluctuate as a result of a variety of factors, many of which are outside of our control and may not fully reflect the underlying performance of our business. These fluctuations could result in our failure to meet our expectations or those of securities analysts or investors. If we fail to meet these expectations for any particular period, the trading price of our common stock could decline significantly. Factors that may cause these quarterly fluctuations include, without limitation, those listed below:
the impact of an economic downturn or market volatility, including the current uncertainty caused by the COVID-19 pandemic, on the price of our common stock, our business and the businesses of our customers, prospective customers and partners;
our ability to attract new customers;
our customer renewal and adoption rates, and our ability to expand use of our platform by existing customers;
the timing and rate at which we sign agreements with customers, including the impact of cost reduction measures, delayed purchasing decisions or prolonged sales cycles at prospective or existing customers as a result of the effects of the COVID-19 pandemic;
the contract value of agreements with customers;
the addition or loss of large customers, including through acquisitions or consolidations;
the timing of recognition of revenue;
the amount and timing of operating expenses;
the amount and timing of completion of professional services engagements;
our ability to hire, train and retain sales personnel, and their productivity rate including, any impact to productivity due to governmental restrictions adopted in response to the COVID-19 pandemic;
changes in our pricing policies or those of our competitors;
fluctuations in currency exchange rates and changes in the proportion of our revenue and expenses denominated in foreign currencies;
seasonal variations in sales of our software subscriptions, which have historically been highest in the fourth quarter of a calendar year but may vary in future quarters;
the timing and success of new product features, updates, and enhancements by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors, customers, or strategic partners;
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the financial condition and creditworthiness of our customers;
the timing of expenses related to the development or possible acquisition and integration of technologies or businesses and potential future charges for impairment of goodwill and long-lived assets from acquired companies;
our ability to maintain a level of liquidity sufficient to grow and support our business and operations;
network outages, technical difficulties or interruptions affecting the delivery and use of our platform or actual or perceived security breaches;
any adverse litigation, judgments, settlements, or other litigation-related costs;
changes in the legislative or regulatory environment;
non-cancelable multi-year purchase commitments with third-party partners which require us to pay for services irrespective of actual usage;
the effects of global pandemics, such as the ongoing COVID-19 pandemic; and
general economic, industry, market and geopolitical conditions and uncertainty, both domestically and internationally.
We have experienced rapid growth and expect to continue to invest in our growth in the future. If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service, or adequately address competitive challenges and our business, financial condition and results of operations may be adversely affected.
We have experienced a period of rapid growth in our headcount and operations in the United States and internationally. We have also significantly increased the size of our customer base and our partner ecosystem. We sell our platform to customers across the globe and have operations in North America, Europe, Asia-Pacific and Israel. We anticipate that we will continue to expand our domestic and international operations and headcount in the future, provided appropriate economic conditions and opportunities are present. This growth has placed, and future growth will place, a significant strain on our management, and administrative, operational, and financial infrastructure. Our success will depend in part on our ability to manage this growth effectively and execute our business plan. To manage the expected growth of our operations and personnel, we must effectively recruit, motivate, integrate and retain employees in a manner consistent with, and that preserves, our corporate culture. We will also need to continue to develop our physical and remote work infrastructure to support our business growth, promote our workers’ safety, and enable our global workforce to effectively and securely communicate with each other, our partners and customers. As our customer base grows, we will need to maintain a high level of customer satisfaction by providing high quality customer support, customer success management and service resources consistency across deployments of our platform, and access to ongoing training. As we grow and our organizational structure becomes more complex, we will need to continue to improve our operational, financial, reporting, compliance, information technology and management systems, controls and procedures, and our risk management activities related to the activities of our customers and partners. For the duration of the COVID-19 pandemic, we will also need to monitor and respond to various and constantly changing local regulations, restrictions and requirements that could impact our operations, personnel and systems, controls and procedures.
These and other improvements in our operations, personnel and systems, controls and procedures will require significant capital expenditures and the allocation of valuable management and employee resources. Failure to effectively manage growth or execute our business plan could result in difficulty or delays in increasing the size of our customer base, declines in quality of customer support or customer satisfaction, increases in costs and expenses, failures to make timely and accurate reports of our operations and financial results, which would escalate the risk of noncompliance with applicable policies or laws, difficulties in introducing new features or other operational difficulties, harm to our reputation and brand. Any of these developments could adversely affect our business performance, results of operations and financial position.
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The ongoing COVID-19 pandemic, and resulting global economic uncertainty, has impacted how we, our customers, and our partners are operating, and could result in a material adverse effect on our business, financial condition, operating results and cash flows.
The COVID-19 pandemic continues to persist. Precautionary measures designed to prevent the spread of COVID-19, such as travel restrictions, shelter-in-place orders, and business shutdowns, have impacted many of the regions in which we conduct business. New or more restrictive measures have been and may continue to be adopted or reimposed if the pandemic worsens or evolves, including due to new variants of the COVID-19 virus. These factors have increased economic and financial market volatility and uncertainty. Although multiple vaccines to protect against COVID-19 have been approved for use by various governments, the effectiveness of such vaccines will depend on the general availability of vaccines, inoculation rates and efficacy of the vaccines against new and existing variants. As such, the duration and severity of the COVID-19 pandemic and the degree of its impact on our business remains uncertain and difficult to predict.
As a result of the COVID-19 pandemic, we modified the manner in which we operated employing precautionary measures designed to protect the health of our employees while enabling us to support our customers and partners. Among other modifications, we required our employees to work remotely, maintained business-related travel restrictions, and virtualized, postponed or cancelled our sales and marketing, employee or industry events. We are slowly reversing certain of these modifications to our operations on a market-by-market basis in accordance with local guidelines, but continue to employ a hybrid work approach in most regions. Our approach may vary among geographies depending on local guidelines, and may change at any time, including in response to new or reimposed precautionary measures as the pandemic evolves. We may incorporate into our ongoing business operations certain business practice modifications implemented in response to the COVID-19 pandemic. These business modifications have and may continue to result in inefficiencies, delays and additional costs in our sales and marketing, administrative, professional services and research and development efforts, which could have an adverse effect on our operations.
In regions where our employees return to our offices and we resume in-person sales and marketing, employee and industry events, we may face additional challenges and incur additional costs, including those associated with managing evolving personnel and workplace safety protocols, disparate regional safety guidelines and workplace or labor disputes or claims related to COVID-19, which could negatively impact our business. Our remote work measures and in-person safety protocols may not be sufficient to mitigate the risks posed by the COVID-19 pandemic, and illness and workforce disruptions could lead to unavailability of key personnel and harm our ability to perform critical functions. Our hybrid work environment may also present operational risks, including challenges to maintaining our corporate culture and employee engagement, lower employee productivity and retention risks. Even where we resume in-person sales and marketing activities, our business operations, including sales-related and customer support activities, could be adversely affected by ongoing or additional business closures, travel restrictions impacting employees and partners, virtualization of events, a continued preference for remote engagement, and other precautionary measures, especially in regions where we have material operations or sales. We may also experience negative impacts on our business if COVID-19 related governmental restrictions, or the easing or tightening of those restrictions, occurs at different rates in the markets in which we, our customers, or our partners operate, and as a result of the disparate restrictions we are unable to meet customer expectations. We may not be able to fully mitigate the impact of these disruptions which cannot be predicted or quantified at this time and which could negatively impact our business.
The pandemic and associated global economic uncertainty and market volatility have had and may continue to have an adverse impact on certain of our customers, prospective customers and partners, which could result in reduced consumer demand and willingness to enter into or renew contracts with us, and ultimately could have a material adverse effect on our financial results. We have seen and may continue to see in certain geographies our customers and prospective customers deferring or delaying buying decisions and project implementations and prolonged sales cycles. In addition, the evolution of the COVID-19 pandemic and the macroeconomic factors triggered by the pandemic, have and could continue to result in decreased business spending by our customers and prospective customers, reduced demand for our solutions, longer sales cycles, and lower renewal rates by our customers, all of which could result in a material adverse impact on our business operations and financial condition even after the immediate impacts of the COVID-19 pandemic on the global economy and our business subside. Further, if we experience a decrease in demand in a given period it could negatively affect our revenue in future periods, particularly if experienced on a sustained basis, because a substantial proportion of revenue related to our platform is recognized over time. While we have developed and continue to develop plans to help mitigate the negative impact of the COVID-19 pandemic on our business, these efforts may not be effective and a protracted economic downturn may limit the effectiveness of our mitigation efforts.
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The extent to which the ongoing COVID-19 pandemic, and associated global economic uncertainty, may impact our business will depend on future developments, including the duration and spread of the pandemic and the prevalence and virulence of variants of COVID-19; the scope and effectiveness of precautionary measures designed to contain and prevent the spread of COVID-19; the availability and effectiveness of vaccines; and the impact on our current and prospective customers, employees, and partners, all of which are highly uncertain and cannot be predicted at this time. The COVID-19 pandemic may also have the effect of heightening many of the other risks described in this “Risk Factors” section. We will continue to evaluate the nature and extent of the impact of the COVID-19 pandemic on our business.
We derive substantially all of our revenue from a single software platform and if our platform fails to satisfy customer demands or to achieve widespread market acceptance it would adversely affect our business, operating results, financial condition, and growth prospects.
We derive and expect to continue to derive substantially all of our revenue from our cloud-based enterprise planning software platform. As such, market acceptance of our platform is critical to our continued success. Demand for our platform is affected by a number of factors, some of which are beyond our control. These factors include continued market acceptance of our platform for existing and new use cases, the introduction of enhancements to our platform that are well received by existing and prospective customers, the pace at which existing customers realize benefits from the use of our platform and its features and decide to expand deployment of our platform across their business, the extent to which our customers involve a wider group of employees in planning, the timing of development and release of new products by us and our competitors, technological change, the perception of ease of use, reliability and security of our platform, the pace at which enterprises engage in digital transformation initiatives, the success of our strategic partners, and developments in data privacy regulations. In addition, we expect that the planning and integration needs of our customers will continue to rapidly change and increase in complexity. We will need to improve the functionality, ease of use, and performance of our platform continually to meet those rapidly changing, complex demands. If we are unable to continue to meet customer demands or to achieve widespread market acceptance of our platform, our business operations, financial results, and growth prospects will be materially and adversely affected.
If we are unable to attract new customers, both domestically and internationally, the growth of our revenue will be adversely affected and our business may be harmed.
Our ability to achieve significant growth in revenue and improvement in other key metrics in the future will depend, in large part, upon the effectiveness of our sales and marketing efforts, both domestically and internationally, and our ability to attract new customers. This may be particularly challenging where an organization has already invested substantial personnel and financial resources to integrate other strategic planning and management solutions into its business, as such organization may be reluctant or unwilling to invest in new products and services. Furthermore, as our industry matures or if competitors introduce lower cost and/or differentiated products or services that are perceived to compete with ours, our ability to sell to new customers based on factors such as pricing, technology, and functionality could be impaired. The effects of the COVID-19 pandemic and the related global economic uncertainty and market volatility, including volatility in IT spending by prospective customers, delays in the implementation of digital transformation initiatives, prolonged sales cycles and a continued preference for remote engagement have disrupted the effectiveness of our sales and marketing efforts, and the duration and scope of this disruption remains unclear. As a result, we may be unable to attract new customers at rates or on terms that would be favorable or comparable to prior periods, and our business, revenue, operating results, and financial condition could be adversely affected.
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Our business depends substantially on our customers renewing their subscriptions and expanding their use of our platform. If our customers do not renew their subscriptions, if they renew on less favorable terms, or if they fail to add more users in more functional areas or upgrade to a higher level of functionality on our platform, our business and operating results will be adversely affected.
In order for us to maintain or improve our operating results, it is important that our customers renew their subscriptions when the contract term expires, add additional authorized users to their subscriptions, and upgrade to a higher level of functionality on the platform. Our customers generally enter into agreements with two- to three- year subscription terms and have no obligation to renew their subscriptions after the expiration of their initial subscription period. Our customers may decide not to renew their subscriptions with a similar contract period, at the same prices or terms or with the same or a greater number of authorized users or level of functionality as a result of a number of factors including uncertain economic conditions due to the COVID-19 pandemic. Some of our customers have elected not to renew their agreements with us, and we may not be able to accurately predict renewal rates. Our customer retention may decline or fluctuate as a result of a number of factors, including our customers’ satisfaction with our platform and features, the quality of the professional services provided by us or our partners, our prices, the availability of our platform, the features and pricing of competing products, reductions in our customers’ spending levels, customer adoption and expanded use of our platform, mergers and acquisitions involving our customers and deteriorating general economic conditions.
In addition, our growth strategy is a “land-and-expand” strategy that depends in substantial part on our customers expanding the use of our platform in their organizations through use by additional users, use across more functional areas of their organization, including finance, sales, supply chain, marketing, human resources, operations, and IT, and the purchase of subscriptions providing additional features and functionality, such as the mobile app and predictive capabilities of our platform for sales and marketing. As part of our “land and expand” strategy, our platform’s agility enables additional use cases across business functions. To increase the opportunities for further expanding the use of our platform by existing customers, we will need to introduce new features and functionality to our platform to more comprehensively address the needs of customers deploying our platform to address a wider variety of use cases and to support large, complex models. We will also need to drive user adoption rates of our platform. If our customers do not realize benefits through their initial adoption of our platform, or if they do not believe that they will realize additional benefits through broader deployment of our platform in other functional areas of their organizations, or in other uses cases, our ability to increase our revenue will suffer. Achieving incremental sales to our current customer base requires increasingly sophisticated and costly sales efforts that are targeted at senior management. If we are not able to attract the attention of our customers’ senior management or to do so in a cost-effective manner, our sales efforts may not be effective and our ability to increase our revenue will suffer. We have seen and may continue to see prolonged sales cycles and other sales disruptions arising as a result of a number of factors including uncertain economic conditions due to the COVID-19 pandemic and the Russian invasion of Ukraine. These disruptions may impact our “land and expand” strategy in certain geographies.
If our customers do not renew their subscriptions, if they renew on less favorable terms, or if they fail to add more users in more functional areas or upgrade to a higher level of functionality on our platform, our business and operating results as well as certain metrics that may be used to evaluate our business such as billings, current remaining performance obligations and dollar-based net expansion rate will be adversely affected.
If we experience a security incident affecting our platform, networks, systems or data or the data of our customers, or are perceived to have experienced such a security incident, our platform may be perceived as not being secure, our reputation may be harmed, customers may reduce the use of or stop using our platform, we may incur significant liabilities, and our business could be materially adversely affected.
Our platform involves the storage, transmission and processing of our customers’ sensitive proprietary information, including their business and financial data. We also use third-party service providers to deliver services to our customers and employees, and those providers may store or process the personal or confidential information of our customers or employees. Security incidents have become more prevalent across industries and our platform, systems, networks or the systems or networks of our third-party service providers may become the subject of such an incident. These security incidents may be caused by the intentional acts of third-party actors, or may arise from failures or defects in our or our partners’ software, systems or controls.
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While we have many security measures in place designed to protect customer and other sensitive information and continuously evaluate new and expanded measures to protect the integrity of our information technology systems and to prevent data loss and other security breaches, our security measures or those of our third party service providers may not be sufficiently broad in scope to protect all relevant information, may be deployed incorrectly, may not be adequately monitored or supported due to insufficient personnel or resources, may not function as planned, or could be breached as a result of third-party action, human error, technical malfunction, malfeasance, or otherwise. As we do not control our third-party service providers, or have real-time visibility of their security measures, we cannot ensure the integrity or sufficiency of their security measures and hackers or other third parties may successfully breach our systems by exploiting a vulnerability in third-party software or applications that are utilized by, or have access to, our systems. Third parties may attempt to fraudulently induce our employees, contractors, or users into disclosing sensitive information such as user names, passwords or other information or otherwise compromise the security of our platform, systems or networks in order to breach our security measures and gain unauthorized access to our data or our customers’ data. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, become more complex over time or may be designed to remain dormant until a predetermined event and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement sufficient preventative measures to defend against these techniques. Further, once a security incident is identified, we may be unable to remediate or otherwise respond to such incident completely or in a timely manner. Our users may also disclose or lose control of their passwords, or use the same or similar passwords on third parties’ systems, which could lead to unauthorized access to their accounts on our platform. Further, we may face additional cybersecurity risks related to our employees and partners working remotely during the ongoing COVID-19 pandemic, and potentially beyond, as remote work becomes more commonplace.
A security incident may result in unauthorized access, use, loss, modification or disclosure of our or our customers’ sensitive information, or denial or degradation of service, which could seriously harm our or our customers’ businesses and reputations. Any security incidents, whether real or perceived, could result in the expenditure of significant resources to analyze, correct, eliminate, or remediate errors or vulnerabilities, negatively affect our ability to attract new customers or partners, negatively affect our reputation or our brand, cause existing partners to end their relationship with us and existing customers to reduce the use of our platform or elect to not renew their subscriptions, expose us to reputational damage, subject us to contractual liability, third-party lawsuits, regulatory inquiries or fines, or other action or liability, which could adversely affect our operating results. We cannot assure you that any limitations of liability provisions in our contracts for a security breach or incident would be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim. While we maintain insurance, our insurance coverage related to security and privacy damages may not be adequate for liabilities actually incurred and we cannot be certain that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage of a future claim. These risks are likely to increase as our brand becomes more widely known and recognized, governments enact increasingly strict regulations regarding data security and privacy, we continue to grow the scale and functionality of our platform and process, store, and transmit increasingly large amounts of our customers’ information and data, which may include proprietary or confidential data or personal or identifying information.
The components of our business continuity and disaster recovery program may fail or may not protect all aspects of our business and we may experience disruptions, outages, and other performance problems on our systems due to natural disasters, human error, service attacks, unauthorized access, or other security-related incidents. For example, unauthorized external third parties may conduct attacks designed to temporarily deny customers access to our services. Any successful denial of service attack could result in a loss of customer confidence in the security of our platform and damage to our brand.
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