by Brenon Daly
Maybe Anaplan can pull off what its rival Adaptive Insights failed to do: make it to Wall Street. The two corporate performance management (CPM) vendors put in their IPO paperwork just four months apart, but the outcomes for the two companies are looking very different. While Adaptive Insights is probably more at home inside the portfolio of an existing enterprise software provider, Anaplan’s stronger financial profile makes it far more likely to go public and continue this year’s bullish run of enterprise software offerings.
By any number of measures at these two vendors, Anaplan’s financials are more in line with what public market investors want to see. (We would note that measuring financials is essentially what the software from each of these companies actually does.) Anaplan is half again as big as Adaptive Insights, and it’s increasing sales at a more rapid clip (40% growth for Anaplan, compared with 30% at Adaptive Insights.) Anaplan’s scale and trajectory put it more in line with other recent enterprise software debutants such as Pluralsight and Zuora.
The fact that Anaplan has lost roughly twice as much as Adaptive Insights in recent quarters due to comparatively rich sales and marketing spending probably won’t trouble public market investors, who have been focused on the top line of this year’s IPOs rather than the bottom line. Lingering concerns around Anaplan’s red ink will likely be eased if Wall Street looks at the company’s customer retention rate of roughly 120%, which puts it in the top segment for SaaS vendors. For comparison, Adaptive Insights renewed customer contracts each year at only about 100% of their value.
All of that points to Anaplan enjoying at least some premium valuation to its CPM rival. In its dual-track process, Adaptive Insights ended up selling to SaaS stalwart Workday for $1.6bn, or 13.6x trailing sales. That’s also roughly the current trading valuation for recent software debutant Zuora.
Although Zuora and Anaplan serve vastly different markets, they are identically sized ($109m in 1H 2018 revenue, with each putting up a majority of subscription sales combined with a bit of professional services) and share a similar growth trajectory. Putting the mid-teens price-to-sales valuation on Anaplan’s trailing sales of $168m puts the CPM provider in the neighborhood of $2.5bn market value, which would work out to roughly 10x forward sales, based on our estimates. Assuming that’s the case, Anaplan’s IPO exit could well be worth $1bn more than Adaptive Insights’ M&A exit.