Smartsheet Earnings Preview: The Secret's Out for Our 2019 Top Pick

On December 4th we highlighted improving trends that our NLP model identified in Smartsheet (SMAR, $4.5B market cap). Ahead of next week’s Q4 earnings call, we used our text analytics platform to track recent data points from software peers, and found evidence of a continued strong demand environment, particularly in the U.S. mid-market, which is the sweet spot for Smartsheet. 

However, since our last note SMAR shares have gained 60% vs just 5% for the Russell 2000, suggesting this once-hidden gem has found the spotlight.

Please note: This in no way represents investment advice. All transcript text provided by S&P Global Market Intelligence.

Revisiting Smartsheet Ahead of Q4 Earnings: Has This Hidden Gem Been Discovered?

Key points from last quarter? Larger customers + installed base sales are key.

Excerpts below are from our December 4th article:

What Have We Learned Since Then? Software Demand Remains Strong.

The average Amenity Score of Software earnings calls this quarter has been 45, up one point from last quarter, and well above the market average of ~20. Recent comments below indicate broad-based demand strength, particularly in the U.S. mid-market. On the risk side Box called out weakness in large deals in Europe, which is consistent with broader macro weakness in the region. However, Smartsheet derives less than 15% of its revenue from Europe and considers a $50,000 ARR to be a large customer, a far cry from Box’s 7-figure lumpiness:

  • Coupa Software (3/11/19):

"From a geographic perspective or a market perspective, we’re seeing very strong growth in our mid-market business."

  • Yext (3/6/19):

"We’re hiring and we see tremendous growth in our mid-market business."

  • Workday (2/28/19):

"In Q4, we saw healthy demand across all product areas."

  • Box (2/27/19):

"Overall, we’re still seeing very strong pipeline. We’re again not happy. I’m not satisfied with the Q4 results in the big deal segments, especially the 7-figure deals. However, those customers are still in the pipeline for this year."

  • Veeva (2/26/19):

"We are seeing greater demand from companies of all sizes. The R&D side of the business also continues to be strong in all areas, with several major wins and expansions in Q4."

  • Intuit (2/21/19):

"At this time, we’re not seeing any evidence of a macro-inspired slowdown in our business."

  • Blackline (2/14/19):

"The demand environment and the fundamentals of the business remained strong and consistent in Q4."

A look at Smartsheet's position (#3) vs Software peers, ranked by Amenity Score:

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Transcript text provided by S&P Global Market Intelligence.

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