Smartsheet (SMAR) Q4 Earnings and Revenues Beat Estimates

Smartsheet Inc. SMAR reported fourth-quarter fiscal 2020 non-GAAP loss of 13 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 16 cents. However, the figure was wider than the year-ago quarter’s loss of 7 cents.

Revenues surged 50.6% year over year to $78.5 million and surpassed the Zacks Consensus Estimate by 0.6%. The year-over-year increase in revenues was driven by customer wins and growth in business value.

Smartsheet ended fiscal the fourth quarter with more than 6.3 million users including more than 950K paid licensed users.

Quarter in Details

Subscription revenues (90.5% of total revenues) increased 52.9% from the year-ago quarter to $71.1 million. Professional services (9.5% of total revenues) revenues rose 31.5% from the year-ago quarter to $7.5 million.

Smartsheet Inc. Price, Consensus and EPS Surprise

Smartsheet Inc. Price, Consensus and EPS Surprise

 

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

Customers with annualized contract value (ACV) of $5,000 or higher increased 47% year over year to 9079.

Additionally, customers with ACV of $50,000 or higher jumped 116% year over year to 961.

Moreover, customers with ACV of $100,000 or higher surged 138% year over year to 350.

Notably, 93 companies increased their annual recurring revenues (ARR) by more than $50,000. Of these, 28 companies increased ARR by more than $100,000.

Smartsheet’s net dollar retention rate was 135% in the reported quarter. Moreover, Smartsheet’s average ACV per domain-based customer grew 48% year over year.

The company ended fourth-quarter fiscal 2020 with over 84,000 domain-based customers, reflecting growing demand for the company’s products like Accelerator, Dynamic View and Data Uploader.

Billings in the reported quarter increased 58% year over year to $101.5 million. Quarterly and multi-year billings represented about 1% of total billings reported in the quarter.

Operating Details

Gross profit surged 48% year over year to $62.8 million. Gross margin contracted 140 basis points (bps) from the year-ago quarter to 80.1%.

Subscription gross margin was 88%, flat sequentially. Professional services margin declined 7% from the prior quarter to 25% as the company used third parties to deliver on services projects.

Operating expenses surged 68.5% year over year to $92.9 million. As a percentage of revenues, operating expenses expanded to 118.4% from 105.8% in the year-ago quarter.

Research & development (R&D), general & administrative (G&A) and sales & marketing (S&M) expenses soared 75%, 72.1% and 47.4%, respectively, on a year-over-year basis.

Notably, R&D expenses were higher due to increase in headcount and introduction of features. S&M expenses increased due to customer conferences and brand advertising campaigns held in the reported quarter.

R&D and S&M expenses as a percentage of revenues increased 500 bps and 800 bps, while G&A expenses declined 40 bps, respectively.

Non-GAAP operating loss was $17.3 million, higher than the year-ago quarter’s loss of $8.5 million due to continued investments in the business.

Balance Sheet & Cash Flow

Smartsheet exited the quarter with cash & cash equivalents of $515.9 million compared with $513.4 million in the previous quarter.

Cash flow from operations was negative $42K compared with cash flow of $4 million in the year-ago quarter. Free cash outflow was $3.6 million compared with free cash flow of $1 million in the year-ago quarter.

Guidance

Smartsheet expects revenues between $82 million and $83 million in first-quarter fiscal 2021, indicating year-over-year growth of 46-48%. Non-GAAP operating loss is expected between $24 million and $26 million.

Non-GAAP net loss is expected to be 19-21 cents per share.

Smartsheet anticipates revenues between $373 million and $378 million for fiscal 2021, indicating growth of 38-40%.

The company expects non-GAAP operating loss of $67-$75 million. Non-GAAP net loss is expected between 55 cents and 62 cents.

Calculated billings are expected to grow 35-36% year over year to $450-$455 million.

Moreover, net free cash outflow is estimated to be $0 to negative $11 million.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the broader computer and technology sector are Garmin Ltd. GRMN, Applied Materials, Inc. AMAT and Microsoft Corporation MSFT. 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.

The long-term earnings growth rate for Garmin, Applied Materials and Microsoft is currently pegged at 7.4%, 9.9% and 13.2%, respectively.

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