Smartsheet (SMAR) Q1 Earnings and Revenues Beat Estimates

Smartsheet Inc. SMAR reported first-quarter fiscal 2021 non-GAAP loss of 11 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 20 cents. Moreover, the figure was narrower than the year-ago quarter’s loss of 12 cents.

Revenues surged 52% year over year to $85.5 million and surpassed the Zacks Consensus Estimate by 3.9%. The year-over-year increase in revenues was driven by strong momentum for Smartsheet’s offerings owing to higher demand for robust data collection and risk assessment capabilities amid the ongoing coronavirus pandemic.

Similar to Zacks Internet-Software industry peers like Anaplan PLAN, Nice NICE and Zoura, ZUO, the coronavirus outbreak had minimal impact on Smartheet’s fiscal first-quarter subscription revenues.

Notably, Anaplan’s first-quarter fiscal 2021 subscription revenues (90.4% of total revenues) soared 44.2% year over year to $93.8 million. NICE’s (NICE) first-quarter 2020 subscription-based cloud revenues rose 26.9% year over year to $172.6 million. Meanwhile, Zuora reported first-quarter fiscal 2021 subscription revenues of $56.9 million, up 20% year over year.

Smartsheet’s subscription revenues (90.3% of total revenues) increased 53% year over year to $77.2 million. Moreover, professional services (9.7% of total revenues) revenues rose 42% year over year to $8.3 million

Notably, Smartsheet has outperformed Anaplan, Nice and Zuora on a year-to-date basis.

Year-to-Date Performance

User Base Increased Y/Y

Customers with annualized contract value (ACV) of $5,000 or higher increased 41% year over year to 9576. Additionally, customers with ACV of $50,000 or higher surged 101% year over year to 1040.Moreover, customers with ACV of $100,000 or higher surged 107% year over year to 391.

Notably, 51 companies increased their annual recurring revenues (ARR) by more than $50,000. Of these, 15 companies increased ARR by more than $100,000.

Smartsheet’s net dollar retention rate was 132% in the reported quarter. Moreover, Smartsheet’s average ACV per domain-based customer increased 45% year over year.

Billings in the reported quarter increased 30% year over year to $89.9 million. Quarterly and multi-year billings represented about 2% of total billings reported in the quarter.

Operating Details

Gross profit surged 46.7% year over year to $67 million. Gross margin contracted 400 basis points (bps) from the year-ago quarter’s figure to 86.8%.

Subscription gross margin was 87%, which contracted 100 basis points (bps) year over year. Professional services margin was 25%, which contracted 600 bps year over year.

Operating expenses surged 44% year over year to $95.9 million. As a percentage of revenues, operating expenses declined 810 bps year over year to 124.2%.

Research & development (R&D), general & administrative (G&A) and sales & marketing (S&M) expenses soared 28.4%, 38% and 54.7%, respectively, on a year-over-year basis.

S&M, expenses as a percentage of revenues, increased 620 bps, while R&D and G&A expenses declined 653 bps and 217 bps, respectively.

Non-GAAP operating loss was $13.6 million, higher than the year-ago quarter’s loss of $147.1 million. Operating loss was better than the company’s expectations due to reduced personnel, travel and marketing expenses.

Balance Sheet & Cash Flow

Smartsheet had cash & cash equivalents of $544.2 million as of Apr 30, 2020, compared with $515.9 million as of Jan 31, 2020.

Net Cash used in operating activities was $24.3 million during the quarter compared with $42K used in the previous quarter. Free cash outflow was $28.2 million compared with free cash outflow of $3.6 million in the year-ago quarter.

Guidance

Smartsheet, which currently carries a Zacks Rank #2 (Buy), expects revenues between $86 million and $87 million for second-quarter fiscal 2021. This indicates year-over-year growth of 33-35%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Non-GAAP operating loss is expected between $19 million and $21 million, while non-GAAP net loss is expected to be 16-18 cents per share.

Calculated billings are expected to grow 15-17% year over year to $91-$93 million.

Moreover, net free cash outflow is estimated to be $9 million to $11 million.

For fiscal 2021, Smartsheet anticipates revenues between $360 million and $370 million that indicates year-over-year growth of 38-40%.

The company expects non-GAAP operating loss of $55-$65 million. Non-GAAP net loss is expected between 45 cents and 54 cents.

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