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Shares of Smartsheet Inc. (SMAR - Free Report) have lost 18.6% since the company announced second-quarter fiscal 2021 results on Sep 2, primarily owing to broader sell off in the market witnessed on Sep 3 and Sep 4.
The company reported non-GAAP loss of 6 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 16 cents. Moreover, the figure was narrower than the year-ago quarter’s loss of 8 cents, and management’s anticipated non-GAAP net loss between 16-18 cents per share.
Revenues surged 41% year over year to $91.2 million and surpassed the Zacks Consensus Estimate by 5.6%. Management had anticipated revenues between $86 million and $87 million. The year-over-year increase in revenues was driven by strong momentum for Smartsheet’s offerings courtesy of higher demand for robust data collection and risk assessment capabilities amid the ongoing coronavirus pandemic.
Smartsheet’s Subscription revenues (91.7% of total revenues) increased 43% year over year to $83.6 million. Moreover, Professional services (8.3% of total revenues) revenues rose 20% year over year to $7.6 million
Notably, on a year-to-date basis, shares of Smartsheet have returned 8%, compared with industry’s rally of 63.6%.
User Base Increased Y/Y
Customers with annualized contract value (ACV) of $5,000 or higher increased 31% year over year to 10,049. Additionally, customers with ACV of $50,000 or higher surged 78% year over year to 1,131. Moreover, customers with ACV of $100,000 or higher soared 92% year over year to 433.
Notably, 79 companies increased their annual recurring revenues (ARR) by more than $50,000. Of these, 19 companies increased ARR by more than $100,000.
Smartsheet’s net dollar retention rate was 128% in the reported quarter. Moreover, Smartsheet’s average ACV per domain-based customer increased 40% year over year to $4,156.
Calculated Billings in the reported quarter increased 22% year over year to $97.3 million. Management had anticipated revenues Calculated billings to grow 15-17% year over year to $91-$93 million. Better-than-expected billings performance was driven by consistent improvement in purchases from customers through the reported quarter. Quarterly and multi-year billings represented about 3% of total billings reported in the quarter.
Operating Details
Non-GAAP gross margin remained flat on a year-over-year basis at 82%.
Subscription gross margin was 87%, which contracted 100 basis points (bps) year over year. Professional services margin was 24%, which contracted 700 bps year over year.
Non-GAAP operating expenses surged 27.6% year over year to $81.8 million. As a percentage of revenues, operating expenses contracted 900 bps year over year to 90%.
Research & development (R&D), general & administrative (G&A) and sales & marketing (S&M) expenses, as a percentage of revenues contracted 500 bps, 100 bps and 400 bps to 24%, 15% and 51%, respectively, on a year-over-year basis.
S&M expenses as a percentage of revenues contracted owing to reduced spend on marketing and travel & entertainment. R&D expenses as a percentage of revenues contracted on lower spend on personnel expenses.
Non-GAAP operating loss was $7.4 million, narrower than the year-ago quarter’s loss of $10.8 million. Management had anticipated non-GAAP operating loss between $19 million and $21 million. Operating loss was better than the company’s expectations due to cost management initiatives.
Balance Sheet & Cash Flow
Smartsheet had cash & cash equivalents of almost $546 million as of Jul 31, 2020, compared with $544.2 million as of Apr 30, 2020.
Net cash used in operating activities was $1.3 million during the quarter compared with $24.3 million used in the previous quarter. Free cash outflow was $4.4 million compared with free cash outflow of $28.2 million in the previous quarter.
Guidance
Smartsheet expects revenues between $94 million and $95 million for third-quarter fiscal 2021. This indicates year-over-year growth of 31-33%. The Zacks Consensus Estimate for revenues is currently pegged at $92.6 million.
Non-GAAP operating loss is expected between $28 million and $26 million, while non-GAAP net loss is expected to be 23-22 cents per share. The Zacks Consensus Estimate for bottom line is currently pegged at loss of 14 cents.
Calculated billings are expected to grow 25-27% year over year to $104-$106 million.
Moreover, net free cash outflow is estimated to be $10 million to $8 million.
For fiscal 2021, Smartsheet tweaked guidance. The company now anticipates revenues between $367 million and $373 million that indicates year-over-year growth of 35-38%. Earlier, management had projected revenues in the range of $360-$370 million. The Zacks Consensus Estimate for revenues is currently pegged at $364.5 million.
The company now expects non-GAAP operating loss of $66-$60 million, compared with prior guided range of operating loss of $65-$55 million.
Non-GAAP net loss is now expected between 54 cents and 49 cents, compared with previously guided loss of 54-45 cents. The Zacks Consensus Estimate for bottom line is currently pegged at loss of 50 cents.
On Aug 24, 2020, Smartsheet inked deal to acquire Denver, CO-based, Brandfolder, in a bid to gain digital asset management capabilities and strengthen product portfolio to facilitate dynamic work.
Management anticipates closing the acquisition worth approximately $155 million in late September. Brandfolder is projected to rake in approximately $2 million to revenues and $6 million to billings in fiscal 2021.
Zacks Rank & Stocks to Consider
Smartsheet currently carries a Zacks Rank #3 (Hold).
Long-term earnings growth rate for Apple, Blackbaud, and Analog Devices is currently pegged at 10.7%, 7.6%, and 13.3%, respectively.
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Image: Bigstock
Smartsheet (SMAR) Q2 Earnings & Revenues Surpass Estimates
Shares of Smartsheet Inc. (SMAR - Free Report) have lost 18.6% since the company announced second-quarter fiscal 2021 results on Sep 2, primarily owing to broader sell off in the market witnessed on Sep 3 and Sep 4.
The company reported non-GAAP loss of 6 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 16 cents. Moreover, the figure was narrower than the year-ago quarter’s loss of 8 cents, and management’s anticipated non-GAAP net loss between 16-18 cents per share.
Revenues surged 41% year over year to $91.2 million and surpassed the Zacks Consensus Estimate by 5.6%. Management had anticipated revenues between $86 million and $87 million. The year-over-year increase in revenues was driven by strong momentum for Smartsheet’s offerings courtesy of higher demand for robust data collection and risk assessment capabilities amid the ongoing coronavirus pandemic.
Smartsheet’s Subscription revenues (91.7% of total revenues) increased 43% year over year to $83.6 million. Moreover, Professional services (8.3% of total revenues) revenues rose 20% year over year to $7.6 million
Notably, on a year-to-date basis, shares of Smartsheet have returned 8%, compared with industry’s rally of 63.6%.
User Base Increased Y/Y
Customers with annualized contract value (ACV) of $5,000 or higher increased 31% year over year to 10,049. Additionally, customers with ACV of $50,000 or higher surged 78% year over year to 1,131. Moreover, customers with ACV of $100,000 or higher soared 92% year over year to 433.
Notably, 79 companies increased their annual recurring revenues (ARR) by more than $50,000. Of these, 19 companies increased ARR by more than $100,000.
Smartsheet’s net dollar retention rate was 128% in the reported quarter. Moreover, Smartsheet’s average ACV per domain-based customer increased 40% year over year to $4,156.
Calculated Billings in the reported quarter increased 22% year over year to $97.3 million. Management had anticipated revenues Calculated billings to grow 15-17% year over year to $91-$93 million. Better-than-expected billings performance was driven by consistent improvement in purchases from customers through the reported quarter. Quarterly and multi-year billings represented about 3% of total billings reported in the quarter.
Operating Details
Non-GAAP gross margin remained flat on a year-over-year basis at 82%.
Subscription gross margin was 87%, which contracted 100 basis points (bps) year over year. Professional services margin was 24%, which contracted 700 bps year over year.
Non-GAAP operating expenses surged 27.6% year over year to $81.8 million. As a percentage of revenues, operating expenses contracted 900 bps year over year to 90%.
Research & development (R&D), general & administrative (G&A) and sales & marketing (S&M) expenses, as a percentage of revenues contracted 500 bps, 100 bps and 400 bps to 24%, 15% and 51%, respectively, on a year-over-year basis.
S&M expenses as a percentage of revenues contracted owing to reduced spend on marketing and travel & entertainment. R&D expenses as a percentage of revenues contracted on lower spend on personnel expenses.
Non-GAAP operating loss was $7.4 million, narrower than the year-ago quarter’s loss of $10.8 million. Management had anticipated non-GAAP operating loss between $19 million and $21 million. Operating loss was better than the company’s expectations due to cost management initiatives.
Balance Sheet & Cash Flow
Smartsheet had cash & cash equivalents of almost $546 million as of Jul 31, 2020, compared with $544.2 million as of Apr 30, 2020.
Smartsheet Inc. Price, Consensus and EPS Surprise
Smartsheet Inc. price-consensus-eps-surprise-chart | Smartsheet Inc. Quote
Net cash used in operating activities was $1.3 million during the quarter compared with $24.3 million used in the previous quarter. Free cash outflow was $4.4 million compared with free cash outflow of $28.2 million in the previous quarter.
Guidance
Smartsheet expects revenues between $94 million and $95 million for third-quarter fiscal 2021. This indicates year-over-year growth of 31-33%. The Zacks Consensus Estimate for revenues is currently pegged at $92.6 million.
Non-GAAP operating loss is expected between $28 million and $26 million, while non-GAAP net loss is expected to be 23-22 cents per share. The Zacks Consensus Estimate for bottom line is currently pegged at loss of 14 cents.
Calculated billings are expected to grow 25-27% year over year to $104-$106 million.
Moreover, net free cash outflow is estimated to be $10 million to $8 million.
For fiscal 2021, Smartsheet tweaked guidance. The company now anticipates revenues between $367 million and $373 million that indicates year-over-year growth of 35-38%. Earlier, management had projected revenues in the range of $360-$370 million. The Zacks Consensus Estimate for revenues is currently pegged at $364.5 million.
The company now expects non-GAAP operating loss of $66-$60 million, compared with prior guided range of operating loss of $65-$55 million.
Non-GAAP net loss is now expected between 54 cents and 49 cents, compared with previously guided loss of 54-45 cents. The Zacks Consensus Estimate for bottom line is currently pegged at loss of 50 cents.
On Aug 24, 2020, Smartsheet inked deal to acquire Denver, CO-based, Brandfolder, in a bid to gain digital asset management capabilities and strengthen product portfolio to facilitate dynamic work.
Management anticipates closing the acquisition worth approximately $155 million in late September. Brandfolder is projected to rake in approximately $2 million to revenues and $6 million to billings in fiscal 2021.
Zacks Rank & Stocks to Consider
Smartsheet currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader sector are Apple (AAPL - Free Report) , Blackbaud (BLKB - Free Report) and Analog Devices (ADI - Free Report) . While Blackbaud flaunts a Zacks Rank #1 (Strong Buy), Apple and Analog Devices carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Apple, Blackbaud, and Analog Devices is currently pegged at 10.7%, 7.6%, and 13.3%, respectively.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>