Smartsheet (SMAR) Q3 Loss Narrower Than Estimates, Revenues Top

Smartsheet SMAR reported third-quarter fiscal 2022 non-GAAP loss of 3 cents per share, narrower than the Zacks Consensus Estimate of a loss of 11 cents as well as the year-ago quarter’s loss of 12 cents.

Revenues surged 46% year over year to $144.6 million and surpassed the Zacks Consensus Estimate by 0.6%. The upside was driven by an increasing number of large deals and momentum in bookings growth.

Subscription revenues (92% of total revenues) increased 46% year over year to $132.6 million. Professional services (8% of total revenues) revenues rose 50% year over year to $12 million.

Calculated billings in the reported quarter jumped 44% year over year to $161.6 million. Quarterly, semi-annual and multi-year billings represented about 4% of total billings reported in the quarter.

Following the earnings announcement, shares of Smartsheet jumped 16.5% in the premarket trading on Dec 3. In the past year, shares have declined 0.6% compared with the industry’s decline of 22%.

Smartsheet Price, Consensus and EPS Surprise

Smartsheet Price, Consensus and EPS Surprise

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

User Base Increases Y/Y

Smartsheet ended the reported quarter with more than 9.5 million users and annual recurring revenues (ARR) growing 10% sequentially.

In the quarter under review, the number of customers with annualized contract value (ACV) of $5,000 or higher increased 27% year over year to 14,228.

The number of customers with ACV of $50,000 or higher surged 56% year over year to 2,078. The number of customers with ACV of $100,000 or higher soared 72% year over year to 868.

Smartsheet’s net dollar retention rate was 131% in the reported quarter. The company’s average ACV per domain-based customer increased 37% year over year to $6,368.

Operating Details

Gross margin on a non-GAAP basis expanded 300 basis points (bps) to 82% on a year-over-year basis. Subscription gross margin was 88%, expanded 500 bps year over year. Professional services margin was 16% compared with 29% reported earlier.

Total operating expenses surged 36.1% year over year to $151.2 million.

Non-GAAP operating loss was $2.7 million, narrower than the year-ago quarter’s loss of $15 million.

Balance Sheet & Cash Flow

As of Oct 31, 2021, Smartsheet’s cash & cash equivalents were $440 million.

Net free cash outflow was $6.3 million compared with net free cash outflow of $3.5 million in the previous quarter.

Guidance

For fourth-quarter fiscal 2022, Smartsheet expects revenues between $151 million and $152 million. This indicates growth of 37-38% from the year-ago quarter’s reported figure.

The company expects calculated billings between $204 million and $205 million, indicating year-over-year growth of 35-36%.

Non-GAAP operating loss is expected between $18 million and $20 million, while non-GAAP net loss is anticipated to be 14-16 cents per share.

For fiscal 2022, Smartsheet now anticipates revenues between $544 million and $545 million, which indicates growth of 41% from the prior fiscal year. Earlier, Smartsheet projected revenues between $530 million and $533 million, indicating growth of 37-38% from the year ago period.

Calculated billings for the current fiscal year are expected between $641 million and $642 million.

The company now expects a non-GAAP operating loss of $38-$40 million.

Non-GAAP net loss is now anticipated between 30 cents and 32 cents per share. Earlier, non-GAAP net loss was projected between 36 cents and 44 cents per share.

Zacks Rank and Stock to Consider

Smartsheet currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks worth considering in the broader technology space are Arrow Electronics ARW, Alphabet GOOGL and Monolithic Power Systems MPWR.

While Alphabet and Arrow Electronics sport a Zacks Rank #1 (Strong Buy), Monolithic carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Arrow Electronics’ shares have gained 26.2% on a year-to-date basis. The long-term earnings growth rate for the company is currently projected at 27.4%.

Alphabet’s shares have surged 63.1% on a year-to-date basis. The long-term earnings growth rate for the company is currently projected at 25.8%.

Monolithic’s shares have rallied 51.4% on a year-to-date basis. The long-term earnings growth rate for the company is currently projected at 25%.

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