UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
☑☑
☐☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
001-38698
(Commission File No.)
ANAPLAN, INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
50 Hawthorne Street
San Francisco, California
(Address of principal executive offices)
27-0897861
(I.R.S. Employer Identification No.)
94105
(Zip Code)
(415) 742-8199
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.0001 per share
Trading Symbol
PLAN
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
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 (Exchange Act) 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 ☑ 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 ☑ 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
Non-accelerated filer
Accelerated filer
Small 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of
the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant as of July 31, 2020, based on the closing price of the shares of common stock on the New
York Stock Exchange on July 31, 2020, was $6.04 billion. Shares of common stock held by each executive officer, director, and their affiliated holders have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of March 5, 2021, the number of shares of the Registrant’s common stock, $0.0001 par value per share, outstanding was 143.7 million.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive Proxy Statement for the Registrant’s 2021 Annual Meeting of Stockholders are incorporated by reference in Part III of this Annual Report on Form 10-K to the extent
stated herein. The Proxy Statement will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days of the Registrant’s fiscal year ended January 31, 2021.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
TABLE OF CONTENTS
Part I
Part II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Part IV
Part III
Exhibits and Financial Statement Schedules
Form 10-K Summary
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16
Page
6
17
53
53
53
53
54
56
58
71
72
101
101
102
103
103
103
103
103
104
107
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K 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
“Business,” “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:
•
•
•
•
•
•
•
•
•
•
•
•
•
the impact of the ongoing COVID-19 pandemic, related public health measures and any associated economic downturn on our
business, operating results and financial condition and the businesses of our customers, prospective customers and partners;
our anticipated responses to, or actions arising out of, the COVID-19 pandemic;
our future performance, including our revenue, costs of revenue, gross profit or gross margin, operating expenses, remaining
performance obligations, deferred revenue, dollar-based net expansion rate and billings;
the demand for and benefits from the use of our platform and solutions;
our growth strategy and ability to compete;
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 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 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;
3
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
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 effectively manage our growth and future expenses;
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 estimated total addressable market;
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;
the rate of expansion and productivity of our sales force;
our anticipated investments in sales and marketing, research and development and other company functions;
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;
our ability to secure financing on favorable terms, or at all, to satisfy future capital needs; and
our ability to successfully defend litigation brought against us.
4
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.
5
ITEM 1. BUSINESS
PART I
Overview
Anaplan is a cloud-native enterprise SaaS company and a market leader in Connected Planning, empowering global enterprises to
orchestrate transformative business performance. Leaders across industries rely on the Anaplan platform—powered by our proprietary
Hyperblock® technology—to connect teams, systems, and insights from across their organizations to continuously adapt to change, transform how
they operate, and reinvent value creation. The Anaplan platform enables businesses to be more agile, make better decisions and to plan and
execute their ongoing digital transformation to compete in today’s digital economy.
Our cloud platform empowers enterprises to orchestrate complex scenario planning and conduct continuous forecasting to systematically
identify possibilities, seize opportunities, and reduce risk. Users of our platform can view and assess the impact of assumptions on plans and key
performance indicators in real time and across multiple business dimensions. Powered by our proprietary Hyperblock® technology, our platform’s in-
memory data storage and calculation capabilities deliver calculations on a massive amount of data in real time and provide a single source of
information for planning, ensuring the consistency, quality, and integrity of the data utilized. Our platform also allows customers to leverage intelligent
forecasting capabilities backed by machine learning to understand future market drivers, analyze the impact of hypothetical planning scenarios, and
quickly pinpoint accurate forecasts. Customers can harness actionable intelligence from these predictive tools that may help them achieve a
competitive advantage. Our platform’s multi-dimensional modeling features enable our customers to plan with large data sets that integrate internal
historical data with external market-driven data to derive finely tuned forecasts. These modeling capabilities provide the flexibility our customers
need to plan at enterprise scale and improve decision-making across their enterprises with any number of users. Our platform puts the power of
planning directly in the hands of its users with agile collaboration tools, and a highly responsive and secure user experience that spans across
devices, personalized views and reporting. The dynamic structure of our platform allows enterprises to break down traditional silos across the
planning processes in ways that can improve decision-making and generate transformative business value.
We put the success of our customers at the center of our culture, strategy, and investments. As a leader in Connected Planning that
enables digital transformation initiatives, we have deep domain expertise and have developed a robust Connected Planning ecosystem to enable our
customers to more effectively unlock the potential of our platform. Our Connected Planning ecosystem includes skilled Anaplan users and dedicated
professionals from Certified Model Builders and Solution Architects to Certified Master Anaplanners, spread throughout both our customer and
partner communities. This ecosystem continues to grow organically as demand for our platform grows and our customers and partners encourage
their users to enhance their Anaplan expertise. By aligning our thought leadership, Connected Planning ecosystem, worldwide development and
delivery capabilities, and local sales and service resources, our Customer First strategy drives exceptional value throughout our customers’
Connected Planning and digital transformation journeys. We view our Customer First strategy as core to capturing our Connected Planning vision
and driving continued expansion in the use of our platform.
Our customers often initially adopt our platform within a specific business function for one or more planning use cases, but also because
our platform has the potential to be used as an enterprise-wide integrated planning and forecasting tool and as part of a broader digital
transformation initiative. We use a “land and expand” sales strategy to capitalize on this potential. Once customers see the benefits of our platform
for their initial use cases, they often increase the number of users, add new use cases, and expand to additional lines of business, divisions, and
geographies. We call this the Honeycomb™ effect. This expansion often generates a natural network effect in which the value of our platform to
customers increases as more use cases are adopted, more users are connected, and greater amounts of data are incorporated in our platform.
6
As of January 31, 2021, over 1,600 customers were using our platform. The success of our “land and expand” strategy is validated by the
expansion we have experienced in the use of our platform by our largest customers and by our dollar-based net expansion rates. Our top 25
customers by average annual recurring revenue as of January 31, 2021, had average annual recurring revenue of approximately $4.2 million,
compared to the average annual recurring revenue represented by their initial purchase of approximately $0.4 million. In addition, our annual dollar-
based net expansion rate for Anaplan was 114%, 122% and 123% at the end of fiscal 2021, 2020, and 2019, respectively. See “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” for a description of how we calculate our dollar-based net expansion rate.
The number of customers with greater than $250,000 of annual recurring revenue was 453, 353, and 248 as of the end of fiscal 2021, 2020, and
2019, 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. While achieving and maintaining incremental sales to existing customers requires increasingly sophisticated and costly
sales efforts, we believe the introduction of new solutions, features and functionality to our platform, and customers realizing benefits through their
initial adoption of our platform, means we have significant opportunities to further expand the use of our platform by our existing customers as well
as to attract additional customers.
We have a robust partner ecosystem that includes strategic consulting, systems integration, and technology firms. Our strategic consulting
and systems integration partners are an essential part of our go-to-market strategy. These partners promote our platform as their clients examine
how to plan more effectively or seek digital transformation through organizational change or improved business processes. They also help us scale
our sales and implementation delivery capacity globally by leveraging their trained staff, and provide a broad range of expertise to our clients and
deep subject-matter expertise in the implementation of specific use cases. We also work closely with our technology partners to extend our
technology platform leadership, execute on our ambitious technology roadmap, and go-to-market jointly with these technology partners. We develop
solutions with our technology partners that expand the intelligence, scale, and extensibility of our platform and accelerate customer adoption,
expansion and lifetime value. We continue to focus on building depth in our partner ecosystem and expanding the breadth and depth of resources
within our partners.
For financial information regarding our business, see “Part II-Item 7-Management’s Discussion and Analysis of Financial Condition and
Results of Operations” of this Annual Report and our consolidated audited financial statements and related notes included elsewhere in this Annual
Report.
7
Our cloud platform is flexible, scalable, and collaborative. It is designed to address the end-to-end Connected Planning needs of all
organizations and to enable them to plan and execute digital transformations. Our platform has the power and functionality to address the most
complex planning challenges of the largest global enterprises. Our customers use our platform to improve their businesses by making better and
faster decisions and transform their businesses by enabling new technology and process changes. Our platform allows our customers to rapidly
achieve productivity gains and cost savings, which can result in high returns on investment. Key aspects of our platform include:
Our Platform
•
•
Planning and Modeling. Our platform empowers customers to quickly and easily build models to address the most complex
business challenges. Powered by our proprietary Hyperblock® technology, our platform’s innovative in-memory architecture delivers
ultra-fast calculations on a massive amount of data. It allows customers to rapidly run alternative scenarios to understand the impact of
changes in business assumptions on plans and key performance indicators in real time. Our in-memory data storage capabilities
provide a single source of information for planning, ensuring the consistency, quality, and integrity of the data utilized. With Anaplan
HyperModelTM, our customers can further expand upon our powerful multi-dimensional modeling capabilities, and are able to plan at a
greater set of dimensions, forecast further into the future, and incorporate larger volumes of meaningful data. These functionalities
allow users to view and assess the impact of assumptions on plans and key performance indicators in real time and across multiple
business dimensions.
Intelligence. Our platform leverages advanced predictive analytics capabilities, including Anaplan PlanIQ™ which delivers artificial
intelligence (“AI”) and machine learning (“ML”)-based forecasting to help business users optimize their plans. PlanIQ is a user-friendly
offering that can absorb a wide array of data, make an intelligent prediction, and help users quickly select the best course of action,
which may provide our customers with a competitive advantage. Our platform also offers a user interface-driven linear programming
optimization engine that quickly analyzes billions of possible outcomes and makes a recommendation of the best path forward. In
addition, Anaplan Predictive Insights helps predict the intent of buyers of our customers by analyzing internal data along with AI and
ML classifications of external data.
• User Experience. Our platform puts the power of planning directly in the hands of its users with agile collaboration tools and a highly
responsive and secure user experience that spans across devices, personalized views and reporting. Customers can rapidly build and
easily modify and manage sophisticated models to address their specific needs without coding, resulting in a more rapid return on their
time and investment with a seamless and personalized experience across devices. Customers can connect people, data, and plans to
collaborate across the organization in real time without transferring data between point solutions and spreadsheets. The user
experience has built-in collaboration capabilities, such as sharing, commenting, and notify actions, and notifications that users can
leverage across any device to speed decision-making. Our modern user interface includes highly customized views and reports that
facilitate personalized experiences for every user of the platform. As a result, our platform is designed to deliver integrated business
planning and a collaborative, intuitive, and engaging user experience at strategic and operational levels across all lines of business.
•
Enterprise Scale. Our platform is designed for planning at enterprise scale. It allows our customers to connect stakeholders across
their enterprise leading to enhanced visibility and improved decision-making. The modular nature of our platform lets decision-makers
in different business units model their unique organizational structure, but also allows our customers to connect these models to
compare and connect planning across business units and to enable executives to plan across their entire organization. Our platform
also includes enterprise-grade governance tools, including application lifecycle management capabilities, that enable customers to
effectively manage the development, testing, deployment, and ongoing maintenance of models without disrupting the production
environment. These tools also allow administrators to view changes between versions of an application and separately designate
ownership of production of an application from the development of the application. In addition, a
8
•
•
detailed logging capability provides administrators with full visibility into how and when models are being accessed and by whom,
ensuring operational integrity.
Extensibility. Our platform enables our customers to model and optimize a vast array of processes within their organizations utilizing
data from many sources. Our suite of extensible and interoperable capabilities, including Anaplan CloudWorks™, allow our customers
to easily integrate our platform with homegrown, cloud, and third-party systems and data. Anaplan CloudWorksTM orchestrates
integrations with both internal and external sources with an easy-to-use interface so users can conduct more agile planning with the
data they need. Users can use Anaplan CloudWorksTM to configure, manage, schedule, and automate integrations. Our customers
can also leverage Transactional APIs to easily interact with model data and properties. Our platform also integrates with the products
of leading enterprise software vendors, including our technology partners, with open API standards-based data sharing capabilities.
Our platform also enables companies to collaborate with users outside of our platform framework, such as trading partners in a supply
chain. Customers can gain actionable intelligence by accessing data from both within and outside of the organization.
Security. Our customers can benefit from the robust security features built into our platform, including data encryption, user access
and identity management. Data at rest is stored in a proprietary, non-readable binary format and subject to full-disk AES-256
encryption. We also support TLS 1.2 for protection of encryption in transit. Backups also use AES-256 encryption. A bring your own
key, or BYOK, option enables our customers to own and manage their own encryption keys if required for compliance needs. The
administration console provides a centralized place to manage, audit, and control users, roles, and access. Our Self-Service SAML
provides an easy way for our customers to configure and manage their single sign on capabilities in line with their organization’s
specific policies.
Our Solutions
Our customers often initially adopt our platform within a specific business function for one or more planning use cases, but also because
our platform has the potential to be used as an enterprise-wide integrated planning and forecasting tool and as part of a broader digital
transformation initiative. The dynamic structure of our platform allows our customers to break down traditional silos between enterprise financial and
operational planning processes which can improve decision-making across enterprises and deliver new levels of transformative business value.
While the use cases for our platform are unbounded, our customers typically use our platform for:
•
•
•
Sales. Managing sales and commercial go-to-market initiatives, including territory and quota planning, incentive compensation,
pipeline optimization, sales forecasting, market segmentation, cost of sales, product/customer profitability, and sales capacity planning.
Finance. Managing financial and enterprise performance, including financial and operational budgeting, planning, and forecasting.
Other solution areas include revenue planning, expense planning, balance sheet and cash flow forecasting, and long-range planning.
Supply Chain. Managing supply chain operations, including demand management, sales and operations planning, integrated
business planning, and commercial planning.
• Workforce. Managing comprehensive human capital plans and strategy, including operational and headcount planning, strategic
workforce planning, talent strategy planning and compensation planning.
• Marketing. Managing marketing planning and operations, including global budget planning, campaign spend management, and
performance management across brands, channels, and customers with internal, vendor and network teams.
Our goal is to make Anaplan the platform of choice for end-to-end Connected Planning for customers with the most complex planning
needs. Key elements of our growth strategy include:
Our Growth Strategy
9
• Drive New Customer Acquisition. While we have enjoyed rapid customer growth, we believe we are still in the very early stages of
penetrating our addressable market. We strive to make our platform the preferred planning foundation for enterprises seeking digital
transformation, which we believe have the largest communities of potential users and face the most complex planning challenges. As
companies across the globe are digitizing their business processes and maturing their digital transformation efforts, they are trying to
be more efficient in managing their resources and increasingly are finding value in our platform to drive large scale digital
transformation of the enterprise planning process. We believe these complex organizations have the greatest potential for expanded
use of our platform and have needs that are particularly well addressed by the comprehensive capabilities of our platform. We seek to
deliver strategic value to the C-suite with the ability to provide a line-of-sight connecting every function, asset, capacity, risk and
resource across the enterprise which creates a dynamic view of financial implications and guides better business outcomes. We utilize
our partner ecosystem to provide leverage to our sales team in targeting and selling our platform to enterprise customers.
•
Expand within Existing Customers. We aim to drive Connected Planning across the entire organization to help our customers
benefit from the full value of our platform. Our platform is often initially adopted within a specific line of business, including in finance,
sales, supply chain, marketing, human resources, and operations, for one or more planning use cases. Once customers see the
benefits of our platform for their initial use cases, they often increase the number of users, add new use cases, and expand to
additional lines of business, divisions, and geographies as they continue unlocking the agile enterprise planning and operating model
across functional boundaries. This expansion often generates a natural network effect in which the value of our platform increases as
more use cases are adopted, more users are connected, and greater amounts of data are incorporated in our platform. We work
closely with our customers and strategic partners to drive adoption of our platform by existing users through joint deployments, by
improving consistency across deployments, and encouraging usage of our platform by end users during initial adoption of our platform
and during expands. The value of the digital transformation capabilities often becomes greater as the use of our platform expands
within an organization.
• Continue to Expand Globally. We have a significant opportunity to further expand globally and we intend to continue to invest in the
use of our platform around the world. We continue to make substantial investments in building our global sales and marketing, service
delivery, and customer support capabilities and have a strong and growing presence globally. In fiscal 2021, approximately 46% of our
revenue was generated outside of the United States, demonstrating the importance of our global operations. We anticipate that new
partnerships will expand the reach of our platform and give us access to new geographies.
• Broaden and Deepen our 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 continue to
augment and deepen our relationships with global and regional partners, including strategic and advisory consulting firms, systems
integration, and technology firms. We believe our partners’ scale and route to market can significantly contribute to our ability to
penetrate our addressable market, extend our geographic coverage and accelerate the usage and adoption of our platform. We
anticipate that new partnerships will help customers accelerate their digital transformation journey through access to expanded
infrastructure.
• Continue to Innovate and Extend our Technology Platform Leadership. We continue to extend the functionality and breadth of
our platform. We have a well-defined technology roadmap to introduce new features and functionality to our platform that we believe
will enhance our ability to generate revenue by broadening the appeal of our platform to potential new customers as well as increasing
the opportunities for further expanding the use of our platform by existing customers. We work closely with our technology partners,
including our new public cloud partners, to execute on our technology roadmap through solutions that leverage our technology and the
technologies of our partners. These solutions can allow customers to extend value across our planning platform with other applications
used for areas such as customer relationship management, marketing, information technology system management, and business
intelligence. We are investing to further enhance the user interface, functionality, interoperability, extensibility, usability and intelligence
of our platform, including in artificial intelligence and machine learning to further expand the predictive capabilities of our platform.
10
As of January 31, 2021, we served over 1,600 customers in 57 countries.
Our Customers
Our customers include leading businesses in diverse industries, including banking, capital markets, consumer products, government
agencies, healthcare, insurance, life science, media, professional services, retail, technology, telecom, as well as transportation. No individual
customer represented more than 10% of our revenue in fiscal 2021.
Employees
Our Human Capital Management
As a market leader in Connected Planning, Anaplan is building a global connected workforce; adding over 300 employees in fiscal 2021.
To realize our potential, we seek employees who are committed to solving challenging problems in a dynamic environment. As of January 31, 2021,
we had over 1,900 employees worldwide, including more than 1,000 employees in the United States, and our remaining employees outside of the
United States working in 18 different countries.
Anaplan’s Values
At Anaplan, we live our values every day. We believe our values shape our company culture and guide our decisions. Our values are an
important part of the employee journey - beginning during the hiring process and continuing during AnaplanGO, our comprehensive onboarding
program, and embedded in our various employee development and recognition programs. We believe that how work gets done is as important as
what work gets done.
Diversity, Inclusion & Belonging
Anaplan thrives on diversity and inclusion. We believe in an experience in which all individuals are respected and valued, regardless of
gender identity or expression, sexual orientation, religion, ethnicity, age, neurodiversity, disability status, citizenship, or any other aspect which
makes people unique. We believe that our diverse workforce and inclusive work environment makes Anaplan a more innovative and collaborative
company – creating better outcomes for our customers and stakeholders.
Our commitment to building and maintaining a diverse and inclusive workplace starts with our corporate leadership. Anaplan’s Board of
Directors is a gender and ethnically diverse group, with members bringing their own unique perspectives to Anaplan. Anaplan’s executive
management team, which includes members from different gender and ethnic backgrounds, has championed diversity, inclusion and belonging,
fostering an environment where our employees can bring their most creative, engaged and collaborative self to work each day.
Anaplan strives to be an employer of choice for a diverse workforce through our talent attraction, development, and retention efforts. To
foster an inclusive environment, we offer unconscious bias training for all employees, as well as expert-led company-wide conversations on diversity,
inclusion and belonging. Our employee rewards programs are designed to achieve parity, while benefits programs are designed to be both
comprehensive and flexible.
We support a community of employee resource groups (“ERGs”) that bring together employees with shared interests, experiences, or
characteristics for discussions, development, and service. These groups include:
•
BEAD (Black Employees of African Descent)
• WIN (Women’s Interest Network)
•
Anaplan PRIDE (LGBTQ)
• Neurodiversity Network
•
ASIAPLAN
11
•
Anaplanable (Accessibility)
Employee Development & Training
We develop employees by providing access to training, tools, and experiences for career progression. Through the Anaplan Academy, we
provide employees with the opportunity to build technical and functional skills - including on the Anaplan platform - through on-demand and live
courses with experts. We recognize that we need to develop agile and empathetic leaders, so our management training is designed to build
leadership skills within our manager community, focused on managing for growth.
Compensation & Benefits
We offer market-competitive compensation and benefits packages designed to attract and retain talented employees. Our compensation
program is designed to pay for performance through variable incentive pay and promote ownership through equity awards and participation in our
Employee Stock Purchase Plan. Our benefits programs are created to support employees and their families in the moments that matter the most.
COVID-19 Response
In response to the COVID-19 pandemic, Anaplan quickly shifted to a remote work environment, to support the safety of our employees,
their respective households and our customers. We offered our employees additional resources, including a remote working stipend, office
equipment loans, and reimbursement for phone and internet services to facilitate continued connectivity and productivity. Anaplan created flexible
work programs, enabling employees to work a varied or reduced schedule while maintaining benefits. Throughout the ongoing COVID-19 pandemic
we have maintained a focus on mental well-being, and offered expanded mental health resources, caregiver resources, wellness days (company-
wide paid days off), and Focus Fridays (no meeting days). We have modified our offices in preparation for an eventual reopening of such facilities by
adding safety partitions and filtration systems, and instituted new cleaning protocols and other precautions, to help protect the health of our
employees when they return to our offices.
Our Go-to-Market and Connected Planning Ecosystem
We sell our platform primarily through our direct sales team targeting customers with complex planning needs. Our customers often initially
adopt our platform within a specific business function for one or more planning use cases. Our customers also adopt our platform because it has the
potential to be used as an enterprise-wide integrated planning and forecasting tool and as part of a broader digital transformation initiative.
Our robust partner ecosystem 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 digital transformation through organizational change 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.
We continue to focus on building depth in our partner ecosystem and expanding the depth of resources within that system.
Once our customers see the initial value of our platform, we use a “land and expand” sales strategy to encourage our customers to
increase the number of users, add new use cases, and expand to additional lines of business, divisions, and geographies. In order to facilitate our
“land and expand” sales strategy, we work closely with our customers and partners to drive adoption of our platform amongst the users of our
platform. We do this through joint deployments, by improving consistency across deployments and encouraging usage of our platform by end users
during initial adoption of our platform and during expands. To accelerate the adoption of our platform, we provide rapid learning models and
templatized Connected Planning and performance orchestration solutions on our App Hub marketplace. We intend to continue showcasing
innovative solutions and use cases co-created by our partners and Master Anaplanners on the App Hub. To increase model builder engagement and
feature usage, we plan
12
to continue to improve how users find, use, share and enjoy personalized training apps and product onboarding content via the App Hub.
Our customers and partners are passionate about our platform. As demand for trained users of our platform continues to grow, so too does
our Connected Planning ecosystem, which includes skilled Anaplan users and dedicated professionals, including Certified Model Builders and
Solutions Architects and Certified Master Anaplanners, spread throughout both our customer and partner communities. This ecosystem continues to
grow organically as our customers and partners encourage their users to enhance their Anaplan expertise and these experienced users enable our
customers and partners to more effectively unlock the potential of our Connected Planning platform. To facilitate this growth, we continue to invest in
the Anaplan Academy. The Anaplan Academy creates and delivers resources about our platform, including the latest innovations and best practices,
for our Connected Planning ecosystem. We have created a program for select users to receive status as Master Anaplanners. These individuals
have volunteered their own time to become identified experts on our platform and frequently promote Anaplan within their organizations and
evangelize the benefits of our platform to prospective customers. Our partner community has committed to expanding the number of Master
Anaplanners on their teams to address the ongoing need from our customers.
We host an annual Anaplan Connected Planning Xperience, or CPX, user conference to connect existing and potential customers, share
best practices, and reinforce our brand. Through CPX virtual and in-person events, we provide thought leadership, training, and community to our
customers, including business decision-makers and Anaplan users, to encourage them to optimize and expand Anaplan across their enterprises.
Research and Development
Our research and development team is focused on maintaining and improving our resilient platform and enabling customers to derive
insights for decision-making and accelerate business agility. We have a research and development culture that seeks to deliver high-quality
enhancements to the flexibility, scalability, intelligence, performance, security, reliability, extensibility and usability of our platform and is focused on
maintaining and improving our resilient platform. Our research and development organization is primarily responsible for design, development,
testing, and delivery of our products and platform in addition to enabling scalable integration and extension of our platform. We focus our efforts on
developing core technologies, as well as further enhancing the usability, functionality, intelligence, mobility, reliability, performance, and flexibility of
our platform. Our research and development team enables our strategic innovation for our customer and partner solutions. We strive to achieve
interoperability and extensibility with flexible integrations, connectors and APIs while providing robust protection through data encryption, identity
management and user access.
We have a global workforce with research and development hubs in the United Kingdom, Israel, and San Francisco, California. We hire
skilled engineers, data scientists, and other talent from a variety of industries with expertise in developing mission-critical applications for customers
with the most complex planning needs.
Competition
The market for Connected Planning and digital transformation solutions is new and characterized by rapid technology innovation. To our
knowledge, there are no other companies that service the breadth of use cases or the varying enterprise needs that we do. In many cases, our
primary competition is manual, often spreadsheet-driven, processes and custom-built approaches. In addition, we compete with certain applications
of large software companies, including legacy vendors such as Oracle Corporation (Oracle), SAP AG (SAP), Workday, Inc. (Workday), and
International Business Machines Corporation (IBM) that offer on-premises applications sold on a perpetual license and maintenance basis, as well
as cloud software versions adapted from on-premises applications. These software companies have offered, and may continue to offer, new
applications through acquisitions or organic development that more directly compete with some of our many individual use cases. We also compete
with vendors of point solution applications focused on a specific department or use case, such as sales performance management, financial
planning, and supply chain planning. We could also face competition from new market entrants, some of whom may be our current technology
partners.
13
We believe the principal competitive factors in our market include the following:
Technology and platform capabilities, including:
•
•
•
•
•
enterprise-grade scalability;
breadth of capabilities within a single modeling environment;
intuitive and user-friendly interface;
in-memory computing capability;
ability to support broad collaboration in real-time;
• multi-tenant cloud-based architecture;
•
•
•
•
•
•
security;
data governance and administration;
rich and dynamic analytics and reporting;
ability to integrate with other data and applications;
predictive algorithms and modeling capabilities; and
configurability and agility in complex, enterprise-grade, planning environments.
Market leadership and customer success orientation, including:
•
•
•
•
•
•
•
involvement in growing the category of Connected Planning;
thought leadership and best practices, from example models to roadmaps for success;
established, proven success;
passionate, dedicated customers;
customer-centric approach and focus;
speed and scale of return on investment; and
time to deployment.
We believe that we are competitive with respect to each of these factors.
Intellectual Property
We rely on a combination of trade secrets, patents, copyrights, and trademarks, as well as contractual protections, to establish and protect
our intellectual property rights while actively working to increase our patent portfolio. As of January 31, 2021, we had four issued U.S. patents that
expire between November 2030 and August 2034. We pursue the registration and enforcement of domain names, trademarks, and service marks in
the United States and in various jurisdictions outside the United States. We also actively seek patent protection covering inventions originating from
our company. Our software is protected by U.S. and international intellectual property laws. We control access to and use of our proprietary and
confidential technology, documentation and other information through internal and external controls. We require our employees and independent
contractors to sign agreements assigning to us any inventions, trade secrets, works of authorship, developments, and other processes generated by
them on our behalf and agreeing to protect our confidential information. In addition, we generally enter into agreements containing confidentiality
obligations with our customers, partners, vendors, and other service providers.
As a company with global operations, we are subject to the laws of the United States and multiple foreign jurisdictions in which we
operate and the rules and regulations of various governing bodies, which
Government Regulation
14
may differ among jurisdictions. 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.
Data privacy and security have become significant issues in the U.S. and in many other countries where our platform is available. Laws,
rules, and regulations in these jurisdictions apply broadly to the collection, use, storage, data residency, disclosure, and security of various types of
data, including data that identifies or may be used to identify an individual, such as names, email addresses, and in some jurisdictions, Internet
Protocol addresses. In the U.S., these include laws, rules, and regulations promulgated under the authority of the Federal Trade Commission, the
Electronic Communications Privacy Act, Computer Fraud and Abuse Act, the Health Insurance Portability and Accountability Act of 1996, or HIPAA,
and state laws relating to privacy and data security. Internationally, virtually every jurisdiction in which we operate has established its own data
security and privacy legal framework with which we, or our customers, must comply. Interpretation of, and costs of compliance with, these laws,
rules, and regulations and their application to our platform and services in the United States and foreign jurisdictions is ongoing and cannot be fully
determined at this time.
Further, the regulatory framework for privacy and security issues worldwide is rapidly evolving, subject to change and is likely to remain
uncertain for the foreseeable future. Examples of recent changes to privacy and security laws that could impact our business include the following:
15
•
The California Consumer Privacy Act (“CCPA”) came into effect on January 1, 2020, and broadly defines personal information, extends
expanded privacy rights and protections to California residents, and provides for civil penalties for violations and a private right of action
for data breaches. In November 2020, California voters approved a new privacy law, the California Privacy Rights Act (“CPRA”) that
significantly amends the CCPA.
• On May 25, 2018, the General Data Protection Regulation (“GDPR”) came into effect in the European Union (“EU”). The GDPR
includes stringent operational requirements for processors and controllers of personal data and gave EU data protection authorities the
power to impose significant sanctions for actual or alleged violations of the GDPR. Actual or alleged violations of the GDPR may also
lead to damages claims by data controllers and data subjects.
•
The United Kingdom formally completed its withdrawal from the EU on January 31, 2020, in a process known as “Brexit”. The United
Kingdom has enacted a Data Protection Act that substantially implemented the GDPR. However, Brexit has created uncertainty with
regard to the future regulation of data protection in the United Kingdom and how data transfers to and from the United Kingdom will be
regulated.
• On July 16, 2020, the Court of Justice of the European Union (“ECJ”), invalidated the EU-U.S. Privacy Shield program on the grounds
that Privacy Shield failed to offer adequate protections to EU personal data transferred to the U.S. While our use of the EU Standard
Contractual Clauses (“Model Clauses”) provides an alternative to the Privacy Shield framework for authorized transfers of certain EU-
U.S. data flows, the use of Model Clauses to protect data exports between the EU and the U.S. is itself subject to ongoing legal
challenges, which may result in a ruling that these industry-standard measures that we, and other companies, have relied on would no
longer be sufficient. Moreover, we may be unsuccessful in maintaining legitimate means for our transfer and receipt of personal data
from the EU to the U.S.
For more information, see Item 1A: “Risk Factors—Legal and Compliance Risks—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.”
Corporate Information
We were formed in 2008 as Anaplan, LLC, a Delaware limited liability company. In July 2009, Anaplan, LLC converted into Anaplan, Inc., a
Delaware corporation. Our principal executive offices are located at 50 Hawthorne Street, San Francisco, CA 94105, and our telephone number
is (415) 742-8199. Our website address is www.anaplan.com. The information on, or that can be accessed through, our website is not part of this
report. We have included our website address as an inactive textual reference only.
Available Information
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed
pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on the Investor Center
section of our website at investors.anaplan.com as soon as reasonably practicable after we file such material with the Securities and Exchange
Commission, or the SEC. The SEC also maintains an Internet website that contains reports and other information regarding issuers, such as
Anaplan, that file electronically with the SEC. The SEC’s Internet website is located at www.sec.gov.
16
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 Annual Report on Form 10-K, including our 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 Annual Report on Form 10-K 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 Annual Report on Form 10-K.
•
•
•
•
•
•
•
•
•
The ongoing COVID-19 pandemic, and resulting global economic downturn, 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 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 may fluctuate significantly 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.
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.
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.
17
•
•
•
•
•
•
•
•
•
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.
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.
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.
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.
Operational Risks
The ongoing COVID-19 pandemic, and resulting global economic downturn, 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, remain in place in many of the regions in which we conduct business, and new or
more restrictive measures have been and may continue to be adopted if the pandemic worsens. 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 production and distribution of such vaccines, and inoculation of a sufficient segment of the population to contain the pandemic,
may require a significant amount of time and is subject to uncertainties including the ability of pharmaceutical companies to quickly increase vaccine
production and the willingness of the general population to be
18
vaccinated. 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 continue to operate in a modified manner employing precautionary measures designed to
protect the health of our employees while enabling us to support our customers and partners. Among other modifications, we continue to require our
employees to work remotely, to maintain business-related travel restrictions, and to virtualize, postpone or cancel our sales and marketing, employee
or industry events. These modifications have and may continue to result in inefficiencies, delays and additional costs in our sales and marketing,
professional services and research and development efforts, which could have an adverse effect on our operations. The remote work measures that
we implemented have generally allowed us to provide uninterrupted service to our customers, but have affected the way we conduct our sales,
research and development, testing, customer support, and other activities. While we have not observed significant impacts to the productivity of our
workforce, working remotely poses additional operational challenges that may impact productivity in the future. Working remotely has made our
employees more reliant on cloud-based communication services, and if those services are interrupted, or are less secure, employee productivity
could be harmed. Our employees may also face unexpected child-care or other related family responsibilities while working from home that could
impact productivity and employee retention. In addition, work-from-home and related business practice modifications present significant challenges
to maintaining our corporate culture, including employee engagement, productivity and retention, both during the immediate pandemic crisis and as
we make additional adjustments in the eventual transition from it. Our remote work measures 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. Even in regions where governmental restrictions related to the COVID-19 pandemic are eased, we may continue to face challenges as our
employees return to our offices, including managing our office environments in a manner that protects the health and safety of our employees and
planning for a potential resurgence of COVID-19, which could negatively impact our business.
Our future growth is substantially dependent on our direct sales team and partners driving new customer acquisition and expanded use of
our platform within existing customers. Prior to the COVID-19 pandemic, we held in-person sales, marketing, and industry events and our employees
traveled frequently to establish and maintain relationships with our customers, prospective customers, and partners. Our business operations,
including sales-related and customer support activities, could be increasingly adversely affected by continued or additional business closures, travel
restrictions impacting employees and partners, virtualization of events, 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 is also having an adverse impact on many 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 our customers and prospective customers
deferring or delaying buying decisions and project implementations, prolonged sales cycles, and an increase in requests for extended payment
terms due to uncertain economic conditions including those caused by the COVID-19 pandemic. In addition, 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, lower renewal rates by our customers and increased competition, all of which could result in a material adverse
impact on our business operations and financial condition even after the COVID-19 pandemic is contained and the shelter-in-place orders are lifted.
If our customers are unable or unwilling to pay for their subscriptions to our platform, we may be adversely affected by an inability to collect amounts
due, the cost of enforcing the terms of our contracts, including litigation, or a reduction in revenue. Further, if we experience a decrease in demand in
a given period it could negatively affect our revenue in future
19
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.
The extent to which the ongoing COVID-19 pandemic, and associated global economic uncertainty, may impact our business will depend
on future developments, including vaccine availability and distribution, 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 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
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 2020 to fiscal 2021, our total revenue grew from $348.0 million to $447.8 million, an increase of 29%, and from fiscal 2019 to
fiscal 2020, our total revenue grew from $240.6 million to $348.0 million, an increase of 45%. 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 $154.0 million, $149.2 million, and $131.0
million, respectively, in fiscal 2021, 2020, and 2019. We had an accumulated deficit of $647.0 million at January 31, 2021. 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 our offices and headcount internationally as we seek to continue to penetrate international markets, provided appropriate
economic conditions and opportunities are present;
20
•
•
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.
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 entered into 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 may fluctuate significantly 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 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 downturn 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;
21
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
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;
the financial condition and creditworthiness of our customers, including greater unpredictability in our customers’ willingness or ability to
timely pay for subscriptions to our platform as a result of the COVID-19 pandemic;
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 achieve and sustain 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
22
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, 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.
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 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 traditional 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. Additionally,
mitigation and containment measures adopted by government authorities to contain the spread of COVID-19 in the U.S. and abroad, including travel
restrictions and other requirements that limit in-person meetings, could limit our ability to establish relationships with new customers. The effects of
the COVID-19 pandemic and the related global economic uncertainty, including decreased spending by prospective customers, delays in the
implementation of digital transformation initiatives and prolonged sales cycles 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.
23
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 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, and operations, 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. We refer to our “land and expand” strategy as the Honeycomb™
effect where 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. The duration and scope of these disruptions on our “land and expand” strategy remains unclear.
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 and dollar-based net expansion rate will be 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 ability to increase our customer base, achieve broader market acceptance of our platform, grow our revenue, and achieve and sustain
profitability will depend, to a significant extent, on our ability to effectively expand our sales and marketing operations and activities, specifically our
direct sales efforts targeted at executives of customers with the most complex planning needs. As we are substantially dependent on our direct sales
force to obtain new customers and expand usage of our platform within existing customers, our ability to execute on our sales and marketing
strategy will depend, in large part, on our success in recruiting, training, incentivizing and retaining a sufficient number of qualified direct sales
personnel and on such personnel attaining desired productivity levels within a reasonable amount of time. In recent years, we have increased the
size of our direct sales force, and accordingly many of the new members of our sales force have not yet become fully productive. While remote work
restrictions remain in place, newly hired direct sales personnel may need additional time to become fully productive
24
as they may face additional hurdles due to remote onboarding and more limited access to customers. We plan to continue to expand our direct sales
force both domestically and internationally but we may not be able to recruit and hire a sufficient number of sales personnel to successfully execute
our hiring strategy, which may adversely affect our ability to expand our sales capabilities. New hires require significant training and time before they
achieve full productivity, particularly in new sales territories. Our recent hires and planned hires may not become as productive as quickly as we
would like, and we may be unable to hire or retain sufficient numbers of qualified individuals in the future in the markets where we do business.
Furthermore, hiring sales personnel in new countries can be costly, complex, and time-consuming, and requires additional set up and upfront costs
that may be disproportionate to the initial revenue that we expect to receive from those countries. We believe that there is significant competition for
direct sales personnel with the sales skills and technical knowledge that we require. Attrition rates may increase, and we may face integration
challenges as we continue to seek to expand our sales force. Moreover, we do not have significant experience as an organization developing and
implementing overseas marketing campaigns, and such campaigns may be expensive and difficult to implement. Our business will be harmed if our
continuing investment in increasing our sales and marketing capabilities does not generate a significant increase in revenue. Our sales and
marketing expenses represent a significant percentage of our expenses, and our operating results will suffer if our sales and marketing expenditures
do not contribute to increasing revenue as we anticipate.
The COVID-19 pandemic has changed the way we interact with our customers and prospective customers. We have, and may continue to,
alter, postpone or cancel planned customer, employee and industry events or shift them to a virtual only format. Our operating results may also
suffer if sales and marketing personnel are unable to maintain the same level of productivity while working remotely during the COVID-19 pandemic.
These and other changes in the ways in which we interact with and market to our customers and prospective customers could adversely impact our
business if they prove to be less effective than in-person events.
25
Our growth depends in part on the success of our strategic relationships with third parties and their continued performance.
We have established strategic relationships with global strategic consulting firms, global systems integrators, regional consulting firms,
implementation partners, public cloud partners and technology partners. We intend for these parties, as members of our partner ecosystem, to
contribute to our growth by, among other things, extending the coverage and enhancing the expertise of our professional services, expanding the
reach of our platform, and accelerating the usage and adoption of our platform. Partners can also exercise a significant role in revenue generation,
by referring opportunities to us, enhancing the effectiveness of our sales efforts by establishing connections with senior management at prospective
customers and/or promoting the use of our platform as a key component of digital transformation projects that the partner is implementing with their
own customers. In order to grow our business, we anticipate that we will need to broaden and deepen our partner ecosystem by continuing to
establish and maintain relationships with such third parties. Identifying partners, and negotiating and documenting relationships with them, requires
significant time and resources. If we are not able to successfully operationalize our partnerships, we may not be able to generate growth sufficient to
meet our contractual commitments, which could adversely affect our revenue, gross margin, profitability, financial position, and cash flow. Our
partners may conclude that they are not receiving sufficient benefits, economic or otherwise, from their relationships with us, resulting in a reduction
or termination of their involvement in our partner ecosystem. Our partners may have relationships with our competitors or experience with their
products or services and such relationships or experience may result in our partners recommending our competitors’ products or services over ours.
Furthermore, our competitors may be effective in providing incentives to our partners to favor their products or services or to prevent or reduce
subscriptions to our services. In addition, acquisitions of our partners by our competitors could result in a decrease in the number of our current and
potential customers, as our partners may no longer facilitate the adoption of our platform by potential customers. Uncertain economic conditions,
including those caused by the COVID-19 pandemic, have and may continue to have an adverse impact on the business operations of our existing
partners and on our ability to attract and retain new partners, which could result in reduced demand generation and ultimately could disrupt our
business operations with a material adverse effect on our financial results.
If we are unsuccessful in establishing or maintaining our relationships with third parties, or our partners fail to perform or are unable to
perform (including due to the impact of the COVID-19 pandemic), our ability to compete in the marketplace or to grow our revenue could be
impaired, we could incur increased operating expenses and our operating results may suffer. Even if we are successful, we cannot assure you that
these relationships will result in increased customer adoption or usage of our platform or increased revenue.
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.
In order for our customers to unlock the full potential of our platform, both our customers and partners need access to highly skilled and
trained users of our platform, such as Master Anaplanners. Implementations of our platform may be technically complicated because our platform is
designed to be deployed in a wide range of technological environments and integrates data from a broad and complex range of workflows and
systems. In order for our customers to successfully implement our platform, they need access to highly skilled users that are familiar with their
operating environment and with our platform. Further, our partners rely heavily on highly skilled and trained users of our platform to effectively
provide implementation, training and consulting services to our customers. Incorrect or improper implementation or use of our platform could result in
customer dissatisfaction and harm our business and financial condition. If our customers are unable to implement our platform, perceptions of our
company and our platform may be impaired, our reputation and brand may suffer, and customers may choose not to renew their subscriptions or
increase their purchases of our related services. Our “land and expand” growth strategy depends in large part on existing customers adding new
users and use cases, and expanding to additional lines of business, divisions, and geographies. We have found that this strategy is most successful
when internal users quickly adopt our platform and build out their expertise as informed end users of our platform. Our partners’ trained users also
develop new solutions on our platform and promote and facilitate adoption of our platform at our customers. If our customers and partners do not
have access to highly skilled and trained users of our platform, implementation and adoption of our
26
platform may not be effective, customer satisfaction may suffer, and our results of operations, financial condition and growth prospects may be
adversely affected.
We need to continue to develop a steady pipeline of highly qualified and trained personnel to meet customer and partner demand, but our
efforts may be ineffective. While we continue to expand our training resources for trained users of our platform, we increasingly rely on our
customers and partners to encourage their users to enhance their Anaplan expertise using our training resources. If our customers and partner do
not encourage enough internal users to become highly skilled users of our platform, there may not be enough trained users of our platform to meet
demand. If a customer has not developed an internal cohort of trained users of our platform, the loss of a trained user could have an adverse impact
on their ability to unlock the value of our platform and ability to expand the platform’s use within the organization. Further, the courses we offer on the
Anaplan Academy, Anaplan’s online training portal providing a full range of training courses on our platform, may not serve their intended purpose or
the certification programs we offer may take longer than anticipated to create a robust and consistent pipeline of talent. Our customers and partners
need regular training to support disparate technologies involved in large-scale deployments and maximize potential of our platform as technology
changes without which our results of operations and growth prospects could be materially adversely affected. Our ability to effectively educate and
train users of our platform may be negatively impacted if our customer support employees or the users of our customers or partners are unable to
receive training virtually while COVID-19 restrictions remain in place or the virtual training is not as effective as in-person training methods. If we fail
to develop and maintain a sufficient pipeline of qualified and trained users of our platform for utilization with our customers and partners, we may
suffer adverse consequences including professional services not being furnished correctly, incorrect or improper use of our platform by partners and
customers, damage to our reputation and brand, and customers choosing not to renew their subscriptions or expand their use of our platform. Any of
these events could have an adverse effect on our business, financial position and growth prospects.
If customers are not satisfied with the implementation services provided by us or our partners, our business could be adversely affected.
Our business depends on the professional services that are performed to help our customers implement and use our platform.
Professional services may be performed by our own staff, by a third-party partner or by a combination of the two. Our strategy is to work with
partners to increase the breadth of capability and depth of capacity for delivery of these services to our customers, and we expect the number of
our partner-led implementations to continue to increase over time. Our ability and the ability of our third-party partners to successfully implement
services may be negatively impacted by remote work environments and travel restrictions adopted as a result of the COVID-19 pandemic. In
response to the travel restrictions and other measures enacted in connection with COVID-19, professional services, including implementation
projects that were previously performed at a customer location are now provided virtually. However, virtual provision of services may not be as
effective or deliver the same benefits as services performed on-site. If a customer is not satisfied with the quality of work performed by us or a
partner or with the type of professional services or functionality delivered, even if we are not contractually responsible for the partner services, then
we could incur additional costs to address the situation, the profitability of that work might be impaired and the customer’s dissatisfaction with our or
our partner’s services could damage our ability to expand the scope of functionality subscribed to by that customer. In addition, negative publicity
related to our customer relationships, regardless of its accuracy, may further damage our business by affecting our ability to compete for new
business with current and prospective customers.
27
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.
The industry in which we compete is characterized by rapid technological change, frequent introductions of new products, and evolving
industry standards. Our ability to attract new customers and increase revenue from existing customers will depend on a number of factors including:
our ability to anticipate industry standards and trends, to continue to enhance our platform and introduce new functionality in a timely manner, to
update and expand our infrastructure, and to keep pace with technological developments. The success of any enhancement, new functionality, or
infrastructure development depends on several factors, including timely completion and market acceptance. Any new enhancement, functionality, or
infrastructure development might not be introduced in a timely or cost-effective manner and might not achieve the broad market acceptance
necessary to generate significant revenue. If any of our competitors implements new technologies before we are able to implement them or if our
competitors are able to respond more quickly and effectively to new or changing opportunities, those competitors may be able to provide more
effective products than ours at lower prices.
We have experienced, and may in the future experience, delays in the planned release dates of enhancements to our platform. Delays
could result in adverse publicity, loss of sales, delay in market acceptance of our platform, any of which could cause us to lose existing customers or
impair our ability to attract new customers. In addition, the introduction of new products and services by competitors or the development of entirely
new technologies to replace existing offerings could make our platform obsolete or adversely affect our ability to compete. Any delay or failure in the
introduction of enhancements, functionality, or infrastructure developments could harm our business, results of operations, and financial condition.
Our platform must also integrate with a variety of third-party technologies, and we need to continuously modify and enhance our platform to
adapt to changes in cloud-enabled hardware, software, networking, browser, and database technologies. Any undetected errors or defects in this
third-party software, or cybersecurity threats or attacks related to such software, could impair the functionality of our platform, result in increased
costs, and injure our reputation. Any failure of our platform to operate effectively with existing or future technologies, or any failure of a third-party
cloud infrastructure partner to support one or more of the features of our platform, could cause customer dissatisfaction and reduce the demand for
our platform, resulting in harm to our business. Further, the emergence of new industry standards related to strategic planning and operational
execution products and services may adversely affect the demand for our platform. In addition, because our platform is cloud-based, we need to
continually enhance and improve our platform to keep pace with changes in Internet-related hardware, software, communications, and database
technologies and standards. Any failure of our platform to operate effectively with future hardware or software technologies, or to comply with new
industry standards, could reduce the demand for our platform and harm our business, results of operations, and financial condition.
We invest significantly in research and development, and to the extent our research and development investments are not directed
efficiently or do not result in material enhancements to our platform, our business and results of operations would be harmed.
A key element of our strategy is to invest significantly in our research and development efforts to enhance the features, functionality,
performance, and ease of use of our platform to address additional applications and use cases that will broaden the appeal of our platform and
facilitate the broad use of our platform across customers with complex planning needs. If we do not spend our research and development budget
efficiently or effectively on compelling enhancements, innovations and technologies, such as public cloud functionality, predictive analytics and
machine learning, our business may be harmed and we may not realize the expected benefits of our strategy. We will need to appropriately deploy
our human resources, and may need to hire new employees with highly technical skills who are often in high demand, or we may not be able to
effectively execute on our research and development strategy. Our ability to conduct research and development activities as planned may also be
negatively impacted by our remote work environment adopted as a result of the COVID-19 pandemic. Moreover, research and development projects
can be technically challenging and expensive. As a result of the nature of research and development cycles, there will be delays between the time
we incur expenses associated with research and development activities and the time we are able to offer compelling enhancements to our platform
and generate revenue, if any, from those activities. Additionally, anticipated customer demand for a platform enhancement we are developing could
decrease after the development
28
cycle has commenced. If we expend a significant amount of resources on research and development efforts that do not lead to the successful
introduction of functionality or platform improvements that are competitive in our current or future markets our business and results of operations will
suffer.
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.
While we have many security measures in place designed to protect customer and other sensitive information and the integrity of our
information technology systems and 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 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, 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
29
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.
We may also experience disruptions, outages, and other performance problems on our systems due to service attacks, unauthorized
access, or other security-related incidents. For example, 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.
30
Real or perceived errors, failures, bugs, service outages, or disruptions in our platform could adversely affect our reputation and harm
our business.
Our platform is complex, has contained defects and errors and may continue to contain undetected defects or errors. We are continuing to
evolve the features and functionality of our platform through updates and enhancements, and as we do so, we may introduce additional defects or
errors that may not be detected until after deployment by our customers. In addition, if our platform is not implemented or used correctly or as
intended, inadequate performance and disruptions in service may result. Our platform is often used in connection with large scale computing
environments which may expose errors, failures, or vulnerabilities in our platform or integrations. Moreover, we have acquired and may in the future
acquire companies or integrate into our platform technologies developed by third parties and we may encounter difficulty in incorporating the newly-
obtained technologies into our platform or maintaining the quality standards that are consistent with our reputation, and furthermore, we may face
technological incompatibilities with the newly-acquired intellectual property. In addition, while we seek to maintain sufficient excess capacity in our
operations infrastructure to meet the needs of all of our customers, we have experienced, and may in the future experience, disruptions, outages,
and other performance problems.
Since our customers use our platform for important aspects of their business, any actual or perceived errors, defects, disruptions in service,
outages, or other performance problems could damage our customers’ businesses. Any defects or errors in our platform and solutions, or the
perception of such defects or errors, or other performance problems could result in any of the following, each of which could adversely affect our
business and results of operations:
•
•
•
•
•
•
•
•
•
•
•
expenditure of significant financial and product development resources in efforts to analyze, correct, eliminate or work around errors or
defects;
loss of existing or potential customers or partners;
interruptions or delays in sales of our platform;
delayed or lost revenue;
delay or failure to attain market acceptance;
delay in the development or release of new functionality or improvements to our platform;
negative publicity, which could harm our reputation;
sales credits or refunds for prepaid amounts related to unused subscription services;
diversion of development and customer service resources;
breach of warranty claims against us, which could result in an increase in our provision for doubtful accounts; and
an increase in collection cycles for accounts receivable or the expense and risk of litigation.
Although we have contractual protections, such as warranty disclaimers and limitation of liability provisions, in our standard terms and
conditions of sale, they may not fully or effectively protect us from claims by customers, partners or other third parties. Any insurance coverage we
may have may not adequately cover all claims asserted against us, or cover only a portion of such claims. A successful product liability, warranty, or
other similar claim against us could have an adverse effect on our business, operating results, and financial condition. In addition, even claims that
ultimately are unsuccessful could result in our expenditure of funds in litigation and divert management’s time and other resources.
We depend on computing infrastructure operated by third parties, and any delays in service or disruption in these operations or an
inability to increase capacity could impair the use or functionality of our platform, harm our business, and subject us to liability.
We currently serve our customers from third-party data center facilities operated by Equinix, Inc. located in the United States, the
Netherlands, and Germany. We are also developing our platform on the infrastructure of certain third-party public cloud partners in order to increase
the accessibility and reach of our platform. If we are unable to renew our cloud infrastructure agreements on commercially reasonable terms, we
may be required to transfer our servers and other infrastructure, and we may incur significant costs and experience possible service interruptions in
connection with doing so.
31
Although we have disaster recovery plans in place, we may experience interruptions, delays and outages in service and availability from
time-to-time arising from problems with our third-party data center or cloud partner infrastructure including technical failures, power loss or
telecommunications failures or capacity issues, natural disasters, security incidents, and other events beyond our control which could negatively
affect the use, functionality or availability of our platform and harm our reputation, damage our customers’ businesses, and adversely affect our
business. In addition, the ongoing COVID-19 pandemic may have an adverse operational impact on our data center and public cloud infrastructure
partners, as they navigate restrictions, health and safety regulations and other impacts from the pandemic. Furthermore, in the event of interruption
or delay in service, our insurance coverage may not adequately compensate us for any losses that we may incur.
In addition, as we continue to increase the number of customers and users on our platform, we will need to increase the capacity of our
cloud infrastructure, including internationally. If we do not increase our capacity in a timely manner, customers could experience interruptions or
delays in access to our platform, and we may not be able to attract potential customers in specific regions of the world unless we provide localized
offerings in those regions. As we continue to increase our cloud capacity, we may move or transfer our data and our customers’ data. Despite
precautions taken during this process, any unsuccessful data transfers may impair the use or functionality of our platform. Any damage to, or failure
of, our systems, or those of our third-party data center or public cloud infrastructure partners, could interrupt our service and hinder the use or
functionality of our platform. Impairment of or interruptions in our service may reduce our revenue, cause us to issue credits or pay penalties, subject
us to claims and litigation, cause our customers to terminate their subscriptions, and adversely affect our renewal rates and our ability to attract new
customers. Our business will also be harmed if our customers and potential customers believe our platform is unreliable.
Any failure to offer high-quality technical support services may adversely affect our relationships with our customers and our financial
results.
Once our platform is implemented, our customers depend on our support organization to resolve technical issues or perceived technical
issues relating to the platform. We may be unable to respond quickly enough to accommodate short-term increases in customer demand for support
services. We also may be unable to modify the format of our support services to compete with changes in support services provided by our
competitors. Our ability to provide support services may also be negatively impacted by our remote work environment adopted as a result of the
COVID-19 pandemic. Increased customer demand for these services, without corresponding revenue, could increase costs and adversely affect our
operating results. In addition, our sales process is highly dependent on our business reputation and on positive recommendations from our existing
customers. Any failure to maintain high-quality technical support, or a market perception that we do not maintain high-quality support, could
adversely affect our reputation, our ability to sell subscriptions to our platform to existing and prospective customers and our business, operating
results, and financial position.
If we fail to develop, maintain, and enhance widespread brand awareness in a cost-effective manner or if we receive negative publicity,
our revenue and competitive position may be materially and adversely affected.
We believe that developing, maintaining, and enhancing widespread awareness of our brand and our platform solutions that enable
Connected Planning and digital transformation in a cost-effective manner is critical to achieving widespread acceptance of our platform, attracting
new customers, and maintaining existing customers. For example, widespread awareness of our brand is critical to ensuring that we are invited to
participate in requests for proposals from prospective customers. We have made, and will continue to make, significant investments to promote our
brand. However, brand promotion activities may not generate customer awareness or increase revenue, and, even if they do, any increase in
revenue may not offset the expenses we incur in building our brand. Furthermore, the ongoing COVID-19 pandemic has made it more challenging to
develop, maintain and enhance widespread awareness of our brand. Numerous marketing and brand promotion events, held in-person with
customers and prospective customers in prior years, have been delayed, cancelled or converted into a virtual format. Virtual events may not be as
successful as in-person interactions, and the precautions and safety measures that have been adopted in response to the COVID-19 pandemic,
particularly if extended for prolonged periods, could have a detrimental effect on our ability to develop, maintain and enhance widespread awareness
of our brand. If we fail to successfully promote and maintain our brand, or incur
32
substantial expenses, we may fail to attract or retain customers necessary to realize a sufficient return on our brand-building efforts or to achieve the
widespread brand awareness that is critical for broad customer adoption of our platform. We believe that the importance of our brand and reputation
will increase as competition in our market further intensifies.
Negative publicity, whether or not justified, relating to our company, our platform, or events or activities attributed to us, our employees, our
partners or others associated with any of these parties, may tarnish our reputation and reduce the value of our brand. Independent industry analysts
often provide reviews of our platform, as well as the products and services of our competitors, and perception of our platform in the marketplace may
be significantly influenced by these reviews. If these reviews are negative, or less positive as compared to those of our competitors’ products and
services, our brand may be adversely affected. Additionally, the performance of our partners may affect our brand and reputation if customers do not
have a positive experience with our partners’ services. Damage to our reputation and loss of brand equity may reduce demand for our platform and
have an adverse effect on our business, operating results, and financial condition. Moreover, any attempts to rebuild our reputation and restore the
value of our brands may be costly and time consuming, and such efforts may not ultimately be successful. The upfront investment and costs incurred
to build and maintain our brand, both domestically and internationally, may not generate increased market acceptance and may negatively impact
our results of operations.
Because our platform is sold to enterprises with complex operating environments, we can encounter long and unpredictable sales cycles,
which could adversely affect our operating results in a given period.
Our ability to increase revenue and achieve profitability depends, in large part, on widespread adoption of our platform by customers with
complex operating environments who tend to make larger purchases of our products. As we target our sales efforts at these customers, we face
greater costs, longer sales cycles and less predictability in completing some of our sales. Further, we have experienced and we expect to experience
prolonged sales cycles as a result of uncertain economic conditions including those caused by the COVID-19 pandemic. As a result of the variability
and length of the sales cycle, we have only a limited ability to forecast the timing of sales. A delay in or failure to complete large sales to one or more
enterprise customers could harm our business and financial results, and could cause our financial results to vary significantly from period to period.
Our sales cycle varies widely, reflecting differences in potential customers’ decision-making processes, procurement requirements, and budget
cycles, and is subject to significant risks over which we have little or no control, including:
•
•
•
•
•
•
customers’ budgetary constraints and priorities;
the timing of customers’ budget cycles;
the need by some customers for lengthy evaluations;
announcements of new products, features, or functionality by us or our competitors;
external factors such as economic uncertainty (including due to the COVID-19 pandemic); and
the length and timing of customers’ approval processes and disruptions to their approval process arising from disruptions in operations
due to the COVID-19 pandemic.
A customer’s decision to use our platform may be an enterprise-wide decision, requiring us to expend substantial time, effort, and money
educating customers as to the use and value of our platform and encouraging widespread adoption of our platform by users. In addition, our ability to
successfully sell our platform to customers with complex planning needs is dependent on us attracting and retaining sales personnel with experience
in selling to these customers. Moreover, our target customers may prefer to purchase software that is critical to their business from one of our larger,
more established competitors. Our typical sales cycles can range from three to nine months, and we expect that this lengthy sales cycle may
continue or lengthen further. Longer sales cycles could cause our operating and financial results to suffer in a given period.
33
Because we recognize revenue over varying periods depending on the nature of the revenue, changes in our business including
downturns or upturns in new sales and renewals will not be immediately reflected in our operating results and may be difficult to discern.
We generally recognize subscription revenue from customers ratably over the terms of their contracts, which are typically two to three
years, although some customers commit for shorter periods. As a result, most of the subscription revenue we report in each quarter is derived from
the recognition of deferred revenue relating to subscriptions entered into during previous quarters. Consequently, a decline in new or renewed
subscriptions in any single quarter will likely have only a small impact on our revenue for that quarter. However, such a decline will negatively affect
our revenue in future quarters. In addition, the severity and duration of events that affect revenue may not be predictable and their effects could
extend beyond a single quarter. Accordingly, the effects of the COVID-19 pandemic, significant downturns in sales and market acceptance of our
platform, and potential changes in our pricing policies or rate of renewals, may not be fully apparent from our reported results of operations until
future periods.
In addition, a majority of our costs are expensed as incurred, while subscription revenue is recognized over the life of the customer
agreement. As a result, increased growth in the number of our customers could continue to result in our recognition of more costs than revenue in
the earlier periods of the terms of our agreements with them. Our subscription model also makes it difficult for us to rapidly increase our revenue
through additional sales in any period, as revenue from new customers must be recognized over the applicable subscription term.
In addition, professional services revenue is recognized as the services are performed or upon the completion of the project, depending on
the type of professional services arrangement involved. Professional services engagements typically span from a few weeks to several months,
which can make it difficult to predict the timing of revenue recognition for such services and the corresponding effects on our results of operations.
Professional services revenue has fluctuated and may continue to fluctuate significantly from period to period, as we are increasingly leveraging our
partners to provide these services. In addition, because professional services expenses are recognized as the services are performed, professional
services margins can significantly fluctuate from period to period.
The sum of our revenue and changes in deferred revenue may not be an accurate indicator of business activity within a period.
Investors or analysts sometimes look to the sum of revenue and changes in deferred revenue, sometimes referred to as “estimated
billings,” as an indicator of business activity in a period for businesses such as ours. However, these measures may significantly differ from
underlying business activity for a number of reasons including:
•
a relatively large number of transactions occur at the end of the quarter. Invoicing of those transactions may or may not occur before
the end of the quarter based on a number of factors including receipt of information from the customer, volume of transactions, and
holidays. A shift of a few days has little economic impact on our business, but will shift deferred revenue from one period into the next;
• multi-year upfront billings may distort trends;
•
•
subscriptions that have deferred start dates; and
services that are invoiced upon delivery.
Accordingly, we do not believe that estimated billings are an accurate indicator of future revenue for any given period of time. However,
many companies that provide subscriptions report changes in estimated billings as a key operating or financial metric, and it is possible that analysts
or investors may view this metric as important. Thus, any changes in our estimated billings could adversely affect the market price of our common
stock.
Changes in our subscription or pricing models could adversely affect our operating results.
As the markets for our software subscriptions grow, as new competitors introduce new products or services that compete with ours or as
we enter into new international markets, we may be unable to attract new customers at the same price or based on the same pricing model as we
have historically used. Regardless of pricing model used, large customers may demand higher price discounts than in the past. As a result, we may
be required to reduce our prices, offer shorter contract durations or offer alternative pricing models, which could adversely affect our revenue, gross
margin, profitability, financial position, and cash flow.
34
In the past, we have been able to increase our prices for our platform and services, but we may choose not to introduce or be unsuccessful
in implementing future price increases. Our competitors may introduce new products that compete with ours or reduce their prices, or we may be
unable to attract new customers or retain existing customers based on our historical pricing models. As we expand internationally, we also must
determine the appropriate pricing to enable us to compete effectively internationally. In addition, if our mix of products sold changes, then we may
need to, or choose to, revise our pricing. As a result, we may be required or choose to reduce our prices or change our pricing model, which could
harm our business, results of operations and financial condition.
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.
Our success depends largely upon the continued services of our key executive officers and certain key employees. We rely on our
executive leadership team in the areas of business strategy, research and development, marketing, sales, services, and general and administrative
functions. We have experienced, and may in the future experience, changes in our executive management team or key employees resulting from the
hiring or departure of executives or key employees, which could disrupt our business. We do not have employment agreements with our executive
officers or other key personnel that require them to continue to work for us for any specified period and, therefore, they could terminate their
employment with us at any time. Conversely, we may terminate the employment of the senior management team and certain key employees, which
may subject us to costly and time-consuming negotiations over severance, litigation and employment claims. While we seek to carefully manage any
changes in our executive management team or key employees, including by establishing processes and procedures and engaging in succession
planning, such measures may be insufficient and the departure or unavailability of one or more of our executive officers or key employees could
have a serious adverse effect on our business.
35
To execute our growth plan, we must attract and retain highly qualified personnel, especially engineering, research and development and
sales personnel. Competition for personnel can be intense, especially for engineers with high levels of experience in designing and developing
software for Internet-related services and for direct sales personnel with the sales skills and technical knowledge that we require. For example,
competition is intense for experienced software and cloud infrastructure engineers in San Francisco in the United States, London and York in the
U.K., and Israel, our primary development locations. We have experienced, and expect to continue to experience, difficulty in hiring and retaining
employees with appropriate qualifications. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and
future growth prospects could be adversely affected.
Many of the companies with which we compete for experienced personnel have greater resources than we have. If we hire employees from
competitors or other companies, their former employers may attempt to assert that these employees or our company have breached their legal
obligations, resulting in a diversion of our time and resources and potential litigation. In addition, job candidates and existing employees often
consider the value of the stock awards they receive in connection with their employment. If the perceived value of our stock awards declines, it may
adversely affect our ability to recruit and retain highly skilled employees. Further, in times of increased economic uncertainty, employees and
potential employees may perceive older or larger companies to be more attractive and the current period of economic uncertainty may adversely
affect our ability to recruit and retain highly skilled employees. The challenges we face in recruiting and hiring qualified personnel may be
compounded by a decreased willingness of candidates to leave their current employment due to various factors including economic uncertainty
caused by the COVID-19 pandemic and uncertainty regarding immigration policies.
Our global operations and sales to customers outside the United States or with international operations subject us to risks inherent in
international operations that can harm our business, results of operations, and financial condition.
A key element of our strategy is to operate globally and sell our products to customers across the world. We derive a significant portion of
our revenue from customers located outside the United States. Operating globally requires significant resources and management attention. We
cannot be certain that the investment and additional resources required to operate globally will produce desired levels of revenue or profitability.
Further, operating globally subjects us to various risks, including:
•
•
•
•
•
•
•
•
•
increased management, travel, infrastructure and legal compliance costs associated with having operations in many countries;
increased financial accounting and reporting burdens and complexities;
variations in adoption and acceptance of cloud computing in different countries, requirements or preferences for domestic products,
and difficulties in replacing products offered by more established or known regional competitors;
new and different sources of competition;
laws and business practices favoring local competitors;
differing technical standards, existing or future regulatory and certification requirements and required features and functionality;
communication and integration problems related to entering and serving new markets with different languages, cultures, and political
systems;
compliance with foreign privacy and security laws and regulations, including data privacy laws that require customer data to be stored
and processed in a designated territory, and the risks and costs of non-compliance;
compliance with laws and regulations for foreign operations, including anti-bribery laws (such as the U.S. Foreign Corrupt Practices
Act, the U.S. Travel Act, and the U.K. Bribery Act), import and export control laws, tax laws, tariffs, trade barriers, economic sanctions,
and other regulatory or contractual limitations on our ability to sell our products in certain foreign markets, and the risks and costs of
non-compliance;
36
•
•
•
•
•
•
•
•
•
•
•
•
compliance with foreign laws, regulations and orders related to health and safety, including the ongoing COVID-19 pandemic;
heightened risks of unfair or corrupt business practices in certain geographies that may impact our financial results and result in
restatements of our consolidated financial statements;
fluctuations in currency exchange rates and related effects on our results of operations;
difficulties in repatriating or transferring funds from or converting currencies in certain countries;
different pricing environments, longer sales cycles, and longer accounts receivable payment cycles and collections issues;
political and economic conditions and uncertainty in the countries or regions in which we operate and around the world;
difficulties in recruiting, managing and retaining local partners, including consulting and implementation firms, to support our operations
and sales;
differing labor standards, including restrictions related to, and the increased cost of, terminating employees in some countries;
difficulties in recruiting, hiring and retaining employees in certain countries;
difficulties in managing a global workforce and maintaining our corporate culture globally;
the preference for localized software and licensing programs;
the preference for localized language support;
• weaker protection in some jurisdictions for intellectual property and other legal rights than in the United States and practical difficulties
in enforcing intellectual property and other rights outside of the United States;
•
•
•
•
compliance with the laws of numerous foreign taxing jurisdictions, including withholding obligations, and overlapping of different tax
regimes;
compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations, including
employment, tax, privacy, and data protection laws and regulations;
the fragmentation of longstanding regulatory frameworks caused by Brexit; and
global pandemics such as the ongoing COVID-19 pandemic and travel restrictions and other measures undertaken by governments in
response to such pandemics.
Any of the above risks could adversely affect our international operations, reduce our revenue from customers outside of the United States
or increase our operating costs, each of which could adversely affect our business, results of operations, financial condition, and growth prospects.
Some of our business partners also have international operations and are subject to the risks described above. Even if we are able to
successfully manage the risks of international operations, our business may be adversely affected if our business partners are not able to
successfully manage these risks.
Our corporate culture promotes an entrepreneurial mindset, and if we cannot maintain this culture as we grow, we could lose the
entrepreneurial spirit, innovation, creativity, and other qualities we believe contribute to our success, and it could harm our business.
We believe that our culture has been, and will continue to be, a key contributor to our success because it fosters the entrepreneurial spirit,
innovation, creativity, and other qualities we believe drive our growth. As we continue to grow, we will need to maintain our corporate culture among
a larger number of employees dispersed in various geographic regions. However, our growth may result in a change to, or dilution of, our corporate
culture, and we may not be able to effectively integrate new hires in our fast-paced culture. The challenge we face in maintaining our culture is
compounded by the COVID-19 pandemic and its effects including an employee base that is working remotely and facing personal and professional
challenges. Any failure to maintain the cohesiveness of our culture could negatively affect
37
our business, decrease employee engagement and productivity, result in current or former employees posting negative feedback on third-party
company review sites, damage our reputation, reduce our ability to retain and recruit personnel and could lead to the failure to achieve our vision
and implement our strategy.
We may engage in strategic transactions, which could divert our management’s attention, result in additional dilution to our stockholders,
disrupt our operations and adversely affect our operating results. We may not be able to successfully integrate acquired businesses and
technologies or achieve the anticipated benefits of such acquisitions.
In pursuing our business strategy, we have in the past acquired and may in the future seek to acquire or invest in businesses, products,
technologies, or talent that we believe could complement or expand our platform, augment our product offerings, enhance our technical capabilities
or otherwise offer growth opportunities. We often compete with others for the same opportunities. The pursuit of any of these strategic transactions
may divert the attention of management and cause us to incur various expenses in identifying, investigating, and pursuing suitable transactions,
whether or not they are consummated.
Any strategic transaction may result in unforeseen operating difficulties and expenditures. If we acquire additional businesses or enter into
other strategic transactions, we may not be able to integrate the acquired personnel, operations, and technologies successfully, or effectively
manage the combined business following the strategic transactions. In addition, we have limited experience in consummating strategic transactions.
We also may not achieve the anticipated benefits from the strategic transactions due to a number of factors, including:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
failure to evaluate, integrate, utilize or benefit from or accurately anticipate the adoption rates of acquired technologies or services;
product synergies, cost reductions, increases in revenue and economies of scale may not materialize as expected;
difficulty in retaining, motivating and integrating key management and other employees of the acquired business;
the business culture of the acquired entity may not match well with our culture;
unforeseen delays, unanticipated costs and liabilities may arise when integrating operations, processes and systems in geographies
where we have not conducted business;
unanticipated costs or liabilities associated with the strategic transactions;
incurrence of transaction-related costs;
assumption of the existing obligations or unforeseen liabilities of the acquired business that we were not able to mitigate through due
diligence or other means;
difficulty integrating the accounting systems, security infrastructure, operations, and personnel of the acquired business;
difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business;
difficulty converting the current and prospective customers of the acquired business onto our platform and contract terms, including
disparities in the revenue, licensing, support, or professional services model of the acquired company;
diversion of management’s attention from other business concerns;
adverse effects to our existing business relationships with business partners and customers as a result of the strategic transactions;
unexpected costs may arise due to unforeseen changes in tax, payroll, pension, labor, trade, environmental and safety policies in new
jurisdictions where the acquired entity operates;
use of resources that are needed in other parts of our business; and
38
•
use of substantial portions of our available cash to consummate the strategic transaction.
In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible
assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required
to take charges to our operating results based on this impairment assessment process, which could adversely affect our results of operations.
Strategic transactions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our
operating results, increase our financial risk, and cause the market price of our common stock to decline. In addition, if a strategic transaction fails to
meet our expectations, our operating results, business, and financial position may suffer.
Industry Risks
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.
The market for business planning software is highly competitive, with relatively low barriers to entry for some software or services. As a
result, we anticipate aggressive competition not only from established vendors of business planning software but also from new entrants into the
industry. Our ability to compete successfully in our market depends on a number of factors, both within and outside of our control. Any failure by us
to compete successfully in any one of these or other areas may reduce the demand for our platform, as well as adversely affect our business,
operating results, and financial condition.
Our competitors primarily include Oracle Corporation (Oracle), SAP AG (SAP), Workday, Inc. (Workday) and International Business
Machines Corporation (IBM), which are well-established providers of business planning and analytics software with long-standing relationships with
many customers. Some customers may be hesitant to adopt cloud-based software such as ours or to purchase cloud-based software from us and
may prefer to purchase from such legacy software vendors. Oracle, SAP, and IBM are larger than we are and have greater name recognition, longer
operating histories, larger marketing budgets, and significantly greater resources than we do. These vendors, as well as other competitors, may offer
business planning software on a standalone basis at a low price or bundled as part of a larger product sale. Our competitors have offered, and may
continue to offer, new products developed through acquisitions or organic development that more directly compete with our products and solutions.
Our competitors may also seek to partner with other leading cloud providers.
We may also face competition from a variety of vendors of cloud-based and on-premises software products that address only a portion of
the use cases addressed by our platform, including spreadsheets, which are used by virtually every business to some degree for business planning.
Some of these applications may have greater functionality than our platform for the specific use cases for which they were designed, even if they
lack the breadth of planning capabilities provided by our platform. In addition, other companies that provide cloud-based software in different target
markets may develop software or acquire companies that operate in our target markets, and some potential customers may elect to develop their
own internal software or simply use the manual processes that they have traditionally used. With the introduction of new technologies and market
entrants, we expect competition to intensify in the future.
Many of our competitors have longer operating histories and greater name recognition than we do, and are able to devote greater
resources to the development, promotion, and sale of their products and services than we can. As a result, our competitors may be able to respond
more quickly and effectively to new or changing opportunities, technologies, operational requirements and industry standards, as well as to new
challenges such as those resulting from the COVID-19 pandemic. Furthermore, our current or potential competitors may acquire or be acquired by
third parties with greater available resources and the ability to initiate or withstand substantial price competition, and the resulting change in the
competitive landscape could adversely affect our ability to compete effectively. In addition, many of our competitors have established marketing
relationships, access to larger customer bases, and major distribution agreements with consultants, systems integrators, and resellers. Our
competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their product
39
offerings or resources. If our competitors are successful in bringing their products or services to market earlier than ours or if their products or
services are more technologically capable than ours, then our revenue could be adversely affected. In addition, some of our competitors may offer
their products and services at a lower price. If we are unable to achieve our target pricing levels, our operating results would be negatively affected.
Pricing pressures and increased competition could result in reduced sales, reduced margins, losses or a failure to maintain or improve our
competitive market position, any of which could adversely affect our business.
If the market for Connect Planning solutions develops more slowly than we expect or declines, or if we are unable to successfully
capitalize on the market, our business could be adversely affected.
Our success will depend to a substantial extent on continued growth in the demand for cloud-based Connected Planning and digital
transformation solutions and on our ability to continue to capitalize on this demand. Many enterprises have invested substantial resources on legacy
planning products, emerging point products and manual processes and, therefore, may be reluctant or unwilling to migrate to enterprise cloud
planning software. Our ability to capitalize on this market depends in part on our ability to sell customers on the benefits that the Connected Planning
and digital transformation features of our platform can provide over their existing solutions. The growth rate of the Connected Planning market
depends on a number of factors, including the cost, performance, and perceived value and security associated with Connected Planning software. If
the market for Connect Planning solutions fails to grow, grows more slowly than we currently expect, or decreases in size, or if we are unable to
successfully capitalize on the market, our business could be adversely affected.
Legal and Compliance Risks
We typically provide service level commitments under our customer contracts. If we fail to meet these contractual commitments, we could
be obligated to provide credits or refunds for prepaid amounts related to unused subscription services or face contract terminations,
which could adversely affect our revenue.
Our customer agreements typically provide service level commitments on a monthly basis. If we are unable to meet the stated service level
commitments or suffer extended periods of unavailability for our platform, we may be contractually obligated to provide these customers with service
credits, or we could face contract terminations, in which case we would be subject to refunds for prepaid amounts related to unused subscription
services. Our revenue could be significantly affected if we suffer unexcused downtime under our agreements with our customers. Any extended
service outages could adversely affect our reputation, ability to attract new customers and retain existing customers, revenue, and operating results.
40
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.
We collect, process, store and transfer various types of information, including personally identifiable information or other sensitive
information, for our customers and similar data about our employees, services providers, partners and potential customers in the normal course of
business. Additionally, our customers can use our platform to collect, process, and store certain types of personal or identifying information regarding
their employees and customers. In most cases we contractually prohibit our customers from using our platform to collect, process, or store sensitive
information (such as personal health information or credit card information); however, our customers may breach such use prohibitions without our
knowledge. Such a breach could result in our violation of the laws, rules, or regulations governing the collection, use, and protection of personal
information, which could adversely impact our business, financial condition, and operating results. Moreover, as our customers face increased
scrutiny for data privacy breaches, they may elect to transfer the risk to us through contractual provisions which may subject us to increasing levels
of contractual liability for data privacy breaches.
Data privacy and security have become significant issues in the United States (“U.S.”) and in many other countries where our platform is
available. Laws, rules, and regulations in these jurisdictions apply broadly to the collection, use, storage, data residency, disclosure, and security of
various types of data, including data that identifies or may be used to identify an individual, such as names, email addresses, and in some
jurisdictions, Internet Protocol addresses. In the U.S., these include laws, rules, and regulations promulgated under the authority of the Federal
Trade Commission, the Electronic Communications Privacy Act, Computer Fraud and Abuse Act, the Health Insurance Portability and Accountability
Act of 1996, or HIPAA, and state laws relating to privacy and data security. Internationally, virtually every jurisdiction in which we operate has
established its own data security and privacy legal framework with which we, or our customers, must comply. Interpretation of, and costs of
compliance with, these laws, rules, and regulations and their application to our platform and services in the United States and foreign jurisdictions is
ongoing and cannot be fully determined at this time.
Further, the regulatory framework for privacy and security issues worldwide is rapidly evolving, subject to change and is likely to remain
uncertain for the foreseeable future. Many federal, state, and foreign government bodies and agencies are considering adopting or amending laws,
rules, and regulations regarding the collection, use, storage, data residency, security, and disclosure of personal information and breach notification
procedures. In addition to government regulation, privacy advocates, and industry groups may propose new and different self-regulatory standards
that may apply to us.
Recent changes to privacy and security laws, including the CCPA, the GDPR, the Data Protection Act, and ongoing legal challenges to
Model Clauses, could impact our business. Aspects of these laws, and their interpretation and enforcement remain unclear, and we cannot yet fully
predict their impact on our business or operations. We have taken and will continue to take steps to comply with these and other new and changing
privacy and security laws, rules, regulations and standards, but such laws, rules, regulations and standards may be unclear and we cannot assure
you that our steps will be compliant. The interpretation and application of privacy and data protection laws, regulations, rules, and other standards
remains uncertain and may be interpreted and applied in a manner that is inconsistent with our data management practices or the features of our
platform. If so, we could be required to fundamentally change our business activities and practices or modify our platform, which we may be unable
to do in a commercially reasonable manner or at all, and which could have an adverse effect on our business. As a result of changing standards, we
may experience reluctance or refusal by current or prospective multi-national customers or customers in geographies with strict privacy laws, like the
EU and the United Kingdom, to use our products, and we may find it necessary or desirable to make further changes to our handling of personal
data for those customers. The changing regulatory environment applicable to the handling personal data, and our actions taken in response, may
cause us to assume additional liabilities or incur additional costs or regulatory penalties, and could result in our business, operating results, and
financial condition being harmed. Our efforts to comply new data protection laws and regulations may cause us to incur substantial operational costs,
require us to modify our data handling practices, and may otherwise adversely impact our business, financial condition and operating results.
41
Despite our compliance efforts, we may fail to achieve compliance with applicable privacy or data protection laws and regulations as they
evolve, or adhere to contractual obligations regarding the collection, processing, storage and transfer of data (including data from our customers,
prospective customers, partners and employees), either due to internal or external factors such as resource limitations or a lack of vendor
cooperation. Any actual or perceived failure to comply with these laws or obligations could result in enforcement action against us, including fines,
claims for damages by customers and other affected individuals, damage to our reputation, and loss of goodwill (both in relation to existing
customers and prospective customers), any of which could harm our business, results of operations, and financial condition.
Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations, and policies that are applicable to the
businesses of our customers may limit the use and adoption of, and reduce the overall demand for, our platform. Privacy concerns, whether valid or
not valid, may inhibit market adoption of our software particularly in certain industries and foreign countries.
Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other
losses.
Our agreements with customers and other third parties generally include indemnification provisions under which we agree to indemnify
them for losses suffered or incurred as a result of claims of intellectual property infringement, or other liabilities relating to or arising from our
software, services or other contractual obligations. Large indemnity payments could harm our business, results of operations, and financial condition.
Although we normally contractually limit our liability with respect to such indemnity obligations, those limitations may not be fully enforceable in all
situations, and we may still incur substantial liability under those agreements. Any dispute with a customer with respect to such obligations could
have adverse effects on our relationship with that customer and other existing customers and new customers and harm our business and results of
operations.
We could incur substantial costs in expanding, protecting or defending our intellectual property rights, and any failure to protect our
intellectual property rights could impair our ability to protect our proprietary technology and our brand.
Our success and ability to compete depend in part upon our intellectual property and our ability to expand our existing intellectual property
portfolio. We primarily rely on copyright, patent, trade secret and trademark laws, trade secret protection, and confidentiality or contractual
agreements with our employees, customers, partners and others to protect our intellectual property rights. However, the steps we take to protect our
intellectual property rights may be inadequate and we may not be able to secure our intellectual property rights in the U.S. and international markets
in which we operate.
Some or all of our issued patents may be invalidated or otherwise limited, allowing our competitors to develop competitive offerings. In
addition, issuance of a patent does not guarantee that we have a right to practice the patented invention or that we can effectively use that patent to
limit the ability of other companies to develop competitive products. We cannot be certain that we are the first to use the inventions claimed in our
issued patents or pending patent applications or otherwise used in our platform, that we are the first to file for protection in our patent applications, or
that third parties do not have blocking patents that could be used to prevent us from marketing or practicing our patented technology. While we have
patents and patent applications pending, we may be unable to obtain patent protection for the technology covered in our patent applications or the
patent protection may not be obtained quickly enough to meet our business needs. In addition, our existing patents and any patents issued in the
future may not provide us with competitive advantages or may be successfully challenged by third parties. Effective patent, trademark, copyright,
and trade secret protection may not be available to us in every country in which our platform is available. The laws of some foreign countries may not
be as protective of intellectual property rights as those in the United States (in particular, some foreign jurisdictions do not permit patent protection
for software), and mechanisms for enforcement of intellectual property rights may be inadequate. Additional uncertainty may result from changes to
intellectual property legislation enacted in the United States, including the America Invents Act, and by other national governments and from
interpretations of the intellectual property laws of the United States and other countries by applicable courts and agencies. Accordingly, despite our
efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property.
42
Although we generally enter into confidentiality and invention assignment agreements with our employees and consultants that have
access to material confidential information and enter into confidentiality agreements with our customers and the parties with whom we have strategic
relationships and business alliances, these agreements may not be effective in controlling access to and distribution of our platform and propriety
information or preventing reverse engineering. Further, these agreements may not prevent competitors from independently developing technologies
that are substantially similar or superior to our platform.
Unauthorized use of our intellectual property may have already occurred or may occur in the future. In order to protect our intellectual
property rights, we may be required to spend significant resources to monitor and protect these rights. Litigation brought to protect and enforce our
intellectual property rights could be costly, time-consuming, and distracting to management and could result in the impairment or loss of portions of
our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and
countersuits attacking the validity and enforceability of our intellectual property rights and could put our patents at risk of being invalidated or
interpreted narrowly and our patent applications at risk of not issuing. Our failure to secure, protect, and enforce our intellectual property rights could
seriously and adversely affect our brand and our business.
We may be sued by third parties for alleged infringement of their proprietary rights, which may be costly to defend, could require us to
pay significant damages and could limit our ability to use certain technologies.
There has been considerable activity in our industry to develop intellectual property and enforce intellectual property rights. Our success
depends upon our not infringing upon the intellectual property rights of others. Our competitors, as well as a number of other entities and individuals,
may own or claim to own intellectual property relating to our platform and underlying technology, and we may be unaware of the intellectual property
rights that others may claim cover aspects of our platform or the underlying technology. In the future, others may claim that our platform and
underlying technology infringe or violate their intellectual property rights.
Claims of intellectual property rights infringement or other violations of intellectual property rights might require us to stop using technology
found to violate a third party’s rights, redesign our platform, which could require significant effort and expense and cause delays of releases, enter
into costly settlement or license agreements, pay costly damage awards, or face a temporary or permanent injunction prohibiting us from marketing
or selling our platform. With respect to such technology for which intellectual property rights are claimed to be infringed or otherwise violated by our
technology or the conduct of our business, if we cannot or do not license any infringed or otherwise violated technology on commercially reasonable
terms or at all, or substitute similar non-infringing technology from another source, we could be forced to limit or stop selling our platform, we may not
be able to meet our obligations to customers under our customer contracts, we may be unable to compete effectively, and our revenue and
operating results could be adversely impacted. We may also be obligated to indemnify our customers and business partners or to pay substantial
settlement costs, including royalty payments, in connection with any such claim or litigation and to obtain licenses, modify our platform, or refund
fees, which could be costly. Even if we were to prevail in such a dispute, any litigation regarding intellectual property could be costly and time-
consuming, damage our reputation and brand, delay or reduce potential sales, deter our partners from promoting adoption of our platform and divert
the attention of our management and key personnel from our business operations. As the number of competitors in our market increases, claims of
intellectual property rights infringement or other violations of intellectual property rights may increase. Furthermore, our insurance coverage may not
adequately cover losses from intellectual property rights infringement claims.
43
We employ third-party licensed software for use in or with our platform, and the inability to maintain these licenses or errors in the
software we license could result in increased costs, or reduced service levels, which could adversely affect our business.
Our platform incorporates certain third-party software obtained under licenses from other companies, and we use third-party software
development tools as we continue to develop and enhance our platform. We anticipate that we will continue to rely on such third-party software in
the future. If we are required to replace such software, commercially reasonable alternatives may not be available, and if they are available, they
might require substantial investment of our time and resources. In addition, integration of the software used in our platform with new third-
party software may require significant work and require substantial investment of our time and resources. Also, to the extent that our platform
depends upon the successful operation of third-party software in conjunction with our software, any undetected errors or defects in this third-
party software could prevent the deployment or impair the functionality of our platform, delay new feature introductions, result in a failure of our
functionality or a security incident, and injure our reputation. Our use of additional or alternative third-party software would require us to enter into
license agreements with third parties. In the event that we are not able to maintain our licenses to third-party software, or cannot obtain licenses to
new software as needed, or in the event third-party software used in conjunction with our platform contains errors or defects, our business, operating
results, and financial condition may be adversely affected.
Our platform utilizes open source software, which could negatively affect our ability to offer our products and subject us to litigation or
other adverse consequences.
Our platform utilizes software governed by open source licenses, which may include, by way of example, the MIT License and the Apache
License. The use of open source software involves a number of risks, many of which cannot be eliminated and could negatively affect our business.
For example, the terms of various open source licenses have not been interpreted by United States courts, and there is a risk that such licenses
could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our platform. By the terms of certain
open source licenses, if we combine our proprietary software with open source software in a certain manner, we could be required to release the
source code of our proprietary software and to make our proprietary software available under open source licenses. We may face claims alleging
noncompliance with open source license terms or misappropriation or other violation of open source technology. These claims could result in
litigation, damage our reputation in the open-source community, or require us to purchase a costly license, devote additional research or
development resources to re-engineer our products or services, discontinue the sale of our products if re-engineering could not be accomplished on
a timely or cost-effective basis, require us to make the source code of our proprietary code generally available, or result in us being enjoined from
the offering of components of our platform that contained the open source software, any of which would have a negative effect on our business and
operating results. We also could be subject to lawsuits from other parties claiming ownership of what we believe to be open source software.
Litigation could be costly for us to defend, have a negative effect on our operating results or financial condition, and could require us to devote
additional research and development resources to re-engineer our platform. In addition to risks related to license requirements, usage of open
source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties
or controls on the origin of the software.
We are subject to anti-corruption, anti-bribery, and similar laws, and failure to comply with these laws could subject us to criminal
penalties or significant fines and harm our business and reputation.
We are subject to anti-corruption and anti-bribery and similar laws, such as the U.S. Foreign Corrupt Practices Act of 1977, as amended, or
the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, the U.K. Bribery Act 2010,
and other anti-corruption, anti-bribery, and anti-money laundering laws in countries in which we conduct activities. Anti-corruption and anti-bribery
laws have been enforced aggressively in recent years and are interpreted broadly and prohibit companies and their employees and agents from
promising, authorizing, making or offering improper payments, or other benefits to government officials and others in the private sector. As we
increase our international sales and business, our risks under these laws may increase.
44
Noncompliance with these laws could subject us to investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of
profits, significant fines, damages, other civil and criminal penalties or injunctions, adverse media coverage, and other consequences. Any
investigations, actions, or sanctions could harm our business, operating results, and financial condition.
We are subject to governmental export and import controls and economic sanctions programs that could impair our ability to compete in
international markets or subject us to liability if we violate the controls or programs.
We are subject to certain U.S. export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S.
Customs regulations, and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign
Assets Controls. Exports of our platform must be made in compliance with these laws and regulations. If we fail to comply with these laws and
regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including: the possible loss of export or import
privileges; fines, which may be imposed on us and responsible employees or managers; and, in extreme cases, the incarceration of responsible
employees or managers. Obtaining the necessary authorizations, including any required license, for a particular sale may be time-consuming, is not
guaranteed, and may result in the delay or loss of sales opportunities.
We incorporate encryption technology into our platform. These encryption products and the underlying technology may be exported outside
of the United States only with the required export authorizations, including by license, a license exception or other appropriate government
authorizations. In addition, various countries regulate the import of certain encryption technology, including through import permitting and licensing
requirements, and have enacted laws that could limit our ability to distribute our platform or could limit our customers’ ability to implement our
platform in those countries. Governmental regulation of encryption technology and regulation of imports or exports of encryption products, or our
failure to obtain required import or export approval for our platform, when applicable, could harm our international sales and adversely affect our
revenue. Furthermore, U.S. export control laws and economic sanctions programs prohibit the shipment of certain products and services to
countries, governments, and persons targeted by U.S. sanctions. Any violations of such economic embargoes and trade sanction regulations could
have negative consequences, including government investigations, penalties, and reputational harm.
Changes in our platform or future changes in export and import regulations may create delays in the introduction and sale of our platform in
international markets, prevent our customers with international operations from deploying our platform globally or, in some cases, prevent the export
or import of our platform to certain countries, governments, or persons altogether. Any change in export or import regulations, economic sanctions or
related legislation, or change in the countries, governments, persons, or technologies targeted by such regulations, could result in decreased use of
our platform by, or in our decreased ability to export or sell our platform to, existing or potential customers with international operations. Any
decreased use of our platform or limitation on our ability to export or sell our platform would likely adversely affect our business, financial condition,
and results of operations.
We incur significant costs, devote substantial management time, and may have difficulty attracting qualified board members as a result of
operating as a public company.
As a public company, we are subject to various securities rules and regulations, including the reporting requirements of the Exchange Act,
the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, the New York Stock Exchange listing standards, and
rules and regulations subsequently implemented by the SEC and the New York Stock Exchange. We expect that complying with these rules and
regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming, and
costly, and place significant strain on our personnel, systems, and resources. The Exchange Act requires, among other things, that we file annual,
quarterly and current reports with respect to our business and operating results. The Sarbanes‑Oxley Act requires, among other things, that we
establish and maintain effective disclosure controls and procedures and internal control over financial reporting. Compliance with these various
requirements has increased, and we expect will continue to increase, our legal and financial compliance costs and makes some activities more time
consuming and costly. In addition, our management and other personnel need to divert attention from operational and other business matters to
devote substantial time
45
to these public company requirements, which could adversely affect our business, financial condition, and operating results. Although we have hired
additional employees to help comply with these requirements, we may need to hire more employees in the future or engage outside consultants,
which will increase our costs and expenses.
In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for
public companies, increasing legal and financial compliance costs and making some activities more time consuming. This could result in continuing
uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Compliance
with evolving laws, regulations and standards may result in increased general and administrative expenses and a diversion of management's time
and attention from revenue‑generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from
the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may
impose fines, initiate legal proceedings or take other action against us and our business may be adversely affected.
As a result of the rules and regulations applicable to public companies, it may be more expensive for us to obtain director and officer
liability insurance and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. It may also be more
difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation
committee, and qualified executive officers.
As a public company we file certain information publicly, which provides visibility into our business and financial condition. We are currently
subject to litigation related to our public filings, and may continue to be subject to threatened or actual litigation in the future. If such claims are
successful, our business, and operating results could be adversely affected, and even if the claims do not result in litigation or are resolved in our
favor, these claims, and the time and resources necessary to resolve them and the diversion of management resources, could adversely affect our
business and operating results.
If we fail to maintain an effective system of internal controls, our ability to produce timely and accurate financial statements, or comply
with applicable regulations could be impaired.
As a public company, we are required to design and maintain internal controls over financial reporting and to report any material
weaknesses in such internal controls. The Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal controls
over financial reporting and provide a management report on the internal controls over financial reporting, which must be attested to by our
independent registered public accounting firm. We are continuing to develop and refine our disclosure controls and other procedures that are
designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized,
and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange
Act is accumulated and communicated to our principal executive and financial officers. We are also continuing to improve our internal control over
financial reporting, including through our internal audit team. In order to maintain and improve the effectiveness of our disclosure controls and
procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources,
including accounting-related costs and significant management oversight.
Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business.
Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. If we fail to develop or
maintain effective controls, encounter difficulties in their implementation or improvement, or identify a material weakness in our controls, our
operating results could be harmed or we could fail to meet our reporting obligations and may be required to restate our financial statements for prior
periods. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic
management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal
control over financial reporting that we are required to include in our periodic reports that will be filed with the SEC. Our independent registered
public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial
reporting is documented, designed, or operating. Ineffective disclosure controls and procedures and internal control over financial reporting could
result in regulatory scrutiny and sanctions, cause investors to lose confidence in our reported financial and other information, and subject us to
stockholder or other third party litigation, any of which could have a material adverse effect on our
46
business and operating results and a negative effect on the trading price of our common stock. In addition, if we are unable to continue to meet
these requirements, we may not be able to remain listed on the New York Stock Exchange.
Financial and Credit Risks
If we are unable to achieve and sustain a level of liquidity sufficient to support our operations and fulfill our obligations, our business,
operating results and financial position could be adversely affected.
We actively monitor and manage our cash and cash equivalents so that sufficient liquidity is available to fund our operations and other
corporate purposes. As an example of our liquidity management, in April 2020, we amended our credit agreement with Wells Fargo Bank, N.A.
(“Wells Fargo”) to, among other things, increase the aggregate revolving credit commitment amount to allow us to borrow up to $60.0 million, subject
to the terms of the credit agreement, including the accounts receivable borrowing base, and extend the maturity date of the revolving credit facility
from April 2020 to April 2022. In the future, increased levels of liquidity may be required to adequately support our operations and initiatives and to
mitigate the effects of business challenges or unforeseen circumstances. If we are unable to achieve and sustain such increased levels of liquidity,
we may suffer adverse consequences including reduced investment in our platform and its functionality, difficulties in executing our business plan
and fulfilling our obligations, and other operational challenges. Any of these developments could adversely affect our business, operating results and
financial position.
We may face exposure to foreign currency exchange rate fluctuations.
While our international contracts are sometimes denominated in U.S. dollars, a significant portion of our revenue is in foreign currencies
and the majority of our international costs are denominated in local currencies. Over time, an increasing portion of our international contracts may be
denominated in local currencies. Therefore, fluctuations in the value of the U.S. dollar and foreign currencies may affect our operating results when
translated into U.S. dollars. We do not currently engage in currency hedging activities to limit the risk of exchange rate fluctuations. However, in the
future, we may engage in hedging activities including the use of derivative instruments, such as foreign currency forward and option contracts, to
hedge certain exposures to fluctuations in foreign currency exchange rates. The use of such hedging activities may not successfully offset any of the
risks associated with exchange rate fluctuations, including uncertainty caused by volatility in the currency exchange rates. Moreover, the use of
hedging instruments may introduce additional risks if we are unable to structure effective hedges with such instruments.
We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs.
We have funded our operations since inception primarily through equity financings and payments by customers. We do not know when or if
our operations will generate sufficient cash to fund our ongoing operations. In the future, we may require additional capital to respond to business
opportunities, challenges, strategic transactions, a decline in the level of customer prepayments or unforeseen circumstances. We may determine to
engage in equity or debt financings or enter into credit facilities for these or other reasons, and we may not be able to timely secure additional debt
or equity financing on favorable terms, or at all, especially during a global economic downturn. Any debt financing obtained by us in the future could
involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for
us to obtain additional capital and to pursue business opportunities, including potential strategic transactions. If we raise additional funds through
further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant
dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences, and privileges senior
to those of holders of our common stock. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it,
our ability to continue to grow or support our business and to respond to business challenges could be significantly limited.
47
If we default on our credit obligations, our operations may be interrupted and our business could be seriously harmed.
We have a credit facility that we may draw on to finance our operations, strategic transactions, and other corporate purposes. Our
obligations pursuant to this credit facility are secured by a first priority lien on our assets for the benefit of the lenders. Our credit facility contains
financial and operating covenants, including maintenance of a specific minimum tangible net worth, customary limitations on the incurrence of certain
indebtedness and liens, restrictions on certain intercompany transactions, and limitations on the amount of dividends and stock repurchases. Our
ability to comply with these covenants may be affected by events beyond our control, and breaches of these covenants or other obligations in the
credit facility, or the occurrence of certain events specified in the credit facility, could result in a default under the credit facility and any future
financial agreements into which we may enter. If we default on the obligations under our credit facility, our lenders may pursue various remedial
actions against us, including:
•
•
•
•
requiring repayment of any outstanding amounts drawn on our credit facility;
terminating our credit facility;
disposing of our assets subject to the lien; and
requiring us to pay significant damages.
If any of these events occur, our operations may be interrupted and our ability to fund our operations or obligations, as well as our
business, could be seriously harmed. For more information on our credit facility, see “Management’s Discussion and Analysis of Financial Condition
and Results of Operations—Liquidity and Capital Resources.”
We may not be able to utilize a significant portion of our net operating loss or research tax credit carryforwards, which could adversely
affect our potential profitability.
We have federal and state net operating loss carryforwards due to prior period losses, which if not utilized will begin to expire in fiscal 2029
and 2025 for federal and state purposes, respectively. These net operating loss carryforwards could expire unused and be unavailable to offset
future income tax liabilities, which could adversely affect our potential profitability.
Also, under the Tax Cuts and Jobs Act of 2017 (“Tax Reform Act”), tax losses generated in taxable years beginning after December 31,
2017, may be utilized to offset no more than 80% of taxable income annually. Although the subsequent CARES Act modified the Tax Reform Act by,
among other things, eliminating the aforementioned 80% limitation for taxable years beginning before January 1, 2021, we may still face reduced
availability of net operating losses in future taxable years, which could adversely affect our potential profitability.
In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, our ability to utilize net operating
loss carryforwards or other tax attributes, such as research tax credits, in any taxable year may be limited if we experience an “ownership change.”
Such an “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their
ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply
under state tax laws. We completed an analysis under Sections 382 and 383 of the Code for the Company’s tax years through January 31, 2019,
and determined two “ownership changes” occurred, one in fiscal 2011 and one in fiscal 2012. We believe utilization of our net operating losses and
tax credit carryforwards have become limited. This could result in increased U.S. federal income tax liability for us if we generate taxable income in a
future period. Limitations on the use of net operating loss carryforwards and other tax attributes could also increase our state tax liability. The use of
our tax attributes will also be limited to the extent that we do not generate positive taxable income in future tax periods.
We are subject to the tax laws of various jurisdictions, which are subject to changes and to interpretation, which could harm our future
results.
We are subject to income, sales, use, value added, and other similar taxes in the United States and foreign jurisdictions, and our domestic
and international tax liabilities are subject to the allocation of expenses in differing jurisdictions. Our effective tax rate could be adversely affected by
changes in the mix of earnings and losses in countries with differing statutory tax rates, certain non-deductible expenses
48
as a result of acquisitions, the valuation of deferred tax assets and liabilities, the interpretation and application of existing tax laws within a
jurisdiction, and changes in federal, state, or international tax laws and accounting principles.
Changes to various tax laws, rules and regulations are currently being considered by the United States and other countries where we do
business. Certain of these proposed changes could be applied solely or disproportionately to services provided over the internet. These tax
initiatives, if implemented, could result in additional tax obligations that we are required to pay or adversely affect our sales activity due to the
inherent cost increase the taxes would represent and ultimately result in a negative impact on our operating results and cash flows. In addition,
existing tax laws, rules, or regulations could be interpreted, modified, or applied adversely to us (possibly with retroactive effect), which could require
us or our customers to pay additional tax amounts, or require us or our customers to pay fines, penalties and interest for past amounts. If we are
unsuccessful in collecting such taxes from our customers, we could be held liable for such costs, thereby adversely affecting our operating results
and cash flows.
Sales and use, value added, and similar tax laws and rates vary greatly by jurisdiction and are subject to varying interpretations that
change over time. We do not collect sales and use, value added, and similar taxes in all jurisdictions in which we have sales, based on our belief that
such taxes are not applicable or that we are not required to collect such taxes with respect to the jurisdiction. Certain jurisdictions in which we do not
collect such taxes may assert that such taxes are applicable, which could result in tax assessments, penalties, and interest, and we may be required
to collect such taxes in the future.
Our customers may fail to pay us in accordance with the terms of their agreements, necessitating action by us to compel payment.
We typically enter into multiple year, non-cancelable arrangements with our customers. If customers fail to pay us under the terms of our
agreements, we may be adversely affected both from the inability to collect amounts due and the cost of enforcing the terms of our contracts,
including litigation. The risk of such negative effects increases with the term length of our customer arrangements. Furthermore, some of our
customers may seek bankruptcy protection or other similar relief, including as a result of the impacts and disruptions caused by the COVID-19
pandemic, and fail to pay amounts due to us, or pay those amounts more slowly, either of which could adversely affect our business, results of
operations and financial condition.
Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.
Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board, or
FASB, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or
interpretations could have a significant effect on our reported financial results for periods prior and subsequent to such change. For example, recent
new standards issued by the FASB that could materially impact our financial statements include certain changes to accounting for leases. We may
adopt one or more of these standards retrospectively to prior periods, and the adoption may result in an adverse change to previously reported
results. Additionally, the adoption of these standards may potentially require enhancements or changes in our systems and could require our
financial management to devote significant time and resources to implementing those changes.
Risks Related to Ownership of Our Common Stock
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.
The market price of our common stock has been and may continue to be volatile. In addition to factors discussed in this report, the market
price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:
•
•
the COVID-19 pandemic and the extent to which, and for how long, it impacts our business and that of our customers and prospective
customers;
overall performance of the equity markets;
49
•
•
•
•
•
•
•
•
•
•
•
•
•
our operating performance, including key metrics, and the performance of other similar companies;
changes in our projected operating results that we provide to the public, our failure to meet these projections or changes in
recommendations by securities analysts that elect to follow our common stock;
changes in our financial, operating or other metrics, regardless of whether we consider those metrics as reflective of the current state
or long-term prospects of our business, and how those results compare to securities analyst expectations;
announcements of technological innovations, new software or enhancements to services, acquisitions, strategic alliances, or significant
agreements by us or by our competitors;
disruptions in our services due to computer hardware, software, or network problems;
a data breach or other security incident involving us, or one of our customers or partners, or another company in the cloud planning
software market;
announcements of customer additions and customer cancellations or delays in customer purchases;
recruitment or departure of key personnel;
the economy as a whole, market conditions in our industry and the industries of our customers;
the sale, purchase, or exercise of a significant block of our common stock;
the impact of environmental, social, governance or other matters on our reputation or investor confidence in our operations;
the size of our market float; and
any other factors discussed in this Annual Report on Form 10-K.
In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market
prices of equity securities of many technology companies. Stock prices of many technology companies have fluctuated in a manner unrelated or
disproportionate to the operating performance of those companies. In the past, stockholders have filed securities class action litigation following
periods of market volatility. For example, in August 2020, a purported stockholder filed a putative securities class action complaint in the United
States District Court for the Northern District of California against us and certain of our executive officers. This lawsuit is further described in Note 9,
Commitment and Contingencies, in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Although we believe this lawsuit lacks merit and intend to vigorously defend against it, this matter, and any other similar matters, could subject us to
substantial costs, divert resources, and the attention of management from our business and adversely affect our business.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock
price and trading volume could decline.
The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us
or our business. If one or more analysts cease or reduce coverage of us, the trading price for our common stock would be negatively affected. If one
or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, our common
stock price would likely decline.
We do not intend to pay dividends for the foreseeable future.
We have never declared nor paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the
operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. Consequently,
stockholders must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains
on their investment.
50
Delaware law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make a
merger, tender offer, or proxy contest difficult, thereby depressing the trading price of our common stock.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may make the acquisition
of our company more difficult, including the following:
•
•
•
•
•
•
a classified board of directors so that not all members of our board of directors are elected at one time, which could delay the ability of
stockholders to change the membership of a majority of our board of directors;
the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares,
including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a
hostile acquiror;
the right of our board of directors, subject to the rights of the holders of any series of preferred stock, to the extent such preferred stock
is issued by the board of directors in the future, to elect a director to fill a vacancy created by the expansion of our board of directors or
the resignation, death, or removal of a director, could impede an attempt by stockholders to fill vacancies on our board of directors;
a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of
our stockholders;
the requirement that a special meeting of stockholders may be called only by a majority vote of our entire board of directors, the
chairman of our board of directors or our chief executive officer, which could delay the ability of our stockholders to force consideration
of a proposal or to take action, including the removal of directors; and
advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose
matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation
of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us.
In addition, as a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law. This provision may
prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from engaging in a business combination with us
even if the business combination would be beneficial to our existing stockholders. A Delaware corporation may opt out of this provision by express
provision in its original certificate of incorporation or by amendment to its certificate of incorporation or bylaws approved by its stockholders.
However, we have not opted out of this provision.
These and other provisions in our amended and restated certificate of incorporation, amended and restated bylaws, and Delaware law
could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by
our then-current board of directors, including delay or impede a merger, tender offer, or proxy contest involving our company. The existence of these
provisions could negatively affect the price of our common stock and limit opportunities for you to realize value in a corporate transaction.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum
for many types of disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial
forum for disputes with us or our directors, officers, or employees.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum
for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us
arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our bylaws or any action asserting a claim against us
that is governed by the internal affairs doctrine. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that
it finds favorable for disputes with us or our directors, officers, or other employees and may discourage these types of lawsuits. Alternatively, if a
court were to find the choice of forum provision contained in our amended and
51
restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such
action in other jurisdictions.
General Risk Factors
Uncertain global economic and market conditions may negatively impact our business, results of operations and cash flows.
Our business depends on the overall demand for information technology and on the economic health of our current and prospective
customers in the United States and abroad. Any significant weakening of the economy in the United States or in regions globally like Europe and
Asia, more limited availability of credit, a reduction in business confidence and activity, decreased government spending, perceived impact of global
trade barriers like tariffs and sanctions and the corresponding retaliatory actions, economic uncertainty, or other difficulties may affect one or more of
the sectors or countries in which we sell our platform. Global economic and political uncertainty, including the uncertainty surrounding the COVID-19
pandemic, Brexit, increased tariffs and international trade disputes, may cause some of our customers or potential customers to curtail spending,
scale back their digital transformation efforts, delay their expansion of Anaplan use cases, result in new regulatory and cost challenges to our
international operations and cause customers to delay or reduce their technology spending overall. In addition, a strong dollar could reduce demand
for our products in countries with relatively weaker currencies. Global economic conditions and market conditions may also continue to experience
volatility and remain uncertain for an indefinite period of time as a result of the COVID-19 pandemic. We expect our business will be impacted in a
variety of ways by these conditions because, among other reasons, some prospective and existing customers may curtail business spending, there
may be greater unpredictability in some customers’ ability to pay for their subscriptions to our platform, business disruptions for us and/or our
customers are likely to persist in at least some jurisdictions and travel by us and our partners to customer sites has been and is expected to remain
limited. These adverse conditions have, in part, resulted in and may result in certain of our customers and prospective customers deferring or
delaying buying decisions and project implementations, prolonged sales cycles, and increased requests for extended payment terms. These adverse
conditions could result in reductions in the rate of enterprise software spending generally, sales of our platform, longer sales cycles, slower adoption
of new technologies, lower renewal rates, and increased price competition. Any of these events could have an adverse effect on our business,
operating results, and financial position.
Catastrophic events and other events beyond our control may disrupt our business and adversely affect our operating results.
Natural disasters, catastrophic events, and other events beyond our control may cause damage or disruption to our business. As an
example, our corporate headquarters are located in San Francisco, California and the west coast of the United States contains active earthquake
zones. An earthquake affecting our headquarters may result in disruption to our business and operations. Additionally, we rely on our network
and third-party infrastructure and enterprise applications, internal technology systems, and our website for our development, marketing, operational
support, hosted services, and sales activities and such infrastructure and systems may also be affected by natural disasters or other catastrophic
events. For example, our data centers are critical infrastructure located in the United States, the Netherlands, and Germany, including in areas with
active earthquake zones. From time to time, global pandemics may result from outbreak of diseases such as the MERS, SARS, avian flu and
COVID-19, which may result in a material adverse impact on our or our customers’ and partners’ business operations including reduction or
suspension of operations in the U.S. or certain parts of the world. We serve a wide range of customers with international operations in varying
industries including manufacturing. Depending upon the continuity and severity of pandemics such as the COVID-19 pandemic, our customers and
partners may suspend or delay their engagement with us, or our partners may have difficulty engaging with customers and delivering the services
we typically expect them to provide, which could result in a material adverse effect on our financial condition. Although we maintain disaster and
crisis recovery plans, in the event of an earthquake, hurricane, flood, natural disaster or catastrophic event such as fire, power loss,
telecommunications failure, breach of security protocols, global pandemics like the COVID-19 pandemic, cyber-attack, war, or terrorist attack, such
plans or the disaster recovery plans established by the third-party data centers and other infrastructure that we rely on may prove to be inadequate
and we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our product development,
lengthy interruptions in our services, breaches of data security, and
52
loss of critical data, all of which could have an adverse effect on our business, operating results, and financial condition. Furthermore, in the event of
a catastrophic event or other crisis, our insurance coverage may not adequately compensate us for any losses that we may incur.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We sublease approximately 55,000 square feet of space for our corporate headquarters in San Francisco, California pursuant to a
sublease that expires in February 2026. We also have leased offices or co-working facilities in Chicago, Illinois, Minneapolis, Minnesota, and New
York, New York. We maintain international offices or co-working facilities in Australia, Austria, France, Germany, India, Israel, Japan, Malaysia, the
Philippines, Singapore, Sweden, Switzerland and the United Kingdom. We believe that we will be able to obtain additional space on commercially
reasonable terms.
ITEM 3. LEGAL PROCEEDINGS
The information set forth in Note 9, “Commitments and Contingencies—Legal Matter” to the consolidated financial statements included in
Part II, Item 8 of this Form 10-K is incorporated herein by reference.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
53
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
PART II
Market Information for Common Stock
Our common stock is listed on the New York Stock Exchange under the symbol “PLAN”.
Dividends
We have never declared or paid any cash dividends on our common stock. We currently intend to retain any future earnings to support
operations and to finance the growth and development of our business and do not intend to declare or pay any cash dividends on our common stock
for the foreseeable future. Any future determination to pay dividends on our common stock will be made at the discretion of our board of directors,
subject to applicable laws, and will depend upon our results of operations, financial condition, contractual restrictions, general business conditions,
capital requirements and other factors that our board of directors considers relevant.
Holders of Record
As of March 5, 2021, there were 101 registered stockholders of record of our common stock. We believe a substantially greater number of
beneficial owners hold shares through brokers, banks or other nominees.
Securities Authorized for Issuance under Equity Compensation Plans
The information concerning our equity compensation plans is incorporated by reference herein to the section of the Proxy Statement
entitled “Equity Compensation Plan Information.”
Stock Performance Graph
The following shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated
by reference into any of our other filings under the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended.
The performance graph below shows the cumulative total stockholder return on our common stock for the period from October 12, 2018 to
January 31, 2021. This is compared with the cumulative total return of the NASDAQ Computer Index and the Standard & Poor’s 500 Stock Index, or
the S&P 500 over the same period. The graph assumes that on October 12, 2018, our initial trading day, $100 was invested in our common stock at
the market close and $100 was invested at the market close in each of the other two indices, with dividends reinvested on the date of payment
without payment of any commissions. Dollar amounts in the graph are rounded to the nearest whole dollar. The performance shown in the graph
represents past performance and should not be considered an indication of future performance.
54
Recent Sale of Unregistered Securities and Use of Proceeds
There were no sales of unregistered equity securities which have not been previously disclosed in a quarterly report on Form 10-Q or a
current report on Form 8-K during our fiscal year ended January 31, 2021.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
55
ITEM 6. SELECTED FINANCIAL DATA
The consolidated statements of operations data for fiscal 2021, 2020, and 2019, and the consolidated balance sheets data as of January
31, 2021 and 2020, are derived from our audited consolidated financial statements and related notes included elsewhere in this Annual Report on
Form 10-K. The consolidated statements of operations data for fiscal 2018 and 2017 and the consolidated balance sheet data as of January 31,
2019, 2018 and 2017 are derived from our audited consolidated financial statements that are not included in this Annual Report on Form 10-K. Our
historical results are not necessarily indicative of our future results. The following selected consolidated financial data should be read in conjunction
with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and
related notes included elsewhere in this Annual Report on Form 10-K.
2021
Year Ended January 31,
2020
2018
2019
(In thousands, except per share data)
2017
Consolidated Statements of Operations
Data:
Revenue:
Subscription revenue
Professional services revenue
Total revenue
Cost of revenue:
Cost of subscription revenue (1)
Cost of professional services revenue (1)
Total cost of revenue
Gross profit
Operating expenses:
Research and development (1)
Sales and marketing (1)
General and administrative (1)
Total operating expenses
Loss from operations
Interest income (expense), net
Other income (expense), net
Loss before income taxes
Provision for income taxes
Net loss
Net loss per share attributable to common
stockholders, basic and diluted (2)
Weighted-average shares used in computing
net loss per share attributable to common
stockholders, basic and diluted (2)
(1) Includes stock-based compensation
expense as follows:
Cost of subscription revenue
Cost of professional services revenue
Research and development
Sales and marketing
General and administrative
Total stock-based compensation
expense
$ 408,199 $ 307,890 $ 208,605 $
32,037
240,642
39,556
447,755
40,132
348,022
143,542 $
24,805
168,347
91,416
29,083
120,499
69,802
39,177
108,979
338,776
51,460
39,317
90,777
257,245
36,500
30,898
67,398
173,244
19,927
32,058
51,985
116,362
100,523
302,002
90,030
492,555
(153,779)
167
3,736
(149,876)
(4,091)
48,998
176,323
76,186
301,507
(128,263)
1,921
(1,465)
(127,807)
(3,209)
$ (153,967) $ (149,217) $ (131,016) $
68,396
250,430
86,852
405,678
(148,433)
4,478
(809)
(144,764)
(4,453)
30,908
100,654
30,719
162,281
(45,919)
108
(482)
(46,293)
(1,261)
(47,554) $
9,072
30,335
39,407
81,092
23,868
73,656
22,503
120,027
(38,935)
88
(835)
(39,682)
(512)
(40,194)
$
(1.10) $
(1.15) $
(2.46) $
(2.51) $
(2.92)
139,499
129,799
53,328
18,956
13,774
$
3,822 $
2,481
18,715
48,210
30,398
2,547 $
2,199
10,608
34,428
30,264
831 $
851
3,826
15,475
31,823
148 $
507
742
3,496
3,746
49
336
634
2,555
2,529
$ 103,626 $
80,046 $
52,806 $
8,639 $
6,103
(2) See Notes 1 and 11 of the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for an
explanation of the method used to calculate basic and diluted net loss per share attributable to common stockholders and the weighted-
average number of shares used in the computation of the per share amounts.
56
Consolidated Balance Sheets Data:
Cash and cash equivalents
Working capital
Total assets (1)
Deferred revenue, current and non-
current
Total stockholders' equity
2021
2020
As of January 31,
2019
(In thousands)
2018
2017
80,155
$ 320,990 $ 309,894 $ 326,863 $ 110,898 $
123,859 155,223 240,301
55,830
63,925
739,125 649,807 528,769 246,747 174,941
295,543 220,208 150,843 101,286
278,013 291,681 307,478 111,639
65,897
84,744
(1) The amounts as of January 31, 2021, and 2020 reflect the impact of the adoption of Topic 842. The amounts as of January 31, 2019, 2018,
and 2017 do not reflect the adoption of Topic 842.
57
ITEM 7. 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
consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. Discussion regarding our financial
condition and results of operations for fiscal 2019 and year-to-year comparisons between fiscal 2020 and fiscal 2019 is included in Item 7 of our
Annual Report on Form 10-K for the fiscal year ended January 31, 2020, filed with the SEC on March 30, 2020. This discussion contains forward-
looking statements that involve risks and uncertainties as discussed in “Cautionary Note Regarding Forward-Looking Statements” included in this
Annual Report on Form 10-K. 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 I, Item 1A in this Annual Report on Form 10-K. Our fiscal year ends January 31.
Overview
Anaplan is a cloud-native enterprise SaaS company and a market leader in Connected Planning, empowering global enterprises to
orchestrate transformative business performance. Our customers rely on the Anaplan platform—powered by our proprietary Hyperblock® technology
—to connect teams, systems, and insights from across their organizations to continuously adapt to change, transform how they operate, and
reinvent value creation. Our cloud platform empowers enterprises to orchestrate complex scenario planning and conduct continuous forecasting to
systematically identify possibilities, seize opportunities, and reduce risk. Users of our platform can view and assess the impact of assumptions on
plans and key performance indicators in real time and across multiple business dimensions. The Anaplan platform enables businesses to be more
agile, make better decisions and to plan and execute their ongoing digital transformation to compete in today’s digital economy.
Our customers often initially adopt our platform within a specific business function for one or more planning use cases, but also because
our platform has the potential to be used as an enterprise-wide integrated planning and forecasting tool and as part of a broader digital
transformation initiative. We sell subscriptions to our cloud-based planning platform primarily through our direct sales team targeting these
customers. We also have a robust 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 digital transformation through
organizational change 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 see a greenfield opportunity to help over 70 million knowledge workers around the world plan more efficiently using Anaplan’s platform.
We derive the substantial majority of our revenue from subscriptions for users on our platform. Our initial subscription term is typically two
to three years, although some customers commit for shorter periods. We generally bill our customers annually in advance. We also offer professional
services, including consulting, implementation, and training, but are increasingly leveraging our partners to provide these services. During fiscal
2021, 2020, and 2019, subscription revenue was $408.2 million,
58
$307.9 million and $208.6 million, respectively, representing a year-over-year subscription revenue growth rate of 33% and 48% in fiscal 2021 and
2020, respectively. During fiscal 2021, 2020, and 2019, services revenue was $39.6 million, $40.1 million and $32.0 million, respectively. Our
subscription revenue as a percentage of total revenue was 91%, 88%, and 87% in fiscal 2021, 2020, and 2019, respectively.
During fiscal 2021, 2020 and 2019, our total revenue was $447.8 million, $348.0 million and $240.6 million, respectively. Approximately
46%, 43% and 43% of our revenue was generated from outside of the United States in fiscal 2021, 2020 and 2019, respectively. Our net loss was
$154.0 million, $149.2 million and $131.0 million in fiscal 2021, 2020 and 2019, respectively.
We believe that our focus on customer success allows us to retain and expand the subscription revenue generated from our existing
customers, and is an indicator of the long-term value of our customer relationships for Anaplan as a whole. We track our performance in this area by
measuring our dollar-based net expansion rate, which compares our annual recurring revenue from the same set of customers across comparable
periods. The dollar-based net expansion rate was 114% and 122% as of January 31, 2021 and 2020, respectively.
Our dollar-based net expansion rate equals the annual recurring revenue at the end of a period for a base set of customers from which we
generated annual recurring revenue in the year prior to the date of calculation, divided by the annual recurring revenue one year prior to the date of
the calculation for that same set of customers. Annual recurring revenue is calculated as subscription revenue already booked and in backlog that
will be recorded over the next 12 months, assuming any contract expiring in those 12 months is renewed and continues on its existing terms and at
its prevailing rate of utilization.
The number of customers with greater than $250,000 of annual recurring revenue was 453, 353 and 248 as of January 31, 2021, 2020 and
2019, 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.
We define calculated billings as total revenue plus the change in deferred revenue in the period. Calculated billings in any particular period
is comprised of subscription contracts with existing customers (including renewal contracts and add-on contracts), subscription contracts with new
customers, and contracts for professional services. Calculated billings is intended to provide information about our subscription revenue growth over
time and can typically be seen as an early indicator of trends in revenue growth. While calculated billings can increase as our revenues grow, it may
significantly fluctuate from period to period for several reasons, including the timing of contracted billings, the timing of renewals, and other factors.
See Part I, Item 1A, “Risk Factors—Operational Risks—The sum of our revenue and changes in deferred revenue may not be an accurate indicator
of business activity within a period” for a description of some limitations in the use of calculated billings.
Calculated billings is calculated as follows:
Total revenue
Add:
Deferred revenue (end of period)
Less:
Deferred revenue (beginning of period)
Calculated billings
59
Year Ended January 31,
2020
2021
(In thousands)
$
447,755 $
348,022
295,543
220,208
$
(220,208)
523,090 $
(150,843)
417,387
We regularly evaluate acquisitions or investment opportunities in complementary businesses, services and technologies and intellectual
property rights as a means to expand our offerings through a disciplined and strategic acquisition process. For example, on October 3, 2019 we
completed the acquisition of Mintigo Limited (Mintigo), an Israel-based artificial intelligence/machine learning company, to enhance the predictive
capabilities of our solutions. We may continue to make such acquisitions and investments in the future, and we plan to reinvest a significant portion
of our incremental revenue in future periods to grow our business and continue our leadership role in the Connected Planning category.
COVID-19 Update
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, remain in place in many of the regions in which we conduct business, and new or
more restrictive measures have been adopted, and may continue to be adopted if the pandemic worsens.
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 continue to operate in a modified manner and to prioritize the health and
safety of our employees, customers and the communities in which we operate. Among other modifications, we continue to require our employees to
work remotely, to maintain business-related travel restrictions, and to virtualize, postpone or cancel our sales and marketing, employee or industry
events. Our plan is to slowly move toward normal operations on a market by market basis in accordance with local authority guidelines and to ensure
that our return to work is thoughtful, prudent and handled with an abundance of caution with the health of our employees being the top priority. When
we determine that it is safe for employees to return to work, we have developed health and safety procedures to enable our employees to do so
safely. The impact, if any, of these and any additional operational changes we may implement is uncertain, but we currently believe the changes we
have implemented have not materially affected and are not expected to have a material and adverse effect on our ability to maintain financial
reporting systems, internal control over financial reporting and disclosure controls and procedures.
While the broader implications of the COVID-19 pandemic on our employees, our results of operations, and overall financial performance
remain uncertain, we have seen and we currently expect our financial performance to be negatively impacted by the economic effects of the COVID-
19 pandemic, at least for the immediate future. We have seen and expect to continue to see certain of our customers and prospective customers
defer or delay buying decisions and project implementations, prolonged sales cycles, and an increase in requests for extended payment terms due
to uncertain economic conditions including those caused by the COVID-19 pandemic. We have seen and expect to continue to see these deferrals
and delays impact our new business pipeline and large deals, including delays in deals arising out of our strategic relationships with our global
partners. We may also experience contraction in our existing customer base. These and other changes in customer demand for our solutions could
materially and adversely impact our business, results of operations, and overall financial performance in future periods.
While we have developed and continue to develop plans to help mitigate the negative impact of the pandemic on our business, these
efforts may not be effective and any protracted economic downturn may limit the effectiveness of our mitigation efforts. In addition, even after the
immediate impacts of the pandemic on the global economy and our business subside, the residual effects of the pandemic may present additional
challenges to our business that are currently difficult to predict. Furthermore, we generally recognize subscription revenue from our customer
contracts ratably over the term of the contract. Therefore, changes in our contracting activity in the near term may not be apparent as a change to
our reported revenue until future periods. See Part I, Item 1A, “Risk Factors” for further discussion of the possible impact of the COVID-19 pandemic
on our business.
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 I, Item 1A, “Risk Factors”. If we are
unable to address these challenges, our business and operating results could be adversely affected.
Factors Affecting Our Performance
60
Market adoption of our platform. Our long-term success will depend on widespread adoption of Connected Planning by enterprises for
numerous planning applications with broad use of those applications within their organizations. While we believe that we are still in the early stages
of penetrating our addressable market, we have benefited from rapid customer growth.
Customer First strategy. We put the success of our customers at the center of our culture, strategy, and investments. We view our
Customer First strategy as core to capturing our Connected Planning vision and driving the continued adoption and expansion in the use of our
platform. By aligning our thought leadership, worldwide development and delivery capabilities, and local sales and service resources, our Customer
First strategy drives exceptional value throughout our customers’ Connected Planning and digital transformation journeys. Our continued success
depends in part on our ability to continue to put customers at the center of our strategy.
Expansion of existing customers. We employ a “land and expand” approach, with many of our customers initially deploying our
product for a specific use case and group of users. Once they realize the benefits and wide applicability of our platform, many of our customers
subsequently renew their subscriptions and expand the number of users or use cases within and across lines of business and geographies as they
continue unlocking the agile enterprise planning and operating model across functional boundaries. As a result, we are able to generate a significant
increase in revenue from the expanded use of our platform across the enterprise. Going forward, we are focused on targeting customers where the
opportunity for expansion and need for our planning solutions are greatest. Our future revenue growth and our ability to achieve and maintain
profitability is dependent upon our ability to maintain existing customer relationships and to continue to expand our customers’ use of our platform.
Scaling our sales team. Our ability to achieve significant growth in revenue in the future will depend, in large part, upon the
effectiveness of our sales leadership and sales efforts, both domestically and internationally. We have invested and intend to continue to invest in
expanding and retaining our sales leadership and direct sales force, particularly in attracting and retaining sales personnel with experience selling to
larger enterprises. Our ability to increase our revenue will depend on the new members of our sales force becoming fully productive and executing
expeditiously and effective sales leadership. 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 fiscal 2021, 2020 and 2019, was approximately
46%, 43% and 43%, respectively, of our total revenue. We believe global demand for our platform will continue to develop as organizations
experience the benefits that our platform can provide to international enterprises with complex planning needs spanning multiple geographies.
Accordingly, we believe there is significant opportunity to grow our international business. We have invested, and plan to invest, ahead of this
potential demand in personnel, marketing, and access to data center capacity to support our international growth.
61
Partner ecosystem. Our partner ecosystem extends our geographic coverage, accelerates the usage and adoption of our platform, and
enables more efficient delivery of service solutions. We intend to augment and deepen our partnerships with strategic and advisory consulting,
systems integration, public cloud, and technology firms. We believe our partners’ scale and route to market can significantly contribute to our ability
to penetrate our addressable market, extend our geographic coverage, and extend usage and adoption of our platform.
Product velocity. We have invested and intend to continue to invest significantly in research and development in an effort to enhance
and expand the functionality of our platform, to attract and retain development personnel, and to protect our market-leading technology advantage.
We have a well-defined technology roadmap to introduce new features and functionality to our platform that we believe will improve our ability to
generate revenue by broadening the appeal of our platform to potential new customers as well as increasing the opportunities for further expanding
the use of our platform by existing customers. We are also investing to further enhance the 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 91%, 88% and 87% of our total revenue for fiscal 2021, 2020 and 2019, respectively. Subscription
revenue is driven primarily by the number of customers, the number of users at each customer, the price of user subscriptions, and renewal rates.
Subscription fees are recognized ratably as revenue over the contract term beginning on the date the platform is made available to the
customer. Our new business subscriptions typically have a term of two to three years. We generally invoice our customers in annual installments at
the beginning of each year within the subscription period. Amounts that have been invoiced are initially recorded as deferred revenue and are
recognized ratably over the subscription period.
Most of our contracts are non-cancelable over the contract term. We had remaining performance obligations, or backlog, in the amount of
$817.6 million and $656.2 million as of January 31, 2021 and 2020, respectively, consisting of both billed and unbilled consideration.
Because we recognize revenue from subscription fees ratably over the term of the contract, changes in our contracting activity in the near
term may not impact our reported revenue until future periods.
Professional Services Revenue
Professional services revenue is generally recognized as the services are rendered for time and material contracts, or on a proportional
performance basis for fixed price contracts. The substantial majority of our professional service contracts are on a time and materials basis.
Implementations generally take one to six months to complete depending upon the scope of engagement with the customer. Our professional
services revenue fluctuates from quarter to quarter as a result of the requirements, complexity, and timing of our customers’ implementation projects.
62
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.
Operating Expenses
Research and Development
Research and development expenses consist primarily of personnel-related costs for our development team, including salaries and
bonuses, benefits, stock-based compensation expense, and allocated overhead costs. We have invested, and intend to continue to invest, in
developing technology to support our growth. We capitalize certain software development costs that are attributable to developing new features and
adding incremental functionality to our platform, and amortize such costs as costs of subscription revenue over the estimated life of the new
incremental functionality, which is generally two to three years. We plan to increase our investment in research and development for the foreseeable
future as we focus on further developing our platform and enhancing its use cases. However, we expect our research and development expenses to
decrease as a percentage of our total revenue over time, although they may fluctuate as a percentage of our total revenue from period to period.
Sales and Marketing
Sales and marketing expenses consist primarily of personnel-related costs directly associated with our sales and marketing staff, including
salaries and bonuses, benefits, commissions, and stock-based compensation. Other sales and marketing costs include promotional events to
promote our brand, including our Anaplan Connected Planning Xperience (CPX) user conferences, advertising, and allocated overhead costs. We
plan to increase our investment in sales and marketing over the foreseeable future, primarily stemming from increased headcount in sales and
marketing, and investment in brand- and product-marketing efforts. However, we expect our sales and marketing expenses to decrease as a
percentage of our total revenue over time, although they may fluctuate as a percentage of our total revenue from period to period.
General and Administrative
General and administrative expenses consist primarily of personnel-related costs associated with our executive, finance, legal, and human
resources personnel, including salaries and bonuses, benefits, and stock-based compensation expense, professional fees for external legal,
accounting and other consulting services, and allocated overhead costs. We expect to increase the size of our general and administrative function to
support the growth of our business and continue to incur additional expenses as a result of operating as a public company. As a result, we expect
the dollar amount of our general and administrative expenses to increase for the foreseeable future. However, we expect our general and
administrative expenses to decrease as a percentage of our total revenue over time, although they may fluctuate as a percentage of our total
revenue from period to period.
63
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, U.K. and Israel deferred tax assets as we have concluded that it is not more likely than not
that the deferred assets will be utilized.
The following tables set forth selected consolidated statements of operations data for each of the years indicated:
Results of Operations
Revenue:
Subscription revenue
Professional services revenue
Total revenue
Cost of revenue:
Cost of subscription revenue (1)
Cost of professional services revenue (1)
Total cost of revenue
Gross profit
Operating expenses:
Research and development (1)
Sales and marketing (1)
General and administrative (1)
Total operating expenses
Loss from operations
Interest income (expense), net
Other income (expense), net
Loss before income taxes
Provision for income taxes
Net loss
(1) Includes stock-based compensation
expense as follows:
Cost of subscription revenue
Cost of professional services revenue
Research and development
Sales and marketing
General and administrative
Total stock-based compensation expense
2021
Year Ended January 31,
2020
(In thousands)
2019
$
408,199 $
39,556
447,755
307,890 $
40,132
348,022
208,605
32,037
240,642
69,802
39,177
108,979
338,776
51,460
39,317
90,777
257,245
100,523
302,002
90,030
492,555
(153,779)
167
3,736
(149,876)
(4,091)
(153,967) $
68,396
250,430
86,852
405,678
(148,433)
4,478
(809)
(144,764)
(4,453)
(149,217) $
36,500
30,898
67,398
173,244
48,998
176,323
76,186
301,507
(128,263)
1,921
(1,465)
(127,807)
(3,209)
(131,016)
3,822 $
2,481
18,715
48,210
30,398
103,626 $
2,547 $
2,199
10,608
34,428
30,264
80,046 $
831
851
3,826
15,475
31,823
52,806
$
$
$
64
Fiscal Year 2021 Compared to Fiscal Year 2020
Revenue
Subscription revenue
Professional services revenue
Total revenue
Year Ended January 31,
2020
2021
(In thousands)
% Change
$
$
408,199 $
39,556
447,755 $
307,890
40,132
348,022
33 %
(1)
29
Total revenue was $447.8 million in fiscal 2021 compared to $348.0 million in fiscal 2020, an increase of $99.8 million, or 29%.
Subscription revenue was $408.2 million, or 91% of total revenue, in fiscal 2021, compared to $307.9 million, or 88% of total revenue, in
fiscal 2020. The increase of $100.3 million, or 33%, in subscription revenue was primarily driven by existing customers expanding their use of our
platform, which accounted for 83% of the increase, and acquisition of new customers, which accounted for approximately 17% of the increase.
Professional services revenue was $39.6 million in fiscal 2021 compared to $40.1 million in fiscal 2020. The decrease of $0.5 million, or
1%, in professional services revenue was primarily driven by lower sales of our professional services due to timing of our customers’ implementation
projects. This also represents a continued decline in professional services revenue as a percentage of total revenue from 12% to 9%, primarily due
to our strategy of shifting professional services revenue to the members of our growing partner ecosystem.
Cost of Revenue
Cost of subscription revenue
Cost of professional services revenue
Total cost of revenue
Year Ended January 31,
2020
2021
(In thousands)
% Change
$
$
69,802 $
39,177
108,979 $
51,460
39,317
90,777
36 %
-
20
Total cost of revenue was $109.0 million in fiscal 2021 compared to $90.8 million in fiscal 2020, an increase of $18.2 million, or 20%.
Cost of subscription revenue was $69.8 million in fiscal 2021 compared to $51.5 million in fiscal 2020, an increase of $18.3 million, or 36%.
The increase in cost of subscription revenue was primarily due to an increase in hosting and consulting costs of $5.2 million, an increase in
amortization of our equipment leases and capitalized software development costs of $4.5 million, an increase in salary and bonuses, and benefits
costs of $4.0 million, including stock-based compensation, and an increase in software license and maintenance costs of $3.7 million.
Cost of professional services revenue was $39.2 million in fiscal 2021 compared to $39.3 million in fiscal 2020, a decrease of $0.1 million.
The decrease in cost of professional services revenue was primarily due to a decrease in the partner implementation costs related to a decrease in
partners activities of $1.5 million, and a decrease in travel related expenses of $0.9 million due to the COVID-19 pandemic, partially offset by an
increase in salary and bonuses, and benefits costs of $2.0 million, including stock-based compensation.
65
Gross Profit and Gross Margin
Subscription gross profit
Professional services gross profit
Total gross profit
Subscription gross margin
Professional services gross margin
Total gross margin
$
$
Year Ended January 31,
2020
2021
(In thousands)
% Change
$
338,397
379
338,776
$
83%
1%
76%
32 %
(53)
32
256,430
815
257,245
83%
2%
74%
Gross profit was $338.8 million in fiscal 2021 compared to $257.2 million in fiscal 2020, an increase of $81.6 million, or 32%. 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 fiscal 2021.
Gross margin was 76% in fiscal 2021 compared to 74% in fiscal 2020. The increase in gross margin was primarily due to the increase in
subscription revenue, which generates a significantly higher gross margin than our professional services revenue, as a percentage of total revenue.
Our gross margins can fluctuate from quarter to quarter as a result of the requirements, complexity, and timing of our customers’
implementation projects that can vary significantly.
Operating Expenses
Operating expense:
Research and development
Sales and marketing
General and administrative
Total operating expenses
Research and Development
Year Ended January 31,
2020
2021
(In thousands)
% Change
$
$
100,523 $
302,002
90,030
492,555 $
68,396
250,430
86,852
405,678
47 %
21
4
21
Research and development expenses were $100.5 million in fiscal 2021 compared to $68.4 million in fiscal 2020, an increase of $32.1
million, or 47%. The increase was primarily due to an increase in salary and bonuses, and benefits costs related to an increase in headcount of
$22.3 million (which included an increase in stock-based compensation of $8.1 million), and an increase in hosting and consulting costs of $5.2
million.
Sales and Marketing
Sales and marketing expenses were $302.0 million in fiscal 2021 compared to $250.4 million in fiscal 2020, an increase of $51.6 million, or
21%. The increase was primarily due to an increase in salary and bonuses, and benefits costs related to an increase in headcount of $55.6 million
(which included an increase in stock-based compensation of $13.8 million and an increase in commission expenses of $10.0 million), partially offset
by a reduction of $13.3 million of discretionary spend such as marketing events and travel related expenses due to the COVID-19 pandemic.
General and Administrative
General and administrative expenses were $90.0 million in fiscal 2021 compared to $86.9 million in fiscal 2020, an increase of $3.1 million,
or 4%. The increase was primarily due to an increase in salary and bonuses, and benefits costs related to an increase in headcount of $5.5 million,
including stock-based compensation, and an increase in allowance for credit losses of $0.8 million primarily stemming from the COVID-19 pandemic,
partially offset by decreases in workplace and recruiting expenses of $2.4 million, and other general expenses.
66
Other Income (Expense), Net
Interest income (expense), net
Other income (expense), net
Interest income (expense), net
Year Ended January 31,
2020
2021
% Change
$
(In thousands)
167 $
3,736
4,478
(809)
(96) %
562
Interest income (expense), net decreased by $4.3 million, or 96%, in fiscal 2021. 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 fiscal 2021 compared to fiscal 2020.
Other income (expense), net
Other income (expense), net was a gain of $3.7 million in fiscal 2021 compared to a loss of $0.8 million in fiscal 2020, an increase in
income of $4.5 million. The change was primarily due to currency fluctuations and the related remeasurements during the fiscal years presented.
Provision for Income Taxes
Provision for income taxes
Year Ended January 31,
2020
2021
% Change
$
(In thousands)
4,091 $
4,453
(8) %
Provision for income taxes was $4.1 million in fiscal 2021 compared to $4.5 million in fiscal 2020, a decrease of $0.4 million, or 8%. The
decrease in provision for income taxes was primarily related to a decrease in income generated from intercompany cost-plus arrangements in
certain European and Asian countries, partially offset by discrete tax expenses relating to gains from intercompany transactions.
Quarterly Financial Data
The following tables set forth selected unaudited quarterly consolidated statements of operations data for each of the eight quarters in
fiscal 2021 and 2020. The information for each of these eight quarters has been prepared on the same basis as the audited annual consolidated
financial statements included elsewhere in this Annual Report on Form 10-K and, in the opinion of management, includes all adjustments, which
consist only of normal recurring adjustments, necessary for the fair presentation of the results of operations for these periods in accordance with
generally accepted accounting principles, or GAAP.
This data should be read in conjunction with our audited consolidated financial statements and related notes included elsewhere in this
Annual Report on Form 10-K. These quarterly operating results are not necessarily indicative of our operating results for a full year or any future
period.
January 31,
2021
October 31,
2020
July 31,
2020
April 30,
2020
January 31,
2020
October 31,
2019
July 31,
2019
April 30,
2019
Three Months Ended
(in thousands, except per share data)
Total revenue
Gross profit
Loss from operations
Net loss
Net loss per share, basic and
diluted
93,103 $
$ 122,525 $ 114,875 $ 106,511 $ 103,844 $
84,540 $
62,033 $
79,104 $
$
$ (41,471 ) $ (35,873 ) $ (37,675 ) $ (38,760 ) $ (37,593 ) $ (32,524 ) $ (41,207 ) $
$ (42,049 ) $ (36,792 ) $ (35,524 ) $ (39,602 ) $ (36,683 ) $ (34,701 ) $ (40,642 ) $
89,410 $
66,926 $
98,242 $
74,033 $
85,500 $
81,069 $
75,830
54,253
(37,109 )
(37,191 )
$
(0.29) $
(0.26) $
(0.26) $
(0.29) $
(0.27) $
(0.26) $
(0.31) $
(0.30)
67
Liquidity and Capital Resources
As of January 31, 2021, our principal sources of liquidity were cash and cash equivalents totaling $321.0 million, which were held for
working capital purposes and strategic initiatives. Our cash equivalents are comprised primarily of money market funds and bank deposits.
Cash from operations could be affected by various risks and uncertainties, including but not limited to, the effects of the COVID-19
pandemic, such as timing of cash collections from our customers and other risks detailed in Part I, Item 1A, “Risk Factors”. We believe our existing
cash and cash equivalents will be sufficient to meet our projected operating requirements for at least the next 12 months. Our future capital
requirements will depend on many factors, including our pace of growth, subscription renewal activity, the timing and extent of spend to support
research and development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced platform offerings, and the
continuing market acceptance of the platform. We may in the future enter into arrangements to acquire or invest in complementary businesses,
services and technologies, and intellectual property rights. We may be required to seek additional equity or debt financing. In the event that
additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise
additional capital when desired, our business, operating results, and financial condition would be adversely affected.
Loan and Credit Facility Agreements
In April 2020, we entered into the Third Amendment to Credit Agreement and First Amendment to Collateral Agreement with Wells Fargo
as administrative agent and a lender (the “Third Amendment”). Among other things, the Third Amendment further amends the Credit Agreement
entered into with Wells Fargo in April 2018, as amended in September 2018 and October 2019 (the “Credit Agreement”) in order to: (1) increase the
aggregate revolving credit commitment amount by $20.0 million, so that we may borrow up to $60.0 million under a secured revolving credit facility,
subject to the terms of the Credit Agreement including the accounts receivable borrowing base, for general corporate purposes, and (2) extend the
maturity date of the revolving credit facility until April 23, 2022. Also, pursuant to the Third Amendment, any loans drawn on the credit facility will
incur interest at a rate equal to the highest of (A) the prime rate, (B) the federal funds rate plus 0.5%, and (C) the one-month LIBOR plus 1%. Interest
is payable monthly in arrears with the principal and any accrued and unpaid interest due on April 23, 2022. As of January 31, 2021, we had not
drawn down any amounts under this agreement.
As part of the Credit Agreement, we granted Wells Fargo a first priority lien in our accounts receivable, all of the issued shares of capital
stock and equity interests in certain of our subsidiaries, and other corporate assets and agreed not to pledge our intellectual property to other parties.
The Credit Agreement, as amended by the Third Amendment, includes affirmative and negative covenants, including financial covenants requiring
the maintenance of: (1) minimum tangible net worth (defined as assets, excluding intangible assets, less liabilities) as of the last day of any fiscal
quarter of not less than $150.0 million for any fiscal quarter ending on or prior to January 31, 2021 and $125.0 million for any fiscal quarter ending
thereafter, and (2) minimum billings for the most recent twelve months ending as of the last day of any fiscal quarter of not less than $350.0 million.
As of January 31, 2021, we were in compliance with the financial covenants contained in the Credit Agreement.
Cash Flows
The following table summarizes our cash flows for the periods presented:
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by financing activities
Operating Activities
2021
Year Ended January 31,
2020
(In thousands)
2019
$
(4,631) $
(15,743)
27,832
(14,405) $
(48,506)
46,506
(45,853)
(22,519)
279,923
Net cash used in operating activities of $4.6 million for fiscal 2021, was primarily due to a net loss of $154.0 million and non-cash foreign
currency remeasurement gains of $4.2 million, partially offset by non-cash charges for stock-based compensation of $103.6 million, amortization of
deferred commissions
68
of $33.4 million, depreciation and amortization of $25.8 million, reduction of operating lease right-of-use assets and accretion of operating lease
liabilities $10.1 million, and other non-cash items of $3.1 million. Changes in working capital were unfavorable to cash flows from operations by
$22.5 million primarily due to an increase in deferred commissions of $65.6 million related to commissions capitalized on our sales, an increase in
accounts receivable of $39.9 million primarily due to increased customer billings, net payments for operating lease liabilities of $9.3 million, and an
increase in prepaid expenses and other current assets of $6.1 million, partially offset by an increase in deferred revenue balance of $71.8 million due
to increased customer billings, an increase in accounts payable and accrued expenses of $21.2 million due to our growth and timing of payments,
and an increase in other noncurrent liabilities of $6.6 million.
Net cash used in operating activities of $14.4 million for fiscal 2020 was primarily due to a net loss of $149.2 million, partially offset by non-
cash charges for stock-based compensation of $80.0 million, amortization of deferred commissions of $20.5 million, depreciation and amortization of
$20.3 million, and reduction of operating lease right-of-use assets and accretion of operating lease liabilities of $10.7 million. Changes in working
capital were favorable to cash flows from operations by $2.6 million primarily due to an increase in deferred revenue balance of $67.5 million due to
increases in sales, and an increase in accounts payable and accrued expenses of $19.6 million due to our growth and the timing of payments,
partially offset by an increase in deferred commissions of $54.0 million related to increases in our sales, an increase in accounts receivable of $16.3
million due to increased customer billings, payments for operating lease liabilities of $10.4 million, and an increase in prepaid expenses and other
current assets of $4.3 million.
Investing Activities
Net cash used in investing activities for fiscal 2021 of $15.7 million was related to the capitalization of internal-use software of $10.1 million
as we expanded our platform and increased our development efforts, and purchases of property and equipment of $5.7 million related to our growth.
Net cash used in investing activities for fiscal 2020 of $48.5 million was related to the net cash payment of $33.5 million for our acquisition
of Mintigo, the capitalization of internal-use software of $11.0 million as we expanded our platform and increased our development efforts, and
purchases of property and equipment of $4.0 million related to our growth.
Financing Activities
Net cash provided by financing activities for fiscal 2021 of $27.8 million consisted primarily of $18.8 million in proceeds from the exercise of
stock options and $17.7 million in proceeds from employee stock purchase plan, partially offset by $8.7 million principal payment on finance lease
obligations.
Net cash provided by financing activities for fiscal 2020 of $46.5 million consisted primarily of $21.9 million in proceeds from the exercise of
stock options, $18.6 million in proceeds from sales of stock under our employee stock purchase plan, and $11.5 million from the repayment of
promissory notes, partially offset by $5.4 million principal payment on finance lease obligations.
The following table summarizes our non-cancelable contractual obligations as of January 31, 2021:
Commitments and Contractual Obligations
Operating lease obligations, including
imputed interest
Finance lease obligations, including
imputed interest
Non-cancelable purchase obligations (1)
Total
Total
Less
Than
1 Year
Payments Due by Period
1 - 3
Years
3 - 5
Years
(In thousands)
More
Than
5 Years
$
44,347 $
9,944 $
17,876 $
13,833 $
2,694
14,272
187,506
$ 246,125 $
8,613
30,250
48,807 $
5,659
70,691
94,226 $
—
70,490
84,323 $
—
16,075
18,769
(1) Includes commitments entered into subsequent to the balance sheet date.
69
The contractual commitment amounts in the table above are associated with agreements that are enforceable and legally binding.
Obligations under contracts that we can cancel without a significant penalty are not included in the table above. Purchase orders issued in the
ordinary course of business are not included in the table above, as these purchase orders represent authorizations to purchase rather than binding
agreements and are generally fulfilled within short time periods.
Off-Balance Sheet Arrangements
Through January 31, 2021, we did not have any relationships with unconsolidated organizations or financial partnerships, such as
structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or
other contractually narrow or limited purposes.
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these 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.
Revenue Recognition
We recognize revenue from contracts with customers using the five-step method described in Note 1 of the notes to our consolidated
financial statements included elsewhere in this Form 10-K. At contract inception we evaluate whether two or more contracts should be combined and
accounted for as a single contract and whether the combined or single contract includes more than one performance obligation. We combine
contracts entered into at or near the same time with the same customer if we determine that the contracts are negotiated as a package with a single
commercial objective; the amount of consideration to be paid in one contract depends on the price or performance of the other contract; or the
services promised in the contracts are a single performance obligation.
Our performance obligations consist of (i) subscription and support services and (ii) professional and other services. Contracts that contain
multiple performance obligations require an allocation of the transaction price to each performance obligation based on their relative standalone
selling price. We determine standalone selling price, or SSP, for all our performance obligations using observable inputs, such as standalone sales
and historical contract pricing. SSP is consistent with our overall pricing objectives, taking into consideration the type of subscription services and
professional and other services. SSP also reflects the amount we would charge for that performance obligation if it were sold separately in a
standalone sale, and the price we would sell to similar customers in similar circumstances.
In general, we satisfy the majority of our performance obligations over time as we transfer the promised services to our customers. We
review the contract terms and conditions to evaluate the timing and amount of revenue recognition; the related contract balances; and our remaining
performance obligations. We also estimate the number of hours expected to be incurred based on an expected hours approach that considers
historical hours incurred for similar projects based on the types and sizes of customers. These evaluations require judgment that could affect the
timing and amount of revenue recognized.
Deferred Commissions
We capitalize sales commissions that are considered to be incremental to the acquisition of customer contracts, which are then amortized
over an estimated period of benefit. To determine the period of benefit of our deferred commissions, we evaluate the type of costs incurred, the
nature of the related benefit, and the specific facts and circumstances of our arrangements. We determine the period of
70
benefit for commissions paid for the acquisition of the initial subscription contract by taking into consideration our historical initial and renewal
contractual terms and estimated renewal rates. We determine the period of benefit for commissions on renewal subscription contracts by considering
the average contractual term for renewal contracts. We evaluate these assumptions at least annually and periodically review whether events or
changes in circumstances have occurred that could impact the period of benefit.
Business Combinations, Goodwill, and Acquisition-Related Intangible Assets
Accounting for business combinations requires us to make significant estimates and assumptions. We use our best estimates and
assumptions to accurately allocate the purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their
estimated fair values, with the excess recorded to goodwill. Critical estimates in valuing certain intangible assets include, but are not limited to, future
expected cash flows, expected asset lives, and discount rates. The amounts and useful lives assigned to acquisition-related intangible assets impact
the amount and timing of future amortization expense.
We use estimates, assumptions, and judgments when assessing the recoverability of goodwill and acquisition-related intangible assets.
We test for impairment on an annual basis, during the fourth quarter or more frequently if a significant event or circumstance indicates impairment.
We also evaluate the estimated remaining useful lives of acquisition-related intangible assets for changes in circumstances that warrant a revision to
the remaining periods of amortization.
See “Summary of Business and Significant Accounting Policies” in Note 1 of the notes to our consolidated financial statements included in
Recent Accounting Pronouncements
Part II, Item 8 of this Form 10-K.
ITEM 7A. 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 fiscal 2021, 2020 and 2019.
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
January 31, 2021, we had cash and cash equivalents of $321.0 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 impact on our operating results for fiscal 2021, 2020 and 2019.
71
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The supplementary financial information required by this Item 8 is included in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Quarterly Financial Data” in Item 7 of this Annual Report on Form 10-K and is incorporated herein by
reference.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
72
Page
73
76
77
78
79
80
To the Stockholders and Board of Directors
Anaplan, Inc.:
Report of Independent Registered Public Accounting Firm
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Anaplan, Inc. and subsidiaries (the Company) as of January 31, 2021 and 2020,
the related consolidated statements of comprehensive loss, stockholders’ equity, and cash flows for each of the years in the three-year period ended
January 31, 2021, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control
over financial reporting as of January 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as
of January 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended January 31,
2021, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of January 31, 2021 based on criteria established in Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as of February 1,
2019 due to the adoption of Accounting Standards Codification Topic 842, Leases.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual
Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements
and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and
whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on
a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audits also included
73
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our
opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the
consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical
audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the
critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Amortization period for capitalized sales commissions
As discussed in Note 1 to the consolidated financial statements, the Company capitalizes sales commissions related to the acquisition of
customer contracts and amortizes them over the estimated period of benefit. In determining the period of benefit, the Company considers data
including historical initial and renewal contractual terms and estimated renewal rates. The Company estimated the period of benefit for the
initial acquisition of a contract to be five years. The Company amortized $33,404 thousand of deferred commissions during the year ended
January 31, 2021 and had $119,202 thousand of deferred commissions capitalized as of January 31, 2021.
We identified the evaluation of the amortization period for capitalized sales commissions related to the acquisition of customer contracts as a
critical audit matter. Evaluating the Company’s assessment of the relevant information used in the model to determine the estimated period of
benefit involved subjective auditor judgment.
74
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating
effectiveness of an internal control related to the Company’s capitalized sales commission process. This control related to the assessment of
the model used and the determination of relevant information, and the re-assessment of the period of benefit. We considered the Company’s
assessment of the information used to estimate the period of benefit by evaluating its relevance against potential alternatives. We recalculated
the Company’s historical initial and renewal contractual terms. We compared the estimated renewal rates to a sample of historical customer
contracts.
We have served as the Company’s auditor since 2013.
San Francisco, California
March 12, 2021
/s/ KPMG LLP
75
ANAPLAN, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net of allowances for credit losses of $3,162
and $996 as of January 31, 2021 and 2020, respectively
Deferred commissions, current portion
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Deferred commissions, net of current portion
Goodwill
Operating lease right-of-use assets
Other noncurrent assets
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
Accrued expenses
Deferred revenue, current portion
Operating lease liabilities, current portion
Total current liabilities
Deferred revenue, net of current portion
Operating lease liabilities, net of current portion
Other noncurrent liabilities
TOTAL LIABILITIES
Commitments and contingencies (Note 9)
Stockholders' equity:
Common stock, par value of $0.0001 per share; 1,750,000 shares
authorized as of January 31, 2021 and 2020; 143,502
and 135,495 shares issued and outstanding as of January 31,
2021 and 2020, respectively
Accumulated other comprehensive loss
Additional paid-in capital
Accumulated deficit
TOTAL STOCKHOLDERS' EQUITY
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
As of January 31,
2021
2020
$
320,990 $
309,894
147,005
36,797
24,252
529,044
51,603
82,405
32,379
33,985
9,709
739,125 $
7,949 $
101,507
287,778
7,951
405,185
7,765
30,130
18,032
461,112
109,217
25,990
17,814
462,915
48,639
57,947
32,379
37,875
10,052
649,807
5,331
79,024
216,059
7,278
307,692
4,149
34,017
12,268
358,126
14
(7,528)
932,505
(646,978)
278,013
739,125 $
13
(4,326)
788,447
(492,453)
291,681
649,807
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
76
Revenue:
Subscription revenue
Professional services revenue
Total revenue
Cost of revenue:
Cost of subscription revenue
Cost of professional services revenue
Total cost of revenue
Gross profit
Operating expenses:
Research and development
Sales and marketing
General and administrative
Total operating expenses
Loss from operations
Interest income (expense), net
Other income (expense), net
Loss before income taxes
Provision for income taxes
Net loss
Comprehensive income (loss):
ANAPLAN, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands, except per share data)
2021
Year Ended January 31,
2020
2019
$
408,199 $
39,556
447,755
307,890 $
40,132
348,022
69,802
39,177
108,979
338,776
100,523
302,002
90,030
492,555
(153,779)
167
3,736
(149,876)
(4,091)
(153,967)
51,460
39,317
90,777
257,245
68,396
250,430
86,852
405,678
(148,433)
4,478
(809)
(144,764)
(4,453)
(149,217)
(3,202)
(157,169) $
(1,290)
(150,507) $
208,605
32,037
240,642
36,500
30,898
67,398
173,244
48,998
176,323
76,186
301,507
(128,263)
1,921
(1,465)
(127,807)
(3,209)
(131,016)
(1,054)
(132,070)
Foreign currency translation adjustments
Comprehensive loss
Net loss per share attributable to common stockholders,
basic and diluted
Weighted-average shares used in computing net loss per
share attributable to common stockholders, basic and
diluted
$
$
(1.10) $
(1.15) $
(2.46)
139,499
129,799
53,328
The accompanying notes are an integral part of these consolidated financial statements.
77
ANAPLAN, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
Convertible
Preferred
Stock
Common Stock
Shares
Amount
Shares
Amount
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
(212,220 ) $
Total
Stockholders’
Equity
111,639
Balance at January 31, 2018
73,610 $
7
29,947 $
3 $
325,831 $
(1,982 ) $
Conversion of Series B convertible
preferred stock
Issuance of common stock upon
initial public offering,
net of issuance costs
Conversion of preferred stock
Stock-based compensation
Repayment of promissory notes, net
of early exercises
Exercise of stock options, net of
repurchases and early exercises
Exercise of warrants
Vesting and settlement of restricted
stock units
Taxes paid related to net share
settlement of equity awards
Net loss
Foreign currency translation
adjustments
Balance at January 31, 2019
Stock-based compensation
Repayment of promissory notes, net
of early exercises
Exercise of stock options, net of
repurchases and early exercises
Vesting of restricted stock units
Issuance of common stock under
employee stock purchase plan
Net loss
Foreign currency translation
adjustments
Balance at January 31, 2020
Cumulative adjustment upon adoption of
ASC 326 (Note 1)
Stock-based compensation
Exercise of stock options, net of
repurchases and early exercises
Vesting of restricted stock units
Issuance of common stock under
employee stock purchase plan
Net loss
Foreign currency translation
adjustments
Other
Balance at January 31, 2021
(4 )
—
4
—
—
—
—
—
—
(73,606 )
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— $
—
(7 )
—
—
—
—
19,001
73,606
—
2
7
—
295,284
—
53,385
—
—
1,603
2,482
24
—
1,182
—
—
—
6,020
37
—
—
—
—
—
—
—
—
—
—
—
295,286
—
53,385
—
1,603
—
—
—
6,020
37
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(28,422 )
—
—
—
—
(131,016 )
(28,422 )
(131,016 )
—
126,246
—
—
12
—
—
653,738
82,355
(1,054 )
(3,036 )
—
—
(343,236 )
—
(1,054 )
307,478
82,355
—
—
11,813
4,619
3,454
1,176
—
1
—
—
—
21,976
—
18,565
—
—
—
—
—
11,813
—
—
21,977
—
—
—
—
(149,217 )
18,565
(149,217 )
—
—
—
135,495
—
13
—
788,447
(1,290 )
(4,326 )
—
(492,453 )
(1,290 )
291,681
—
—
—
—
—
—
—
—
—
—
—
2,916
4,666
425
—
—
—
—
107,501
1
—
—
—
18,854
—
17,678
—
—
—
—
—
(558 )
—
(558 )
107,501
—
—
18,855
—
—
—
—
(153,967 )
17,678
(153,967 )
—
—
143,502 $
—
—
14 $
—
25
932,505 $
(3,202 )
—
(7,528 ) $
—
—
(646,978 ) $
(3,202 )
25
278,013
The accompanying notes are an integral part of these consolidated financial statements.
78
ANAPLAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization
Amortization of deferred commissions
Stock-based compensation
Reduction of operating lease right-of-use assets and accretion of
operating lease liabilities
Foreign currency remeasurement losses (gains)
Other non-cash items
Changes in operating assets and liabilities:
Accounts receivable
Prepaid expenses and other current assets
Other noncurrent assets
Deferred commissions
Accounts payable and accrued expenses
Deferred revenue
Payments for operating lease liabilities, net
Other noncurrent liabilities
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment
Capitalized internal-use software
Business combinations, net of acquired cash
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from initial public offering, net of underwriting
discounts and commissions
Proceeds from issuance of common stock in private placement
Proceeds from exercise of stock options
Proceeds from repayment of promissory notes
Proceeds from employee stock purchase plan
Payment of exercise of warrants
Taxes paid related to net share settlement of equity awards
Principal payments on finance lease obligations
Net cash provided by financing activities
Effect of exchange rate changes on cash, cash equivalents,
and restricted cash
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS,
AND RESTRICTED CASH
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH -
Beginning of period
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH -
End of period
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest
Cash paid for income taxes
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Purchases of property and equipment included in liabilities
Finance leases for property and equipment
2021
Year Ended January 31,
2020
2019
$
(153,967 ) $
(149,217 ) $
(131,016 )
25,831
33,404
103,626
10,060
(4,178)
3,100
(39,947 )
(6,128)
(1,017)
(65,639 )
21,163
71,751
(9,252)
6,562
(4,631)
(5,680)
(10,063 )
—
(15,743 )
—
—
18,834
—
17,678
—
—
(8,680)
27,832
3,638
11,096
20,341
20,508
80,046
10,748
(516)
1,077
(16,313 )
(4,266)
(1,419)
(53,978 )
19,550
67,478
(10,435 )
1,991
(14,405 )
(3,991)
(11,023 )
(33,492 )
(48,506 )
—
—
21,859
11,526
18,565
—
—
(5,444)
46,506
(564)
(16,969 )
309,894
326,863
12,937
11,709
52,806
—
246
1,070
(29,276 )
(1,439)
702
(32,813 )
15,544
52,604
—
1,073
(45,853 )
(15,122 )
(7,397)
—
(22,519 )
281,813
20,000
6,209
1,914
—
37
(28,422 )
(1,628)
279,923
(1,714)
209,837
117,026
$
$
$
$
$
320,990 $
309,894 $
326,863
725 $
2,317 $
19 $
7,775 $
826 $
945 $
1,331 $
7,232 $
279
582
1,435
12,600
The accompanying notes are an integral part of these consolidated financial statements.
79
ANAPLAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Business and Significant Accounting Policies
Description of Business
Anaplan, Inc. (the Company or Anaplan) 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.
Fiscal Year
The Company’s fiscal year ends on January 31. References to fiscal 2021, for example, refer to the fiscal year ended January 31, 2021.
Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in
the United States of America (U.S. GAAP) 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. Certain prior period amounts in the consolidated
financial statements have been reclassified to conform to the current period’s presentation.
Use of Estimates
The preparation of 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
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, the period of benefit for deferred commissions, the fair value of intangibles and stock awards
issued, and the allowance for credit losses. Actual results could differ from those estimates.
In March 2020, the World Health Organization declared the outbreak of the novel strain of coronavirus (“COVID-19”) as a global pandemic
with widespread and detrimental effect on the global economy. The extent of the impact of COVID-19 on the Company's operational and financial
performance will depend on certain developments, including the duration and spread of the pandemic, impact on the Company's customers,
prospective customers, sales cycles, and employees, all of which are uncertain and cannot be predicted. During fiscal 2021, the Company assessed
the impact of COVID-19, including its estimate of credit losses for accounts receivable. As of the filing date of 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 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 its consolidated
financial statements.
Foreign Currency
The functional currency of the Company’s foreign subsidiaries is primarily their respective local currency. The Company translates all
assets and liabilities of foreign subsidiaries to U.S. dollars at the current exchange rate as of the applicable consolidated balance sheet date.
Revenue and expenses are translated at the average exchange rate prevailing during the period. The related unrealized gains and losses from
foreign currency translation are recorded in accumulated other comprehensive loss as a separate component of stockholders’ equity. Foreign
currency transaction gains were $3.8 million for fiscal 2021. Foreign currency transaction losses were $0.4 million and $1.4 million for fiscal 2020
and
80
2019, respectively, and are included in other income (expense), net in the consolidated statements of comprehensive loss.
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. The balance of restricted cash
at the end of fiscal 2021 and 2020 was immaterial.
Fair Value Measurement
The Company’s financial instruments, other than cash and restricted cash, consists principally of accounts receivable and accounts
payable of which the fair value approximates the carrying value of these financial instruments because of their short-term nature.
Property and Equipment, net
Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over
the estimated useful lives of the related assets, which is two or three years for all property and equipment, excluding leasehold improvements.
Leasehold improvements are amortized using the straight-line method over the shorter of 10 years or the remaining lease term.
Business Combinations
The Company uses its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities
assumed as of the acquisition date. During the measurement period, which may be up to one year from the acquisition date, the Company may
record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to
goodwill. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever
comes first, any subsequent adjustments are recorded to the Company’s consolidated statements of comprehensive loss.
Goodwill, Intangible Assets and Other Long-Lived Assets
The Company performs a qualitative assessment on goodwill at least annually, during the fourth quarter, or more frequently if indicators of
potential impairment exist, to determine if any events or circumstances exist, such as an adverse change in business climate or a decline in the
overall industry that would indicate that it would more likely than not reduce the fair value of a reporting unit below its carrying amount. If it is
determined in the qualitative assessment that the fair value of a reporting unit is more likely than not below its carrying amount, then the Company
will perform a quantitative impairment test. The quantitative goodwill impairment test is performed by comparing the fair value of a reporting unit with
its carrying amount. Any excess in the carrying value of a reporting unit’s goodwill over its fair value is recognized as an impairment loss, limited to
the total amount of goodwill allocated to that reporting unit. For purposes of goodwill impairment testing, the Company has one reporting unit.
81
Acquisition-related intangible assets with finite lives are amortized over their estimated useful lives. The Company evaluates long-lived
assets, including property, equipment and leasehold improvements and other intangible assets subject to amortization, for recoverability whenever
events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable based on expected future
cash flows attributable to that asset or asset group. Recoverability of assets held and used is measured by comparison of the carrying amount of an
asset or an asset group to estimated undiscounted future net cash flows expected to be generated by the asset or asset group. If the carrying
amount of an asset or asset group exceeds estimated undiscounted future cash flows, then an impairment charge would be recognized based on the
excess of the carrying amount of the asset or asset group over its fair value. Assets to be disposed of are reported at the lower of their carrying
amount or fair value less costs to sell.
There were no material impairment charges recognized related to goodwill, intangible assets, or other long-lived assets during fiscal 2021,
2020, and 2019.
Leases
The Company adopted Accounting Standards Codification Topic 842 (ASC 842), Leases, effective February 1, 2019, using the effective
date transition method, which applies the provisions of the new guidance at the effective date without adjusting the comparative periods presented.
The Company elected to use certain practical expedients permitted under the transition guidance within the new guidance, which allows it to carry
forward the historical accounting relating to lease identification and classification for existing leases upon adoption. The Company also elected not to
use the hindsight practical expedient in determining the lease term and impairment of the right-of-use (ROU) assets and elected to keep operating
leases with an initial term of 12 months or less off of its consolidated balance sheet. The Company elected not to separate lease and non-lease
components for all classes of underlying assets.
The Company determines if an arrangement is a lease at inception. The Company’s lease agreements do not contain any material options
to extend or terminate leases, any material residual value guarantees, any material restrictions or covenants, or any material variable lease
payments. Any variable lease payments consist of common area maintenance, taxes and other costs and are expensed as incurred.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to
make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized based on the present value of lease
payments over the lease term at the commencement date. In determining the present value of lease payments, the Company uses its country
specific incremental borrowing rate based on the information available at the lease commencement date, including the lease term, for operating
leases. The incremental borrowing rate is a hypothetical rate based on the Company’s understanding of what its credit rating would be within each
country. The operating lease ROU asset was valued at the amount of the lease liabilities adjusted for the remaining balance of unamortized lease
incentives, prepaid rent, and deferred rent. Finance lease ROU assets and liabilities are recognized based on the carrying amount of the lease
assets and lease liabilities. The finance lease ROU asset also includes any remaining unamortized initial direct costs. Lease expense is recognized
on a straight-line basis over the lease term.
Concentration of Risk and Significant Customers
Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, restricted
cash, and accounts receivable. The Company maintains its cash, cash equivalents, and restricted cash with high-quality financial institutions with
investment-grade ratings. A majority of the cash balances are with U.S. banks and are insured to the extent defined by the Federal Deposit
Insurance Corporation.
The Company markets its subscription and services in the United States and in foreign countries through its direct sales force and partners.
No customer accounted for more than 10% of total revenue for fiscal 2021, 2020, and 2019, or more than 10% of total accounts receivable as of
January 31, 2021 and 2020.
82
Segment Information
The Company operates in one operating segment. Operating segments are defined as components of an enterprise about which separate
financial information is evaluated regularly by the chief operating decision maker, who is the chief executive officer, in deciding how to allocate
resources and assessing performance. The Company’s chief operating decision maker allocates resources and assesses performance based upon
discrete financial information at the consolidated level.
The following table summarizes the Company’s long-lived assets by geographic area, which consist of property and equipment, net and
operating lease right-of-use assets:
Long-lived assets
United States
United Kingdom
Other
Total
As of January 31,
2021
2020
(In thousands)
$
$
61,111
17,862
6,615
85,588
$
$
67,104
15,235
4,175
86,514
Revenue by geographical region is discussed below in the Revenue Recognition disclosures.
Accounts Receivable, net
The Company adopted Accounting Standards Codification Topic 326 (ASC 326), Financial Instruments – Credit Losses, effective February
1, 2020 using a modified retrospective approach.
Under ASC 326, accounts receivable are recorded at the invoiced amount, net of allowance for credit losses. The Company regularly
reviews the adequacy of the allowance for credit losses based on a combination of factors. In establishing any required allowance, management
considers historical losses adjusted for current market conditions, the Company’s customers’ financial condition, the amount of any receivables in
dispute, the current receivables aging, current payment terms and expectations of forward-looking loss estimates. Accounts receivable deemed
uncollectable are charged against the allowance for credit losses when identified.
As of January 31, 2021, the allowance for credit losses reflects increased collectability concerns stemming from the COVID-19 pandemic.
The allowance for credit losses was $3.2 million and $1.0 million as of January 31, 2021 and 2020, respectively.
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.
83
The Company determines revenue recognition through the following steps:
1. Identification of the contract, or contracts, with the customer
2. Identification of the performance obligations in the contract
3. Determination of the transaction price
4. Allocation of the transaction price to the performance obligations in the contract
5. Recognition of the revenue when, or as, a performance obligation is satisfied
Subscription Revenue
The Company generates revenue primarily from sales of subscriptions to access its cloud-based business and execution planning platform.
Subscription arrangements with customers do not provide the customer with the right to take possession of the software operating the platform.
Instead, customers are granted continuous access to the platform over the contractual period. A time-elapsed method is used to measure progress
because the Company’s obligation is to provide continuous service over the contractual period. Accordingly, the fixed consideration related to
subscription revenue is recognized ratably over the contract term beginning on the date access to the platform is provided.
The typical subscription term is two to three years and customers are generally invoiced in annual installments at the beginning of each
year within the subscription period. Most contracts are non-cancelable over the contractual term. Some customers have the option to purchase
additional subscription services at a stated price. These options are evaluated on a case-by-case basis but generally do not provide a material right
as they are priced within a range of prices provided to other customers for the same products and, as such, would not result in a separate
performance obligation.
Professional Services Revenue
Professional services revenue consists of fees associated with implementation or consultation services, and training. Professional services
do not result in significant customization of the subscription service and are considered distinct. A substantial majority of the professional service
contracts are recognized on a time and materials basis and the related revenue is recognized as the service hours are performed. For time and
materials projects, the Company invoices for professional services as the work is incurred and in arrears.
Contracts with Multiple Performance Obligations
Most contracts with customers contain multiple performance obligations that are distinct and accounted for separately. The transaction
price is allocated to the separate performance obligations on a relative standalone selling price (SSP) basis. The Company determines SSP for all
performance obligations using observable inputs, such as standalone sales and historical contract pricing. SSP is consistent with the Company’s
overall pricing objectives, taking into consideration the type of subscription services and professional and other services. SSP also reflects the
amount the Company would charge for that performance obligation if it were sold separately in a standalone sale, and the price the Company would
sell to similar customers in similar circumstances.
Variable Consideration
Revenue from sales is recorded based on the transaction price, which includes estimates of variable consideration.
Variable consideration may exist where a customer has purchased professional services that are sold on a time and materials basis. The
Company estimates the number of hours expected to be incurred based on an expected values approach that considers historical hours incurred for
similar projects based on the types and sizes of customers.
84
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:
Americas
EMEA
APAC
Total
2021
Year Ended January 31,
2020
2019
Amount
Percentage
of Revenue
Amount
Percentage
of Revenue
Amount
Percentage
of Revenue
$ 253,775
144,260
49,720
$ 447,755
(In thousands, except percentage data)
57 % $ 205,345
110,057
32
32,620
11
100 % $ 348,022
59 % $ 141,595
78,868
32
20,179
9
100 % $ 240,642
59 %
33
8
100 %
The United States and the United Kingdom were the only two countries that represented more than 10% of the Company’s revenues in any
period, comprised of $243.7 million and 54%, $197.6 million and 57%, and $136.8 million and 57% for the United States in fiscal 2021, 2020, and
2019, respectively, and $53.3 million and 12%, $41.5 million and 12%, and $32.3 million and 13% for the United Kingdom in fiscal 2021, 2020, and
2019, respectively.
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 were $0.3 million and $0.2 million as of January 31, 2021 and 2020, respectively, which were included within
prepaid expenses and other current assets on the consolidated balance sheets.
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 fiscal 2021, 2020, and 2019 that was included in deferred revenue at the beginning of each period was $216.1 million, $149.6 million,
and $101.0 million, respectively.
Deferred Commissions
The Company capitalizes sales commissions that are incremental due to the acquisition of customer contracts. These costs are recorded
as deferred commissions on the consolidated balance sheets. The Company determines whether costs should be deferred based on its sales
compensation plans, if the commissions are in fact incremental and would not have occurred absent the customer contract.
Sales commissions for renewal of a subscription contract are not considered commensurate with the commissions paid for the acquisition
of the initial subscription contract given the substantive difference in commission rates between new and renewal contracts. Commissions paid upon
the initial acquisition of a contract are amortized over an estimated period of benefit of five years, while commissions paid related to renewal
contracts are amortized over the renewal term. Amortization is recognized on a straight-line basis commensurate with the pattern of revenue
recognition. Commissions paid on professional services are typically expensed as incurred. The Company determines the period of benefit for
commissions paid for the acquisition of the initial subscription contract by taking into consideration the historical initial and renewal contractual terms
and estimated renewal rates. The Company determines the period of benefit for renewal subscription contracts by considering the average
contractual term for renewal contracts. Amortization of deferred commissions is included in sales and marketing expense in the consolidated
statements of comprehensive loss.
The Company periodically reviews deferred commissions to determine whether events or changes in circumstances have occurred that
could impact the period of benefit. There were no impairment losses recorded during the periods presented.
85
The following table represents a rollforward of the Company’s deferred commissions:
Beginning balance
Additions to deferred commissions
Amortization of deferred commissions
Foreign currency translation effect of deferred
commissions
Ending balance
Deferred commissions, current (to be
recognized in next 12 months)
Deferred commissions, net of current portion
Total deferred commissions
Remaining Performance Obligations
As of January 31,
2021
2020
(In thousands)
83,937 $
65,639
(33,404)
50,890
53,978
(20,508)
3,030
119,202 $
(423)
83,937
36,797
82,405
119,202 $
25,990
57,947
83,937
$
$
$
As of January 31, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was $817.6 million,
which consists of both billed consideration in the amount of $295.5 million and unbilled consideration in the amount of $522.1 million that the
Company expects to recognize as revenue. The Company expects to cumulatively recognize approximately 51% and 83% 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.
Cost of Revenue
Cost of Subscription Revenue
Cost of subscription revenue primarily consists of costs related to providing cloud applications, compensation and other employee-related
expenses for data center staff, payments to outside service providers, customer service, data center and networking expenses, depreciation
expenses, and amortization of capitalized software development costs.
Cost of Professional Services Revenue
Cost of professional services primarily consists of costs related to providing implementation services, optimization services, and training,
and includes compensation and other employee-related expenses for professional services staff, costs of subcontractors, and travel.
Advertising Costs
Advertising costs are expensed as incurred in sales and marketing expense and amounted to $13.7 million, $17.7 million, and $15.1 million
for fiscal 2021, 2020, and 2019, respectively.
Stock-Based Compensation
Prior to the Initial Public Offering (IPO), the Company’s board of directors determined the fair value of its common stock using various
valuation methodologies, including valuation analyses performed by third-party valuation firms. After the IPO, the Company uses the publicly quoted
market closing price as reported on the New York Stock Exchange as the fair value of its common stock.
The Company measures the cost of employee services received in exchange for an award of equity instruments, including stock options,
stock purchase rights (SPRs), restricted stock units (RSUs), and purchase rights issued under the 2018 Employee Stock Purchase Plan (ESPP),
based on the estimated grant-date fair value of the award. The Company calculates the fair value of options, SPRs, and the purchase rights issued
under ESPP using the Black-Scholes option-pricing model and the related expense is recognized using the straight-line attribution approach. The
vesting period is the period the employee is required to provide service in exchange for the award.
86
The Company’s RSUs granted under the 2012 Stock Plan (2012 Plan) vest upon the satisfaction of both a service condition and a liquidity
condition. Both the service and liquidity conditions must be met for the expense to be recognized. The liquidity condition was satisfied upon the IPO,
and the Company recognized an expense of $29.9 million in the three months ended October 31, 2018 for the portion of the RSUs that had met the
service condition as of such date.
The Company’s RSUs granted after the IPO under the 2018 Equity Incentive Plan (2018 Plan) vest upon the satisfaction of a service
condition and do not have a corresponding liquidity condition.
Stock-based compensation expense includes the impact of estimated forfeitures, and has been allocated between cost of revenue and
operating expense lines based on the cost category of the respective award holders.
Income Taxes
Income taxes are accounted for under the asset-and-liability method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company records a valuation allowance to reduce its deferred tax assets to the net amount that the Company believes is more likely
than not to be realized. In assessing the need for a valuation allowance, the Company has considered its historical levels of income, expectations of
future taxable income and ongoing tax planning strategies. Because of the uncertainty of the realization of the deferred tax assets, the Company has
recorded a valuation allowance against substantially all deferred tax assets. Realization of its deferred tax assets is dependent primarily upon future
U.S., U.K. and Israel taxable income.
The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized
income tax positions are measured at the largest amount that has a greater than 50% likelihood of being realized. Changes in recognition or
measurement are reflected in the period in which the change in judgment occurs.
Capitalized Software Development Costs
The Company capitalizes software development costs in connection with its cloud-based business modeling and planning software
application, as well as certain projects for internal use, as incurred. Qualifying computer software costs that are incurred during the application
development stage are capitalized. The Company capitalized $13.6 million, $13.6 million, and $8.1 million related to software costs incurred during
fiscal 2021, 2020, and 2019, respectively. Capitalized software costs are amortized on a straight-line basis over the estimated useful life of the
related software, which is generally two to three years, in cost of subscription revenue.
Net Loss Per Share Attributable to Common Stockholders
Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by
the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share attributable to common
stockholders adjusts basic net loss per share for the potentially dilutive impact of stock options, restricted stock units, and stock repurchase rights.
As the Company has reported losses for all periods presented, all potentially dilutive securities are antidilutive and accordingly, basic net loss per
share equals diluted net loss per share.
87
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes, which
simplifies the accounting for income taxes by removing certain exceptions to the general principles of income taxes and reducing the cost and
complexity in accounting for income taxes. The guidance is effective for interim and annual periods beginning after December 15, 2020, with early
adoption permitted. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13 “Financial Instruments – Credit Losses (Topic 326): Measurement of credit Losses on
Financial Instruments”, which replaces the existing incurred loss impairment model with an expected credit loss model and requires a financial asset
measured at amortized cost to be presented at the net amount expected to be collected. The Company adopted the new standard on February 1,
2020, using a modified retrospective approach and recorded a cumulative-effect adjustment to decrease retained earnings in the amount of $0.6
million for expected credit losses on accounts receivable at the adoption date.
(2) Consolidated Balance Sheet Components
Property and Equipment, net
Property and equipment consisted of the following:
Computer and office equipment
Leasehold improvements
Internal-use software
Construction in progress
Property and equipment, gross
Less: accumulated depreciation
Property and equipment, net
As of January 31,
2021
2020
(In thousands)
$
$
58,231 $
14,055
41,475
6,941
120,702
(69,099)
51,603 $
46,986
12,728
29,445
3,943
93,102
(44,463)
48,639
Depreciation expense was $24.5 million, $19.9 million, and $12.7 million for fiscal 2021, 2020, and 2019, respectively.
The Company capitalized $13.6 million and $13.6 million in internal-use software for fiscal 2021 and 2020, of which $3.5 million and $2.3
million was stock-based compensation expense. Amortization of the capitalized internal-use software, included in total depreciation expense above
was $9.3 million and $6.1 million for fiscal 2021 and 2020, respectively.
Accrued Expenses
Accrued expenses consisted of the following:
Vendor accruals
Accrued commission
Accrued bonuses
Accrued other payroll liabilities
Current portion of finance lease obligations
Accrued other
Accrued expenses
As of January 31,
2021
2020
(In thousands)
11,262 $
12,521
15,583
31,238
8,031
22,872
101,507 $
11,098
10,033
14,279
21,077
6,956
15,581
79,024
$
$
88
Preferred Stock
As of January 31, 2021 and 2020, 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 January 31, 2021 and 2020.
(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 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. As of
January 31, 2021, the Company had not drawn down any amounts under this agreement. The Company was in compliance with the financial
covenants contained in the agreement as of January 31, 2021.
(4) Leases
The Company leases certain facilities under operating leases, and property and equipment under finance leases that expire from fiscal
2021 to 2028.
The components of lease expense were as follows:
Operating lease costs
Finance lease costs
Amortization of assets
Interest on lease liabilities
Total finance lease costs
Year Ended January 31,
2021
2020
(In thousands)
10,060 $
8,510 $
725
9,235 $
10,748
5,737
826
6,563
$
$
$
Supplemental balance sheet information related to leases is as follows:
Operating leases:
Operating lease ROU assets
Operating lease liabilities, current portion
Operating lease liabilities, net of current portion
Total operating lease liabilities
Finance leases:
Property and equipment, gross
Less: accumulated depreciation
Property and equipment, net
Accrued expenses
Other noncurrent liabilities
Total finance lease liabilities
As of January 31,
2021
2020
(In thousands)
33,985 $
7,951 $
30,130
38,081 $
29,132 $
(15,876)
13,256 $
8,031 $
5,761
13,792 $
$
$
$
$
$
$
$
89
37,875
7,278
34,017
41,295
21,321
(7,347)
13,974
6,956
7,261
14,217
Weighted-average lease terms and discount rates are as follows:
Weighted-average remaining lease terms
Weighted-average discount rates
Weighted-average remaining lease terms
Weighted-average discount rates
As of January 31, 2021
Operating Leases
4.8 years
5.5%
Finance Leases
1.8 years
4.4%
As of January 31, 2020
Operating Leases
5.6 years
5.6%
Finance Leases
2.1 years
5.3%
Future minimum lease payments under operating leases and finance leases as of January 31, 2021 are as follows:
Years ending January 31,
2022
2023
2024
2025
2026
Thereafter
Total lease payments
Less: amount representing interest
Less: leases less than 12 months
Total lease liabilities
As of January 31, 2021
Operating Leases
Finance Leases
(In thousands)
$
$
9,944 $
9,417
8,459
6,962
6,871
2,694
44,347
(5,811)
(455)
38,081 $
8,613
4,333
1,326
—
—
—
14,272
(480)
—
13,792
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 acceptance. As of January 31, 2021, the amounts related to these leases were approximately $7.4 million, which are to
be paid over three years after the date of commencement.
(5) Business Combination
On October 3, 2019, the Company acquired all outstanding shares of Mintigo Limited (Mintigo), an Israel-based company that provides a
predictive analytics platform for marketing and sales. The acquisition of Mintigo is intended to enhance the predictive capabilities of the Company’s
solutions.
The following table summarizes the allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed:
Cash
Other current and noncurrent assets
Intangible assets
Goodwill
Deferred revenue
Other current and noncurrent liabilities
Total purchase consideration
$
$
(In thousands)
2,735
1,793
7,300
32,379
(2,100)
(5,880)
36,227
The intangible assets acquired consist of developed technology of $5.2 million, and customer relationships of $2.1 million and were
assigned useful lives of 5 and 7 years, respectively. The fair value of the developed technology was determined utilizing the multi-period excess
earning method, and the with-and-without method was utilized to determine the fair value of customer relationships. The excess of the purchase
consideration over the fair value of net tangible and identifiable intangible assets acquired
90
and liabilities assumed was recorded as goodwill, and is attributable to Mintigo’s workforce and the synergies expected to arise from the acquisition.
The Company does not expect goodwill to be deductible for income tax purposes.
Acquisition-related costs of approximately $1.3 million were included in general and administrative expenses during fiscal 2020 in the
consolidated financial statements. The total cash consideration was $33.5 million, net of cash acquired of $2.7 million, and was fully paid in fiscal
2020.
The consolidated financial statements include the operating results of the acquisition from the date of acquisition. Pro forma results of
operations for the acquisition have not been presented because the effects of the acquisition, individually and in the aggregate, were not material to
the financial results of the Company.
Additionally, the Company entered into retention agreements with employees of Mintigo who joined the Company after the acquisition,
totaling up to approximately $10.0 million. As payment of these retention agreements is contingent upon the continuous service of these employees
with the Company, they are being accounted for as compensation over the required service period of three years commencing from the acquisition
date.
(6) Acquisition-Related Intangible Assets
The components of identifiable intangible assets included in “Other noncurrent assets” are as follows:
Developed technology
Customer relationships
Total
Developed technology
Customer relationships
Total
As of January 31, 2021
Intangible
Assets, Gross
Accumulated
Amortization
(In thousands)
Intangible
Assets, Net
5,200 $
2,976
8,176 $
(1,387) $
(1,276)
(2,663) $
3,813
1,700
5,513
As of January 31, 2020
Intangible
Assets, Gross
Accumulated
Amortization
(In thousands)
Intangible
Assets, Net
5,200 $
2,976
8,176 $
(346) $
(977)
(1,323) $
4,854
1,999
6,853
$
$
$
$
Remaining
Amortization
Periods
3.7 years
5.7 years
Remaining
Amortization
Periods
4.8 years
6.8 years
Amortization expense of acquisition-related intangible assets was $1.3 million, $0.5 million and $0.2 million for fiscal 2021, 2020, and 2019,
respectively.
The expected future intangible assets amortization as of January 31, 2021 is as follows:
Years ending January 31,
2022
2023
2024
2025
2026
Thereafter
Total future intangible assets amortization
As of January 31, 2021
(In thousands)
1,340
1,340
1,340
993
300
200
5,513
$
$
91
(7) Common Stock and Employee Stock Plans
As of January 31, 2021, the Company was authorized to issue 1,750,000,000 shares of common stock. Shares were reserved for future
issuance as follows:
Outstanding stock options
Outstanding restricted stock units
Outstanding stock purchase rights
Shares available for future issuances under the 2018
Stock Plan
Shares available for future issuances under the 2018
ESPP
Total
2012 Stock Plan
As of January 31,
2021
2020
(In thousands)
6,600
8,558
—
10,198
10,260
5
21,564
17,071
3,717
40,439
2,786
40,320
In March 2012, the Company adopted the 2012 Plan, under which officers, employees, and consultants may be granted various forms of
equity incentive compensation at the discretion of the Board of Directors, including stock options, RSUs, and SPRs. The awards have varying terms,
but generally vest over four years, and are issued at the fair value of the shares of common stock on the date of grant.
In connection with the IPO, the 2012 Plan was terminated and the number of shares of common stock reserved under the 2012 Plan that
were not issued or subject to outstanding awards under the 2012 Plan on the IPO date were transferred to the 2018 Plan. As of January 31, 2021,
options to purchase and RSUs to convert to a total of 8.0 million shares of common stock were outstanding under the 2012 Plan pursuant to their
original terms and no shares were available for future grant.
2018 Stock Plan
In October 2018, the Company adopted the 2018 Plan, which became effective on October 11, 2018 and serves as the successor to the
Company’s 2012 Plan, and provides various forms of equity incentive awards to the Company’s officers, employees and consultants at the discretion
of the Board of Directors. The awards have varying terms, but generally vest over four years, and are issued at the fair value of the shares of
common stock on the date of grant.
As of January 31, 2021, options to purchase and RSUs to convert to a total of 7.1 million shares of common stock were outstanding under
the 2018 Plan. On the first day of each fiscal year of the Company during the term of the 2018 Plan, commencing on February 1, 2019 and ending
on (and including) February 1, 2028, the aggregate number of common shares that may be issued under the 2018 Plan shall automatically increase
by a number equal to the least of (a) 5% of the total number of common shares issued and outstanding on the last day of the preceding fiscal year,
(b) 7,500,000 of common shares subject to anti-dilution adjustments or (c) a number of common shares determined by the Company’s board of
directors.
Employee Stock Purchase Plan
In September 2018, the Company adopted the 2018 Employee Stock Purchase Plan (the ESPP), which became effective on October 12,
2018. The ESPP initially authorizes the issuance of 2,700,000 shares of the Company’s common stock pursuant to purchase rights granted to
eligible employees. The number of shares of common stock available for sale under the ESPP also includes an annual increase on the first day of
each fiscal year beginning on February 1, 2019, equal to the least of: (i) 1% of the outstanding shares of common stock as of the last day of the
preceding fiscal year, (ii) 1,500,000 shares of stock subject to anti-dilution adjustments or (iii) such other amount as the board of directors may
determine.
92
Except for the initial offering period, the ESPP provides for 12-month offering periods beginning June 21 and December 21 of each year,
and each offering period will consist of two six-month purchase periods. The initial offering period began October 12, 2018 and ended on December
20, 2019. On each purchase date, eligible employees will purchase the shares at a price per share equal to 85% of the lesser of (1) the fair market
value of the Company’s stock on the offering date or (2) the fair market value of our stock on the purchase date.
For fiscal 2021, 0.4 million shares of common stock were purchased under the ESPP at a weighted-average price of $41.67 per share, and
$7.8 million of stock-based compensation expense was recorded. During fiscal 2020, 1.2 million shares of common stock were purchased under the
ESPP at a weighted-average price of $15.78 per share, and $5.9 million of stock-based compensation expense was recorded. During fiscal 2019,
there was no common stock purchased under the ESPP, and $1.6 million of stock-based compensation expense was recorded.
The Company accounted for the stock purchase rights under ESPP at the grant date (first day of the offering period) by valuing each
purchase period separately. The Black-Scholes assumptions used to value the ESPP are as follows:
ESPP:
Risk-free interest rate
Expected term (years)
Expected volatility
Expected dividend yield
Year Ended January 31,
2020
2021
2019
0.09% -
2.05%
0.50 - 1.00
34.9% -
64.0%
—
1.52% -
2.69%
0.50 - 1.19
32.5% -
42.9%
—
2.51% -
2.69%
0.69 - 1.19
32.5% -
34.9%
—
Stock Purchase Rights (SPRs) with Recourse Notes
SPRs have been issued in exchange for recourse promissory notes with the aggregate price of the underlying shares as the principal
amount. The promissory notes are collateralized by the related common stock. Repayment is due between four and twelve years from the date of
the promissory notes or earlier in certain circumstances. In addition, any proceeds from the sale of shares purchased with the notes must be applied
to repay the outstanding note receivable balance. The Company has a right to repurchase the shares if the employee’s service period is not fulfilled
or upon termination of employment at the original per share issuance price. The right of repurchase lapses over an employee service period which is
typically four years with 25% vesting on the first anniversary of the vesting commencement date and 1/48 each month thereafter. The Company
deemed all employee recourse promissory notes to be non-substantive in nature and therefore the notes are not reflected in the consolidated
balance sheets and consolidated statements of stockholders’ equity. Rather, the note issuances and the share purchases are accounted for as
share option grants, with the related share-based compensation measured using the Black-Scholes option-pricing model and recognized over the
vesting periods.
There were no SPRs issued since fiscal 2017.
Shares underlying the SPRs are presented as outstanding on the consolidated balance sheets and consolidated statements of
stockholders’ equity as the shares have voting and dividend rights and are thus considered legally outstanding. There were no outstanding SPRs as
of January 31, 2021. During fiscal 2020 and 2019, an immaterial amount and 4.8 million of these underlying shares, respectively, have been
excluded from the respective net loss per share calculations because the shares are considered contingently issuable and subject to repurchase.
During fiscal 2021, 2020, and 2019, the recorded stock-based compensation expense related to the SPRs was immaterial.
93
Share Repurchase
There were no shares repurchased in fiscal 2021. During fiscal 2020 and 2019, the Company repurchased approximately 0.1 million
unvested shares from one employee, and 0.2 million unvested shares from one employee, respectively. The share repurchases took place upon
termination of employment by cancelling the principal balance of the related note, plus any accrued interest from the date of purchase related to the
unvested portion.
Stock Options and Restricted Stock Units
Stock options can be granted with an exercise price equal to or greater than the stock’s fair value at the date of grant. Most awards have
10-year terms and vest and become exercisable at a rate of 25% on the first anniversary of the vesting commencement date and 1/48th each month
thereafter. Options granted may include provisions for early exercisability.
The Black-Scholes assumptions used to value the employee options at the grant dates are as follows:
Stock Options:
Fair value of common
stock
Risk-free interest rate
Expected term (years)
Expected volatility
Expected dividend yield
2021
Year Ended January 31,
2020
2019
$37.61 - $59.91
0.36% - 1.40%
5.14 - 6.08
36.9% - 40.3%
—
$32.75 - $58.82
1.51% - 2.54%
5.07 - 6.25
37.5% - 38.8%
—
$7.12 - $25.10
2.68% - 3.00%
6.06 - 6.26
37.0% - 37.8%
—
These assumptions and estimates were determined as follows:
•
Fair Value of Common Stock. Prior to the IPO, the Company’s board of directors determined the fair value of its common stock using
various valuation methodologies, including valuation analyses performed by third-party valuation firms. After the IPO, the Company
uses the publicly quoted market closing price as reported on the New York Stock Exchange as the fair value of its common stock.
• Risk-Free Interest Rate. The risk-free interest rate for the expected term of the options was based on the U.S. Treasury yield curve in
effect at the time of the grant.
•
•
•
Expected Term. The expected term was estimated using the simplified approach, in which the expected term of an award is
presumed to be the mid-point between the vesting date and the expiration date of the award, as the Company does not have sufficient
historical data relating to stock-option exercises.
Expected Volatility. As there was no public market for the Company’s common stock prior to IPO, the Company has limited
information on the volatility of its common stock. Accordingly, the expected volatility for the Company was estimated by taking the
average historic price volatility for industry peers, consisting of several public companies in the Company’s industry which are either
similar in size, stage of life cycle, or financial leverage, over a period equivalent to the expected term of the awards.
Expected Dividend Yield. The Company has never declared or paid any cash dividends and does not presently plan to pay cash
dividends in the foreseeable future. As a result, an expected dividend yield of zero was used.
94
A summary of stock option and RSU activities for fiscal 2021 is as follows:
Shares
Available
for Grant
Shares
Subject to
Options
Outstanding
Options Outstanding
Weighted
Average
Exercise
Price
Average
Remaining
Contractual
Life (Years)
Aggregate
Intrinsic
Value
RSUs Outstanding
Weighted-
Average
Grant Date
Fair Value
Shares
(in thousands, except weighted average exercise price, average remaining contractual life and
weighted average grant date fair value)
17,071
6,775
(422)
-
1,104
(4,162)
-
1,198
21,564
10,198 $
-
422
(2,916)
(1,104)
-
-
-
6,600 $
11.69
-
38.47
6.46
34.97
-
-
-
11.83
7.55 $ 468,079
-
-
-
-
-
-
-
6.85 $ 362,149
-
-
-
-
-
-
-
10,260 $
-
-
-
-
4,162
(4,666)
(1,198)
8,558 $
23.70
-
-
-
-
50.28
20.37
33.02
37.15
6,401 $
11.40
6.80 $ 354,018
4,521 $
8.13
6.41 $ 264,776
7,416
Balance as of January 31, 2020
Shares authorized
Options granted
Options exercised
Options forfeited
RSUs granted
RSUs vested
RSUs forfeited
Balance as of January 31, 2021
Exercisable as of January 31, 2021
Vested and expected to vest as
of January 31, 2021
The total intrinsic value of the options exercised during fiscal 2021, 2020, and 2019 was $129.5 million, $194.1 million, and $24.2 million,
respectively. The intrinsic value is calculated as the difference between the fair value of the underlying common stock at the exercise date and the
exercise price of the stock option.
The weighted-average grant date fair value of options granted during fiscal 2021, 2020, and 2019 was $14.36, $13.87, and $5.48,
respectively.
As of January 31, 2021, unrecognized stock-based compensation cost related to outstanding unvested stock options that are expected to
vest was $14.0 million, which is expected to be recognized over a weighted-average period of 2.1 years.
RSUs granted under the 2012 Stock Plan (2012 Plan) vest upon the satisfaction of both a service condition and a liquidity condition. Both
the service and liquidity conditions must be met for the expense to be recognized. The liquidity condition was satisfied upon completion of our IPO,
and we recognized an expense of $29.9 million in the three months ended October 31, 2018 for the portion of the RSUs that had met the service
condition as of such date. In connection with the IPO, the 2012 Plan was terminated and the number of shares of common stock reserved under the
2012 Plan that were not issued or subject to outstanding awards under the 2012 Plan on the IPO date were transferred to the 2018 Plan.
The RSUs granted after the IPO under the 2018 Plan solely vest upon the satisfaction of a service condition.
As of January 31, 2021, unrecognized stock-based compensation cost related to outstanding unvested RSUs that are expected to vest was
$221.5 million, which is expected to be recognized over a weighted-average period of 2.8 years.
95
Stock-Based Compensation
The stock-based compensation expense, net of estimated forfeitures, by line item in the accompanying consolidated statements of
comprehensive loss is summarized as follows:
Cost of subscription revenue
Cost of professional services revenue
Research and development
Sales and marketing
General and administrative
Total stock-based compensation expense
2021
Year Ended January 31,
2020
(In thousands)
2019
$
$
3,822 $
2,481
18,715
48,210
30,398
103,626 $
2,547 $
2,199
10,608
34,428
30,264
80,046 $
831
851
3,826
15,475
31,823
52,806
The Company’s estimated forfeiture rate is based on accumulated historical forfeiture data.
The capitalized stock-based compensation expense relating to research and development expense was $3.5 million, $2.3 million, and
$0.6 million during fiscal 2021, 2020, and 2019, respectively.
(8) Fair Value Measurements
The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the
extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or a liability in the
principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value
hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
–
–
–
Level 1 inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the
measurement date.
Level 2 inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or
indirectly, for substantially the full term of the asset or liability.
Level 3 inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not
available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.
Cash and cash equivalents included investments in money market funds of $240.0 million at January 31, 2021. 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 January 31, 2021 or 2020. There were no transfers into or out of Level 1, Level 2, or Level 3 during fiscal 2021, 2020, and 2019.
(9) Commitments and Contingencies
Indemnifications
The Company delivers its application over the Internet as a subscription service using a SaaS model. Each subscription is subject to the
terms of the contractual arrangement with the customer and generally includes certain provisions for holding the customer harmless against and
indemnifying the customer for costs, damages, losses, liabilities, and expenses arising from claims that the Company’s software infringes upon a
copyright, trademark, or other trade secret rights, and third-party claims arising from the Company’s breach of the contract.
The Company has not incurred any expense in defense or reimbursement of any of its customers for losses related to indemnification
provisions, and no material claims against the Company are outstanding as of January 31, 2021 and 2020. The Company’s exposure under these
indemnification provisions is generally capped at a fixed amount in many customer agreements and uncapped in others.
96
Due primarily to the lack of history of prior indemnification claims and the unique facts and circumstances involved in each particular contractual
arrangement, the Company has determined that potential costs related to indemnification are not probable or estimable and, as such, has not
recorded a reserve for fiscal 2021, 2020, or 2019.
Warranties
The Company provides a warranty for the implementation services it performs for its subscription services to its customers for a period of
30 days after completion of the services. The Company’s services are generally warranted to conform to the specifications set forth in the related
customer contract and published documentation. In the event there is a failure of such warranties, the Company generally will correct the problem or
provide a reasonable workaround or replacement product. If the Company cannot correct the problem or provide a workaround or replacement
product, then the customer’s remedy is generally limited to termination of the contractual arrangement related to the nonconforming product services
with a refund of the related fees paid. Accordingly, no amounts have been recorded.
Legal Matters
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 alleges 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 are 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. At this point, no discovery has occurred in this case. The case is still in the preliminary
stages, and it is not possible for the Company to quantify the extent of potential liability to the defendants, if any. The Company believes that the
lawsuit lacks merit and intends to vigorously defend the action. The Company cannot predict the outcome of or is not able to reasonably estimate the
amount or range of possible loss from the above described matter.
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.
Other Contractual Commitments
Other contractual commitments primarily consist of data center, cloud and IT operations related to our daily business operations. Future
minimum payments under our non-cancelable purchase commitments are presented in the table below:
97
Year ending January 31,
2022
2023
2024
2025
2026
Thereafter
Total future minimum payments
The table above includes commitments entered into subsequent to the balance sheet date.
(10) Income Taxes
The components of the loss before income taxes were as follows:
Purchase
Obligations
(In thousands)
$
$
30,250
30,912
39,779
37,271
33,219
16,075
187,506
Domestic
Foreign
Total
The provision for income taxes was as follows:
Current:
Federal
State
Foreign
Total current income tax expense
Deferred:
Federal
State
Foreign
Total deferred income tax expense
Total provision for income tax
2021
Year Ended January 31,
2020
(In thousands)
2019
$
$
(157,373) $
7,497
(149,876) $
(115,107) $
(29,657)
(144,764) $
(89,375)
(38,432)
(127,807)
2021
Year Ended January 31,
2020
(In thousands)
2019
$
$
$
1,311 $
90
288
1,689
— $
—
2,402
2,402
4,091 $
— $
76
1,741
1,817
— $
—
2,636
2,636
4,453 $
—
244
2,078
2,322
—
—
887
887
3,209
A reconciliation of the U.S. federal statutory tax rate to the Company’s provision for income taxes was as follows:
U.S. federal taxes at statutory tax rate
State taxes, net of federal benefit
Stock-based compensation
Change in valuation allowance
Foreign income taxed at various rates
Impact of provision to tax return adjustment
Other
Total
2021
Year Ended January 31,
2020
(In thousands)
2019
(31,474) $
(10,479)
(40,853)
84,772
(6,623)
3,640
5,108
4,091 $
(30,400) $
(9,427)
(40,628)
98,343
(5,986)
(9,382)
1,933
4,453 $
(26,841)
(3,413)
(431)
32,828
1,984
240
(1,158)
3,209
$
$
98
Significant components of net deferred tax assets are as follows:
$
Deferred tax assets:
Net operating losses
Stock-based compensation
Accruals and reserves
Depreciation and amortization
Lease liabilities
Deferred research and development costs
Gross deferred tax assets
Valuation allowance
Deferred tax liabilities:
Depreciation and amortization
Accruals and reserves
ROU assets
Deferred commissions
Gross deferred tax liabilities
Total net deferred tax liabilities
$
As of January 31,
2021
2020
(In thousands)
282,400 $
13,984
5,992
2,295
9,524
1,321
315,516
(280,412)
(4,247)
(2,583)
(7,291)
(27,098)
(41,219)
(6,115) $
184,752
18,234
4,522
253
9,545
579
217,885
(189,737)
(3,647)
(2,097)
(8,387)
(17,443)
(31,574)
(3,426)
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income
during the periods in which those temporary differences become deductible. Management believes it is more likely than not that the deferred tax
assets will not be realized; accordingly, a valuation allowance has been established on U.S., U.K. and Israel net deferred tax assets. The valuation
allowance increased $90.7 million for fiscal 2021 and increased $110.0 million for fiscal 2020.
As of January 31, 2021, the Company has net operating loss carryforwards for federal income tax purposes of $933.0 million available to
reduce future income subject to income taxes. The federal net operating loss carryforwards will begin to expire, if not utilized, in fiscal 2029. In
addition, the Company has $233.2 million and $330.4 million of net operating loss carryforwards available to reduce future taxable income subject to
California state income taxes and all other applicable state jurisdictions, respectively. The California net operating loss carryforwards will begin to
expire, if not utilized, in fiscal 2031 through fiscal 2040. The other states’ net operating loss carryforwards will begin to expire at various dates
beginning in fiscal 2025 through fiscal 2040, if not utilized. The U.K. net operating loss carryforwards of $235.5 million do not expire.
The federal and state net operating loss carryforwards may be subject to significant limitations under Section 382 and Section 383 of the
Code and similar provisions under state law. The Tax Reform Act of 1986 contains provisions that limit the federal net operating loss carryforwards
that may be used in any given year in the event of special occurrences, including significant ownership changes. The Company completed an
analysis under Code Sections 382 and 383 through January 31, 2019 and concluded that the limitation on its ability to utilize its net operating loss
carryforwards will not be material. If there were material ownership changes subsequent to the study, such changes could limit the Company’s
ability to utilize its net operating loss carryforwards.
Changes in our unrecognized tax benefits are summarized as follows:
Beginning balance
Additions for current year items
Mintigo acquisition
Lapse of statute of limitations
Ending balance
As of January 31,
2021
2020
(In thousands)
6,530 $
1,250
—
(1,519)
6,261 $
—
—
7,355
(825)
6,530
$
$
99
The Company does not expect any significant change in its unrecognized tax benefits during the next twelve months that would be material
to the consolidated financial statements because nearly all of the unrecognized tax benefits have been offset by a deferred tax asset, which has
been reduced by a valuation allowance.
The Company files income tax returns for U.S. federal income tax, several U.S. states, and other foreign jurisdictions. The Company’s most
significant tax jurisdictions are the United States and the United Kingdom. The Company’s tax years for 2009 and forward are subject to examination
by the federal tax authorities. The Company’s tax years for 2009 and forward are subject to examination by the state tax authorities. The Company’s
tax years for 2011 and forward are subject to examination by the foreign tax authorities. The Company is currently under examination for income tax
in Israel.
(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:
2021
Year Ended January 31,
2020
(In thousands, except per share data)
2019
Numerator:
Net loss
Denominator:
Weighted-average shares used in computing
net loss per share attributable to common
stockholders, basic and diluted
Net loss per share attributable to common
stockholders, basic and diluted
$
(153,967) $
(149,217) $
(131,016)
139,499
129,799
53,328
$
(1.10) $
(1.15) $
(2.46)
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:
Stock options
Stock repurchase rights
Restricted stock units
Unvested shares subject to repurchase
Total
(12) Employee Benefit Plans
2021
As of January 31,
2020
(In thousands)
2019
6,600
—
8,558
—
15,158
10,198
5
10,260
6
20,469
14,986
4,776
10,894
24
30,680
On January 1, 2013, the Company initiated a savings and retirement plan for employees. The Company’s employee savings and retirement
plan is qualified under Section 401 of the Internal Revenue Code. The plan is available to all regular employees on the Company’s U.S. payroll and
provides employees with tax-deferred salary deductions and alternative investment options. Employees may contribute up to 90% of their salary up
to the statutory prescribed annual limit. The Company also has a defined-contribution retirement plan or participates in government programs that
covers substantially all employees in Australia, Canada, France, Germany, India, Israel, Japan, Malaysia, the Netherlands, the Philippines,
Singapore, Sweden, Switzerland and the United Kingdom. The Company matches employees’ contributions to the U.S. 401(k) plan, subject to
certain limitations. The Company also matches at varying percentages of income, voluntarily or within a statutory scheme, for employees in the
countries listed above.
100
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. 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 Exchange Act, as of
the end of the period covered by this Annual Report on Form 10-K.
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.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the
preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles.
Our management, under the supervision of our principal executive officer and principal financial officer, conducted an evaluation of the
effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013), issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control
over financial reporting was effective as of January 31, 2021, to provide reasonable assurance regarding the reliability of our financial reporting and
the preparation of consolidated financial statements for external reporting purposes in accordance with generally accepted accounting principles.
The effectiveness of our internal control over financial reporting as of January 31, 2021 has been audited by KPMG LLP, an independent
registered public accounting firm, as stated in their report, which is included in Item 8 of this Annual Report on Form 10-K.
101
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-
15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended January 31, 2021 that have materially affected, or are 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.
ITEM 9B. OTHER INFORMATION
None.
102
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information called for by this item will be set forth in our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with
the SEC within 120 days of the fiscal year ended January 31, 2021 and is incorporated herein by reference.
We have adopted a Code of Conduct and Ethics that applies to all officers, directors and employees, which is available on our Website.
The Internet address for our Website is investors.anaplan.com, and the Code of Conduct and Ethics may be found from our main Web page by
clicking first on “Investor Center,” in the “About” menu, next on “Governance,” next on “Governance Documents” and then on “Code of Conduct and
Ethics.”
We intend to satisfy any disclosure requirements under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of
this Code of Conduct and Ethics by posting such information on our Website, at the Internet address and location specified above.
ITEM 11. EXECUTIVE COMPENSATION
The information called for by this item will be set forth in our Proxy Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information called for by this item will be set forth in our Proxy Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information called for by this item will be set forth in our Proxy Statement and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information called for by this item will be set forth in our Proxy Statement and is incorporated herein by reference.
103
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
We have filed the following documents as a part of this Form 10-K:
(a) Financial Statements
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheet
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(b) Financial Statement Schedules
Page
73
76
77
78
79
80
All schedules are omitted because they are not applicable or the required information is included in the Financial Statements or in the notes
thereto.
(c) Exhibits
The following exhibits, as required by Item 601 of Regulation S-K are attached or incorporated by reference as stated below.
Incorporated by Reference
Exhibit
Number
3.1
3.2
4.1
4.2
Exhibit Description
Form
File No.
Exhibit
Filing Date
Amended and Restated Certificate of
10-K
001-38698
Incorporation of Registrant.
Amended and Restated Bylaws of
10-K
001-38698
Registrant.
Amended and Restated Investors’ Rights
Agreement, dated November 21, 2017, by
and among the Registrant and the parties
thereto.
Description of the Registrant’s Securities
Registered Pursuant to Section 12 of the
Exchange Act of 1934
S-1
333-227355
3.1
3.2
4.1
March 29, 2019
March 29, 2019
September 14, 2018
10.1#
Form of Indemnification Agreement
S-1/A
333-227355
10.1
October 1, 2018
between the Registrant and each of its
directors and executive officers.
10.2#
2012 Stock Plan and forms of agreements
S-1
333-227355
10.2
September 14, 2018
thereunder.
Filed/
Furnished
Herewith
X
104
Exhibit
Number
Exhibit Description
Form
File No.
Exhibit
Filing Date
10.3#
The Registrant’s 2018 Equity Incentive
S-8
333-227798
99.2
October 12, 2018
Plan, including form agreements.
10.4#
Severance and Change in Control
S-1/A
333-227355
10.4
October 1, 2018
Incorporated by Reference
Filed/
Furnished
Herewith
Agreement, dated as of September 28,
2018, by and between the Registrant and
Frank Calderoni.
10.5#
Severance and Change in Control
S-1
333-227355
10.16
September 14, 2018
Agreement, dated as of September 9,
2018, by and between the Registrant and
David H. Morton, Jr.
10.6#
The Registrant’s 2018 Employee Stock
S-1/A
333-227355
10.7
October 1, 2018
Purchase Plan.
10.7#
Confirmatory Employment Letter, dated
S-1/A
333-227355
10.8
October 1, 2018
September 28, 2018, between the
Registrant and Frank Calderoni.
10.8#
Employment Agreement, dated
S-1
333-227355
10.15
September 14, 2018
10.9#
September 9, 2018, between the
Registrant and David H. Morton, Jr.
Employment Agreement, dated January
29, 2019, and Severance and Change in
Control Agreement, between the
Registrant and Ana Pinczuk.
10-K
001-38698
10.9
March 20, 2020
10.10#
Employment Agreement, dated
10-K
001-38698
10.10
March 20, 2020
September 24, 2018, and Severance and
Change in Control Agreement, between
the Registrant and Vivie Lee.
10.11#
Form of Stock Option Grant Agreement
10-Q
001-38698
10.10
December 10, 2018
under Anaplan, Inc.’s 2018 Equity
Incentive Plan
10.12#
Compensation Program for Non-
Employee Directors.
10.13
Credit Agreement between the Registrant
and Wells Fargo, National Association.
S-1/A
333-227355
10.13
October 1, 2018
X
105
Exhibit
Number
10.14
Exhibit Description
Amendment to Credit Agreement between
the Registrant and Wells Fargo Bank, N.A.
Form
10-Q
File No.
Exhibit
Filing Date
001-38698
10.1
December 9, 2019
10.15
Third Amendment to Credit Agreement
8-K
001-38698
10.1
April 29, 2020
Incorporated by Reference
Filed/
Furnished
Herewith
and First Amendment to Collateral
Agreement, dated as of April 23, 2020, by
and among Anaplan, Inc., Wells Fargo
Bank, National Association, as
Administrative Agent, and the lenders
party thereto.
10.16
Sublease, dated November 9, 2017, by
S-1/A
333-227355
10.14
October 1, 2018
and among the Registrant and
athenahealth, Inc.
10.17#
Anaplan, Inc. Cash Incentive Plan
10-Q
001-38698
10.11
December 10, 2018
Agreement
21.1
23.1
24.1
31.1
31.2
32.1†
List of Subsidiaries of Registrant.
S-1
333-227355
21.1
September 14, 2018
Consent of Independent Registered Public
Accounting Firm.
Power of Attorney (contained in the
signature page to this report).
Certification of Principal Executive Officer
Pursuant to Rules 13a-14(a) and 15d-
14(a) under the Securities Exchange Act
of 1934, as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer
Pursuant to Rules 13a-14(a) and 15d-
14(a) under the Securities Exchange Act
of 1934, as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Executive Officer
Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
106
X
X
X
X
X
Exhibit Description
Form
File No.
Exhibit
Filing Date
Filed/
Furnished
Herewith
Incorporated by Reference
Exhibit
Number
32.2†
Certification of Principal Financial Officer
Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
101.INS
Inline XBRL Instance Document - the
instance document does not appear in the
Interactive Data File because its XBRL
tags are embedded within the Inline XBRL
document.
101.SCH
Inline XBRL Taxonomy Extension Schema
Document
101.CAL
101.DEF
Inline XBRL Taxonomy Extension
Calculation Linkbase Document
Inline XBRL Taxonomy Extension
Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label
Linkbase Document
101.PRE
104
Inline XBRL Taxonomy Extension
Presentation Linkbase Document
The cover page for the Company’s Annual
Report on Form 10-K for the year ended
January 31, 2021, has been formatted in
Inline XBRL and contained in Exhibit 101.
X
X
X
X
X
X
X
X
________________
# Indicates management contract or compensatory plan, contract or agreement.
† The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed
“filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically
incorporates it by reference.
ITEM 16. FORM 10-K SUMMARY
None.
107
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: March 12, 2021
ANAPLAN, INC.
By:
/s/ Frank Calderoni
Frank Calderoni
Chairman & Chief Executive Officer
108
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Frank
Calderoni and David H. Morton, Jr. and each of them, as his or her true and lawful attorneys-in-fact and agents, with power to act with or without the
others and with full power of substitution and resubstitution, to do any and all acts and things and to execute any and all instruments which said
attorneys and agents and each of them may deem necessary or desirable to enable the registrant to comply with the U.S. Securities Exchange Act
of 1934, as amended, and any rules, regulations and requirements of the U.S. Securities and Exchange Commission thereunder in connection with
the registrant’s Annual Report on Form 10-K for the fiscal year ended January 31, 2021, or the Annual Report, including specifically, but without
limiting the generality of the foregoing, power and authority to sign the name of the registrant and the name of the undersigned, individually and in
his or her capacity as a director or officer of the registrant, to the Annual Report as filed with the U.S. Securities and Exchange Commission, to any
and all amendments thereto, and to any and all instruments or documents filed as part thereof or in connection therewith; and each of the
undersigned hereby ratifies and confirms all that said attorneys and agents and each of them shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
Signature
/s/ Frank Calderoni
Frank Calderoni
/s/ David H. Morton, Jr.
David H. Morton, Jr.
Title
Chairman and Chief Executive Officer and Director
(Principal Executive Officer)
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Gagan Dhingra
Gagan Dhingra
Chief Accounting Officer and Corporate
Controller (Principal Accounting Officer)
/s/ Robert E. Beauchamp
Robert E. Beauchamp
Director
/s/ Susan L. Bostrom
Susan L. Bostrom
/s/ David F. Conte
David F. Conte
/s/ Allan Leinwand
Allan Leinwand
/s/ Brooke E. Major-Reid
Brooke E. Major Reid
/s/ Sandesh Patnam
Sandesh Patnam
/s/ Suresh Vasudevan
Suresh Vasudevan
/s/ Yvonne Wassenaar
Yvonne Wassenaar
Director
Director
Director
Director
Director
Director
Director
109
Date
March 12, 2021
March 12, 2021
March 12, 2021
March 12, 2021
March 12, 2021
March 12, 2021
March 12, 2021
March 12, 2021
March 12, 2021
March 12, 2021
March 12, 2021
DESCRIPTION OF REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934
Exhibit 4.2
The following description of the capital stock of Anaplan, Inc. (“us,” “our,” “we” or the “Company”) is a summary of the rights of
our capital stock and summarizes certain provisions of our amended and restated certificate of incorporation and our amended and
restated bylaws. This summary does not purport to be complete and is qualified in its entirety by the provisions of our amended and
restated certificate of incorporation and amended and restated bylaws, copies of which have been filed as exhibits to this Annual Report on
Form 10-K, as well as to the applicable provisions of the Delaware General Corporation Law.
General
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 1,775,000,000 shares, all with a par value of $0.0001 per share, of which:
• 1,750,000,000 shares are designated common stock; and
• 25,000,000 shares are designated preferred stock.
Common Stock
Dividend Rights
Subject to preferences that may apply to shares of preferred stock outstanding at the time, the holders of outstanding shares of
our common stock are entitled to receive dividends out of funds legally available if our board of directors, in its discretion, determines to
issue dividends and only then at the times and in the amounts that our board of directors may determine.
Voting Rights
The holders of our common stock are entitled to one vote per share. Stockholders do not have the ability to cumulate votes for the
election of directors. Our amended and restated certificate of incorporation and amended and restated bylaws provide for a classified
board of directors consisting of three classes of approximately equal size, each serving staggered three-year terms. Only one class of
directors is elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective
three-year terms.
No Preemptive or Similar Rights
Our common stock is not entitled to preemptive rights and is not subject to conversion, redemption, or sinking fund provisions.
Right to Receive Liquidation Distributions
Upon our dissolution, liquidation, or winding-up, the assets legally available for distribution to our stockholders are distributable
ratably among the holders of our common stock, subject to prior satisfaction of all outstanding debt and liabilities and the preferential
rights and payment of liquidation preferences, if any, on any outstanding shares of preferred stock.
Preferred Stock
Our board of directors is authorized, subject to limitations prescribed by Delaware law, to issue preferred stock in one or more
series, to establish from time to time the number of shares to be included in each series and to fix the designation, powers, preferences,
and rights of the shares of each series and any associated qualifications, limitations or restrictions. Our board of directors also can increase
or decrease the number of shares of any series, but not below the number of shares of that series then outstanding, without any further
vote or action by our stockholders. Our board of directors may authorize the issuance of preferred stock with voting or conversion rights
that could adversely affect the voting power or other rights of the holders of the common stock. The issuance of preferred stock, while
providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of
delaying, deferring or preventing a change in control of our company and may adversely affect the market price of our common stock and
the voting and other rights of the holders of common stock. We have no current plan to issue any shares of preferred stock.
Anti-Takeover Provisions
Delaware Law
We are governed by the provisions of Section 203 of the Delaware General Corporation Law regulating corporate takeovers. This
section prevents some Delaware corporations from engaging, under some circumstances, in a business combination, which includes a
merger or sale of at least 10% of the corporation’s assets with any interested stockholder, meaning a stockholder who, together with
affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own 15% or more of
the corporation’s outstanding voting stock, unless:
• the transaction is approved by the board of directors prior to the time that the interested stockholder became an interested
stockholder;
• upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction began, excluding for
purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder)
those shares owned (i) by persons who are directors and also officers and (ii) employee stock plans in which employee participants
do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange
offer; or
• at or subsequent to such time that the stockholder became an interested stockholder the business combination is approved by the
board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by at least two-
thirds of the outstanding voting stock which is not owned by the interested stockholder.
A Delaware corporation may “opt out” of these provisions with an express provision in its original certificate of incorporation or an
express provision in its certificate of incorporation or amended and restated bylaws resulting from a stockholders’ amendment approved by
at least a majority of the outstanding voting shares. We have not opted out of these provisions. As a result, mergers or other takeover or
change in control attempts of us may be discouraged or prevented.
Certificate of Incorporation and Bylaws Provisions
Our amended and restated certificate of incorporation and our amended and restated bylaws include a number of provisions that
may have the effect of deterring hostile takeovers or delaying or preventing changes in control of our management team, including the
following:
• Board of Directors Vacancies. Our amended and restated certificate of incorporation and amended and restated bylaws authorize
our board of directors, subject to the rights of holders of any series of preferred stock, to fill vacant directorships, including newly-
created seats. In addition, subject to the rights of holders of any series of preferred stock to elect directors, the number of
directors constituting our board of directors
is set only by resolution adopted by a majority vote of our entire board of directors. These provisions would prevent a stockholder
who did not have support from a majority of the board of directors from increasing the size of our board of directors and gaining
control of our board of directors by filling the resulting vacancies with its own nominees.
• Classified Board. Our amended and restated certificate of incorporation and amended and restated bylaws provide that our board
of directors is classified into three classes of directors, each of which hold office for a three-year term. In addition, directors may
only be removed from the board of directors for cause and only by the approval of 66 2⁄3% of our then-outstanding shares of our
common stock. A third party may be discouraged from making a tender offer or otherwise attempting to obtain control of us as it
is more difficult and time consuming for stockholders to replace a majority of the directors on a classified board of directors.
• Stockholder Action; Special Meeting of Stockholders. Our amended and restated certificate of incorporation provide that
stockholders are not able to take action by written consent, and are only able to take action at annual or special meetings of our
stockholders. Stockholders are not permitted to cumulate their votes for the election of directors. Our amended and restated
bylaws further provide that special meetings of our stockholders may be called only by a majority vote of our entire board of
directors, the chairman of our board of directors or our chief executive officer.
• Advance Notice Requirements for Stockholder Proposals and Director Nominations. Our amended and restated bylaws provide
advance notice procedures for stockholders seeking to bring business before our annual meeting of stockholders, or to nominate
candidates for election as directors at any meeting of stockholders. Our amended and restated bylaws also specify certain
requirements regarding the form and content of a stockholder’s notice. These provisions may preclude our stockholders from
bringing matters before our annual meeting of stockholders or from making nominations for directors at our meetings of
stockholders.
• Issuance of Undesignated Preferred Stock. Our board of directors has the authority, without further action by the holders of
common stock, to issue up to 25,000,000 shares of undesignated preferred stock with rights and preferences, including voting
rights, designated from time to time by the board of directors. The existence of authorized but unissued shares of preferred stock
enable our board of directors to render more difficult or discourage an attempt to obtain control of us by means of a merger,
tender offer, proxy contest, or otherwise.
• Amendment of Certificate of Incorporation and Bylaws Provisions. Certain amendments to our amended and restated certificate
of incorporation require approval by holders of 66 2⁄3% of the voting power of our then-outstanding capital stock entitled to vote.
Our amended and restated bylaws provide that the approval of holders of 66 2⁄3% of the voting power of our then-outstanding
capital stock entitled to vote is required for stockholders to amend or adopt any provision of our bylaws. This will have the effect
of making it more difficult to amend our amended and restated certificate of incorporation or amended and restated bylaws to
remove or modify any existing provisions.
Choice of Forum
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the
exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action
asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of
incorporation or our amended and restated bylaws or any action asserting a claim against us that is governed by the internal affairs
doctrine. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in
legal proceedings, and it is possible that a court could find these types of provisions in our certificate of incorporation to be inapplicable or
unenforceable.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Computershare Trust Company, N.A. The transfer agent’s address is 250
Royall Street, Canton, Massachusetts 02021, and its telephone number is 1-800-736-3001.
Listing
Our common stock is listed on the New York Stock Exchange under the symbol “PLAN.”
Exhibit 10.12
Compensation Program for Non-Employee Directors
(Effective June 3, 2020)
A. Cash Compensation
1.
Non-employee directors (“Outside Directors”) will receive the following cash retainers, paid quarterly in
arrears, for their service on the Board of Directors (the “Board”) and its committees:
Board service
plus (as applicable):
Lead Director or Chairman of the Board
Audit Committee Chair
Other Audit Committee Member
Compensation Committee Chair
Other Compensation Committee Member
Nominating and Corporate Governance Committee Chair
Other Nominating and Corporate Governance Committee Member
$35,000
$15,000
$20,000
$8,000
$12,000
$6,000
$8,000
$4,000
2.
The reasonable expenses incurred by directors in connection with attendance at meetings of the Board and its
committees will be reimbursed upon submission of appropriate documentation.
B. Equity Compensation
3.
4.
Annual Equity Award: Upon the conclusion of each regular annual meeting of the Company’s stockholders
beginning in calendar year 2020, each Outside Director who continues to serve as a member of the Board
thereafter (including a director elected or appointed at such meeting) will automatically be granted restricted
stock units (“RSUs”) under the Company’s 2018 Equity Incentive Plan (the “Plan”) with a target value of
$190,000. Subject to the Outside Director’s continuing service, each such RSU award will vest in full on the
earlier of the one-year anniversary of the date of grant or the date of the regular annual meeting of the
Company’s stockholders held in the year following the date of grant.
Pro-Rated Annual Equity Award: On the date an Outside Director is first elected or appointed to the Board, the
Outside Director will automatically be granted a pro-rated annual equity award consisting of RSUs under the
Plan. Such pro-rated annual equity award will have an aggregate target value equal to (i) $190,000,
1
Exhibit 10.12
Compensation Program for Non-Employee Directors
(Effective June 3, 2020)
multiplied by (ii) a fraction, the numerator of which is the number of whole months remaining until the one-
year anniversary of the most recent regular annual meeting of stockholders and the denominator of which is
12. Subject to the Outside Director’s continuing service, each such RSU award will vest in full on the earlier of
the one-year anniversary of the date of grant or on the date of the regular annual meeting of the Company’s
stockholders following the date of grant. For avoidance of doubt, an Outside Director who is first elected or
appointed to the Board on the date of a regular annual meeting of stockholders will receive the full annual
equity award described in section B1 above, without any pro-ration.
C. General
5.
6.
7.
8.
The number of RSUs subject to each automatic equity award will be determined by dividing the target equity
value allocated to such RSUs by the average closing price of the Company’s Common Stock as reported on the
New York Stock Exchange (or such other exchange on which the Company lists its shares of Common Stock)
over the ninety calendar day period ending on the first trading day of the month in which the grant is made,
rounded down to the nearest whole share. However, if the closing price of the Company’s Common Stock two
trading days before the date of grant is twenty-five percent higher or lower than the average closing price as
calculated under the prior sentence, then the number of RSUs will be determined using the average closing
price over the thirty calendar day period ending two trading days before the date of grant, rounded down to
the nearest whole share.
Each RSU will be settled by issuing one share of the Company’s common stock upon vesting, unless a deferral
program is implemented.
All automatic equity awards will fully vest upon the occurrence of a Change in Control (as defined in the Plan)
before the Outside Director’s service terminates.
All equity awards will be subject to the form of RSU agreement adopted by the Board for use under the Plan
consistent with the foregoing.
2
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
The Board of Directors
Anaplan, Inc.:
We consent to the incorporation by reference in the registration statements (Form S-8 Nos. 333-227798, 333-232048, and 333-
239567) of Anaplan, Inc. of our report dated March 12, 2021, with respect to the consolidated balance sheets of Anaplan, Inc. as
of January 31, 2021 and 2020, the related consolidated statements of comprehensive loss, stockholders’ equity, and cash flows
for each of the years in the three-year period ended January 31, 2021, and the related notes (collectively the Consolidated
Financial Statements), and the effectiveness of internal control over financial reporting as of January 31, 2021, which report
appears in the January 31, 2021 annual report on Form 10-K of Anaplan, Inc.
Our report on the Consolidated Financial Statements refers to a change in the method of accounting for leases due to the
adoption of Financial Accounting Standards Board Accounting Standards Codification Topic 842, Leases, as of February 1,
2019.
/s/ KPMG LLP
San Francisco, California
March 12, 2021
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Frank Calderoni, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Anaplan, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-
15(f) and 15d-15(f)) for the registrant and have:
a.
b.
c.
d.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
b.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: March 12, 2021
By:
/s/ Frank Calderoni
Frank Calderoni
President & Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, David H. Morton, Jr., certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Anaplan, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-
15(f) and 15d-15(f)) for the registrant and have:
a.
b.
c.
d.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
b.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: March 12, 2021
By:
/s/ David H. Morton, Jr.
David H. Morton, Jr.
Executive Vice President & Chief Financial Officer
(Principal Financial Officer)
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Frank Calderoni, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that,
to my knowledge, the Annual Report of Anaplan, Inc. on Form 10-K for the year ended January 31, 2021 fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in such Form 10-K fairly presents, in all material
respects, the financial condition and results of operations of Anaplan, Inc.
Exhibit 32.1
Date: March 12, 2021
By:/s/ Frank Calderoni
Frank Calderoni
President & Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, David H. Morton, Jr., certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to my knowledge, the Annual Report of Anaplan, Inc. on Form 10-K for the year ended January 31, 2021 fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in such Form 10-K fairly presents, in all material
respects, the financial condition and results of operations of Anaplan, Inc.
Date: March 12, 2021
By:/s/ David H. Morton, Jr.
David H. Morton, Jr.
Executive Vice President & Chief Financial Officer
(Principal Financial Officer)
Exhibit 32.2