Business Wire | Aug 31, 2021 04:05PM EDT

Anaplan Announces Second Quarter Fiscal Year 2022 Financial Results

Aug. 31, 2021

SAN FRANCISCO--(BUSINESS WIRE)--Aug. 31, 2021--Anaplan, Inc. (NYSE:PLAN), provider of a leading cloud-native platform for orchestrating business performance, today announced financial results for its second quarter ended July 31, 2021.

"We are pleased with our strong performance and healthy momentum across the business," said Frank Calderoni, chief executive officer of Anaplan. "With the post-pandemic economy emerging, we are well positioned to take advantage of the numerous market opportunities to help solve our customers' biggest challenges. I want to personally thank all our employees for their resiliency and commitment."

Second Quarter Fiscal 2022 Financial Results

* Total revenue was $144.3 million, an increase of 35.5% year-over-year. Subscription revenue was $130.8 million, an increase of 34.6% year-over-year. * GAAP operating loss was $49.1 million or 34.0% of total revenue, compared to $37.7 million in the second quarter of fiscal 2021 or 35.4% of total revenue. Non-GAAP operating loss was $10.9 million or 7.6% of total revenue, compared to $9.6 million in the second quarter of fiscal 2021 or 9.0% of total revenue. * GAAP loss per share was $0.35, compared to $0.26 in the second quarter of fiscal 2021. Non-GAAP loss per share was $0.09, compared to $0.04 in the second quarter of fiscal 2021. * Cash and Cash Equivalents were $312.9 million as of July 31, 2021.

Financial Outlook

The company is providing the following guidance for its third quarter fiscal 2022:

* Total revenue is expected to be between $145.5 and $146.5 million. * Non-GAAP operating margin is expected to be between negative 10.0% and 11.0%. * As a baseline for third quarter, we expect billings to be in the range of $179 million to $181 million.

The company is updating its previous guidance provided on May 27, 2021 for its full year fiscal 2022:

* Total revenue is expected to be between $571.5 and $573.5 million (was between $555 and $560 million). * Non-GAAP operating margin is expected to be between negative 8.0% and 9.0%.

The guidance provided above are forward-looking statements and actual results may differ materially. Refer to the "Forward-Looking Statements" safe harbor section below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.

The section titled "Non-GAAP Financial Measures" below contains a description of the non-GAAP financial measures used in this press release, definitions of our operating metrics and a reconciliation of GAAP and non-GAAP financial measures is contained in the tables below. A reconciliation of non-GAAP measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, costs and expenses, including the impact of stock-based compensation, which is dependent on factors such as future stock price and volume of equity awards granted in the future, that may be incurred in the future and therefore, cannot be reasonably predicted. The effect of these excluded items may be significant.

Recent Highlights

* Vikas Mehta joined Anaplan as Chief Financial Officer * Anaplan launched new platform innovations, including Management Reporting * Gartner recognized Anaplan in the first-ever Market Guide for Cloud Extended Planning and Analysis (XP&A) Solutions * OZON selected Anaplan to manage P&L reporting and FP&A processes in support of rapid growth * Childrensalon chose Anaplan to transform its financial forecasting and data processing systems

Webcast and Conference Call Information Event: Anaplan Second Quarter Fiscal Year 2022 Earnings Conference Call When: Tuesday, August 31, 2021 Time: 2:00 p.m. PT / 5:00 p.m. ET Live Call: Please see online registration Replay: (800) 585-8367 or (416) 621-4642 with passcode 3667246 Live Webcast: https://investors.anaplan.com or with replay available for 12 months

Upcoming Investor EventsAnaplan management will be participating in the following investor conferences:

Wolfe Research Inaugural TMT Conference Wednesday, September 8, 2021 9:15am PT/12:15pm ET

Jefferies Virtual Software Conference Tuesday, September 14, 2021 10:00am PT/1:00pm ET

About Anaplan

Anaplan (NYSE: PLAN) is a transformative way to see, plan, and run your business. Using our proprietary Hyperblock(tm) technology, Anaplan lets you contextualize real-time performance, and forecast future outcomes for faster, confident decisions. Because connecting strategy and plans to collaborative execution across your enterprise is required to move business FORWARD today. Based in San Francisco, Anaplan has over 175 partners and more than 1,750 customers worldwide. To learn more, visit anaplan.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, each as amended, including all statements other than statements of historical fact contained in this press release and includes, without limitation, statements about the impact of the COVID-19 pandemic and resulting global economic uncertainty, the quotations from management, statements regarding market demand, market opportunity, competitive position including of the company's solutions compared to the offerings of competitors, use of the company's solutions and the results of such use, statements regarding the need for, or interest in, enterprise planning or digital transformation, statements about the company's plans, strategies and prospects, statements about offerings, solutions, services and functionality, statements regarding growth and momentum, statements about customers' challenges, plans and priorities, the financial outlook and guidance, which may include expected GAAP and non-GAAP financial and other results, for the company's third fiscal quarter ending October 31, 2021 and for the full fiscal year ending January 31, 2022 and the underlying assumptions, and statements about events and trends including events and trends that we believe may affect our financial condition, results of operations, short- and long-term business operations and objectives, and financial needs. These statements identify prospective information and may include words such as "expects," "intends," "continue," "plans," "anticipates," "believes," "estimates," "predicts," "projects," "potential," "should," "may," "will," or the negative version of these words, variations of these words and comparable terminology. These forward-looking statements are based on information available to the company as of the date of this press release and are based on management's current views and assumptions. These forward-looking statements are conditioned upon and also involve a number of known and unknown risks, uncertainties, and other factors that could cause actual results, performance or events to differ materially from those anticipated by these forward-looking statements. Such risks, uncertainties, and other factors may be beyond the company's control and may pose a risk to the company's operating and financial condition. Such risks and uncertainties include, but are not limited to, the following risks: the ongoing COVID-19 pandemic, and resulting global economic uncertainty, has impacted how we, our customers, and our partners are operating, and could result in a material adverse effect on our business, financial condition, operating results and cash flows; we have a limited history of operating at our current scale and under our current strategy, which makes it difficult to predict our future operating results, and we may not achieve our expected operating results in the future; our recent revenue growth rates may not be indicative of our future performance or growth; we have a history of net losses, we anticipate increasing our operating expenses in the future, and we do not expect to be profitable for the near future; our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business; we have experienced rapid growth and expect to continue to invest in our growth in the future, and if we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service, or adequately address competitive challenges and our business, financial condition and results of operations may be adversely affected; we derive substantially all of our revenue from a single software platform and if our platform fails to satisfy customer demands or to achieve widespread market acceptance it would adversely affect our business, operating results, financial condition, and growth prospects; if we are unable to attract new customers, both domestically and internationally, the growth of our revenue will be adversely affected and our business may be harmed; our business depends substantially on our customers renewing their subscriptions and expanding their use of our platform and if we fail to achieve renewals or expansions or our customers renew or expand their subscriptions 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; failure to effectively expand our sales and marketing capabilities, including to hire and retain direct sales personnel, could harm our ability to increase our customer base and achieve broader market acceptance of our service; our growth depends in part on the success of our strategic relationships with third parties and their continued performance; if our customers and partners do not have access to highly skilled and trained users of our platform, our customers may not be able to unlock the full potential of our platform, customer satisfaction may suffer, and our results of operations, financial condition and growth prospects may be adversely affected; if we fail to continue to enhance our platform, satisfy the cloud infrastructure priorities of our clients or adapt to rapid technological change, our ability to remain competitive could be impaired; if we experience a security incident affecting our platform, networks, systems or data or the data of our customers, or are perceived to have experienced such a security incident, our platform may be perceived as not being secure, our reputation may be harmed, customers may reduce the use of or stop using our platform, we may incur significant liabilities, and our business could be materially adversely affected; real or perceived errors, failures, bugs, service outages, or disruptions in our platform could adversely affect our reputation and harm our business; we depend on the experience and expertise of our senior management team and certain key employees, especially engineering, research and development and sales personnel, and our inability to retain these executive officers and key employees or recruit them in a timely manner, could harm our business, operating results, and financial condition; the markets in which we participate are intensely competitive, and if we do not compete effectively, our business and operating results could be adversely affected; we collect, process and store personal information and furthermore, our platform could be used by customers to do the same, and 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. Furthermore, the additional or unforeseen effects from the COVID-19 pandemic and the global economic climate may amplify many of these risks. Information concerning risks, uncertainties and other factors that could cause results to differ materially from the expectations described in this press release is contained in the company's filings with the U.S. Securities and Exchange Commission ("SEC"), including its annual report on Form 10-K filed with the SEC on March 12, 2021, and other documents the company may file with or furnish to the SEC from time to time such as annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. These forward-looking statements should not be relied upon as representing the company's views as of any subsequent date and the company undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made. The information contained in, or that can be accessed through, Anaplan's website and social media channels are not part of this press release.

PreliminaryCondensedConsolidatedStatements ofOperations

(In thousands,except per shareamounts)

(Unaudited)

Three Months Ended July 31, Six Months Ended July 31,

(In thousands,except per share 2021 2020 2021 2020amounts)

Revenue:

Subscription revenue $ 130,751 $ 97,117 $ 249,094 $ 190,941

Professional 13,573 9,394 25,055 19,414 services revenue

Total revenue 144,324 106,511 274,149 210,355

Cost of revenue:

Cost of subscription 22,645 16,148 43,974 31,333 revenue (1)

Cost of professional 13,582 9,294 25,074 18,849 services revenue (1)

Total cost of 36,227 25,442 69,048 50,182 revenue

Gross profit 108,097 81,069 205,101 160,173

Operating expenses:

Research and 36,217 24,595 69,429 48,357 development (1)

Sales and marketing 96,281 72,914 184,751 144,588 (1)

General and 24,685 21,235 49,630 43,663 administrative (1)

Total operating 157,183 118,744 303,810 236,608 expenses

Loss from operations (49,086) (37,675) (98,709) (76,435)

Interest income (131) (184) (282) 327 (expense), net

Other income (2,375) 4,007 (2,834) 3,676 (expense), net

Loss before income (51,592) (33,852) (101,825) (72,432) taxes

Provision for income 471 (1,672) (787) (2,694) taxes

Net loss $ (51,121) $ (35,524) $ (102,612) $ (75,126)

Net loss per shareattributable to $ (0.35) $ (0.26) $ (0.71) $ (0.55) common stockholders,basic and diluted

Weighted-averageshares used incomputing net lossper share 145,474 138,335 144,828 137,359 attributable tocommon stockholders,basic and diluted

(1) Includesstock-based compensation expenseas follows:

Cost of subscription $ 1,830 $ 876 $ 3,352 $ 1,584 revenue

Cost of professional 991 692 1,822 1,200 services revenue

Research and 8,384 4,380 15,350 8,026 development

Sales and marketing 18,064 11,213 34,697 21,244

General and 6,189 7,818 14,308 15,418 administrative

Total stock-based $ 35,458 $ 24,979 $ 69,529 $ 47,472 compensation expense

Preliminary Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

As of

July 31, 2021

January 31, 2021

ASSETS

Current assets:

Cash and cash equivalents

$

312,946

$

320,990

Accounts receivable, net

118,589

147,005

Deferred commissions, current portion

41,198

36,797

Prepaid expenses and other current assets

27,881

24,252

Total current assets

500,614

529,044

Property and equipment, net

61,832

51,603

Deferred commissions, net of current portion

89,998

82,405

Goodwill

32,379

32,379

Operating lease right-of-use asset

35,409

33,985

Other noncurrent assets

9,310

9,709

TOTAL ASSETS

$

729,542

$

739,125

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

9,679

$

7,949

Accrued expenses

101,726

101,507

Deferred revenue, current portion

292,492

287,778

Operating lease liabilities, current portion

8,942

7,951

Total current liabilities

412,839

405,185

Deferred revenue, net of current portion

4,029

7,765

Operating lease liabilities, net of current portion

30,850

30,130

Other noncurrent liabilities

19,932

18,032

TOTAL LIABILITIES

467,650

461,112

Stockholders' equity:

Common stock

14

14

Accumulated other comprehensive loss

(8,576)

(7,528)

Additional paid-in capital

1,020,044

932,505

Accumulated deficit

(749,590)

(646,978)

TOTAL STOCKHOLDERS' EQUITY

261,892

278,013

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

729,542

$

739,125

Preliminary Condensed Consolidated BalanceSheets

(In thousands)

(Unaudited)

As of

July 31, January 31, 2021 2021

ASSETS

Current assets:

Cash and cash equivalents $ 312,946 $ 320,990

Accounts receivable, net 118,589 147,005

Deferred commissions, current portion 41,198 36,797

Prepaid expenses and other current assets 27,881 24,252

Total current assets 500,614 529,044

Property and equipment, net 61,832 51,603

Deferred commissions, net of current portion 89,998 82,405

Goodwill 32,379 32,379

Operating lease right-of-use asset 35,409 33,985

Other noncurrent assets 9,310 9,709

TOTAL ASSETS $ 729,542 $ 739,125

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 9,679 $ 7,949

Accrued expenses 101,726 101,507

Deferred revenue, current portion 292,492 287,778

Operating lease liabilities, current portion 8,942 7,951

Total current liabilities 412,839 405,185

Deferred revenue, net of current portion 4,029 7,765

Operating lease liabilities, net of current 30,850 30,130 portion

Other noncurrent liabilities 19,932 18,032

TOTAL LIABILITIES 467,650 461,112

Stockholders' equity:

Common stock 14 14

Accumulated other comprehensive loss (8,576) (7,528)

Additional paid-in capital 1,020,044 932,505

Accumulated deficit (749,590) (646,978)

TOTAL STOCKHOLDERS' EQUITY 261,892 278,013

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 729,542 $ 739,125

Preliminary Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Six Months Ended July 31,

2021

2020

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(102,612)

$

(75,126)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

14,040

12,263

Amortization of deferred commissions

20,053

16,184

Stock-based compensation

69,529

47,472

Reduction of operating lease right-of-use assets and accretion of operating lease liabilities

4,999

5,544

Foreign currency remeasurement losses (gains)

1,004

(3,247)

Other non-cash items

376

950

Changes in operating assets and liabilities:

Accounts receivable

28,591

17,927

Prepaid expenses and other current assets

(3,646)

1,317

Other noncurrent assets

(287)

(1,493)

Deferred commissions

(32,454)

(29,947)

Accounts payable and accrued expenses

757

2,459

Deferred revenue

62

(4,367)

Payments for operating lease liabilities, net

(4,625)

(4,938)

Other noncurrent liabilities

740

6,546

Net cash used in operating activities

(3,473)

(8,456)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment

(6,368)

(4,996)

Capitalized internal-use software

(6,535)

(5,380)

Net cash used in investing activities

(12,903)

(10,376)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from exercise of stock options

3,483

8,624

Proceeds from employee stock purchase plan

11,514

9,481

Principal payments on capital lease obligations

(5,132)

(3,671)

Net cash provided by financing activities

9,865

14,434

Effect of exchange rate changes on cash and cash equivalents

(1,533)

1,548

NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

(8,044)

(2,850)

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH - Beginning of period

320,990

309,894

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH - End of period

$

312,946

$

307,044

Preliminary Condensed Consolidated Statements ofCash Flows

(In thousands)

(Unaudited)

Six Months Ended July 31,

2021 2020

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss $ (102,612) $ (75,126)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 14,040 12,263

Amortization of deferred commissions 20,053 16,184

Stock-based compensation 69,529 47,472

Reduction of operating lease right-of-use assets 4,999 5,544 and accretion of operating lease liabilities

Foreign currency remeasurement losses (gains) 1,004 (3,247)

Other non-cash items 376 950

Changes in operating assets and liabilities:

Accounts receivable 28,591 17,927

Prepaid expenses and other current assets (3,646) 1,317

Other noncurrent assets (287) (1,493)

Deferred commissions (32,454) (29,947)

Accounts payable and accrued expenses 757 2,459

Deferred revenue 62 (4,367)

Payments for operating lease liabilities, net (4,625) (4,938)

Other noncurrent liabilities 740 6,546

Net cash used in operating activities (3,473) (8,456)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment (6,368) (4,996)

Capitalized internal-use software (6,535) (5,380)

Net cash used in investing activities (12,903) (10,376)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from exercise of stock options 3,483 8,624

Proceeds from employee stock purchase plan 11,514 9,481

Principal payments on capital lease obligations (5,132) (3,671)

Net cash provided by financing activities 9,865 14,434

Effect of exchange rate changes on cash and cash (1,533) 1,548 equivalents

NET DECREASE IN CASH, CASH EQUIVALENTS, AND (8,044) (2,850) RESTRICTED CASH

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH - 320,990 309,894 Beginning of period

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH - End $ 312,946 $ 307,044 of period

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except percentages and per share amounts)

(Unaudited)

Three Months Ended July 31,

Six Months Ended July 31,

(In thousands, except percentages and per share amounts)

2021

2020

2021

2020

Revenue

$

144,324

$

106,511

$

274,149

$

210,355

GAAP operating loss

$

(49,086)

$

(37,675)

$

(98,709)

$

(76,435)

Stock-based compensation

35,458

24,979

69,529

47,472

Employer payroll tax expense related to employee stock plans

1,602

1,875

3,602

3,360

Business combination and other related cost

783

936

1,561

1,955

Amortization of acquired intangibles

335

335

670

670

Non-GAAP operating loss

$

(10,908)

$

(9,550)

$

(23,347)

$

(22,978)

GAAP operating margin %

-34.0

%

-35.4

%

-36.0

%

-36.3

%

Stock-based compensation %

24.6

%

23.4

%

25.4

%

22.6

%

Employer payroll tax expense related to employee stock plans %

1.1

%

1.8

%

1.3

%

1.6

%

Business combination and other related cost %

0.5

%

0.9

%

0.6

%

0.9

%

Amortization of acquired intangibles %

0.2

%

0.3

%

0.2

%

0.3

%

Non-GAAP operating margin %

-7.6

%

-9.0

%

-8.5

%

-10.9

%

GAAP net loss

$

(51,121)

$

(35,524)

$

(102,612)

$

(75,126)

Stock-based compensation

35,458

24,979

69,529

47,472

Employer payroll tax expense related to employee stock plans

1,602

1,875

3,602

3,360

Business combination and other related cost

783

936

1,561

1,955

Amortization of acquired intangibles

335

335

670

670

Non-GAAP tax adjustments

-

1,250

-

1,250

Non-GAAP net loss

$

(12,943)

$

(6,149)

$

(27,250)

$

(20,419)

GAAP net loss per share, basic and diluted

$

(0.35)

$

(0.26)

$

(0.71)

$

(0.55)

Stock-based compensation

0.24

0.18

0.48

0.35

Employer payroll tax expense related to employee stock plans

0.01

0.02

0.02

0.02

Business combination and other related cost

0.01

0.01

0.01

0.02

Amortization of acquired intangibles

-

-

0.01

-

Non-GAAP tax adjustments

-

0.01

-

0.01

Non-GAAP net loss per share

$

(0.09)

$

(0.04)

$

(0.19)

$

(0.15)

Shares used to compute GAAP net loss per share attributable to common stockholders, basic and diluted

145,474

138,335

144,828

137,359

Shares used to compute Non-GAAP net loss per share

145,474

138,335

144,828

137,359

GAAP net cash used in operating activities

$

(17,282)

$

(6,952)

$

(3,473)

$

(8,456)

Purchase of property and equipment

(3,255)

(3,413)

(6,368)

(4,996)

Capitalized internal-use software

(3,449)

(2,500)

(6,535)

(5,380)

Non-GAAP free cash flow

$

(23,986)

$

(12,865)

$

(16,376)

$

(18,832)

Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), this press release and the accompanying tables contain non-GAAP financial measures, including non-GAAP loss from operations, non-GAAP operating margin, non-GAAP net loss, non-GAAP net loss per share, and free cash flow. The non-GAAP financial information is presented for supplemental informational purposes only, and is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. The non-GAAP measures presented here may be different from similarly-titled non-GAAP measures used by other companies.

We use these non-GAAP measures in conjunction with GAAP measures as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies and to communicate with our board of directors concerning our financial performance. We believe these non-GAAP measures, when viewed collectively with the GAAP measures, may be helpful to investors because they provide consistency and comparability with our past financial performance and facilitate period-to-period comparisons of our operating results.

There are material limitations associated with the use of non-GAAP financial measures since they exclude significant expenses and income that are required by GAAP to be recorded in our financial statements. The definitions of our non-GAAP measures may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may utilize metrics that are not similar to ours. We compensate for these limitations by analyzing current and future results on a GAAP basis as well as a non-GAAP basis and by providing specific information regarding the GAAP items excluded from these non-GAAP financial measures. Please see the reconciliation tables in this release for the reconciliation of GAAP and non-GAAP results.

We adjust the following items from one or more of our non-GAAP financial measures:

Stock-based compensation expense. We exclude stock-based compensation expense, which is a non-cash expense, from certain of our non-GAAP financial measures because we believe that excluding this item provides meaningful supplemental information regarding operational performance. In particular, companies calculate stock-based compensation expense using a variety of valuation methodologies and subjective assumptions.

Employer payroll tax expense related to employee stock plans. We exclude employer payroll tax expense related to employee stock plans, which is a cash expense, from certain of our non-GAAP financial measures because we believe that excluding this item provides meaningful supplemental information regarding operational performance. In particular, this expense is tied to the exercise or vesting of underlying equity awards and the price of our common stock at the time of exercise or vesting, which may vary from period to period independent of the operating performance of our business.

Amortization of acquired intangible assets. We exclude amortization of acquired intangible assets, which is a non-cash expense, from certain of our non-GAAP financial measures. Our expenses for amortization of intangible assets are inconsistent in amount and frequency because they are significantly affected by the timing, size of acquisitions and the inherent subjective nature of purchase price allocations. We exclude these amortization expenses because we do not believe these expenses have a direct correlation to the operation of our business.

Business combinations and related cost. We exclude transaction, integration, and retention expenses that are directly related to business combinations from certain of our non-GAAP financial measures because we believe that excluding these items provides meaningful supplemental information regarding operational performance.

Non-GAAP tax adjustments. We exclude discrete tax expenses associated with non-recurring intercompany transactions because we believe that excluding these items facilitate a comparison of the non-GAAP tax provision in the current and prior periods.

Free cash flow. Our management reviews cash flows generated from operations after taking into consideration capital expenditures such as purchase of property and equipment and internal-use software as these expenditures are considered to be a necessary component of ongoing operations. We define non-GAAP free cash flow as net cash provided by (used in) operating activities, reduced by purchase of property and equipment and capitalization of internal-use software.

Operating Metrics

Annual recurring revenue (ARR) 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.

Dollar-based Net Expansion Rate is calculated as the ARR at the end of a period for the base set of customers from which we had ARR in the year prior to the calculation, divided by the ARR one year prior to the date of calculation for that same customer base.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210831005948/en/

CONTACT: Investor Contact: Edelita Tichepco investors@anaplan.com

CONTACT: Media Contact: Anthony Harrison press@anaplan.com