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Investment Analysis Clubs Saul’s Investing Discussions
1

I had said when I asked for help, that my three little SaaS companies (DOCU, ZUO,COUP), with 30% to 40% growth and net retention rates of 110% to 120%, were good companies but they seemed like weaker versions of my full position companies. Well, you guys found Smartsheets for me, and it was what I had been looking for. Here are updated tables, some of which I got from StockNovice’s great deep dive, and some I added myself.


**Q1	Q2	  Q3	   Q4	         YR**
**Revenues**
**2017: 	        14	16	  18       20	         67**
**2018		22	27	  29       33           111**
**2019		36      42        47	   52           178**
**2020						        257 est**

**% Revenue Increase**
**2017:**
**2018		63	 69	  65      68           66%**
**2019		63	 59	  60      58           60%**
**2020                                       	       45% est**

**Revenue Growth per year declined from 66% to 60%, which is perhaps**
**normal with increasing size. Guidance to 45% is, of course, silly.**

**Sub Revenues**
**2017: 	        13	 15	  17      18	         62**
**2018		20	 24	  26      30            100**
**2019		32   	 37	  42      46            158**

**% Sub Revenue Increase**
**2018		59	 61	  61      62		 61%**
**2019		57	 58	  57      56             57%**

**Subscription revenue is about 88-89% of total revenue.**

**Adj Gross Margins %**
**2017: 	        80	 79       79      79		 79%**
**2018		80	 80	  81      82		 81%**
**2019		80	 82	  82      82		 82%**

**Adj Subscription Gross Margins %**
**2019		87	 88	  89      88		 88%**

**Gross margins look great, and rising.** 
**Gross margins for subscriptions at 88% is in the range we are looking for.**

**Billing**
**2017: 	        17	 19	  21	   23   	80**
**2018		30	 34	  33       39	       136**
**2019		45	 52	  55	   64	       216**
**2020						       310 est** 

**Total Billings Increase %**
**2018		76	 79	  57      70         70%**
**2019		50	 55	  69      63         59%    (Subs billings up 90%!)**

**Billings are rising even faster than revenue, and Subscription billings were rising at 90%** 
**(I got that from the presentation slides if I read it right. Service billings held back total billings).**

**Customers with ACV over $5000**

**2018		2.4	 2.8	  3.3      3.8**
**2019		4.4	 5.0	  5.6      6.2**

**% Increase**
**2019		78	 76	  70       63%** 

**Cust with ACV over $50,000**
**2017:**
**2018		100	 121	  145      189** 
**2019		239	 298	  360      444**

**% Increase**
**2019		139	 146	  148      135%  !!!!!!!!**

**Cust with ACV over $100,000**
**2018		                            65** 
**2019		 79	  99	  127      147**

**% Increase**
**2019		 xx	  xx      xxx     126%  !!!!!!!!**

**These figures don’t need any explanation and show how**
**well the business is doing.**

**ACV per Domain Customer	 (in thousands)**
**2017: 	        0.9	 1.0	  1.0	   1.1**
**2018		1.2	 1.4	  1.5      1.6** 
**2019		1.8	 2.0	  2.2      2.5** 

**% Increase**
**2018		37	 41	  47	  48%**
**2019		47	 49	  49      50%**

**Dollar based net retention rate**
**2018					   130%**
**2019		130	 131	  132      134%**
**2020**

**Free Cash Flow**
**2018					  -10.0**
**2019		-9.7	 -4.2	  -2.0    + 1.0**
**2020**

**First positive FCF.**

It’s kind of odd but I don’t see any weak spots to worry about. I could mention revenue growth rate, but it’s hard to worry about a growth rate of 58% for the last quarter and 60% for the year.

Saul

51 Likes
2

You’re right, there really is no weak spot in the numbers; it’s in the “story.”

I held a starter position in SMAR for about a week after a great ER:
https://www.fool.com/investing/2018/06/05/why-shares-of-smar…

I folded after a ~15% loss, because I wasn’t comfortable with its moat, or my understanding of it anyway. Here we are several months later, at 2X the share price, and they continue to execute. Sometimes it’s better to let the numbers do the talking. I did re-initiate a starter position last week in spite of my lack of understanding the moat of its primary offering, but it still gives me a nagging feeling. Then again, so did MDB for a while, and TWLO did almost two years ago. I hate to go back and see what my cost basis could have been if I didn’t pull the plug on the UBER news.

2 Likes
3

You’re right, there really is no weak spot in the numbers; it’s in the “story.” …I wasn’t comfortable with its moat, or my understanding of it anyway. Here we are several months later, at 2X the share price, and they continue to execute. Sometimes it’s better to let the numbers do the talking…it still gives me a nagging feeling. Then again, so did MDB for a while.

Hi Mister Jones, and welcome to the board. You know, I don’t have a clue what a lot of these tech companies like Smartsheets and Mongo actually DO ! But the numbers tell me that their customers need them, and like what they do, and that’s what counts.
Saul

15 Likes
4

Saul,

I don’t think they were saying that Subscriptions Billings were up 90%. Were you looking at the slide with the graph of Billings?

I think this is what that slide was saying.

Q4 Current Billings

90% Subscription
10% Services

Subscriptions break out as 90% for annual, 10% monthly, <1% other (like 3 year).

That jives with the call and is pretty consistent over last few quarters.

Darth

5

Hi Darth,

You may be right but it’s pretty obscure. It’s a page with bar graphs of Calculated Billings for five quarters, showing under each bar the percent growth QoQ and YoY.

Then on the side they say:

  • Q4 FY19 Billings strength driven by new products and larger deals. [Still apparently talking about growth]
  • Q4 FY19 Subscription billings: 90% annual, 10% monthly, <1% other

I don’t see how you can read that differently than subscription billings were up “90% annually”, and are growing 10% monthly. What else could “10% monthly” mean?

I haven’t a clue what “<1% other” means.

And it’s true that they do say that Q4 Services revenue was 10% of billings, but I don’t see how that relates to the above.

But I agree, 90% subscription billings growth is a lot, but who knows?

Saul

1 Like
6

* Q4 FY19 Subscription billings: 90% annual, 10% monthly, <1% other

I read that to mean that 90% of their subscriptions are paid annually, 10% monthly, and <1% otherwise. e.g., whether a customer pays a full year upfront (typically at a discounted rate) vs. monthly.

11 Likes
7

Saul,

From the CC:

Now turning to billings. Our fourth quarter billings were $64.1 million, up 63% versus a year ago. The strength in billings was driven by the launch of new products and a larger number of big deals that closed in the quarter. Approximately 90% of our subscription billings were annual with most of the remainder monthly. Quarterly and multi-year billings represented less than 1% of the total.

I hope this helps.

Daniel

8 Likes
8

Quarterly and multi-year billings represented less than 1% of the total.

This basically means that they aren’t interested in doing long term deals. This is very good, because they are more likely not to give away pricing and conditions just to get more money up front.

DJ

2 Likes
9

Thanks Daniel and Vaking, you solved it. It sure wasn’t clear to me.
Saul