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Smartsheet (SMAR) Q1 Earnings and Revenues Beat Estimates

Zacks Equity Research

Smartsheet Inc. SMAR reported first-quarter fiscal 2020 non-GAAP loss of 12 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 18 cents. The bottom line was flat year over year.

Revenues surged 54.7% year over year to $56.2 million and surpassed the Zacks Consensus Estimate of $55 million. The year-over-year increase in revenues was driven by customer wins and growth in business value.

Smartsheet ended fiscal the first quarter with more than 5.1 million users.

Smartsheet Inc. Price, Consensus and EPS Surprise

Smartsheet Inc. Price, Consensus and EPS Surprise

Smartsheet Inc. price-consensus-eps-surprise-chart | Smartsheet Inc. Quote

Quarter in Details

Subscription revenues (89.5% of total revenues) increased 57% from the year-ago quarter to $50.3 million. Professional services (10.5%) revenues rose 37.8% from the year-ago quarter to $5.9 million.

Customers with annualized contract value (ACV) of $5,000 or higher increased 56% year over year to 6,779. Additionally, customers with annualized contract value (ACV) of $50,000 or higher jumped 117% year over year to 518. Moreover, customers with annualized contract value (ACV) of $100,000 or higher surged 139% year over year to 189.

Smartsheet was successful in improving business relationship with a few customers, including Seagate STX, American Electric Power Company AEP, DocuSign DOCU and Arc'teryx in the reported quarter. Notably, 34 companies increased their annual recurring revenues (ARR) by more than $50,000 and of these, 13 companies increased ARR by more than $100,000.

Smartsheet’s net dollar retention rate was 134% in the reported quarter, up 4% year over year. Moreover, Smartsheet’s average annualized contract value per domain-based customer grew 48% year over year to $2,675, reflecting growing demand for the company’s products like Accelerator.

Calculated billings in the reported quarter were $69 million, higher than $45.4 million in the year-ago quarter.

Operating Details

Gross profit surged 57.6% year over year to $45.7 million. Gross margin expanded 150 basis points (bps) from the year-ago quarter to 81.3%.

Subscription gross margin was 88%, flat sequentially. Professional services margin was 31%, on par with the prior quarter.

Operating expenses surged 58.4% year over year to $66.6 million. As percentage of revenues, operating expenses increased 280 bps to 118.5%.

Research & development (R&D), general & administrative (G&A) and sales & marketing (S&M) expenses soared 57.6%, 60.9% and 58.2%, respectively, on a year-over-year basis.

Notably, R&D expenses were higher due to increase in headcount and introduction of features. R&D, S&M and G&A expenses, as a percentage of revenues, increased 70 bps, 140 bps and 70bps, respectively.

Non-GAAP operating loss was $14.1 million, higher than the year-ago quarter’s loss of $11 million, due to continued investments in the business.

Balance Sheet & Cash Flow

Smartsheet exited the quarter with cash & cash equivalents of $208.8 million compared with $213.1 million in the previous quarter.

Cash outflow from operations was $9.2 million compared with cash outflow of $8.2 million in the year-ago quarter. Free cash outflow was $13.1 million compared with free cash outflow of $9.7 million in the year-ago quarter.

Recent Updates

On May 1, 2019 Smartsheet acquired Artefact Product Group LLC for about $27.5 million. The company noted that the acquisition will help its customers do “real-time capacity planning, resource management and reporting.”

Guidance

Second-quarter fiscal 2020

Smartsheet expects revenues between $63 million and $64 million, indicating year-over-year growth of 49-51%. Non-GAAP operating loss is expected between $17 million and $18 million.

Non-GAAP net loss is expected to be 15-16 cents per share. Net free cash outflow is expected to be a maximum of $8 million.

Fiscal 2020

Smartsheet anticipates revenues between $262 million and $265 million, indicating growth of 47-49%.

The company expects non-GAAP operating loss of $60-$65 million. Non-GAAP net loss is expected between 54 cents and 59 cents.

Calculated billings are expected to grow 46-48% year over year to $316-$320 million.

Moreover, net free cash outflow is estimated to be a maximum of $20 million.

Currently, Smartsheet carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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