Smartsheet (NYSE:SMAR) Exceeds Q4 Expectations But Stock Drops 10.4%

Radek Strnad /
2022/03/15 4:13 pm EDT

Project management software maker Smartsheet (NYSE:SMAR) reported Q4 FY2022 results beating Wall St's expectations, with revenue up 43.2% year on year to $157.3 million. Guidance for next quarter's revenue was $162.5 million at the midpoint, which is 1.56% above the analyst consensus. Smartsheet made a GAAP loss of $53.1 million, down on its loss of $28.6 million, in the same quarter last year.

Is now the time to buy Smartsheet? Access our full analysis of the earnings results here, it's free.

Smartsheet (SMAR) Q4 FY2022 Highlights:

  • Revenue: $157.3 million vs analyst estimates of $151.5 million (3.81% beat)
  • EPS (GAAP): -$0.42
  • Revenue guidance for Q1 2023 is $162.5 million at the midpoint, above analyst estimates of $159.9 million
  • Management's revenue guidance for upcoming financial year 2023 is $752.5 million at the midpoint, beating analyst estimates by 2.96% and predicting 36.6% growth (vs 42.7% in FY2022)
  • Free cash flow was negative $2.74 million, compared to negative free cash flow of $6.3 million in previous quarter
  • Net Revenue Retention Rate: 134%, up from 131% previous quarter
  • Customers: 15,150 customers paying more than $5,000 annually
  • Gross Margin (GAAP): 79%, up from 77.8% 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.

The future of work requires teams to collaborate across departments and remote offices. Project management software is both driving this change and benefiting from it. While the trend of collaborative work management has been strong for a while, the Covid pandemic has definitively accelerated the demand for tools that allow work to be done remotely.

Sales Growth

As you can see below, Smartsheet's revenue growth has been impressive over the last year, growing from quarterly revenue of $109.8 million, to $157.3 million.

Smartsheet Total Revenue

And unsurprisingly, this was another great quarter for Smartsheet with revenue up 43.2% year on year. Quarter on quarter the revenue increased by $12.7 million in Q4, which was in line with Q3 2022. 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 38.7% year on year to $162.5 million, in line with the 36.9% 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 $752.5 million at the midpoint, growing 36.6% compared to 42.7% increase in FY2022.

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Large Customers Growth

You can see below that at the end of the quarter Smartsheet reported 15,150 enterprise customers paying more than $5,000 annually, an increase of 922 on last quarter. That is quite a bit more contract wins than last quarter and quite a bit above what we have typically seen lately, demonstrating that the business itself has good sales momentum. We've no doubt shareholders will take this as an indication that the company's go-to-market strategy is working very well.

Smartsheet customers paying more than $5,000 annually

Key Takeaways from Smartsheet's Q4 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on Smartsheet’s balance sheet, but we note that with a market capitalization of $5.47 billion and more than $449 million in cash, the company has the capacity to continue to prioritise growth over profitability.

We were impressed by the exceptional revenue growth Smartsheet delivered this quarter. And we were also glad to see the acceleration in new contract wins. Overall, we think this was a really good quarter, that should leave shareholders feeling very positive. But investors might have been expecting more and the company is down 10.4% on the results and currently trades at $38.97 per share.

Should you invest in Smartsheet 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.