Shares of Smartsheet (SMAR -3.64%), a provider of workflow automation software, had tumbled 10.6% by 9:40 a.m. EDT Wednesday despite reporting an earnings beat Tuesday night.
Heading into its second-quarter 2022 earnings report, analysts had forecast the company would lose $0.13 per share (pro forma) on sales of only $125.5 million. As it turned out, Smartsheet lost only $0.05 per share, and its sales beat expectations, rising 44% year over year to $131.7 million.
CEO Mark Mader noted "the continued rapid adoption of our platform in new deals and expansion within existing customers," pointing out that subscription revenue growth (recurring revenue) was even a bit better than revenue growth overall, up 45%. Nevertheless, the company's losses swelled during the quarter, and that might be what is upsetting investors today.
When calculated according to generally accepted accounting principles, Smartsheet lost $0.35 per share in its fiscal second quarter, about 59% worse than in the year-ago quarter. That was in contrast to adjusted losses, which at $0.05 per share were actually a bit less than the $0.06 lost a year ago and much better than the losses Wall Street had forecast.
Smartsheet predicted slowing (but still speedy) revenue growth in the third quarter: up 39% or 40% to perhaps $139 million, but with continuing adjusted losses (and presumably GAAP losses as well) of between $0.10 and $0.12 per share.
For the full fiscal year 2022, Smartsheet anticipates revenue growth continuing to slow, up 37% to 38% over fiscal 2021, at between $530 million and $533 million. Pro forma losses for the year are expected to range from $0.36 to $0.44 per share. At the midpoint, that would be about a penny worse than Wall Street's projected $0.39 loss, although revenue looks likely to beat expectations of $514.1 million for the year.