Smartsheet Posts Stellar Cash Flow
Smartsheet exceeded revenue and earnings expectations for the second quarter of fiscal year 2025.
Smartsheet (SMAR 4.25%), a leading work management and automation platform, announced its earnings for the second quarter of fiscal year 2025 on September 5, 2024.
The company reported total revenue of $276.4 million, which was above its expected range of $273 million to $275 million. This increase represented a 17% year-over-year growth. Smartsheet also significantly outperformed its guidance for non-GAAP net income per share, achieving $0.44 against the highest forecast of $0.29.
Overall, the quarter showed strong performance across various financial metrics.
| Metric | Q2 FY 2025 Actual | Management’s Guidance | Q2 FY 2024 Actual | Y/Y Change |
|---|---|---|---|---|
| Total Revenue | $276.4 million | $273 million – $275 million | $235.6 million | 17% |
| Non-GAAP Operating Income | $45.3 million | $38 million – $40 million | $19.2 million | 136% |
| Non-GAAP Net Income Per Diluted Share | $0.44 | $0.28 – $0.29 | $0.16 | 175% |
| Free Cash Flow | $57.2 million | Not provided | $45.5 million | 26% |
Source: Expectations based on management’s guidance, as provided in 2024-06-05 earnings report.
Understanding Smartsheet
Smartsheet offers a platform designed for work management and automation, enabling businesses of all sizes to manage workflows, collaborate, and drive efficiency. The company has been focusing on enhancing its platform scalability and integration capabilities. Introducing features like Board View, a Kanban-style task management tool, illustrates their commitment to flexibility and usability.
Recently, Smartsheet implemented a new subscription model aimed at simplifying pricing and administration for its customers. The model is designed to encourage valuable usage, streamline budgeting, and increase adoption rates.
Quarterly Highlights
In Q2 FY 2025, Smartsheet’s total revenue grew 17% year-over-year to $276.4 million, slightly exceeding management’s upper guidance of $275 million. Subscription revenue saw a 19% increase to $263.5 million, while professional services revenue fell by 8% to $12.9 million.
Reported non-GAAP operating income was $45.3 million, representing 16% of total revenue, substantially higher than Q2 FY 2024’s $19.2 million, which was 8% of total revenue. This increase suggests improved operational efficiencies, resulting in wider profit margins.
GAAP operating loss improved notably, shrinking to $8.5 million from $36.1 million the prior year. Non-GAAP net income surged to $61.6 million from $22.0 million in Q2 FY 2024, contributing to a non-GAAP net income per share of $0.44, well above the $0.29 forecasted by management.
Free cash flow was a highlight, climbing 26% year-over-year to $57.2 million, indicating strong cash generation, though management didn’t specify quarterly guidance for this metric. The increase underlines Smartsheet’s effective cash management and robust financial health.
Looking Ahead
For Q3 FY 2025, Smartsheet expects total revenue between $282 million and $285 million, forecasting 15% to 16% year-over-year growth. Non-GAAP operating income is projected at $42 million to $44 million, and non-GAAP net income per diluted share is anticipated to be in the range of $0.29 to $0.31.
The company reaffirmed its full-year FY 2025 guidance, expecting total revenue to be between $1,116 million and $1,121 million, representing 16% to 17% growth. Non-GAAP net income per share is projected to be between $1.36 and $1.39, with anticipated free cash flow of $240 million. Investors should monitor these metrics closely in upcoming quarters, particularly in the context of Smartsheet’s continued adoption and customer expansion efforts.
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