Smartsheet's stock soars on surprise earnings beat

CLOUD

Shares of Smartsheet Inc. surged in extended trading today after the work collaboration software provider posted a surprise profit and revenue beat in its fourth-quarter earnings report.

Smartsheet’s stock gained more than 12% in after-hours trading, wiping out a decline of more than 3% in the regular session.

The company reported a fourth-quarter net loss of $42.7 million, down from the $53.1 million net loss it posted a year earlier. Earnings before certain costs such as stock compensation came to seven cents per share, handily beating the analyst consensus estimate of a penny-per-share loss. Revenue for the period rose 35% from a year earlier, to $212.3 million, ahead of Wall Street’s forecast of $206.2 million.

Smartsheet also reported subscription revenue of $198.9 million, up 37% from a year ago, and professional services revenue of $13.5 million, up 15%.

For the full year fiscal 2023, it posted total revenue of $766.9 million, up 39%. Its net loss for the year came in at $215.6 million, rising from the $171.1 million loss from a year earlier.

Chief Executive Mark Mader (pictured) said the company hit a major milestone in the fiscal year by achieving a positive free cash flow for the first time. “Our largest customers continue to expand at a faster rate than our overall net dollar retention rate, a sign of the rapid return on investment they’re realizing from Smartsheet’s enterprise platform,” he added.

Smartsheet is a leader in the collaborative work management space, providing a modern alternative to traditional project management tools. Its main focus is on the collaborative aspects of project management, as opposed to functions like schedules and tasks.

Its collaborative approach is proving popular, with the company reported strong customer growth in the quarter. It said it ended the period with 1,484 customers that generated at least $100,000 in revenue per year, up 45% from a year earlier. Meanwhile, its number of customers that deliver at least $50,000 in annual sales rose 36% from a year ago, to 3,206. Those customers are spending more too, with the average annual contract value per domain-based customer rising 20% to $8,377.

Holger Mueller of Constellation Research Inc. said Smartsheet is on a tear, growing rapidly as the de factor work platform for an increasing number of enterprises. “This growth helps to improve its financial health, and it became cash flow positive for the first time in its history,” Mueller said. “The management plans to drive that to over $100 million in the next full year, so investors will be looking to see it execute on that objective. Smartsheet will need to keep innovating to do that, and the first quarter will show us if it’s likely to happen.”

Looking ahead, the company forecast adjusted earnings of between eight and nine cents per share for the first quarter, with revenue of $213 million to $215 million. Analysts are targeting a loss of five cents per share on higher sales of $217.1 million.

For the full year, Smartsheet is expecting adjusted earnings of between 31  and 38 cents per share, with sales ranging from $943 million to $948 million. Again, Wall Street’s forecast contrasts rather starkly, with analysts looking for a loss of seven cents per share on total revenue of $955.6 million for the year.

Chief Financial Officer Pete Godbole said in a conference call that the company’s guidance reflects its expectations of a worsening macroeconomic environment. “Therefore, we have incorporated more conservatism into our guidance philosophy,” he said. “If the macro environment does not decline, this would be a source of upside to our current full year expectations.”

Photo: SiliconANGLE