Project management software maker Smartsheet (NYSE:SMAR) reported results in line with analysts’ expectations in Q2 CY2024, with revenue up 17.3% year on year to $276.4 million. On the other hand, the company expects next quarter’s revenue to be around $283.5 million, slightly below analysts’ estimates. It made a non-GAAP profit of $0.44 per share, improving from its profit of $0.16 per share in the same quarter last year.
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Smartsheet (SMAR) Q2 CY2024 Highlights:
- Revenue: $276.4 million vs analyst estimates of $274.5 million (small beat)
- Adjusted Operating Income: $45.3 million vs analyst estimates of $40 million (13.2% beat)
- EPS (non-GAAP): $0.44 vs analyst estimates of $0.29 (49.6% beat)
- The company reconfirmed its revenue guidance for the full year of $1.12 billion at the midpoint
- EPS (non-GAAP) guidance for the full year is $1.38 at the midpoint, beating analyst estimates by 9.1%
- Gross Margin (GAAP): 82%, up from 80% in the same quarter last year
- Free Cash Flow Margin: 20.7%, up from 17.4% in the previous quarter
- Net Revenue Retention Rate: 113%, down from 114% in the previous quarter
- Customers: 20,198 customers paying more than $5,000 annually
- Billings: $282.9 million at quarter end, up 16.4% year on year
- Market Capitalization: $6.55 billion
"Q2 was a strong quarter highlighted by continued growth in the enterprise,” said Mark Mader, CEO of Smartsheet.
Founded in 2005, Smartsheet (NYSE:SMAR) is a software as a service platform that helps companies plan, manage and report on work.
Project Management Software
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 31.6% annualized revenue growth over the last three years has been impressive, and its sales came in at $276.4 million this quarter.
This quarter, Smartsheet’s quarterly revenue was once again up 17.3% year on year. We can see that Smartsheet’s revenue increased by $13.43 million quarter on quarter, which is a solid improvement from the $6.04 million increase in Q1 CY2024. This acceleration of growth was a great sign.
Next quarter’s guidance suggests that Smartsheet is expecting revenue to grow 15.3% year on year to $283.5 million, slowing down from the 23.2% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 15.2% over the next 12 months before the earnings results announcement.
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Large Customers Growth
This quarter, Smartsheet reported 20,198 enterprise customers paying more than $5,000 annually, an increase of 221 from the previous quarter. That’s quite a bit more contract wins than last quarter but also quite a bit below what we’ve typically observed over the last year, suggesting that the company may be reinvigorating growth.
Key Takeaways from Smartsheet’s Q2 Results
We enjoyed seeing Smartsheet accelerate its new large contract wins this quarter. We were also glad its billings outperformed Wall Street’s estimates. On the other hand, its revenue guidance for next quarter missed analysts’ expectations and its full-year revenue guidance slightly missed Wall Street’s estimates as well. Zooming out, we think this was a decent quarter featuring some areas of strength but also some blemishes, especially in the outlook. The stock remained flat at $49.65 immediately after reporting.
So should you invest in Smartsheet right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.