Smartsheet (NYSE:SMAR) Q2: Beats On Revenue But Full Year Guidance Underwhelms

Petr Huřťák /
2022/09/01 4:22 pm EDT

Project management software maker Smartsheet (NYSE:SMAR) reported results ahead of analyst expectations in the Q2 FY2023 quarter, with revenue up 41.7% year on year to $186.6 million. However, guidance for the next quarter was less impressive, coming in at $193.5 million at the midpoint, being 1.43% below analyst estimates. Smartsheet made a GAAP loss of $62.3 million, down on its loss of $44.1 million, in the same quarter last year.

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Smartsheet (SMAR) Q2 FY2023 Highlights:

  • Revenue: $186.6 million vs analyst estimates of $180.5 million (3.39% beat)
  • EPS (GAAP): -$0.48
  • Revenue guidance for Q3 2023 is $193.5 million at the midpoint, below analyst estimates of $196.3 million
  • The company reconfirmed revenue guidance for the full year, at $752.5 million at the midpoint
  • Free cash flow of $7.1 million, up from negative free cash flow of $9.06 million in previous quarter
  • Net Revenue Retention Rate: 131%, in line with previous quarter
  • Customers: 16,682 customers paying more than $5,000 annually
  • Gross Margin (GAAP): 78.2%, down from 79.1% 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 strong quarterly results demonstrate the value customers are seeing from our core platform and premium capabilities,” 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 year, growing from quarterly revenue of $131.7 million, to $186.6 million.

Smartsheet Total Revenue

And unsurprisingly, this was another great quarter for Smartsheet with revenue up 41.7% year on year. On top of that, revenue increased $18.3 million quarter on quarter, a very strong improvement on the $10.9 million increase in Q1 2023, and a sign of acceleration of growth.

Guidance for the next quarter indicates Smartsheet is expecting revenue to grow 33.7% year on year to $193.5 million, slowing down from the 46.1% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 33.3% over the next twelve months.

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Large Customers Growth

You can see below that at the end of the quarter Smartsheet reported 16,682 enterprise customers paying more than $5,000 annually, an increase of 803 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 Q2 Results

With a market capitalization of $4.3 billion Smartsheet is among smaller companies, but its more than $227.3 million in cash and the fact it is operating close to free cash flow break-even put it in a robust financial position to invest in growth.

We enjoyed seeing Smartsheet’s impressive revenue growth this quarter. And we were also glad to see the acceleration in new contract wins. On the other hand, it was unfortunate to see that the revenue guidance for both the next quarter and full year missed analysts' expectations. Overall, this quarter's results could have been better. The company is down 2.33% on the results and currently trades at $30.15 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.