Smartsheet (SMAR) Q4 Earnings And Revenues Beat Estimates

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. (NASDAQ:GRMN) , Applied Materials, Inc. (NASDAQ:AMAT) and Microsoft Corporation (NASDAQ: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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