Smartsheets (SMAR)

Investment Analysis Clubs Saul’s Investing Discussions
1

Smartsheets (SMAR) - This is a little stock that I’ve taken a tiny “get to know it” position (less than 1%) in this week. I don’t really entirely understand what they do, and don’t like that they haven’t controlled expenses and losses, and their valuation is quite expensive, but I like their growth and gross margins and dollar-based retention rate. We’ll see. Here are my notes on it so far.
Saul

Apr 2018 – IPO at $15.

June 2018 – Caps4growth brought it to the board. Here are his lightly edited observations:

It offers Smartdashboards that provide the status of work to align individuals, managers, and executives. It has subscription revenue growth of nearly 60% and billings growth of about 50%. It has 80% gross margins, and grew revenues 66% last year and guides to 44% growth this year and 35-40% each of the two years thereafter. It has over 3.6 million users with 90% of the Fortune 100 using its product (Saul: I suspect this means that at least some tiny percent of each company has a seat) and a 130% dollar retention rate (now that’s more impressive). Its cloud-based collaboration platform makes it easier for businesses to plan, track and automate work at scale. Market cap of $2.7 billion. I did not find TAM. It might be a little pricy but looks like a long runway.

June 2018 – Apr quarter results (Saul: with some of my additions and comments)

• EPS of minus 12 cents (beats by 6 cents)
• Total revenue up 63% to $36 million (beats by $3 million).
• Last 5 quarters of revenue growth: 63%, 69%, 65%, 68%, 63%

• GAAP operating loss was $13.0 million,
• Op cash flow was negative $8.2 million,
• Free cash flow was negative $9.7 million

• Subscription revenue was $32 million, up 57% from $20 million.
• Prof services revenue was $4.3 million, up 129%
• Calculated Billings were $45 million, up 50% They were 25% greater than revenue for a 1.25 ratio.
• Last 5 quarters of Calc Billings: 30, 34, 33, 39, 45
• Last 5 quarters of Calc Billings growth: 75%, 73%, 57%, 74%, 50%

• Adj operating loss was $11.0 million, or 30% of revenue, worsening from $6.7 million, or 30% of revenue a year ago.
• (Our operating loss was impacted by higher costs of operating as a public company).

• Adj net loss was $11.0 million, worsening from $6.6 million a year ago.
• Adj net loss per share was 12 cents, worsening from 7 cents
• Op cash flow was negative $8.2 million, worsening from neg $5.3 million a yearr ago.
• Free cash flow was minus $9.7 million, worsening from minus $7.8 million a year ago.
• Cash flows were impacted by annual bonus payouts of $4.2 million this quarter and $2.6 million a year ago.

• Domain-based customers 75,642
• New Domain-based customers 1,500
• Customers with annualized contract values (ACV) of $5,000 or more up 78% yoy to 4,349.
• Customers with annualized contract values (ACV) of $50,000 or more up 139% to 239
• Domaine Customers Average annualized contract values was ACV up 47% to $1,808,

• Dollar-based net retention rate was 130%. And the last five quarters have been 124%, 126%, 129%, 130%, 130%!

Guidance for quarter:
• Total revenue of $39.5 million for growth of 48%
• Adj operating loss of $13 million
• Adj net loss per share of 13 cents, assuming 102 million shares

Guidance for fiscal year
• Total revenue of $ $162 million for growth of 46%
• Adj operating loss of $54 million
• Adj net loss per share of 56 cents, assuming 99 million shares
• Billings of $196 million representing for growth of 44%
• Net free cash flow of negative $25 million

16 Likes
2

among all the stocks out there, what is your criteria to pay attention to this one and not another one?

tj

1 Like
3

Can’t speak for Saul but 80% gross margins and a very high retention rate. It’s doubled though since its IPO.

4

I don’t understand how these two figures fit together:

• Last 5 quarters of Calc Billings: 30, 34, 33, 39, 45
• Last 5 quarters of Calc Billings growth: 75%, 73%, 57%, 74%, 50%

Growth of 30 to 34 is 13%, not 73%. Going from 34 to 33 isn’t growth. What am I missing?

1 Like
5

It’s YOY, (Year over year) not sequential.

So 30 to 45 is the only one you can see and compare, which is 50% growth.

Chris

1 Like
6

Year over year growth. Not sequential.

Compare the 45 to the 30 shown on the list and you get 50% growth as sated.

7

What am I missing?

yoy! $45 million is 50% growth from $30 million (which was 4 quarters before). Calculating backward from the previous quarter of $39 million, its 74% growth means that the year before quarter was about $22.4 million.

3 Likes
8

I bought 100 shares primarily on the basis that you bought some, Saul! But the numbers do look good. Now, a question to you or anyone else who may read this: If you were going to buy additional shares of a stock discussed on this board right now, what would it/they be? I’m not sure this is even an appropriate question to post here, so that’s why I’m throwing it out as a part of this thread rather than as a “new topic.”

Thanks much!

jackie

9

Market cap of $2.7 billion. I did not find TAM

Hi Saul,

I could not locate this either. I did take a look at their competitor, Atlassian (TEAM).

For comparative purposes, TEAM has:

$15.61 Billion Market Cap

Had revenue of approx $620 million in 2017.

Recently quarterly revenue of $223.7 million (+39.9% yoy)

Subscription revenue was $105.6 million, up 66.7% year over year.

Maintenance revenue was $82 million, up 22.2% year over year.

Atlassian ended the quarter with 119,158 customers on active subscriptions or maintenance agreements. The company added 6,587 net new customers during the quarter.

Maybe the above will help paint a picture of what the company could be at some point in the future. TEAM is currently profitable. I just have absolutely no idea if Smartsheets product is superior to Atlassian. SMAR’s 130% retention rate at least shows that customers are liking the product!

Best,
Matt

7 Likes
10

lots of competitors

https://www.getapp.com/p/sem/project-management-software?cam…

https://www.techopedia.com/definition/26751/smartsheet

Smartsheet is primarily a project management tool. It provides the ability to manage a project from project launch to setup and provides tools to enable collaboration with project team members and to produce reports on the project. Smartsheet has a similar user interface to that of a spreadsheet, and provides different templates for a variety of business domains. the spreadsheet format should make learning it easier for many
updates to mobile devices too

2 Likes
11

I would have to sell something in order to buy something else. At present, TLND is the only stock I don’t currently hold which I am strongly considering for a starter position.

I have no knowledge of SMAR beyond what’s been written on this board. I’m not sure what they actually sell, but as described it is some electronic dashboard that helps an organization keep track of mission alignment from executives down to worker bees. My experience over 30 years at a very big corporation, a third of that time in management was that one method or another for measuring/monitoring alignment would be embraced, then disappointments would arise and then it would be abandoned for the latest silver bullet written up in some business magazine or even an airlines in-flight magazine. Rinse, repeat.

Maybe this one’s different. Maybe it works better in a smaller setting but doesn’t scale up well. Nevertheless, based on the spare description of the primary product, I was not interested. Maybe I’ll look deeper.

1 Like
12

I bought 100 shares primarily on the basis that you bought some, Saul!

Jackie, that is a terrible reason to buy a stock that you know little or nothing about. You are just betting on a horse at the racetrack based on a tip from a stranger.

First of all, I make mistakes. I recently was very enthusiastic about Nectar and it dropped 50% in a few weeks.

Secondly, it was just a try-out position, that I might sell tomorrow, and almost certainly wouldn’t be announcing it for weeks.

Thirdly, this isn’t a question of trying to make a few bucks on a tip. You need to learn to do this for yourself. I’m and old guy and won’t be here forever. You need to learn how to analyze stocks for yourself. That’s what the KnowledgeBase is for.

If you were going to buy additional shares of a stock discussed on this board right now, what would it/they be? I’m not sure this is even an appropriate question to post here.

That’s absolutely an inappropriate question. You are back at the racetrack, looking for more tips. Read about the stocks yourself and decide for yourself. There’s plenty of information on each company’s website and plenty of discussion on the board. Decide for yourself! Make some mistakes. You’ll learn from them.

Saul

For Knowledgebase for this board,
please go to Post #17774, 17775 and 17776.
We had to post it in three parts this time.

A link to the Knowledgebase is also at the top of the Announcements column
that is on the right side of every page on this board

56 Likes
13

This one bothering me too. I am at 8 stocks and that includes NKTR.

Cheers
Qazulight

14

I mentioned this stock last week but it fell flat, no reply or comment. It was post 42486. I wondered if others were not seeing my posts, if newbies arent allowed to make suggestions, or if nobody liked the stock. Please enlighten me if you have time. Thanks Matt

15

or if nobody liked the stock

Hi Caps, I liked the stock, and I gave you credit for bringing it to the board. But if you look at the information you posted, it was a fairly short paragraph. But when you are presenting a new stock to the board that no-one has ever heard of, I’ve found that people react with much more interest if you give them more information (as I did at the top of this thread).

Saul

6 Likes
16

Smartsheet can be tried out for free at https://www.smartsheet.com/. Seems like a good idea for those considering investment?

(No position.)

3 Likes
17

Thanks, just trying to understand the expectations, rules and norms. I tried providing specifics on the stock but looks like I came up short. It’s a learning process. I should have bought some when you did, but I wasn’t sure if I was missing something glaring. I may have missed the boat on this one. I missed any comments you made before today, maybe it’s my settings. Thanks for clarifying. Have a great evening.

18

From Glassdoor:
Come work for the business ranked Washington’s Best Workplace for 2017 by Puget Sound Business Journal! Smartsheet is a cloud-based work management platform that enables teams to collaborate with speed and accountability. Smartsheet is used by over 50% of the Fortune 500 and maintains rich data integrations with mission-critical applications from Microsoft, Google, Salesforce, Atlassian, and many others.
As a rapidly growing company with customers in 190 countries, we are driven to succeed. We hold the bar high and our values even higher.
96 reviews, 4.6 (out of 5) stars to recommend, 98% approval rating of CEO.

Interesting that they mention TEAM as a data integrator (I would guess that they aren’t considered competition then).

P/S seems very high for a company that hasn’t proven itself. Although, it might be what you pay for when getting in this early. A lot of red on the financial sheets (seeking alpha) as well.

interesting, maybe a 1% stake, but I might hold off personally.

Robert

19

Great….P/S of 26 and a new IPO!

Perhaps this investment is more indicative of risk taking behavior indicative of market tops??

What did you give up to invest in SMAR?

8 Likes
20

Saul,

I was actually trying to be funny and flattering, but IT BACK-FIRED, I’M NOT VERY CLEVER, IT WAS A BAD POST AND I ADMIT IT!

It was the financials that appealed to me. I also looked at Smartsheet’s website as well but as a non-techy person, it wasn’t a lot of help to me. I only bought 100 shares (.08% position for me) so I would be reminded to follow it. Bought a little more today and am now up 1/2% or so. I’ve been investing my own money since 1990 or so and have done very well. So not exactly the newbie coat-tail investor my lame post admittedly painted me to be.

As to the “If you were going to buy additional shares of a stock discussed on this board right now, what would it/they be? I’m not sure this is even an appropriate question to post here,” I truly apologize for an inappropriate question. I have been following discussions on this board since I first stumbled on it a year or so ago (despite being an MF follower since 2010), and have waded into several of the companies discussed on your board over that time. I have learned a tremendous amount. I will never be an all-out limited portfolio investor because I am a tech/IT/software dummy who can not do even the simplest HTML coding to get italics and bolds, and an old lady to boot!

So, again, mea culpa to you and others on this terrific, educational, and dare I say even “fun” board.

jackie

5 Likes