Smartsheet’s (NYSE:SMAR) Q3 Sales Beat Estimates

Published 2024-12-05, 04:49 p/m
© Reuters.  Smartsheet’s (NYSE:SMAR) Q3 Sales Beat Estimates
SMAR
-

Stock Story -

Project management software maker Smartsheet (NYSE:SMAR) reported Q3 CY2024 results exceeding the market’s revenue expectations, with sales up 16.7% year on year to $286.9 million. Its non-GAAP profit of $0.43 per share was 41.6% above analysts’ consensus estimates.

Is now the time to buy Smartsheet? Find out by reading the original article on StockStory, it’s free.

Smartsheet (SMAR) Q3 CY2024 Highlights:

  • Revenue: $286.9 million vs analyst estimates of $283.9 million (16.7% year-on-year growth, 1.1% beat)
  • Adjusted EPS: $0.43 vs analyst estimates of $0.30 (41.6% beat)
  • Adjusted Operating Income: $56.36 million vs analyst estimates of $43.13 million (19.6% margin, 30.7% beat)
  • Operating Margin: -1.2%, up from -14.4% in the same quarter last year
  • Free Cash Flow Margin: 21.5%, similar to the previous quarter
  • Customers: 20,430 customers paying more than $5,000 annually
  • Net Revenue Retention Rate: 111%, down from 113% in the previous quarter
  • Billings: $297.3 million at quarter end, up 10.7% year on year
  • Market Capitalization: $7.81 billion
Company OverviewFounded in 2005, Smartsheet (NYSE:SMAR) is a software as a service platform that helps companies plan, manage and report on work.

Project Management Software (ETR:SOWGn)

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

A company’s long-term sales performance signals its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Luckily, Smartsheet’s sales grew at an impressive 29.1% compounded annual growth rate over the last three years. Its growth beat the average software company and shows its offerings resonate with customers, a helpful starting point for our analysis.

This quarter, Smartsheet reported year-on-year revenue growth of 16.7%, and its $286.9 million of revenue exceeded Wall Street’s estimates by 1.1%.

Looking ahead, sell-side analysts expect revenue to grow 14.6% over the next 12 months, a deceleration versus the last three years. Despite the slowdown, this projection is noteworthy and suggests the market is baking in success for its products and services.

Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL) were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on .

Billings

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Smartsheet’s billings punched in at $297.3 million in Q3, and over the last four quarters, its growth slightly outpaced the sector as it averaged 14% year-on-year increases. This alternate topline metric grew slower than total sales, meaning the company recognizes revenue faster than it collects cash - a headwind for its liquidity that could also signal a slowdown in future revenue growth.

Customer Retention

One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.

Smartsheet’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 114% in Q3. This means Smartsheet would’ve grown its revenue by 13.5% even if it didn’t win any new customers over the last 12 months.

Despite falling over the last year, Smartsheet still has a good net retention rate, proving that customers are satisfied with its software and getting more value from it over time, which is always great to see.

Key Takeaways from Smartsheet’s Q3 Results

It was good to see Smartsheet significantly beat analysts' EPS and adjusted operating income estimates this quarter. On the other hand, its billings missed and its net revenue retention decreased. Overall, this was a mixed quarter with strong bottom-line performance but mediocre top-line results. The stock remained flat at $56.07 immediately following the results.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2025 - Fusion Media Limited. All Rights Reserved.