Anaplan, Inc.
Q4 2019 Earnings Call Transcript

Published: 25 Feb 2019

[Operator:]

Good morning. My name is Sherin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Anaplan Fourth Quarter Fiscal 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there’ll be a question-and-answer session. [Operator Instructions] Edelita Tichepco, Investor Relations. You may begin your conference call.

[Edelita Tichepco:]

Good morning, and thank you for joining us on today’s conference call to discuss Anaplan’s fiscal fourth quarter 2019 financial results. Joining me on the call are Frank Calderoni, Anaplan’s Chief Executive Officer; and Dave Morton, our Chief Financial Officer. On this call we’ll be making forward-looking statements including financial guidance and expectations. Our forecast for our first quarter and full year 2020, anticipated future operational and financial performance, strategies, customer demand, product and technologies. These statements reflect our best judgment based on factors currently known to us and actual events or results may differ materially. Please refer to documents we filed with the SEC including the form 8-K filed with today's press release. Those documents contain risks and other factors that may cause our actual results to differ from those contained in our forward-looking statements. These forward-looking statements are being made as of today and we disclaim any obligation to update or revise these statements. This call is reviewed after today, the information presented during this call may not contain current or accurate permission. We'll also discuss non-GAAP financial measures which are not quite prepared in accordance with Generally Accepted Accounting Principles. Unless otherwise stated during the call all references to our gross margins, expenses and operating results are on a non-GAAP basis. Historical periods reconciliation of GAAP and non-GAAP results is provided in the press release and in supplemental financial information on our website. And finally, we’re planning for today's call to last approximately 45 minutes since we will be discussing the fourth quarter, full year and outlook for fiscal 2020. And we will do our best to accommodate your questions following our prepared remarks. And with that I'll now turn it over to Frank Calderoni.

[Frank Calderoni:]

Thank you, Edelita. Good morning and welcome to our fourth quarter and fiscal year earnings call. We finished off an outstanding fiscal year 2019, as we delivered a strong fourth quarter wrapping up a successful initial year as a public company. As we look back at this past year, we achieved many significant milestones such as pioneering the Connected Planning category and becoming the leader in this market space. We saw impressive growth with new customer acquisition and the sizable expands and renewables clearly show the value of our platform and of course, add to this our successfully and monumental IPO. This has all set us up nicely to continue to lead the market and we strongly believe we are well positioned for this upcoming fiscal year. As a demonstration of our market leadership here are the details of this past fiscal year's performance. Our revenue totaled $241 million, which was up 43% from the prior year, and we ended the year with over 1,100 customers, which is a testament to the strong continued customer adoption we have been experiencing all year. The average ARR of our top 25 customers are now close to $3 million each. This momentum with our customers is exceptional because they understand the significant benefits and the value of Anaplan’s Connected Planning platform, which demonstrates that we have a unique solution. To illustrate this point, here are some examples of how our platform is helping our customers drive value. One of our new customers this year is a multinational health technology company with over 70,000 employees in more than 100 countries. This customer required process standardization and a user centric solution that would enable their large field sales organization to drive maximum value by optimizing worldwide compensation plans, which in turn would increase employee engagement and retention. With our platform, the customer expects to drive several million dollars in future savings, an increase in projected revenue globally and a reduction in overpayment of commissions. The current cycle takes approximately six months and our solution will reduce this cycle to weeks. This new customer engagement was a joint partnership with one of our top partners and was rolled out almost 2,000 field sales reps across two countries. Since our first initial deployment, we have already kicked off Phase 2, with this customer and plan to roll out the platform to an additional business unit with over 600 sellers. The initial deployment of our platform was one of our largest new deals this year. I also want to highlight an impressive Connected Planning customer example that represents one of the largest expand deals this quarter. This customer is a leading multinational biopharmaceutical company who initially became a customer about a year and a half ago. They have now invested over $8 million and they have currently deployed Anaplan across sales, supply chain and finance and even then we are still in early stages of the relationship with so much more opportunity ahead. They have an enterprise wide initiative to prioritize technology investments that could be repurposed across multiple areas of the business, as different functions across the company, are looking to replace legacy solutions, our Anaplan platform was a perfect match for the Company's future direction. We're now one of their core strategic platforms that has become the standard as they replace point solutions. With 18 current use cases we have currently a roadmap for a multi-year rollout to enable Connected Planning globally. This is such a great example of the type of long-term partnership we are building with our customers and why we win major deals when it comes to company wide transformation efforts. This success speaks to our overall vision and strategy when it comes to helping our customers evolve the way their business approach is planning to achieve better decision making. Through this strategy, we are generating strong top line growth at scale and we focused heavily this past fiscal year on customer adoption in several ways. First, from a product perspective, we enhanced our features and exciting ways designed to allow our customers to make better decisions. As one example, this past year we launched Optimizer, a completely UI driven algorithm based analytical engine that helps determines the best responses to any complex problem with virtually unlimited constraints. Customers have leveraged this feature in various ways such as sales territory optimization, inventory optimization and project portfolio optimization. It's important to note that our differentiated technology is a game changer. It's the reason why our customers are asking to learn more about what they do and how they can help solve all their planning challenges in one compelling solution. The need is so great regardless of the industry or size of company because we all need a better way to plan. Second, we focused on a grass roots approach to proliferating customer adoption. What has really helped us is the visibility we have achieved by investing in targeted events such as the strategic Gartner Supply Chain Executive Summit with over 700 attendees where we had 45 onsite meetings. Hub Comes to You, events in London, Paris, Tokyo and Singapore were also great successes engaging over 2,000 customers, prospects and partners across 1,300 companies covering over 45 countries. All of these targeted events have helped us drive global awareness and demand generation. Third, we gained significantly more credibility as evidenced in our customer references and the rapid growth of our global user community. Now with user groups in 26 cities worldwide. We launched new programs and features experienced record growth and began to expand our focus from providing content solely related to supporting Anaplan platform to becoming a destination for Connected Planning content. Our member growth in 2018 was nearly equivalent to the previous five years combined. This is such an important part of driving customer adoption often that users gain more insight from seeing how others are using the solution. Four, we also built an exclusive program to certify expert model builders called master Anaplaner’s. They are the pioneers of Connected Planning who are building best practices within the industry, acting as leading experts that represent the top 1% of Anaplan users while evangelizing the platform in their everyday jobs by architecting and deploying innovative Connected Planning solutions. We also rolled out the Anaplan University Connect program, which connects Anaplan to educational institutions and communities. We are helping students but come better prepared for tomorrow's careers by developing Anaplan modeling skills and helping our customers locate Anaplan skilled talent. Finally, and the fifth way we were able to improve our adoption is with our expanded partner ecosystem. We have a broad network of consulting and implementation partners that help expand our customer reach and accelerate the scale and delivery of our platform. With over 1,000 individual partners trained as Anaplan consultants, we are off to a great start and we expect even more expansion in the coming fiscal year. Seeing the value that the Anaplan practice bring, partners are increasing their level of commitment and investment. As an example, one of our largest partners has finalized plans to scale it's practice three times more than they did before. We saw increased partner contribution positively impact our net new deals this year when we leverage partners in our sales cycle, our average ACV is nearly three times larger overall. And as a result, our partners are eager to grow their business on the Anaplan practice. For example, with EY, they're investing to help drive enterprise scale transformation with our planning solution. They are focused on financial services and banking customers to help them accelerate their customer's decision making by using our platform. We're excited to have the global partnership with them, bring faster time to value for the world's leading financial services firms. We're also building solutions together with our partners to provide smarter options for our customers. As an example with EY we offer a cloud spend optimization solution that allows users to address several key value drivers including identifying wasted spend on cloud solutions, ways to maximize utilization and load forecasting. We also have worked closely with our premium partner, Deloitte on a digital commercial planning solution for CPG, the first of its kind solution. It connects the front end of CPG companies to their end users by targeting consumer products and retail companies. This solution delivers tighter integration with demand planning, promotion and retail execution, all of which results in real time visibility of the category brand and customer P&Ls. Over the coming year we will prioritize our customer first while we accelerate our execution efforts. We will also continue to invest in sales and marketing our partner ecosystem and the product enhancements. In addition, we will hire and retain the best talent while building a sustainable and thoughtful culture. With the momentum we are experiencing and the massive opportunities ahead, we are confident that we will maintain our leadership in this space. Now let me turn the call over to Dave who will discuss out fourth quarter financials and provide our outlook for the first quarter and fiscal year 2020. Dave?

[Dave Morton:]

Thanks Frank and good morning, everyone. Anaplan’s solid fourth quarter and fiscal year 2019 performance was driven by a strong revenue growth, momentum with an expanding customer base, increasing deal size, healthy unit economics and early returns on our purposeful investments in the go to market and R&D functions, all of which we believe positions us to extend our leadership because we pursue an exciting market opportunity in fiscal 2020 and beyond. Total revenues for the fourth quarter grew 49% year-over-year to $69 million, subscription revenues were $60 million, up 44% year-over-year and comprised 86% of total revenue. Service revenues were $10 million, up from $5 million in the fourth quarter last year. Total revenues for fiscal 2019 were $241 million, up 43% year-over-year demonstrating strong growth at scale and a reacceleration of revenue compared to the prior year. Calculated billings for the fourth quarter was $101 million and grew 54% from the previous year. Billings for the fiscal year was $290 million and grew 42%. Our international business continued to perform well and provides a significant opportunity to further expand and invest in the use of our platform outside of the United States. Revenue from the international operations grew 48% in the fourth quarter and represented approximately 43% of total revenue. We had a record quarter achieving our highest net new ACV as well as new customers acquired and the highest G2K customer adds. Turning to our key metrics, we had new customer growth was strong. We ended the year with over 1,100 customers. Our dollar-based net expansion rate underscores our ability to retain and steadily expand business with our existing customers. The key metric continues to track well above 120% and this quarter was 123%. We ended the year with 248 customers, over $250,000 in annual recurring revenue up from 181 customers this time last year. We had four deals over $1 million in the breadth of our top 10 land and expand deals, span industries such as financial services, chemical, biopharmaceutical, retail and consumer packaged goods and media. We are still in the early phase of seeing meaningful returns from our increased investment over the fiscal years with our go-to-market and R&D functions. But we are seeing reacceleration in our top line billings and better leverage and scale within our financial model, as we exited the fiscal year with EBITDA margins of a negative 18%. Fourth quarter gross margins were 72% compared to 73% in the same period last year, reflecting a higher services revenue mix this quarter. Subscription gross margins were 83%, up approximately 90 basis points year-over-year and services gross margins were approximately 5%. For the fourth quarter, total operating expenses were $66 million, up from $50 million in the prior year and reflecting our go-to-market investments. Fourth quarter loss from operations was $16 million approximately flat compared to the same period last year. Operating margins of negative 23% improved 12 percentage points compared to negative 35% in the same period last year as we balanced growth with continued improvement in operating margins. Net loss per share in the fourth quarter was $0.13 based on 119 weighted average shares. Free cash flow, which is defined as our cash from operations, less capital expenditures for the fourth quarter was negative $20 million. We exited the fiscal year with $327 million of cash and cash equivalents. Looking ahead, the guidance for the fiscal year 2020, for the first quarter we expect total revenue to be in the range of $70 million to $71 million and non-GAAP operating margin to be in the range of negative 34.5% to $35.5%. Weighted average share count for Q1 is expected to be approximately 122 million shares. For the fiscal year of 2020, we expect total revenue to be in the range of $310 million to $314 million as we expect billings for the fiscal year to track in line with overall revenue growth rates. As a reminder, quarterly calculated billings can fluctuate from quarter-to-quarter impacted by timing of renewals and of annual contracted billings. We expect non-GAAP operating margins for the full year to be in the range of negative 26% to 27%, including seasonality in certain expenses such as our annual sales kickoff event and audit fees. First quarter operating expenses will also reflect the full quarter impact from new hires, added during the latter part of the fourth quarter, as well as further expected ramping of headcount in the first quarter. For fiscal 2020, we have moved our annual user conference to June and the expenses from that event will be incurred in the second fiscal quarter this year versus the first fiscal quarter last year. Weighted average share count for the full year is expected to be approximately 125 million shares. In summary, we believe our fiscal 2019 performance demonstrates that we have a long runway for meaningful growth and we will continue to make investments to extend our leadership in this market. We're confident we can continue to drive growth at scale with strong customer economics, while continuing to improve our operating margins. And we look forward to continued execution against our growth strategy. With that, we will now turn it back to the operator to take your questions.

[Operator:]

[Operator Instructions] Your first question comes from Stan Slotsky with Morgan Stanley. Your line is open.

[Stan Slotsky:]

Hi guys, good morning and thank you so much for taking my question. So very strong momentum seen across the board, specifically in certainly sounds like in use cases outside of the core finance? What are you seeing in areas like supply chain and then within sales. Maybe just give us a quick update on how much of your business is now happening from outside of the core finance. And then I have a quick follow-up.

[Frank Calderoni:]

Hi Stan, it’s Frank. Thank you for your question. So as we've mentioned before, I mean, the breadth of the Anaplan platform is that it does span across the enterprise. And it's great to see that we have very strong, both land as well as expand business in sales, supply chain and workforce planning. If you look at it from a percentage of our business that represents about 40%, that's been fairly consistent now for a number of quarters. But it shows even with the example that I mentioned on the call that regardless of where we land, we tend to have expansion that goes beyond the starting use case. So the starting function, which enables it to be much more enterprise wide. So we're very pleased with how things have performed. And we are increasing our focus with partners in the sales arena as well as in supply chain because we think it fits extremely well with the platform that we have.

[Stan Slotsky:]

Okay, perfect. And then a quick follow-up for Dave, very strong billings in the quarter, if you – on total billings maybe if you – some investors look at it in a subscription billings basis but regardless of how you slice and dice is very strong results. Is there anything one-time or something that we need to be mindful of that happened in the quarter that impacted deferred revenue dynamics? That’s it. Thank you.

[Dave Morton:]

Yes, appreciate it, Stan. There was nothing unique or unusual about this past quarter. And it just really stems from the overall connected planning. And we're still very, very early innings, not only from that journey, but then also just our overall opportunity as we look at this landscape. And so if you put everything in combination together of just not billings, but if you look at our land and expand, our NRR rates, our total customers above 250,000, just even that growth and the scale. And then even as Frank was referencing, not only use cases within finance, but outside of finance. I mean, just the opportunities continue to grow. And so even though the management team isn't necessarily focused on that one specific item i.e. billings, more or less over the overall enterprise. And we like those opportunities and so that's how we position ourselves going forward.

[Stan Slotsky:]

Perfect. Thank you so much.

[Operator:]

Your next question comes from Alex Zukin with Piper Jaffray. Your line is open.

[Alex Zukin:]

Hey guys, congratulations on another strong quarter. I guess, maybe first for Frank, can you comment on how sales productivity is trending and how should we think about the incremental productivity gains going forward toward next year? Then I’ve got a quick follow-up.

[Frank Calderoni:]

Yes. So clearly, I know we've talked about this now as we went through the IPO and then on the last call. The importance of this past fiscal year, fiscal year 2019, from an Anaplan standpoint was the investments that we were making in sales, in the go-to-market with the partner ecosystem as well as with engineering. And I'm very pleased with how all three have turned out. I think it's reflective in the results that we were able to demonstrate in Q3 and Q4. From a sales standpoint that the – again, we added capacity in FY2019, that was the plan. And that's going quite well. We finished the year on a strong note, I would say, an indication of some of the productivity I think we've talked about this before. Our ramping is about 12 to 18 months and that pretty much continues. So those that we brought on this past year will continue to ramp as we go into FY2020. And the whole purpose of that was to make sure that we expanded our capacity to continue the growth in 2020. Some of the key things that I'm really pleased about is if the number of individuals, in this past year on the sales organization that were able to make club, was significantly above where they were the year before. So it's showing that we're seeing the productivity, the teams are really engaged in delivering. We also have had a significant reduction in attrition, we've been on the low end of attrition versus if you look at companies in general, especially SaaS companies. And I would say the overall morale and enthusiasm of the sales team, which was reflected even just two weeks ago at our kickoff for 2020, was outstanding. So all of that shows that the investments that we're making, really working out, we have an energized, enthusiastic sales force and they're ready for 2020.

[Alex Zukin:]

Perfect. And then Dave, just a follow-up on professional services revenue, it's been a little bit more volatile seasonally this year than if you look at the prior year in the fourth quarter, it's saw a pretty strong move up sequentially in the fourth quarter. I'm wondering how should we look at that for fiscal 2019, what drove that sequential increase? Is that – should we think of that almost as a forward-looking indicator of your growth potential? What's the right way to frame that?

[Dave Morton:]

Yes, good question. We'll continue to deemphasize our professional services, specifically as how we go to market with our strong partner program. And so this past quarter was really just the catch-up on some of the overall momentum for the year. And so even we will have some limited seasonality from quarter-to-quarter, there was nothing in there specific that would suggest one trend versus the other. And that's why our team focuses really been on the subscription piece of it. And so for us, we just looked at this last quarter and really year-end is just a catch-up over the overall year. So there was nothing really specific to it.

[Alex Zukin:]

Perfect. Thank you, guys.

[Operator:]

Next question comes from Heather Bellini with Goldman Sachs. Your line is open.

[Heather Bellini:]

Great. Thank you so much. I wanted to ask a little bit, I guess just following up on Alex's question, you guys were talking about kind of retention. I was wondering if you could talk a little bit more specifically about quota carrying reps and just kind of how you think about the pace of growth there in fiscal 2020. And I'm not sure if you shared where you ended fiscal 2019. And then, my second question was just given your comments in your prepared remarks, just talking about the – the deal size is being three times larger when you're working with partners. Anything you could update us with in terms of the revenue that are coming in or the revenue generated from partner leads at this point? Thank you.

[Frank Calderoni:]

So you want me to start with the partners? So Heather, thanks for the question, and Dave will jump in on the sales side as well. So the partner ecosystem, as we've been working throughout FY 2019 was one of the major areas for investment. As I mentioned on the call, we had over 1,000 Anaplan consultants out in the ecosystem of the partners and it continues to expand on a regular basis. An indication, I hear this from many investors who actually do some of their due diligence. If you go out there and look at some of our major partners, you'll see that they have an extended number of jobs that are open where they're trying to recruit additional consultants, which is great to see. And I think that bodes well as we go into 2020. The key thing about the partners right now is, we have – it's about 50% of our transactions are about partner led, or partner engaged I should say. And that's been about that throughout, it's been coming up a slowly throughout FY 2019, but it's been a good mix. The key thing that we look at for our customers – for our partners is, first of all, Anaplan plays a critical role in selling the solution or selling the platform, I should say, the Anaplan platform. And then our partners come in and I gave some examples EY and Deloitte and they bring a lot of the transformation services transformation consulting on top of that. And so it's great to see that when we do have partners engaged, we're able to first of all, land higher, three times higher is what the data shows. And then it also helps from the expansion standpoint, we ended up getting faster expands, primarily because partner engagement involves a transformational project or an effort that's well underway with those partners in the customers. And that usually takes an extended period of time. So it does provide us with a tremendous amount of expansion. So we very much appreciate, the partnership engagement that we have. And we'll continue to invest in that, both partners as well as Anaplan to continue that success going forward.

[Dave Morton:]

Yes. Sorry, thanks, Frank, and just some qualitative comments on comments on the productivity. Not only do we have a great partner ecosystem, but then also as we step back and even within our four walls, we're able to model out, using Anaplan and not only the quote in territory, but then also on the productivity. And so not only is how we go to these end journey map across not only the G2Ks, but with different partners, as well as different aspects of the platform that will apply. And so even though we've been very thoughtful, about our resources in the different pods and adding respective individuals to those, I'll call them, one patches. We're still in very, very early innings, but at the end of the day, we do like some of the early returns, if you will and we'll continue to make those proper investments along that path.

[Frank Calderoni:]

And if I could just throw in some other stats, I mean – we mentioned about the top 10 customers, average ARR is almost a $4 million, which is really significant, and that comes from the investment that we're making in the sales from a productivity standpoint as well as having some of the comments I mentioned about the partner ecosystem. The average size of our top 10 new land deals and expand deals, we mentioned this in Q3, but the same in Q4 were both over 500,000 both the lands as well as the expands. And then when we focused on G2K, which is another major point, 70% of our G2K customers have expand deals. And G2k again aligns with the investment that we're making with sales as well as the investment that we're making with partners.

[Heather Bellini:]

Can I just ask one more, any change in the – have you started to see adaptive now that workdays has been focusing there? Have you started to see them a little bit more in your RFPs?

[Frank Calderoni:]

So there's no real change in the competitive dynamics, as we've talked about before, our platform and the approach to enterprise wide planning is unique. And so for all the reasons that we just talked about, as we sell not only in finance but sales, supply chain, workforce planning, and I think that's very compelling to our customers because it does provide the value of some of which I mentioned earlier. And as a result of that, the competitive landscape for us, and we're in a fortunate situation to be leading the connective planning marketplace. So there's really no change.

[Heather Bellini:]

Great. Thank you.

[Operator:]

Next question comes from Brent Bracelin with KeyBanc. Your line is open.

[Brent Bracelin:]

Thank you and good morning. Frank, one for you and one for Dave if I could. You just wrapped up a strong year side acceleration and subscription growth, seeing larger deals, very sharp acceleration in billings. My question for you, Frank, what are you most excited about this year? Is it the partnerships? Is it going to be just improved sales productivity? What are the things you're most excited about? And again, one quick follow-up Dave.

[Frank Calderoni:]

Well, that's a tough question, because I have to say, everything. I mean, it's early here in California and on Monday morning. But, I'm excited, I will have to say every day, seven days a week. But the most thing, and I say this all the time, both internally and externally. What gets me all excited and it started when I first joined Anaplan, is our customers. The stories that we hear from them as we’re working with them on their first land and especially the stories that we hear, after they've had the land and they're really excited about further expand. I have to give you this example. I was in New Jersey a few – during the fourth quarter, and I met with a customer that we had a very large, G2K customer that we with about a year ago. And it was in finance, and as you can imagine, I can't really say the name of this customer. It was – their procurement process was very challenging, but we were able to get through that. And to see where they've come in a year was unbelievable. I spent four hours with them that day and all of that was just going from one part of the organization to another, to another, to another where they talked about all that they were doing on the platform. And then also talking about what more things that they wanted to do at a senior level in the organization. So when you hear and see a real time evidence, and especially with me having spent 30 plus years in the planning space and dealt with so many planning challenges over the years to see it, it's kind of rewarding for me to see that, that, large enterprise companies can really get value from now and really get energized about that value from a new platform.

[Brent Bracelin:]

Got it. So that message is really resonating with larger customers, that certainly encouraging. If things ended my questions for Dave, which is two quarters now, we've talked about larger lands, which are certainly encouraging sign, but how should we think about the net expansions? Typically when we see larger expands, that does put a little more pressure on the expands. But Frank just talked about, how we see – you’re seeing surprise, relative to the expansions that some of these large customers are having. So how do we think about net expansion with the context of larger lands? Do you think that could remain above 120% or do you think that could moderate and next year?

[Dave Morton:]

Good question Brent. And we've definitely modeled that out internally. And even on our road show, and even last quarter, and will continue to be fairly conservative, within our measured approach. But within the near term and near term being the next year or two, we still think the 120% is achievable. but then, afterwards, as we continue to scale and the original lands continue to become more and more material, we'll have to revisit that. Obviously the economics work for us either way, but we're fairly comfortable here that over the next year or two, the 120%, it should be definitely within our attainment.

[Frank Calderoni:]

So one thing, I'll just throw in here, the top 25 customers, the ARR have an average expansion rate of about 200%. Just to give you an idea that, all of the things that we've been talking about with the other questions that came up, that when you start, especially with large complex companies, when you start working with them and they see the power of the platform is when the expansion really can accelerate.

[Brent Bracelin:]

Very good. Thank you.

[Operator:]

Your next question comes from Richard Davis with Canaccord. Your line is open.

[Richard Davis:]

Hey, quick question. So on the supply chain side, I have to imagine the bottom of the sales when for you guys, it's slightly different buyers and – at least in part of the decision making, if that's so A, is that true? And B, does that change at all kind of the sales cadence? Is it longer or shorter or, maybe you could just kind of talk about that or just be interesting thought. Thanks

[Frank Calderoni:]

So the buyer is different, as you would expect in supply chain. I wouldn't say that the length of the cycle is any longer. It's probably about the same. It's different, but it's probably about the same. We're actually – you're going in, you're dealing with supply chain experts. One of the things that we've done, as we started to of the past year started to see the opportunity and supply chain for us, is two things. One, we've concentrated our focus with partners, this is a great area of where you can bring partner expertise around solutions for supply chain into the equation. So they bring a couple of things. One, they bring the right connections in supply chain. Secondly, they bring the awareness, having worked with those companies before and what the needs are. And third, of course, they can help us with some of the solutions around supply chain. The second thing I would say, as it relates to, supply chain is what we've done in Anaplan is that we've hired several on the team, that have experienced in supply chain. Similar to what we did back a couple of years ago, when we were primarily focused in finance and then also in sales is bring expertise in on the Anaplan team, we call it a village that actually become somewhat of a SWAT team that goes out and works with the AEs that we have on specific accounts and we know that there's interest in supply chain. So, that helps us position both with the partners and with the equities that we have for a successful implementation. And I will say, when we do get supply chain lands, it really helps us make connections back into finance if we start in supply chain. And then there's also a strong connection back into sales. So supply chain deals tend to work well, bode well for enterprise Connected Planning.

[Richard Davis:]

That's very helpful. Thank you so much.

[Operator:]

Your next question comes from Raimo Lenschow with Barclays. Your line is open.

[Raimo Lenschow:]

Steve, thanks for taking my question and congrats on a great quarter. The – quick question Frank, where are we on the sales side in terms of splitting territories where there is still expanding coverage? I seem to remember like when you started kind of the company had fallen behind a little bit and have seen acceleration in the go-to market et cetera. Where are we at this point in terms of where you want to be?

[Frank Calderoni:]

I again, I would say that FY19 was very successful for us in the go-to market of both as talked lot about the partners, but also with the sales deployment, for all the reasons I have mentioned, I'll say this, we opened in FY19 I don't know the exact number, we call them pods and I think we – during the IPO we talked about we had a slightly over 30 pods on a global basis. We added some additional pods in FY19, pods could be a region or it could be a country, two of the countries that we added this past year were Germany as well as India and we added I think a part or two in Europe as well as in the United States. Going into 2020, now that we're starting up the new year and with the kickoff that we had a few weeks ago, we're also splitting territories because of the growth that we've seen this past year and then creating new pods, in the U S, in Europe, as well as in Asia-Pacific we're seeing growth in those pods in all regions, which is part of how we're going to look for an acceleration of that growth in 2020.

[Raimo Lenschow:]

Okay, perfect. And then one follow-up, if I look to you – one of the commentaries in the Magic Quadrant on the Sales Performance was that you don't and some of the deals you don't show up because you're just kind of a broader – you're selling a broader platform but kind of you might miss out on some field specific et cetera. How do you think of it in 2020 about like your go-to market in terms of the platform message versus maybe kind of adding like more vertical or more functional kind of sales capabilities?

[Frank Calderoni:]

So the benefit clearly is the Connected Planning platform that crosses across the enterprise. We don't always go in and sell the Connected Planning platform first. It depends on the customer's situation. We could end up, if there's a specific request out for, let's say a finance transformation or finance project we will go in there and talk finance. At the same time we talk about long-term, that they have much more capability in the platform. But if it's a transformational, like if they're doing digital transformation or their driving something broader across the enterprise will clearly start with the Connected Planning platform. So it varies depending upon the customer requirement, at the time that we're entering the customer. And then the other thing that we do is similar to what I just mentioned a few minutes ago, is that we will bring in a partner solution, right. So the partner solution will help us address either the narrow opportunity or the broader opportunity depending upon the needs of that customer. And the example that I mentioned in New Jersey was a great example. We started out with one use case in finance a year ago and it extended more broadly across finance and now we're talking about sales opportunities and the sales function.

[Raimo Lenschow:]

Perfect, makes perfect sense. Thank you. Well done.

[Operator:]

Your next question comes from Kirke Materne of Evercore ISI, your line is open.

[Daniel Greenfield:]

Hi, this is Daniel Greenfield on for Kirke. Can you just discuss where your ecosystem partners are in terms of selling the whole Connected Planning vision, meaning are they honing in on selling specific use cases around say financial planning or more focused on selling the entire enterprise planning vision? Thanks.

[Frank Calderoni:]

Again, both the partners will focus on both. I would say we have a group of boutique partners in each of the regions around the world that tend to specialize. Some of them specialize in finance, some of them specialize in supply chain, some of them specialize in sales. And so they tend to focus specifically on use cases from a functional standpoint, the SI tend to focus more on the broader solution, that could be a digital transformation, a finance transformation, a supply chain transformation which tend to be a broader across the enterprise and longer-term let's say over several years. And one other thing I'll add too is, the amount of focus that we get from partners as it pertains to verticals, which of course applies to customers in healthcare or retail or banking, I mentioned EY during the call as far as the focus they have on financial services and banking customers. So we tend to also get certain partners that tend to focus on specific industries and therefore solutions appropriate on Anaplan’s platform for the needs of those customers may have. And by the way on that, we're probably going to be emphasizing some of those vertical solutions, even more or so this year.

[Daniel Greenfield:]

Okay. Thanks.

[Operator:]

Your next question comes from Pat Walravens with JMP. Your line is open.

[Pat Walravens:]

Oh, great. Thank you and congratulations Frank and Dave. So it's great to see Anaplan driving the success of Connected Planning. My question is around this idea of the sensitivity of CFOs to put their financial data in the cloud. We used to hear that a lot, you were both formerly CFOs of big companies. So does that concerns still exist? If so, where do you see it? And how do you address it?

[Frank Calderoni:]

I was – I was just having this conversation over the last couple of weeks. We had our quarterly business review and we had a strategy session last week, so we had a lot of conversation on this. It's amazing for me because as you mentioned and Dave can probably say the same thing, having spent so many years on the side thinking about cloud and being concerned about the cloud, how far I think it's come in the last year or two years. And those companies are really aggressively adopting cloud even more or so than ever before. And I would say there are some exceptions. I think understandably, financial institutions tend to still be a bit more cautious as it relates to data in the cloud. But even them had been much more open to working with cloud providers like Anaplan, I'm anticipating especially with some of the customers, situations that have come up in the last quarter, even more aggressive movement to the cloud and also from the standpoint, one thing I'll throw out there is that customers are looking at Anaplan especially the ones – even the one that I mentioned with 10 or 15 or 20 use cases a really standardizing on Anaplan as one of if not, one of the few platforms that they have. So yes, the adoption for cloud is moving forward much more aggressively than I've ever seen.

[Pat Walravens:]

Great. Thank you very much.

[Operator:]

Your next question comes from Scott Berg with Needham. Your line is open.

[Unidentified Analyst:]

Great. This is [indiscernible] on for Scott Berg. You've already talked a little bit about this, but can you expand on what regions are focused for investment in calendar 2019 and then our international deals typically more or less partner led than domestic deals?

[Frank Calderoni:]

The answer to the latter is no. One of the things that I would say there's no difference by geographic region. I will say that in Asia-Pacific we have not expanded the partner ecosystem as aggressively as we have in the U.S and in Europe. And that's less focused in a lot of part of this past year and will be further focused as we go into 2020. And as far as the investments for 2020, again continuation of what we've been able, I’d say the three things again, which is sales capacity, building on the success we had this past year. The partner ecosystem again building on the success we've had this past year, highlighting Asia-Pacific as I just mentioned here. And then the third is the product platform. We have a unique platform. We're very excited to have the Hyperblock technology in enabling Connected Planning. We have a rollout of new products that are coming up over the next couple of months, specifically around user-interface, mobility and also intelligent planning. Dave mentioned earlier that we have our Connected Planning user conference this year in June in San Francisco, where we're going to have probably a large number. It is anticipated – we're anticipating a large number of customers as well as partners really to talk about the platform and the enhancements that we're making in the product side. So we're looking forward to that.

[Unidentified Analyst:]

Okay, great. And then maybe just one more financial question, the guidance suggests the healthy level of margin leverage in the second half based on Q1 guidance. Is there any specific line item that should benefit in the model?

[Dave Morton:]

No, it's just an overall scale and size and as we continue to go to market, like I've said we're starting to see early innings from our investments and so we're really excited about where we're at today, but there's nothing I would suggest there's going to be any inherent change, not only within our financial model but also strategy and so it just really comes down to size and scale.

[Unidentified Analyst:]

Great. Thanks guys.

[Operator:]

Your last question comes from Terry Tillman with SunTrust. Your line is open.

[Unidentified Analyst:]

Hey, guess this [indiscernible] on for Terry. Thanks for squeezing me in. Just one for me, can you give an update on the sales planning use case and anything that can be said about demand generation coming out of last year during reinforce conference, any benefits that you're seeing in the scheduled billings.

[Frank Calderoni:]

So, you are talking about the sales planning, use case just the whole SPM space, it's going extremely well. We're adding a large number of customers, doing territory planning called assignment, compensation, sales compensation analysis, sales forecasting. One of the things I'll say is, we built this past year even more so we call it Anaplan on Anaplan SPM, that Steven Birdsall our Head of Sales is using to leverage the investment that we're making in Anaplan across sales as we talked about that on the call today. Having an Anaplan model that does all of the territory assignments, quota management, sales forecasting has been outstanding and we're actually using that now, just the Anaplan plan model has the demonstration to customers and it's going extremely well. Customers are seeing a very live enterprise wide to SPM, but also expanding across the enterprise and it's really making a compelling case for them to also do the same thing, so really excited about that.

[Operator:]

And at this time I will, Oh pardon me. I'll turn the call over to Mr. Calderoni

[Frank Calderoni:]

Thanks everyone for joining our call today. I just want to thank you all to our customers, our partners and our shareholders as well as all the team members with Anaplan for their continued support and we look forward to talking to you again in the next quarter. Thank you.

[Operator:]

This concludes today’s conference call you may now disconnect.