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Smartsheet (SMAR) Q4 Earnings Beat Estimates, Revenues Up Y/Y

Zacks Equity Research

Smartsheet Inc. SMAR reported fourth-quarter fiscal 2019 non-GAAP loss of 7 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 14 cents and the year-ago quarter’s loss of 8 cents.

Revenues surged 58.2% year over year to $52.2 million and surpassed the Zacks Consensus Estimate of $50 million. The increase in revenues was driven by customer wins and new product launches.

Smartsheet ended fiscal 2019 with more than 4.8 million users, including more than 800,000 paid licensed users and nearly 79,000 domain customers.

Shares surged almost 11% in after-hours trading, following the solid results.

Quarter in Details

Subscription revenues climbed 56.2% from the year-ago quarter to $46.5 million. Professional services revenues soared 76.8% from the year-ago quarter to $5.7 million.
Smartsheet was successful in attracting large customers in the reported quarter. Adoption was strong for products like Control Center, Accelerators and Dynamic View.

Smartsheet Inc. Price, Consensus and EPS Surprise

Smartsheet Inc. Price, Consensus and EPS Surprise | Smartsheet Inc. Quote


In fiscal 2020, Smartsheet plans to expand its Accelerator portfolio into new solution areas, including construction, corporate governance and marketing. The acquisition of TernPro, the makers of Slope, is notable in this regard. Slope is a work execution platform that allows teams to collaborate on and manage a creative work.

Customers with annualized contract value (ACV) of more than $50,000 jumped 135% year over year to 444. Moreover, annual recurring revenue (ARR) from 40 existing customers increased more than $50,000 and by more than $100,000 from nine companies.

The company also recorded robust billings of $64.1 million, up 63% year over year. This can be attributed to strong adoption of new products and larger deals.

Smartsheet also witnessed an increase of 134% in net dollar retention rate, increasing 4% year over year.

Smartsheet’s average annualized contract value (ACV) per domain-based customer grew 50% year over year to $2,454, reflecting growing demand for the company’s products.

Operating Details

Gross margin expanded 10 basis points (bps) from the year-ago quarter to 81.5%. Subscription gross margin was 88%, down 100 bps on a year-over-year basis, owing to higher personnel costs. Professional services margin was 30%.

Operating expenses surged 55.7% year over year to $55.2 million. However, as percentage of revenues, operating expenses declined 170 bps to 105.8%.

Research & development (R&D), general & administrative (G&A) and sales & marketing (S&M) expenses soared 66.6%, 70.9% and 46.1%, respectively, on a year-over-year basis.

R&D and G&A expenses, as percentage of revenues, increased 160 bps and 140 bps, respectively. However, S&M expenses declined 470 bps on a year-over-year basis.

Non-GAAP operating loss was $8.5 million compared with the year-ago quarter’s loss of $7.5 million.

Balance Sheet & Cash Flow

Smartsheet exited the quarter with cash & cash equivalents of $213.1 million compared with $212 million in the previous quarter.

Cash flow from operations was $4 million compared with cash outflow of $6.6 million in the year-ago quarter. Free cash flow was $1 million compared with free cash outflow of $10 million in the year-ago quarter.


For first-quarter fiscal 2020, Smartsheet expects revenues between $54 million and $55 million, reflecting year-over-year growth of 49-51%. Non-GAAP operating loss is expected between $20 million and $19 million.

Non-GAAP net loss is expected to be 19-18 cents per share. Net free cash outflow is expected to be a maximum of $14 million.

For fiscal 2020, Smartsheet anticipates revenues between $253 million and $257 million, representing growth of 42-45%.

Management expects gross margin to move south toward long-term target of 78-80% for fiscal 2020.

The company expects non-GAAP operating loss of $65-$60 million. Non-GAAP net loss is expected between 59 cents and 55 cents.

Calculated billings are expected to grow 41-43% to $305-$310 million.

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

Zacks Rank & Stocks to Consider

Currently, Smartsheet has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same industry include Alteryx AYX, MongoDB MDB and eGain Corp. EGAN. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Alteryx, MongoDB and eGain is projected to be 15.4%, 8% and 30%, respectively.


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