SMAR - Earnings call transcript Q1 2022

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Operator

Good day and thank you for standing by. Welcome to the Smartsheet First Quarter Fiscal 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. now today, hand Investor Aaron would to conference Relations. I speaker your Turner, Instructions] like the to over [Operator Head of Thank you. Please ahead. go

Aaron Turner

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

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

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

we within the statements call, this the forward-looking make securities federal will of laws. meaning During

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

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

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

Mark Mader

today vision in companies for value revenue every who call. increasing And $XX,XXX, our start for our X.X our thanking to belief over drive members in joining and from was want QX QX from Aaron, users. us increasing average their or Revenue or $XXX.X to rate in net recurring points XX% In $XX,XXX, by million, with of year-over-year thanks, and within XX us million off a domain QX contract their by to our I XXX by and earnings day improved grew motivates annual up increasing ARR strong than ended than XX XXX of first grew me $XXX,XXX, expansion whose you, year; Thank more last year; and dedication. dollar-based everyone, ARR inspire more of team year. quarter QX, companies our to customers, $XXX.X in ARR XXX XX% more included last QX $X,XXX. up XX XX% from our than their grew Billings by by annualized ACV the retention their quarter. base up We last million. our XXX%. with quarter X to and

United VF Group, Health, also Jude We Stanley Department St. California Corp., Allen Airbus, Netflix, Rivian Home Transportation, including within Hill, Children's United Sage Therapeutics, Hospital, BlackRock Charter Communications, strong Booz Honeywell, & Meditech, Workday, AbbVie, continue Bath CrowdStrike, Research Black and & Kaiser Google, Permanente, of HubSpot, Comcast, salesforce.com, Beyond, to Amazon, Intuit, a Food, enterprises, McGraw Bed Hamilton, AstraZeneca, Disney, name Roche, FX, Verizon, University, National VMware, Automotive, Dexcom, Packard, TBS, see few. Equinix, Decker, Sony growth Arthrex, UnitedHealth, to Peloton, Armour, Hewlett Depot, Stanford Cardinal Vertiv, Pictures, McDonald's, Under

mission-critical capability-rich platforms workflows customer needs while those demand to support of deployments strategic customers. advanced administration. their and can Smartsheet's Enterprise the customers meeting serving security enterprise demonstrate also requirements deserve for Our scale in and momentum that

disparate and enterprise-wide while can across cases platform, run scale, the to that from And workflows compliance, change delivered customers enterprise and manage these control With providing of broad functions. we and the cross workflows bundle execution trust departments also support customers into that they this use and a at with systems their range manageability, Smartsheet curated experience security, expect partners.

a that offerings, of its its on was as agencies even for customers. GSA, also will well of Commerce, more invest the year, is value across QX other we delivers based their for to Defense. expansions drive Over we on resource deploys and of course Oracle the for empower quarter support Perseverance of With Smartsheet, individuals customers taken to our in that X,XXX and Rover, flows our re-imagine able benefit X, the to from machining and do fiscal understanding positioned We've key scheduling for best that of and flow the to future. departments. this managing changes do Department operating our transform Today, new Notably, rapidly to with involved of day Power moving coming Propulsion yielded are the and government how deployed Department XX not customers for simply strategy Human of on our and And as and significant priority the deep strong such unique company, This Smartsheet like organization executing U.S. dashboards insights that business, by manufacturing we of Services software Health efficiency, Lab Department XX bigger Since BI. Mars this category-leading U.S. or with Affairs, continue tracking platform at we the enable as relied in paid Smartsheet something marketing of Smartsheet a our the Intuit XX Jet Veteran get NASA, are an such the listened platform and is XX,XXX a as to work, even and operations like NASA's OKRs and frequent have work attention, the data and the experience, platform supported years of allocation but team evolve to compound to to Department NASA build gets vision parts the and choosing experience enable perspective this years enterprise. endeavor. solution our we've at streamline the have thousands Smartsheet improved solutions our delivering systems management work to done, them communications corporate an teams connecting NASA's to ERP solution means visibility to a and of integrated done. that challenges. workflow Snap. end-to-end well whole systems process solve customer to

or performance the of Smartsheet offer intuitive further look, We've introduced a evolving the experience. we're platform apps, legal Smartsheet critical business previously able year, real modern customer clarify been standardize and and systems business marketing mobile Uber's solutions and to quickly systems to across building web cleaner, development and power using to at scale, our solved required the Smartsheet units, also employing simplifying usability efficiently more Smartsheet's organization across now engineering, this for on curated Smartsheet. resource-intensive design problems. Many solve solutions and WorkApps, which uses creating fact, to marketing. manage estate, build has for no-code on choose Customers In and facilities, day. respond team workflows strategic costly of customers our experience And ability amplifies every legacy user that change, deliver accessible entire WorkApps, and the and can be enterprise further modifications by to are Uber including platform processes. to deliver

these ever that for In action. has made teams it to easier experience addition, the than provides priorities take and WorkApps streamlined locate their user

robust We business tools very new approach companies maintain built by this As power From demands business: solve people. responds Advance. we giving to resource ability integration, problems. touched Advance unlock across a build scalable content IT-endorsed true control risk has of Initial Advance to systems with to departments regional Smartsheet customer receives to scale. the on employees skills-based with population to X.X capabilities align of and functions scale the with customers Recently, to and to to across premium combining positive. over workflows of academic easily global management and easier taken Smartsheet access The teams compliance. reaction its enterprise-ready, at is that Smartsheet business Smartsheet the a also systems, Smartsheet Advance while health XX,XXX it that drove capabilities premium and our and to million to our packaging last England. even expansion automate and system growing been the New core the deploy enterprise make and to serves solutions manage IT Advance across X,XXX doctors no-code quarter, we've high-value Smartsheet's acquire call for

work. enterprise most meaningful with systems provide Advance, We system to Smartsheet with to to continue bolstered loss Smartsheet a M&A details leverage help partnership policies. further Over projects In be To this IT, their on that integrate to X. focused CWM deliver choice, efficiencies of integrations resulted differentiate May, organic implementation PMO the year, that that and platform June IT is and building Smartsheet and on on automate organizations including critical at McAfee's pharmacy, center's security used detection the significant comply efforts. to their have past to finance, Smartsheet manual With and cloud integration, acquisitions. that a Advance and leverages provide data enterprise offering departments, improve new process from on to our we medical plan prevention conference will Smartsheet QA, our ENGAGE investment McAfee additional product threat depend platform the manage have growth

input to Smartsheet's and off to tools the ahead. we've across into easy strong way manner their specific vision data CIOs clear growth and are started Smartsheet and Smartsheet the environment an intuitive compliance. within expand for in need entire base including and is continues our provides help environments with and risk-related leaders, flag momentum insight for to like find to in and activities Customers that Integrating our year McAfee sensitive paramount. As violations. data need sensitive a data secured assurance a remediate customer their customers, identify industries, and In IT with regulated closing,

over results. additional turn to Pete me on Pete? financial the to let provide details Now call our

Pete Godbole

with and We XXXX entered Mark, Thank you, everyone. good momentum. continued afternoon,

of relative was last a and Our our year deal solid levels. are saw volume large we environment dissipating. Many QX demand function sales a guidance pressures the of has outperformance approaching to that pre-COVID been execution,

and of cycle we conversion in to significant improved, pipeline relative QX sizes. saw growth year, lengths deals shortened, sales example, all has of have our For last

as stated, release before GAAP otherwise presentation that the results posted to our in and basis call. Another and was as after material in the of remediated important milestone call I weaknesses our XXXX. our year fiscal will of call, go results all earnings are through out, references operating to earnings non-GAAP end our QX. reconciled for SOX are expenses filed a financial all results Unless on XX-K disclosed our were to last and now the the

mentioned, growth previously quarter was Subscription growth As at revenue Services X%. revenue was XX% year-over-year. million, of in $XXX came up representing first XX%. representing revenue $X.X million, year-over-year $XXX.X of year-over-year million,

billings. to Turning

year-over-year came of X% over Quarterly, of annual strong total. $XXX.X quarter growth with Approximately at XX% semiannual billings were and First billings subscription million, multiyear billings in of represented representing X% monthly. the our over XX%.

Moving paying us per $XXX,XXX have more on metrics. or $X,XXX ARR. XX%, reported year; total segments XX% XX%, or to $XX,XXX and customer of us more per or now paying respectively, more paying These XX,XXX now customers our year; year. X,XXX now We represent and per XXX

the full percentage contract moderately further a improved value, retention the grew we to Through to higher. rounds from of domain The down $X,XXX. rate remainder to X%. with X trend churn net now XX% We our dollar-based the Next, a annualized expect point retention QX. XXX%, and dollar-based year, ended improvement ACV, of our rate year-over-year rate average net quarter

Now the turning to financials. back

point margin. than Our total gross was due services to professional gross percentage quarter a previous X lower the lower margin XX%,

Our quarter. QX XX%, subscription the gross with in line margin was previous

loss against We year XX%. our our sales ago. was for marketing year $XX between million, 'XX gross was XX% cash a negative expect be function model. revenue, and $X.X improvement continue margin operating flow inherent line our our across quarter guidance. scale in in which revenue and the This negative Free XX% margin an million from of of or overachieved was improvement to to fiscal Overall, XX% of a

Now let to me move on guidance.

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

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

in million, momentum revenue revenue XX%. now growth continued be the XX% to strong million expect guidance. to business, to to $XXX full Given results billing representing in $XXX be QX in our million, 'XX million our $XXX expected the Billings XX% of $XXX of year to of we range and to range of XX%. are growth We raising are representing and the

to $XX for XXX to in outstanding. We be be average range million $X.XX share approximately million per net the weighted loss and $XX the non-GAAP based on operating shares loss non-GAAP expect and million $X.XX year of between to

enterprise-grade is Our free in 'XX in customer signal QX, X%. in signal revenue negative expect empowerment about cash guidance. with with of flow extensibility. fiscal execution margin between the to this billing exemplified by manifested Consistent work has now expectation quarter billings is strength negative year users This X% to and growth. We

volumes early our WorkApps. of traction excellent saw bigger and and Advance quarter via This Smartsheet so the offering with curation larger with deals resonance workflows in enterprise

see opportunities invest signal to managing to behind cash this the burn significant continue We effectively. while

the me let back it for turn Now Operator? to questions. operator

Operator

Your Mark Murphy comes question Instructions] [Operator from first from JPMorgan.

Mark Murphy

less mentioned, had Yes, Amazon very Congrats government with of market at thank is actually like results And from business to enterprise? SMB penetration huge Depot, the and down competition spectacular, you Home on of you level? then sounded you to of are about done And rattled there you you in finding the handful guidance. Mark, top we that you list that that. consider up just a I the Verizon I'm start and list when relatively you're see How are enterprise very a off that you guess agencies Airbus. whenever logos much. of than feeling of wondering, pretty strong customers, at depth on it the

Mark Mader

customers we where we still million, journey. journey, think XX the over $X the seeing paying value. have early find now in us I ourselves And Mark, in increased is we're

coverage in group deliver more behind so and job then to these them. The go have building, landing companies that coming most massive Fortune numbers penetration value of X. is the seeing things for up where what to think flight to that's indicative opportunity of deliver. continued Those almost right value I Fortune messaging present that full I now. we up, is are the us and and look them us represent And still continue value our into we're is for to X now

that it's a see in highlight really we're thousands of So quarter. in with us to we pleased expanded it. When the context handful of the customers of customers,

that So The familiar those happen as to be some well. names. list is long beyond

Mark Murphy

Pete. rethinking it think If technologies. follow-up, that I technology showed for had last And technology kind commissioned noticed, showed was of Okay. of a may, had quick it survey. And workforce commissioned I XX% it survey. decision-makers maybe a of a around month, are XX% We you

them in Smartsheet are that, companies with the kind you So and in broadly? question reason that is, I use and guess sensing with sensing my more pipeline that as tandem then to a you of a somehow workforce see hybrid strength, decide that the are on billing they

Pete Godbole

Pete. Mark, this is

how at the pipeline this quarter very traction you We found sort conversion hard we as exactly quarter we piecemeal saw As drivers look was our found of out, were did are the What of deals strong. this being for but asked, number -- rates definitely stronger. The out. in we what larger. this describe that I to we would your played

Mark Mader

me Mark, add Yes. one let comment.

to see me what one asked add you of what Mark, terms Let scale. at comment, we in

And that there the people when controls And are the that's happening And that we believe leaders scale you're we're few think in last and I fortunate at you built think need sort of security that the and I elements, the can keeps offer hard we're have innovation a past we level, of there. really number the who that over and really functional go. to the requirements something years. furiously. fast

environments. to capitalize that companies We coming a do to And already. the that's X. But just large to cater have Advance, those all as both those enable super super well not releasing on for to We're to offering is think how what's not bunch as stuff I it's to those are who large, up really Smartsheet innovation. super relevant Advance be ENGAGE a interesting June about be who think I of super-large companies Smartsheet it's you interesting established very yet on going growing smaller-growth going are

Operator

question next Your from comes from Canaccord. DJ Hynes

DJ Hynes

Great on guys. quarter. just that Advance. Thanks Maybe, off building Mark, comment last Smartsheet

bundled you're hiring? of a feel kind like sales, to strategic you staff Just at momentum larger given slight who how maybe all, the that with do selling? see of more you your force Just take your customers, the on composition towards sales curious of kind changing shift

Mark Mader

have We in diversity to real that continue group.

a at hit getting think type starting actually a it tools. of also go right journey go-on-your those the not we're with a time people what selling approach. CWM right just consulting hope is how in motion, that's a with to different scaling And services with And This is the motion. works I that is appetite fully right from super focusing across now. areas I for in That us. we product, a say self-directed dialed helping people and understand helping not is you the it. stages advisory these really the -- we the capitalize you enterprise a across is opportunity see both commercial areas. when the space way look solutions to of And would have now important think large We large, product business. the those large as very we're creating business, to on is and we have organize I also on enterprise just not that hiring but the pitching with own out in role, really almost that

DJ Hynes

very follow just makes And could sense. question. a up I with big-picture Yes. That maybe

IPO going now. in vendor obviously, there's an So another through space process the look,

of in contemplating hit you've just it Smartsheet since And lot the some conversation throw But key to investors is having differentiated of lot, a I maybe it's on a areas think or three would think what you competitive two are the of market? as could I kind a this. in you highlight like differentiation where space. I'm you, really the

Gene Farrell

DJ, this Gene one. I'll take Farrell. is this Yes.

us, at in entire on answers, program, a CWM really enterprise both it smaller that very we execute part differentiation. set enterprise don't help remarks we've cases it's a can compliance. then us, having and But doesn't think feel the our to ability in talked and ability diverse being mean them in the leader the project, we is do their work. have and And space. to our prepared process, really serve as departments of about about key across of And companies to use workflow really I continue focused been and and departments really Mark For that to effective Pete like really small scale support and be more scale teams well securely that for driving and with and

Operator

Stan Your Stanley. from next question comes from Zlotsky Morgan

Stan Zlotsky

very I was far seeing are now on contextualize as logo large to -- of what But logo what wanted year Mark, you're now ago? -- lands that, as you through XXXX, it were that beginning. seeing versus logos the and a the acquisitions you obviously, from these a versus seeing you impressive large just to the the challenge. scale acquisition back mentioned us help just of to at the very list Maybe especially the go logo new platform

Mark Mader

serving vast you about Well, more shared the majority of It's for in a X, them landing more it's the companies example, segment, serve in logos. like I not quarters, certain when fully. think, really about previous Fortune as we've

you and mega departments so you at to opposed more again, But as those value. like lands. diversifying at lands -- look adding So departmental it's more logo almost new when caps, into it's look

primary our how diversifying, we coach terms for really how reality mobilizers. that's run of run really So book companies our we're enable we're those looking book. within in and how and That's

early. we terms we about those in as get and target logo platform, mega try where And generation lands them to who those very think we us choose bring growers try next carefully the of we to of feel capital fast in how good I and of identify spend going caps, on our that's well. to terms

Stan Zlotsky

them. it. should very, back a to certainly -- really and landing revenue we How fiscal question ton net selling far the with on chance Got half the revenue 'XX do we makes the up that the we for maybe is all there's -- And and retention And get for Got back expand levels start just net it. then the sense. a as of It is to that sounds maybe departmental of year? motion about nicely deals Pete maybe retention? of about going pre-pandemic up rest very like we to with ticking that forward think Smartsheet this thinking motion expanding that of a And core within retention or go XXX. into year the as as through back net be revenue like

Pete Godbole

trend lapping to to that will moderately we being Dan, quarter we're X headwind QX year. quarter. quarter-over-quarter. really I net X as first fact pleased net has up about And bring in stated the through a rate first dollar with came go It's prepared includes rate we That potentially where its of my the that we which that on year there's for be as points. Brandfolder, out retention where in the expect remarks, as retention gone said, our up the the

So expect to that grow through year. the we

Operator

from Your next Alex Research. comes Wolfe from question Zukin

Alex Zukin

taking different, pandemic respect but cycle that's simple working? right really their of post to are sales I'll depending start created it as you're now into But on as it's around -- something same sales why us of now way seeing is the with strategy approach the these clear working in with now to So new those the found Or side? lot on of the is the the kind about level, this vertical has some we're guys has further is think, I ahead at talked seems unlocked, that's than and but you traction on like we've but -- are, federal Because your more to their This and in wanted getting the It of a coming of much here. get competitors bit past that a also enterprise a more pause seems then a cycles few the it those color question your take has pandemic maybe two quarters. months kind meaningfully a in results, hearing -- of terms to sense? aspects. the both even become fruition quickened And digitization and companies to you it little federal coming bear pace segment. of what over kind in from

Mark Mader

Yes.

of think to to expansion in as as I I were would favorable. robust terms rates last it from year, went a class extremely still opposed They robust Alex, pause. very

across So was really business see good to in the net It acceleration major the dollar quarter to expansion similar retention. we serve, our rate in see up continued expand. industries tick last to

a it's It of as present moving tend and I was here's technology to to So benefits from a confidence from XX one people. here's But was three easier moving choose navigate and can moving to opposed when paths. be buy they I okay, standstill. And to the something, also something derive you here say, investing more having are can as for ability people again, to to a when more what's move, rate. would not people -- premium you from that already capabilities, how clarity would -- the they cohesive quickly story you how to value it the have can is around have say at the to in helpful in have higher that seems say improved. to

we're I as as condition as providing. it's the inputs to So think market it much is

part to is was just It transaction, I think of diversification government business. -- an who and saw across our agencies remains or was our agency We wasn't a first our the which I diversification DoD nonmilitary but diversity happy IL-X on the was in authorization What the of on the it see side, X. backs recently. buying. of growing small some or

market, So been We're table multiyear new investment. that a is again, I I would to hit nicely growth. committed that think for this to setting heights And the that's expect continued there year. and up

Alex Zukin

kind disclosure a Pete, material in getting first, to the the gave. terms that in filling from you how an of full number. Was think or account? respect we year, the should to should year? item go gave strength ask, year follow-up; this year we take as we on weaknesses wanted commentary the either there look XX-K, the -- billings, on as to kind balance that models rid the then, Perfect. And consider last maybe of as onetime just our in of into with the seasonality those You at congratulations of given renewal about anything given base we of billing billings the I for

Pete Godbole

changed. I in that in QX can my won't only count for which one-time you that is, year. again you'll of billings on full that pickup seasonality in we acquired this thing would for The you is billings historically you that We predictably The we prepared that year. And QX, QX, would I've got, was is historical I remember forward. remarks, we the as guidance have repeat I carry given tell and has that only stated, As don't this in thing a as quarter the tell which you the seasonality you've there part deferred of revenue Brandfolder. seen

Alex Zukin

Congrats Perfect. quarter. on a great

Pete Godbole

Alex. Thanks,

Operator

Your next RBC. question comes Jaluria from from Rishi

Rishi Jaluria

we grow these you that But last customers? starting laid And you're new I see for talked First, that customers, XXk-plus and with initiatives large employees. opportunity start And then what I you won't ask penetration think on update follow-up. within sense list opportunity within of you and out to Mark, last logos us Obviously, with again, some Pete, very customers. back an progress expansions. the a rates the a got can some really quarter. gave going data every of for you to impressive on us points wanted maybe and quarter, I've give quarter to interesting the to large

Pete Godbole

So was Rishi, time, as slated investment mentioned areas. I our I what last into call three

them XX,XXX customers. hits the of One employee

capacity. So about adding was it sales

our We've sales sales of other sales goes on across to QX, capacity. for We added quota-carrying all capacity, all planned we elements enterprise invested team to, focused also have That the in as team. in help and of teams, sales resources support people part including customer journey We've those go-to-market the who with sales that two, side it. conversation. on those and invested outcomes that of and

competition. Additionally, Where capabilities, as are widen the capabilities, we're just we've from differentiated also product described in those completely in we're investments Mark and product invested moat, the our things competitive where progressing.

So we're of all articulated I making excellent quarter. -- progress elements of the what last on

Rishi Jaluria

in in Got Got driving a go head the bit helpful. ramping was just the you about That's little wanted to where services. then a count it. can that Putting that the this Or aside, And -- you was margin implications it. on? comment deck, talk you're to is primarily around maybe normal areas Thanks. which to trying running increase a get certain focus head services that it what's back guess to services? count? it just want is hot in and to Are I there level? Or

Pete Godbole

the fulfill very is demand billings answer that needing that into a simple sort to and of pure number. as demand. just to Rishi, with we you translates remember, QX, that finished significant And

that demand. on is was count hiring And quarter this So to that head the count. the side way services head fulfill about ramping

in but QX broad-based was I as seeing demand, my we're only So remarks. not in noted in well, QX as which prepared

Operator

from Bhatia Arjun comes question William from Blair. next Your

Arjun Bhatia

little on to Congrats WorkApps I wanted a Mark, ask about quarter. the bit.

Is quarter. this the is know I to enterprise to think I just from enterprise how see, gave metrics strength about to would still early of a the at impressive be should now with WorkApps starting some last playing pretty that then if we you're And think in tell? all. you your light adoption curious in And just might too result monetization that it adoption? role conversation the customers

Mark Mader

I the only would and no important let Smartsheet one but start guess that. Yes. Advance it that's by means I is it to how comment I'll driving it. Gene it's element, with speak well. an Gene element And it's speak with is, an as coincides I'll to thing the have

Gene Farrell

Yes.

to build think having the desktop whether is on or a Arjun, user about a to it mobile. experiences, is not business it'd for really the rely ability be curated more WorkApps So way to IT app

platform bring dashboard as Tableau really in love of the a -- a we're third-party Google customers elements we into early in ability both from app-like that'd overall workflow what so kind whether package And complete seeing to Docs that elements signal seeing launched of we're experience. What or they of a is mid-January. experience a be as platforms, well Smartsheet is the -- and from into

Control And And so seeing at it most enthusiasm continued starting have are solution building deploy they're as to to on. adoption and our other level then is map scale the the of to value. that new the customers that where actually is from really that integration And feedback broadly going with and a things understanding, even through that number we solutions. hearing in road more are we're customers Center seeing we're capabilities and customers enable --

the build consistency capabilities workflows technology scale, and not you using users. change cost grow offload recently workflows those broad across workflow customers really Smartsheet have that other validation solutions also those thing ability and a really set which us the really systems as To WorkApps platform over number via pretty that of announced, of there customers enabling and for a in way, designed both monetization expand question, friction increases, it's enable is to would systems. Those But eliminate add to goes of Advance just Advance connection systems speak broad with across included connecting Smartsheet data as that way users across Data cases. WorkApps to they canvas with in designed, the recently -- is just is which the we and like or and up Shuttle, use to Importantly, connected gives data in your combined big give complex us. more that at Bridge with synchronization but at the capabilities management a between scale, the time, of upload and Advance with I data that launch things the

Arjun Bhatia

and of the up very That's I helpful. more and over Rishi's a then And if services that hear Obviously, consultative question time? Perfect. building, just developing for deploy role customers especially your capabilities you sophisticated they think lot Advance you that today Smartsheet? And some those enterprise follow love may be business. just of the these more on I'd deeper into you're can with larger how around as are services partners want WorkApps go that enterprise partner as curious would where the changes ecosystem, in to you

Mark Mader

that get in think it's with been for us Pete highlighted the continued, amazing was partners wave of this demand that's opportunity to started things QX I one activated. that and an our XXX

all So and of many those We alongside companies. us, to family stand-alone. deliver think those seeding -- seeding bring the about Smartsheet when opportunity services those within we of delivery, about we think delivering don't an of about people think just

our cases, some on in So those services are contracts.

we're are fully them capabilities a who go be Smartsheet. developing on rate, which them are paying knowledge to good those large-scale high-value, deliver We that and do teams, out at have like We we expect other deployments where can delivered Slalom then partners standalone. within seeding and very

enabling of in think And position, to this next the by is to in where a I that any services concern terms we're on those So delivering and going you're tightening think hundreds have demand behalf. margins partners fact partners. I of we're favorable be on muted our year, going very

Operator

question Berg next Needham. from from comes Your Scott

Scott Berg

fantastic Congrats two have guess questions. quarter I on I a here.

First who obviously I upsell the of revenue saw to and net enterprise but up on retention don't I strength strength. know the general two We all, take points. wants tick guess this,

of early customer that of seat-driven? of more. all But of the along as on with modules module-driven some expansions you time net out If at was does seat more from something lot that customers a shift what most the and years, movement before there. spent look that's your three we was two penetrated to retention mainly mix revenue or or you a look Company you upsell the new some seat-driven of historically, adoption around Mark, how

Mark Mader

blend, going be Scott. it's think I to a

I ourselves the The to we not certain monetizing from the quote on WorkApps to have amount capabilities, adhere past signal. that how they different is is we putting where think what approach must a certain scaling listen saying from see customers, assign like we're based taken on doing a and users, value. we've to coming from coming customer in amount licensed users

we will continue I So it. monitor think to

I elements will fully capabilities the We us -- expect continue growing to to further. continue

Brandfolder for diversifying you you revenue big and when the and alongside, opportunities like start those elements tailwind things those streams. think are I selling have XX,XXXft introducing

report Smartsheet quarters. on So that be it's, in we'll on to fully again, and the Advance, early coming days able more

Scott Berg

up, if the then Company's impact largest of spend? we Great. break history, the the look your much increase count is third versus in in increase I quarter, in And conference If sequential the view in marketing statement -- you're that How quarters. is customer how marketing income were head we million. should about $X.X new at to prior in that that excluding today? It's programs the sales that maybe and targeting in

Pete Godbole

Scott, think as you of this should sequential.

out. of of it's element come these a First how seasonal all, dollars

number in a So are there's fair typically, which quarter-related. QX, expenses, of

think that over time, going this count marketing see see head happen. parts the quota-driven. part going increase we is through we're gen revenue you're climb of as going would that's large of marketing I you see to A is because the sales to about think percent associated -- to of the And demand to and year. sales spend, go a as going you which make as and

Operator

question Brent Your from Thill comes from next Jefferies.

Joe Gallo

security point the an spurred of you appreciate upsell curious differentiator the an Brent. Mark, controls the you as recent your integrations. that to the just made governance view breaches was against concerns capabilities It's question. third-party Really of it some a and that some competitive tiers security include interesting of have I'm McAfee if access and on peers. postures and on for Joe about

Mark Mader

think but of noted, an portfolio, new what's of happening in -- I would to elements are these this we on based frequency market. expect increasing relatively I you to conversation, as the some be

to Some of things are difficult these to respond quickly.

started And now, areas, us I years the IT in to some have engagement a someone see very of controls we of to for some got clear. to those position companies strong security measures with a in movement. -- few remember that especially sign these as that's really presented business now terms moving financial great put were really these institutions things strong vividly terms of So bar in again, right, it's have a over security is and starting quite grade us in when to in we giving critical a tentative that SaaS. us in of adopting to passing and realm the years are investing forward. XX who's when high we're ago, very, And place, It's to been the and a when see

Joe Gallo

for quick a the sense quarter? hear. Any in That's billings-wise And what one of Brandfolder awesome to you. then, maybe Pete, just contributed

Pete Godbole

that in with we've pleased with but Brandfolder's pleased general, first for our We're acquisition, not Brandfolder just year breaking our done Brandfolder generally were performance. the really We because performance. of

Joe Gallo

lower Okay. or Was XQ? higher it than

Pete Godbole

Brandfolder line lot think it In would I say in really I of exceeded general, our plan, And with other a well. businesses.

reporting that of we strong and with As I a of said, really were sort was quarter, a it kind performance. consistent

Operator

comes question Turrin from Securities. from Michael next Your Wells Fargo

Michael Turrin

but customer referenced to the the I'm to all unique through those expansions adds really QX. on ask of does XX,XXX out Mark not through The previously again, call. for the went going read list stands as strength you certainly seems

billings can growth versus the anything calls then roughly drove flattish that QX QX. there's what you if wondering And add around uptick. guide just So for

just that I'm you there's informs just strength so if wondering saw call QX sequential here you. out to Thank if outlook the as in or some abnormal outlook the in that well. conservatism And there's maybe anything

Pete Godbole

Michael, I'll start with the billings guide.

recap, we year-on-year the QX growth. year-on-year based XX% XX% reason XX% strength represented deals and to a a the year, we're pipeline, on guide my growth growth. our So call started and year-on-year is for for a it, I the our QX, of this close And see just number as for And shorter calling when across all of QX: larger I've approximately, XX% just stated because remarks transactions. in call in what times sizes general prepared cycle we confidence customer what to to

is And and seeing through the at you it. way excess in this that we're confidence we've actually of the on when emphasizing guide that's raised because rest So we're also year. that's look parsing beat, the we the what of the annual of see sort billings,

So the part that take let of second one. Mark I'll it,

Mark Mader

we -- derives of Yes. from the started talked the terms QX. sales far year, really And during people teams on more a value what we And CWM how were as of about doing implementations. articulate to I the -- people, in think last it's continuation to customer that being when demanding saw present our to one expansion in able really value side,

I that and multiple we're way. as now belts I our under of the that again, think in said think we quarters goes performance favor. that QX quarters I And presenting where out talking in is never have ago,

business, for there with every the So better We've say with value now nothing of shared out quarters. to I simply nothing ordinary. names some thousands you customers We of things. combined have was think when the in confidence that of few last -- quarter expanding was presentation growing But the those you wouldn't leads of had I there today.

Operator

Enders comes Your from next Steve question KeyBanc Capital from Markets.

Steve Enders

use expansion have cases I driving just quicker market, been impact existing customers know guess, seen now either wanted driving of for But to kind new to out has or out check. months. couple you I UI top-of-funnel help? that of there, the anything any early a of from I conversion better tend and that would

Gene Farrell

learning kind Yes. a has UI Steve, of Phase ongoing. as launched. in that to seen and make a the as We And starting will I'll the that then far. really over user that's approach course that seen the really and And enhancements. continue this the improvements as year think view of to And modernization speed and the net engagement multiphase uptick X of -- I say biggest we'll continue be so kind positive see engagement one. with we've benefit of been overall this and I we But platform. big take understanding has we've would

Steve Enders

kind have kind seen and have specifically and what cases rolled into you But you these marketing the and you you some modules guess in Okay. drive strength acquisitions the marketing for a I years, department seen focused as couple customers Great. marketing past you know products there. out And side particularly have go what been And try since newer few made roll on acquisitions? new since of of I back the of use out? made those into

Gene Farrell

cases. their out about of with marketing Well, I have We've And Mark's as with remarks in that WorkApps customers in Uber got are integrations integrations think use talking one the improved group. marketing proofing after using XX,XXXft, of Brandfolder, examples us lot we you workflow. prepared value going feel examples the it's of obviously segment, and using really lot rolled other heard very we and for and countless through a our folks the There's a but top-of-mind of that we've about And good and of a unique interest. we added offering management we're content that seeing capabilities space.

Operator

Brett from from Knoblauch Your question comes next Berenberg.

Brett Knoblauch

we Should the quarter this year? to margins mix. Thanks the similar to services for and in taking the saw business? my growth question. I the gross Maybe of level subscription in reinvest the How should rest goes what out panning and kind a revenue assume higher for at we it gross we of front, on margin from think maybe incremental profits guess about that

Pete Godbole

margins. try guidance We the questions. quarter it investment our with to guide the fully first. and one One both opportunity. you've of I'll the signals invest terms of gave in for amount based on year But over-performed this original where reported Brett, two and a of us capital also towards the size we our intend lot put our op and take we've that the I quarter. for We asked about we answer margin a beat quarter of I'll cash on start flow is outlook the the think free them. and intended.

So that's your one part of question.

services part was second question on of margin. The your

where services as a should ramping utilization I ramp through that of historically our few we to take been. should our quarters get headcount approach initial people start and and teams. margin you And see we've through think to sort should get -- period start this you of new of

Operator

Tillman Truist. question comes next from Your Terry from

Joe Myers

This for is Terry. Joe Myers on

about M&A about You've question has do thinking now. your the How going to bit circling wondering I'm How's right M&A are how -- you. now? owned appetite? you the Brandfolder just think that's helping with a And pipeline? how how forward for valuations back about and progressed you

Gene Farrell

of and product see about of all and about feel the Brandfolder with about them I we it's continue acquired our end we come -- integration. of good into And offering -- better really it our kind year. last quarter third the performing. we is really to we the guess, acquisitions quarter get feel of customers. third the good our in, We Joe, synergy was team And as better way feel we the

change. and So engagement continue is we enhance growth to lever a customer for we we there feel I strategic improve I M&A that But would looking we overall and it delivery both to -- could think M&A exponential more key experience. capabilities forward, also there. about see are we're deliver where and from value can make say a a the to of blessed way we that really guess, evaluating M&A in customers going a step more accelerate moves view the will I as utility to more accelerate constantly way, create at or customers

off we ensuring also kind time. we we're make think that so and fit both is over table. perspective. And say think value the that those I growth of strategy sense strategic into would of a that deals is -- of M&A part about of none But It's from fit that all the our of also how things value

to in is the really I to some multiples spending combined last to on lofty right the for in how And long and value think so create be there's the valuations, going some great at situations, clear term those I you entity are really comfortable have about in levels. of order thoughtful feel had; And now. of question, get with part situations, we what pretty you do your other

about that's you'll us So And of but -- be saying not the just signaling active. and anything, landscape see today. how I'm kind -- to we think continue

Operator

Your last from question comes Citigroup. from Kim Boyoung

Boyoung Kim

Radke. on is This for Boyoung Tyler

importance consulting to characterize landmarks established markets? to execute in seen drive sales you've international for you just the and that both markets? U.S. what would advisory productivity sales markets you of the how and And upsell, ability sales international mentioned feel you given do about to sales in Just how role for relative in more

Mark Mader

Yes.

in approach way, with they I a you become initially a think is things these real it. one comprehensive -- types of trained that someone to engage when the how on this of of deploy platform that's attribute

our with think in scaling of services with about customers becomes investing we when one Advance, Smartsheet team that who's So large team operators.

So you the every services want have or with configuration you to workflow. well to back another go to time make the don't expand

big a that's plus. So

good about Australia have think in a our we partners coverage New employees the and we and that's on coverage with As based U.K. are Zealand. who a today combining very international, today partner our and XXX

been So the focusing those about when that have next two think we scaling. have And over planted, now the is been planted seeds on years. it really

be Next the first Europe, the be those opportunity of be unlock plural. Continental -- further And the continent which on in with in which X, we outside sorry, spending things markets. Smartsheet Europe. introducing U.S., We one Regions, anticipate that in of don't will will us Region's will lets which is of Smartsheet June those

services We will with continue our teams regions and that pair to go to other on-the-ground sales and capacity.

will direct. to again, that But in the opposed likely we a year. skew probably more is it more little fully think towards that I as partner international unfold bit next in

Operator

I presenters. turn call will the now the over back to

Aaron Turner

today We'll Thank again for Great. quarter. joining you you everyone. speak to us next

Operator

conference This call. today's concludes participating. for Thank you

You may disconnect. now

Smartsheet (SMAR) 3 Jun 212022 Q1 Earnings call transcript