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Cloud Stocks: Smartsheet Should Follow Atlassian’s Example

Posted on Tuesday, Sep 22nd 2020

Enterprise collaboration solution provider Smartsheet (NYSE: SMAR) continues to deliver strong topline growth amid the current conditions. The company recently acquired Brandfolder to accelerate its efforts to digitize enterprise workflows.

Smartsheet’s Financials

For the second quarter, Smartsheet’s revenues grew 41% to $91.2 million compared with the market’s forecast of $81.3 million and the company’s earlier estimates of $86-$87 million. Net loss was $0.06 per share, which was significantly better than the market’s estimated loss of $0.16 per share.

By segment, Subscription revenues grew 43% to $83.6 million, and Professional services revenue grew 20% to $7.6 million.

Among operating metrics, customers with annualized contract value (ACV) of $5,000 or higher increased 31% to 10,049. Customers with ACV of $50,000 or higher grew 78% to 1,131, and customers with ACV of $100,000 or higher soared 92% to 433. Its net dollar retention rate was 128% and average ACV per domain-based customer increased 40% to $4,156. Calculated Billings grew 22% to $97.3 million.

For the third quarter, Smartsheet expects revenues of $94-$95 million with non-GAAP net loss per share of $0.23-$0.22. The market was looking for Q3 revenues of $92.6 million with a loss of $0.14 per share. Smartsheet expects to end the year with revenues of $367-$373 million with a loss of $0.54-$0.49 per share. The market was looking for revenues of $364.5 million for the year with a net loss of $0.50 per share.

Smartsheet’s Acquisition

Last month, Smartsheet announced the acquisition of Denver-based Brandfolder for an estimated $155 million. Brandfolder is a leading digital asset management (DAM) services provider. It was set up in 2012 to provide a centralized platform that can organize, discover, control, distribute, and measure all forms of digital content. Besides supporting content management, it also helped users get insights and analysis on the discoverability and reusability of assets. Smartsheet will integrate Brandfolder’s DAM capabilities with its collaborative work management platform to create a dynamic solution that manages workflows around content and collaboration.

Prior to the acquisition, Brandfolder had raised $11 million in four funding rounds led by Telescope Partners, White Cedar Enterprises, Techstars, and Right Side Capital Management.

Smartsheet believes that simply digitizing or using cloud-based versions of traditional collaboration, workflow, and content management tools will not help organizations achieve higher efficiencies. A lack of integration between traditional apps results in loss of critical information within workflows, leading to missed opportunities and inefficiencies. By integrating Brandfolder, Smartsheet will focus on enabling enterprise-wide content workflows that will help organizations break down these silos and make better decisions faster.

Its stock is currently trading at $47.91 with a market capitalization of $5.7 billion. It climbed to a 52-week high of $60.80 in June this year. It had fallen to a low of $30.91 in September last year.

Smartsheet’s Missing PaaS Strategy

I think Smartsheet is missing out by not following an active PaaS strategy. It should look at others like Atlassian who have built a robust PaaS ecosystem that is mutually beneficial to both the ISVs and Atlassian.

Atlassian’s app marketplace boasts of over 4,000 apps that have helped bring $1 billion in lifetime sales for its developers. Its developer community has built more than 28,000 apps for their in-house teams and it sees more than 60% of its customers across Jira Software and Confluence use at least one Marketplace app. Atlassian also uses the marketplace to scout for companies that it can acquire. It has acquired numerous companies from its PaaS ecosystem in the recent past that have helped add value to its portfolio of offerings.

Atlassian’s stock is currently trading at $177.4 with a market cap of $44 billion.  It touched a 52-week high of $198.41 in July this year. It hit a 52-week low of $107 in October last year.

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
. Will GoDaddy Follow the PaaS Route?
. 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?
. 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
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. Why Salesforce Buying Vlocity Proves the Growing Importance of PaaS
. Datadog Performing Well Post Recent IPO
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. Anaplan Focuses on API Connectors for its Platform
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. Splunk Should Open up About its PaaS Metrics
. Okta Benefiting from App Diversity
. Oracle Sees Growth Momentum
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. DocuSign Resilient to COVID-19
. Smartsheet Looking up to Enterprise Customers for Growth
. Paylocity Delivers Solid Results
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. AppFolio Leverages AI for Product Enhancement
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. Dropbox Needs to Share API Metrics
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. MongoDB has Miles to go
. Nutanix Needs to Define a PaaS Strategy
. Cloudera Focuses on Hybrid Cloud
. Atlassian Gears Up for Growth, Unfazed by Covid-19
. Shopify Helps Merchants Pivot to Online Stores
. ServiceNow Steady in Turbulent Seas
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. Twilio Hits 52-Week High Amidst COVID Crisis
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. MongoDB Soars Even in the Crisis
. Okta Reiterates Outlook
. Is Anaplan a Prospect for Oracle, SAP?
. Oracle Relies on Autonomous Offerings
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. Datadog's Integrations and Upgrades Help it Soar
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. The PaaS Landscape
. HubSpot Focuses on the Enterprise Segment
. GoDaddy Restructures During COVID
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. Blackline Needs a PaaS Strategy
. Twilio - A Successful PaaS Story
. Zendesk Invests in the Future
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. Analysis of Alteryx PaaS Strategy
. Fastly Needs to Diversify from TikTok
. Way to Go, Salesforce
. Intuit Continues to Acquire
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. Analysis of Five9's PaaS Strategy
. Okta Expands Alliances to Attract Enterprises
. Palo Alto Continues to Acquire
. Analysis of Splunk's PaaS Strategy
. BigCommerce Goes Big with IPO
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. Bill.com Sees Strong Demand
. Analysis of MongoDB's PaaS Strategy
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. New Relic Product Upgrades Deliver Growth
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. Smartsheet Should Follow Atlassian’s Example
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