Smartsheet Inc. Announces First Quarter Fiscal Year 2020 Results

  • First quarter total revenue grew 55% year over year to $56.2 million
  • First quarter net operating cash flow was negative $9.2 million,
    net free cash flow was negative $13.1 million

BELLEVUE, Wash.–(BUSINESS WIRE)–Smartsheet Inc. (NYSE: SMAR), a leading cloud-based platform for work
execution, today announced financial results for its first fiscal
quarter ended April 30, 2019.

“The momentum with which we ended fiscal year ‘19 continued in the first
quarter,” said Mark Mader, President and CEO of Smartsheet. “We are well
positioned to help organizations meet their digital transformation
objectives by delivering the type of increased agility, collaboration,
and visibility that empowers teams and unlocks organizational
achievement.”

First Quarter Fiscal 2020 Financial Highlights

  • Revenue: Total revenue was $56.2 million, an increase of 55%
    year over year. Subscription revenue was $50.3 million, an increase of
    57% year over year. Professional services revenue was $5.9 million, an
    increase of 38% year over year.
  • Operating Loss: GAAP operating loss was $20.9 million, or 37%
    of total revenue, compared to GAAP operating loss of $13.0 million, or
    36% of total revenue, in the first quarter of fiscal 2019. Non-GAAP
    operating loss was $14.1 million, or 25% of total revenue, compared to
    non-GAAP operating loss of $11.0 million, or 30% of total revenue, in
    the first quarter of fiscal 2019.
  • Net Loss: GAAP net loss was $19.8 million, compared to GAAP net
    loss of $14.3 million in the first quarter of fiscal 2019. GAAP net
    loss per share was $0.19, compared to GAAP net loss per share of $0.68
    in the first quarter of fiscal 2019. Non-GAAP net loss was $13.0
    million, compared to non-GAAP net loss of $11.0 million in the first
    quarter of fiscal 2019. Non-GAAP net loss per share was $0.12, equal
    to non-GAAP net loss per share recorded in the first quarter of fiscal
    2019.
  • Cash Flow: Net operating cash flow was negative $9.2
    million, compared to net operating cash flow of negative $8.2 million
    in the first quarter of fiscal 2019. Net free cash flow was negative
    $13.1 million, compared to negative $9.7 million in the first quarter
    of fiscal 2019.

First Quarter Fiscal 2020 Business Highlights

  • Ended the quarter with 80,280 domain-based customers
  • The number of all customers with annualized contract values (“ACV”) of
    $5,000 or more grew to 6,779, an increase of 56% year over year
  • The number of all customers with ACV of $50,000 or more grew to 518,
    an increase of 117% year over year
  • The number of all customers with ACV of $100,000 or more grew to 189,
    an increase of 139% year over year
  • Average ACV per domain-based customer increased to $2,675, an increase
    of 48% year over year
  • Dollar-based net retention rate was 134%

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 2020, the Company currently expects:

  • Total revenue of $63.0 million to $64.0 million, representing
    year-over-year growth of 49% to 51%
  • Non-GAAP operating loss of $18.0 million to $17.0 million
  • Non-GAAP net loss per share of $0.16 to $0.15, assuming basic and
    diluted weighted average shares outstanding of approximately 106.5
    million
  • Net free cash flow burn of up to $8 million

For the full fiscal year 2020, the Company currently expects:

  • Total revenue of $262.0 million to $265.0 million, representing
    year-over-year growth of 47% to 49%
  • Billings of $316.0 million to $320.0 million, representing
    year-over-year growth of 46% to 48%
  • Non-GAAP operating loss of $65.0 million to $60.0 million
  • Non-GAAP net loss per share of $0.59 to $0.54, assuming basic and
    diluted weighted average shares outstanding of approximately 106.5
    million
  • Net free cash flow burn of up to $20 million

On May 1, 2019 the Company acquired Artefact Product Group LLC
(“10,000ft”) for approximately $27.5 million. After considering
anticipated impacts of purchase accounting on acquired deferred revenue
as well as the timing of the acquisition, the Company expects to
recognize an additional $2 million in revenue and $4 million in billings
for FY20 from the acquisition. These amounts have been included in the
updated FY20 guidance presented above.

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 revenues and deferred revenues, and guidance for revenues 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 5, 2019. 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 8398112. 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 12,
2019. 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, 2019 and the full fiscal year ending January 31,
2020, 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, 2019 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 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 loss as GAAP loss from operations excluding
share-based compensation expense, amortization of acquisition-related
intangible assets, and one-time costs associated with mergers and
acquisitions. Non-GAAP net loss, which is used in calculating non-GAAP
net loss per share, also excludes expense associated with revaluation of
convertible preferred stock warrant liability. 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 capital 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.

Definitions of Business Metrics

Number of domain-based customers

We define domain-based customers as organizations with a unique email
domain name such as @cisco. All other customers, which we designate as
ISP customers, are typically small teams or individuals who register for
our services with an email address hosted on a widely used domain such
as @gmail, @outlook, or @yahoo.

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 is a leading cloud-based platform for work execution,
enabling teams and organizations to plan, capture, manage, automate, and
report on work at scale, resulting in more efficient processes and
better business outcomes. Today, over 95,000 customers, including more
than 80,000 domain-based customers, rely on Smartsheet to implement,
manage, and automate processes across a broad array of departments and
use cases.

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
(in thousands, except per share data)
(unaudited)
 
Three Months Ended April 30,
2019   2018
Revenue
Subscription $ 50,321 $ 32,057
Professional services 5,873   4,262  
Total revenue 56,194   36,319  
Cost of revenue
Subscription 6,201 4,236
Professional services 4,284   3,087  
Total cost of revenue 10,485   7,323  
Gross profit 45,709   28,996  
Operating expenses
Research and development 20,238 12,844
Sales and marketing 35,413 22,384
General and administrative 10,939   6,798  
Total operating expenses 66,590   42,026  
Loss from operations (20,881 ) (13,030 )
Interest income (expense) and other, net 1,037   (1,300 )
Net loss before income tax benefit (19,844 ) (14,330 )
Income tax benefit (35 )  
Net loss $ (19,809 ) $ (14,330 )
Net loss per share attributable to common shareholders, basic and
diluted
$ (0.19 ) $ (0.68 )
Weighted-average shares outstanding used to compute net loss per
share attributable to common shareholders, basic and diluted
105,595   21,008  
 
 

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

 
Three Months Ended April 30,
2019   2018
 
Cost of subscription revenue $ 235 $ 34
Cost of professional services revenue 217 47
Research and development 2,272 665
Sales and marketing 2,108 514
General and administrative 1,464   582
Total share-based compensation expense $ 6,296   $ 1,842
 
   
SMARTSHEET INC.
 
Condensed Consolidated Balance Sheets
(in thousands, except share data)
 

April 30, 2019

 

January 31, 2019

(unaudited)  
Assets
Current assets
Cash and cash equivalents $ 208,799 $ 213,085
Accounts receivable, net of allowances of $1,369 and $1,234,
respectively
33,286 30,173
Prepaid expenses and other current assets 6,413   3,922  
Total current assets 248,498 247,180
Long-term assets
Restricted cash 862 2,620
Deferred commissions 31,823 29,014
Property and equipment, net 23,256 22,540
Operating lease right-of-use assets 51,514
Intangible assets, net 1,619 1,827
Goodwill 5,496 5,496
Other long-term assets 169   67  
Total assets $ 363,237   $ 308,744  
Liabilities, convertible preferred stock, and shareholders’ equity
Current liabilities
Accounts payable $ 4,723 $ 4,658
Accrued compensation and related benefits 18,071 25,557
Other accrued liabilities 8,186 6,544
Operating lease liabilities, current 9,423
Finance lease liabilities, current 3,410 3,768
Deferred revenue 108,759   95,766  
Total current liabilities 152,572 136,293
Operating lease liabilities, non-current 44,571
Finance lease liabilities, non-current 1,994 2,164
Deferred revenue, non-current 302 367
Other long-term liabilities 1,003   2,928  
Total liabilities 200,442   141,752  
Commitments and contingencies
Shareholders’ equity
Preferred stock, no par value; 10,000,000 shares authorized, no
shares issued or outstanding as of April 30, 2019 and January 31,
2019
Class A common stock, no par value; 500,000,000 shares authorized,
74,179,772 shares issued and outstanding as of April 30, 2019;
500,000,000 shares authorized, 48,003,701 shares issued and
outstanding as of January 31, 2019
Class B common stock, no par value; 500,000,000 shares authorized,
32,198,631 shares issued and outstanding as of April 30, 2019;
500,000,000 shares authorized, 56,967,742 shares issued and
outstanding as of January 31, 2019
Additional paid-in capital 343,120 327,510
Accumulated deficit (180,325 ) (160,518 )
Total shareholders’ equity 162,795   166,992  
Total liabilities, convertible preferred stock, and shareholders’
equity
$ 363,237   $ 308,744  
 
 
SMARTSHEET INC.
 
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
Three Months Ended April 30,
2019   2018
Cash flows from operating activities
Net loss $ (19,809 ) $ (14,330 )
Adjustments to reconcile net loss to net cash used in operating
activities:
Share-based compensation expense 6,296 1,842
Remeasurement of convertible preferred stock warrant liability 1,326
Depreciation of property and equipment 2,647 1,488
Amortization of deferred commission costs 3,858 1,997
Unrealized foreign currency loss 38 61
Amortization of intangible assets 208 127
Amortization of operating lease right-of-use assets 1,874
Changes in operating assets and liabilities:
Accounts receivable (3,151 ) (3,352 )
Prepaid expenses and other current assets (2,698 ) (956 )
Other long-term assets (101 ) (240 )
Accounts payable 324 237
Other accrued liabilities 1,687 1,508
Accrued compensation and related benefits (5,265 ) (2,141 )
Deferred commissions (6,667 ) (4,694 )
Other long-term liabilities (87 )
Deferred revenue 12,928 9,060
Operating lease liabilities (1,354 )  
Net cash used in operating activities (9,185 ) (8,154 )
Cash flows from investing activities
Purchases of property and equipment (1,338 ) (497 )
Capitalized internal-use software development costs (1,553 ) (313 )
Net cash used in investing activities (2,891 ) (810 )
Cash flows from financing activities
Payments of principal on finance leases (1,014 ) (759 )
Payments of deferred offering costs (12 ) (1,495 )
Proceeds from exercise of stock options 4,734 2,162
Proceeds from Employee Stock Purchase Plan 2,347    
Net cash provided by (used in) financing activities 6,055 (92 )
Effect of foreign exchange on cash, cash equivalents, and restricted
cash
(23 ) (25 )
Net decrease in cash, cash equivalents, and restricted cash (6,044 ) (9,081 )
Cash, cash equivalents, and restricted cash
Beginning of period 215,705   61,059  
End of period $ 209,661   $ 51,978  
 
Supplemental disclosures
Cash paid for interest $ 66 $ 81
Purchases of fixed assets under capital leases 486
Accrued purchases of property and equipment (including internal-use
software)
614 474
Deferred offering costs, accrued but not yet paid 883
Share-based compensation expense capitalized in internal-use
software development costs
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,
2019   2018
(dollars in thousands)
Loss from operations $ (20,881 ) $ (13,030 )
Add:
Share-based compensation expense 6,296 1,842
Amortization of acquisition-related intangible assets 200 120
One-time acquisition costs 330   47  
Non-GAAP operating loss $ (14,055 ) $ (11,021 )
 
Operating margin (37 )% (36 )%
Non-GAAP operating margin (25 )% (30 )%
 
 
 

Reconciliation from GAAP to non-GAAP net loss

Three Months Ended April 30,
2019 2018
(in thousands)
Net loss $ (19,809 ) $ (14,330 )
Add:
Share-based compensation expense 6,296 1,842
Amortization of acquisition-related intangible assets 200 120
One-time acquisition costs 330 47
Remeasurement of convertible preferred stock warrant liability   1,326  
Non-GAAP net loss $ (12,983 ) $ (10,995 )
 
 
SMARTSHEET INC.
 
Reconciliation from GAAP to Non-GAAP Financial Measures
(unaudited)
 
Reconciliation from GAAP to non-GAAP weighted average shares
outstanding (basic and diluted)
 
Three Months Ended April 30,
2019   2018
(in thousands)
GAAP weighted-average shares outstanding used in computing net loss
per share attributable to common shareholders, basic and diluted
105,595 21,008
Add: common shares that would have resulted from conversion of
convertible preferred stock at the beginning of the period, or when
granted (if later), on a weighted average basis
  68,480
Non-GAAP weighted-average shares outstanding used in computing net
loss per share attributable to common shareholders, basic and diluted
105,595   89,488
 
 

Anti-dilutive shares (in thousands)

April 30,
2019 2018
Convertible preferred shares (as converted) 68,480
Convertible preferred stock warrant 137
Shares subject to outstanding common stock awards 14,053 15,656
Shares issuable pursuant to the 2018 Employee Stock Purchase Plan 42  
Total potentially dilutive shares 14,095   84,273
 
 
SMARTSHEET INC.
 
Reconciliation from GAAP to Non-GAAP Financial Measures
(unaudited)
 
Reconciliation from net operating cash flow to net free cash flow
 
Three Months Ended April 30,
2019   2018
(in thousands)
Net cash used in operating activities $ (9,185 ) $ (8,154 )
Less:
Purchases of property and equipment (1,338 ) (497 )
Capitalized internal-use software development costs (1,553 ) (313 )
Payments of principal on finance leases (1,014 ) (759 )
Free cash flow $ (13,090 ) $ (9,723 )
 

 

Reconciliation from revenue to calculated billings

Three Months Ended April 30,
2019 2018
(in thousands)
Total revenue $ 56,194 $ 36,319
Add:
Deferred revenue (end of period) 109,061 66,341
Less:
Deferred revenue (beginning of period) 96,133   57,281  
Calculated billings $ 69,122   $ 45,379  
 
   
SMARTSHEET INC.
 

Reconciliation from GAAP to Non-GAAP Financial Measures

(unaudited)
 
Reconciliation from GAAP to non-GAAP operating loss guidance
 
Q2 FY 2020 FY 2020
Low   High Low   High
(in millions)
Loss from operations $ (30.7 ) $ (29.7 ) $ (113.4 ) $ (108.4 )
Add:
Share-based compensation expense 11.0 11.0 43.0 43.0
Amortization of acquisition-related intangible assets 1.6 1.6 4.9 4.9
One-time costs of acquisition 0.1   0.1   0.5   0.5  
Non-GAAP operating loss $ (18.0 ) $ (17.0 ) $ (65.0 ) $ (60.0 )
 
 

Reconciliation from GAAP to non-GAAP net loss guidance

Q2 FY 2020 FY 2020
Low High Low High
(in millions)
Net loss $ (30.2 ) $ (29.2 ) $ (111.4 ) $ (106.4 )
Add:
Share-based compensation expense 11.0 11.0 43.0 43.0
Amortization of acquisition-related intangible assets 1.6 1.6 4.9 4.9
One-time costs of acquisition 0.1   0.1   0.5   0.5  
Non-GAAP net loss $ (17.5 ) $ (16.5 ) $ (63.0 ) $ (58.0 )

Contacts

Smartsheet Inc.
Investor Relations:
Aaron Turner
[email protected]

Media:
Dan Benelisha
[email protected]

Read full story here

Smartsheet Inc. Announces First Quarter Fiscal Year 2020 Results

  • First quarter total revenue grew 55% year over year to $56.2 million
  • First quarter net operating cash flow was negative $9.2 million,
    net free cash flow was negative $13.1 million

BELLEVUE, Wash.–(BUSINESS WIRE)–Smartsheet Inc. (NYSE: SMAR), a leading cloud-based platform for work
execution, today announced financial results for its first fiscal
quarter ended April 30, 2019.

“The momentum with which we ended fiscal year ‘19 continued in the first
quarter,” said Mark Mader, President and CEO of Smartsheet. “We are well
positioned to help organizations meet their digital transformation
objectives by delivering the type of increased agility, collaboration,
and visibility that empowers teams and unlocks organizational
achievement.”

First Quarter Fiscal 2020 Financial Highlights

  • Revenue: Total revenue was $56.2 million, an increase of 55%
    year over year. Subscription revenue was $50.3 million, an increase of
    57% year over year. Professional services revenue was $5.9 million, an
    increase of 38% year over year.
  • Operating Loss: GAAP operating loss was $20.9 million, or 37%
    of total revenue, compared to GAAP operating loss of $13.0 million, or
    36% of total revenue, in the first quarter of fiscal 2019. Non-GAAP
    operating loss was $14.1 million, or 25% of total revenue, compared to
    non-GAAP operating loss of $11.0 million, or 30% of total revenue, in
    the first quarter of fiscal 2019.
  • Net Loss: GAAP net loss was $19.8 million, compared to GAAP net
    loss of $14.3 million in the first quarter of fiscal 2019. GAAP net
    loss per share was $0.19, compared to GAAP net loss per share of $0.68
    in the first quarter of fiscal 2019. Non-GAAP net loss was $13.0
    million, compared to non-GAAP net loss of $11.0 million in the first
    quarter of fiscal 2019. Non-GAAP net loss per share was $0.12, equal
    to non-GAAP net loss per share recorded in the first quarter of fiscal
    2019.
  • Cash Flow: Net operating cash flow was negative $9.2
    million, compared to net operating cash flow of negative $8.2 million
    in the first quarter of fiscal 2019. Net free cash flow was negative
    $13.1 million, compared to negative $9.7 million in the first quarter
    of fiscal 2019.

First Quarter Fiscal 2020 Business Highlights

  • Ended the quarter with 80,280 domain-based customers
  • The number of all customers with annualized contract values (“ACV”) of
    $5,000 or more grew to 6,779, an increase of 56% year over year
  • The number of all customers with ACV of $50,000 or more grew to 518,
    an increase of 117% year over year
  • The number of all customers with ACV of $100,000 or more grew to 189,
    an increase of 139% year over year
  • Average ACV per domain-based customer increased to $2,675, an increase
    of 48% year over year
  • Dollar-based net retention rate was 134%

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 2020, the Company currently expects:

  • Total revenue of $63.0 million to $64.0 million, representing
    year-over-year growth of 49% to 51%
  • Non-GAAP operating loss of $18.0 million to $17.0 million
  • Non-GAAP net loss per share of $0.16 to $0.15, assuming basic and
    diluted weighted average shares outstanding of approximately 106.5
    million
  • Net free cash flow burn of up to $8 million

For the full fiscal year 2020, the Company currently expects:

  • Total revenue of $262.0 million to $265.0 million, representing
    year-over-year growth of 47% to 49%
  • Billings of $316.0 million to $320.0 million, representing
    year-over-year growth of 46% to 48%
  • Non-GAAP operating loss of $65.0 million to $60.0 million
  • Non-GAAP net loss per share of $0.59 to $0.54, assuming basic and
    diluted weighted average shares outstanding of approximately 106.5
    million
  • Net free cash flow burn of up to $20 million

On May 1, 2019 the Company acquired Artefact Product Group LLC
(“10,000ft”) for approximately $27.5 million. After considering
anticipated impacts of purchase accounting on acquired deferred revenue
as well as the timing of the acquisition, the Company expects to
recognize an additional $2 million in revenue and $4 million in billings
for FY20 from the acquisition. These amounts have been included in the
updated FY20 guidance presented above.

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 revenues and deferred revenues, and guidance for revenues 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 5, 2019. 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 8398112. 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 12,
2019. 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, 2019 and the full fiscal year ending January 31,
2020, 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, 2019 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 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 loss as GAAP loss from operations excluding
share-based compensation expense, amortization of acquisition-related
intangible assets, and one-time costs associated with mergers and
acquisitions. Non-GAAP net loss, which is used in calculating non-GAAP
net loss per share, also excludes expense associated with revaluation of
convertible preferred stock warrant liability. 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 capital 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.

Definitions of Business Metrics

Number of domain-based customers

We define domain-based customers as organizations with a unique email
domain name such as @cisco. All other customers, which we designate as
ISP customers, are typically small teams or individuals who register for
our services with an email address hosted on a widely used domain such
as @gmail, @outlook, or @yahoo.

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 is a leading cloud-based platform for work execution,
enabling teams and organizations to plan, capture, manage, automate, and
report on work at scale, resulting in more efficient processes and
better business outcomes. Today, over 95,000 customers, including more
than 80,000 domain-based customers, rely on Smartsheet to implement,
manage, and automate processes across a broad array of departments and
use cases.

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
(in thousands, except per share data)
(unaudited)
 
Three Months Ended April 30,
2019   2018
Revenue
Subscription $ 50,321 $ 32,057
Professional services 5,873   4,262  
Total revenue 56,194   36,319  
Cost of revenue
Subscription 6,201 4,236
Professional services 4,284   3,087  
Total cost of revenue 10,485   7,323  
Gross profit 45,709   28,996  
Operating expenses
Research and development 20,238 12,844
Sales and marketing 35,413 22,384
General and administrative 10,939   6,798  
Total operating expenses 66,590   42,026  
Loss from operations (20,881 ) (13,030 )
Interest income (expense) and other, net 1,037   (1,300 )
Net loss before income tax benefit (19,844 ) (14,330 )
Income tax benefit (35 )  
Net loss $ (19,809 ) $ (14,330 )
Net loss per share attributable to common shareholders, basic and
diluted
$ (0.19 ) $ (0.68 )
Weighted-average shares outstanding used to compute net loss per
share attributable to common shareholders, basic and diluted
105,595   21,008  
 
 

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

 
Three Months Ended April 30,
2019   2018
 
Cost of subscription revenue $ 235 $ 34
Cost of professional services revenue 217 47
Research and development 2,272 665
Sales and marketing 2,108 514
General and administrative 1,464   582
Total share-based compensation expense $ 6,296   $ 1,842
 
   
SMARTSHEET INC.
 
Condensed Consolidated Balance Sheets
(in thousands, except share data)
 

April 30, 2019

 

January 31, 2019

(unaudited)  
Assets
Current assets
Cash and cash equivalents $ 208,799 $ 213,085
Accounts receivable, net of allowances of $1,369 and $1,234,
respectively
33,286 30,173
Prepaid expenses and other current assets 6,413   3,922  
Total current assets 248,498 247,180
Long-term assets
Restricted cash 862 2,620
Deferred commissions 31,823 29,014
Property and equipment, net 23,256 22,540
Operating lease right-of-use assets 51,514
Intangible assets, net 1,619 1,827
Goodwill 5,496 5,496
Other long-term assets 169   67  
Total assets $ 363,237   $ 308,744  
Liabilities, convertible preferred stock, and shareholders’ equity
Current liabilities
Accounts payable $ 4,723 $ 4,658
Accrued compensation and related benefits 18,071 25,557
Other accrued liabilities 8,186 6,544
Operating lease liabilities, current 9,423
Finance lease liabilities, current 3,410 3,768
Deferred revenue 108,759   95,766  
Total current liabilities 152,572 136,293
Operating lease liabilities, non-current 44,571
Finance lease liabilities, non-current 1,994 2,164
Deferred revenue, non-current 302 367
Other long-term liabilities 1,003   2,928  
Total liabilities 200,442   141,752  
Commitments and contingencies
Shareholders’ equity
Preferred stock, no par value; 10,000,000 shares authorized, no
shares issued or outstanding as of April 30, 2019 and January 31,
2019
Class A common stock, no par value; 500,000,000 shares authorized,
74,179,772 shares issued and outstanding as of April 30, 2019;
500,000,000 shares authorized, 48,003,701 shares issued and
outstanding as of January 31, 2019
Class B common stock, no par value; 500,000,000 shares authorized,
32,198,631 shares issued and outstanding as of April 30, 2019;
500,000,000 shares authorized, 56,967,742 shares issued and
outstanding as of January 31, 2019
Additional paid-in capital 343,120 327,510
Accumulated deficit (180,325 ) (160,518 )
Total shareholders’ equity 162,795   166,992  
Total liabilities, convertible preferred stock, and shareholders’
equity
$ 363,237   $ 308,744  
 
 
SMARTSHEET INC.
 
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
Three Months Ended April 30,
2019   2018
Cash flows from operating activities
Net loss $ (19,809 ) $ (14,330 )
Adjustments to reconcile net loss to net cash used in operating
activities:
Share-based compensation expense 6,296 1,842
Remeasurement of convertible preferred stock warrant liability 1,326
Depreciation of property and equipment 2,647 1,488
Amortization of deferred commission costs 3,858 1,997
Unrealized foreign currency loss 38 61
Amortization of intangible assets 208 127
Amortization of operating lease right-of-use assets 1,874
Changes in operating assets and liabilities:
Accounts receivable (3,151 ) (3,352 )
Prepaid expenses and other current assets (2,698 ) (956 )
Other long-term assets (101 ) (240 )
Accounts payable 324 237
Other accrued liabilities 1,687 1,508
Accrued compensation and related benefits (5,265 ) (2,141 )
Deferred commissions (6,667 ) (4,694 )
Other long-term liabilities (87 )
Deferred revenue 12,928 9,060
Operating lease liabilities (1,354 )  
Net cash used in operating activities (9,185 ) (8,154 )
Cash flows from investing activities
Purchases of property and equipment (1,338 ) (497 )
Capitalized internal-use software development costs (1,553 ) (313 )
Net cash used in investing activities (2,891 ) (810 )
Cash flows from financing activities
Payments of principal on finance leases (1,014 ) (759 )
Payments of deferred offering costs (12 ) (1,495 )
Proceeds from exercise of stock options 4,734 2,162
Proceeds from Employee Stock Purchase Plan 2,347    
Net cash provided by (used in) financing activities 6,055 (92 )
Effect of foreign exchange on cash, cash equivalents, and restricted
cash
(23 ) (25 )
Net decrease in cash, cash equivalents, and restricted cash (6,044 ) (9,081 )
Cash, cash equivalents, and restricted cash
Beginning of period 215,705   61,059  
End of period $ 209,661   $ 51,978  
 
Supplemental disclosures
Cash paid for interest $ 66 $ 81
Purchases of fixed assets under capital leases 486
Accrued purchases of property and equipment (including internal-use
software)
614 474
Deferred offering costs, accrued but not yet paid 883
Share-based compensation expense capitalized in internal-use
software development costs
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,
2019   2018
(dollars in thousands)
Loss from operations $ (20,881 ) $ (13,030 )
Add:
Share-based compensation expense 6,296 1,842
Amortization of acquisition-related intangible assets 200 120
One-time acquisition costs 330   47  
Non-GAAP operating loss $ (14,055 ) $ (11,021 )
 
Operating margin (37 )% (36 )%
Non-GAAP operating margin (25 )% (30 )%
 
 
 

Reconciliation from GAAP to non-GAAP net loss

Three Months Ended April 30,
2019 2018
(in thousands)
Net loss $ (19,809 ) $ (14,330 )
Add:
Share-based compensation expense 6,296 1,842
Amortization of acquisition-related intangible assets 200 120
One-time acquisition costs 330 47
Remeasurement of convertible preferred stock warrant liability   1,326  
Non-GAAP net loss $ (12,983 ) $ (10,995 )
 
 
SMARTSHEET INC.
 
Reconciliation from GAAP to Non-GAAP Financial Measures
(unaudited)
 
Reconciliation from GAAP to non-GAAP weighted average shares
outstanding (basic and diluted)
 
Three Months Ended April 30,
2019   2018
(in thousands)
GAAP weighted-average shares outstanding used in computing net loss
per share attributable to common shareholders, basic and diluted
105,595 21,008
Add: common shares that would have resulted from conversion of
convertible preferred stock at the beginning of the period, or when
granted (if later), on a weighted average basis
  68,480
Non-GAAP weighted-average shares outstanding used in computing net
loss per share attributable to common shareholders, basic and diluted
105,595   89,488
 
 

Anti-dilutive shares (in thousands)

April 30,
2019 2018
Convertible preferred shares (as converted) 68,480
Convertible preferred stock warrant 137
Shares subject to outstanding common stock awards 14,053 15,656
Shares issuable pursuant to the 2018 Employee Stock Purchase Plan 42  
Total potentially dilutive shares 14,095   84,273
 
 
SMARTSHEET INC.
 
Reconciliation from GAAP to Non-GAAP Financial Measures
(unaudited)
 
Reconciliation from net operating cash flow to net free cash flow
 
Three Months Ended April 30,
2019   2018
(in thousands)
Net cash used in operating activities $ (9,185 ) $ (8,154 )
Less:
Purchases of property and equipment (1,338 ) (497 )
Capitalized internal-use software development costs (1,553 ) (313 )
Payments of principal on finance leases (1,014 ) (759 )
Free cash flow $ (13,090 ) $ (9,723 )
 

 

Reconciliation from revenue to calculated billings

Three Months Ended April 30,
2019 2018
(in thousands)
Total revenue $ 56,194 $ 36,319
Add:
Deferred revenue (end of period) 109,061 66,341
Less:
Deferred revenue (beginning of period) 96,133   57,281  
Calculated billings $ 69,122   $ 45,379  
 
   
SMARTSHEET INC.
 

Reconciliation from GAAP to Non-GAAP Financial Measures

(unaudited)
 
Reconciliation from GAAP to non-GAAP operating loss guidance
 
Q2 FY 2020 FY 2020
Low   High Low   High
(in millions)
Loss from operations $ (30.7 ) $ (29.7 ) $ (113.4 ) $ (108.4 )
Add:
Share-based compensation expense 11.0 11.0 43.0 43.0
Amortization of acquisition-related intangible assets 1.6 1.6 4.9 4.9
One-time costs of acquisition 0.1   0.1   0.5   0.5  
Non-GAAP operating loss $ (18.0 ) $ (17.0 ) $ (65.0 ) $ (60.0 )
 
 

Reconciliation from GAAP to non-GAAP net loss guidance

Q2 FY 2020 FY 2020
Low High Low High
(in millions)
Net loss $ (30.2 ) $ (29.2 ) $ (111.4 ) $ (106.4 )
Add:
Share-based compensation expense 11.0 11.0 43.0 43.0
Amortization of acquisition-related intangible assets 1.6 1.6 4.9 4.9
One-time costs of acquisition 0.1   0.1   0.5   0.5  
Non-GAAP net loss $ (17.5 ) $ (16.5 ) $ (63.0 ) $ (58.0 )

Contacts

Smartsheet Inc.
Investor Relations:
Aaron Turner
[email protected]

Media:
Dan Benelisha
[email protected]

Read full story here

Smartsheet Inc. Announces First Quarter Fiscal Year 2020 Results

  • First quarter total revenue grew 55% year over year to $56.2 million
  • First quarter net operating cash flow was negative $9.2 million,
    net free cash flow was negative $13.1 million

BELLEVUE, Wash.–(BUSINESS WIRE)–Smartsheet Inc. (NYSE: SMAR), a leading cloud-based platform for work
execution, today announced financial results for its first fiscal
quarter ended April 30, 2019.

“The momentum with which we ended fiscal year ‘19 continued in the first
quarter,” said Mark Mader, President and CEO of Smartsheet. “We are well
positioned to help organizations meet their digital transformation
objectives by delivering the type of increased agility, collaboration,
and visibility that empowers teams and unlocks organizational
achievement.”

First Quarter Fiscal 2020 Financial Highlights

  • Revenue: Total revenue was $56.2 million, an increase of 55%
    year over year. Subscription revenue was $50.3 million, an increase of
    57% year over year. Professional services revenue was $5.9 million, an
    increase of 38% year over year.
  • Operating Loss: GAAP operating loss was $20.9 million, or 37%
    of total revenue, compared to GAAP operating loss of $13.0 million, or
    36% of total revenue, in the first quarter of fiscal 2019. Non-GAAP
    operating loss was $14.1 million, or 25% of total revenue, compared to
    non-GAAP operating loss of $11.0 million, or 30% of total revenue, in
    the first quarter of fiscal 2019.
  • Net Loss: GAAP net loss was $19.8 million, compared to GAAP net
    loss of $14.3 million in the first quarter of fiscal 2019. GAAP net
    loss per share was $0.19, compared to GAAP net loss per share of $0.68
    in the first quarter of fiscal 2019. Non-GAAP net loss was $13.0
    million, compared to non-GAAP net loss of $11.0 million in the first
    quarter of fiscal 2019. Non-GAAP net loss per share was $0.12, equal
    to non-GAAP net loss per share recorded in the first quarter of fiscal
    2019.
  • Cash Flow: Net operating cash flow was negative $9.2
    million, compared to net operating cash flow of negative $8.2 million
    in the first quarter of fiscal 2019. Net free cash flow was negative
    $13.1 million, compared to negative $9.7 million in the first quarter
    of fiscal 2019.

First Quarter Fiscal 2020 Business Highlights

  • Ended the quarter with 80,280 domain-based customers
  • The number of all customers with annualized contract values (“ACV”) of
    $5,000 or more grew to 6,779, an increase of 56% year over year
  • The number of all customers with ACV of $50,000 or more grew to 518,
    an increase of 117% year over year
  • The number of all customers with ACV of $100,000 or more grew to 189,
    an increase of 139% year over year
  • Average ACV per domain-based customer increased to $2,675, an increase
    of 48% year over year
  • Dollar-based net retention rate was 134%

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 2020, the Company currently expects:

  • Total revenue of $63.0 million to $64.0 million, representing
    year-over-year growth of 49% to 51%
  • Non-GAAP operating loss of $18.0 million to $17.0 million
  • Non-GAAP net loss per share of $0.16 to $0.15, assuming basic and
    diluted weighted average shares outstanding of approximately 106.5
    million
  • Net free cash flow burn of up to $8 million

For the full fiscal year 2020, the Company currently expects:

  • Total revenue of $262.0 million to $265.0 million, representing
    year-over-year growth of 47% to 49%
  • Billings of $316.0 million to $320.0 million, representing
    year-over-year growth of 46% to 48%
  • Non-GAAP operating loss of $65.0 million to $60.0 million
  • Non-GAAP net loss per share of $0.59 to $0.54, assuming basic and
    diluted weighted average shares outstanding of approximately 106.5
    million
  • Net free cash flow burn of up to $20 million

On May 1, 2019 the Company acquired Artefact Product Group LLC
(“10,000ft”) for approximately $27.5 million. After considering
anticipated impacts of purchase accounting on acquired deferred revenue
as well as the timing of the acquisition, the Company expects to
recognize an additional $2 million in revenue and $4 million in billings
for FY20 from the acquisition. These amounts have been included in the
updated FY20 guidance presented above.

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 revenues and deferred revenues, and guidance for revenues 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 5, 2019. 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 8398112. 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 12,
2019. 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, 2019 and the full fiscal year ending January 31,
2020, 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, 2019 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 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 loss as GAAP loss from operations excluding
share-based compensation expense, amortization of acquisition-related
intangible assets, and one-time costs associated with mergers and
acquisitions. Non-GAAP net loss, which is used in calculating non-GAAP
net loss per share, also excludes expense associated with revaluation of
convertible preferred stock warrant liability. 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 capital 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.

Definitions of Business Metrics

Number of domain-based customers

We define domain-based customers as organizations with a unique email
domain name such as @cisco. All other customers, which we designate as
ISP customers, are typically small teams or individuals who register for
our services with an email address hosted on a widely used domain such
as @gmail, @outlook, or @yahoo.

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 is a leading cloud-based platform for work execution,
enabling teams and organizations to plan, capture, manage, automate, and
report on work at scale, resulting in more efficient processes and
better business outcomes. Today, over 95,000 customers, including more
than 80,000 domain-based customers, rely on Smartsheet to implement,
manage, and automate processes across a broad array of departments and
use cases.

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
(in thousands, except per share data)
(unaudited)
 
Three Months Ended April 30,
2019   2018
Revenue
Subscription $ 50,321 $ 32,057
Professional services 5,873   4,262  
Total revenue 56,194   36,319  
Cost of revenue
Subscription 6,201 4,236
Professional services 4,284   3,087  
Total cost of revenue 10,485   7,323  
Gross profit 45,709   28,996  
Operating expenses
Research and development 20,238 12,844
Sales and marketing 35,413 22,384
General and administrative 10,939   6,798  
Total operating expenses 66,590   42,026  
Loss from operations (20,881 ) (13,030 )
Interest income (expense) and other, net 1,037   (1,300 )
Net loss before income tax benefit (19,844 ) (14,330 )
Income tax benefit (35 )  
Net loss $ (19,809 ) $ (14,330 )
Net loss per share attributable to common shareholders, basic and
diluted
$ (0.19 ) $ (0.68 )
Weighted-average shares outstanding used to compute net loss per
share attributable to common shareholders, basic and diluted
105,595   21,008  
 
 

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

 
Three Months Ended April 30,
2019   2018
 
Cost of subscription revenue $ 235 $ 34
Cost of professional services revenue 217 47
Research and development 2,272 665
Sales and marketing 2,108 514
General and administrative 1,464   582
Total share-based compensation expense $ 6,296   $ 1,842
 
   
SMARTSHEET INC.
 
Condensed Consolidated Balance Sheets
(in thousands, except share data)
 

April 30, 2019

 

January 31, 2019

(unaudited)  
Assets
Current assets
Cash and cash equivalents $ 208,799 $ 213,085
Accounts receivable, net of allowances of $1,369 and $1,234,
respectively
33,286 30,173
Prepaid expenses and other current assets 6,413   3,922  
Total current assets 248,498 247,180
Long-term assets
Restricted cash 862 2,620
Deferred commissions 31,823 29,014
Property and equipment, net 23,256 22,540
Operating lease right-of-use assets 51,514
Intangible assets, net 1,619 1,827
Goodwill 5,496 5,496
Other long-term assets 169   67  
Total assets $ 363,237   $ 308,744  
Liabilities, convertible preferred stock, and shareholders’ equity
Current liabilities
Accounts payable $ 4,723 $ 4,658
Accrued compensation and related benefits 18,071 25,557
Other accrued liabilities 8,186 6,544
Operating lease liabilities, current 9,423
Finance lease liabilities, current 3,410 3,768
Deferred revenue 108,759   95,766  
Total current liabilities 152,572 136,293
Operating lease liabilities, non-current 44,571
Finance lease liabilities, non-current 1,994 2,164
Deferred revenue, non-current 302 367
Other long-term liabilities 1,003   2,928  
Total liabilities 200,442   141,752  
Commitments and contingencies
Shareholders’ equity
Preferred stock, no par value; 10,000,000 shares authorized, no
shares issued or outstanding as of April 30, 2019 and January 31,
2019
Class A common stock, no par value; 500,000,000 shares authorized,
74,179,772 shares issued and outstanding as of April 30, 2019;
500,000,000 shares authorized, 48,003,701 shares issued and
outstanding as of January 31, 2019
Class B common stock, no par value; 500,000,000 shares authorized,
32,198,631 shares issued and outstanding as of April 30, 2019;
500,000,000 shares authorized, 56,967,742 shares issued and
outstanding as of January 31, 2019
Additional paid-in capital 343,120 327,510
Accumulated deficit (180,325 ) (160,518 )
Total shareholders’ equity 162,795   166,992  
Total liabilities, convertible preferred stock, and shareholders’
equity
$ 363,237   $ 308,744  
 
 
SMARTSHEET INC.
 
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
Three Months Ended April 30,
2019   2018
Cash flows from operating activities
Net loss $ (19,809 ) $ (14,330 )
Adjustments to reconcile net loss to net cash used in operating
activities:
Share-based compensation expense 6,296 1,842
Remeasurement of convertible preferred stock warrant liability 1,326
Depreciation of property and equipment 2,647 1,488
Amortization of deferred commission costs 3,858 1,997
Unrealized foreign currency loss 38 61
Amortization of intangible assets 208 127
Amortization of operating lease right-of-use assets 1,874
Changes in operating assets and liabilities:
Accounts receivable (3,151 ) (3,352 )
Prepaid expenses and other current assets (2,698 ) (956 )
Other long-term assets (101 ) (240 )
Accounts payable 324 237
Other accrued liabilities 1,687 1,508
Accrued compensation and related benefits (5,265 ) (2,141 )
Deferred commissions (6,667 ) (4,694 )
Other long-term liabilities (87 )
Deferred revenue 12,928 9,060
Operating lease liabilities (1,354 )  
Net cash used in operating activities (9,185 ) (8,154 )
Cash flows from investing activities
Purchases of property and equipment (1,338 ) (497 )
Capitalized internal-use software development costs (1,553 ) (313 )
Net cash used in investing activities (2,891 ) (810 )
Cash flows from financing activities
Payments of principal on finance leases (1,014 ) (759 )
Payments of deferred offering costs (12 ) (1,495 )
Proceeds from exercise of stock options 4,734 2,162
Proceeds from Employee Stock Purchase Plan 2,347    
Net cash provided by (used in) financing activities 6,055 (92 )
Effect of foreign exchange on cash, cash equivalents, and restricted
cash
(23 ) (25 )
Net decrease in cash, cash equivalents, and restricted cash (6,044 ) (9,081 )
Cash, cash equivalents, and restricted cash
Beginning of period 215,705   61,059  
End of period $ 209,661   $ 51,978  
 
Supplemental disclosures
Cash paid for interest $ 66 $ 81
Purchases of fixed assets under capital leases 486
Accrued purchases of property and equipment (including internal-use
software)
614 474
Deferred offering costs, accrued but not yet paid 883
Share-based compensation expense capitalized in internal-use
software development costs
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,
2019   2018
(dollars in thousands)
Loss from operations $ (20,881 ) $ (13,030 )
Add:
Share-based compensation expense 6,296 1,842
Amortization of acquisition-related intangible assets 200 120
One-time acquisition costs 330   47  
Non-GAAP operating loss $ (14,055 ) $ (11,021 )
 
Operating margin (37 )% (36 )%
Non-GAAP operating margin (25 )% (30 )%
 
 
 

Reconciliation from GAAP to non-GAAP net loss

Three Months Ended April 30,
2019 2018
(in thousands)
Net loss $ (19,809 ) $ (14,330 )
Add:
Share-based compensation expense 6,296 1,842
Amortization of acquisition-related intangible assets 200 120
One-time acquisition costs 330 47
Remeasurement of convertible preferred stock warrant liability   1,326  
Non-GAAP net loss $ (12,983 ) $ (10,995 )
 
 
SMARTSHEET INC.
 
Reconciliation from GAAP to Non-GAAP Financial Measures
(unaudited)
 
Reconciliation from GAAP to non-GAAP weighted average shares
outstanding (basic and diluted)
 
Three Months Ended April 30,
2019   2018
(in thousands)
GAAP weighted-average shares outstanding used in computing net loss
per share attributable to common shareholders, basic and diluted
105,595 21,008
Add: common shares that would have resulted from conversion of
convertible preferred stock at the beginning of the period, or when
granted (if later), on a weighted average basis
  68,480
Non-GAAP weighted-average shares outstanding used in computing net
loss per share attributable to common shareholders, basic and diluted
105,595   89,488
 
 

Anti-dilutive shares (in thousands)

April 30,
2019 2018
Convertible preferred shares (as converted) 68,480
Convertible preferred stock warrant 137
Shares subject to outstanding common stock awards 14,053 15,656
Shares issuable pursuant to the 2018 Employee Stock Purchase Plan 42  
Total potentially dilutive shares 14,095   84,273
 
 
SMARTSHEET INC.
 
Reconciliation from GAAP to Non-GAAP Financial Measures
(unaudited)
 
Reconciliation from net operating cash flow to net free cash flow
 
Three Months Ended April 30,
2019   2018
(in thousands)
Net cash used in operating activities $ (9,185 ) $ (8,154 )
Less:
Purchases of property and equipment (1,338 ) (497 )
Capitalized internal-use software development costs (1,553 ) (313 )
Payments of principal on finance leases (1,014 ) (759 )
Free cash flow $ (13,090 ) $ (9,723 )
 

 

Reconciliation from revenue to calculated billings

Three Months Ended April 30,
2019 2018
(in thousands)
Total revenue $ 56,194 $ 36,319
Add:
Deferred revenue (end of period) 109,061 66,341
Less:
Deferred revenue (beginning of period) 96,133   57,281  
Calculated billings $ 69,122   $ 45,379  
 
   
SMARTSHEET INC.
 

Reconciliation from GAAP to Non-GAAP Financial Measures

(unaudited)
 
Reconciliation from GAAP to non-GAAP operating loss guidance
 
Q2 FY 2020 FY 2020
Low   High Low   High
(in millions)
Loss from operations $ (30.7 ) $ (29.7 ) $ (113.4 ) $ (108.4 )
Add:
Share-based compensation expense 11.0 11.0 43.0 43.0
Amortization of acquisition-related intangible assets 1.6 1.6 4.9 4.9
One-time costs of acquisition 0.1   0.1   0.5   0.5  
Non-GAAP operating loss $ (18.0 ) $ (17.0 ) $ (65.0 ) $ (60.0 )
 
 

Reconciliation from GAAP to non-GAAP net loss guidance

Q2 FY 2020 FY 2020
Low High Low High
(in millions)
Net loss $ (30.2 ) $ (29.2 ) $ (111.4 ) $ (106.4 )
Add:
Share-based compensation expense 11.0 11.0 43.0 43.0
Amortization of acquisition-related intangible assets 1.6 1.6 4.9 4.9
One-time costs of acquisition 0.1   0.1   0.5   0.5  
Non-GAAP net loss $ (17.5 ) $ (16.5 ) $ (63.0 ) $ (58.0 )

Contacts

Smartsheet Inc.
Investor Relations:
Aaron Turner
[email protected]

Media:
Dan Benelisha
[email protected]

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