Billion Dollar Unicorns: Smartsheet Delivers High Growth, But No Profits

Billion Dollar Unicorn Smartsheet (NYSE: SMAR), went public in April this year. Analysts have big expectations from the company given that it has a modest 1% penetration in the cloud-based work management market, that some estimate, is more than a $20 billion opportunity. The company’s recently reported results show strong revenue growth, but profits have remained elusive. Smartsheet hopes to change that with the product upgrades launched recently.

Smartsheet’s Financials

Smartsheet was founded in 2005 to deliver an easy-to-use application for work management. It is “a hybrid of multiple concepts” that integrates multiple solutions such as spreadsheets to track numbers, SharePoint to store files, and Access or Google Forms to capture information, into one single application. Smartsheet allows users to collect unstructured data in a format that is easy to track and report and acts as a single source of truth across work processes to become a leading cloud-based platform for work execution.

Smartsheet recently announced its second quarter results. For the quarter, Smartsheet’s revenues grew 59% to $42.4 million and were ahead of the market’s forecast of $39.1 million. It continues to report losses and ended the quarter with a net loss of $12.3 million or $0.12 per share. On an adjusted basis, it reported a loss of $0.08 per share compared with the Street’s forecast of a loss of $0.14 per share.

Smartsheet operates on a subscription-based model. Subscription revenues for the quarter grew 57% to $37.5 million and professional services revenues growing 71% to $4.9 million.

Among key operating metrics, it ended the quarter with 76,693 domain-based customers. The number of all customers with annualized contract values (ACV) of $50,000 or more grew nearly 150% to 298. Average ACV per domain-based customer increased 49% to $2,002.

For the current quarter, it expects revenues of $43.5-$44.5 million with non-GAAP net loss per share of $0.16-$0.14. It forecast revenues of $167-$169 million for the year with a non-GAAP net loss per share of $0.56-$0.52. Analysts were expecting the company to end fiscal 2019 with revenues of $161 million and a net loss of $0.57 per share.

Smartsheet’s Product Upgrades

To expand market reach, Smartsheet continued with several product upgrades in the recent quarter. In June this year, the company launched an enterprise premier plan that will focus on the enterprise level customers by providing them access to higher value capabilities including dashboards and automation.

As part of its efforts to improve collaboration in the organization, Smartsheet continued to integrate with popular enterprise messaging platforms. It already has integrations with Slack and Workplace by Facebook. Recently, it launched an integration with Google Hangouts chat as well.

This quarter, Smartsheet launched a set of prepackaged solutions called Accelerators, which are focused on three key segments – IT PMO, Professional services, and M&A. These tools will leverage Smartsheet’s insights and best practices to support services required in these three key areas by its customers. Accelerators cost over $10,000.

Finally, bearing in mind the need to support the mobile platforms, Smartsheet added significant enhancements to its mobile capabilities in the quarter, including a contextually aware editing experience and barcode scanning.

Smartsheet is not the only platform available in the market, but its product has seen rapid adoption in the market. A Capterra report ranks Smartsheet as the fourth largest vendor in the industry with Microsoft Project, Atlassian JIRA, and Podio ahead of it in the race.

I would like to know from the users about the features that they most like in Smartsheet and the features that they would like to be changed. What do you think will help Smartsheet gain ground amongst its competition?

Till April this year, Smartsheet had been venture funded, having raised $113.2 million from investors including Jenny Ceran, Sutter Hill Ventures, Insight Venture Partners, and Madrona Venture Group. Its last funding round was held in May 2017 when it was valued at $852 million. Recently, Smartsheet raised $174 million by selling 11.6 million shares at $15 each. It is currently trading at $25.72 with a market capitalization of $2.6 billion. It had climbed to $34.83 within a few weeks of listing.

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Comments

Gil Richards 5 years ago Member's comment

$SMAR's lack of profits doesn't concern me. #Smartsheet is still showing strong growth... it took #Amazon 8 years to make a profit!