Smartsheet (SMAR), which provides cloud-based workflow management software, is set to report Q1 (Apr) results today after the close (last time they reported at 16:07 ET, 7 minutes after the close) with a call to follow at 4:30pm ET. Of note, SMAR made its IPO debut in late April 2018. This will be just its fifth earnings report as a public company. 

The CapitalIQ consensus for Q1 (Apr) non-GAAP EPS is an $(0.18) loss and for revenue it's $54.7 mln.

On March 19, SMAR guided to Q1 (Apr) EPS of $(0.19)-(0.18) and revenue of $54-55 mln. At the time, this was upside revenue guidance but downside EPS guidance. It seems SMAR has decided to spend more to drive growth. However, this may delay profitability. 

Subscription revenue is a key metric for SMAR and that came in at $46.5 mln in JanQ, an increase of 56% yr/yr and 12% sequentially with a dollar-based net retention rate reaching a record 134%. 

An important topic is SMAR signing larger deals with new customers. Last quarter, notable expansions occurred at Home Depot, Abbott Diagnostics and PayPal. Also, 40 companies increased their annual recurring revenue (ARR) by more than $50,000 and nine by more than $100,000. SMAR has also prioritized expanding into new markets and industries. On this point, SMAR recently opened a London sales office. 

In terms of performance relative to consensus, SMAR has beaten on the EPS line in the $0.05-0.07 range in each of its four quarters as a public company. There has also been revenue upside each quarter. Any downside deviation from this would be a negative.

Profits are still a ways off as SMAR has been spending a lot of money to develop its platform and acquire new customers. 

After months of being range-bound in the $20-30 area, the stock has broken out in recent months, going from around $25 in early January to trade in the $35-45 range since February. 

They key takeaway here is that SMAR's focus right now is not profits, rather it wants to achieve scale and grow the top line. However, we do not want to see too many more quarters where SMAR guides higher for revenue but guides below consensus for EPS. We do want to see SMAR make progress toward profitability.

TRADE: SMAR JUN21 45C