SMAR - Earnings call transcript Q2 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon. My name is Emma, and I will be your conference operator today. At this time, I would like to welcome everyone to the Smartsheet Second Quarter 2023 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. you. Thank Instructions] [Operator of Head Investor Turner, Relations. Aaron

begin may your conference. You

Aaron Turner

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

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

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

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

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

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

Mark Mader

grew year Aaron, and quarter another QX $XXX.X Revenue million. was XX% and XXXX. quarter fiscal earnings our you, for in for quarter to the billings welcome grew XX% $XXX.X to Smartsheet. strong Thank call million second to everyone

by Smartsheet deploy by their $XX,XXX. continue In XXX globe customers critical the workflows. XX across at $XXX,XXX to QX, mission investment solve expanded scale enterprises As over Smartsheet and to their over expanded

Affinity added ARR We now tier have XX.X customers million was with over saw have motion, We new at Operative, business QX surpassing the companies bookings QX the platform business REPAY, with million as IMAX, million Partners, ARR also Vision Smartsheet and management Services another new Group, payment such We $X now this $XXX our Partners. setting Hospitals, Bloomberg great record. three broadcast quarterly ARR XX ended Health new over UnitedHealth another Industry process and quarter Midwest users. Consulting and more threshold. customers to Logic for wins

additional are impacts and the condition. we not layers. immune compression of to sales In July, macro cycles, impacts expansion longer resulted the some we macroeconomic deal on changing lower in our However, started including business, to month These rates. see approval

our we'd Additionally, hired reps to the sales for previous what in be time experienced with we year past. guidance of beginning at consistent ramp the assumed a the

a We're been enablement improve and tools ramp to time slower than this has training investing productivity. anticipated. However, we new

our a macro taking persists. approach and guidance environment we're low assumption billings to factors, the year Given current thoughtful revenue the guidance electing with these that to full are and

of key the growth on the provide portfolio changing impacting you success of update how namely our details I drivers, more macroeconomies our the and enterprise capabilities our for will Pete about year, in While to the products, the financials of want status Brandfolder. remainder our

are or Whether lets power attachment to advanced of asset drive in that to and as premium customer Brandfolder the they across platform. deep capabilities data Shuttle, bundled most further our purchased add-ons projects from digital Smartsheet users we an rest From continues these Our portfolio that control of of differentiate package base to workflows. across category. multiple workflows thousands our within and customers' which refer the lets on center system capabilities act of Smartsheet operate individually, or management build important systems users to hundreds CWM a work Data our to

to by capabilities is Our Xx work These the since to and range of customers security, our of offerings XXXX. increased collaborative lets DNS Smartsheet leader a An portfolio customers has workloads in a in example organizations. the within that its management connect value close differentiated space. of to unmatched keys massive unlock next-generation usage give management this their InfoBlox,

Over Dynamic workloads workflows full As Smartsheet's organization. adopted implement a control advance their more to capabilities began plus advanced to they InfoBlox to opportunities View. help more enable deploy and customers with that more making. OKR premium up seeing they automated more upgraded CRM plan in deployed In multiple complex summarize and such capabilities. their time, a DataMesh, Data InfoBlox Smartsheet, that Shuttle, they Shuttle faster data between secure to capabilities capabilities systems access Bridge decision Smartsheet teams to and Control need to the advanced and QX, important using centralized departments integrate and see as solution using value set of and create integrated We're access premium large and for Data their and center reporting at scalable, Center, to to sync other

of their least company, XX% with save to They deals still of security investment deployment. the NVX adding further Smartsheet the platform potential their with [indiscernible], and deployed in crown to continue highlight XX% of year. ARR expected $X Advanced, company advanced their company Smartsheet roughly will the grow time. the department helping QX, leaders The of of only to a the capabilities component creation consolidate those that companies. total goal roofing In more thousand over its Through Smartsheet of at and one. that at XXX For their and subscription around technology taking templates pharmaceutical revenue Smartsheet. X,XXX for use as customer choice. retired effort hundred licensed platform strong. to central of of more users expected company's Smartsheet Apps their its to their implemented X,XXX that than than over is achieve million And now An the half only (ph) rapidly where remains is this to suggested View I'd Dynamic its teams used connected consulting last $X very accounts one growth elegant just for biopharmaceutical to and and including work uses. in various enterprise in other and will Fortune of customers Fortune Center customers expansion, value With significant Those of our for executives custom in compared the in are package’s its divisions was of process. doubled solutions revenue CWM number in for Smartsheet and fiscal Smartsheet the allowing views CWM next waterproofing for they spin-off example, health naturally capabilities number to also doubled ROI research. ROI first of organization migrated a happening. information increasingly had has and connected and in users QX in using management now million, based their year, executive Control making on tier capabilities to that from tens engagement its expanding increase teams ensure of companies deployment at users a like to realizing past increase Fortune Capability. to few company provider changes the their favor executive Work resulting consistency for over licensed expanded two important, an $XXX,XXX to pace. rely by has it who company's time the create thousands entertainment This the are senior decision automate as A realization our of be continues are QX, value are This field the primary of now $X this one attention in as XXX show them and IT paid which has the included the on enterprise in gets involved is manage scale. XXX while year, selecting role, This in help them Smartsheet demonstrated is the data over year ARR users rapid motion relevant that's deployments million. XX Most go-to-market almost

for food their collaborative work We beverage also at won standard global a Fortune an management. to RFP company XX and become

management still a accelerating in adoption investing table head we approval a $X.X understanding is a low million over sets asset optimize within space. of win large a RFPs customer this departments. the rational years. Fortune to of technology leadership our this few XPreviously, example, platform years business, the for share but fuel extensibility, across This to demand. dozen more Naturally, growth and Last importance I've for of management helped spent like I'd rare at security rapid cementing the X, comparison, as we've company this six QX, $X.X platform has time several RFP Brandfolder total to delivering XX the head to digital platform for CWM Smartsheet our became a in emphasized that our Smartsheet today, organization CWM ARR. of in approved over thanks significant that this businesses next year, million QX in While of marketers. from our growth are our to to to a shows the globally by key figure is expanded in our for workflow One company lot how company. scalability,

and at new making place brand capabilities other to that will space. resources. our platform templating taking with across of XX to more and Marketing meet through content velocity flow thousands free year. content to by are content And channels largest improved the our many end now, capabilities customers' To managing remain track in Outfit drive of suite management resources Brandfolders' content differentiated carefully Outfit. management engaged distribute and to Pete? market automation achieve Pete. a breakeven turbocharge the we distribution margins to the I'll world. and expanded fiscal time distribution while creative teams over customer to need to our leading confident being to We're conference of consistency. cash is the our position fewer in closing, ensuring market, in new In Yet higher our more for remain leader capabilities, deliver growth needs, asked acquired and has leading portion forward in Smartsheet since due the facing abilities a This impacted are durable the us and of confidence profitability. long One September business. reality brand the XXXX. in we've XX users organizations marketers person XXXX features and turn is introducing the this to insights on We're exciting our do presence are our looking first companies we automation of term, and in economic that Outfit more it

Pete Godbole

good Thank and you, afternoon, Mark, everyone.

durable This macro greater powers saw how policy XX%-plus that As less the pipeline August. cycles, quarter a Mark in that strong a to of work compression gets enterprises sustained is rate and record sales growth, form has procurement the rates. the In and was see to mentioned, churn that model began lower largest headwinds We than July, world changes, and set shows XXX% dollar-based growth, around X%. low we QX growth net that fuel growth. revenue retention a resulting billings this continued than in at in into product business gross and progress elongating a reflected profitable trend done of related

and incorporated I those the towards guidance details additional my macro our updated will into headwinds prepared We full remarks. end have of provide year

the of SMBs. customer coming base, employees, with quarter Regarding our with X,XXX now composition from only comes of approximately ARR over enterprises a XX% our from

very remains with our diversified from also XX% only largest coming vertical. ARR Our

As Mark offering. Outfit acquired mentioned, recently enhance we our Brandfolder to

results of now We fiscal will Outfit operating the go results billings earnings in basis revenue and our the each reconciled quarter. expenses expect GAAP on around second results year. I and our be from was that a non-GAAP for through the and for to the the to rest Unless before financial contribution and our to presentation call. references posted the are all stated, release $X otherwise are million

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

billings. to Turning

growth represented total Second X% of at quarter of billings represented of in year-over-year with came were our billings representing approximately XX% annual million the billings. $XXX.X X% approximately Quarterly of total. monthly. approximately and XX%, X% billings Multi-year subscription semi-annual

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

Next, our grew year-over-year ACV average domain $X,XXX. XX% to

experience we growth healthy of new As a continue to reminder, customers.

Smartsheet a on growth the customers initial at ACV our New than average dollar pressure ACV. their journey our typically in begin values These some rate near lands put average overall term, domain smaller but rate base the ended with of dropped is X%. healthy now a quarter churn provide expansion net XXX%. and retention future. further the for dollar-based below in We The rate full

of year. to would in see current a the that macro be XXXs net the the overall high end scenario we the environment, to our retention Given cause mid rate dollar-based by

to Now turning the back financials.

XX%. total margin Our was gross

gross margin was subscription XX%. Our QX

'XX for cost revenue, to point was We moderation or margin which minus quarter above million improvement. sequential negative we plan continue cost saving margin $XX.X result margin our percentage hiring operating represents our of a remain initiatives and was in expect discussed of X% a quarter, of FY the last XX%. The to Overall, included rationalization. X gross loss which improvement

the of the significant total we demonstrating quarter bottom the our free cash positive revenue in operating portion to dropped flow negative million. in business was a our $X the cash bringing Free to outperformance half for Additionally, flow leverage our led million, first $X.X model. inherent line,

that customer three one the related and large extra Looking run-in outflows are conference, in quarter engaged related payroll QX, a ahead payment cloud contractual we quarter a semiannual our provider. to to to the unique have cash

expect outflows, our we to these cash million. negative Given QX flow $XX free be

Now let me move on guidance. to

and towards August of headwinds continued newer previously, emerge. saw productivity have the for our macro mentioned sales ramp our in we sales impacted and time related end to reps. These we July, As begin headwinds

the thoughtful for macro preference we through the guide are the our electing continue the pressures and prudence, taking assumption trends and to to year. these full under Given guidance our a approach year of end that

expect in to the For we $XX the 'XX, $XXX the range revenue FY million third million operating $XX million non-GAAP to million. and $XXX loss of quarter to be of of to in be range

our and As million first a believe customer in reminder, QX, host line. we incremental in around $X result on we in will our of person which years, will an sales marketing three conference expenses

be on loss shares expect We net $X.XX average $XXX.X between million. based non-GAAP per outstanding to share and weighted $X.XX of

full representing of the of ‘XX, million billings fiscal expected are For in to be year to growth the $XXX range to million XX%. $XXX XX%

revenue our representing $XXX We expect be $XXX XX% million to of million growth to XX%. to

expect services total revenue. be X% to We of

posture million on our non-GAAP the We to more based and This efficiencies generating cost the improvement measured per and combined and reductions shares for a operating in a due business million investment with improving loss this share $X.XX outstanding. year profitability average our expenses and in loss to of to to careful million policies. range identified non-GAAP of between our articulated we year be of evaluation are areas $XX and approximately be non-revenue weighted $XXX our is in $XX $X.XX earlier net

margins flow free the us our positions revenue durable maintaining of To quarters value system outsized scale the billion and able year demanding in high and with I are for is three of for XXs, growth, breakeven. the work believe flows. to cash approaching conclude, proposition With our largest ARR term world. Smartsheet long a growth businesses in most We to of $X the cash deliver improving guidance

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

Operator

of first Partners. you. with line question Difucci comes John from Thank Guggenheim Your today Instructions] [Operator the

open. now line Your is

John Difucci

it's has when the became your I of I about on Smartsheet, just seeing with but job? for I the you, a -- a you're use, sense makes with follow-up and both acquainted a because for out complex macro quarter, just in the for to business did there backdrop Smartsheet outlook. just more commentary difficult sales I mean, then it's more I it's to wondering some for is as a think your realize more the period. much the the platform. gotten prudent easy environment Pete. more sophisticated a the still sophisticated, sophisticated things about anyway macro build be Is -- for just if job it's requirements But and of first simply Mark, you of time calculations to -- regarding and clarification job Mark that gotten and I'm and sort that time new And that required Pete reps. a the your you. ago, as you our ramp said more growing or strength application. has the the application agrees question Thank have years in were new me the

Mark Mader

we think I around have, early improved also the I've enablement and support John, mechanisms the the dramatically but seen the requirements tooling have from days.

servicer So larger for and I of can structures I good think we place (ph) value that support that. the have think in with offering we deliver, put more

point I look would at And new macro of the you reps year bringing accounts, largest beginning an to to Those is sales being value articulate who's the to of as customers. being motion to that new think our the where And are reps they're experienced many between I when So assigned impact. most existing bookings to relationship talk customer. in trying expansion. new the at rep going existing

effect times, result think new during carry to investing these next more but well. that a from to get as year tooling. going comes We're that it's supporting we're And reps. I in I we pronounced capacity it, there's think our in

think So pay-off. a there will be I

John Difucci

Good. Okay.

at great. say anyway to a And quarter gave like uptick it's get we hear, least sort year? listen, as last good to again, continues to look here. guidance the stays it at quarter, you strong I'm And to the them the harder assuming backdrop macro rest wondering, the so when from the out big a really that a give guidance, the from going looks But it. way of us just prudent I that's it or you are and job, this an soften just it's Pete, through not is, to you're

Pete Godbole

So consistent stays go -- weakens the we and John backdrop slightly backdrop year. that fairly our is through economic the as assumption

John Difucci

lot That Great. of Okay. makes sense a to Thanks. me.

lot a Thanks guys. Okay.

Mark Mader

Thanks, John.

Operator

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

line is Your now open.

Robert Dion

question. logo for the follow-up. environment? the a change macro of does how This for (ph) And drive at relates new macro logo new much to all so question playbook to I'm adds then Thanks taking the I current is My tougher curious for one strength positioning. Dion Thank you. amid assumptions Robert some have first Great. if Terry. the what And guide? are implied for in continuing

Mark Mader

So as of was environment. we're -- looked question seeing at changes where your you our sort and on looking macro our at assumption, the

it seen extended I business. of August we've think it's particular across would we've and looking We've of guide. the elements not what the the say in that we is all assumed seen forward all through segments in it I what that's and in across vertical, We've it it's our our way July all board. any year. what And spread in saw

Pete Godbole

to expansion on entry still us or a we're those opportunities play. businesses, the other well. the coming more SaaS what dollars, of are on dollars of And it's many as what see of are new approval the to and the new maybe flowing critical terms peers -- couple point and additional logos, thousand It's has of coming seeing the quite seeing. quite the remained. And into velocity layers larger logo, But business the I sub a we eye both on volume in speak to low continue with

Robert Dion

evolve as on How see Okay. Thank haven't? out Great. about proposition who some both to that? much for who impressive at have nice addition adopted week. for with and And last a benefits Forrester follow-up, resonating with stats the then Brandfolder you. Brandfolder’s how those solution folks ROI been might this customers, that you. Thank And

Mark Mader

production they a opportunity. because interesting it's Well, hearing content automation enterprise we're out needs. for who to the teams have larger larger have where of of Outfit addition And that one ties some opportunities is really our from an to need response larger enterprise the what

having them, hear learning of And phase So ROI tag digital now to mid-sized I favorable think about of graduating it's a to we're in it's ramped on lot in to companies, still usage But Brandfolder's them. rep, that really time our distribute them, you positive in statement. from very your be the impact take the able getting when strong of assets of a a there's I read think seeing from Brandfolder the still available early right reps. even to all very to response. can a market -- measure We're people they that ROI, simply

So we mainline our expect our would that team year. continue throughout the to co-selling motion which to that's Brandfolder strengthen between and reps, something

Robert Dion

much. so Thanks great. That's

Mark Mader

Yeah.

Operator

Your next with of Fargo. question from the Michael Turrin line comes Wells

line now Your open. is

Michael Turrin

questions. Hey, great. the Thanks. Appreciate you taking

a just hearing wondering kind to how or just position as software? is ROI if tangible consistent sales First I'm just across we're finding deal equipped and conversations around or well question. on is higher hand to your layer just what their elongation, of level sales of what into scrutiny of these in of more and just just gains across continue of kind raise decisions. stats team efficiency some you're it's and signs saying cycles software, more you're It ties broadly

Mark Mader

Yeah.

our those I are capabilities we're either is -- capabilities. premium introducing the think of a or when them which package the capabilities, advanced, especially one-off

And themselves from strongly to when quantitative statement. confidence I people measures, up can the think lend cycle. those way an sales to goes ROI the qualitative in most move

engineering side self-directed capabilities portfolio get on as to people I exposed how do assisted those human how doing do is of on out get can exposed year more the basis. opposed of more So what over part next figuring a you what we're people sales basis to more we think to looking a we're to earlier? the of is, that

an It portfolio. that of see and formula. can very talk things feel But in Control about open self-directed next So up and Data beings human like very confident doing things year being be I set more think more how way or involved. in more will up tie do automation in content that's can And the things the as Center a Shuttle to to when letting not system, more it people lifecycle, up automated digital where interesting is motion be grounded needing you directly to human the that

so And of we the how those my one is more aspiration do of customers. into buyer median opposed driven X,XXX capabilities hundred get as to thousand our more than

Michael Turrin

helpful. super That's

you've already the think questions metrics around just gotten I some on QX look strong.

You're and talking the rates holding about expansion churn well. low in relatively

what billings In the is I it generally for, on fair just guiding those of side impacts XQ to up business? of more know new assume a terms of you're heavier show that there's dynamics. your net And

just So of some you're seeing? around given existing add base into the the have uncertainty you you visibility anything can there

Pete Godbole

Yeah, Michael.

in guidance, is class changes of categories, it level look say expansion there. our you seeing really playing taking break is it gives the them to numbers, of color business you Europe side if for. our all expansion net the there's sort and comes the looking out. it's the at X% for the FX, existing probably the total economic you're the the in If weakness and just key you'd sales Hopefully, which getting of it it And in productivity And it is the of And out conversation, of it large experienced few of macro rest this billings change X% you Europe. to X%of balance the part into then reps in that and of is the tied of is this to of tied we're of median almost of where down a from probably it reps. the change,

Michael Turrin

helpful. I Very Appreciate like Thanks. that. quantifying, you

Operator

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

now Your open. is line

Brent Thill

their quarter Pete, carrying just that there for on thinking you you as that the environment tighten tapping had bit in, holding margin, well about up the forward. going you're a reps that and you Are we're expenses still early you that approach? investments your in year? Are how the planned and are to brakes that the plan

Pete Godbole

hiring hiring support driving what that we've Brent, and I of the our that I moderated in we'll efficiencies approach I roles ancillary focusing is focused operational review is important you of, if expense also every think the we're dollar there. taking which growth things revenue We've what every will. the of generating generating find on different non-revenue call focusing call on on to in we've sort and and activities, taken got, core aren't and what really efficiencies locations approach plan, dollar

well relates it rep just quota us carrying of way sales but the FY and and the up to class going in about good it's ‘XX feel this set As we the really and think to that we're capacity we (ph), not for really year, how the appears.

make sort we our will based adjustments to changes on it but sales of capacity Now management as onboard reps, that's plan. the

Brent Thill

you're in based? seats When seeing, seeing you there? follow-up. Okay. about some seat Are are the more is more you upsell What to this pressure higher the or seeing it just quick of base? inside install talk a And then guys value you

Mark Mader

it seeing in we're think I two forms.

I that. which us. were there, of and And journey not as I But at rates consistent full think who seeing I be the it customers what more capabilities it, expansion terms could value earlier seen of and that of you're the or planned. to a down so their the we much are I think it seeing would we're say customers journey packages, in you're based who would have ability way seeing it, with seeing are expanding some are and buy seat in with describe

Brent Thill

Thanks.

Operator

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

is line open. Your now

George Iwanyc

for taking you my Thank question.

near-term perspective give the So maybe following prioritizing how up the us Can on some now? sales investment looking you're Pete. at on priorities R&D talked that that you're priorities you about, you just and investment

Pete Godbole

through hired that of Yeah. year a areas to class capacity large R&D and we of Thought build we and continue very early targeted we in. we to we our needed needed QX of of in the knew sort R&D is, kind grow

of So hiring to of that's not at year, hiring been we first we're go as opportunistic the half. in had the playbook. We're R&D the but through in indexed level the going we to certainly be same sort looking

George Iwanyc

like Are or you're I’ve give Okay. sense M&A either an us a that on And investment? a talked self-service Mark, maybe focused from roadmap up areas about can you that, you other the really following there perspective on?

Mark Mader

Yeah.

we control As going impact really entire things at we service. line And from a head to operating the those into in capabilities signs collaborator in the the new across every from I have one late Engage, expense to scale September. scale areas. capabilities important one at things is enterprise of things portfolio our go of to choices Yeah, that they don't person of and announcing think we're experiential we who -- control our of and number get that new every the for make governance of benefits up be to center one

I feel and one balance of about achieved not to from focus pains. investment those really had have we've we good eliminate So the any important

George Iwanyc

Thank you.

Operator

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

line now Your open. is

Rishi Jaluria

have go on you virtually is horizontal a you I and kind that to you then the used prospects tell Thanks are It down bit interpretation, case. I to please maybe motion I getting marketing bit feel about kind led Brandfolder Wonderful. and my There's to of it cases. can start I'm this me, does But side? much feel on this a Outfit. a know you're just marketing doubling feedback wanted and follow-up. down if customers does maybe first, Maybe deeper the so this on like been platform. talk wrong for taking unlimited the questions. a doubling little like And that little used on had from

Mark Mader

Yeah.

buyer. would pattern running just able think say XX because on to that. want. multiple to at of I that is content, It's within when overlay to people requests classify importance with be everyone what able a And to terms in the of template, and you could of do I not different assets I'm but being pattern especially you my here's needs created. store I asset, create need some gift this of notion need the enterprise content digital a saying, scale which that it, campaign to huge a identify distribute a and being class see I emerge, when a gets

that, telling for your automation and it a have understood content within a someone have What merge lot define live easily is don't expand a starting within it manual beyond which resonance digital that assets is you, we're frame, basically assets and that in then Like is will you do and design content does load manually, eliminate your Smartsheet the what you're seeing says you your can really build If of of concept. that Brandfolder XXX team. marketers. to

you construction, within came when health, within all it. within off people So tech, have from

to marketing value, foresee are think I counter really back function. I -- in early, a relevance we is but the we think, the the definitely puts I into think signs the it's this absence of as But which of sort about of thesis. outside talk quantifying our content we're you still manual content seeing of discussion, automation,

think it's a has to what our So I brand promise really nice complement been.

Rishi Jaluria

like I'd is But all one is maybe to That's SBC in commentary look, about control, I expense comp, now right? Wonderful. continues around then It more stock environment. little really obviously, a definitely on bit right? appreciate to to prudent that revenue. elevated, down XX% this a helpful. of And get the thing drill do the

step You're have dilution. plans over it's tracking a know annual comp to may stock your and term to a about maybe little talk of any comp to you you longer can around or medium close of taking way But term kind a philosophy get time? I kind bit you. analyze it. Thank messy stock X% down back, obviously

Pete Godbole

is Rishi, Pete. So this

stock of the talk texture created. Your about question is on stock comp, comp let's how

generally sort compensation starts think it we of expense. and stock how And it. You're all which of grant managing and annual a multi of become of into part extremely with stock grants, controlling years think calculation. this we We're levels, the how leveraging carrying mindful in cohort a of they they're about

outcomes So taken we haven't thoughtful the total managing really focus of that what the I of on approach first them that of as we very going acceptable taken compensation coming population. grants call basis the driving saying, We've we we're on expense approach stock to to us. regreening selective our stock reasonable that and and entire hires and that ensuring consider number into a granting business, a are have into then what

team been effort, myself through. and a a management have the of Mark, part gone So deliberate that's

Rishi Jaluria

really That's All you, Thank Pete. Thank you, helpful. right. Mark.

Mark Mader

you. Thank

Operator

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

Your line is now open.

Scott Berg

taking and just talk Thanks everyone. small little Hi, Outfit for a about Obviously, little guess my here. questions. price the bit more. pivot a on purchase bit I

as ARPU create on buying obviously from a not just you understand add-ons You're product of set? is getting rest a of maybe a that of more Help customers develop that product time the fit us you're modest the you a can or something this pricing this. way here, little this in smaller as and really want bit some maybe with Brandfolder more the over competitor product a drive from is helps the significant differentiation perspective,

Mark Mader

to as -- rates first, it improve would really Brandfolder. win think I our opportunity I it with see an Scott,

I There primary significant evidence is that's that have large to customer portfolio this. So value think their benefit. signed the organizations within

of we an is -- see that scale those some being some average of revenue evidence, customers customer stand a set that size Now have would of of but emerging multiples their alone. Brandfolder at of the

integrate do add to opportunity early I on to be So as a will which opposed we because it. The in it buy meaningful with absolutely will for for value we manifest as there's will a adjustment that our it. which having to revenue an days. customers We as degree see But up it charge associated a this itself freebie. see such

Scott Berg

that within not rep half hiring of in outside on hiring the and about of year -- quota of ecosystem bearing sales is rest up delayed Helpful. Got generating this necessarily of following positions way forward reductions, most it. And company guess -- revenue reps? the is the take same cost kind just comments or but I earlier should here of and Pete's of the of non-kind around kind the sales the the sales we rest the sales going then

Pete Godbole

Yeah.

the roles. part help we we've a generally carriers, leaving field moderated in to support deal with of there's think plan. like sort But capacity roles sales of them approach of that We're are hiring and want as capacity many the taken quota those in there's carrying the our of I us for ‘XX.

box sales the the organization. who of call In roles support of what infrastructure that the that sales rest in folks those I terms of more support consider the systems,

Scott Berg

Got helpful. Very Thanks it. again.

Operator

line Your with next Roberge the Blair. question Jacob of comes from William

Your line is now open.

Jacob Roberge

you that that uncertain of prioritized for my environment any and talk taking Brandfolder? like Shuttle and wondering macro Work could less been more you're more newer Apps or of I have if Data headwinds was over the seeing about Thanks given the in demand Hey, questions. the month? just you'd some these or products experienced And guys. some last those of

Mark Mader

Shuttle you mean decision, Yeah. the your simple managing put such that but I manually would are economic do egress want you hit return Data ones, on super say and on the it's ingress, ones the want there's example. is prop. are really a system be or great rails so to Do resonating a it button. value to in to a data of go clear I

digital the rails that So degree data the beautiful are do have case describe. Brandfolder. that you highest to more there's way, that's content If in on center velocity, distribution ROI do on a needs, portfolio is store analogous my has need, the it that a are a to probably and a I digital well. really degree degree where have the say manually -- I would to do more control a to which landing on replicate the company has degree needs, and which for Those not the assets it's one carrying really Control -- strong the simply for I'd Center it's the it you? big one, Shuttle a which which do drives which all templating want to you and mouth want to to to Brandfolder to sense management the like program put automation in it say simplest the it concepts side, it Data or it fully. the hand would of has

mindful really value us we to really, the present we're get and need the in So that from understanding Centers well those where But really Shuttles that promise. right are is back is our to ability landing a Control the before customer Brandfolders, of can what position ROI now. with the folks make they for Data again, that reps

Pete Godbole

of second the was in part one changing And your question environment. of the what's demand

the So really seen called we've us. that really appreciate help impact our apps premium of capabilities people

seeing We they the that's cases elect to helps long customers easier it them for sell are in because to to But people want we're in we're way environment package them want happy, open because them. term. to this consume it's the [indiscernible] them we consume and buy and

total it. to do So and model addressable sort way flexibility we to going have the the take use in to we're the in our want market of both customers

Jacob Roberge

are really the Thanks. Great. click I restructurings a macro any headwinds sales balance and then Is could territorial some training of there the that That's And just helpful. you're year? plan complete on quota over issue or to the double of you really it experiencing? or just that

Pete Godbole

seeing introduced the elongated of the level additional talking some think that of set process. was into being There part. about was So compression. were three layers we were were We're seeing. described we an cycles sales headwinds an approval I then deal And there

will. that you entire sort those experiencing across if call elements seeing macro in So are I were base, of what everything we the were we our

needed additional there is large what The second the very was we taken a into was introduced ramp part sort that class, is, that more question and productive be your single-minded of field time what these found of through. was, had we to get that's be could -- folks today, focus our to get effort but productive productive. Not to we're And the they're they to experience driving trips. relative more with

Jacob Roberge

taking questions. Thanks for great. Sounds my

Operator

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

line Your now is open.

Keith Bachman

$XXX,XXX. want you're of base want on relative small yet margins. your models it's guidance, kind to even to improving margins pretty bit broader here, really couple look key client is question If at how average QX, X% I on reflect the at of And you. to on Yes. kind focused a I to I still and the ACV the SBC. kind new your our Thank negative -- with build pursuant I is, we guessing operating I improve but loss is on still previous to question little start as your profitability? get here, your of do What's have we if operating a attribute the because look

And to your high certainly relative companies. sales marketing software is and so most

your but margins, operating you but only the that the reach and is fact start solve think improve do you is, if not improve sales -- ACV, just I but do So it operating profitability? and scale, dollars, really you investors the and that but non-GAAP you how your riddle how your to can question at grow time same reach improve generate satisfy profit marketing simply in

Mark Mader

Despite, your both. I'll to and question speak Keith to it has components two

greatest I our we're business is think the us. thing our are driving first customers for largest profitability in the seeing

get model larger our So as the business migration percentage just bigger, as to in a natural customers coming larger profitability. of inherent of the an we these from lift

we're pro when like you as of what prime we Brandfolder. is The second demand an force sales model sales products adding to think that uplift where and that introducing using existing leverage margin our What core to rata marketing do of mainstream we're in part dollars, a profile. not our newer we is, prime farm base our we and like call leveraging

in you location, think things to the sales drivers as more examples camp. use get, we And then which are The those the we we in drivers, and two of So achieve there and efficiency built hiring, at a have don't larger elements, as think those as scale. we've get efficiency which automation marketing would the a in. to which this efficiently. we that taken get expect to out here. we doing year, between focus build We've geographic And it and stop single-minded we story effectively for but

as to continue it well. expect years future into We

Keith Bachman

Okay. in trajectory? my margin excuse Yes, the to how might into that terms on deals a a do do ’XX, impact. that XXXX few think like assume of about you -- deal looks I do think me. find your roadmap you if quarters negatively the terms that about and -- in really willingness there there your not or impact of but like, candidly or M&A margin are Are led understand positively FY second in out what investors question you guidance boundaries we'll I operating is would think parameters any But you to you

relates could impact margins? you the more to little M&A a bit just about If the philosophy talk of as it on

Mark Mader

a we've To is are used a and sales always into give terms enterprise establishing And us established return there that you're a there important top past of been can historically customers a signal. the telling clear where that you line buyers is and has in why and that because out where signal demand in that's growth. is eke dollars

done. we've fit looking Brandfolder future So perspective on. sales thing our helps are indexed adjacencies, with really profile. that Even That's we which of the at in the fiscal years Outfit, recent first most that's acquisition it we've what

we're the boundary metric the So And trading us being me how extremely accretion expect give conditions, that's I against the thoughtful top about that using. those? What's been am we've about I the has? line? it impact you asked the acquisitions returns and been in What's dilution

Keith Bachman

Right.

the given to backdrop result seemed pretty congratulations solid. Well, Okay.

So congratulations. for That's it thanks. Many, me.

Mark Mader

Keith. Thanks,

Operator

of Your Pinjalim Bora next the line question from JPMorgan. with comes

is Your open. line now

Pinjalim Bora

the it geos? questions. you cycles was the various elongation comment. was taking more turn if back around sales to more want smaller? go And difference texture larger you for around enterprise/smaller between I give there mid-market Could to deals any the the business driven, Thank us Great. was elongated size largely maybe versus

Mark Mader

a sophisticated looks I was more every enterprise but think you of we when fully at have general the saw things at and in because they that. business, before sales was we to cycle, trends there of to So mechanisms looked it, their it that their elongation a react in deal the think pronounced buyer

would we by cycles being represent sales tier. of segment or as kind elongating that's So what

Pinjalim Bora

Understood. see. I

other Maybe time. the versus the in environments. what are you two hearing I'm during What was guidance, take you XX the guidance from versus this seeing pretty math seems at in now to seems that July had timeframe July what XXXX? April Okay. did is the you the about I the XXXX question, pronounced to was when half are table slowdown -- [indiscernible] -- that the And hearing like are off billings flow guess, deals first billings looking like the customers at the points quickly, the compare and I last when but more in

Pete Godbole

Yeah.

we're -- quite new were in the conditions There were that is of XXXX right? that think the before. had seeing variables people, saw I what set faced we people many

while dealing inputs different worsening. -- set variables XXXX than conditions were how of internally dealing lack What's some So certainty in is I that slightly for the or improving we're there had set would with. we are XXXX. we with us was, say a is would changed there say I recognized what on of of different we more was did

in So this half. the We brought that company’s we in on the in XXXX. largest do class didn't first history year,

to conditions. reacting set we're fundamentally different how a So is

this the are what's for the In is So on they're I XXXX. was if terms me? focus it quickly not the the value, there's the you now changed sit to go more going pronounced than what's what's return how would but value? asking say does of what the through only where get buyers return, What I'd bit probably can around a has the that is in time being return say on little horizon more the around investment commonality

Pinjalim Bora

Understood. Thank you.

Operator

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

open. is line Your now

Steve Enders

aspects I Thanks the of the ask on little question. go-to-market great. of taking for bit some a guess I'd Hi, more business. the

the feel try to the But to that side to marketing potentially turn -- I accounts? -- and better around. try and strategies levers think in mentioned that expansion of try and could rates some the you're you to and in going try to about drive thought could pull sales you to was the more you penetration put different place you enablement on there and do things how

Pete Godbole

think first our possibilities of to driver has customer with one education, welcome we it we're going years, our people most the for develop time valuable three where things big terms the a event really Registration event change a spending plans. doing in the that's engaged conference of past I be in account is is, an in been in-person have in also time well. will and Seattle. of That years. teams It's person an thousands understanding

teams of those representing people where teams, signed companies. our already we So largest customers up up have some have showing you of largest our

product positive improving single penetrated things that we is So we're our say cross-sell digit know and cross and marketing a introduce I today. we that's doing portfolio variable. other is how would the really that

in a educate customers enablement, just part product we on big end the are and materials is his also the new stride, to that brought And they're -- marketing at on CMO at they the new doing marketing not and start could time last be us second think for team push half team hitting the benefiting but a through of developing year. So with second expect developing Smartsheet. I right Andrew I is they're things, in to of what product around that new half. members new

variables we as into head positive have changing next. this year be some should exit we So that and

Steve Enders

solutions of other verticals simplify you're and I you That's what helpful. beyond some guess the of kind you doing Brandfolder after then that area how specific for of really Okay. used cases, could for marketing guess about hit kind do areas? And I kind there, the go and think other more core or tailor

Pete Godbole

use work We're now our right around within Yeah. largest commonality identifying on doing cases customers.

certain in cases commonality more our we team approach sales can recommendation very on introduce a industries to more we're taking that based much and so use set where PPM we not there's of value functional the marketing, in presented successful. cases we've So used to just like week to how last but just specific like the been prop, core have so Board this our granular

something in is much very which that right So now. flight is

our are capabilities. -- we say, to an think for use to give in customers continue I the example. you see sophisticated requests responding how I'll terms of cases, would I more

whole manage given track scale. applying which are we work, project understand also capacity I set For we Don't of years, the we skill at in sold coming of developed across ability when capabilities which forecasting of in their resources forward saying, utilization largest resource being and tell going the people to to looking and a out have the do assigned, them, management The world we that. me is of have very how in the quarters. portfolio that ability allocation I'm I well, to today, resource but to There's help the great. And talk the be management projects about type sets the me companies is have. do coming across what

opposed these So other we're in are of extending to adjacent can the as what simple depth things saying do capabilities of we spaces. some

term enterprise our capabilities are of broad in simple, differentiation be category, very, the differentiating capabilities the understood deeply winner have set think in I So very long but are discrete and a very demand. simply based will not that that

broadening, but So deepening. as just it's build we our portfolio, not about

And so those capabilities seen really work well. we've far,

Steve Enders

Perfect. for questions. taking the Thanks

Pete Godbole

Yeah.

Operator

Your next with question Josh from Stanley. comes the of Baer line Morgan

Your line is now open.

Josh Baer

Thanks for the Great. question.

weighted think assume linearity, with I'd toward I quarter. the end billings the of

wondering Just XX% outperformance the why and impacts surfaced macro didn't that billings growth a July in the impact the quarter? versus have more in significant billings

Mark Mader

was in through The impact July that partway saw we July.

quarter have impact of So how billings. the had you And an played bigger would we that impact, frankly, even out quarter some in saw without it. in

well guide. think So into extend or saw. as I play as far which And the of we and itself trend our we basis trend we that's went the out that August saw became

Josh Baer

sense. Okay. That makes

those like and with strong? thinking would of you or kind by were June sort month expectations line say were your month So May in actually extra

Mark Mader

what month have No, they seen. fairly we by historically month, I consistent with what think we'd expected were and would

So or June. about May -- was unusual nothing no there

Josh Baer

Okay. Great. Thank you.

Operator

with the next comes Degasperi of from Your question Berenberg. Andy line

open. now is line Your

Andrew Degasperi

the realignment the -- a issue have any guess, been taking my I I as on particularly an changes? I side Thanks mean or on retention since you carrying just not question. quota employment seen first employee the employee side. for mean, follow-up

Pete Godbole

seen meaningful a not have change attrition in We rates.

Andrew Degasperi

as in the environment, if an well? you've competitive that the the market has -- seen given particularly improved Great. change just smaller players just on I conditions, been And from CWM then wondered unchanged secondly, or

Pete Godbole

there's -- of to a not head don't We lot head.

single-digits As quarter, notable right. -- those rare I we're talking like RFPs, we in when a said, those but have

are already. So they're what Smartsheet deals it's where contested. grounded to experiencing. of Most others to most really businesses not our Again, expansion our difficult committed of are say the in

say to saying. what So it's difficult they're

our what reliant from think a on the lot I comes where advertising our marketing where mechanism, product we're new usage benefiting overly from is the like of we're demand mechanisms. not of

out something through little don't people seeing have having and dollar new heavily. that analysis for are there's cost We participate of to a in bit in next of been that battle fortunately we it a our to the raise that's

Andrew Degasperi

you. Thank Understood.

Operator

last line question comes today the Your Davidson. from Robert of with Simmons D.A.

Your line is now open.

Robert Simmons

Thanks taking Hey. our questions. for

increased user you're downgrades (ph) of you it on is or plant one on really headwinds the contraction just of First thing to clients or seeing side experiencing. the Are economic things? clarify that expansion

Mark Mader

we're Robert, it the entirely seeing expansion on net side.

Our is rate churn level a now low X%. that shared I our and churn at remains record below

on all headwinds. it's the that in we're these net side So seeing expansion

Robert Simmons

any from numbers? Got And Great. that have it. this then holding year upside in to benefits you would engagement be revenue or in-person built

Mark Mader

of haven't built of some level we we upside. what in experiencing improvement in So we what I rate based with call, amount a built would what our an in we September, a expect big on close are modest but Engage in

Robert Simmons

very much. sense. Thank Got That makes it. you

Mark Mader

Rob. welcome, You're

Operator

over I Q&A. to back today's call the now concludes This Turner. Aaron turn

Aaron Turner

joining thank and us all for today. much so you Thank you Great.

We will quarter. speak next with again you

Operator

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

now may You disconnect.

Smartsheet (SMAR) 2 Sep 222023 Q2 Earnings call transcript