Smartsheet (NYSE:SMAR) Beats Q4 Sales Targets, Stock Soars

Petr Huřťák /
2023/03/14 4:13 pm EDT
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Project management software maker Smartsheet (NYSE:SMAR) reported Q4 FY2023 results topping analyst expectations, with revenue up 34.9% year on year to $212.3 million. However, guidance for the next quarter was less impressive, coming in at $214 million at the midpoint, being 1.73% below analyst estimates. Smartsheet made a GAAP loss of $42.7 million, improving on its loss of $53.1 million, in the same quarter last year.

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Smartsheet (SMAR) Q4 FY2023 Highlights:

  • Revenue: $212.3 million vs analyst estimates of $205.9 million (3.15% beat)
  • EPS (non-GAAP): $0.07 vs analyst estimates of -$0.01 ($0.08 beat)
  • Revenue guidance for Q1 2024 is $214 million at the midpoint, below analyst estimates of $217.8 million
  • Management's revenue guidance for upcoming financial year 2024 is $945.5 million at the midpoint, missing analyst estimates by 1.19% and predicting 23.3% growth (vs 39.6% in FY2023)
  • Free cash flow of $16.4 million, up from negative free cash flow of $4.65 million in previous quarter
  • Net Revenue Retention Rate: 125%, down from 129% previous quarter
  • Customers: 18,093 customers paying more than $5,000 annually
  • Gross Margin (GAAP): 78.9%, in line with same quarter last year

Founded in 2005, Smartsheet (NYSE:SMAR) is a software as a service platform that helps companies plan, manage and report on work.

“Our Q4 results cap off a strong fiscal year in which we achieved the major milestone of positive free cash flow,” said Mark Mader, President and CEO of Smartsheet.

Sales Growth

As you can see below, Smartsheet's revenue growth has been impressive over the last two years, growing from quarterly revenue of $109.9 million in Q4 FY2021, to $212.3 million.

Smartsheet Total Revenue

And unsurprisingly, this was another great quarter for Smartsheet with revenue up 34.9% year on year. Quarter on quarter the revenue increased by $12.8 million in Q4, which was in line with Q3 2023. This steady quarter-on-quarter growth shows the company is able to maintain a strong growth trajectory.

Guidance for the next quarter indicates Smartsheet is expecting revenue to grow 27.1% year on year to $214 million, slowing down from the 43.8% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $945.5 million at the midpoint, growing 23.3% compared to 39.2% increase in FY2023.

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Large Customers Growth

You can see below that at the end of the quarter Smartsheet reported 18,093 enterprise customers paying more than $5,000 annually, an increase of 647 on last quarter. That is a bit less contract wins than last quarter and also quite a bit below what we have typically seen over the past couple of quarters, suggesting that the sales momentum with large customers is slowing down.

Smartsheet customers paying more than $5,000 annually

Key Takeaways from Smartsheet's Q4 Results

With a market capitalization of $5.22 billion Smartsheet is among smaller companies, but its more than $456.4 million in cash and positive free cash flow over the last twelve months give us confidence that Smartsheet has the resources it needs to pursue a high growth business strategy.

It was good to see Smartsheet deliver quarterly revenue that was both strong in growth and above analysts' expectations. Both operating profit and free cash flow also exceeded expectations. On the other hand, it was unfortunate to see that Smartsheet's revenue guidance for the full year missed analysts' expectations and the revenue guidance for next year indicates quite a significant slowdown in growth. Overall, this quarter's results were mixed. The company is up 5.09% on the results and currently trades at $40.25 per share.

Smartsheet may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.