Smartsheet Reports 17% Revenue Growth to $286.9 Million, Announces Merger Agreement

Smartsheet Inc. reported significant financial performance improvements in its latest quarterly filing, with total revenue reaching $286.9 million for the three months ended October 31, 2024, a 17% increase from $245.9 million in the same period last year. Subscription revenue, which constitutes the bulk of the company's income, rose by 18% to $273.7 million, driven by strong sales of capabilities-based products and user-based subscription plans. For the nine months ending October 31, 2024, total revenue was $826.3 million, up 18% from $701.4 million in the prior year, with subscription revenue increasing by 19% to $786.3 million.

Despite the revenue growth, Smartsheet reported a net income of $1.3 million for the third quarter, a notable recovery from a net loss of $32.4 million in the same quarter of 2023. The company’s operating expenses increased slightly to $236.5 million from $234.3 million year-over-year, primarily due to higher research and development costs. The gross profit for the quarter was $233.1 million, reflecting a gross margin of 81%, consistent with the previous year. The company also reported a loss from operations of $3.4 million, a significant improvement from a loss of $35.5 million in the prior year.

In terms of strategic developments, Smartsheet announced a merger agreement on September 24, 2024, with Einstein Parent, Inc., an affiliate of investment funds managed by Blackstone and Vista Equity Partners. Under the terms of the agreement, Smartsheet will become a wholly owned subsidiary of Parent, with shareholders set to receive $56.50 per share in cash. The merger is expected to close in the fourth quarter of the fiscal year ending January 31, 2025, pending customary closing conditions and shareholder approval.

Operationally, Smartsheet reported a total of 20,430 customers with annual recurring revenue (ARR) of $5,000 or more, up from 19,389 in the previous year. The company also noted a dollar-based net retention rate of 111%, down from 118% a year earlier, indicating a slight decline in revenue growth from existing customers. The annualized recurring revenue (ARR) reached $1.1 billion, a 15% increase from $981 million in the prior year. The company’s cash and cash equivalents stood at $454.3 million as of October 31, 2024, bolstered by strong cash flows from operations.

Looking ahead, Smartsheet's management expressed optimism about the company's growth trajectory, driven by continued demand for its work management platform and the anticipated benefits from the merger. However, they acknowledged potential risks from macroeconomic conditions, including inflation and interest rate fluctuations, which could impact future performance. The company remains focused on enhancing its product offerings and expanding its customer base to sustain its growth momentum.