Anaplan (PLAN) 10-Q 2021 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  For the transition period from:                  to

Commission File Number 001-38698

ANAPLAN, INC.

(Exact name of registrant as specified in its charter)

Delaware	27-0897861
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

 50 Hawthorne Street

San Francisco, California 94105

(Address of principal executive offices)

(415) 742-8199

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	PLAN	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☑ 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:	☑	Accelerated filer:	☐
Non-accelerated filer:	☐	Smaller reporting company:	☐
		Emerging growth company:	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐           

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No ☑  

As of May 29, 2020, the number of shares of the registrant’s common stock, $0.0001 par value per share, outstanding was 137,540,450.

TABLE OF CONTENTS

		Page
	Part I. FINANCIAL INFORMATION	5
Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Comprehensive Loss	6
	Condensed Consolidated Statements of Stockholders’ Equity	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30
Item 4.	Controls and Procedures	30
	Part II. OTHER INFORMATION	32
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64
Item 6.	Exhibits	65
	Signatures	66

2

CAUTIONARY note regarding FORWARD-lOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements. All statements other than statements of historical facts contained in this report are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect,” “could,” “plan,” “potential,” “predict,” “seek,” “should,” “would,” or the negative version of these words and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short- and long-term business operations and objectives, and financial needs. The forward-looking statements are contained principally in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.” Forward-looking statements contained in this report include, but are not limited to, statements about:

• the impact of the global pandemic related to the novel coronavirus and resulting COVID-19 pandemic, and any associated economic downturn on our business operations and financial results 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, deferred revenue, and billings;

• our ability to sell our platform to new customers;

• our ability to retain, and expand use of our platform by, our existing customers;

• our ability to train our customers and partners to effectively utilize our platform;

• the sufficiency of our cash and cash equivalents to meet our projected operating requirements;

• our ability to maintain the security of our platform;

• our ability to maintain the availability of our platform;

• 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 ecosystems;

• our estimated total addressable market;

• our ability to maintain, protect, and enhance our intellectual property;

• our ability to enhance our platform 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 attraction and retention of qualified employees and key personnel and the rate of expansion and productivity of our sales force;

• our anticipated investments in sales and marketing and research and development;

• our ability to realize anticipated benefits from strategic transactions in a timely manner;

• our ability to manage changes in foreign currency exchange rates and effectively hedge our foreign currency exposure; and

• our ability to successfully defend litigation brought against us.

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

3

assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. The forward-looking statements made in this report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this report to reflect events or circumstances after the date of this report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this report and the documents that we reference in this report and have filed with the Securities and Exchange Commission as exhibits to this report with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

4

PART I

item 1. Financial Statements

ANAPLAN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

	As of
	April 30, 2020			January 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	303,098		$	309,894
Accounts receivable, net of allowances for credit losses of $2,768 and $996    as of April 30, 2020 and January 31, 2020, respectively		92,971			109,217
Deferred commissions, current portion		26,488			25,990
Prepaid expenses and other current assets		16,195			17,814
Total current assets		438,752			462,915
Property and equipment, net		49,994			48,639
Deferred commissions, net of current portion		58,825			57,947
Goodwill		32,379			32,379
Operating lease right-of-use assets		35,520			37,875
Other noncurrent assets		11,745			10,052
TOTAL ASSETS	$	627,215		$	649,807
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	10,646		$	5,331
Accrued expenses		70,629			79,024
Deferred revenue, current portion		205,958			216,059
Operating lease liabilities, current portion		6,548			7,278
Total current liabilities		293,781			307,692
Deferred revenue, net of current portion		6,280			4,149
Operating lease liabilities, net of current portion		32,422			34,017
Other noncurrent liabilities		14,151			12,268
TOTAL LIABILITIES		346,634			358,126
Stockholders' equity:
Common stock, par value of $0.0001 per share; 1,750,000 shares    authorized as of April 30, 2020 and January 31, 2020; 137,131    and 135,495 shares issued and outstanding as of April 30, 2020    and January 31, 2020		13			13
Accumulated other comprehensive loss		(2,575	)		(4,326	)
Additional paid-in capital		815,756			788,447
Accumulated deficit		(532,613	)		(492,453	)
TOTAL STOCKHOLDERS' EQUITY		280,581			291,681
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	627,215		$	649,807

The information as of January 31, 2020, was derived from the Company’s audited Consolidated Balance Sheet as of January 31, 2020.

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

ANAPLAN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, except per share data)

(Unaudited)

	Three Months Ended April 30,
	2020			2019
Revenue:
Subscription revenue	$	93,824		$	65,085
Professional services revenue		10,020			10,745
Total revenue		103,844			75,830
Cost of revenue:
Cost of subscription revenue		15,185			11,091
Cost of professional services revenue		9,555			10,486
Total cost of revenue		24,740			21,577
Gross profit		79,104			54,253
Operating expenses:
Research and development		23,762			15,059
Sales and marketing		71,674			56,290
General and administrative		22,428			20,013
Total operating expenses		117,864			91,362
Loss from operations		(38,760	)		(37,109	)
Interest income, net		511			1,251
Other income (expense), net		(331	)		(246	)
Loss before income taxes		(38,580	)		(36,104	)
Provision for income taxes		(1,022	)		(1,087	)
Net loss		(39,602	)		(37,191	)
Comprehensive loss:
Foreign currency translation adjustments		1,751			(266	)
Comprehensive loss	$	(37,851	)	$	(37,457	)
Net loss per share attributable to common stockholders,    basic and diluted	$	(0.29	)	$	(0.30	)
Weighted-average shares used in computing net loss per    share attributable to common stockholders, basic and    diluted		136,362			122,992

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

ANAPLAN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

							Accumulated
					Additional		Other						Total
	Common Stock				Paid-in		Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Capital		Loss			Deficit			Equity
Balance at January 31, 2020		135,495	$	13	$	788,447	$	(4,326	)	$	(492,453	)	$	291,681
Cumulative adjustment upon adoption of     ASC 326 (Note 1)		—		—		—		—			(558	)		(558	)
Stock-based compensation		—		—		23,486		—			—			23,486
Exercise of stock options, net of repurchases    and early exercises		698		—		3,798		—			—			3,798
Vesting of restricted stock units		938		—		—		—			—			—
Net loss		—		—		—		—			(39,602	)		(39,602	)
Foreign currency translation adjustments		—		—		—		1,751			—			1,751
Other		—		—		25		—			—			25
Balance at April 30, 2020		137,131	$	13	$	815,756	$	(2,575	)	$	(532,613	)	$	280,581
Balance at January 31, 2019		126,246	$	12	$	653,738	$	(3,036	)	$	(343,236	)	$	307,478
Stock-based compensation		—		—		16,624		—			—			16,624
Repayment of promissory notes, net of early    exercises		—		—		8,157		—			—			8,157
Exercise of stock options, net of repurchases    and early exercises		722		—		3,060		—			—			3,060
Vesting and settlement of restricted stock units		569		—		—		—			—			—
Net loss		—		—		—		—			(37,191	)		(37,191	)
Foreign currency translation adjustments		—		—		—		(266	)		—			(266	)
Balance at April 30, 2019		127,537	$	12	$	681,579	$	(3,302	)	$	(380,427	)	$	297,862

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

ANAPLAN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended April 30,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(39,602	)	$	(37,191	)
Adjustments to reconcile net loss to net cash used in operating    activities:
Depreciation and amortization		6,070			4,355
Amortization of deferred commissions		7,718			4,139
Stock-based compensation		22,493			16,302
Reduction of operating lease right-of-use assets and accretion of    operating lease liabilities		2,852			2,442
Other non-cash items		1,106			(496	)
Changes in operating assets and liabilities:
Accounts receivable		12,848			774
Prepaid expenses and other current assets		1,508			518
Other noncurrent assets		114			(513	)
Deferred commissions		(10,056	)		(8,191	)
Accounts payable and accrued expenses		(2,546	)		6,470
Deferred revenue		(3,159	)		12,061
Payments for operating lease liabilities		(2,835	)		(2,361	)
Other noncurrent liabilities		1,985			(209	)
Net cash used in operating activities		(1,504	)		(1,900	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(1,583	)		(922	)
Capitalized internal-use software		(2,880	)		(2,161	)
Net cash used in investing activities		(4,463	)		(3,083	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options		3,792			3,004
Proceeds from repayment of promissory notes		—			9,280
Principal payments on finance lease obligations		(1,728	)		(1,088	)
Net cash provided by financing activities		2,064			11,196
Effect of exchange rate changes on cash, cash equivalents, and    restricted cash		(743	)		(398	)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS,    AND RESTRICTED CASH		(4,646	)		5,815
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH - Beginning    of period		309,894			326,863
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH - End of    period	$	305,248		$	332,678
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest	$	184		$	65
Cash paid for income taxes	$	307		$	20
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND    FINANCING ACTIVITIES:
Purchases of property and equipment included in liabilities	$	1,687		$	568
Finance leases for property and equipment	$	568		$	2,423

The accompanying notes are an integral part of these condensed consolidated financial statements.

8

ANAPLAN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Summary of Business and Significant Accounting Policies

Description of Business

Anaplan, Inc. (the Company, Anaplan, we, us, or our) was incorporated in Delaware on July 9, 2009 and is headquartered in San Francisco, California, with offices in multiple U.S. and international locations.

The Company provides a cloud-based connected planning platform that helps connect organizations and people to make better and faster decisions. The Company delivers its application over the Internet as a subscription service using a software-as-a-service (SaaS) model. The Company also offers professional services related to implementing and supporting its application.

Fiscal Year

The Company’s fiscal year ends on January 31. References to fiscal 2021, for example, refer to the fiscal year ending January 31, 2021.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting and include the accounts of the Company and its wholly owned subsidiaries (collectively, the Company). All significant intercompany balances and transactions have been eliminated in consolidation. The unaudited condensed consolidated balance sheet as of January 31, 2020, included herein was derived from the audited financial statements as of that date, but does not include all disclosures including certain notes required by U.S. GAAP on an annual reporting basis. The unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the balance sheets, statements of comprehensive loss, statements of stockholders’ equity, and statements of cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year or any future period. Certain prior period amounts in the condensed consolidated financial statements have been reclassified to conform to the current period’s presentation.

The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Form 10-K filed with the SEC on March 30, 2020.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates include, but are not limited to, the determination of revenue recognition, certain assumptions in the valuation of stock awards, the determination of the period of benefit for deferred commissions, the determination of the incremental borrowing rate used for operating lease liabilities, the allowance for credit losses, and the fair value of assets acquired and liabilities assumed for business combinations. 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 outbreak, impact on the Company's customers, prospective customers, sales cycles, and employees, all of which are uncertain and cannot be predicted. During the quarter ended April 30, 2020, we assessed the impact of COVID-19, including our estimate of credit losses for accounts receivable. As of the date of filing of these unaudited condensed consolidated financial statements, the Company is not aware of any specific event or circumstance that would require updating significant estimates or judgments or revising the carrying value of the Company's assets or liabilities as presented in the unaudited interim condensed consolidated financial statements. These estimates may change as new events occur and additional information is obtained. Actual results could differ from those estimates and any such differences may be material to our financial statements.

9

Summary of Significant Accounting Policies

The Company’s significant accounting policies are discussed in Note 1 of the notes to the consolidated financial statements included in the Company’s Form 10-K filed with the SEC on March 30, 2020. There have been no significant changes to these policies during the three months ended April 30, 2020, except as noted below.

Accounts Receivable, net

The Company adopted Accounting Standards Codification Topic 326 (ASC 326), Financial Instruments – Credit Losses, effective starting 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 April 30, 2020, the allowance for credit losses reflects increased collectability concerns stemming from the COVID-19 pandemic. The allowance for credit losses was $2.8 million and $1.0 million as of April 30, 2020, and January 31, 2020, respectively.  

Recently Issued Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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 is in the process of assessing the impact of this ASU 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

Cash, Cash Equivalents and Restricted Cash

The following table provides a summary of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that reconciles to the corresponding amount in the condensed consolidated statements of cash flows:

	As of
	April 30, 2020		January 31, 2020		April 30, 2019		January 31, 2019
	(In thousands)
Cash and cash equivalents	$	303,098	$	309,894	$	332,678	$	326,863
Restricted cash included in other noncurrent assets		2,150		—		—		—
Total cash, cash equivalents and restricted cash shown in    the condensed consolidated statements of cash flows	$	305,248	$	309,894	$	332,678	$	326,863

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As of April 30, 2020, the Company’s other noncurrent assets included $2.15 million in restricted cash as a collateral for certain of our operating leases.

Property and Equipment, net

Property and equipment consisted of the following:

	As of
	April 30, 2020			January 31, 2020
	(In thousands)
Computer and office equipment	$	47,853		$	46,986
Leasehold improvements		12,674			12,728
Internal-use software		32,026			29,445
Construction in progress		7,379			3,943
Property and equipment, gross		99,932			93,102
Less: accumulated depreciation		(49,938	)		(44,463	)
Property and equipment, net	$	49,994		$	48,639

Depreciation expense was $5.7 million and $4.3 million for the three months ended April 30, 2020 and 2019, respectively.  

The Company capitalized $3.8 million and $2.5 million in internal-use software in the three months ended April 30, 2020 and 2019, respectively, of which $1.0 million and $0.3 million was stock-based compensation expense for each respective period. Amortization of the capitalized internal-use software, included in total depreciation expense above, was $2.1 million and $1.3 million in the three months ended April 30, 2020 and 2019, respectively.  

Accrued Expenses

Accrued expenses consisted of the following:

	As of
	April 30, 2020		January 31, 2020
	(In thousands)
Vendor accruals	$	8,849	$	11,098
Accrued commission		4,892		10,033
Accrued bonuses		6,215		14,279
Accrued other payroll liabilities		25,736		21,077
Current portion of finance lease obligations		7,003		6,956
Accrued other		17,934		15,581
Accrued expenses	$	70,629	$	79,024

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Preferred Stock

As of April 30, 2020 and January 31, 2020, the authorized preferred stock of the Company consisted of 25 million shares with a par value of $0.0001 per share. There were 0 shares of preferred stock issued and outstanding as of April 30, 2020, and January 31, 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 Bank, N.A. (“Wells Fargo”) as administrative agent and lender (the “Third Amendment”). Among other things, the Third Amendment further amends the Credit Agreement entered into with Wells Fargo in April 2018, as amended in September 2018 and October 2019 (the “Credit Agreement”) in order to: (1) increase the aggregate revolving credit commitment amount by $20.0 million, so that the Company may borrow up to $60.0 million under a secured revolving credit facility, subject to the terms of the Credit Agreement including the accounts receivable borrowing base, for general corporate purposes; and (2) extend the maturity date of the revolving credit facility until April 23, 2022. Also, pursuant to the Third Amendment, any loans drawn on the credit facility will incur interest at a rate equal to the highest of (A) the prime rate, (B) the federal funds rate plus 0.5%, and (C) the one-month LIBOR plus 1%. Interest is payable monthly in arrears with the principal and any accrued and unpaid interest due on April 23, 2022. As of April 30, 2020, and January 31, 2020, the Company had 0t drawn down any amounts under this agreement. As of April 30, 2020, the Company was in compliance with the financial covenants contained in the agreement.   

(4) Leases

The Company leases certain facilities under operating leases that expire from fiscal 2021 to 2028. The Company also enters into finance leases to finance equipment.

The components of lease expense were as follows:

	Three Months Ended April 30,
	2020		2019
	(In thousands)
Operating lease costs	$	2,852	$	2,442
Finance lease costs
Amortization of assets	$	1,785	$	1,120
Interest on lease liabilities		184		199
Total finance lease costs	$	1,969	$	1,319

Supplemental balance sheet information related to leases is as follows:

	As of
	April 30, 2020			January 31, 2020
	(In thousands)
Operating leases:
Operating lease ROU assets	$	35,520		$	37,875
Operating lease liabilities, current portion	$	6,548		$	7,278
Operating lease liabilities, net of current portion		32,422			34,017
Total operating lease liabilities	$	38,970		$	41,295
Finance leases:
Property and equipment, gross	$	21,884		$	21,321
Less: accumulated depreciation		(9,129	)		(7,347	)
Property and equipment, net	$	12,755		$	13,974
Accrued expenses	$	7,003		$	6,956
Other noncurrent liabilities		6,017			7,261
Total finance lease liabilities	$	13,020		$	14,217

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Weighted-average lease terms and discount rates are as follows:

	As of April 30, 2020
	Operating Leases	Finance Leases
Weighted-average remaining lease terms	5.5 years	1.9 years
Weighted-average discount rates	5.6%	5.2%

Future minimum lease payments under operating leases and finance leases as of April 30, 2020, are as follows:

	As of April 30, 2020
	Operating Leases			Finance Leases
	(In thousands)
Years ending January 31,
2021 (remaining 9 months)	$	6,711		$	5,878
2022		7,829			6,067
2023		7,855			1,794
2024		7,501			46
2025		6,825			—
Thereafter		9,183			—
Total lease payments		45,904			13,785
Less: amount representing interest		(6,737	)		(765	)
Less: leases less than 12 months		(197	)		—
Total lease liabilities	$	38,970		$	13,020

The Company enters into commitments to lease computer and office equipment for which the timing of the lease payments is not determined until the date of commencement. As of April 30, 2020, the amounts related to these leases were approximately $3.9 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 allocation of the purchase price for this acquisition has been prepared on a preliminary basis and changes to the allocation to certain assets, liabilities, and tax estimates may occur as additional information becomes available.

The following table summarizes the preliminary allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed:

	(In thousands)
Cash	$	2,735
Other current and noncurrent assets		1,793
Intangible assets		7,300
Goodwill		32,379
Deferred revenue		(2,100	)
Other current and noncurrent liabilities		(5,880	)
Total purchase consideration	$	36,227

The total cash consideration was $33.5 million, net of cash acquired of $2.7 million, and was fully paid in fiscal 2020. 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 and liabilities assumed was recorded as goodwill, and is attributable to Mintigo’s

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workforce and the synergies expected to arise from the acquisition. The Company does not expect goodwill to be deductible for income tax purposes.

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 are as follows:

	As of
	April 30, 2020			January 31, 2020
	(In thousands)
Developed technology	$	5,200		$	5,200
Customer relationships		2,976			2,976
Intangible assets, gross	$	8,176		$	8,176
Less: accumulated amortization		(1,658	)		(1,323	)
Intangible assets, net	$	6,518		$	6,853

Amortization expense of acquisition-related intangible assets was immaterial for the three months ended April 30, 2020 and 2019.

The expected future intangible assets amortization as of April 30, 2020 is as follows:

	As of April 30, 2020
	(In thousands)
Years ending January 31,
2021 (remaining 9 months)	$	1,005
2022		1,340
2023		1,340
2024		1,340
2025		993
Thereafter		500
Total future intangible assets amortization	$	6,518

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(7) Employee Stock Plans

As of April 30, 2020 and January 31, 2020, the Company was authorized to issue 1,750,000,000 shares of common stock. Shares were reserved for future issuance as follows:

	As of
	April 30, 2020		January 31, 2020
	(In thousands)
Outstanding stock options		9,802		10,198
Outstanding restricted stock units		10,184		10,260
Outstanding stock purchase rights		—		5
Shares available for future issuances under    the 2018 Stock Plan		22,678		17,071
Shares available for future issuances under    the 2018 ESPP		4,221		2,786
Total		46,885		40,320

Stock Options

A summary of stock option activity for the three months ended April 30, 2020, was as follows:

	Number of Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value
Balance as of January 31, 2020		10,198		$	11.69	$	468,079
Options granted		411			38.22		-
Options exercised		(698	)		5.43		-
Options forfeited		(109	)		7.56		-
Balance as of April 30, 2020		9,802		$	13.30	$	273,990
Exercisable as of April 30, 2020		4,534		$	5.99	$	158,198
Vested and expected to vest as    of April 30, 2020		8,644		$	10.40	$	264,670

As of April 30, 2020, unrecognized stock-based compensation cost related to outstanding unvested stock options that are expected to vest was $22.7 million, which is expected to be recognized over a weighted-average period of 2.5 years.

Restricted Stock Units

A summary of RSU activity for the three months ended April 30, 2020, was as follows:

	Number of Shares			Weighted- Average Grant Date Fair Value
Balance as of January 31, 2020		10,260		$	23.70
RSUs granted		1,085			43.00
RSUs vested		(938	)		18.72
RSUs forfeited		(223	)		26.08
Balance as of April 30, 2020		10,184		$	26.06

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As of April 30, 2020, unrecognized stock-based compensation cost related to outstanding unvested RSUs that are expected to vest was $170.9 million, which is expected to be recognized over a weighted-average period of 3.2 years.

Stock-Based Compensation

The stock-based compensation expense, net of estimated forfeitures, by line item in the accompanying condensed consolidated statements of comprehensive loss is summarized as follows:

	Three Months Ended April 30,
	2020		2019
	(In thousands)
Cost of subscription revenue	$	708	$	491
Cost of professional services revenue		508		492
Research and development		3,646		1,836
Sales and marketing		10,031		6,617
General and administrative		7,600		6,866
Total stock-based compensation expense	$	22,493	$	16,302

The Company’s estimated forfeiture rate is based on accumulated historical forfeiture data.

(8) Fair Value Measurements

The Company did 0t hold any assets or liabilities that are measured at fair value on a recurring basis as of April 30, 2020, or January 31, 2020, and there were 0 transfers into or out of Level 1, Level 2, or Level 3 during the three months ended April 30, 2020 or 2019.

(9) Revenue Recognition

The Company adopted Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, effective February 1, 2018, using the full retrospective transition method.

The Company derives revenue primarily from sales of subscription services and, to a lesser degree, from professional services. Revenue is recognized when a customer obtains access to the platform and receives the related professional services. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to receive in exchange for these services.

Disaggregation of Revenue

The following table summarizes the revenue by region based on the shipping address of customers who have contracted to use the Company’s cloud-based application:

	Three Months Ended April 30,
	2020					2019
	Amount		Percentage of Revenue			Amount		Percentage of Revenue
	(In thousands, except percentage data)
Americas	$	60,070	58		%	$	44,886	59		%
EMEA		32,843	32				24,014	32
APAC		10,931		10			6,930		9
Total	$	103,844	100		%	$	75,830	100		%

The United States and the U.K. were the only two countries that represented more than 10% of the Company’s total revenue in any period. Revenue in the United States and as a percentage of total revenue comprised of $57.7 million and 56%, and $43.3 million and 57% in the three months ended April 30, 2020 and 2019, respectively. Revenue in the U.K. comprised of $12.0 million and 12%, and $9.5 million and 13% in the three months ended April 30, 2020 and 2019, respectively.     

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Contract Balances

Contract assets represent revenue recognized for contracts that have not yet been invoiced to customers, typically for multi-year arrangements. Total contract assets were $0.4 million and $0.2 million as of April 30, 2020, and January 31, 2020, respectively, which were included within prepaid expenses and other current assets and other noncurrent assets on the condensed 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 the three months ended April 30, 2020 and 2019 that was included in deferred revenue at the beginning of each period was $88.6 million and $55.9 million, respectively.   

Remaining Performance Obligation

As of April 30, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was $646.8 million, which consists of both billed consideration in the amount of $212.3 million and unbilled consideration in the amount of $434.5 million that the Company expects to recognize as revenue in the future periods. 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.   

As of January 31, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was $656.2 million, which consists of both billed consideration in the amount of $220.2 million and unbilled consideration in the amount of $436.0 million that the Company expects to recognize as revenue in the future periods. The Company expects to recognize 50% and 82% of this amount as revenue in the next 12 months and 24 months, respectively, with the remaining balance recognized thereafter.       

The Company applied a practical expedient allowing it not to disclose the amount of the transaction price allocated to the remaining performance obligations for contracts with an original expected duration of one year or less.

(10) Income Taxes

The Company computed its interim provision using its estimated annual effective tax rate. The Company’s income tax expense was $1.0 million and $1.1 million during the three months ended April 30, 2020 and 2019, respectively.

(11) Net Loss Per Share Attributable to Common Stockholders

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders:

	Three Months Ended April 30,
	2020			2019
	(In thousands, except per share data)
Numerator:
Net loss	$	(39,602	)	$	(37,191	)
Denominator:
Weighted-average shares used in    computing net loss per share    attributable to common    stockholders, basic and diluted		136,362			122,992
Net loss per share attributable to    common stockholders, basic    and diluted	$	(0.29	)	$	(0.30	)

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The potential shares of common stock that were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been antidilutive are as follows:

	As of April 30,
	2020		2019
	(In thousands)
Stock options		9,802		13,353
Stock repurchase rights		-		563
Restricted stock units		10,184		10,619
Unvested shares subject to repurchase		-		10
Total		19,986		24,545

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ITEM 2. management’s discussion and analysis of financial condition and results of operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended January 31, 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 Quarterly Report on Form 10-Q. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, impacts on our business and general economic conditions due to the current COVID-19 pandemic, those identified below and those discussed in “Risk Factors” under Part II, Item 1A in this Quarterly Report on Form 10-Q. Our fiscal year ends January 31.

Overview

Anaplan is pioneering the category of Connected Planning. Our platform enables organizations to make better decisions and to plan and execute their ongoing digital transformation to compete in today’s digital economy. We believe Connected Planning is an essential cloud category. It fundamentally transforms planning by connecting all of the people, data, and plans needed to accelerate business value and enable real-time planning and decision-making in rapidly changing business environments. Connected Planning accelerates business value by transforming the way organizations make decisions and placing the power of planning in the hands of every individual at every level within and between organizations. We continue to see the growth in the strategic value of the Connected Planning platform as a foundation for companies to drive digital transformation.

Connected Planning represents a fundamental shift from the legacy approach to planning, which is typically confined to the finance department and uses a patchwork of outdated and disconnected tools and manual processes that are often overly complex, slow, inefficient, and static. Connected Planning enables dynamic, collaborative, and intelligent planning across all areas of an organization, including finance, sales, and supply chain, and other corporate functions such as marketing, human resources, and operations. It enables organizations to manage their people, products and customers with agility.

We sell subscriptions to our cloud-based planning platform primarily through our direct sales team. We also have strategic partnerships that provide us with a significant source of lead generation and implementation leverage. Our global partners, including global strategic consulting and advisory firms, global systems integrators and technology firms, 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 partner with leading regional consulting firms and implementation partners. These highly skilled regional partners not only provide subject-matter expertise in the implementation of specific use cases, but they also act as an extension of our direct sales force by identifying and referring opportunities to us. We and our partners create templatized solution offerings to further accelerate the implementation, adoption and expansion of our platform.

We focus our selling efforts on executives of large enterprises, who are often making a strategic purchase of our platform with the potential for broad use throughout their organizations. We use a “land and expand” sales strategy to capitalize on this potential. Our platform is often initially adopted within a specific line of business, including in finance, sales, and supply chain, and other corporate functions such as 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. We call this the Honeycomb^™ effect. 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 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 the three months ended April 30, 2020 and 2019, subscription revenue was $93.8 million and $65.1 million, respectively, representing a year-over-year subscription revenue growth rate of 44%. During the three months ended April 30, 2020 and 2019, services revenue was

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$10.0 million and $10.7 million, respectively. Our subscription revenue as a percentage of total revenue was 90% and 86% in the three months ended April 30, 2020 and 2019, respectively.    

During the three months ended April 30, 2020 and 2019, our total revenue was $103.8 million and $75.8 million, respectively. Approximately 44% and 43% of our total revenue was generated from outside of the United States in the three months ended April 30, 2020 and 2019, respectively. Our net loss was $39.6 million and $37.2 million in the three months ended April 30, 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 117% and 122% as of April 30, 2020, and January 31, 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 367 and 353 as of April 30, 2020, and January 31, 2020, respectively. 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 large customers.

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, 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

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic.  As the impact of the COVID-19 outbreak continues to unfold around the world, many governments have implemented measures to address the outbreak, including travel restrictions, quarantines and shelter-in-place orders, and business limitations and shutdowns.

In response to the COVID-19 pandemic, we have taken several immediate steps including shifting our training courses to an online only format, and moving our global Connected Planning Xperience (CPX) to an online only format. To support the health of our employees, in March 2020, we took steps to enable our global workforce to work remotely, and we implemented our business continuity plan with the goal of providing uninterrupted service to our customers. 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. 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, at least for the immediate future, we expect our financial performance to be impacted by the economic crisis arising from the COVID-19. We are starting to see certain of 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. We expect these deferrals and delays to 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 a 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.

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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 the “Risk Factors” section for further discussion of the possible impact of the COVID-19 pandemic on our business.

Factors Affecting Our Performance

We believe that our future performance will depend on many factors, including those described below. While these areas present significant opportunity, they also present risks that we must manage to achieve successful results. See the section titled “Risk Factors”. If we are unable to address these challenges, our business and operating results could be adversely affected.

Market adoption of our platform.    Even though we believe Connected Planning is a strategic imperative for enterprises and that enables them to plan and execute digital transformations in today’s rapidly changing business environment, it is at an early stage of adoption. 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, and, once they realize the benefits and wide applicability of our platform, subsequently renewing subscriptions and expanding 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 our large 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 strategically invest in expanding and retaining our sales leadership, 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. In the enterprise market, a customer’s decision to use our platform may be an enterprise-wide decision. These types of sales require us to provide greater levels of education regarding the use and benefits of our platform, which involves substantial time, effort, and costs.

International sales.    Our total revenue generated outside of the United States during the three months ended April 30, 2020 and 2019, was approximately 44% 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 strategically invest, ahead of this potential demand in personnel, marketing, and access to data center capacity to support our international growth.

Partner ecosystem.    Our partner ecosystem extends our geographic coverage, accelerates the usage and adoption of our platform, and enables more efficient delivery of service solutions. We intend to augment and deepen our partnerships with global and regional partners, including strategic and advisory consulting, 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 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

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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 user interface, functionality, and usability of our platform, including in machine learning and other artificial intelligence technologies, to further enhance the predictive capabilities of our platform. We will need to continue to focus on bringing cutting-edge technology to market in order to remain competitive.

Components of Results of Operations

Revenue

We offer subscriptions to our cloud-based planning platform. We derive our revenue primarily from subscription fees and, to a lesser degree, from professional services fees. Subscription revenue consists primarily of fees to provide our customers access to our cloud-based platform. Professional services revenue includes fees from assisting customers in implementing and optimizing the use of our cloud-based platform. These services include implementation, consulting, and training.

Subscription Revenue

Subscription revenue accounted for 90% and 86% of our total revenue for the three months ended April 30, 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-cancellable over the contract term. We had remaining performance obligations, or backlog, in the amount of $646.8 million and $656.2 million as of April 30, 2020 and January 31, 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, including as a result of the COVID-19 pandemic, 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.

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 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 over the requisite service period.

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Operating Expenses

Research and Development

Research and development expenses consist primarily of personnel-related costs for our development team, including salaries and bonuses, benefits, stock-based compensation expense, and allocated overhead costs. We have invested, and intend to continue to invest, in developing technology to support our growth. We capitalize certain software development costs that are attributable to developing new features and adding incremental functionality to our platform, and amortize such costs as costs of subscription revenue over the estimated life of the new incremental functionality, which is generally two to three years. 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. 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 strategically increase the size of our general and administrative function to support the growth of our business and to take advantage of the large opportunity we see in front of us. We continue to incur additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a U.S. securities exchange and costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC. 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.

Interest Income, Net

Interest income, net consists primarily of interest income earned on our cash and cash equivalents.

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.

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Results of Operations

The following tables set forth selected condensed consolidated statements of operations data for each of the periods indicated:

	Three Months Ended April 30,
	2020			2019
	(In thousands)
Revenue:
Subscription revenue	$	93,824		$	65,085
Professional services revenue		10,020			10,745
Total revenue		103,844			75,830
Cost of revenue:
Cost of subscription revenue (1)		15,185			11,091
Cost of professional services revenue (1)		9,555			10,486
Total cost of revenue		24,740			21,577
Gross profit		79,104			54,253
Operating expenses:
Research and development (1)		23,762			15,059
Sales and marketing (1)		71,674			56,290
General and administrative (1)		22,428			20,013
Total operating expenses		117,864			91,362
Loss from operations		(38,760	)		(37,109	)
Interest income, net		511			1,251
Other income (expense), net		(331	)		(246	)
Loss before income taxes		(38,580	)		(36,104	)
Provision for income taxes		(1,022	)		(1,087	)
Net loss	$	(39,602	)	$	(37,191	)
(1) Includes stock-based compensation expense as follows:
Cost of subscription revenue	$	708		$	491
Cost of professional services revenue		508			492
Research and development		3,646			1,836
Sales and marketing		10,031			6,617
General and administrative		7,600			6,866
Total stock-based compensation expense	$	22,493		$	16,302

Three Months Ended April 30, 2020 and 2019

Revenue

	Three Months Ended April 30,
	2020		2019		% Change
	(In thousands, except percentage data)
Subscription revenue	$	93,824	$	65,085		44		%
Professional services revenue		10,020		10,745		(7	)
Total revenue	$	103,844	$	75,830		37

Total revenue was $103.8 million in the three months ended April 30, 2020, compared to $75.8 million in the three months ended April 30, 2019, an increase of $28.0 million, or 37%.   

Subscription revenue was $93.8 million, or 90% of total revenue, in the three months ended April 30, 2020, compared to $65.1 million, or 86% of total revenue, in the three months ended April 30, 2019. The increase of $28.7 million, or 44%, in subscription revenue was primarily driven by existing customers expanding their use of our

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platform, which accounted for 64% of the increase, and acquisition of new customers, which accounted for approximately 36% of the increase.  

Professional services revenue was $10.0 million in the three months ended April 30, 2020, compared to $10.7 million in the three months ended April 30, 2019, a decrease of $0.7 million, or 7%. The decrease 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 14% to 10% primarily due to our strategy of shifting professional services revenue to the members of our growing partner ecosystem.

Cost of Revenue

	Three Months Ended April 30,
	2020		2019		% Change
	(In thousands, except percentage data)
Cost of subscription revenue	$	15,185	$	11,091		37		%
Cost of professional services    revenue		9,555		10,486		(9	)
Total cost of revenue	$	24,740	$	21,577		15

Total cost of revenue was $24.7 million in the three months ended April 30, 2020, compared to $21.6 million in the three months ended April 30, 2019, an increase of $3.1 million, or 15%.   

Cost of subscription revenue was $15.2 million in the three months ended April 30, 2020, compared to $11.1 million in the three months ended April 30, 2019, an increase of $4.1 million, or 37%. The increase in cost of subscription revenue was primarily due to an increase in amortization of our equipment leases and capitalized software development costs of $1.3 million, an increase in salary and bonuses, and benefits costs related to an increase in headcount of $1.1 million, including stock-based compensation, and an increase in hosting and consulting costs of $1.0 million.  

Cost of professional services revenue was $9.6 million in the three months ended April 30, 2020, compared to $10.5 million in the three months ended April 30, 2019, a decrease of $0.9 million, or 9%. The decrease in cost of professional services revenue was primarily due to a decrease in the partner implementation costs related to a decrease in partner activity of $1.2 million, partially offset by an increase in salary and bonuses, and benefits costs of $0.5 million, including stock-based compensation.

Gross Profit and Gross Margin

	Three Months Ended April 30,
	2020			2019			% Change
	(In thousands, except percentage data)
Subscription gross profit	$	78,639		$	53,994			46	%
Professional services    gross profit		465			259			80
Total gross profit	$	79,104		$	54,253			46
Subscription gross margin		84	%		83	%
Professional services    gross margin		5	%		2	%
Total gross margin		76	%		72	%

Gross profit was $79.1 million in the three months ended April 30, 2020, compared to $54.3 million in the three months ended April 30, 2019, an increase of $24.8 million, or 46%. The increase in gross profit was the result of the increases in our subscription revenue primarily driven by existing customers expanding their use of our platform and acquisition of new customers in the three months ended April 30, 2020.

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Gross margin was 76% in the three months ended April 30, 2020 compared to 72% in the three months ended April 30, 2019 .  The increase in gross margin year-over-year 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

	Three Months Ended April 30,
	2020		2019		% Change
	(In thousands, except percentage data)
Operating expense:
Research and development	$	23,762	$	15,059		58	%
Sales and marketing		71,674		56,290		27
General and administrative		22,428		20,013		12
Total operating expenses	$	117,864	$	91,362		29

Research and Development

Research and development expenses were $23.8 million in the three months ended April 30, 2020, compared to $15.1 million in the three months ended April 30, 2019, an increase of $8.7 million, or 58%. The increase was primarily due to an increase in salary and bonuses, and benefits costs related to an increase in headcount of $6.4 million, including an increase in stock-based compensation and related taxes of $1.9 million, and an increase in consulting costs of $1.8 million, partially offset by an increase in capitalized software development costs of $1.4 million.  

Sales and Marketing

Sales and marketing expenses were $71.7 million in the three months ended April 30, 2020, compared to $56.3 million in the three months ended April 30, 2019, an increase of $15.4 million, or 27%. The increase was primarily due to an increase in salary and bonuses and benefits costs related to an increase in headcount of $16.8 million, including an increase in stock-based compensation and related taxes of $4.1 million and an increase in commission expenses of $2.8 million, partially offset by a decrease of $1.8 million in expenses due to cancellation of conferences or events.  

General and Administrative

General and administrative expenses were $22.4 million in the three months ended April 30, 2020, compared to $20.0 million in the three months ended April 30, 2019, an increase of $2.4 million, or 12%. The increase was primarily due to an increase in salary and bonuses, and benefits costs related to an increase in headcount of $2.5 million, including an increase in stock-based compensation and related taxes of $0.7 million, and an increase in allowance for credit losses of $0.6 million driven by customer collections concerns primarily stemming from the COVID-19 pandemic, partially offset by a decrease in other general expenses.  

Other Income (Expense), Net

	Three Months Ended April 30,
	2020			2019			% Change
	(In thousands, except percentage data)
Interest income, net	$	511		$	1,251			(59	)	%
Other income (expense), net		(331	)		(246	)		35

Interest Income, net

Interest income, net decreased by $0.7 million in the three months ended April 30, 2020. The decrease in interest income, net was primarily due to lower interest rates in the three months ended April 30, 2020 compared to the three months ended April 30, 2019.

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Other Income (Expense), net

Other income (expense), net was a loss of $0.3 million in the three months ended April 30, 2020, compared to a loss of $0.2 million in the three months ended April 30, 2019, an increase in expense of $0.1 million, or 35%. The change was primarily due to currency fluctuations and the related remeasurements during the periods, primarily related to our U.K. operations and an intercompany loan denominated in a non-functional currency.

Provision for Income Taxes

	Three Months Ended April 30,
	2020		2019		% Change
	(In thousands, except percentage data)
Provision for income taxes	$	1,022	$	1,087		(6	)	%

The provision for income taxes was $1.0 million in the three months ended April 30, 2020, compared to $1.1 million in the three months ended April 30, 2019, a decrease of $0.1 million, or 6%. The decrease in provision for income taxes was primarily related to decreased income generated from intercompany cost-plus arrangements in certain European and Asian countries.

Liquidity and Capital Resources

As of April 30, 2020, our principal sources of liquidity were cash and cash equivalents totaling $303.1 million, which were held for working capital purposes and strategic initiatives. Our cash equivalents are comprised primarily of 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 “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 April 30, 2020 and January 31, 2020, 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 April 30, 2020, we were in compliance with the financial covenants contained in the agreement.  

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Cash Flows

The following table summarizes our cash flows for the periods presented:

	Three Months Ended April 30,
	2020			2019
	(In thousands)
Net cash used in operating activities	$	(1,504	)	$	(1,900	)
Net cash used in investing activities		(4,463	)		(3,083	)
Net cash provided by financing activities		2,064			11,196

Operating Activities

Net cash used in operating activities of $1.5 million for the three months ended April 30, 2020, was primarily due to a net loss of $39.6 million, partially offset by non-cash charges for stock-based compensation of $22.5 million, depreciation and amortization of $6.1 million, amortization of deferred commissions of $7.7 million, and amortization of operating lease right-of-use assets and accretion of operating lease liabilities of $2.9 million. Changes in working capital were unfavorable to cash flows from operations by $2.1 million primarily due to an increase in deferred commissions of $10.1 million related to commissions capitalized on our sales, a decrease in deferred revenue balance of $3.2 million due to lower billings, a decrease in accounts payable and accrued expenses of $2.5 million due to timing of payments, and payments for operating lease liabilities of $2.8 million, partially offset by a decrease in accounts receivable of $12.8 million due to lower billings, an increase in other noncurrent liabilities of $2.0 million and a decrease in prepaid expenses and other current assets of $1.5 million.  

Net cash used in operating activities of $1.9 million for the three months ended April 30, 2019 was primarily due to a net loss of $37.2 million, partially offset by non-cash charges for stock-based compensation of $16.3 million, depreciation and amortization of $4.4 million, amortization of deferred commissions of $4.1 million, and amortization of operating lease right-of-use assets and accretion of operating lease liabilities of $2.4 million. Changes in working capital were favorable to cash flows from operations by $8.5 million primarily due to an increase in the deferred revenue balance of $12.1 million due to increases in sales, an increase in accounts payable and accrued expenses of $6.5 million due to our growth, partially offset by an increase in deferred commissions of $8.2 million, and payments for operating lease liabilities of $2.4 million.

Investing Activities

Net cash used in investing activities for the three months ended April 30, 2020 of $4.5 million was related to the capitalization of internal-use software of $2.9 million as we expanded our platform and increased our development efforts, and purchases of property and equipment of $1.6 million related to our growth.

Net cash used in investing activities for the three months ended April 30, 2019 of $3.1 million was related to the capitalization of internal-use software of $2.2 million as we expanded our platform and increased our development efforts, and purchases of property and equipment of $0.9 million related to our growth.

Financing Activities

Net cash provided by financing activities for the three months ended April 30, 2020 of $2.1 million consisted primarily of $3.8 million in proceeds from the exercise of stock options, partially offset by $1.7 million principal payment on finance lease obligations.

Net cash provided by financing activities for the three months ended April 30, 2019 of $11.2 million consisted primarily of proceeds of $9.3 million from the repayment of promissory notes, and $3.0 million in proceeds from the exercise of stock options, partially offset by $1.1 million principal payment on finance lease obligations.

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Commitments and Contractual Obligations

There were no material changes outside of the ordinary course of business in our contractual obligations and commitments during the three months ended April 30, 2020 from the contractual obligations and commitments disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2020 filed with the SEC on March 30, 2020.

Off-Balance Sheet Arrangements

Through April 30, 2020, 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 condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.

During the three months ended April 30, 2020, there were no significant changes to our critical accounting policies and estimates as described in the financial statements contained in the Annual Report on Form 10-K for the year ended January 31, 2020 filed with the SEC on March 30, 2020.

Recent Accounting Pronouncements

See “Summary of Business and Significant Accounting Policies” in Note 1 of the notes to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Exchange Risk

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the British Pound Sterling, Euro, Swedish Krona and Singapore Dollar. Fluctuations in foreign currency exchange rates, including those resulting from COVID-19 pandemic, may cause variability in our results of operations. Impacts to our operations from changes in foreign currency have been fairly limited to date and thus we have not instituted a hedging program. We expect our international operations to continue to grow in the near term and we will monitor our foreign currency exposure to determine when we should begin a hedging program. A majority of our agreements have been and we expect will continue to be denominated in U.S. dollars. A hypothetical 10% increase or decrease in the relative value of the U.S. dollar to other currencies would not have had a material effect on operating results for the three months ended April 30, 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 April 30, 2020, we had cash and cash equivalents of $303.1 million, which consisted primarily of bank deposits. Such interest-earning instruments carry a degree of interest rate risk; however, historical fluctuations of interest income have not been significant. We have not been exposed nor do we anticipate being exposed to material risks due to changes in interest rates. We expect to continue to observe lower interest income as a result of reduction in Federal Funds rate in response to COVID-19, which may cause variability in our results of operations. A hypothetical 10% change in interest rates would not have had a material impact on our operating results for the three months ended April 30, 2020 and 2019.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d- 15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q.

Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures are designed to, and are effective to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Inherent Limitations on Effectiveness of Controls

Our management, including our principal executive officer and principal financial officer, do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are party to litigation and subject to claims incident to the ordinary course of business. As our growth continues, we 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 our future results of operations, cash flows, or financial position. We are not presently party to any legal proceedings that, in the opinion of management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition, or cash flows.

ITEM 1A. RISK FACTORS

A description of the risks and uncertainties associated with our business and ownership of our common stock is set forth below. You should carefully consider the risks described below, as well as the other information in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the events or developments described below could materially and adversely affect our business, financial condition, results of operations, and growth prospects. In such an event, the market price of our common stock could decline. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. This Quarterly Report on Form 10-Q also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including the risks described below. See “Cautionary Note Regarding Forward-Looking Statements.”

The COVID-19 pandemic, and any resulting global economic downturn, could significantly disrupt our business operations, prolong our sales cycle and result in a material adverse effect on our financial condition, operating results and cash flows.

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The duration and severity of the COVID-19 outbreak and the degree of its impact on our business is uncertain and difficult to predict. In light of the uncertain and rapidly evolving situation relating to the spread of the COVID-19, including actions by governments, businesses and individuals to address the outbreak, we have temporarily closed most of our offices, encouraged our employees to work remotely, instituted business-related travel restrictions, and virtualized, postponed or cancelled our sales and marketing, employee or industry events, among other modifications. The remote work measures that we implemented have generally allowed us to provide uninterrupted service to our customers, but have also introduced additional operational risks, including cybersecurity risks, and have affected the way we conduct our sales, research and development, testing, customer support, and other activities.  These modifications may 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. Our remote work measures may not be sufficient to mitigate the risks posed by the COVID-19, and illness and workforce disruptions could lead to unavailability of key personnel and harm our ability to perform critical functions. In addition, work-from-home and related business practice modifications present significant challenges to maintaining our corporate culture, including employee engagement and productivity, both during the immediate pandemic crisis and as we make additional adjustments in the eventual transition from it. 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. Although such disruptions did not have any impact on our guided revenue for the first quarter of fiscal 2021, we currently expect that revenue for the second quarter of fiscal 2021 will be lower than initially anticipated at the beginning of fiscal 2021 as a result of customers and prospective customers deferring or delaying buying decisions and project implementations and prolonged sales cycles. In recognition of the uncertainty surrounding the impact of the COVID-19 pandemic, we have withdrawn our full-year fiscal 2021 guidance.

If the COVID-19 outbreak worsens or is prolonged, especially in regions where we have material operations or sales, our business operations in affected areas, including sales-related and customer support activities, could be adversely affected by continued or additional business closures, travel restrictions impacting employees and partners, and other precautionary measures. Even in regions where governmental restrictions related to the COVID-19 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 the COVID-19, which could negatively impact our business.

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The outbreak is also expected to have an adverse impact on our customers, prospective customers and partners for an indefinite period of time, 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.

Furthermore, the COVID-19 outbreak has increased the likelihood of an extended global economic downturn and has already increased market volatility. We are starting 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, we anticipate that these macroeconomic factors could result in decreased business spending by our customers and prospective customers, reduced demand for our solutions, increased unpredictability in some of our customers’ willingness or ability to pay for their subscriptions to our platform, 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 outbreak is contained and the shelter-in-place orders are lifted. Further, if we experience a decrease in demand in a given period it could negatively affect our revenue in future periods, particularly if experienced on a sustained basis, because a substantial proportion of revenue related to our platform is recognized over time. While we have developed and continue to develop plans to help mitigate the negative impact of the outbreak on our business, these efforts may not be effective and a protracted economic downturn may limit the effectiveness of our mitigation efforts.

The COVID-19 outbreak may also have the effect of heightening many of the other risks described in this “Risk Factors” section, including “We have experienced rapid revenue growth in recent periods, and our recent growth rates may not be indicative of our future growth”, “Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business” and “Uncertain global economic and market conditions may negatively impact our business, results of operations and cash flows”. We will continue to evaluate the nature and extent of the impact of the COVID-19 outbreak 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 over the last four years. Over the last four years we have hired new senior management, substantially increased our sales and customer success headcount, shifted our sales strategy to increase our focus on large global enterprises and increased our reliance on partners to accelerate our sales process and provide implementation services. We have also substantially increased our engineering headcount and increased the frequency of our product enhancements and releases. 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 determining appropriate investments of our limited resources, market acceptance of our existing and future products and capabilities, competition from other companies, successfully acquiring large new customers on a cost-effective basis and increasing revenue from existing customers, determining an appropriate headcount strategy and recruiting, training and retaining skilled personnel in support of such strategy, developing new products and capabilities, determining appropriate pricing and pricing structures for our products and capabilities, successfully protecting our intellectual property and defending against intellectual property infringement claims, unforeseen expenses and challenges in forecasting accuracy.

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.

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We have experienced rapid revenue growth in recent periods, and our recent growth rates may not be indicative of our future growth.

From fiscal 2019 to fiscal 2020, our total revenue grew from $240.6 million to $348.0 million, an increase of 45%, and from fiscal 2018 to fiscal 2019, our total revenue grew from $168.3 million to $240.6 million, an increase of 43%. 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 revenue growth as indicative of our future performance. We believe that historical comparisons of our revenue may not be meaningful and should not be relied upon as an indication of future performance. Accordingly, you should not rely on our revenue and other growth for any prior quarter or fiscal year as an indication of our future revenue or revenue 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 $149.2 million, $131.0 million, $47.6 million and $39.6 million, respectively, in fiscal 2020, 2019, 2018, and for the three months ended April 30, 2020. We had an accumulated deficit of $532.6 million at April 30, 2020. 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:

• strategically 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;

• investing in research and development to improve the capabilities, features and functionality of our platform;  

• growing our partner ecosystem;

• making additional investments to broaden and deepen our user community;

• strategically 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, which we also refer to as the Honeycomb^™ effect, a failure to increase our number of 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, or an inability to timely and cost-effectively introduce new products and services that are favorably received by customers and partners. Furthermore, 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, as well as 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 such as billings that our analysts may use to evaluate our business, have fluctuated in the past and may vary significantly in the future, and quarter-to-quarter comparisons of our operating results, key metrics and other metrics may not be meaningful. Accordingly, the results of any one quarter should not be relied upon as an indication of future

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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 effects of the COVID-19 pandemic, the related market volatility and any economic downturn caused by the COVID-19 pandemic or other global health crises on our business and the price of our common stock, including cost reduction measures, delayed purchasing decisions or prolongment of our sales cycle due to workforce availability at prospective or existing customers, greater unpredictability in our customers’ willingness or ability to pay for subscriptions to our platform, shelter-in-place orders and travel restrictions affecting our employees, existing and prospective customers and partners;

• our ability to maintain our existing customer base and attract new customers;

• the timing and rate at which we sign agreements with customers;

• the contract value of the agreements with customers;

• our ability to expand use of our platform by existing customers through the Honeycomb^™ effect;

• our ability to release platform updates and enhancements on a timely basis;

• the addition or loss of large customers, including through acquisitions or consolidations;

• our ability to successfully compete in our markets;

• the timing of recognition of revenue;

• the amount and timing of operating expenses;

• the amount and timing of completion of professional services engagements;

• 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 feature introductions 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 of our customers;

• the timing of expenses related to the development or possible acquisition and integration of technologies or businesses and potential future charges for impairment of goodwill and long-lived assets from acquired companies;

• our ability to achieve and sustain a level of liquidity sufficient to grow and support our business and operations;

• network outages or security breaches;

• any adverse litigation, judgments, settlements, or other litigation-related costs;

• changes in the legislative or regulatory environment, such as with respect to privacy; and

• general economic, industry, and market conditions, both domestically and internationally.

We have experienced rapid growth and expect to continue to strategically 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. During this period, we also established operations in a number of countries outside the United States. We have also significantly increased the size of our customer base.

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We anticipate that we will continue to expand our operations and headcount in the future, including internationally, provided appropriate economic conditions and opportunities are present. We sell our platform to customers in a considerable number of countries and have employees in North America, Europe, Asia-Pacific and Israel. We plan to continue to expand our operations into other countries 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 will need to continue to improve our operational, financial, and management systems and controls and our reporting systems and procedures by, among other things:

• effectively recruiting, training, integrating, overseeing and retaining employees, particularly members of our sales team;

• further improving our key business applications, processes and information technology infrastructure to support our business needs;

• reviewing our workplace and facilities strategy on a regular basis, including our relationships with flexible workspace vendors, to ensure business needs are appropriately supported;

• enhancing our information and communication systems to ensure that our employees and offices around the world are well coordinated and can effectively communicate with each other and our partners and customers;

• improving our remote work infrastructure, including information security, to enable our global workforce to work remotely on an as-needed basis;

• effectively monitoring various local regulations, restrictions and requirements that continually change due to the COVID-19 pandemic and the impact of such regulations, restrictions and requirements on our personnel and corporate culture;

• developing and improving our internal administrative infrastructure, particularly our financial, operational, compliance, recordkeeping, communications and other internal systems; and

• ensuring that we maintain high levels of customer support.

These and other improvements in our systems and controls will require significant capital expenditures and the allocation of valuable management and employee resources. Failure to effectively manage growth and/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, escalating risk of noncompliance with applicable policies or laws, difficulties in introducing new features or other operational difficulties, and any of these developments could adversely affect our business performance, results of operations and financial position.

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 outbreak, 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 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 are, in part, beginning to 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.

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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 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.

Because we derive substantially all of our revenue from a single software platform, failure of Connected Planning solutions and digital transformation in general and our platform in particular to satisfy customer demands or to achieve increased market acceptance would adversely affect our business, results of operations, 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, the market acceptance of cloud-based Connected Planning solutions and digital transformation in general and our platform in particular are critical to our continued success. Market acceptance of a cloud-based Connected Planning solution depends in part on market awareness of the benefits that Connected Planning and digital transformation can provide over legacy planning products, emerging point products and manual processes and organizations more broadly deploying planning solutions to their employees and across functional lines of business. In addition, in order for cloud-based Connected Planning solutions to be widely accepted, organizations must overcome any concerns with placing sensitive information on a cloud-based platform. The market for cloud-based Connected Planning solutions is at an early stage of development, and we cannot be sure that this market will expand in a manner that will support the growth of our business. In addition, demand for our platform in particular is affected by a number of other factors, some of which are beyond our control. These factors include continued market acceptance of our platform for existing and new use cases and the introduction of enhancements to our platform, 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, the pace at which enterprises transform their business planning capabilities, and developments in data privacy regulations. In addition, we expect that the planning and integration needs of our enterprise 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 more widespread market acceptance of Connected Planning solutions in general or our platform in particular, 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, the related market volatility and the global economic uncertainty caused by the COVID-19 pandemic, 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

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comparable to prior periods, and our business, revenue, operating results, and financial condition could be adversely affected.

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, our prices, the features and pricing of competing products, reductions in our customers’ spending levels, 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. 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 senior management, our sales efforts may not be effective and our ability to increase our revenue will suffer. Although we are beginning to see prolonged sales cycles and other sales disruptions as a result of a number of factors including uncertain economic conditions due to the COVID-19 pandemic, the duration and scope of this disruption of 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.

The success of our business depends upon training our customers to effectively utilize our platform to unlock its full potential. Our failure to effectively educate, train and provide continuing guidance and support to our customers may adversely affect the results of operations, financial condition and growth prospects.

Our business requires our customers to be trained on our platform to effectively implement and increase adoption of our platform. Incorrect or improper implementation or use of our platform could result in customer dissatisfaction and harm our business and financial condition. 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. Our ability to support such large-scale deployments using disparate technologies requires ongoing training in the proper use of our platform. In order to maximize the value of our platform we must continue to educate and train our customers to develop the skills necessary to harness the power of our platform. Without proper implementation and training, including training qualified professionals and developing a steady stream of skilled users of our platform, we may not be able to accelerate our business. Failure to develop a pipeline of qualified, highly trained professionals may adversely impact our financial performance. Our ability to effectively educate and train our customers may be negatively impacted if our customer support employees or our customers’ employees 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 our customers are unable to implement our platform, perceptions of our company and our platform may be impaired, our reputation and brand may

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suffer, and customers may choose not to renew their subscriptions or increase their purchases of our related services. Our customers and partners need regular training to derive the numerous benefits of our platform and maximize its potential without which our results of operations and growth prospects could be materially adversely affected.

Our efforts aimed at developing a steady pipeline of highly qualified and trained personnel, including through investments in the Anaplan Academy, Anaplan’s online training portal providing a full range of training courses on our solution, may not be successful. For example, the courses we offer on the Anaplan Academy 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.

If we experience a security incident affecting our platform or internal networks, systems or data, 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.

Security incidents have become more prevalent across industries and may occur on our platform or internal systems or the systems of our third-party service providers. These security incidents may be caused by or result in, but are not limited to, security breaches, loss, modification or disclosure of sensitive information, computer malware or malicious software, computer hacking, denial or degradation of service attacks, security system control failures in our own systems or from vendors we use, email phishing, software vulnerabilities, social engineering, and sabotage. Such security incidents, whether intentional or otherwise, may result from actions of hackers, criminals, nation states, vendors, employees, customers, or others. The techniques used to effect unauthorized penetration of computer systems are constantly evolving and have been increasing in sophistication. Further, we face additional cybersecurity risks related to our employees working remotely as a result of the COVID-19 outbreak. While we have security measures in place that are 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 not function as planned, or could be breached as a result of third-party action, employee or vendor error, malfeasance, or otherwise. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently 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 control 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.

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.

Our platform involves the storage, transmission and processing of our customers’ sensitive proprietary information, including their business and financial data. As a result, unauthorized access to customer data or security breaches could result in the loss, or unauthorized dissemination or modification, of such data, which could seriously harm our or our customers’ businesses and reputations. Any of these 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, cause existing customers to elect to not renew their subscriptions, expose us to reputational damage, subject us to 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. These risks are likely to increase as our brand becomes more widely known and recognized, we continue to grow the scale and functionality of our platform and process, store, and transmit increasingly large amounts of our customers’ information and data, which may include proprietary or confidential data or personal or identifying information.

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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 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. 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 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.

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Failure to effectively expand our sales and marketing capabilities 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 and strategically expand our sales and marketing operations and activities. Our sales and marketing expenses represent a significant percentage of our revenue, and our operating results will suffer if our sales and marketing expenditures do not contribute to increasing revenue as we anticipate. We are substantially dependent on our direct sales force to obtain new customers. 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 outbreak. Over the last three 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 as they may face additional hurdles due to remote onboarding and more limited access to customers. We plan to continue to strategically 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. Our ability to achieve significant revenue growth in the future 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. Attrition rates may increase, and we may face integration challenges as we continue to seek to aggressively 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 do not generate a significant increase in revenue.

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 in significant part on our ability to anticipate industry standards and trends and continue to enhance our platform, introduce new functionality, including in predictive analytics and machine learning, update our infrastructure on a timely basis to broaden the appeal of our platform to potential new customers, provide an intuitive and user-friendly interface, incorporate robust security features that address existing and developing threats, increase the opportunities for further expanding the use of our platform by existing customers, and 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 failure of our platform to operate effectively with existing or future technologies could cause customer dissatisfaction and reduce the demand for our platform, resulting in harm to our business. Further, the emergence of new

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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.

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, 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, 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 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. 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, may 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 outbreak), 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.

Our ability to achieve growth in revenue will depend substantially on our partners being able to utilize highly skilled and trained users of our platform to provide professional services, promote the adoption of our platform and drive revenue generation activities. If we fail to effectively educate, train and provide continuing guidance to a sufficient number of qualified users of our platform for utilization with our partners, our results of operations, financial condition and growth prospects may be adversely affected.

Our partners rely heavily on highly skilled and trained users of our platform, such as Master Anaplanners, to effectively provide implementation, training and consulting services to our customers, develop new solutions on our platform, promote and facilitate adoption of our platform and help drive revenue generation activities that are beneficial to us.

We address our partners’ demand for skilled and trained users of our platform by investing in efforts aimed at developing a steady pipeline of highly qualified and trained personnel, including through investments in the Anaplan Academy. However, our efforts may be ineffective. For example, the courses we offer on the Anaplan Academy 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 ability to effectively educate and train users of our platform may be negatively impacted if such users 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 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.

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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. 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.

Interruptions, delays in service or inability to increase capacity, including internationally, at our third-party data center facilities 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. Although we have disaster recovery plans that utilize multiple data center facilities, any incident affecting a data center facility’s infrastructure or operations that may be caused by fire, flood, severe storm, earthquake, power loss, telecommunications failures, breach of security protocols, computer viruses and disabling devices, failure of access control mechanisms, natural disasters, war, criminal act, military actions, terrorist attacks and other similar events beyond our control could negatively affect the use, functionality or availability of our platform and harm our business. Furthermore, in the event of interruption or delay, 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 data center infrastructure, including internationally. If we do not increase our capacity in a

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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 open data centers in those regions. As we continue to add data centers and capacity in our existing data centers, 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 centers, 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.

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 acceptance of our platform by enterprise customers 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 are beginning 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 sales 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 outbreak); 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 outbreak.

In the enterprise market, a customer’s decision to use our platform may be an enterprise-wide decision, requiring us to expend substantial time, effort, and money educating enterprise customers as to the use and value of our platform. In addition, our ability to successfully sell our platform to enterprises is dependent on us attracting and retaining sales personnel with experience in selling to larger organizations. 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.

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

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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.

We have limited experience with respect to determining the optimal prices for our platform and services. 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 price 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 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 the largest enterprise customers. If we do not spend our research and development budget efficiently or effectively on compelling innovation and technologies such as predictive analytics and machine learning or deploy our human resources appropriately in

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support of such research and development efforts, our business may be harmed and we may not realize the expected benefits of our 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 outbreak. 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 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 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. 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.

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.

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 outbreak. 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.

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If we fail to develop, maintain, and enhance widespread brand awareness cost-effectively, and expedite the awareness of Connected Planning solutions that enable digital transformation, our revenue and competitive position may be materially and adversely affected.

We believe that developing, maintaining, and enhancing widespread awareness of our brand and Connected Planning solutions that enable 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. If we fail to successfully promote and maintain our brand, or incur 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.

In addition, 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. Negative publicity, whether or not justified, relating to 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. 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.

We depend on the experience and expertise of our senior management team and certain key employees, 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 officers and key employees in the areas of business strategy, research and development, marketing, sales, services, and general and administrative functions. The departure of an executive officer or key employee,or a prolonged period without an executive officer over a particular function, may subject us to various adverse effects, including loss of institutional knowledge, experience and skills, loss of employee focus and less effective execution, reduction in employee morale and negative press coverage. We have in the past experienced, and from time to time in the future we may 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. The loss of one or more of our executive officers or key employees could have a serious adverse effect on our business.

To execute our growth plan, we must attract and retain highly qualified 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. For example, competition is intense for experienced software and cloud infrastructure engineers in San Francisco in the United States and London and York in the U.K., our primary development locations. We have, from time to time, experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications. 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. If we fail to attract

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new personnel or fail to retain and motivate our current personnel, our business and future growth prospects could be adversely affected.

A significant portion of our senior management team has worked at the company for a limited time.

Despite having significant experience in their individual areas of expertise, several key members of our senior management team have a relatively short tenure with us. These members of management are critical to our vision, strategic direction, culture, and overall business success. Because of these recent changes, our senior management team has not worked together at the company for an extended period of time and may not be able to work together effectively to execute our business objectives. Furthermore, if we are unable to quickly and comprehensively prepare the new members of our senior management team for their respective responsibilities and integrate them into the company, 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.

We collect, process, store and transfer various types of information, including personally identifiable 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 and in many other countries where our platform is available. The regulatory framework for privacy and security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. For example, in June 2018, California enacted the California Consumer Privacy Act, or CCPA. The 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 addition to California, many federal, state, and foreign government bodies and agencies have adopted or are considering adopting laws, rules, and regulations regarding the collection, use, storage, data residency, security, and disclosure of personal information and breach notification procedures. 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. 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.

In the United States, 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, the Gramm Leach Bliley Act, 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. There may be substantial amounts of personally identifiable information or other sensitive information processed and stored on our internal systems and networks and on our platform.

In December 2015, European Union, or EU, institutions reached agreement on a draft regulation that was formally adopted in April 2016, referred to as the General Data Protection Regulation, or GDPR. The GDPR, which became effective May 25, 2018, includes more stringent operational requirements for processors and controllers of personal data, and it replaces both the 1995 EU Data Protection Directive and supersedes applicable EU member state legislation.

The GDPR significantly increases the level of sanctions for non-compliance from those in existing EU data protection law. EU data protection authorities have the power to impose administrative fines for violations of the GDPR of up to a maximum of €20 million or 4% of the data controller’s or data processor’s total worldwide global turnover for the preceding financial year, whichever is higher, and actual or alleged violations of the GDPR may also lead to damages claims by data controllers and data subjects. We have taken and will continue to take steps to cause our processes to be

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compliant with applicable portions of the GDPR, but the rules and regulations under the GDPR may not be fully articulated and we cannot assure you that our steps will be compliant. Our efforts to comply with the GDPR or other 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.

Further, following a referendum in June 2016 in which voters in the United Kingdom approved an exit from the EU, the United Kingdom formally completed its withdrawal from the European Union on January 31, 2020 in a process known as “Brexit”. This has created uncertainty with regard to the future regulation of data protection in the United Kingdom. We may experience reluctance or refusal by current or prospective customers in Europe, including 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 of European residents. The regulatory environment applicable to the handling of European residents’ personal data, and our actions taken in response, may cause us to assume additional liabilities or incur additional costs, and could result in our business, operating results, and financial condition being harmed.

We have been certified under the EU-U.S. Privacy Shield with respect to our transfer of certain personal data from the European Union to the United States. The Privacy Shield program is subject to annual review and may be challenged, suspended, or invalidated. At present, the EU-U.S. Privacy Shield framework and the use of EU Standard Contractual Clauses, or the Model Clauses, to protect data exports between the European Union and the U.S. are both subject to ongoing legal challenges. These legal challenges may result in a ruling that the industry-standard measures we, and other companies, have taken are no longer sufficient. It is also possible that the Privacy Shield program may need to be updated by the European Commission and Department of Commerce to take into account the GDPR. Moreover, we may be unsuccessful in maintaining legitimate means for our transfer and receipt of personal data from the European Union to the United States and may be at risk of experiencing reluctance or refusal of European or multi-national customers to use our solutions and incurring regulatory penalties, which may have an adverse effect on our business. In addition to government regulation, privacy advocates, and industry groups may propose new and different self-regulatory standards that may apply to us. Because the interpretation and application of privacy and data protection laws, regulations, rules, and other standards are still uncertain, it is possible that these laws, rules, regulations, and other standards’ actual or alleged legal obligations, such as contractual or self-regulatory obligations, may be interpreted and applied in a manner that is inconsistent with our data management practices or the features of our platform. If so, in addition to the possibility of fines, lawsuits, and other claims, 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.

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.

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 and subject us to regulatory, economic, geographic, and political 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;

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• 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, 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;

• 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;

• weak economic conditions in certain countries or regions and general economic uncertainty around the world;

• differing labor standards, including restrictions related to, and the increased cost of, terminating employees in some countries;

• difficulties in recruiting and hiring employees in certain countries;

• the preference for localized software and licensing programs;

• the preference for localized language support;

• unstable regional economic and political conditions;

• 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

• our international operations and international sales may be impacted by global pandemics such as the ongoing COVID-19 pandemic.

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.

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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 may face exposure to foreign currency exchange rate fluctuations.

While our international contracts are sometimes denominated in US 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 rely on third parties for essential services and functionality in support of our business, and a failure or disruption in these services could materially and adversely affect our business and operating results.

We rely on third parties to provide essential services and functionality, including data storage and collaboration, customer relationship management and human capital management services, to support our business. These services are generally provided to us via a cloud-based model instead of software that is installed on our premises. If these services become unavailable due to extended outages or interruptions, security vulnerabilities, or cyber-attacks, because they are no longer available on commercially reasonable terms or prices, or due to other unforeseen circumstances such as global pandemics, our expenses could increase, our ability to manage these critical functions could be interrupted, and our ability to support our customers and employees could be impaired, all of which could materially and adversely affect our business and operating results.

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. 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

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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 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.

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.

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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.

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.

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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.

If the market for enterprise cloud software develops more slowly than we expect or declines our business could be adversely affected.

Since our inception, nearly all of our revenue has come from sales of our subscription-based cloud software platform. We expect these sales to account for the substantial majority of our revenue for the foreseeable future. Our success will depend to a substantial extent on the widespread adoption of cloud computing in general and of cloud-based business planning solutions in particular. The enterprise cloud software market is not as mature as the market for on-premises enterprise software, and it is uncertain whether enterprise cloud software will achieve and sustain high levels of customer demand and market acceptance. Many enterprises have invested substantial personnel and financial resources to integrate traditional enterprise software into their businesses and, therefore, may be reluctant or unwilling to migrate to enterprise cloud software. It is difficult to predict customer adoption rates and demand for our platform, the future growth rate and size of the enterprise cloud software market, or the entry of competitive solutions. The expansion of the enterprise cloud software market depends on a number of factors, including the cost, performance, and perceived value associated with enterprise cloud software, as well as the ability of enterprise cloud software companies to address security and privacy concerns. If other enterprise cloud software providers experience security incidents, loss of customer data, disruptions in delivery or other problems, the market for enterprise cloud software as a whole, including our platform, may be negatively affected. If enterprise cloud software does not achieve widespread adoption, or if there is a reduction in demand for enterprise cloud software caused by a lack of customer acceptance, technological challenges, weakening economic conditions, security or privacy concerns, competing technologies and products, decreases in corporate spending, or otherwise, our business could be adversely affected. Even if the enterprise cloud software market achieves widespread adoption in certain geographies, our business may be adversely affected if it does not achieve widespread adoption in other geographies.

Forecasts of market opportunity and market growth may prove to be inaccurate, and, even if the markets in which we compete achieve the forecasted growth, we cannot assure you our business will grow at similar rates, if at all.

Estimates of market opportunity and forecasts of market growth are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The estimates of the size of the markets that we may be able to address and forecasts relating to the expected growth in the performance management and analytic applications software market are subject to many assumptions and may prove to be inaccurate. We may not be able to address fully the markets that we believe our platform may address, and these markets may not grow at the rates that we forecast, including due to the COVID-19 pandemic. Even if our platform is able to address the markets that we believe represent our market opportunity and even if these markets experience the forecasted growth, we may not grow our business at similar rates, or at all. Our growth is subject to many factors, including our success in determining an

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appropriate business strategy and implementing such strategy, which is subject to many risks and uncertainties. Accordingly, estimates of market opportunity and forecasts of market growth should not be taken as indicative of our future growth.

Our corporate culture promotes an entrepreneurial mindset, and if we cannot maintain this culture as we grow, it could harm our business.

Our corporate culture is intended to promote an entrepreneurial mindset and devotion to certain values, including openness, authenticity, inclusivity, creativity and tenacity. Furthermore, our culture encourages our employees to maintain a customer-first mentality and to perform their responsibilities with speed, innovation and a sense of ownership. Our culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the core principles and values that have fueled our growth. We believe that our culture has been and will continue to be a key contributor to our success. We hope to maintain our growth trajectory and will continue to hire strategically as we expand, especially engineering, research and development and sales personnel. If we do not continue to maintain our corporate culture as we grow, we may be unable to foster the entrepreneurial spirit, innovation, creativity, and other qualities we believe we need to support our growth. As we hire new employees, we may not be able to effectively integrate new hires in our fast-paced culture. Our efforts to increase our headcount and maintain our growth may result in a change to our corporate culture, which could harm our business and results of operations.

As we expand our geographical footprint and increase our headcount, we will need to maintain our corporate culture among a larger number of employees dispersed in various geographic regions. Any failure to maintain the cohesiveness of our culture could negatively affect our business, reduce our ability to retain and recruit personnel and could lead to the failure to achieve our vision and implement our strategy.

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 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.

We may engage in strategic transactions, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and adversely affect our operating results. The anticipated benefits of our acquisitions or joint ventures may not materialize or may take longer than expected.

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 evaluate potential targets for possible acquisitions in alignment with our business objectives. We could also enter into joint ventures or other strategic transactions for the same purpose. 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.

Although we seek to mitigate the risks and liabilities associated with such transactions through due diligence and other means, there may be risks and liabilities that such due diligence efforts fail to discover or that are not accurately and fully disclosed to us or that we inadequately assess.

We may fail to accurately anticipate the adoption rates of the acquired technology and such technology may fail to operate as expected. Additionally, if key personnel leave, the acquisition may not yield anticipated returns. In addition, we have limited experience in consummating strategic transactions. 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. We also may not achieve the anticipated benefits from the strategic transactions due to a number of factors, including:

• inability to integrate or benefit from acquired technologies or services;

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• product synergies, cost reductions, increases in revenue and economies of scale may not materialize as expected;

• 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;

• 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;

• difficulty in retaining, motivating and integrating key management and other employees of the acquired business;

• use of resources that are needed in other parts of our business; and

• 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.

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. 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.

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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.”

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 the COVID-19, which may result in a material adverse impact on our or our customers’ 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 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 outbreak, cyber-attack, war, or terrorist attack, such plans 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 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.

We incur increased costs and devote substantial management time as a result of operating as a public company.

As a public company, we incur significant legal, accounting, and other expenses that we did not incur as a private company. For example, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and are required to comply with the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules and regulations subsequently implemented by the Securities and Exchange Commission, or the SEC, and the New York Stock Exchange. 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

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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 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.

We are no longer an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012, or the JOBS Act, and as a result, are required to comply with additional disclosure and reporting requirements. We have incurred, and we expect to continue to incur, significant expenses and we have devoted, and we expect to continue to devote, substantial management effort toward ensuring compliance with these additional disclosure and reporting requirements, including the requirement, set forth in Section 404 of the Sarbanes-Oxley Act, that we have our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting.  

Public company reporting and disclosure obligations have caused our business and financial condition to become more visible. We believe that this increased visibility may result in threatened or actual litigation from time to time. 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 subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the rules and regulations and the listing standards of the New York Stock Exchange. We expect that the requirements of 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 Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. 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. 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. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of 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. 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 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 applicable stock exchange.

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Pursuant to Section 404 of the Sarbanes-Oxley Act, we are required to have our independent registered public accounting firm formally attest to the effectiveness of our internal control over financial reporting. 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. Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material adverse effect on our business and operating results and could cause a decline in the price of our common stock.

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, or 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. As a result, 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.

Comprehensive tax reform legislation or tax rulings could adversely affect our business and financial condition.

The Tax Reform Act includes significant changes in the taxation of business entities. These changes include, among others, a permanent reduction to the corporate income tax rate, limiting interest deductions, adopting elements of a territorial tax system, assessing a repatriation tax or “toll-charge” on undistributed earnings and profits of U.S.-owned foreign corporations, and introducing certain anti-base erosion provisions. The primary impact of the new legislation on our provision for income taxes will be a reduction of the future tax benefits of existing temporary differences, which are primarily comprised of net operating loss carryforwards. Since we have recorded a full valuation allowance against our deferred tax assets, we do not anticipate that these changes will have a material impact on our operating results, but we continue to examine the impact that this tax reform legislation may have on our business. The overall impact of this tax reform is uncertain, and our business and financial condition, including with respect to our non-U.S. operations, could be adversely affected. In addition, it is uncertain if and to what extent various states will conform to the Tax Reform Act and what effect that legal challenges will have on the Tax Reform Act.

On June 7, 2019, the U.S. Court of Appeals for the Ninth Circuit issued an opinion in Altera Corp. v. Commissioner upholding the U.S. Treasury Department’s regulations requiring related parties in an intercompany cost-sharing arrangement to share expenses related to share-based compensation in proportion to the economic activity of the related parties. This opinion reversed the prior decision of the U.S. Tax Court. On November 12, 2019, the Ninth Circuit denied a petition for a rehearing of the case and on February 10, 2020, Altera Corp. filed a petition for a writ of certiorari asking the U.S. Supreme Court to review the opinion issued by the Ninth Circuit. We will continue to monitor developments in this matter and potential impacts to our consolidated financial statements.

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Adverse tax laws or regulations could be enacted or existing laws could be applied to us or our customers, which could increase the costs of our services and adversely affect our business.

The application of federal, state, local, and international tax laws to services provided electronically is evolving. New income, sales, use, or other tax laws, statutes, rules, regulations, or ordinances could be enacted at any time (possibly with retroactive effect) and could be applied solely or disproportionately to services provided over the Internet. These enactments could 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, statutes, rules, regulations, or ordinances could be interpreted, changed, modified, or applied adversely to us (possibly with retroactive effect), which could require us or our customers to pay additional tax amounts, as well as require us or our customers to pay fines or 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.

Taxing authorities may successfully assert that we should have collected or in the future should collect sales and use, value added, or similar taxes, and we could be subject to liability with respect to past or future sales, which could adversely affect our results of operations.

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. Sales and use, value added, and similar tax laws and rates vary greatly by 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. The U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. increasing states’ ability to assert taxing jurisdiction on out-of-state retailers could result in certain additional jurisdictions asserting that sales and use and other taxes are applicable, which could result in tax assessments, penalties, and interest, and we may be required to collect such taxes in the future. Such tax assessments, penalties, and interest or future requirements may adversely affect our results of operations.

Unanticipated changes in our effective tax rate could harm our future results.

We are subject to income 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 as a result of acquisitions, the valuation of deferred tax assets and liabilities, and changes in federal, state, or international tax laws and accounting principles. In addition, we may be subject to income tax audits by many tax jurisdictions throughout the world, many of which have not established clear guidance on the tax treatment of SaaS-based companies. Any tax assessments, penalties, and interest, or future requirements may adversely affect our results of operations. Moreover, imposition of such taxes on us going forward will effectively increase the cost of our products to our customers and might adversely affect our ability to retain existing customers or to gain new customers in the areas in which such taxes are imposed.

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.

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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;

• 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, including whether those results fail to meet, exceed, or significantly exceed 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;

• 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;  

• trading activity by a limited number of stockholders who together beneficially own a majority of our outstanding common stock;

• the size of our market float; and

• any other factors discussed in this Quarterly Report on Form 10-Q.

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. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources, and the attention of management from our business and adversely affect our business.

Substantial sales of shares of our common stock, or the perception that such sales could or will occur, could cause the price of our common stock to decline.

The market price of the shares of our common stock could decline as a result of the sale of a substantial number of our shares of common stock in the public market, particularly by our directors, executive officers, or significant stockholders, or the perception in the market that the holders of a large number of shares intend to sell their shares. While shares held by directors, executive officers, and other affiliates will be subject to volume limitations under Rule 144 under the Securities Act and various vesting agreements, shares held by substantially all other stockholders can be freely sold and the price of our common stock could decline as a result of the sale of a significant number of our shares of common stock.

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Subject to the satisfaction of applicable exercise periods, the shares issued upon exercise of outstanding stock options or settlement of outstanding restricted stock units will be available for immediate resale in the United States in the open market. The issuance of these shares will dilute the ownership interests of existing stockholders. Any sales in the public market of the common stock issuable upon such issuance or conversion could adversely affect prevailing market prices of our common stock.

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.

The concentration of our stock ownership will likely limit your ability to influence corporate matters, including the ability to influence the outcome of director elections and other matters requiring stockholder approval.

A relatively small number of stockholders own a majority of our common stock. As a result, these stockholders, if they were to act together, would have significant influence over all matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions. Corporate actions might be taken even if other stockholders oppose them. This concentration of ownership might also have the effect of delaying or preventing a change of control of our company that other stockholders may view as beneficial.

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;

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• 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 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.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sale of Unregistered Securities and Use of Proceeds

Sale of Unregistered Securities

None.

Use of Proceeds

The information required by this item regarding the use of our IPO proceeds has been omitted pursuant to SEC rules because such information has not changed since our last periodic report was filed.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

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ITEM 6. EXHIBITS

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Exhibit	Filing Date	Filed/ Furnished Herewith
3.1	Amended and Restated Certificate of Incorporation of Registrant.	10-K	001-38698	3.1	March 29, 2019
3.2	Amended and Restated Bylaws of Registrant.	10-K	001-38698	3.2	March 29, 2019
10.1	Third Amendment to Credit Agreement and First Amendment to Collateral Agreement between Anaplan, Inc. and Wells Fargo Bank, N.A.	8-K	001-38698	10.1	April 29, 2020
31.1	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.					X
31.2	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.					X
32.1†	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.					X
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.					X
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.					X
101.SCH	Inline XBRL Taxonomy Extension Schema Document					X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document					X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document					X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document					X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document					X
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

†  This certification is deemed not filed for purposes of section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

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SIGNATURE

Pursuant to the requirements 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.

	ANAPLAN, INC.
	By:	/s/  David H. Morton, Jr.
Date: June 4, 2020		David H. Morton, Jr.
		Executive Vice President & Chief Financial Officer
		(Principal Financial Officer)

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