SMAR Subscription Growth

Something interesting. Here is Smartsheet’s subscription revenue growth year over year since going public. About 90%+ of revenue is subscription.

In Fiscal years.

Q1 2020 - 57%
Q4 2019 - 57%
Q3 2019 - 57%
Q2 2019 - 57%
Q1 2019 - Can you guess it? Yup 57%

That is unheard of and really impressive. I mean accelerating looks better of course, but that level of consistency should count for something.

The only variable has been the pro services revenue. That had been tracking a higher growth rate than the subscription growth rate in prior quarters, but that is no longer the case. For instance this most recent quarter Q1 2020 pro services grew at only 38% while in Q4 2019 pro services saw 77% growth. In Q1 2019, pro services grew at 129%. So the overall top line growth has been ever so slowly ticking lower the last few quarters, but subscription growth has not.

Low margin services has become less meaningful to SMAR and high margin SaaS has grown with remarkably steady and high growth. Management attributes some of the pro services slow down to the number templates and accelerators that they are up selling to customers rather than dedicating teams to spin up a solution.

This is an attractive business SMAR is building IMO. With very little competition in what they are actually building. Which some will clutch the pearls at. And I say take some more time to get to know what SMAR is really doing.



Unlike Elastic, SMAR actually has its true core product that we can see taking hold and growing with real world evidence.

Elastic does have logging as its bread and butter. Some places say Elastic is the de facto standard in logging. If so, then Elastic to has its core product. Just more difficult to get the real world evidence about it. The new stuff…it is like Docusign starting out a new product they bought that had less than $20 million in revenues.

Will Elastic be able to make any of these products material? Their largest purchase was what, $235 million or something like that?

SMAR, no such issues. It is valuation valuation of course, and how much growth, how much cash, how much like Atlassian can they become, but in their own market areas.



Another interesting thing I found about SMAR, while I don’t have it’s numbers in front of me at this time, is that their S&M spend was a very consistent percentage of their sales growth. It’s like they agreed to spend, say, 60% of sales on S&M and just stick with that, growing the same percent every quarter like a well oiled machine.


Am I the only one who finds that unearthly consistency a little surprising (to avoid the word fishy)?

Is there some financial smoothening of the numbers going on, e.g. with a discretional allocation of costs and revenue?

Just wondering…

And anecdotally: I have been burned by cooked books before. At that time I thought “I can’t find anything not to like in the numbers”. I’m almost sure that any resemblance to Saul’s current take on SMART is purely coincidental.



No. Consistent performance is indicative of consistent performance. And we’re only talking about one metric among hundreds of others.

Let’s not invent conspiracies.



No. Consistent performance is indicative of consistent performance. And we’re only talking about one metric among hundreds of others.

Let’s not invent conspiracies.

But let’s also be accurate in the wording. Most often are reported consistent numbers indicative of consistent performance. I sure hope they are because I make my investment decisions largely based on these numbers. But as we all know, in some very rare and criminal exceptions they are not. This is not a conspiracy theory, it’s a fact of life.



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LNS, One of Bernie Madoff’s methods to accumulate so much outside investment was due to his non-volatile growth. Just consistent numbers year after year. However I’d have to say TRUE criminal/fraudulent numbers are such a rare occurrence I would not make it a big focus. Is that something Enron or WorldCom did? I do know they all tended to show falling growth/numbers before they were found out a fraud… so chances are you’d probably be out first anyways (not to say fraud is wrong, but lets face it, these kinds of frauds tend to start showing cracks long before they blow up).

I remember when I first started investing, one of my first big winners was HBO&Co. I was upset they got acquired by McKesson. But not too long after they were bought out, a bunch of irregularities came about and former HBO CEO Charles McCall was sentenced to 10 years in prison.

One analyst said they should have got bought out for more because of their consistent 50% earnings growth.

I obviously don’t recall the exact numbers as it was like 20 years ago, but they were pretty steady in their growth rates. Seems odd though that a company would hit 57% every quarter, and on top of that do that because they are a fraud.

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