SMAR - Earnings call transcript Q4 2022

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Smartsheet Fourth Quarter Fiscal 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Aaron Turner, Head of Investor Relations, you may begin your conference.

Aaron Turner

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

in We discussing With issued CFO, and after Smartsheet will press Mark Pete the our be CEO, is market the of Godbole. results be also There on remarks, Today's close a Investor presentation being and today. Mader; slide replay can is Pete's which Relations prepared section me Investor will call are in our for the today be our announced website. Relations viewed that our available investors.smartsheet.com. website webcast Events accompanies release at

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

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

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

Mark Mader

earnings good to Thank afternoon, call everyone. quarter Welcome you, FYXXXX. Aaron, for fourth our and

sharing thoughts up that of sharing all extraordinary Ukraine that to we Before year our support at by outstanding affected. with the to quarter of Smartsheet. rolls those an be the results, I'd and results and people are our speaking Today, start to like will an

growth We will the that us discuss at strategy positioned our and trajectory our in of confidence will keep also top proven CWM category. reinforces my the

XXX%, share Smartsheet year-over-year provide While the year. grew QX I Pete standout year saw both new grew revenue the $XXX,XXX, quarterly quarter the deals Smartsheet than of want QX of $XXX quarterly results, $XXX.X than for XX and more of XX record new XXX than for then XX% and some year-over-year. with more and million $XX,XXX and of users. for million. XX% respectively, million will more closed a deals first to record to XXX% year-over-year We billings out details, up to a

Work the now at business businesses the use is alongside billings Smartsheet and Business the in According setup I as to FYXXXX, work FYXXXX. XXX. platform the confident Okta's Microsoft the in XXXX of momentum popular most am with acceleration start strong, very we is management Given study, that

XXXX Capterra management also In with the to eight performer of management as thousands software on on apps been project products Shortlist fact, the only from scoring of conjunction of on included a list the Okta's is in used the Smartsheet popular MXXX. appear work feedback most users. top We've highest based platform

move and people Insights. take reviews both more drive on solution the matter, By and earned investments. categories action customer that in most Gartner more of a realizing outcomes are returns and Additionally, teams more which their CWM the Smartsheet in to customers PPM we've five-star quickly enterprise Smartsheet Peer significant no-code delivering can

category-leading retention climb drives motion and rate all Our inclusive a unique expand dollar-based over of of customers land, net XXX%.

is the new our new Between Pro of and at make has to business business selling the Plan, simplification record introduction continue on of significant levels. our had the team volume the improving advance motion. We progress processes, to onboarding of land customers, success new

fact, was by new record number the new and record of from business bookings QX customers. licenses quarter purchased quarter In a for a

use larger from we transforming graduate and customers productivity As operational cases basic acceptance to more across workflows, see departments. uptake

as growth allowing by cylinders. rate, and base. anyone expansion Miller, inside free experience Beyond our outside into of customer Motors, enable We Herman the on also net expanding letting QX, with is we invited than environment, product continues By firsthand. fueled from General all best-in-class by customers companies teams, our a of organizations. Goodwill. partners motion of saw use Daimler continue Mills, who In collaborate, PACCAR, fire benefits Smartsheet to user Smartsheet extended that the Zendesk, and our growth expansion more Meat, such to Target, to Today, suppliers expansions viral we and pull is them But our Lucid

climbing expand by allow ARR usage their integrate the in expansion scale or of XX groups scenario FYXXXX growth space to license represented capabilities through existing sales media to We to mission-critical chain paid the seats provider the land, their in continue added increasing Smartsheet we and additions, paid again to as over which our attach of license see value itself X,XXX communication with organizations. success which, and high-value as $X turn, departments $XX,XXX Smartsheet tripled repeats up-leveling ARR a QX ecosystem, across million. again, $XXX,XXX they global conglomerate This Advance within doubled was to that systems Smartsheet and workflows. added both leads new across organization and ARR deployment growth In Gold. separate and workflows and by as people base A in up of user saw over This Smartsheet attaching customers wireless These its user more. global transactions in workloads. significant well active their This in driven alone. FYXXXX, departments, climb within

start. we to total like also enable internal QX, I'd Now and apps and Gold, using processes business, using customers and of over created growth. many use including Center. a records as standardizing up When of unlock from capabilities data like Smartsheet practice At get and real-time and for Smartsheet practice use our X millions drive period to tiered are programs, the a Shuttle other of underscore X.X for Data to now can starting forecasting the top and are the between Advance data of meaningful Advance simpler to Data to support tracking new portfolio of Platinum and the Instead, cross-functional In other month, of Bridge Advance import export in Advance. Shuttle scale. would number from synchronizing way QX. XX% projects integration billion is Control collaborators View. to that that data customers we They our that applications the Advance every using systems product from tier, areas. Smartsheet billion the introduced continuously using work records up based time cases across developments connectors. accounting over workflows a set their capabilities to systems performance aspects of before moving that businesses new new at to number Work our FYXXXX, across enables organizations some orchestrate and tools QX of full largest Apps we the trigger practice processing key and world's Data events Smartsheet Gold Customers advisory fueling and of a Advance projects to planning, With BDO, XX,XXX. also comprehensive using potential quarter-over-quarter Table. expectations levels purchased Smartsheet adds in additional choosing well of workflows desire as no-code Advance, customers of In compliance, created were for can see external The QX. will customers one introduced Dynamic on curated Advance measurement. grew Advance Silver and of governance policy sophisticated create networks, advanced for transferring

million-plus school the Fortune they all School The process districts to new management. over ARR the is other as organizations to customers of XX% closed to a solutions Smartsheet. Advance Advance in are way more for School organizations better can of embrace develop to help in we features pave from to State. looking projects and serve grant to communities. resonates customers QX, for in the District sizes, They District Washington that them add like their of the technology Olympia scale with deals XXX Olympia Just Advance customers were $X using

Our produce to continues velocity as well. innovation

better Work ensuring seamless all the Manager, to align the as automatically within one by data with top-rated users after beta snapshot requirements; Brandfolder's digital sheet from marketing customers. announced creative and streamlining just a Enterprise follow allowing and the and Smartsheet platform functionality all management job, Smartsheet making the team an tab; Resource asset core it for highlights a best last Smartsheet Insights, deep we into working visualize of integration Enhancing week, customers organization's Smartsheet Plan analyze cross asset helps of of Brandfolder plans Unified between Some capabilities set experience. time work to diverse build their and And include, Management, series compliance governance or management. security,

U-Haul. For When asset integration solution. assets approvals value now assets Ethan used insights use of of at those a content Since creatives Clinical manage set more Brandfolder, acquiring bring can reflect the with like of one and make deliverables. of unified now Brandfolder completion marketers we've assets across customers shares extended downloads manage creative like is Wynn Smartsheet surface the development can development Smartsheet, example, visual informed Resorts the the iS views, helping see Brandfolder, and website decisions. a and company's Allen, manager in Customers in broad into the within for cases to Smartsheet,

six-figure With firm. CISOs of was the the additional and CWM IT a Capabilities security encryption was getting of differentiating such Smartsheet intensifying. top landscape strategy, capital investment across and Smartsheet several classification deployed QX. are in Security market. expansion was with more example loss use corporate the Information adopt CIOs Earning data directories in across investment focus buy-in, work most and QX a additional integrations a systems, and and platform in are we inspecting promote prevention deeply as organization. security-first by of On seeing sharing governance step Smartsheet comes to This controls of as cases, expansion and evolving rapidly threat data More the including from number the to VP streams. egress followed management, the critical key trust is representing An customer-controlled controls. an securities quickly and front, the in granular support keys, analysis corporate five enterprise-ready the and a are and

company organization small Resource lack using with X of Connector, manage billion We Management, includes workers delivering discovered where status savings product, the the sales greenfield adaptability, creative to Brandfolder, needs of that middle The resourcing massive most handoffs Smartsheet. of creative supplying like their in CWM field. One integrations better with such making over very that collaboration a Smartsheet have the we engaged and production well. This Smartsheet power CWM while demonstrate Dynamics as smoother presentations, scope the deals Microsoft at a in with thousands are app our globally, full solution manual our meet experience primitive of of employees only able e-mails their the and involve events a of delivering best-in-class spreadsheets, We replacing scale are decisions required to and worldwide. company competitive win processes existing a opportunity with informed highly Dashboards scale. mobile products capabilities were tools with global and And quo initially competitive them displacing customer was also a via a to connects teams their fraction with but ability customer of work. from their using knowledge Smartsheet's time the while delivers and their

in we Pac years, the and customers. high invested federal momentum to customers past enabling in with and last are opportunities we few unlocking Europe, quickly government. Smartsheet of the we've year, Asia Already, establish content potential offering their hosted markets in the launched plans In Over U.S. Regions EU October gaining EU, like with Germany.

the our with and EU Smartsheet is The unable of place in this and Japan sales established European right Center scale But help deploy but in them, our a EU of fully U.S.-based its therapeutics. invest management Control into was Region, development started able company therapeutic Enterprise expanding Building Smartsheet company market office the One to we for this platform treatment both with privacy requirements. Smartsheet the in due we Smartsheet to was data be Advance to release on To close, to using to Region, our modern grows time biotech are year. investments, and cancer company leveraging out View work on manage rapidly. right workflows. international the positioned the Germany fiscal a Silver will as Dynamic at

more them latitude tight We I great exceptional people In need market, going team Smartsheet product never people sales, by things. tools, directly have do expanded XXX for making and choosing to hiring the years the our and felt we Customers job and a success are giving FYXXXX. resources they to in are growth are we numbers forward. more about investments certain will our in marketing the support across record and come. our than

it turn to I'll Now over Pete.

Pete Godbole

everyone. good you, Thank and afternoon, Mark,

mentioned, Mark strong with As QX and that accelerating our we billings across full-year exceeded the results growth on a finished board year the basis. culminated guidance an

our to through product continue the offering sales our with a our earnings presentation that I and the fueled financial to our by references call. all Smartsheet business, on success now the before was our continued fourth increasing results strong full-year posted of experience execution in and non-GAAP expenses We our momentum results and and for basis results in the stated, platform, and and operating reconciled otherwise are GAAP Advance are will awareness go the by release teams. Unless quarter. strong to

annual million. For cash up billings increase operating full-year $XX.X of XX% the free $XX.X year-over-year negative loss We and $XXX of we year-over-year, total year revenue flow XX% million, revenue million, nearly with $XXX.X $XXX.X up million. of ended of million, $XXX year-over-year, the of ended of FYXXXX, a million with recurring

representing will of of was I million, came year-over-year quarter details fourth results. Next, up in revenue at $XX.X additional million year-over-year on representing growth revenue XX% Subscription growth $XXX.X million, our Services Fourth year-over-year. XX%. financial revenue was XX%. quarter provide $XXX.X

to billings. of total. at our billings X% of billings Multi-year quarter year-over-year of XX%. approximately Turning Approximately less $XXX.X representing represented growth XX% monthly. Quarterly with annual, subscription came billings strong semiannual in total million, billings. represented the than of Fourth were X% X% and

a with X,XXX. These of year-over-year on from coming ARR with XX% reported customer customers to metrics. now segments number $X,XXX over represent to now The XX% $XX,XXX is grew of total with and to and of $XXX,XXX number grew ARR percentage customers customers over ARR our XX%, of respectively, Moving The XX% over X,XXX year-over-year ARRs. our XX%. ARR

of improvement the average to We rate retention further remains domain ACV $X,XXX. and below QX. year-over-year XX% grew The rate XXX%, dollar-based with full net point X our dropped a quarter Next, churn from a ended percentage X%.

retention expect rate to above be For our FYXXXX, net we dollar-based XXX%.

financials. the to back turning Now

gross XX%. total Our was margin

was subscription QX Our margin gross XX%.

$XX.X strong Overall, overachieved to was for our operating We revenue. the quarter due FYXXXX or Free expect cash our gross margin million remain loss of X% against negative in above negative was to XX%. collections. flow $X.X which million guidance

basis to let Now billings move approach pre-COVID providing a by in Starting flow full-year free be guidance me FYXXXX, cash we will our on and only. on to guidance. reverting

basis to billings the the our growing the growth and the more expect we our and of to the percentage occurring in Given quarterly billings seasonality then towards weighted in of contribute roles, cadence expansion quarter additional the in be The year. back the half year, business, with front-loaded growing sales reps first an of management absolute new in-person lowest on that towards the an factors quota-carrying and internal the promotions of to kickoff territories, of or March. hiring this building back sales are seasonality

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

XX% XX%. to $XXX range representing $XXX growth million For expect are to to to in XX%. growth Billings million in the of be million, to of representing we full-year of the $XXX range to of be million, FYXXXX, the revenue expected XX% $XXX

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

flow We and million between cash negative negative expect free to million. be $XX $XX

we short-term global flow awareness, margins. cash To see with in combined improving both targeted expansion investment brand modestly while into finished tremendous expect in impacts, fuel incremental and we continuing to momentum, continue year and which multi-year investments we FYXXXX capacity, expect conclude, the free business, our with momentum opportunities international Given this we FYXXXX. with

high in opportunity, our conviction invest will growth and appropriately. continue long-term We we have to

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

Operator

with first of from [Operator Turrin Fargo. question Instructions] Your comes Michael Wells line the

line Your is open.

Michael Turrin

Maybe could Smartsheet for Hey there. questions. can taking displacing on I what competitive that? share, what's drives you driving Thanks. Appreciate differentiation you mentioned other the some Anything else just the around CWM guess today? a you spend Thank and first, in you. remarks. also prepared you wins Mark, moment

Mark Mader

with when a prettier, look when to it's customer succeeding, compelling highly have happen was it we I had the were or in who really the and we an have still are we bulk And portfolio more faster, on displacing, seeing as rationalize. a encroach presence. we at competitor really security one of growth sized efficiency front, traditional the at differentiated. larger quantitative. business would think we looking people functional as and account. occasional in growing they the move them. to in investments, highly it's tools more while opportunities discussion a that sense business around you Again, very think to, that a It's but I why are nodes drives that workflows, the confidence in may needs, few to is looking a companies a are really nice meets And not notable I as really land have compliance If again, on things other Yes, say, tremendously a where for the was win we're that's wins displacing are cases, and some really competitor things, it's it platform can that in opportunities conversation either that their your on they is within qualitative

I can integration heads to provide. able that, where post. really think and their Center And the I around Advance things Advance nicely with simply are others statistics scaled with proving been offering Data get we've process don't people those out is such, Shuttle, in Control the think,

Michael Turrin

free may. expected. operating level. helpful. very in looks have would It's pace year close XX% guide I flow one coming the bit The cash for looks maybe on that a in guide The backdrop Pete, if that than target more, margin breakeven getting lighter margin to

maybe of the coming then are margins So could between ticked might investments gap where those things off those you couple you heading. remind what a the us And can broaden year? revisit in two we

Pete Godbole

So free of sort and should think by and margin. Michael, they're you going billings revenue together, flow lagged and cash sort of op of

when billings billings reflected fairly in guide. you That's a margin So going about. op go flow, think and after is field hiring revenue, itself guide represent in sort in be the – going guide is about improving large which the There converting gap, lag we've the what's the growth to our opportunity of are capacity Mark in to of sort talked reflecting what's that's and a between to we to cash provided. this the

following a free So flow numbers. cash you lag of see sort the behind that as

Michael Turrin

out year. Appreciate Nice job the it. Thanks. closing

Operator

next of Your Zlotsky question comes from Stanley. the Morgan line with Stan

Your line is open.

Unidentified Analyst

[indiscernible] Hi, for Stan. guys. is This Ben on

and market profitability first be Maybe from given a beats of back you dig seems bottom to reinvesting in. question market through I'll the the let thinking large to especially in line this start dig me think into can potential returns between topline environment, the I just opportunity? investments, attention your trade-off to versus more into of paying How flowing sort is our about which there, end. team business?

Pete Godbole

take we're the how we're of question of cover broadly. about in first At as of more your I'll terms it I'll thinking part. Ben, where So end, that investing, the sort sort

international these part we're marketing opportunity. It's capacity. points year-on-year, productive. it. think that's it's customers, That's investments three go increase emphasis order, will. them and focused you first investments and of the but global Orders on an of making in first, with we're investments, getting about after ramping when of to international this And sales if in our on magnitude, that's making So board, the with some about people, in ranked greater across you fuel and enterprise

lastly, enablement of part or the getting is a people customer are. customers got awareness we Think and to about to sort we've in it top as global mid-funnel, up sort of second They're spending. The pre-COVID who funnel and field And it to of know our engagement level. starting to in-person of get resumption know closer

in three unit really with question our that marketing your those sales it. solid thinking and talked are factors So then CAC. this and And that to seen. about business sort of are been the fueling eye numbers we LTV how of Mark of getting. how terms we looking driving the we're tremendous we've of we've it, think signal we To are investment. we're like customer about this metric economics the are the to of how we driving momentum to a That's thing, specific invest. in ways sort Those

Unidentified Analyst

feels then net one range. XXXX Got almost implied low-to-mid on it. acquisitions. stays growth, customer roughly fiscal maybe more new like That's XXX say, billing guidance And limited between like XX% helpful. with billings It let's revenue there's implying, Especially guidance. retention

So maybe of for you're thinking the about pace and guidance through XXXX, in there? how walk implied logo what the that's new us fiscal acquisitions just

Pete Godbole

Yes.

It from a expansion we comes So comes you net think total in from – a customers, rate. the the dollar new spots. on customers from it build comes think billings, should few retention new if capture of like and for it you numbers of

end as growth, the Mark both enterprise of at the we the there. sort numbers and stated as in those are we've we to as of thinking of new healthy number net And contributions rate we're XXX%. you sort well of license land spectrum, we terms in from on So at expansion of we're looking at guided as If said, new. expect focused levels, land what a of the expectations lower logos dollar we retention ends and

Unidentified Analyst

it. Thank much. so Got you

Operator

from Iwanyc Oppenheimer. comes of George the line question next Your with

is line open. Your

George Iwanyc

they strength. questions. of expand Smartsheet? give a Are also once cases start new departments? my how Thank they you sense And quickly taking following in can that the for start with you use the do seeing across us cross changes you maybe start, department business people Pete, or across to start just to on any up

Mark Mader

We is really Mark. haven't seen – this

from what's deep that – demand veins. years. process, are vectors. is three really those Those haven't over driven and of seen a This notion of programs, I big last the Project-oriented people are difference that still much cases most function tip where diversification It's more the it so use the of area. see really the that the in The the start. very mean, serves. process We couple projects a we spear. are It's deviation the isn't or

come into So we've in and motion. we in in, into seen land and finance. not it from may deviation marketing have It a branch really the operation years. and But expand observed then few or climb a remains what similar last

George Iwanyc

And the cautious European adjustments? your right. they we're with right making are you that view spending of any All customers? given seeing or a taking Or any now, are seeing more Mark, bit environment changes other

Mark Mader

our a new, selling have customers, not all at existing The landing yet. we any We around seen of not motion have we seen have No. to blip regions. in it

George Iwanyc

Have been in for built the of outlook? right. kind All you guidance in your geopolitical any conservatism

Pete Godbole

environment have stays So similar. assumed George, largely sort the today we've of we

turns have that current we but persist environment environment assumption. we turn sort our of So is in assumed not the assume any big negative, that

George Iwanyc

very you much. Thank

Operator

line from Truist of Terry next Securities. Your question comes the with Tillman

Your line open. is

Terrell Tillman

Yes. Thanks.

me hear okay? you can First,

Mark Mader

Yes.

Pete Godbole

Terry. We can,

Terrell Tillman

for Thanks Mark, and my Hey, Thanks. well. Aaron. questions as Pete Okay. taking

organizations? enterprises about what you lower getting is follow-up so The for Pete? to had I'm as far are the it first what customer of or a to you, smaller for it relates Is Or seeing in is get of way the terms adoption? is midsize And bigger question friction actually of Pro I going? then curious this a actually Mark, introduction Plan,

Mark Mader

where grow, starting, effect right. or make and faster self-directed to internationally then a it's place have both we segment sure seeing an spectrum, people they apply is M can organizations. who's signing that large understand the that start all rates, and it's capacity to the Pete support then and really a and an up our it's S that if state And thrive. improvement you up and people with have as start enterprise-type is in across People putting to well? rate a when And the see and if Terry. job small Pete? size to conversion in all conversion mechanisms those But a field or large question, the we're that a not have It's we down customer different it's to there of see potential high it And to ready Terry, domestically we're them. customer, and improvement sizes. Was need interest the yes, for there from

Terrell Tillman

it. And don't Thanks a the just so Pete, Yes, me, did. so notes front Yes, for that, I Mark. my Got I in question. I of Day follow-up have from Analyst apologize.

that to Does sales and international mean what of about Or in some ramp growth. guidepost. kind is target? about capacity. So change you've could more the some help revenue the are going terms areas, here of part you out of just regurgitating significant $X I think of of this of this need for kind that including called anything longer-term you. But And those to kind to talking a Thank path pretty ramp billion? this investing in getting

Pete Godbole

not cash a guided will call driving sort growth. free all, sort the I what we've sort thing margin salient year-on-year, what that that flow to sort to first relative Essentially, given to away from responsible of Terry, and are, trend year changing of to you of shared our we've of a part the guidance So that's we're the anything XXXX. improvement of of key with And point only for we've you imply take you. is fiscal

Operator

with Your KeyBanc. of Steve comes the next line question Enders from

open. is line Your

Steven Enders

better taking far a outlook competitors for so and that little sales the get bit I Hey, even making thinking year. and sense capacity, closest I for here. have are it you're the like spend raised question this seems your next you want great. investments of Thanks to guess about for all just the in how

thinking So about the higher any model kind I gives to this of could potentially pulling you from how you guess, Are putting forward? that before? about think should ROI XXXX in kind what investments And the have the those of kind we sales maybe that on of you're impact of forward were the work? confidence going

Mark Mader

Yes.

is really I uptick is factors. the There first. by few of think of massive the a a confidence a driven category, convergence in that's awareness

much it's now. The offerings packaging have, portfolio, new almost of last quarters year, fit we're we out. proving new some the like bringing second is this we're Advance of the market on products three into based or is into in product QX was And whether new the

take root. the is really So starting evidence to

other somebody, The the and million and modest of landing piece XXX, then XX, growing tiers for XX, contribution from we have out is beyond. through a $X.X someone go-to-market mechanism figured to up standpoint, the

So a model confident signal we companies the state being that's you entrenched in, that. market feel of And at have ability the to category, reacting a that's world's to customer not with a overall. you and sort as high when customer of that just is look well, at in invest this to feed very largest deeply that the

is So you now. Like on you light the about the I've right go. light, green see green talked on the past calls, when must often

greater from to the been improving at year, have follow to the LTV the than last this. digits We look it's CAC, over improved you And to high like single when has XX. which

investment. LTV XX, great manifest in itself when going at confidence the of longer you not gives horizon But is to of look CAC, in which you sort measures. in-year north that's Now to that

much pushing So forward. very we throttle the are

Steven Enders

very That's helpful. Yes. Okay.

and of more part point repeatable finer it Smartsheet guess, that? right way So like the on are it, go-to-market kind a to of a it's the kind to that that motion frame Advance, kind is I sales that. put going after of teams a sounds becoming of mean, kind of Is I

Mark Mader

Absolutely.

companies, transactions Advance both our new, the up way largest at customer. XXX to over have midsize, We now all

segments domestically off And And doing we're So something riding in that that. we're and again, it's of down. pattern-matching all the just up momentum.

Pete Godbole

question way the these what's of one And areas about mentioned. just the scale They're the those investments talked the as asked, expect across like? Steve, you we've become would it. future of field these model areas we resumption That's all Mark across opportunity. you line resources So that items. major is the OpEx look productive, in model And

Steven Enders

the questions. taking for Thanks you. Thank perfect. Okay,

Operator

of next the question from with comes Your Mark Murphy JPMorgan. line

Your line is open.

Mark Murphy

very you much. Thank Yes.

very billings we've surprised, of So seeing in just the across sequential And little your industry. opposite the actually than stronger been I'm growth It's norms. QX a seasonal is strong. the kind

So needle-movers unusual deals affected is just two in if might any Or or something this unusual. that that there one or Were discrete broad-based have was wondering there that? mega QX? more I'm anything was

Pete Godbole

So deals, it's Mark Mark, customer momentum, interest. his as the We're net in it dollar-based earlier Advance, feel broad-based, demand, the referenced Customers the answer up. nothing value short elements just just of Nothing is this. comments. out unusual, board. of solid large seeing are ordinary, just across retention seeing all We're the it it, of seeing across is the rate progression was

Mark Mader

tens mega and XXX,XXX on hinge welcome We this But did not deal, XX,XXX, this is and deals. did XXX,XXX-plus This quarter deal. the on mega that. of a Yes. but quarter tens tens and not right, hinge

Mark Murphy

Yes.

low-code positioning management hands are kind you my Mark, to emphasize people Interesting. of from given question building work so perspective buzz the more those low-code, Okay. Just the the no-code? of the currently just and try Is pool much effective to there's it much is second imperative that the or subject to so products experts. actually of for pipeline. matter around put into there's

just and I'm extra linkage due of side? able if to kind your the So low-code to realize an you're tailwind your curious strength on

Mark Mader

wouldn't their business key the them now within that's opportunity say unlock the that's I building, sits recognizing an helps there's people mean I but say tailwind investment units. value is that tailwind. key would I that

have So make do IT my actually opportunities progress. unlock my business big I I front, they're to saying, stretched how on units pursue, I'm to

starting anymore on work enable to call, team. technology to the that that mainstream. and have platform, that the nice I'm for product solution is is my people it management call natural isn't case And a articulate. don't a can saying, business no-code I you I But management. hit that say, investment then of centered map the for is think But like, not that's Hey, area philosophical I'm predominant to would sale call that's use and when no-code and starting So looking work can I inbound And business that working, to problem, a feel up our they around is business to Hey, this again, they hey, thing job case looking or they the say help.

Mark Murphy

marketing performance will? percentage the of versus we're sales vector investment that spend or field sales, revenue, able is understand that just I One – As budget, guess increasing just direct or decreasing if this the and fiscal look one, year? I'm just on a you all you to I'm of within trying to marketing? Pete. Okay. at could final comment advertising on If digital

Pete Godbole

combination various when of taken demand as that biggest. of gen, So Mark, we we've think marketing It's PPC channels. is of not this spend a being of The the approach channels. the think one our we

Our us through organically through people it's biggest sharing. is find through channel It's viral have content. adoption, how we

your answer yes, with of sort investment. spend question, with sort way our we've percentage up is our sort but the it's of to we're for up, marketing QX. the That's staying of of way it ramped So consistent

Mark Murphy

Thank you.

Operator

with line of Research. Your Wolfe next Alex question comes Zukin the from

Your line is open.

Aleksandr Zukin

And to this quarter. I know motions, there of talking sales – – is highs I we new specifically, you and from as your these extent? enterprise you But two Hey asked. unlock mind How look year. which have the I've think before we and the how sub of go there back XXX, retention kind I got of mentioned questions best-in-class around I an X%, expansion, what I guys. you these follow-up? rate of hit point. we're both my guess at with quick that all-time much the lower like aspirationally, mean, are peaks Advance among increase at of we Congrats that had the gradients But unlock already, churn to room if you're come can new at before think, And is a on associated next much go? the to also, some new [absence] XXX, XXX, then climb almost there as – the is Most some is are, like been is more to cycles about motion

Mark Mader

would are as within we say Alex, whole. Yes, our the single-digit still at customers penetration I a

from I expense loss or think upside, X through to greatness the reducing through achieving X.X. So of you your achieve greatness, don't savings what

number consider expanding. greatness accounts, would of when But our I wall-to-wall, You lower at fantastic. losses, many with a accounts look largest when achieved even big And so it's our massive but paired of our you accounts by that we – have upside. have still

the guide typically signal we're on we seeing. based So

just year. say, a be max. capping Pete expected As north to to we're of XXX ourselves not We're here's this said, coming

adjacent things, serving Like, we're offerings advanced DAM. portfolio will we cross-selling expansion, exciting to either like think capping not ourselves have do really continue capabilities, cross-sell We And yes, up all. to at I a in.

Aleksandr Zukin

everybody's do replacing to the the made least. earnings you've the of [indiscernible] at talked probably two-parter, of It's share? that of to this some time those have next spent now a opportunity think more take COVID, then, this you're this grow. is and to private grow. the a questions, mind. out and some about ones And investing even race investing in money investment category think, are to guess separate you guess, to the that I the point but asked that well, companies kind and investing Is to you for first a three been I one spending the of I stream I want see this are it. the you call more made extent? you you that talking consciousness. – point opportunities Got that And dynamic And Again, of the about it's because on Is as have, around companies, on higher? pipeline the coming do I but this to for in is people an I connect about I public all year To vendors. guess, two – like know that point share

Mark Mader

the thing else's is our and I move. Yes. on say to thesis I'll reacting guess based posture investment someone isn't first

would marketing, when continue identified we're on our we all of say logos, and which more and customers. starting value present, race? about that non-PPC I terms be proved around mean, our those second investing If gladly our it's what we optimize provide of base. grow – maximum are this year. I to our have think So within more our to run field we to in plays we happens them. to half to another player the scale, in out a add in displacement, who's investing existing clearly there there are are Is those looking would in we based the observing to all job

displacement. of greater absolutely our terms where for we it at spend best think in stage return But the we hunting to value If consolidate. to – them. don't displace the show happens take market that is investment where and point wouldn't try our is be is for time, I like focal on say is go will someone out, them the But there, company. the that We

Aleksandr Zukin

Perfect. Thank you, guys.

Operator

line Your next of Hynes question the comes Canaccord. with DJ from

open. Your line is

David Hynes

with motion? are guys. a more there? strong a the customers sales Mark, land with still landing active Congrats on Hey direct finish you that are year. that taking self-discovery Or largely approach the Advance, is to the

Mark Mader

DJ, come, Those an in assisted motion.

So we way. think land fulsome a it's really our duty somebody in to

looks – them book get started. guide helping the understand to what that's like the what So almost

Shuttle, are. are platform more Dynamic those understand So to with what people say, would Center, maximize to sometimes practices when how And can I are advanced done Control How really View, investments. super you those and I deploy processes how have best customers say it? where Data an sophisticated I for Hey, my derisk hungry can others useful

field customer rep more whether even that do one that. I So or as sales looking there's we of capacity. a we a say functions that's appetite out again, very things And to or would other for the through we're a build strong success have, our of customer

David Hynes

for around then, And Pete, you it. follow-up be would the the Got numbers. just Yes.

implicit you So that of us? year XX% was XX% headcount in it your growth this gave operating know you in grew fiscal kind like What I headcount, targets XXXX. to loss targets for are the

Pete Godbole

sort DJ, get would about change growth if roles grow, dollar of of sort in model. And talking terms to of we that We're adding. rough that various a a that operating you what how many gave terms, in the field approximately – going of will as sense unit capacity three anymore reps you I field part about these think significant be the So or points of year-over-year would think of that margin we're you to add we're be number of mentioned, in roles. a customers want just not Mark if help

David Hynes

Okay. Thank Got guys. you, it.

Operator

with the Brent Your from Jefferies. Thill next line comes of question

line open. Your is

Brent Thill

Thanks. was throttle? almost bottom to shareholders Xx what you start on How you what the I line? do we Are $XX the $XX record see new the on model? side? guess the negative are to three add mean pull Where out? of the And willing any the Mark, us you're kind little starting expecting. I'm on, multinational granularity point returning seeing to more million you a think where is loss you Pete, new going like that? That are on would you're there And you loss. you a – many Street leverage operating of could ask in of two seeing I commitment to surprise, are wins? business what long-term seeing commented million business back at to positive larger, us color was you're do no the new to years levels out, What dynamic years give a about to asking

Mark Mader

Brent, on side. the new I'll start

we're seeing improvement a new deals. modest from contribution in So

of we're thousands happen So starting of the some evidence. transactions new that every quarter, see to

XX deals, Advance new to the were customers. have Advance we I XX% new deals so think of

it's average it's – really still, a XX%, the sub-$X,XXX XX% still year-on-year, figure. the is up So while

we So Pete, expect a in And to want contribution. lands. of on second it's speedboat-like the some question? half not add that huge that of you very remain to the terms color

Pete Godbole

Yes.

op about you question margins. Brent, asked So the

So margin leading let's ones op and free that your billings cash of you're that's question with indicator, When think profitability, flow of are the broader the sort then we of and profitability, I think sort revenue And of asking. start are right. lag. how

minus cash stays where positive guidance if and year this exited that we So be and I'm we've improvement of an be cash And assume to scores be free free current X% X%, speed to flow wouldn't assume and to we it I the but take from way is, sort minus if guided in X%. giving – macro on not would I I at flow unreasonable – go minus for of sort it FYXXXX, FYXXXX.

is flip the what question of op end Now your about margin.

Did because in it. the as after I question? answer think lags, margin following op periods think that your would is revenue I of way of you So should the

Brent Thill

there And guess, XX% an you're Yes. so easy you you all sales, into the awareness, Is the put giving about awareness, the think brand that of sales, XX% going – other – I would us? brand if is XX to of the quota-carrying not how and this but bulk you bucketed international when adds, sales business international, incremental the bucket? way to explain

Pete Godbole

biggest that well would think field enterprise biggest numbers rank quota-carrying. international field the say it's you the order, I as And should higher and towards in Yes. waiting the a to slightly in is the within capacity. as but capacity, across board, there

enterprise So capacity. field think I

then you've that magnitude, first So smaller In of awareness. element. as got think your

activities sort So smallest you be as think then of know of are. and funnel, its as sales the kickoff field-enablement resumption is number we or of And Engage, whether a getting like that's which to aware hold that Smartsheet events or awareness a like the launched. result will portion about the we people is customer in-person this just year, mid-funnel, who who top come of T&E or being

Brent Thill

the color. Great. Thanks for

Pete Godbole

Brent. Thanks,

Operator

line the Your from Bhatia next with of Arjun comes question William Blair.

Your line is open.

Jake Roberge

Jake for This Arjun. on is

the front, but never has more activity how awareness driven much sounds of it which approaching could category Pro teams you funnel in onboarding of success are of and kind continues customer how that versus is size stronger, SKU, that adoption? funnel of this So increase? on actually like of introduction the to curious just then customer by the top actually investments remove initial just as And friction from been

Mark Mader

CAC, the would we deployed do the Pro delay opportunity. when I we're in make investments and terms in last immediate of the the to comes in and what improving we a say in gives of that there in the investments out confidence would second the be, response QX we it that of a for QX, suite and multiple these funnel, say Plan think and more right of in with weight of profile sort the curve the releases two more in card early top investing mid-funnel and Plan, I up to I you had every I how think had terms think, able people moving as on bit we that. quarters. of half I Pro the will LTV

I overnight think Plan response. almost again, instant packaging had, Pro the an

more an year. how it contribute other And we into we're expansion the say – significantly we motion. higher-value this expect think we terms those the terms applying seats see areas, the of do I we in expanding resource, more of people in So and both assisted with beyond can the these to maximize

we're deals into XXX again, Advance XXX to So only it.

to opportunity And We every how and that out have customers, we there. XXX,XXX passes, I again, well there's with capable we quarter refined deploy those put lot over think really people capital. of that a

Jake Roberge

then And just as great. That's follow-up. a

for next the market a retention, So should massive how obviously, expansions XXXX guidance? to with continues between, net seat year, bifurcate obviously, so your to about people but be Kind actually of best-in-class. that those Advance, How the the adoption we thinking into starting think of still should platform. about and how delta fiscal we also, a approaching on expectation lot you're see for between thinking climbing growing you're robust about you're

Pete Godbole

we've of you successful XX%. things been billings of the to as was extension It guidance, Our for sort XX% contemplates gave we an at.

we've If That's part a the year. not We're to capabilities but deals next Think thinking done this just what's of continue you into about for in. built as terms XXX Advance, broader in Advance, product about it that of fiscal sort of start year. suite. expecting

do The sort what part net of retention the dollar how rate. around second you of asking was visualize were we

we're think to we're that think to the year. of market the potential the think models going for XXX get we're expansions, this you but leader be with trend sizes. sort after, we how going that they continues. of customers than have to contemplates really expand, If different industry expansion that an They're being different have. of bullish on today And we next And we it bigger fact number of is going going

Jake Roberge

my for and taking on congrats quarter. the questions, great Thanks again Great.

Operator

line comes Berg Your with the Needham. of next Scott question from

is open. line Your

Scott Berg

on the quick. Congrats guess thanks my for taking quarter. pretty generally everyone. Hi great questions. And have hopefully, I they're I two,

on one you called that the first is Mark. The out, replacement

earlier, a or I think I I over handle you replacing How know, – doesn't vendor XXX Alex because public call. a know, on time is they have platform to mentioned just think their don't that XX scale much don't added of was first of the I last from, that premium capabilities – versus the X,XXX all some I to the moving of seats couple capabilities, years? it

Mark Mader

when tremendous easiest pain there's a I think customer situation. displacement within is felt

breakage problem. they company that team, there displace opportunities move that we see most XX that's The situation. within benefits, breakage case, a administration, to a have small they're case sprouting on one see expanded may it a this being In player. node. But to or and just breakage what about may And fascinating it's security synergies more the I another now. you, CWM there's of node we're they we expansions, those $XX,XXX, when going mentioned call, we that some over in vendor benefit. unable Do right proceed, other And was nodes. other that And node, the And case, you not around have past within in account that forced another $XX,XXX a and when may are So other you all that's be but which like talked and where one of are they a plus to in go, there's change. that can't player pronounced.

scale proceed, we the never when But tap basically would I as situation. redirected most follow, And again, out say, people you quite they and so one pattern it's and that – replacements. cannot there's straightforward cannot not those they or are, the

Scott Berg

greatly growth. from And share-based follow-up than revenue Helpful. the perspective, expense compensation rate XXXX, Pete, faster a increased much fiscal Got your then, in it. XXXX over of

– share-based it's comp, math. of XX% around year-over-year an comp why marketing concern in an Your you seems that be commonality that think also according going kind some even outsized And to kind to expansion some – guidance that I between be to up for it excess all you. outlier, about is growth going such maybe kind that my to accelerates of further there share-based and of XXXX spend the there's about that's Thank sales implies rate [indiscernible] of to are but some

Pete Godbole

parts. So two break Scott, let's your question in

then XXXX. and XXXX direction of a little about bit we over talk can XXXX sort First, in

grown, all, personnel goes So strike up the is low because, expense ago and first we've people added number of that is where price net is years we've four price all at the of higher, whose in people the significantly stock-based grants stated you're strike FYXXXX higher to reason compensation in narrative replacing people significant much fairly stock-based that were year, of equation. adding becomes sort the compensation FYXXXX. as on Like this of a you XXX you're replacing as part a wide of the

what a same Now sort capabilities come next the we're field we're capacity. basically of customers talked is trend, When This in going comp field goes it. be, about roles large This equation, stock-based level. adding part, personnel. we and going with our field take FYXXXX, call to people is adding to a with the to that of sort to into in adding the I

Scott Berg

questions my and congrats. taking for Thanks Excellent.

Pete Godbole

Scott. Thanks,

Operator

comes of with next question line Jaluria from Markets. Rishi Your the RBC Capital

is open. line Your

Rishi Jaluria

you're Pete, you awareness. Thanks Or you to questions. the driving Mark, that incrementally I within for that more follow-up? types the so specific market a to Nice a about bit wanted specific in continued that customers? on Hey, my much then business. got making of hoping market guess in this starting out, invest, kind after? momentum in Aaron. you're more you're go specific awareness? is trying that to be what And double-click of more areas to intend see of to Can I parts the organizations, taking drive I've broad-based Wonderful. And little is investments terms

Mark Mader

Yes, we really across phases of split the it three game.

just put water look where have our have mid-funnel, to, top the opportunity, the significant to the penetration I set to the model, you to lure you how not you a our is accounts, part companies percentage And in a single-digit call do presence, earlier, opportunity auction where we have have fish. use funnel. of expensive largest our at as cases. already of really the when get we We bottom our the PPC next on within good it, have I present an yourself funnel, Its spoke

again, tailored part So a is ABM. big that's of like And ABM that.

those very it's marketing – Fortune areas. into we when specific So at look in Fortune the have X, the so looking penetration many at X, the very, XX% we with

realm, businesses that how understand opportunity can those there's years. management PPC their think is really I helping to which the digital the for yielded outside is apply in us CWM and also have content really of asset they well over customers and

we've areas to in-person to think events the two around looking forward have engaged I kicking Pete this world, now We other an off the event that again very years in plan to, been in-person. the we're much spoke COVID fall.

the We just is we on we've was expect when smart a the large made of you We're in again, it. that that think customers to asking to be at been pair which the second amazing. that half have I side now forward the investments investments. very But year the off, event, well. marketing takeaway about international as really We to with sales domestically, are had really looking looking our kick look

people So it's when we're low the and not of funnel are same Japan, talking top, about have into Germany the setting mechanisms, sure it's those there, in getting to put make mid up team and people type just successful. support

investment year, say point we have the on of I really signature international, sort the balanced domestic would that's and attack So strategy. a next

Rishi Jaluria

customer maybe it's back competitor using is of example grew helpful. Is customer part and kind up going call, everything gave something what let's displacement. where hearing one another of the that you right. was to it? I indicative using is competitive it was where which on there existing the All you've or competitor, everyone there know Thanks. a then – again, that of was other was business, more new which departments a and Or the do that a about, Wonderful. about customers around on you Smartsheet of narrow department consolidation that talking seen? type they them. more just and the a really And That's is an Mark, yes, And a topic actually indicative we're of Smartsheet are were way? of

Mark Mader

But XX. the way within time, again, best large But of entirely. out your versus is again, Yes. one company on get on to all along and point will landing capital happy that land Those else that replace try that look isn't it situations return let time on units, at can become they're just you it occurring. the the return area, occasionally. tip if we're and in around mad. to to one business you I everywhere don't when and that moving If And there, and in your you return is eventually the be these XX trying think the you one, and breakage on do return happen like grow do fantastic your someone when time, a you where the knock brand one over node nodes dominant confident

Rishi Jaluria

That's really much. so you helpful. Thank

Operator

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

open. line Your is

Keith Bachman

bridge can you I'm which the you cash they Many Day. start in to your And op margins are XX% help we steps In related. questions the be at provided And operating still Analyst answered concurrently I thanks. free my to a going us clear thinking income. ask just previously guiding margins X% bridge X% this with Should know other to FYXXXX Pete, flow you to you, since to you're not I'm year. words, what to this means. gradual that? negative on that

you Mark, cash to back bit mean than it billings. broader mean everybody ask billings quickly my Does that that And reason a made, free bring that You pretty what it's and little more FYXXXX, – Xx these given expecting? was thought want – follows a I flow? comes the I to said loss, significant you. concurrently, revenue in it want back Does we guide the about if to

in money think, predecessor, see course can spending is XXXX. do your you couple targets you don't question single-digit customer. of loan what established, lot have XX%. penetration, times you and cash concerns you're cash which low flow investors to a mentioned You've cut you now do that XXXX. you have to the going it what targets margins great are the we there's flow had Pete's penetration, calendar is, dollar that competitors you cash Day, year opportunities. a And operating get – year do there's to out from At of free the the that Previously, of per XX% again. The during free The average free if pushed Analyst how I tell by margins a because

haven't XXXX. you generated cash go been We flow. back free to – You've

investors What if been So ultimately generate a while. we that your you around flow you will free company for and look out comfort cash has into can FYXXXX to meaningful give beyond?

Mark Mader

Yes.

start, Let follow. let Pete I'll me and

I right. to when is think say that I eight into the what mean that account by not that's of about revenue it's contribution, fall really not important average I'm trap. single-digit I figures here And approaching penetration, thinking

connected see that. problem. which some evidence go-to-market north to that to you ability see be in So at XX, XXX,XXX are get would an and we huge, you accounts that people where yes, the a is can you CAC, of If motion and you have we invest X%, our there, that LTV like and see was platform. everyone When the you

be inside, seeing of record leaning because If are confidence us great you a efficiently, that that to But climb million-dollar no are it, deals, bold on the we $XXX,XXX in being established, would effectively investment forward. seeing of giving able evidence what's and had record is because customers posture. Pete? we more being

Pete Godbole

billings. have on to is is sort shown signal, need flow, – the year. on year, sales specifically. would you But taking that ahead flow we're ties that why the team, the the free first, Keith, there's sort So your year-over-year, a it moves At your the into it you see question seeing we're the said, improving of question that that. They're why next in explanation indicator of because does free clear we've leading so op to but first of revenue a very you, the and we cash reason support you're the is fiscal doing for free you we get as deliver flow, And cash of what and cash metrics the hits billings. a Mark margin? the able what sort hire building parts, to when two And end OpEx, – of collect you it cash, the

So about leading talking I'm it indicator. as that's a why

as Now X% are shown they're guiding X% to so a negative XXXX, to numbers, to minus improving. leading we've indicator, from gone minus these in in that in XXXX All we've X% XXXX. negative. We're X%

giving guide, FYXXXX, be Now we when course, should cash a in but speed you – current we're in what look with at I feel is say, there's it and outlook? and saying I comfortable you As the flow not positive. said,

Now we're something changing out. other by nothing model gets that That's on, talking blocks that way point in at the the some FYXXXX. from We're there. you years gradient shared along showing Day, is we of We're building standing you you two there. with the about the the just Analyst

Keith Bachman

sorry back good opportunities. to growth just, Yes. you still – interject. Mark, take if you'll still see you flow I to But cash growth guess like good come I free your margins it see and sacrifice comments, if sounds if opportunities,

growth I perhaps too or over your is as potential rate billings for then as your optimize there, potential you'll take your current from So on long growth and penetration margins answer reading that even is what much answer? into I'm

Mark Mader

Yes.

demand seeing we're demand my demand domestically, I we're And derisked confidence field in doing with the in year. this I capacity right margins. taking the the we're on and so time. is, the think a within environment is demand seen we've I internationally. the op of This time environment, what And diversified now, grower precisely year seen that's would investment is seen not desire the that's mean a of this this a – this being the XX% not with seeing our again, think new, situation seen like I XXth be you to pullback. say, And in at a opportunity think in pretty for a – in lot. XX% firm is our not existing, when lot that's category, Seen And now. ahead I grounded about thesis us us. have our coming

Keith Bachman

Okay. Thank you.

Operator

back turn closing the to for That for the call Turner time we remarks. is all have to Aaron like questions. I'd

Aaron Turner

Great. today, Thank us for quarter. thank you everyone, again and to you, joining and Josh, we'll you, speak next

Operator

call. conference today's concludes This

now disconnect. may You

Smartsheet (SMAR) 16 Mar 222022 Q4 Earnings call transcript