SMAR - Earnings call transcript Q1 2021

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Operator

Thank you for standing by and welcome to the Smartsheet First Quarter Fiscal 2021 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Aaron Turner, Investor Relations. Thank you, please go ahead.

Aaron Turner

Great. Thank you, Jesse. everyone call. first welcome year of and earnings XXXX afternoon to quarter Smartsheet's fiscal Good

be the With will CFO, after Smartsheet's We discussing Mark Jennifer the release our CEO, market issued Ceran. press close and today. Mader; me are results today our announced in

a the will Investor Our Product is also our which Jennifer's investors.smartsheet.com. for on our during site. be Web accompanies Farrell call site is There also be Relations will Investor in available presentation Chief Today's be being Relations prepared at be Gene Web can of available the Officer, that Q&A. slide webcast and replay section Events remarks, viewed

call the this the will Laws. within statements meaning Federal During of make we forward-looking Securities

other current our future financial business. expectations those and We around Investor SEC these but expectations These subject of have at number including not COVID-XX factors, www.sec.gov. based a projections site Web trends forward-looking Relations available to events, limited our SEC forward-looking on filings on and risks and Web to impact the site our on statements of the in are our statements on about and largely described our

update and law. forward-looking believe except do statements call may expectations information or the we in are statements we any on events information All a these reflected based to results future as as as are required Although our today reasonable, not made us actual differ the of adversely. that and by result this materially of statements forward-looking during to obligation new available assume

With reconciliation found accompanies certain let to the to me is the discuss over Mark. this we U.S. available that site. which A be in turn that, Relations on the the measures. can call, GAAP In U.S. comparable addition Investor Web to financials, financial measures will call our GAAP most presentation also directly non-GAAP

Mark Mader

underscored I'm to just thank employees, disruptions partners. first The our are, couple how our lives team support have another. communities, And that our quarter despite for interconnected one joining customers you, last pleased Thank spirit, of see you personal call. significant earnings collective months we to Aaron. everyone and professional us worked our on to In

Our our circumstances. or perhaps grateful teams has work despite for of these been never and stronger to customers team's other each commitment because and I'm to extraordinary the dedication.

generated of For the $XX.X loss quarter, guidance the and set March. first operating we in $XX.X of million revenue above non-GAAP we million

billings how the came Smartsheet response COVID. customers as Our accommodations has the our the below of it seen be enables to a COVID. to by in extension deployed aided pandemic, in with million impacted we've speed which $XX.X agility of customers and onset the guidance of our can the at result Since platform

a deployed risks available supporting Difficulty]. as and for [Technical enable of customer offering expanded way templates to high of times on to scale ongoing For demonstrated rapidly the made aid of And nearly of and to their orchestrate differentiator organizations a tests set example, clear enterprise production hundreds solution coordinate speed which a the government's a March, analyzers scale recently global response antibody Smartsheet use the also can that his with Center to changes collect the employees distribution our we workloads. the value Smartsheet information of from an we In COVID. to and order concept Resource and became sites lab as assess could ability move the health data that hub across XX,XXX in healthcare The of creation Park thousands U.S. and are

obligations. of FedRAMP To-date local availed this of and As can state agencies without charge authorized environment federal, announced last government XXX during have crisis call, to our offer. responding nearly U.S. and themselves our the free agencies use

position progress toward enable of efficiently and the sectors significant of Smartsheet securely Smartsheet topic [IO-X] Defense authorization. the so level deploy X impact on DoD While achieving platform I workflows to and [ph] Gov will processes. their we Department these [IO-X] made aerospace modernize a Gov, and that [ph] use Doing sectors mentioned to Smartsheet many in COVID first of expand we're to to use We the their achieve in organizations the expect Smartsheet front solid and the authorization future. the increased near quarter. on significantly during lines believe of We saw in of

customers an just safe and of such to their employee end, For And active workplace, enabling to Mental a a customer critical CDC working specifically since adapting increase. designed were their by increased many air other was users a They hard and million deeply operations more deployed enterprises Hygiene for X-fold users awareness. team a employee first active our return conditions for assets XXXX releasing PPE and abrupt changing of rapidly anywhere, connected processing help QX. company remote the XX,XXX payment from over transport by help inventory the platform for templates particularly at to our XXX empowering in hallmark mission shift responsible XXXX their dynamic of saw mission and crisis, of example, city their their manage times Department Overall, an over risk planning developed as and that nearly increase. are one QX our in Helping of deployed To customers American recently, we work product X.XX staying team. manage end to from by of X.X to XX-fold preparedness, customers and and capable a The to of name users fleets were an a QX. organizations has to users usage onboarding recognize Health the XX through saw million active a the and business medical a few. become tracking the at hit than as up and company quarter. adapt increase individual workforce Smartsheet increased which begin More increase. been number XX-fold XXXX that's Smartsheet workforce. These the has increasingly end The that total vehicle now for

digital larger, our form a our Privacy of updates builder accelerator and extension this best are recognized sales regulation commitment as that and continued a reinforces Cloud faster the Smartsheet an that time Consumer performance a category for an to accelerator, augments such May's of workflows. latest launched growth solutions work development for delivering Smartsheet data logic, including new and leadership. high value mechanism effective positioned that Creative when quarter, also At number to COVID increasingly pipeline product stabilization caused California regulations. early suggests disruption our CCPA, analysis for is conditional with and management GDPR by Adobe a investing a meaningful transformation of Preliminary collaborative sheets, privacy We for

development innovation, deepen product as position capacity expand a to capital our allocating us our company that succeeds and long-term. are and selling over We the

from able workforces, enterprises and dynamic to to being we from a As and work capable workforces quickly productive new home the Smartsheet's were with reality, adapting anywhere. of ability and be highlighting respond in market to empower of agile importance recognize a campaign

As these resilience of phase and companies seek build emerge from and the agility. disruption to the initial organizational COVID

we but good among value a the many pronounced of given has I most a using world. Jenny the businesses importance challenging time the impact changed navigate our promote walk details of help first feel will will market been through quarter businesses, the churn had Smartsheet a for SMB to our financial conditions. We was and QX everywhere customers. results. It

And over life the remains to ARR the addition, They large of business widespread through had come Smartsheet's because the expanded set XX and instead platform finance point respond transform the it seek work office their customers what's Market changing lean than communication to possible, a service serve They return end that and to horizon. declined, to to customers remained the not we up a landscape. we more happen versus XXX%. unit had The workflows ever execution. net new a other already with not ago. enhance It's industries to collaboration how more business simply science, make unforeseen results. looking but tools. QX, know we are ago, It's in empower the marketing connecting we on change, With there's of sooner. beyond to are earnest. will It the shift we thriving an before as have to future digital their two work forward, The Even a XX and transformation the and work we and year optimism enroll meet the become same XX now rate, or broad working a with itself over performance let new clear. from tipping our in presented evolution. execution organizations video globe the ARR high matter no call expanded business in steps goes productions government empower the includes diverse causing of people execute is important rapid driven vectoring in and ARR And performed we're their achieve That from It's in COVID, secular home, them to of million. expansion XX or disruption the in people and more brought the and dimension. in it's detail and it's hybrid. to turn why customers succeed more accelerant strong in XX,XXX Despite of ability and at sales Jenny begun capacity, expansions to serving interpret strong. environment, or That understand and that activity to financial IT in as companies not and of remains their as well balance many expansion relevant In and versus to success a value which together. than continuing the new $X to balancing ARR sales the technology their an of well. digital focus for me prepared to is that across And navigating from teams working six healthcare quarter and the or the led over continue leaders evolving mix. COVID a and by QX opportunity world of had I into distributed signals Though that to through how but need the brand not circumstance, diminish communicating. their the provide to it's to midst out product to impact trial hesitating as Smartsheet's COVID day. become two. and increase of additional to work will strong It's ensure be gross every work year initiatives, best that such business they QX to expectations pivot has believe needs than increasingly our international said, the process mid-stride, The a inevitable offerings innovation. a a taking partner on healthy value was segments, increasingly their and XXX,XXX of the than needs automate can by not realism. remote collaboration we our on to enterprises saw proven the receives and out conviction are work are customers the businesses variable, Jenny?

Jennifer Ceran

or our in represented are end in enterprise customers XXX now in and revenue, the everyone. We half saw headwinds ARR quarter. operating billings the key segment, the from related approximately guidance support we the deeply experienced care we afternoon some Thank better flow within and quarter. delivered as below certain good segments, expected being came customers negative loss our and impact W in the cash you, XX% impacted for growth first impacted QX of XX% came net while and to than extended our our the customers. range in and and Free front back of terms most COVID Fortune customers COVID such quarter. adjustments income by those at in with the XXX year-over-year This last supported Contrasting customers and billings. the was SMB our XX% and on our billings XX% exhibited annual demand a semi-annual COVID the $XX.X notably those year. Fortune our Revenue our strength were Many XX% travel quarterly of industries And impacted or coming up and particularly for strong ARR industry million of retail. versus product. $XX.X The well and billings large rate to of year-over-year up from million, from had hospitality of organizations and which softness revenue recurring lines grew as about quarter. Mark,

in operating cash flow negative at better loss $XX.X free million. and came was Our $XX.X expected than million negative

from customers offset our free Despite The that cost range. remains the more cash cost savings digital home believe lower well Difficulty], an our and opportunity from we long-term from deliver structure important than benefited resulting payment to Extending flow significant. During was ability as investments. ever as to environment, some marketing our than the planned in real-time workforce quarter, some [Technical more savings distributed even today. is achieved, market solutions in generated to we of the terms work workflows

and plans. we belief, go-to-market Given product in most important this invest continue initiatives to our

global and look of make learning larger capitalized to community no an host and the new we our conference balance will announcements. this the of together debt as of day with engaged a much well at event the as strength product for X remain We We a of online October a $XXX these forward cash bringing from virtual on sheet position quarter. million financial on end decisions customer and

basis first on and in Unless before provide color the results expenses non-GAAP our that all results. otherwise results our will to GAAP and stated Next are on our and operating quarter to posted presentations references reconciled release earnings more are was the call. I financial a

year-over-year growth at many XX%. $X.X Finance. quarter was and and growth including revenue helped came As year-over-year, XX% was representing by The revenue our we rate revenue representing million $XX.X of million Healthcare, across mentioned, of strengthen subscription was revenue XX% Life subscription first Sciences, customer million services in demand in $XX.X growth year-over-year of Technology, Manufacturing industries

versus growth fourth backlog. a as the revenue on accelerated services we large Our quarter rate delivered services

professional team to deliver a remotely. our set we As was services environment, on fully in able customer already to work digital and are up training

billings billings, to came Turning first at $XX.X million. in quarter

on on As impacted which and with customers mentioned, we larger XXX we and saw an organizations as impact employees. defined segment, from SMB industries than COVID fewer the

offered to due addition, In we by reduced appropriate, These help our COVID where accommodations when flow related million. approximately other billing and cash actions customers' requested $X to billings and constraints. COVID accommodations with

were For of annual quarter monthly. over the XX% of approximately represented total. semi-annual billings X% our X% with billings multi-year the subscription and Quarterly,

now XX% year, $XXX,XXX year. year, per paying XXXX, more Turning respectively, us $X,XXX to and These segments more reported XX%, or paying XXXX metrics, XX% now than XXX% us have total of or per XXX% or grew we $XX,XXX customers ARR. now paying more per represent versus more and and ago XX%, XXX and a year

track ACV Our build dashboards create products expansion reporting. to domain average plan more for and to grew as and see we additional visibility continue $X,XXX XX% work, and for to licenses and workflows year-over-year

up churn to rounded by compared ongoing declined prior three down from The expect our from the while impact the net rates, trend Our by retention rate expansion X%. XXX%. net rates COVID, quarter percentage dollar we of the quarter dollar the was quarter decline the Due of to driven prior points to XXXs. X% XXth to second rate high net lower a and retention the to the during end to improved

Turning gross margin. to

margin Our XX%, cloud. percentage driven migration incremental costs one public total gross to declined related to by the to point our

long-term our We trend fiscal this gross are our the complete transition to during target year towards expect and margin Difficulty]. [Technical ahead to of schedule of

driven Operating negative expected expenses. one above. points two one points and than a administrative percentage revenue than percentage percentage loss Operating general and operating better flow quarter of percentage of areas and as marketing costs negative quarters spend was costs $XX.X expense year. a was Research than during several predominantly eight percentage to and the prior both was mentioned and prior the the and of percentage than revenue better prior revenue the due $XX.X was better development million. in was to by Sales in a operating as ago The scale XX%, loss And the million than lower personnel, year than cash and free reduced Turning better point and travel was planned points XX%, year the six better respectively. quarters. marketing ago percentage XX%, expenses. and and as quarter quarter was

Our personnel expenses. XX% total expenses represented our of

the slowed to headcount pace intend but support to of planned to where hiring, our have investments. add We continue needed

Now move let me on guidance. to

certain While path impact we we remain segments near bullish term. will our on billion revenue, to that especially environment, in the COVID in $X to expect demand the continue in

are remainder the year. we year full to this against continue assuming backdrop, our the a top-line revenue be COVID So of adjusting that will for headwind guidance

initiatives, continue and investing and notably public we the capabilities engage in product, our and our enterprise our As against functionality will operations. new to to our our earlier, systems conference and key platform Mark scale cloud, mentioned migration brand

loss the to of the fiscal revenue million loss expect range the in and in For $XX of and million billings XXX.X we million negative negative and quarter, $XX $XX of operating be to outstanding non-GAAP $X.XX range be the per shares net to second and and average $XX weighted in million on $X.XX million, million. $XX to between based million, share of be $XX range be

and flow cash free be expected $XX of in million. range to negative Our negative million $X the is

invest market the opportunity revenue negative million on our and given the and issued guidance free Difficulty] Difficulty] of size and into however I million, providing year our in low full we fiscal Operator? $X.XX guidance, limited flow for year cash over loss range average approximately the million $XXX previously [Technical the $XX exceed year, for are XXX.X the billings our million. cash of the expect non-GAAP will outstanding. we shares to back to $X.XX of visibility year, net million half we decision based be year to weighted to [Technical the expect between turn to share Difficulty] Due free the of For now negative end full and questions. XX $XX fiscal of million to operator [Technical $XXX for burn it our per our and the flow [Technical Difficulty]

Operator

Arjun Thank comes from you. with first Your question Blair. Bhatia [Operator Instructions] William

Your line is open.

Arjun Bhatia

this briefly, over about some pipeline have bit that And could talk maybe evolved I saw if you just past that'd of great. May. Mark, you in little weeks, handful you stabilization the but elaborate was on be remarks you the mentioned of in specifically trends some your the prepared could how a dynamics hoping of

Mark Mader

Yes.

throughout just improvement on. exiting this is of a terms our with where of isn't development, the size, single opportunity and month point we've think of good in significant to to the And and any reps customer company. May, in need at most saw layer. execute really the I increased in segments had leaving a our the the terms the both and pipeline had we history month in we're commercial go Quarter-on-quarter across strategic of the -- ARR we and every enterprise This stack. one company now pipeline we've

Arjun Bhatia

then, enterprise been been that this, the kind and it's Or the trend moving you've there's in performing And the so on Smartsheet going follow think the impacts think we both steady IPO, and environment side investing since on? as when far? quick we focus the product it's of kind essentially on function. other -- And been current of look up. the enterprise and that to you that? that it's the How to do into know of this you a think should of do track relatively I be go-to-market that accelerating

Mark Mader

who happening that looking to as Well, are scale decision years at ago, purchases aren't we couple that grateful make I'm a we to customers much. because talked very made

experience which and significant we've to transactions change, and how core can today. value that And material ability were now business closed types processes articulate business business customer Your hooked matters of impacts. those changes size were the process some to to of in the connect real

our customer experiences all getting. in marketers, So -- years signal ago us of I'm the a developing elite these focus for that are getting example, quite couple pleased prior for The years with in we weren't that move. couple heard around conversations continued we've

the a we're that different that I'm elevation deepening pleased companies. speak at very pleased within we I'm offering. So can

Operator

with from comes question David next Your Hynes Canaccord.

Your open. line is

David Hynes

through more is of to that Mark been the cases where just you think that much SMB or certain are seen to that trying use and challenged? drive really it some growth momentum of in used have as certain kind you've just haven't there seen verticals impacts,

Mark Mader

[ph] think inspecting as go well. that through it's we're of every some within decision investment decisions -- I a the XX,XXX, own of our the really north as] we business, [business

So transactions ones articulated, the that happening are process freely in sort transactions, on the are exact number right? about different a we're transactions closed that that sponsor, are size, is micro five the business clearly digit business it talking flowing have has still past. that if north has a again, the is in the a --clearly But anything having of than had business

we've we our how as we We've we adjusted with mechanisms. So sales down check pipeline with how reps work them. our adjusted and that through go

SMB the So SMB we or deferral the the really saw change at full saw some actually a And But of delay loss the churn or quarter. did bit wasn't side. little we a more it side, on rate on full the the companies, we churn what larger see in decisions. improved in overall pronounced, the

happen? the like are companies are recovery? out And those still going seeing a we're try of when questions What's to figure is reopening much shape a asking think of as the people we I provider. to lot

Jennifer Ceran

number I want whose of just bit And little rate what just a industry to increased from industries in to a there might add size. retention dollar perspective, Mark were an net said,

by deceleration health think saw you about saw being we retention actually in we where COVID. pronounced, that we're if dollar rate, the acceleration heavily education, net the truly impacted sectors finance, in more So are care, telecommunications,

as industry results. and both that outcome retail overall business our hospitality and influenced as declined of the the travel So well

David Hynes

you shortfall on make And quarter. I in billing to right the sure then the Jenny, just, I heard want

that terms, would to Is right it flexible attributable payment any frame have gross lower million it? that So way been sell. by further was to attrition was the X delta up unchanged driven and

Jennifer Ceran

it. Yes. That exactly is

Operator

Zlotsky question Your Morgan with Stanley. comes from next Stan

open. is line Your

Stan Zlotsky

Couple end. from my

further the and least of think you potential it guidance I that payment a to for of just up changes billing churn? the uncertainty the new and guides, billings straight on logo visibility. -- right, kind acquisition? continuing limited withdrawal it or aware continuous terms, Help Is about it Just noted is guidance, rest say of when us visibility, rank, is continuing you for year have is the around

Mark Mader

I we're think we a lot influenced schedule this as good month things by, the of coming decisions, Stan the and in very what is online. the looking we hiring happening at we're making at guidance look next back for And what's half, into have the the month. visibility first

terms the things York, half, macro New is the on In that be see carrying Boston, function these Sydney, we within a what are be all to to decision second of quota the what on state economic we of our Washington, increase London, see rep's of unfolding. partially be to to side, are still going or

it is determinant. So motions than about those react ability other more any to major it to our is

Stan Zlotsky

it billings revenue QX there reconcile to help get direction Help that And changes, the somewhere midpoint me continuing expectation Is the billings, high term in on net XXXs. the call just me let's be your Maybe then retention function for just Delta guidance. payment close a and XX%. essentially of gap. of the

Jennifer Ceran

Yes.

sign. I really What's March. the request industries, terms quarterly are down, to in for was for for requests from driving guidance get that businesses, either billing. from we're percentage change So payment say or seen a still is Businesses had the in aren't the flying good May, significant billings continuing now what which was we a April extended I think part. will certain it is right closed, still results, people most the small customers

and that purchase of their seeing just So in we're right now. reflective to pain certain it's ability customers the

Operator

question comes next Berg from Scott with Needham. Your

Your line open. is

Scott Berg

sample anything I here internationally the domestically than I but the in United Mark, the guess trends in States? you probably sales differently know small, see size is do

Jennifer Ceran

saw. one deceleration growth the the a in saw Asia. Americas the saw in markets percentage a trend rates That's retention three down the markets, rate, We sort little you internationally, the we very And point, a you the talked healthy, percentage EMEA, point In Mark that in went slight if So the we if acceleration of decline, bit look more. at QX at look then in revenue general, global other U.S. and phenomenon. net dollar about was really that

you So than customers XXXX. the or than customers at were have more U.S. looking $X,XXX, whether spend less who spend international, who

some think really everyone this to pandemic I degree. affecting is

Scott Berg

follow-up obviously a use Got And seen and I then benefit We've kind helpful. that general? home you've it department still that Or conversations [ph] But you had most technology from are manage strategy level us more perspective. in lot obviously, the seeing with from months level these get period, of work will a is bucket, Smartsheet of in become from it this the strategic a believe different more in question of a sale this their in fits of conversations? a call on tools customers higher two think cases. as last decisions during the be more [CIO] of individuals part

Mark Mader

move the the and who's size a of transaction. it's you of think the participating. driver north typically that's into I function six as on figures key And

tools the all we of I and reacted to being terms used, at work-from-home. think In technologies

have stop what first communicate we will people think be ability technologies another? see can communicate benefit I will the people as subsequent do be the different we now And they of to for that was, one I So we and what the is will anticipate phases "Mastered" with them. looking around deploying, talked that previously to

Operator

Thill Brent comes with from Jefferies. question next Your

is line open. Your

Brent Thill

year, wanted on quota record you more last, call still is to the that about the this Jenny, reps track hire you mentioned last comment then pipeline? and Mark

Jennifer Ceran

QX. reps XX hired we Yes, is. in It

was good. that very So

mentioned, We opening back do a landscape continue we're as demand to and then, reps Mark things to see. to yes, based And are how in on the year and is, this QX. hired the up. going back we see we'll But hire step more that where we've few going so are

Brent Thill

you week just are by And better saying to can guess work that Mark the has of we day, across May circle all many day when all back consider kind seen how is to track. week just past see from the a month with we look think industries tech trying in figure you the of that or frame getting comment issue, I by number just I differences made, be you and been companies what normal things you before? you've it of this and to you historically, would May, really the everyone's a this to month saw out would of this more you month an April an

Mark Mader

organization horses people And a phone on concerted the key the picking had. their there up was for pipeline sales who prior conversations deeper engaged and also are all were effort news our got good about on think April, very were accelerate customers of the The inspections would went quality is in like development. is speaking customers. of The generated, pipeline was I quarters. and say to going the I companies under than being out being

it's this pleased convert convert to team's your now month the the May. very that's us. to then pipeline, do job need front activities see and business Now same we of to we're So right? And I on think that in the in

Operator

question Capital RBC is next Your with from Markets. Alex Zukin

open. is line Your

Alex Zukin

seeing not -- Or you, TCV flexibility. shifting perspective? staying reconcile you are for ACV to the the you're what Mark. no are just that And thanks from follow a I sounds I've with them exactly basically my trying Are It primarily like, to cohort. And quick guess then that and Jenny, you're I'm trying safe. maybe first payment adjustments is there's for change hope making in billings their figure that got term I'm guys, to something commitment churn maybe Hey, the taking but dollar SMB nuance? some out other there up, it's impacting change the a payment question.

Jennifer Ceran

Yes.

for So we're seeing payment some terms. extended requests

about think don't you any in airline, They they revenue they're to something they now, generating Even for. not to if still want upgrade an use want cases, for need they to So right us. us downgrade. some want

right folks pay XX versus have cases, requests down, some those businesses others some where relevant. customers, extended we've say, to much don't generating for was XXX or that annually. not shut So in money XX pay where are And And typical day could I'm days. we as we're And just because I quarterly just there seeing their instances still in XXX terms were now term. revenue, pay that but us then, about have

And so those extending some been we've well. of as offers

Alex Zukin

Okay.

cohort, changing changing happening SMB you've seen? the ACV SMB really, not is actually not So impact churn and is what the changing. What is the is the is what the I guess again, cohort, to within if for

Mark Mader

the full The on the cohort churn out go in up quarter. did SMB

was So we SMBs churn had the the COVID that reaction more in we reaction environment than to prior. to full saw

an So increase. there was

our overall As okay? a we went churn. as aggregate within segment, rate improved company, SMB window, company So segment a loss loss full that's a full slightly, statement have the in loss up

Alex Zukin

Got it.

Okay.

the over that seeing logo -- guess, and encompassing engagement, in is does And improve. -- the if is well the up, so I seeing dollar revert going that's change and situation a like there could and you I are as guess because is but a few you're going dollar engagements in temporarily down next that's Mark quarters change SMB what monetization customers

Mark Mader

I occur. company when segments larger within on to saw a someone in the increasing and we and that engagement mean, population, engagement saw segments, right? Yes. our zero, industry, As we some based stay goes attrite, decline unfortunately, level

within we than would instance, engaging, site, of spike when activity release people segment in our in pipeline our SMBs. to overall we So, results time the within say specifically, like COVID saw level terms in coming SMB more But templates trials, issued, we've of we created. pronounced hits, for some the level did the larger people the that engagement I

Jennifer Ceran

every have small one COVID married been in getting marketing because pushed September, business, her business business Smartsheet. you give was She they just does, year one My single I now. she I'll a An accommodations. requested programs a out right weddings. has us event she now. no do prove to literally She's it's of firm, these has example right accommodation daughter for she management of She all but of now. the no loves needs that because

her restarted. then I in to business get product again. to And expect So our engaged fully see she needs her

Alex Zukin

Okay.

Mark And going destruction when vendor? sneak or these is I sorry, attrite, in. I'll just one you're more, a customers seeing is guess, to just this different it

Mark Mader

due saw uptick mean, was the the business data we this these largest challenges, uptick lot to COVID look vendor to a operations. the are That operate Yes. business at pronounced saw critically. I of citations. in majority we more cases, we these inability vast of And disruption. mentions continue In

Operator

Your Montreal. Bachman with of Bank comes next question from Keith

Your line is open.

Keith Bachman

past thread XX in were effectively I to you you're where to bit, situation together I'm on And moving to cut a moving you're so the April I'm said guiding XX%. stuck to in little trying on May. situation a about the want to piece just -- billings a follow XX, couple around roughly what questions and And half. your numbers from when billings the where guidance

didn't You increase, stabilization. was a certainly it say there but sounds material like that

together thread imagine it's lower understandable about versus number billings you've stabilization get in XX%. April move probably lower to that than bottom, May. was talked why because to I in why I'm trying why trying but half just I'm moving cut the So would would billings, thread

that to that some explained cover seem certainly of You've the of a but billings magnitude to terms doesn't anywhere change. close

you any got else there question. could number? point up billings in I is other -- And to have follow the terms then, a anything So of

Jennifer Ceran

Yes.

do So a our terms want increased what improvement pipeline for nicely, see May we people And we in demand of was did our to in saw to slight buy. product April.

all So not didn't But that's what we're good. levels yet. to selling is, back we see pre-COVID

want it's May June actually people assuming and be And thing better, so, if who similar open know we begin and we'll see but until are buy product, that is the good that July to that we I I believe we're happens, there be. what as very a going it's up, because to in just to to

Keith Bachman

level your Understand had next the cash up about then it, free as about Okay. cash longer as investors talk rescinded. or a free assumed flow we've is the thinking through more Maybe over look you you bit guidance some we year. situation? be free course you a think flow that it out as COVID gave targets the have, the indicated does out pushed to should cash but get would little looked taking flow how But I positive, everything parameters around get you of just just turn you objectives and that that term most

Mark Mader

I at -- that COVID to year five billion] look passed three to our little we high that has at deeper year done, think [a ability a what operating pushes -- on as remarked, level. generate to margin three our we [ph] think within mean, have to Jenny as five remain frame, I it into conviction our I frame. But

fully invested We in this. are

a what do So for with are, scenarios, And wide models of within half, again, happening As there us and want planning. businesses those which to one second you variety things you until see within our choose, right? locales the this are coming up terms we're right? we is in come evidence of our models online,

of year to we window. feel decade, in is, a within comments. not a what really can for in sales we the that. be position respond, solving So the where what we still do be maintain terms in past invest year, to dimension, our It's whether our marketing we further on impact So I position to are second we hit true want to go be can trying are half And the our the a we to dimension, we five you have that prospects, three to optionality business it can want that. stay rep we of to to a long-term think very where a to of But continuation to right? after able

Jennifer Ceran

We just quarter, would this for really that I short-term, did were of be guidance our be with going continued we I homes to know billings gave be any a the to changed. this to that until our really to add homes which impacts to impact number we this this were our like we feel COVID that is sequestered see we going didn't collections right? even related not all coming, issue. Yes. sequestered When mid-March, to in situation and that

going, until no business. are one really to to other going of stuff at That is happening. performing into not saw well. no really say airbnb, XX no restaurants our stay and what What So me, our home, don't is I was was flying, late excuse businesses business was But, this, March April one is fine that. impacted performing mean we're really kind March

this, get we're pretty through So to better that when going performance. feel I a we see lot confident

Mark Mader

that across have that trials, Now front the at organizations trialing concerned. of the a would news look monthly pipeline basis, number the was on seeing at is, look good I segments, this if me on indicators, look leading all you at at look more softness

that We're to serve when I continue will the there need does. improve market customer. we best to the be And to recover so it be believe to to going do positioned going the market we're that to product. and own

Operator

line next question the Pritchard with Citi. of Your comes Walter from

Your line is open.

Walter Pritchard

on seeing low-end. two a private -- push I And wondering sort the think that you've aggressive, the there's I'm been first, companies follow I've the and as a questions, up? environment? just you're this up in pretty moved moderate into I'm space, wondering, from of

Gene Farrell

as we've take really trend reported haven't We the I'll Well, seen in a change in that we've -- Yes. seen on one. that the the past.

quo. our We replacing majority are status to the of transactions continue the see vast

customers those in pushed And we've actually brands. had providers much number that We where it's quarter. really pretty happened have had and situations this footholds of of not are feel any in that a had Smartsheet small Both grab. of a those yes, like seeing have out consolidated We those very land large large super couple to encroachment. still we're early and brands. a smaller we're But days

Walter Pritchard

and retail, Got event think SMB your but of magnitude of around overlap, percentage what could understand maybe the of is of it. dancing planning so help to hospitality, from an just just sort you affected is industries And understand I us highlight this everybody revenue question for then, is? these of us what Jenny, industries, the their forth, like kind impact I

Jennifer Ceran

Yes.

well. X%. just is as it SMBs we ahead. and hospitality. not roughly other travel retail that in industries was But last It's quarter, Go of reported So kind and

Gene Farrell

one to to I add going just that. was thing

because they things caused of be they spend nobody about think the back how thoughtful important has really company companies size, with COVID a what I to market the take by in curve knows industries disruption the is, step recovery one like. in and across caused the understand uncertainty see certainty the and almost every looks that's

a emerges delaying decisions for one model And And more shows to the start little so across unlock that in the those what of all the of expect those in contemplation. confidence that bit the a we a things of sale we I saw But this and transactions a we trends to that's that -- the numbers to quarter. relatively as recovery that slow build, say to business lot companies companies taking lot expect board, of give when hesitation think of and But we're short see certainly longer our build, improve. I and is, a down, the up seeing advantages us have trial cycle. and would pipeline we the ton our quickly path,

Operator

with next from Davidson. Rishi comes Jaluria Our D.A. question

is Your line open.

Rishi Jaluria

a hope I wanted to little staying question. philosophical safe everyone's bit I out asking a by start of there.

that areas going still So big aggressive you're Maybe you Jenny continuing in have believe, down remarks, obviously given after. prepared now. the a the of the hiring, why given the help TAM mentioned me pace you're I huge that right ahead, understand to opportunity slowing bit in hiring you'd not hire little that in more be matter

think of I the his has from not Marc foot taking XX/XX he -- was said was accelerator. the what regrets off one Benioff

this thinking So environment. a to maybe that up. got then follow want And understand philosophy in investment about the how you're I and

Mark Mader

Yes.

very things in few now. at aggregate, think we I look

You're right.

spring, our hammer about So are the innovating, we growth, incredibly enterprise when incredibly we spring. hiring having and roadmap innovation like like to on we're have product pipeline, deliver are and we and productive in unlock engineering down, an we productive I had people, investing think to an mid-market

served, carrying have pretty that good people sure are especially you to compensation needs who that territories members Make mindful online, have think with right? they darn those be very added are are one think so adding we've reps, have that when the team that. quota territories you well quota that we XX people thoughtful about or the producing I carrying of just

So government, go into all of pieces aware those we new conversion, it. are development, territory pipeline

reopens decide we as a of brand like opposed is to if a market to market push a spend, closing, into dimension, portion seems when investment. marketing brand prudent the spend that a On quarter a when a

the making. because takes think category I and were do back So absolutely they these is alive and not to well. Benioff this innovating stop are comment, puts all But

and do need the You that. to product continuing to there be we're best with

Rishi Jaluria

you really Mark, to something in in interesting completely going work on said with that. then remarks that kind you And be we're you of environment. hybrid agree prepared think I And

is the world mentioned office are a I also where valuable the versus guess that there of maybe in purely perspective, in some kind a You remote purely Smartsheet's for a hybrid or or delays from deals reopening. and most of work office sweet waiting presence a people Thanks. physical market of from kind environment? spot a one,

Mark Mader

Yes.

we when or about about the the deal and in in think their think is about their and the it's and business. the confidence I the think flow situation less more deferral someone's economic sort transition, -- not, office of I whether of the reopening

to I I dimensions all hybrid that. of clarify just those wanted mentioned. on The notion So

will not work I to going between from technologies clear and work it like you when it's that little it's I going about And never and like, often than mobile in Remember to our more one think when and it's Absolutely. to think are cut be think that. work, years be well, in when like all phone companies. to quite like mobile eight it the I life, my people to from make remote home, the day, office calendar people right? that's it's mobile people going category So back merged bridging technologies bit need say, all be years ago, back connecting And later, simple my thing across think about XX quite there's as think the office, office, well, people it's a different? mail will right? my this that's

and you I just less about condition of about though, the Gene So home any? have wanted not work that from economic customers. do or it's the to more clarify,

Gene Farrell

evidence is value Smartsheet segments and thing working in in better folks that particularly those -- business moving the I and in tremendous that technology that increases companies where a of number had side. where the one you just usage saw on seeing sectors, more we prospects. Actually have add think in on workloads I'll their certainty of I to from home think

I that company the think how environment So confident lot it point their that and depended on is. where of reinforces Mark's is a

which of or and COVID that reconfigure demand as thing emerging actually activities reconfigure agility an cases workflow a We would that great to business Smartsheet managing at number referenced they changing and leveraging government meet add were opportunity customers I the on need. The customers supply appreciated And think across we other use a business to I that well where a this chain. created was them speed business as or had really to configure some around it the realized we coordination work. remote pandemic both and process can switching help is, us, companies for testing of

platform, actually a this So being through think dynamic able gained I us. to of mindshare think adapt offering real a quickly that process. is I and differentiator lot for we And

Operator

with comes question next Robinson. Tillman SunTrust Your from Terry

open. is line Your

Terry Tillman

or dials doing that don't that But those What control didn't are of didn't using in about what you're in sometimes of an solutions, right. go at or of from helpful question whether and there about question center, I'm could some can you when with the of these they're ask or, seems like just your to first it really curious resilient. accelerators using aggressively past it's say, more thinking dynamic they maybe seeing and know know been even them, are we look you about them, playbooks, it terms software to, talking you'd capability we just sales and had activity based they about confirm we And been the KPI cross than standpoint. in relates we've for I talk kind When levels, activity actually businesses some are maybe they whatever the a do. though, could customers would these view to what the your maybe aggressive The to our lot dynamic research. of turn

a users of and budget going? do that buy around what's heavy opportunity add-ons. is an are you those I right some will And on had then, the what How's So have that because doing follow-up. going now

Gene Farrell

I we capabilities. agree I can with would understand how I that they to Terry sales your how observation we side leverage motion on and and product better educate opportunities plays identify say and identify marketing and running are both tell would also customers easier easily to and discoverability a you and to side the available it have very product flight make investment now development improve significant them average right to what's in that user more capability. understand for much enable the on that

to it's So think I between market a opportunity think I really us, approach it's improvement. and for product a go huge balanced actually but

Terry Tillman

the premier Jenny, last be based this and could had the kind I I quantify about all change see way of And on it quarter SKU. it because, forward generation capability would I website. revenue new you guess part asked question the of could now think this I it going

a just ala lot easier steadier, the a trending? So where, in again, bunch to could is it's as a that separate one for Because it's kind see connectors How including businesses opposed packaging product of packaging. I buy to carte. of are more that stuff,

it how's you. out Thank SKU? premier playing So with the

Jennifer Ceran

very we first it Yes. absorbs the sold premier or in typical lot QX, SKU. end and end QX, A We've because start that's had buying it increasingly quarter. strong but people strength less of of it enterprise in into demand their for as are the in then year

Operator

Murphy Mark with from comes question JPMorgan. next Your

open. line is Your

Pinjalim Bora

seeing Hey. the become sitting ago, customers hub added an maybe and for in of Gene, based you've are workflows kind you automated year, could retention about This do any workflow you what on the organization execution say Mark. or a between, within workflow this Pinjalim Mark have a Smartsheet is you capabilities? think using as year last those And seen over time? relationship capabilities

Gene Farrell

single the And they there's serve place the capability developers will citizen work be as record drive to those large to that in specific signal and continues complex first is, we will would stack, workflows ago, that users And the that even from that's move automated of we do with to the have that a And doubling play of multi there to step the in over intake don't like as automation. want and number a we and they much And XX-day the your all seen lot period the month with systems in hub? report of some will automations growth two think workflows. be results customers automation. to systems run up almost able if accelerate later you us really further We you back nice from coming now I manage Absolutely. hear but we workflow triggered millions it's strongly manage month. Well, power importantly, that workflow on started have numbers, is over crosses orchestrate based as but well managing to of workflow years Smartsheet. Smartsheet, more year simple question, support IT now. And seeing automations think or demand mentioned, Yes. in I to both other ERP so we're disclose capabilities really We our CRM, systems. in there. able or can to become on new a very allow to the I that we And we a really, either step the

I So going real the we that are And differentiators in and on agility value, deployment to cost, be that. bullish for us think are of super speed that space.

Pinjalim Bora

a assumptions? what about rate billings, that year? thinking on you did and it you net are or the the on are on net you your assumptions just obviously, for is hit talked in QX and of see expansion did took the big ARR, XXXs. being retention Jenny, rest -- what net logo And what in QX are Or guidance your the What

Jennifer Ceran

at say ARR logo industry. as overall for at increased mentioned quarter look as ARR, every and you you net When across dollar look logos earlier, well -- you if Mark the increased ARR if

Operator

from Oppenheimer. comes question George with next Your Iwanyc

line open. is Your

George Iwanyc

you're possibly and Could more in FedRAMP seeing vertical a on us give you color the any what benefits? government with bit

Mark Mader

Yes.

that breakthrough as for to unlocks quarter. is We're looking So deal the pipeline go it. big continuing the really last said we

the for I team the think of -- work report in as we soon of DoD couple we team again, out on opportunities about. good those. will The very [ph], on DC, one terms side [IO-X] have us. that the in And of in I will feel place a the doing we're its new as have provide we unlock

us really and And think number of big cases of north Center, to Gov use around platform. go we're standpoint, a the on to those piece is transactions compelling dollars government offering that of call. very from standpoint I into ARR Control million an capabilities, really multiple of for is operation prospects. doing allows which anchor go Fed very, continues some our with a The now that agencies, one out

definitely we're we've planted this So year. outcome good seeds and a expecting

George Iwanyc

might with Just customers, seeing larger especially all is that that maybe be the with the all your anything, suggests the disruptions have seeing, you're in way up, a conversations beneficiary second you're COVID following there near-term from you changes related that to happen.

Mark Mader

quite it explicitly. don't articulating I are think your that customers

this our second, perspective And we doing modern delineating not people's transformation workloads of between on their that they're first into really think and I that's centered notions. mechanisms. we're remain the on

from absolutely. one as the Gene this invested so smokes, at reasons their that and reinforcing investing importance respond how But all connecting this or to important do The earlier just I I capabilities within correlation matter. extract being of why we're the that things again, cusp starting these And to get system. And money between being to So systems? systems can more system the is is resonating it? able us well. you Smartsheet. of unexpected say And integration to really more look That now theme from just How there sticky do notions more not with that workloads to think, those we're we're success, question a come other of on in said, that. having actually yield in to my around, CIOs cross holy ERP really I've is automation yield up can

Operator

with Your next Securities. Steve Wedbush Koenig from question comes

Your line is open.

Steve Koenig

I a management recognition some and of terms on trends, Mark, a seeing love as would specifically, to awareness of color in Smartsheet and category you're get brand. collaborative work as what

what much. I'm trends? three Thanks and that, gen and last those to in those that both months, the trends you very well. in investments translating What your curious here, and to seeing are doing are You're lead just as how add secular is to

Mark Mader

been nicely Yes. to continued on a up really studies aided the the very And and leading both unaided. over We've was of for I recall within pleased on year. our and of to see that aided check Anna, year. having our are in point little course in now with CMO is terms a we terms unaided fronts, of over category

around, larger transactions, had with on we're not oh, themselves saw So see a pleased brand. users I'm yes, statements Yep, to heard it. really of it. with sponsors make Smartsheet that some who about We've been that's our we familiar

important. can't does, having what softened articulate really So it even that if perfectly they beachhead,

pleased with So results. we're really those

our So set now. And you as investments, minutes next the think you mentioned to on Smartsheet it phase ongoing good we've the and name? importance ago, to It's entering how But is -- couple not can some of bring terms foundation what are articulate me? do that now we're a the asked bear? for say, to Terry do of I of In though. full just build really aware value

Gene Farrell

signal a third over of in software you some awareness marketing. I introduce increase number inquiries time marketing interestingly appetite. And that getting think collaborative have departments, inquiries a capabilities enough, function a this neutral at at least and analysts of out work source targeted saw to I expanding spent around one some or market they just and from we're reported is that And number is would those management. an the industry parties companies with within or we've quarter us the there's category, add

Operator

with question Brett Knoblauch last from our Capital And Berenberg comes Markets.

open. is line Your

Brett Knoblauch

asking just perform these mileage accelerators the and core the how Can follow-up quarter in seen the from you just timing performance maybe that in, combinations in of are a a you for this have how customers? capabilities talk business? terms different payment or you kind about Was give made then And number And on, of decelerate mainly of particular week them of April? customers to meaningfully payment combination? that in

Jennifer Ceran

Yes. question. I'll your second start with

in to So And most we of started the any third week until were March. see in these mentioned days seeing customers terms. And were third -- XXX I to given customers they asked them April. extended when March, asked for I pronounced and had start days, didn't billing about that in week quarterly the we terms mean of earlier, about XX XX for the and that XXX we XX like

Mark Mader

firing record. And really across saw side, products We on unbelievably on to the QX. uploader. had the that heels systems activity We saw view an of in strong connectors was capability data sequentially our all we of dynamic QX

building has capabilities a sort would those of a up so to the bit. in of seen And foundation as the And reignite haven't I things any expect one again, categories. on someone we open a disinterest and

I think licenses, people looking interested deferral bases are of at think the about capabilities, decisions are those right the now, core some learning but covered. really in products. some sure on ancillary I are those They're of making

Operator

remarks. presenters will closing call I the the any for that, With to turn back

Aaron Turner

again Well, next for we'll joining us Great. and you to you thank quarter. speak

Operator

This concludes today's conference call.

You may now disconnect.

Smartsheet (SMAR) 3 Jun 202021 Q1 Earnings call transcript