Introduction: Smartsheet Inc. (NASDAQ: SMAR) experienced a decline in its share value during the extended session on Wednesday due to a lower-than-expected free cash flow outlook. Despite an otherwise successful quarter, the company's projection led to a drop of up to 14% in after-hours trading, following a 5.2% decline during regular trading hours. In this article, we'll delve into the details of Smartsheet's recent financial performance, explore the factors behind the share price decline, and provide insights into analysts' estimates for the company's future prospects.
Smartsheet's First Quarter Performance: Smartsheet reported a loss of $29.9 million, or 23 cents per share, for the first quarter, marking an improvement compared to the year-ago period when the loss stood at $70.5 million, or 42 cents per share. However, adjusted earnings, which exclude stock-based compensation expenses and other items, were 18 cents per share, a significant improvement from the year-ago period's loss of 18 cents per share. Revenue for the first quarter also saw impressive growth, rising to $219.9 million from $168.3 million in the same quarter last year.
Free Cash Flow Outlook Disappointment: Despite the positive financial performance in the first quarter, Smartsheet's free cash flow outlook for the year disappointed investors. The company forecasted free cash flow (FCF) of $110 million, slightly lower than analysts' estimate of $110.9 million, according to FactSet. This disparity raises concerns that the free cash flow for the remainder of the year might underperform expectations to a greater extent than the $900,000 gap in annual estimates would suggest. As a result, Smartsheet shares experienced a drop of as much as 14% in after-hours trading.
Future Projections and Analyst Expectations: For the fiscal second quarter, Smartsheet expects adjusted net income between 7 cents and 8 cents per share on revenue ranging from $228 million to $231 million. However, analysts anticipate earnings of 7 cents per share on revenue of $230.4 million. Looking ahead to the full fiscal year, the company projects adjusted earnings of 37 cents to 44 cents per share on revenue of $943 million to $948 million. In contrast, analysts estimate earnings of 35 cents per share on revenue of $945.9 million for the year.
Conclusion: While Smartsheet Inc. delivered a solid performance in the first quarter, the company's shares experienced a significant drop due to a disappointing free cash flow outlook. Investors remain cautious about the potential underperformance in free cash flow for the remainder of the year. The discrepancy between Smartsheet's projections and analysts' estimates raises questions about the company's ability to meet expectations and maintain growth. As Smartsheet progresses through the fiscal year, market participants will closely monitor its financial results to assess its ability to deliver on future projections and restore investor confidence.