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Cloud Stocks: Smartsheet Acquiring Bootstrapped Startups to Drive Growth

Posted on Wednesday, Jan 16th 2019

According to a MarketsandMarkets research report, the global Enterprise Collaboration Software market is expected to grow from $34.6 billion in 2018 to $59.9 billion by 2023, translating to an annualized growth rate of nearly 12% over the five year period. Billion Dollar Unicorn Smartsheet (NASDAQ: SMAR) recently announced its second acquisition in a bid to keep itself ahead of the pack in this high growth market.

Smartsheet’s Financials

For the third quarter of the year, Smartsheet’s revenues grew an impressive 59% over the year to $46.9 million. They were significantly ahead of the market’s forecast of $44.12 million. It ended the quarter with a net loss of $16.4 million. On an adjusted basis, it reported a loss of $0.09 per share, compared with the Street’s forecast of a loss of $0.16 per share.

By segment, Smartsheet’s subscription revenues for the quarter grew 57% to $41.5 million and professional services revenues grew 81% to $5.3 million. It recorded billings of $54.9 million, translating to a growth of 69% over the year.

Among key operating metrics, Smartsheet ended the quarter with 77,893 domain-based customers. The number of all customers with annualized contract values (ACV) of more than $50,000 grew nearly 148% to 360. Average ACV per domain-based customer increased 48% over the year and 11% over the quarter to $2,214.

For the current quarter, Smartsheet expects revenues of $49-$50 million with non-GAAP net loss per share of $0.15-$0.13. It expects to end the fiscal with revenues of $174.6-$175.6 million with a non-GAAP net loss per share of $0.44-$0.42. Analysts were expecting the company to report its current quarter revenues of $49.6 million and fiscal 2019 revenues of $175.2 million.

Smartsheet’s Product Upgrades

Smartsheet began as a “hybrid of multiple concepts” where it wanted to build a collaborative working platform that could integrate a spreadsheet with a Sharepoint with a Google Forms application. But since being founded, it has become more than a collaborative platform to a mission critical work execution platform needed by organizations to drive processes across their business. Analysts believe that collaborative work management (CWM) technologies are no longer optional, but have become a requirement for businesses.

Smartsheet recently delivered several product upgrades that included features like enhanced dashboards, assignment capabilities, time-based triggers, and individual workflow builder. It released Data Uploader, a capability that automatically merges or replaces data from third-party systems into Smartsheet, thus eliminating the need to manually copy and paste data. It also introduced Dynamic View that provides granular sharing controls and allows customers to achieve higher level of control over the information that can and cannot be shared on a sheet. Smartsheet also introduced two new Connectors for Tableau and Microsoft Dynamics.

Smartsheet Acquires TernPro

Earlier this week, Smartsheet announced the acquisition of Slope manufacturer TernPro for an undisclosed sum. Seattle-based TernPro was founded in 2014 by Brentt Baltimore, Brian Bosche, Daniel Bloom, and Robby Melling as a video production startup. To help with collaboration on video development, TernPro launched Slope in 2016. It soon pivoted itself to focus on Slope, which soon evolved to become a dynamic software built to simplify the process of content development and approval. Slope’s financials are not known, but prior to the acquisition, it had raised $2.4 million through funding from Bizdom and Venture for America. Smartsheet plans to leverage Slope’s expertise to allow content to become a native part of its end-to-end business process.

This was Smartsheet’s second acquisition so far. Earlier in the year, it had announced the acquisition of another small startup Converse.ai for an undisclosed sum. Smartsheet appears to be tracking capital efficient startups that are bootstrapping to exit as potential acquisitions. The strategy should play well for the company.

In a recent Forrester’s Wave Report, Smartsheet was named the leader in the enterprise CWM market due to its product features and future strategy. It was ranked the highest on 19 categories including customer satisfaction, integrations, enterprise adoption rate, and workflow. I would like to know what other capital-efficient acquisitions should Smartsheet make to ensure its rapid success?

Till last year, Smartsheet was venture funded and had raised $113.2 million from investors including Jenny Ceran, Sutter Hill Ventures, Insight Venture Partners, and Madrona Venture Group. Prior to listing, Smartsheet had raised its last round in May 2017 at a valuation of $852 million. Currently, it is trading at $26.54 with a market capitalization of $2.6 billion. It had climbed to a 52-week high of $33.98 in September last year. It had listed at $15 in April last year.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns.

This segment is a part in the series : Cloud Stocks


. Smartsheet Acquiring Bootstrapped Startups to Drive Growth
. Bootstrapped Unicorn Atlassian is Acquiring Capital Efficient Startups
. Netflix Price Hike Ruffles Competition
. How Will Carbon Black Differentiate?
. ServiceNow Grows Through Addition of Capital-Efficient Startups
. Zendesk and Freshworks Follow Different Acquisition Strategies
. Tableau Grows Through Small Acquisitions
. Open Platform Strategy Stands Intuit in Good Stead
. SaaS Companies NEED PaaS Strategy
. Will GoDaddy Follow the PaaS Route?
. Calling ALL PaaS Leaders
. Adobe Delivers Via PaaS
. A Look at Oracle’s 2018 M&A Activity
. What Apps Will Drive More Traction for Cloudera?
. Slack's App Focus Will Be Key to Post-IPO Success
. IBM Counts on its Cloud and Platform for the Turnaround
. Atlassian Acquires From its PaaS Marketplace
. What Should SAP Acquire to Triple its Value by 2023?
. Expect ServiceNow to Acquire From App Marketplace
. Should Alarm.com Follow a PaaS Strategy?
. Six Cloud Stock Picks Based on PaaS Prospects
. How Upwork Can Leverage the Virtual Company Trend
. Qualys Scouting For Acquisitions
. Should SAP Acquire Zendesk or Freshworks?
. HubSpot Counts on its API Strategy
. SurveyMonkey Eyes Acquisitions for Growth
. Workday Wants to Disrupt Cloud Computing Using Machine Learning
. Einstein and Open-Source Platform Lead the Charge for Salesforce
. DocuSign Prepares to Beat Rival Adobe
. Veeva Soars, But Dassault Acquires Medidata for $5.8 Billion
. Tableau Acquisition Signals Massive Analytics Push for Salesforce
. Oracle Joins Hands with Microsoft to Take on Amazon
. GoDaddy is Making Strategic Acquisitions for the Next Level of Growth
. Alteryx Sees Strong Momentum
. Adobe Leveraging Magento and Marketo to Deliver Blockbuster Performance
. Is Slack Overvalued?
. How Will Cloudera Address the Competition?
. Zoom is Not Bothered by Cisco or Microsoft
. Domo Counts on Enterprise Revenue for Growth
. Netflix Plays with Pricing and Games to Attract Subscribers
. CrowdStrike Has a Successful IPO
. Atlassian Crosses the Billion Dollar Revenue Milestone
. ServiceNow Believes Strength Lies in Tie-ups
. Partnerships are the Mantra for BlackLine
. SurveyMonkey Counts on Enterprise Segment for Growth
. HubSpot Soars to a New High
. Intuit Pushes AI to Simplify Tax Filing
. Splunk Sees Strong Cloud Momentum
. Forescout Partners with Big Names
. Smartsheet Tapping into the Government Sector
. Salesforce Continues its Shopping Spree
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. Oracle Brags About Autonomous Database
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. The Market Expects a Lot More from Adobe
. Anaplan Makes its First Acquisition Post IPO
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. MongoDB's Formula for Success
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. Dropbox on a Rocky Road
. Medallia Banks on Acquisitions
. IBM Banks on AI
. Time For Skepticism with Netflix
. SAP Riding High on the Cloud
. Amazon's Faster Shipping Hurting its Earnings
. ServiceNow CEO Change Signals Focus on Acquisitions
. Will Google Acquire Fitbit?
. HubSpot Focuses on Its Platform
. BlackLine Partners with Google Cloud
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. Splunk Bets Big on Data Streaming
. Intuit's QBO Scores Big
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. Palo Alto Targets $5B Revenue by 2022
. Workday Targeting Procure-to-Pay Cycle
. Will Salesforce Acquire DocuSign?

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