CFO purchases can be very bullish insider transactions. CFOs tend to have a superior level of information in relation to their firms’ financial health and some studies have found that these insiders earn higher abnormal returns following their purchases of company shares than CEOs.
In this report, we are going to highlight a CFO purchase at Smartsheet Inc (SMAR:US). Smartsheet is a technology company that provides collaboration and work management solutions. Its solutions enable employees to track and organize work, share work with colleagues, track discussions, view change history, and create summary reports. The company is listed on the New York Stock Exchange and currently has a market capitalization of $9.1 billion.
Smartsheet Inc: Insider Buying
Our insider transaction data shows that on 6 July, Smartsheet’s CFO Pete Godbole bought 1,400 SMAR shares at a price of $76.10 per share. The purchase, which cost the insider $106,537, was Godbole’s first since he joined the company late last year.
First Buy Since IPO
This trade stands out for a couple of reasons. Firstly, insiders at Smartsheet don’t buy stock very often. Our records show that this is the first purchase from an insider since the company went public in 2018.
Secondly, Godbole’s purchase is substantial.The fact that he has spent over $100,000 on company stock suggests that he is confident that the stock is set to move higher.
It’s worth noting that Godbole has more than two decades of leadership experience in the enterprise software industry. Prior to joining Smartsheet, he served as CFO of Hearsay Systems, Inc., CFO of GoodData Corporation, and in various roles at VMware, Autodesk, and The Hewlett-Packard Company. So, it’s likely that he has a good read on his company’s prospects.
Strong Top-Line Growth
Smartsheet recently posted a solid set of first-quarter results that beat expectations. For the quarter, total revenue came in at $117.1 million, an increase of 37% year over year with subscription revenue amounting to $108.0 million, an increase of 40% year over year. Non-GAAP operating loss was $12.0 million, or 10% of total revenue, compared to a loss of $13.6 million, or 16% of total revenue, in the first quarter of fiscal 2021. Net operating cash flow was -$3.0 million, compared to net operating cash flow of -$24.3 million in the first quarter of fiscal 2021.
“We’re very pleased with our strong start to the year, bolstered by our continued traction in the enterprise,” said Mark Mader, President, and CEO. “These results demonstrate how no-code technologies like Smartsheet are becoming a critical part of the enterprise technology stack, enabling organizations to manage programs, processes, and projects at scale," he added.
Going forward, the company expects to continue growing at a rapid rate. For the full fiscal year 2022, it expects to generate revenue of between $510 million and $515 million, which would represent year-on-year growth of 32% to 34%.
In light of these results, we see the purchase from the CFO here as a bullish indicator.