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Smartsheet: The Good, The Bad And The Ugly

Jun. 06, 2020 9:18 AM ETSmartsheet Inc. (SMAR)4 Comments
Nick Perez profile picture
Nick Perez


  • Smartsheet is a great generator of revenue growth and gross profit.
  • Trying to keep up with growth has stripped away cash flow and profitability.
  • But it has a plan to become profitable over the next five years. The current environment may nix those plans.

Smartsheet Inc. (NYSE:SMAR) provides cloud-based platform for execution of work. It enables teams and organizations to plan, capture, manage, automate, and report on work. The company offers Smartdashboards that provides real-time visibility into the status of work to align individuals, managers, and executives; Smartportals to easily locate and access from any device the resources available for a project without IT assistance; Smartcards to organize, share, and act on workflows; and Smartgrids to keep teams on task by easily tracking multiple moving parts. Company provides applications that integrate functionality with companies, such as Google (GOOG) (GOOGL) and Microsoft (MSFT).

Below is the year-to-date performance. We can see the downturn due to COVID-19 and the recovery. Note that huge drop in stock price right at the end of the chart. I know it is scary and we will review what caused that precipitous drop.

The Good

I heart companies that have a strong revenue growth future and fat margins. We are in luck, because SMAR has both. The table below is from its 2020 earnings presentation.

The revenue growth and total billings are just a thing of beauty. It is firing on all cylinders with organic growth, building deeper relationships, signing larger contracts and strong retention rates.

This table is for the subscription segment, which is the largest of the two segments.

There is an increase in wallet share and strong organic growth with current customers. Now Smartsheet can cross-sell other applications and services. This stuff makes the company happy.

I mentioned this earlier, but here is a nice pic of its gross margin performance.

Total revenue in FY20 was $271MM and SMAR has a goal to reach $1Bn in revenue between FY23 and FY25. That is a lofty goal, but its historical performance provides support that this can be done.

This article was written by

Nick Perez profile picture
I am a long only stock investor. I look for companies that are under appreciated and have a catalyst to realize a more premium valuation. I take a bottom-up up approach by analyzing the financial statements. I can be found on Twitter @NPerezResearch

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (4)

I agree with the concerns over cash burn if this continues longer term. But for argument's sake, let's say SMAR has ($100mm) cash burn pa as a round number. That would still give them ~5 years of runway given their current cash balance to ride out the downturn underway and/or to invest in growth initiatives. Not bullet proof but relative to most growth companies, the cushion looks reasonable (and assuming their accounting issues have been addressed).
Nick Perez profile picture
Reasonable statement. The point I was trying to convey is that investors may seek better operating performance rather than continuous losses and pushing back revenue and cash flow targets to 2025.
HardytheTrader profile picture
"Historically poor operating performance." Growing at 50%+ with moderate cash burn is poor? Give $SMAR a break. There are very few high growth companies which are profitable.
The only thing to worry about right now is the depressing billings guidance for Q2. I am fine with slow improvement of operating margin as long as they manage to reaccelerate growth once the economy is out of recession
Nick Perez profile picture
There is cash burn from core operations. The saving grace is the non cash addbacks. They can do a better job managing the income statement.
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