Smartsheet Stock Flat After Earnings Report

Last Updated: 11. Dezember 2023By

In the current stock market year, Smartsheet stock (+13.6%) is still significantly lagging behind the technology stock index Nasdaq (+38.6%), but the latest business figures provided a ray of hope: both revenue and profit expectations were exceeded.

Smartsheet: Beneficiary of the Pandemic Founded in Bellevue (Washington) in 2005, the company now employs more than 2,600 people and serves customers in more than 190 countries.

Smartsheet offers a cloud-based platform for coordinating and executing project work. As a software-as-a-service provider, Smartsheet develops solutions for assigning tasks, tracking project progress, or managing calendar entries. Documents can also be easily shared and released. You can think of Smartsheet as an alternative to Microsoft Excel with significantly improved collaboration features for projects. The goal of such workflow management software is to make work processes more efficient and transparent.

Smartsheet makes its money through a subscription model, which generates a fixed amount of revenue on a monthly basis – with an annual payment in the regular case. Around 90% of revenues are generated through such subscriptions, giving the business a good degree of predictability.

Smartsheet continues to show high growth – revenue up 23% With its positioning, Smartsheet also recently showed impressive growth rates: in the third quarter, revenue rose 23% to $245.9 million. This was 4.6 million dollars above analyst estimates.

Also impressive: the so-called Net Retention Rate (NRR) was 118% and thus well above the 100% mark. This is one of the most important metrics in the analysis of subscription business models. For background: the NRR indicates how the revenue with existing customers changes over time and is calculated as the revenue of the previous period minus the „churn rate“ (revenue that is missing due to customer loss or lower prices) plus the „expansion rate“ (additional revenue with these customers due to increased usage, upsell, price increases).

NRR values above 100% mean growth in revenue from existing customers and are also an indication of high customer satisfaction.

Customer acquisition is in full swing Apparently customers are booking ever larger subscription packages with Smartsheet. So in the last three-month period, the number of customers with a contract volume of more than $100,000 rose 32% to 1,779. With customers with an order volume of more than $50,000, the company was able to record an increase of 26% to 3,719 customers.

Smartsheet with less loss than expected At the same time, Smartsheet performed better in terms of profits. In the end, the company recorded a loss of $32.7 million. That was down from last year’s level (-$40.1 million).

The adjusted profit could also beat the expectations of the Wall Street bankers with 16 cents per share. The analysts had previously assumed 7 cents per share.

Targeting further growth rates of 25% For the current financial year, CEO Mark Mader is confident and has forecast a revenue of between $955 and $957 million. That’s a 25% increase in revenue. At the same time, the adjusted profit is expected to be between 68 and 69 cents.

Conclusion: The Smartsheet stock has recently been able to make some ground. The figures were solid and even exceeded expectations. Whether this will help the stock in the long run remains to be seen. The valuation level (price-earnings ratio 2024e: 65) already implies a lot of accolades. Of the 20 analysts who are dealing with the stock, 17 are recommending to buy the papers. The average target price of all analysts is 55.53 dollars, 25% above the closing price from last Friday.