Smartsheet(US:SMAR)2023-03-21 16:00Part I Business Smartsheet provides a cloud-based, no-code enterprise platform for work management, serving over 80% of Fortune 500 companies - Smartsheet is an enterprise platform for modern work management, offering a no-code software solution for planning, capturing, managing, automating, and reporting on work19 - The company serves customers in approximately 190 countries, including 90 of the Fortune 100 and over 80% of the Fortune 500 companies as of January 31, 202322 - Growth strategies include new customer acquisition, existing customer expansion, international growth (16% of FY2023 revenue from outside the U.S.), government sector targeting, and strategic acquisitions35373839 - Primary competition includes manual processes with Google and Microsoft tools, and collaborative work management platforms like Airtable, Asana, Atlassian, ClickUp, and Monday.com97 Key Business Metrics | Metric | Value | | :--- | :--- | | Total Employees (as of Jan 31, 2023) | 3,191 | | U.S. Employees | 2,676 | | International Employees | 515 | | Backlog (as of Jan 31, 2023) | $69.1 million | | Backlog (as of Jan 31, 2022) | $53.9 million | Risk Factors The company faces significant risks including intense competition, cloud provider dependency, security breaches, cumulative losses, and customer retention challenges - The market for collaborative work management software is highly competitive, with rivals including Google, Microsoft, Airtable, Asana, Atlassian, ClickUp, Monday.com, and others112113 - The business is dependent on public cloud service providers, and any service interruptions or outages could significantly harm operations and reputation130 - The company has a history of cumulative losses, with a net loss of $215.6 million in fiscal 2023 and an accumulated deficit of $758.2 million as of January 31, 2023, with future profitability not assured151 - The business is subject to a wide range of laws and regulations, including those related to data privacy (GDPR, CCPA), export controls, and anti-corruption (FCPA), which could impose significant costs and liabilities209213228 - Adverse economic conditions, such as inflation, rising interest rates, and potential financial institution instability, may harm the business by causing customers to delay or reduce spending245246 Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - None256 Properties Smartsheet's corporate headquarters are located in Bellevue, Washington, with additional long-term leases in Boston, London, and Sydney - Corporate headquarters are in Bellevue, Washington, with approximately 123,000 square feet under lease agreements expiring between 2026 and 2029257 - Other major leased facilities are located in Boston, Massachusetts; London, England; and Sydney, Australia257 Legal Proceedings The company is subject to various legal matters in the normal course of business, with details provided in the consolidated financial statements - For details on legal proceedings, refer to Note 14, Commitments and Contingencies, in the notes to the consolidated financial statements258 Mine Safety Disclosures This item is not applicable to the company - Not applicable259 Part II Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Smartsheet's Class A common stock trades on the NYSE under "SMAR", with no current intention to pay cash dividends - Class A common stock is listed on the New York Stock Exchange under the symbol "SMAR"260 - The company does not intend to declare or pay cash dividends in the foreseeable future262 - As of March 15, 2023, there were 110 holders of record of Class A common stock261 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses fiscal 2023 financial performance, including revenue growth, increased net loss, improved free cash flow, and changes in critical accounting policies Key Business Metrics (as of Jan 31) | Metric (as of Jan 31) | 2023 | 2022 | | :--- | :--- | :--- | | Average ACV per domain-based customer | $8,377 | $6,977 | | Dollar-based net retention rate | 125% | 134% | | Customers with ACV > $100k | 1,484 | 1,026 | | Customers with ACV > $50k | 3,206 | 2,354 | Financial Performance (Year Ended Jan 31) | Financial Item (Year Ended Jan 31) | 2023 (in millions) | 2022 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $766.9 | $550.8 | 39% | | Subscription Revenue | $713.7 | $507.4 | 41% | | Gross Profit | $601.6 | $434.4 | 39% | | Loss from Operations | $(221.6) | $(170.0) | 30% | | Net Loss | $(215.6) | $(171.1) | 26% | - The company changed its accounting estimate for the amortization period of deferred sales commissions from three years to four years, effective August 1, 2022, resulting in a benefit to net loss of approximately $0.09 per share for fiscal 2023356 - Free cash flow was positive at $9.8 million for fiscal 2023, a significant improvement from a negative free cash flow of $(20.8) million in fiscal 2022324 - Calculated billings increased to $892.0 million in fiscal 2023, up from $661.5 million in fiscal 2022327 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate fluctuations on its cash and investments, and foreign currency exchange risk from international operations - The company is exposed to interest rate risk on its cash, cash equivalents, and short-term investments totaling $456.4 million as of January 31, 2023367 - Foreign currency risk exists due to operations and transactions in currencies such as the British Pound Sterling, Euro, Australian dollar, Canadian dollar, and Costa Rican Colón370 - The company has not engaged in hedging foreign currency transactions to date but may do so in the future if exposure becomes more significant371 Financial Statements and Supplementary Data This section presents audited consolidated financial statements, an unqualified auditor's opinion, and detailed notes on accounting policies and commitments - The independent auditor, Deloitte & Touche LLP, issued an unqualified opinion on the financial statements and internal controls, highlighting Subscription Revenue as a Critical Audit Matter due to its significant transaction volume378386 Consolidated Operations (in thousands) | Consolidated Operations (in thousands) | FY 2023 | FY 2022 | FY 2021 | | :--- | :--- | :--- | :--- | | Total Revenue | $766,915 | $550,832 | $385,513 | | Gross Profit | $601,630 | $434,359 | $299,974 | | Loss from Operations | $(221,636) | $(170,036) | $(120,472) | | Net Loss | $(215,639) | $(171,097) | $(114,979) | | Net Loss Per Share | $(1.66) | $(1.36) | $(0.95) | Consolidated Balance Sheet (in thousands) | Consolidated Balance Sheet (in thousands) | Jan 31, 2023 | Jan 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $710,087 | $634,602 | | Total Assets | $1,110,209 | $1,002,832 | | Total Current Liabilities | $574,663 | $437,439 | | Total Liabilities | $624,551 | $498,053 | | Total Shareholders' Equity | $485,658 | $504,779 | - On September 1, 2022, the Company acquired Outfit for a total purchase consideration of $20.6 million in cash, enhancing its Brandfolder templating and creative automation solutions470 - As of January 31, 2023, the company had U.S. federal net operating loss carryforwards (NOLs) of approximately $473.8 million and state NOLs of $307.8 million to offset future taxable income517 - The company has non-cancelable purchase commitments, primarily for cloud-based hosting services, totaling $160.1 million as of January 31, 2023534 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting or financial disclosure matters - None543 Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of January 31, 2023 - Management concluded that disclosure controls and procedures were effective as of January 31, 2023546 - Management concluded that internal control over financial reporting was effective as of January 31, 2023, based on the COSO framework548 - No material changes were made to the company's internal control over financial reporting during the fourth quarter of fiscal 2023550 Other Information The company reports no other information for this item - None553 Part III Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, and Principal Accountant Fees Information for directors, executive officers, corporate governance, executive compensation, and security ownership is incorporated by reference from the 2023 Proxy Statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's Proxy Statement for the 2023 Annual Meeting of Shareholders556557558559560 Part IV Exhibits and Financial Statement Schedules This section lists all exhibits filed with the Form 10-K, including financial statements and corporate governance documents - All required financial statement schedules have been omitted because the information is not applicable or is included in the financial statements in Item 8562 - A detailed list of exhibits filed with the annual report is provided, including corporate governance documents, material contracts, and certifications563 Form 10-K Summary The company reports no information for this item - None566