[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) This part presents the company's unaudited financial statements, management's analysis, market risk disclosures, and an evaluation of internal controls [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements for the three months ended April 30, 2020 [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The company reports a 52% revenue increase to $85.5 million and a net loss of $27.8 million for the quarter | Metric | Three Months Ended April 30, 2020 (in thousands) | Three Months Ended April 30, 2019 (in thousands) | | :--- | :--- | :--- | | **Total Revenue** | **$85,487** | **$56,194** | | Subscription Revenue | $77,163 | $50,321 | | Gross Profit | $67,046 | $45,709 | | Loss from Operations | ($28,824) | ($20,881) | | **Net Loss** | **($27,784)** | **($19,809)** | | Net Loss Per Share | ($0.23) | ($0.19) | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows total assets of $782.6 million and total shareholders' equity of $510.4 million as of April 30, 2020 | Metric | April 30, 2020 (in thousands) | January 31, 2020 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $544,178 | $515,924 | | Total Current Assets | $603,630 | $630,962 | | **Total Assets** | **$782,606** | **$797,714** | | Deferred Revenue (Current) | $162,740 | $157,972 | | Total Current Liabilities | $211,606 | $233,240 | | **Total Liabilities** | **$272,243** | **$283,654** | | **Total Shareholders' Equity** | **$510,363** | **$514,060** | [Condensed Consolidated Statements of Changes in Shareholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Shareholders' equity decreased by $3.7 million, primarily driven by the quarterly net loss - Total shareholders' equity decreased from **$514.1 million** at January 31, 2020, to **$510.4 million** at April 30, 2020, driven by the **net loss of $27.8 million**[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company experienced a net cash outflow from operations of $24.3 million and a net increase in cash of $28.1 million | Cash Flow Activity (in thousands) | Three Months Ended April 30, 2020 | Three Months Ended April 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($24,285) | ($9,185) | | Net cash provided by (used in) investing activities | $47,270 | ($2,891) | | Net cash provided by financing activities | $5,373 | $6,055 | | **Net increase (decrease) in cash** | **$28,109** | **($6,044)** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail key accounting policies, including revenue recognition, business combinations, and share-based compensation - The company operates as **one operating segment**, with its Chief Executive Officer acting as the chief operating decision maker[32](index=32&type=chunk) - As of April 30, 2020, the company had approximately **$171.7 million of revenue** expected to be recognized from remaining performance obligations[50](index=50&type=chunk) - On May 1, 2019, the company acquired 100% of Artefact Product Group, LLC ("10,000ft") for approximately **$27.8 million in cash**[57](index=57&type=chunk) - For the three months ended April 30, 2020, total share-based compensation expense was **$14.4 million**, a significant increase from $6.3 million in the prior year[75](index=75&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the 52% revenue growth, key business metrics, the impact of COVID-19, and non-GAAP financial measures [Overview and Impact of COVID-19](index=19&type=section&id=Overview%20and%20Impact%20of%20COVID-19) The company outlines its cloud-based work execution platform and the initial business impacts of the COVID-19 pandemic - Smartsheet is a **cloud-based platform for work execution**, enabling teams to plan, manage, automate, and report on work[92](index=92&type=chunk) - In response to COVID-19, the company restricted travel and implemented a **mandatory work-from-home policy** for its global workforce[97](index=97&type=chunk) - During the quarter, purchasing decisions of some customers were **impacted and deferred** due to uncertainties around COVID-19[98](index=98&type=chunk)[99](index=99&type=chunk) [Key Business Metrics](index=21&type=section&id=Key%20Business%20Metrics) The company reports strong growth in customer annual contract value (ACV) and a high dollar-based net retention rate | Metric | As of April 30, 2020 | As of April 30, 2019 | | :--- | :--- | :--- | | Average ACV per domain-based customer | $3,866 | $2,675 | | Dollar-based net retention rate (trailing 12 months) | 132% | 134% | | Customers with ACV of $5k+ | 9,576 | 6,779 | | Customers with ACV of $50k+ | 1,040 | 518 | | Customers with ACV of $100k+ | 391 | 189 | [Results of Operations](index=24&type=section&id=Results%20of%20Operations) This section analyzes the drivers of the 52% revenue growth and the significant increase in operating expenses Revenue Comparison | Revenue Type | Q1 FY21 (in thousands) | Q1 FY20 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Subscription | $77,163 | $50,321 | 53% | | Professional services | $8,324 | $5,873 | 42% | | **Total Revenue** | **$85,487** | **$56,194** | **52%** | - The **$26.8 million increase in subscription revenue** was driven by a $21.0 million increase from user-based subscription plans[122](index=122&type=chunk) - Total cost of revenue increased 76% to $18.4 million, causing the **total gross margin to decrease from 81% to 78%** year-over-year[123](index=123&type=chunk)[124](index=124&type=chunk) - Operating expenses increased significantly, with **sales and marketing up 55%** to $54.8 million and **research and development up 28%** to $26.0 million[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) [Non-GAAP Financial Measures](index=28&type=section&id=Non-GAAP%20Financial%20Measures) Reconciliations for non-GAAP operating loss and free cash flow are provided to supplement GAAP results Non-GAAP Operating Loss Reconciliation | Metric (in thousands) | Three Months Ended April 30, 2020 | Three Months Ended April 30, 2019 | | :--- | :--- | :--- | | Loss from operations (GAAP) | ($28,824) | ($20,881) | | 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)** | Free Cash Flow Calculation | Metric (in thousands) | Three Months Ended April 30, 2020 | Three Months Ended April 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($24,285) | ($9,185) | | Less: Purchases of property and equipment | ($1,018) | ($1,338) | | Less: Capitalized internal-use software | ($2,244) | ($1,553) | | Less: Payments on principal of finance leases | ($680) | ($1,014) | | **Free cash flow** | **($28,227)** | **($13,090)** | [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity remains strong with $544.2 million in cash, deemed sufficient for the next 12 months - As of April 30, 2020, the company's principal source of liquidity was cash and cash equivalents totaling **$544.2 million**[147](index=147&type=chunk) - Management believes existing cash will be **sufficient to meet needs for at least the next 12 months**[149](index=149&type=chunk) - A substantial source of cash is from **deferred revenue**, which was **$163.2 million** as of April 30, 2020[150](index=150&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risks are identified as interest rate and foreign currency exchange rate fluctuations - The company's primary market risks are **interest rate risk** on its $544.2 million in cash and **foreign currency exchange risk**[168](index=168&type=chunk)[171](index=171&type=chunk) - A hypothetical 10% change in interest rates or foreign currency exchange rates is **not expected to have a material impact** on financial results[170](index=170&type=chunk)[171](index=171&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls were not effective due to previously identified material weaknesses - The CEO and CFO concluded that as of April 30, 2020, the company's disclosure controls and procedures were **not effective**[173](index=173&type=chunk) - The ineffectiveness is due to previously identified **material weaknesses** related to the control environment, IT controls, and revenue processes[175](index=175&type=chunk) - **Remediation efforts have commenced**, including engaging consultants, designing new controls, and hiring a Senior Director of Internal Audit[180](index=180&type=chunk) [Part II. Other Information](index=37&type=section&id=Part%20II.%20Other%20Information) This part covers legal proceedings, risk factors, unregistered equity sales, and a list of filed exhibits [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material legal proceedings but notes a potential indemnification claim - The company is **not currently a party to any material legal proceedings** or claims that would have a material adverse effect on its business[183](index=183&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) This section details significant business risks including a history of losses, competition, and the impact of COVID-19 [Risks Related to Our Business and Industry](index=37&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) Key operational risks include a history of net losses, intense market competition, and potential data security breaches - The company has a **history of cumulative losses**, incurring a net loss of $27.8 million for the quarter, and expects losses to continue[188](index=188&type=chunk) - The market is **highly competitive**, with competitors including Airtable, Asana, Atlassian, Google, and Microsoft[189](index=189&type=chunk)[191](index=191&type=chunk) - **Security breaches** or unauthorized access to customer data could lead to significant liabilities and damage the company's reputation[193](index=193&type=chunk) - The business is **dependent on co-location data centers and public cloud service providers**; any service disruptions could harm operating results[206](index=206&type=chunk) [Risks Related to Ownership of Our Common Stock](index=61&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) Stock ownership risks include price volatility and anti-takeover provisions in the company's charter - The market price of the Class A common stock has been and is expected to continue to be **volatile**[310](index=310&type=chunk) - **Sales of a substantial amount of stock** by insiders could cause the market price to decline[314](index=314&type=chunk) - Provisions in the company's articles of incorporation and bylaws could **make a potential acquisition more difficult**[319](index=319&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=65&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of equity securities and no material change in the use of IPO proceeds - There were **no unregistered sales of equity securities** during the three months ended April 30, 2020[326](index=326&type=chunk) [Item 6. Exhibits](index=65&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the report, including required officer certifications - The exhibits filed with the report include **CEO and CFO certifications** pursuant to Sarbanes-Oxley Sections 302 and 906[328](index=328&type=chunk)

α smartsheet Earnings Conference Call Q1 Fiscal Year 2021 June 3, 2020 Forward- Looking Statements This presentation (including the accompanying oral presentation) contains forward-looking statements within the meaning of the federal securities laws, including statements regarding future financial performance, business strategy and objectives, potential market and growth opportunities, technological or market trends, and projected sales and customer retention rates. We have based these forward-looking state ...

Financial Data and Key Metrics Changes - Revenue for Q1 2021 was $85.5 million, representing a 52% year-over-year increase, while billings were $89.9 million, up 30% compared to the previous year [9][32] - Non-GAAP operating loss was $13.6 million, which was better than expected, and free cash flow was negative $28.2 million [31][45] - Annual recurring revenue (ARR) from Fortune 500 customers grew 48% year-over-year, with 79% of the Fortune 500 now being key customers [32] Business Line Data and Key Metrics Changes - Subscription revenue was $77.2 million, reflecting a 53% year-over-year growth, while services revenue was $8.3 million, growing 42% year-over-year [37] - The average annual contract value (ACV) grew 45% year-over-year to $3,866, indicating expansion in licenses and additional products [40] Market Data and Key Metrics Changes - The SMB segment represented approximately 28% of ARR at the end of the quarter, showing COVID-related softness, while sectors like life sciences, healthcare, and finance performed well [33][61] - Total users increased to over 6.75 million at the end of Q1, up from 6.3 million at the end of Q4 [14] Company Strategy and Development Direction - The company is focusing on international expansion, government initiatives, increasing sales and service capacity, brand marketing, and product innovation [28] - The management emphasized the importance of adapting to a hybrid work environment, balancing remote and in-office work [29][107] Management's Comments on Operating Environment and Future Outlook - Management noted that while there was a stabilization in pipeline development and sales performance in May, the overall demand environment remains uncertain due to COVID [19][46] - The company remains committed to investing in key initiatives despite the challenges posed by the pandemic [28][90] Other Important Information - The company provided guidance for Q2 2021, expecting revenue in the range of $86 million to $87 million and billings between $91 million and $93 million [48] - The company has $544 million in cash on the balance sheet and no debt, indicating financial strength [36] Q&A Session Summary Question: Stabilization trends in May - Management observed significant improvement in opportunity development in May, with the strongest pipeline in the company's history [53] Question: Impact of current environment on enterprise focus - The company is pleased with its decision to focus on enterprise, as it has led to meaningful transactions tied to business processes [55] Question: Specific impacts on growth use cases - The company noted that while micro transactions continue, larger transactions are experiencing delays due to economic uncertainty [59] Question: Guidance for billings and visibility - Management indicated that guidance is influenced by the macroeconomic environment and the pace of reopening in various regions [64] Question: International sales trends - Revenue growth rates accelerated in EMEA, while there was a slight deceleration in Asia [69] Question: Hiring strategy in the current environment - The company is being cautious with hiring, focusing on areas that matter while ensuring existing sales reps are well supported [104]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 31, 2020 OR Commission File No. 001-38464 Smartsheet Inc. (Exact name of Registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number) 10500 NE 8th Street, Suite 1300 Bellevue, WA 98004 (Address of principal executive offices) ( ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION For the quarterly period ended October 31, 2019 Washington, D.C. 20549 OR FORM 10-Q ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-38464 Smartsheet Inc. (Exact name of Registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) (I ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number) Washington, D.C. 20549 FORM 10-Q For the quarterly period ended July 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-38464 Smartsheet Inc. (Exact name of Regis ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 2019 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-38464 Smartsheet Inc. (Exact name of Registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) (I.R ...

Part I [Business](index=6&type=section&id=Item%201.%20Business) Smartsheet Inc. provides a cloud-based work execution platform serving over 95,000 customers with a subscription model and blended go-to-market strategy - Smartsheet is a cloud-based platform for work execution, designed to manage unstructured or dynamic work without requiring coding capabilities[18](index=18&type=chunk)[19](index=19&type=chunk)[21](index=21&type=chunk) - As of January 31, 2019, the company had over **95,000 customers**, including over **78,000 domain-based customers**, with a significant presence in Fortune 100 (over **90 companies**) and Fortune 500 (three-quarters of companies)[18](index=18&type=chunk)[23](index=23&type=chunk) - The company employs a blended go-to-market model, including a digital self-service sales model, an inside sales team using machine learning, and a targeted field sales team for large enterprises[24](index=24&type=chunk)[25](index=25&type=chunk) - Key growth strategies focus on attracting new customers, expanding within the existing base (including converting over **4.0 million collaborators** to paid users), growing internationally (**24% of FY2019 revenue** was international), and enhancing product functionality[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) [Our Platform and Products](index=7&type=section&id=Our%20Platform%20and%20Products) The Smartsheet platform offers a comprehensive suite of tools and premium solutions for work execution, designed for broad adoption by business users - The platform provides a suite of tools for work execution: Smartdashboards for real-time visibility, Smartportals for resource access, Smartcards for workflow visualization, Smartgrids for tracking, Smartprojects for collaboration, Smartcalendars for timelines, Smartforms for data collection, and Smartautomation for repetitive processes[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) - Premium offerings include Connectors for integration with leading systems (Salesforce, Atlassian, ServiceNow), Control Center for consistent execution at scale, and Accelerators, which are pre-packaged solutions for specific use cases like IT PMO, M&A, and Professional Services[55](index=55&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk) - The platform is designed for broad adoption, with an intuitive interface that allows business users to configure and modify workflows with little to no training[21](index=21&type=chunk)[30](index=30&type=chunk) [Competition and Intellectual Property](index=14&type=section&id=Competition%20and%20Intellectual%20Property) Smartsheet competes against manual processes and dedicated software vendors, protecting its intellectual property through patents and trademarks - Primary competition comes from manual, spreadsheet-based processes from Microsoft and Google, as well as specific work execution software from Asana, Atlassian, Planview, and Workfront[76](index=76&type=chunk) - As of January 31, 2019, the company held **10 issued U.S. patents** (expiring between 2019 and 2035), **three international patents**, and had **seven pending U.S. patent applications**[78](index=78&type=chunk) - The company owns **two U.S. and 23 international trademark registrations** for the "SMARTSHEET" mark[79](index=79&type=chunk) [Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) The company identifies numerous risks including cumulative losses, intense competition, reliance on third-party data centers, and a material weakness in internal controls - The company has a history of cumulative losses, with a net loss of **$53.9 million** for the year ended January 31, 2019, and an accumulated deficit of **$160.5 million**, with profitability not assured in the foreseeable future[86](index=86&type=chunk) - The market for work management platforms is highly competitive, with rivals ranging from large companies like Microsoft and Google to specialized vendors like Asana and Atlassian[87](index=87&type=chunk)[88](index=88&type=chunk) - Security breaches or unauthorized access to customer data could lead to significant liabilities, damage the company's reputation, and cause customers to stop using the platform[97](index=97&type=chunk) - A material weakness in internal control over financial reporting was identified due to a lack of sufficient qualified accounting personnel, which has not been fully remediated as of January 31, 2019[171](index=171&type=chunk) - The dual-class stock structure concentrates voting control with holders of Class B common stock (**10 votes per share**), limiting the influence of Class A common stockholders on corporate matters[211](index=211&type=chunk) [Properties](index=41&type=section&id=Item%202.%20Properties) The company's corporate headquarters are in Bellevue, Washington, with additional leased facilities in Boston and Edinburgh - Corporate headquarters are in Bellevue, Washington, with approximately **155,000 square feet** of leased space under agreements expiring between 2019 and 2026[226](index=226&type=chunk) - Additional long-term leased facilities are located in Boston, Massachusetts, and Edinburgh, Scotland[226](index=226&type=chunk) [Legal Proceedings](index=41&type=section&id=Item%203.%20Legal%20Proceedings) Smartsheet is not currently involved in any legal proceedings expected to have a material adverse effect on its business or financial condition - The company is not party to any legal proceedings that would individually or in aggregate have a material adverse effect on its business[228](index=228&type=chunk) Part II [Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities](index=41&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Shareholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Smartsheet's Class A common stock began trading on the NYSE in April 2018, and the company does not intend to pay cash dividends - Class A common stock has been listed on the NYSE under the symbol "SMAR" since April 27, 2018[230](index=230&type=chunk) - The company does not intend to declare or pay any cash dividends in the foreseeable future[232](index=232&type=chunk) - The Initial Public Offering (IPO) closed on May 1, 2018, providing the company with net proceeds of **$160.4 million** after deducting underwriting discounts, commissions, and offering expenses[238](index=238&type=chunk)[239](index=239&type=chunk) [Selected Consolidated Financial and Other Data](index=43&type=section&id=Item%206.%20Selected%20Consolidated%20Financial%20and%20Other%20Data) This section presents key historical financial data and business metrics, showing significant revenue growth and increasing customer value Consolidated Statements of Operations Data (in thousands) | | Year Ended January 31, | | | | :--- | :--- | :--- | :--- | | | **2019** | **2018** | **2017** | | **Total revenue** | $177,722 | $111,253 | $66,964 | | **Gross profit** | $143,873 | $89,571 | $52,831 | | **Loss from operations** | $(55,084) | $(48,978) | $(15,155) | | **Net loss attributable to common shareholders** | $(53,885) | $(53,664) | $(15,184) | Consolidated Balance Sheet Data (in thousands) | | January 31, | | | :--- | :--- | :--- | | | **2019** | **2018** | | **Cash, cash equivalents, and short-term investments** | $213,085 | $58,158 | | **Total assets** | $308,744 | $116,604 | | **Deferred revenue, current and non-current** | $96,133 | $57,281 | | **Total shareholders' equity (deficit)** | $166,992 | $(80,741) | Key Business Metrics | | January 31, | | | | :--- | :--- | :--- | :--- | | | **2019** | **2018** | **2017** | | **Domain-based customers** | 78,959 | 74,116 | 66,645 | | **Average ACV per domain-based customer** | $2,454 | $1,640 | $1,106 | | **Dollar-based net retention rate (trailing 12 months)** | 134% | 130% | 122% | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=46&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses significant revenue growth, continued investment in operations, and liquidity, including non-GAAP reconciliations and critical accounting policies [Results of Operations](index=50&type=section&id=Results%20of%20Operations) Total revenue increased by 60% in fiscal 2019, driven by subscription and professional services, while operating loss widened due to increased expenses Revenue Comparison (FY2019 vs. FY2018) | | Year Ended January 31, | | Change | | | :--- | :--- | :--- | :--- | :--- | | **(dollars in thousands)** | **2019** | **2018** | **Amount** | **%** | | Subscription | $157,529 | $100,368 | $57,161 | 57% | | Professional services | $20,193 | $10,885 | $9,308 | 86% | | **Total revenue** | **$177,722** | **$111,253** | **$66,469** | **60%** | - The increase in subscription revenue was driven by existing customers (**dollar-based net retention rate of 134%**) and new customers (**7% increase in domain-based customers**)[282](index=282&type=chunk) - Sales and marketing expenses increased by **45% to $106.1 million** in FY2019, primarily due to a **$25.4 million** increase in employee-related costs and a **$5.4 million** increase in marketing costs[290](index=290&type=chunk) - Research and development expenses increased by **57% to $58.8 million** in FY2019, mainly due to a **$16.2 million** increase in employee-related costs from higher headcount[289](index=289&type=chunk) [Non-GAAP Financial Measures](index=60&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP measures like operating loss, calculated billings, and free cash flow to evaluate performance, showing strong billings growth despite negative cash flow Non-GAAP Operating Loss Reconciliation (in thousands) | | Year Ended January 31, 2019 | | :--- | :--- | | Loss from operations (GAAP) | $(55,084) | | Add: Share-based compensation expense | $15,903 | | Add: Amortization of acquisition-related intangible assets | $480 | | Add: One-time acquisition costs | $196 | | **Non-GAAP operating loss** | **$(38,505)** | Calculated Billings (in thousands) | | Year Ended January 31, | | | | :--- | :--- | :--- | :--- | | | **2019** | **2018** | **2017** | | Total revenue | $177,722 | $111,253 | $66,964 | | Change in deferred revenue | $38,852 | $24,569 | $13,140 | | **Calculated billings** | **$216,574** | **$135,822** | **$80,104** | Free Cash Flow (in thousands) | | Year Ended January 31, | | | | :--- | :--- | :--- | :--- | | | **2019** | **2018** | **2017** | | Net cash provided by (used in) operating activities | $(2,855) | $(13,581) | $58 | | Less: Purchases of property and equipment | $(5,767) | $(6,006) | $(1,820) | | Less: Capitalized internal-use software | $(3,017) | $(3,350) | — | | Less: Payments on capital lease obligations | $(3,253) | $(2,326) | $(303) | | **Free cash flow** | **$(14,892)** | **$(25,263)** | **$(2,065)** | [Liquidity and Capital Resources](index=63&type=section&id=Liquidity%20and%20Capital%20Resources) Smartsheet's liquidity was significantly bolstered by its IPO, providing sufficient cash to meet operational needs despite a history of negative cash flows - Principal sources of liquidity as of January 31, 2019, were cash and cash equivalents of **$213.1 million**[333](index=333&type=chunk) - The company received net proceeds of **$160.4 million** from its IPO on May 1, 2018[335](index=335&type=chunk) Summary of Cash Flows (in thousands) | | Year Ended January 31, 2019 | | :--- | :--- | | Net cash used in operating activities | $(2,855) | | Net cash used in investing activities | $(13,784) | | Net cash provided by financing activities | $171,321 | - As of January 31, 2019, the company had total contractual obligations of **$104.1 million**, with the largest component being **$79.1 million** in operating lease obligations[349](index=349&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=71&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate and foreign currency exchange risks, though a 10% fluctuation is not expected to have a material impact - The company's primary market risk exposures are interest rate risk on its cash and cash equivalents and foreign currency exchange risk from international operations[392](index=392&type=chunk)[395](index=395&type=chunk) - A hypothetical **10% change** in interest rates or foreign currency exchange rates is not expected to have a material impact on the company's financial results[394](index=394&type=chunk)[395](index=395&type=chunk) [Financial Statements and Supplementary Data](index=73&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the audited consolidated financial statements, including statements of operations, balance sheets, and cash flows, along with detailed notes [Consolidated Statements of Operations](index=75&type=section&id=Consolidated%20Statements%20of%20Operations) For fiscal 2019, Smartsheet reported significant revenue growth but incurred an operating loss and net loss per share Consolidated Statements of Operations Highlights (in thousands) | | Year Ended January 31, 2019 | | :--- | :--- | | Total revenue | $177,722 | | Gross profit | $143,873 | | Loss from operations | $(55,084) | | Net loss attributable to common shareholders | $(53,885) | | Net loss per share, basic and diluted | $(0.65) | [Consolidated Balance Sheets](index=77&type=section&id=Consolidated%20Balance%20Sheets) As of January 31, 2019, total assets increased significantly, primarily due to cash from the IPO, while total shareholders' equity turned positive Consolidated Balance Sheet Highlights (in thousands) | | January 31, 2019 | | :--- | :--- | | Cash and cash equivalents | $213,085 | | Total assets | $308,744 | | Deferred revenue | $96,133 | | Total liabilities | $141,752 | | Total shareholders' equity | $166,992 | [Consolidated Statements of Cash Flows](index=80&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For fiscal 2019, net cash provided by financing activities, primarily from the IPO, offset cash used in operating and investing activities Consolidated Statements of Cash Flows Highlights (in thousands) | | Year Ended January 31, 2019 | | :--- | :--- | | Net cash used in operating activities | $(2,855) | | Net cash used in investing activities | $(13,784) | | Net cash provided by financing activities | $171,321 | | Net increase in cash, cash equivalents, and restricted cash | $154,646 | [Controls and Procedures](index=105&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls were ineffective due to a material weakness in internal control over financial reporting, related to insufficient qualified accounting personnel - Management concluded that disclosure controls and procedures were not effective as of January 31, 2019, due to a material weakness in internal control over financial reporting[553](index=553&type=chunk) - The material weakness, first identified in fiscal 2018, stems from a lack of qualified accounting and financial reporting personnel with appropriate experience[555](index=555&type=chunk) - Remediation efforts are underway, including hiring additional staff and implementing new controls, but the material weakness has not yet been fully remediated as it requires validation over a sustained period[557](index=557&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Compensation, Security Ownership, and Accountant Fees](index=107&type=section&id=Item%2010%2C%2011%2C%2012%2C%2013%2C%2014) Information for these items is incorporated by reference from the company's forthcoming 2019 Proxy Statement - Information regarding directors, executive officers, corporate governance, executive compensation, security ownership, related party transactions, and principal accountant fees is incorporated by reference from the forthcoming 2019 Proxy Statement[564](index=564&type=chunk)[565](index=565&type=chunk)[566](index=566&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=108&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all exhibits filed with the Form 10-K, including corporate governance documents, equity plans, and required certifications - Lists all exhibits filed with the Form 10-K, including corporate governance documents, equity plans, executive offer letters, and material contracts[570](index=570&type=chunk) - Includes certifications by the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act of 2002[572](index=572&type=chunk)