Executive Summary:
Smartsheet Inc. is a American company headquartered in Bellevue, Washington. They are the developers of the Smartsheet application, a software as a service for collaboration and work management. Founded in 2005, the software boasts a user-friendly interface similar to spreadsheets and is used for assigning tasks, tracking project progress, managing calendars, and sharing documents.
Smartsheet reported their non-GAAP EPS came in at $0.32 per share, exceeding analyst estimates of $0.25. Revenue grew 20% year-over-year to $263 million.
| Ticker | $SMAR | Price | $44.27 | Market Cap | $6.09B |
| 52 Week High | $49.42 | 52 Week Low | $35.52 | Shares outstanding | 137.66M |
Company background:
Smartsheet Inc., is a leader in cloud-based work management solutions. Founded by Brent Frei, shortly after selling his previous software company. Initial funding came primarily from Frei himself, but within a year the company had secured $4 million in additional funding.
Their core product, Smartsheet, is a software as a service (SaaS) platform designed to streamline collaboration and work management. With a user interface resembling familiar spreadsheets, Smartsheet allows teams to assign tasks, track project progress, manage calendars, share documents, and automate workflows. The platform boasts scalability, making it suitable for businesses of all sizes, from small teams to Fortune 500 companies (over 80% reportedly use Smartsheet).
Smartsheet faces competition from established players like Microsoft Teams, Asana, and monday.com, all offering project management and collaboration tools. However, Smartsheet differentiates itself through its intuitive interface, robust automation capabilities, and focus on enterprise-grade security.
Recent Earnings:
Revenue grew a significant 20% year-over-year to $263 million, exceeding analyst projections. This strong performance was driven by a 21% increase in subscription revenue, which makes up the bulk of their income.
Non-GAAP EPS came in at $0.32 per share, exceeding analyst estimates of $0.25. This represents a substantial year-over-year growth compared to $0.18 in the same quarter of the previous fiscal year.
Annualized recurring revenue (ARR), a key indicator of future revenue streams, reached $1.056 billion, reflecting a 19% increase year-over-year. The number of customers with significant annual spending power grew, with those spending over $50,000 annually increasing by 20%.
Smartsheet provided optimistic forward guidance. They project revenue for the second quarter to fall between $273 million and $275 million, again exceeding analyst expectations. For the full fiscal year, they anticipate revenue to land in the range of $1.116 billion to $1.121 billion, alongside an adjusted EPS of $1.22 to $1.29. These projections demonstrate Smartsheet’s confidence in continued growth.
The Market, Industry, and Competitors:
Smartsheet Inc. market is fueled by the ever-increasing need for businesses to improve collaboration, streamline workflows, and boost productivity, especially with the growing remote work trend. Analysts anticipate this market to experience significant growth in the coming years, with some predictions suggesting a Compound Annual Growth Rate (CAGR) exceeding 15% until 2030.
This growth is driven by several factors, including the rising adoption of cloud computing solutions, the increasing number of knowledge workers, and the growing emphasis on digital transformation within organizations. As businesses look for ways to manage complex projects and geographically dispersed teams, Smartsheet, with its user-friendly interface and robust features, is well-positioned to capitalize on this expanding market.
Unique differentiation:
Microsoft Teams: This ubiquitous communication platform from Microsoft giant offers integrated project management tools, including task assignment, file sharing, and basic workflow automation. While not as feature-rich as Smartsheet, its deep integration within the Microsoft ecosystem makes it a compelling choice for businesses heavily invested in Microsoft products.
Asana: A popular project management solution known for its user-friendly interface and focus on team communication. Asana excels in project organization with features like task lists, timelines, and workload management.
monday.com: This highly customizable platform provides a visual approach to work management, allowing users to create unique workflows and dashboards. monday.com caters well to creative teams and agencies with its focus on visual organization and collaboration.
Intuitive Interface: Smartsheet boasts a user-friendly interface that resembles familiar spreadsheets, making it easy for users to learn and adopt the platform quickly. This is crucial for businesses looking for a solution with minimal onboarding time.
Robust Automation Capabilities: Smartsheet goes beyond basic task management by offering powerful automation features. This allows users to automate repetitive tasks and workflows, streamlining processes and boosting efficiency.
Focus on Enterprise-Grade Security: For businesses handling sensitive data, security is paramount. Smartsheet prioritizes robust security measures to ensure data protection and compliance, making it a trusted choice for large organizations with stricter security requirements.
Management & Employees:
Mark Mader (President and CEO): Mader boasts over 25 years of experience in the tech industry. He’s recognized as a leader in the field and steers Smartsheet’s overall direction and growth strategy.
Praerit Garg (Chief Product Officer and EVP of Engineering): Garg oversees both product development and engineering teams, ensuring the platform stays innovative and meets customer needs.
Financials:
Revenue has steadily climbed, with a Compound Annual Growth Rate (CAGR) likely exceeding 20%. This strong performance is fueled by rising customer adoption and increasing subscription revenue, the core of their income stream.
Earnings growth has mirrored the revenue trajectory. Earnings per share (EPS) have also seen significant increases year-over-year, reflecting the company’s expanding profitability.
Smartsheet boasts a healthy cash position, which allows them to invest in future growth initiatives and product development. They’ve also managed to keep debt levels under control, indicating a financially sound position.
Technical Analysis:
A stage 4 markdown (bearish) trend on the monthly and weekly chart, and a reversal underway in the $38 to $45 range on the daily chart. Smartsheet had bounced twice on the $36 range and on the daily chart it looks like it wants to head higher to $46 range with a bull flag emerging.
Bull Case:
Large and Growing Market: Smartsheet operates in the cloud-based work management software market, anticipated to experience significant growth in the coming years. This growth is fueled by factors like rising cloud adoption, increasing knowledge workers, and the digital transformation push within businesses.
Customer Acquisition & Retention: The company exhibits strong customer acquisition and retention, with subscription revenue being the core of their income stream. Growth in Annual Recurring Revenue (ARR) and a rising number of high-value customers further solidify this positive trend.
Bear Case:
Slower Adoption or Innovation: If Smartsheet fails to keep pace with evolving industry trends or experiences delays in product development, it could lose ground to more innovative competitors.
Focus on Large Enterprises: While Smartsheet caters to enterprise-grade security, a too-strong focus on large companies could limit their market penetration among smaller businesses with different needs.
Profitability Concerns: While revenue is growing, Smartsheet is not yet consistently profitable. This raises concerns about their long-term financial sustainability, especially if they face increased competition or economic headwinds.
