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Classified in: Science and technology, Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

Smartsheet Inc. Announces First Quarter Fiscal Year 2021 Results


Smartsheet Inc. (NYSE: SMAR), the platform for enterprise achievement, today announced financial results for its first fiscal quarter ended April 30, 2020.

"We delivered a good first quarter, given the market conditions," said Mark Mader, President and CEO of Smartsheet. "Smartsheet has become an increasingly mission-critical platform for enterprises seeking to enable a dynamic workforce; a workforce capable of working from anywhere, adapting to rapidly changing conditions, and staying deeply connected to their individual work and the mission of their teams, no matter the circumstance."

First Quarter Fiscal 2021 Financial Highlights

First Quarter Fiscal 2021 Business Highlights

The dollar-based net retention rate is calculated by dividing the aggregate ACV as of the end of the quarter (net of expansions, reductions and cancellations) by the same customer cohort's net aggregate ACV as of the end of the comparable year-ago quarter. This calculation excludes customers acquired within the previous 12 months. The ACV for customers which Smartsheet acquired through the purchase of 10,000ft on May 1, 2019 does not impact the dollar-based net retention rate metric until the second fiscal quarter of fiscal year 2021, one year from the date of acquisition.

The section titled "Use of Non-GAAP Financial Measures" below contains a description of the non-GAAP financial measures with a reconciliation between GAAP and non-GAAP information. The section titled "Definitions of Business Metrics" contains definitions of certain non-financial metrics provided within this earnings release.

Financial Outlook

For the second quarter of fiscal 2021, the Company currently expects:

For the full fiscal year 2021, the Company currently expects:

Given uncertainties related to the ongoing novel coronavirus and resulting COVID-19 disease ("COVID-19") pandemic and rapidly changing global economic environment, Smartsheet is withdrawing its previously issued full-year 2021 billings and free cash flow guidance provided March 17, 2020. These statements are forward-looking and actual results may materially differ. Refer to the "Forward-Looking Statements" section below for information on the factors that could cause our actual results to materially differ from these forward-looking statements.

We have not reconciled net free cash flow guidance to net cash from operating activities because we do not provide guidance on the reconciling items between net cash from operating activities and net free cash flow, due to the uncertainty regarding, and the potential variability of, these items. The actual amount of such reconciling items will have a significant impact on our net free cash flow. Accordingly, a reconciliation of net cash from operating activities to net free cash flow is not available without unreasonable effort. We do not provide reconciliation of calculated billings guidance as its components are solely revenue and deferred revenue, and guidance for revenue is already provided.

Conference Call Information

Smartsheet will host a conference call and live webcast for analysts and investors at 1:30 p.m. Pacific Time on June 3, 2020. A live webcast and accompanying presentation can be accessed on the Investor Relations section of the Company's website at: https://investors.smartsheet.com. The conference call can also be accessed by dialing (877) 274-9243, or +1 (647) 689-5417 (outside of the US). The conference ID is 4242968. A replay of the call via webcast will be available at https://investors.smartsheet.com or by dialing (800) 585-8367 or +1 (416) 621-4642 (outside of the US). The dial-in replay will be available until the end of day on June 10, 2020. The webcast replay will be available for one year.

Forward-Looking Statements

This press release contains "forward-looking" statements that are based on our management's beliefs and assumptions and on information currently available to management. Forward-looking statements include, but are not limited to, statements about Smartsheet's outlook for the second fiscal quarter ending July 31, 2020 and the full fiscal year ending January 31, 2021, and Smartsheet's expectations regarding possible or assumed business strategies, potential growth and innovation opportunities, new products, and potential market opportunities.

Forward-looking statements generally relate to future events or our future financial or operating performance. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as "believe," "continue," "could," "potential," "remain," "will," "would" or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These risks include, but are not limited to, risks and uncertainties related to: our ability to achieve future growth and sustain our growth rate, our ability to attract and retain customers and increase sales to our customers, our ability to develop and release new products and services and to scale our platform, our ability to increase adoption of our platform through our self-service model, our ability to maintain and grow our relationships with strategic partners, the highly competitive and rapidly evolving market in which we participate, our ability to identify targets for, execute on, or realize the benefits of, potential acquisitions, and our international expansion strategies. Further information on risks that could cause actual results to differ materially from forecasted results is included in our filings with the SEC, including our Quarterly Report on Form 10-Q for the quarter ended April 30, 2020 to be filed with the SEC. Any forward-looking statements contained in this press release are based on assumptions that we believe to be reasonable as of this date. Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons if actual results differ materially from those anticipated in the forward-looking statements.

Use of Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance investors' overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. A reconciliation of the non-GAAP financial measures to such GAAP measures can be found in the accompanying financial statements included with this press release.

We believe that these non-GAAP financial measures provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to important metrics used by our management for financial and operational decision-making. We are presenting these non-GAAP financial metrics to assist investors in seeing our financial performance through the eyes of management, and because we believe that these measures provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.

We define non-GAAP operating and net loss as GAAP operating and net loss excluding share-based compensation expense, amortization of acquisition-related intangible assets, and one-time costs associated with mergers and acquisitions. There are a number of limitations related to the use of these non-GAAP measures as compared to GAAP operating loss and net loss, including that the non-GAAP measures exclude share-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of our compensation strategy.

We use the non-GAAP financial measure of net free cash flow, which is defined as GAAP net cash flows from operating activities, reduced by cash used for purchases of property and equipment (inclusive of spend on internal-use software) and principal payments on finance lease obligations. We believe net free cash flow is an important liquidity measure of the cash that is available, after capital expenditures and operational expenses, for investment in our business and to make acquisitions. Net free cash flow is useful to investors as a liquidity measure because it measures our ability to generate or use cash. Once our business needs and obligations are met, cash can be used to maintain a strong balance sheet and invest in future growth. There are a number of limitations related to the use of net free cash flow as compared to net cash from operating activities, including that net free cash flow includes capital expenditures, the benefits of which are realized in periods subsequent to those when expenditures are made.

We define calculated billings as total revenue plus the change in deferred revenue in the period. Because we recognize subscription revenue ratably over the subscription term, calculated billings can be used to measure our subscription sales activity for a particular period, to compare subscription sales activity across particular periods, and as an indicator of future subscription revenue.

Definitions of Business Metrics

Average ACV per domain-based customer

We define average ACV per domain-based customer as total outstanding ACV for domain-based subscriptions as of the end of the reporting period divided by the number of domain-based customers as of the same date.

Dollar-based net retention rate

We calculate dollar-based net retention rate as of a period end by starting with the ACV from the cohort of all customers as of the 12 months prior to such period end, or Prior Period ACV. We then calculate the ACV from these same customers as of the current period end, or Current Period ACV. Current Period ACV includes any upsells and is net of contraction or attrition over the trailing 12 months, but excludes subscription revenue from new customers in the current period. We then divide the total Current Period ACV by the total Prior Period ACV to arrive at the dollar-based net retention rate.

About Smartsheet

Smartsheet (NYSE: SMAR) is the platform for enterprise achievement. By aligning people and technology so organizations can move faster and drive innovation, Smartsheet enables its customers and users to achieve more. Visit www.smartsheet.com to learn more.

Disclosure of Material Information

Smartsheet announces material information to its investors using SEC filings, press releases, public conference calls, and on its investor relations page of the company's website at https://investors.smartsheet.com.

SMARTSHEET INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share data)

(unaudited)

 

Three Months Ended April 30,

 

2020

 

 

2019

 

Revenue

 

 

 

Subscription

$

77,163

 

 

 

$

50,321

 

 

Professional services

8,324

 

 

 

5,873

 

 

Total revenue

85,487

 

 

 

56,194

 

 

Cost of revenue

 

 

 

Subscription

11,781

 

 

 

6,201

 

 

Professional services

6,660

 

 

 

4,284

 

 

Total cost of revenue

18,441

 

 

 

10,485

 

 

Gross profit

67,046

 

 

 

45,709

 

 

Operating expenses

 

 

 

Research and development

25,991

 

 

 

20,238

 

 

Sales and marketing

54,783

 

 

 

35,413

 

 

General and administrative

15,096

 

 

 

10,939

 

 

Total operating expenses

95,870

 

 

 

66,590

 

 

Loss from operations

(28,824

)

 

 

(20,881

)

 

Interest income

1,327

 

 

 

1,149

 

 

Other income (expense), net

(214

)

 

 

(112

)

 

Net loss before income tax provision (benefit)

(27,711

)

 

 

(19,844

)

 

Income tax provision (benefit)

73

 

 

 

(35

)

 

Net loss and comprehensive loss

$

(27,784

)

 

 

$

(19,809

)

 

Net loss per share attributable to common shareholders, basic and diluted

$

(0.23

)

 

 

$

(0.19

)

 

Weighted-average shares outstanding used to compute net loss per share attributable to common shareholders, basic and diluted

118,868

 

 

 

105,595

 

 

Share-based compensation expense included in the condensed consolidated statements of operations and comprehensive loss was as follows (in thousands, unaudited):

 

Three Months Ended April 30,

2020

 

2019

 

 

 

 

Cost of subscription revenue

$

895

 

 

$

235

 

Cost of professional services revenue

433

 

 

217

 

Research and development

5,128

 

 

2,272

 

Sales and marketing

5,105

 

 

2,108

 

General and administrative

2,856

 

 

1,464

 

Total share-based compensation expense*

$

14,417

 

 

$

6,296

 

*Includes amortization related to share-based compensation that was capitalized in internal-use software in previous periods.

SMARTSHEET INC.

Condensed Consolidated Balance Sheets

(in thousands, except share data)

(unaudited)

 

April 30, 2020

 

January 31, 2020

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

544,178

 

 

$

515,924

 

Short-term investments

?

 

 

50,532

 

Accounts receivable, net of allowances of $3,477 and $2,989, respectively

49,453

 

 

56,863

 

Prepaid expenses and other current assets

9,999

 

 

7,643

 

Total current assets

603,630

 

 

630,962

 

Long-term assets

 

 

 

Restricted cash

720

 

 

865

 

Deferred commissions

49,857

 

 

48,255

 

Property and equipment, net

27,053

 

 

26,981

 

Operating lease right-of-use assets

67,929

 

 

57,590

 

Intangible assets, net

14,306

 

 

15,155

 

Goodwill

16,497

 

 

16,497

 

Other long-term assets

2,614

 

 

1,409

 

Total assets

$

782,606

 

 

$

797,714

 

Liabilities and shareholders' equity

 

 

 

Current liabilities

 

 

 

Accounts payable

$

6,108

 

 

$

7,720

 

Accrued compensation and related benefits

16,001

 

 

39,635

 

Other accrued liabilities

10,654

 

 

12,428

 

Operating lease liabilities, current

13,890

 

 

13,020

 

Finance lease liabilities, current

2,213

 

 

2,465

 

Deferred revenue

162,740

 

 

157,972

 

Total current liabilities

211,606

 

 

233,240

 

Operating lease liabilities, non-current

57,397

 

 

47,913

 

Finance lease liabilities, non-current

1,235

 

 

1,664

 

Deferred revenue, non-current

474

 

 

837

 

Other long-term liabilities

1,531

 

 

?

 

Total liabilities

272,243

 

 

283,654

 

Shareholders' equity

 

 

 

Preferred stock, no par value; 10,000,000 shares authorized, no shares issued or outstanding as of April 30, 2020 and January 31, 2020

?

 

 

?

 

Class A common stock, no par value; 500,000,000 shares authorized, 119,464,110 shares issued and outstanding as of April 30, 2020; 500,000,000 shares authorized, 118,194,159 shares issued and outstanding as of January 31, 2020

?

 

 

?

 

Class B common stock, no par value; 500,000,000 shares authorized, no shares issued and outstanding as of April 30, 2020; 500,000,000 shares authorized, no shares issued and outstanding as of January 31, 2020

?

 

 

?

 

Additional paid-in capital

794,605

 

 

770,518

 

Accumulated deficit

(284,242

)

 

(256,458

)

Total shareholders' equity

510,363

 

 

514,060

 

Total liabilities and shareholders' equity

$

782,606

 

 

$

797,714

 

SMARTSHEET INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

Three Months Ended April 30,

 

2020

 

2019

Cash flows from operating activities

 

 

 

Net loss

$

(27,784

)

 

$

(19,809

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

Share-based compensation expense

14,362

 

 

6,296

 

Depreciation and amortization of property and equipment

2,988

 

 

2,647

 

Amortization of deferred commission costs

6,719

 

 

3,858

 

Unrealized foreign currency loss

97

 

 

38

 

Amortization of intangible assets

849

 

 

208

 

Non-cash operating lease costs

2,736

 

 

1,874

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

7,442

 

 

(3,151

)

Prepaid expenses and other current assets

(2,213

)

 

(2,698

)

Other long-term assets

(804

)

 

(101

)

Accounts payable

(1,996

)

 

324

 

Other accrued liabilities

(1,853

)

 

1,687

 

Accrued compensation and related benefits

(19,861

)

 

(5,265

)

Deferred commissions

(8,321

)

 

(6,667

)

Other long-term liabilities

1,531

 

 

?

 

Deferred revenue

4,405

 

 

12,928

 

Operating lease liabilities

(2,582

)

 

(1,354

)

Net cash used in operating activities

(24,285

)

 

(9,185

)

Cash flows from investing activities

 

 

 

Proceeds from early termination of short-term investments

50,532

 

 

?

 

Purchases of property and equipment

(1,018

)

 

(1,338

)

Capitalized internal-use software development costs

(2,244

)

 

(1,553

)

Net cash provided by (used in) investing activities

47,270

 

 

(2,891

)

Cash flows from financing activities

 

 

 

Payments on principal of finance leases

(680

)

 

(1,014

)

Payments of deferred offerings costs

(59

)

 

(12

)

Proceeds from exercise of stock options

3,467

 

 

4,734

 

Shares withheld related to net share settlement of restricted stock units

(969

)

 

?

 

Proceeds from Employee Stock Purchase Plan

3,614

 

 

2,347

 

Net cash provided by financing activities

5,373

 

 

6,055

 

Effects of changes in foreign currency exchange rates on cash, cash equivalents, and restricted cash

(249

)

 

(23

)

Net increase (decrease) in cash, cash equivalents, and restricted cash

28,109

 

 

(6,044

)

Beginning of period

516,789

 

 

215,705

 

End of period

$

544,898

 

 

$

209,661

 

Supplemental disclosures

 

 

 

Cash paid for interest

$

46

 

 

$

66

 

Cash paid for income taxes

14

 

 

3

 

Purchases of fixed assets under finance leases

?

 

 

486

 

Right-of-use assets obtained in exchange for new operating lease liabilities

13,076

 

 

?

 

Accrued purchases of property and equipment (including internal-use software)

709

 

 

614

 

Share-based compensation expense capitalized in internal-use software development costs

350

 

 

156

 

SMARTSHEET INC.

Reconciliation from GAAP to Non-GAAP Financial Measures

(unaudited)


Reconciliation from GAAP to non-GAAP operating loss and operating margin

 

Three Months Ended April 30,

 

2020

 

2019

 

(dollars in thousands)

Loss from operations

$

(28,824

)

 

$

(20,881

)

Add:

 

 

 

Share-based compensation expense*

14,417

 

 

6,296

 

Amortization of acquisition-related intangible assets

845

 

 

200

 

One-time acquisition costs

8

 

 

330

 

Non-GAAP operating loss

$

(13,554

)

 

$

(14,055

)

 

 

 

 

Operating margin

(34

)%

 

(37

)%

Non-GAAP operating margin

(16

)%

 

(25

)%

*Includes amortization related to share-based compensation that was capitalized in internal-use software in previous periods.

Reconciliation from GAAP to non-GAAP net loss

 

Three Months Ended April 30,

 

2020

 

 

2019

 

 

(in thousands)

Net loss

$

(27,784

)

 

 

$

(19,809

)

 

Add:

 

 

 

Share-based compensation expense*

14,417

 

 

 

6,296

 

 

Amortization of acquisition-related intangible assets

845

 

 

 

200

 

 

One-time acquisition costs

8

 

 

 

330

 

 

Non-GAAP net loss

$

(12,514

)

 

 

$

(12,983

)

 

*Includes amortization related to share-based compensation that was capitalized in internal-use software in previous periods.

Anti-dilutive shares (in thousands)

 

April 30,

2020

 

2019

Shares subject to outstanding common stock awards

13,673

 

 

14,053

 

Shares issuable pursuant to the 2018 Employee Stock Purchase Plan

50

 

 

42

 

Total potentially dilutive shares

13,723

 

 

14,095

 

Reconciliation from net operating cash flow to net free cash flow

 

Three Months Ended April 30,

 

2020

 

2019

 

 

 

 

 

(in thousands)

Net cash used in operating activities

$

(24,285)

 

 

$

(9,185)

 

Less:

 

 

 

Purchases of property and equipment

(1,018)

 

 

(1,338)

 

Capitalized internal-use software development costs

(2,244)

 

 

(1,553)

 

Payments on principal of finance leases

(680)

 

 

(1,014)

 

Free cash flow

$

(28,227)

 

 

$

(13,090)

 

Reconciliation from revenue to calculated billings

 

Three Months Ended April 30,

 

2020

 

2019

 

 

 

 

 

(in thousands)

Total revenue

$

85,487

 

 

$

56,194

 

Add:

 

 

 

Deferred revenue (end of period)

163,214

 

 

109,061

 

Less:

 

 

 

Deferred revenue (beginning of period)

158,809

 

 

96,133

 

Calculated billings

$

89,892

 

 

$

69,122

 

Reconciliation from GAAP to non-GAAP operating loss guidance

 

Q2 FY 2021

 

FY 2021

 

Low

 

High

 

Low

 

High

 

 

 

 

 

 

 

 

 

(in millions)

Loss from operations

$

(41.8

)

 

 

$

(39.8

)

 

 

$

(148.4

)

 

 

$

(138.4

)

 

Add:

 

 

 

 

 

 

 

Share-based compensation expense*

20.0

 

 

 

20.0

 

 

 

80.0

 

 

 

80.0

 

 

Amortization of acquisition-related intangible assets

0.8

 

 

 

0.8

 

 

 

3.4

 

 

 

3.4

 

 

One-time costs of acquisition

?

 

 

 

?

 

 

 

?

 

 

 

?

 

 

Non-GAAP operating loss

$

(21.0

)

 

 

$

(19.0

)

 

 

$

(65.0

)

 

 

$

(55.0

)

 

*Includes amortization related to share-based compensation that was capitalized in internal-use software in previous periods.

Reconciliation from GAAP to non-GAAP net loss guidance

 

Q2 FY 2021

 

FY 2021

 

Low

 

High

 

Low

 

High

 

 

 

 

 

 

 

 

 

(in millions)

Net loss

$

(41.8

)

 

 

$

(39.8

)

 

 

$

(147.4

)

 

 

$

(137.4

)

 

Add:

 

 

 

 

 

 

 

Share-based compensation expense*

20.0

 

 

 

20.0

 

 

 

80.0

 

 

 

80.0

 

 

Amortization of acquisition-related intangible assets

0.8

 

 

 

0.8

 

 

 

3.4

 

 

 

3.4

 

 

One-time costs of acquisition

?

 

 

 

?

 

 

 

?

 

 

 

?

 

 

Non-GAAP net loss

$

(21.0

)

 

 

$

(19.0

)

 

 

$

(64.0

)

 

 

$

(54.0

)

 

*Includes amortization related to share-based compensation that was capitalized in internal-use software in previous periods.

 


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