SMAR - Earnings call 3 2024

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Operator

Good day, and welcome to the Smartsheet Third Quarter Fiscal 2024 Earnings Call. Today's call is being recorded. And I would now like to turn the conference over to Aaron Turner, Head of Investor Relations. Please go ahead.

Aaron Turner

Thank you, Lisa. Good afternoon, and welcome, everyone, to Smartsheet's Third Quarter Fiscal Year 2024 Earnings Call.

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

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

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

the that are or adversely Although the statements actual may in adversely. reflected expectations differ forward-looking results believe -- materially our reasonable we and/or

available of as assume forward-looking made of on law. during this call a except as or to do new not based by are we result information as future to information any these statements and events, All required us update obligation statements today,

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

call Mark. to turn over And with let the me that,

Mark Mader

fiscal call flow quarter $XXX XX.X and annual of In operating million. XX% and recurring guidance revenue We and million, Aaron, users. ended than XXXX. our QX, year-over-year the XX% non-GAAP $XXX.X for earnings with margins you, good year-over-year revenue million. X% Thank more year Smartsheet grew $XXX cash and quarter for to free afternoon, billings $XX.X generated to Welcome by quarter third Smartsheet everyone. was grew and million exceeded of the our million to we

their XXX over and customers companies Smartsheet more by XX $XX,XXX. QX, expanded by expanded In ARR than $XXX,XXX,

$X million, year up with ARR now XX have over ago. a from we Additionally, customers XX

strength company Wakefield, quarter, at expansions high-impact quarter store openings was QX continued specialty in of will the XXX multiyear, others. to Gold in Similar and with and a were Cushman as of our for projects, QX. well & executes role Corporation, capabilities played improvements. expansion the deployments, in of strong Cintas top company, Advance also each XX among suite Their included our enterprise last Smartsheet beverage expansions. new key bundle our BeiGene XXX upgrades expansions in it our in products. Our deal capabilities-based equipment product including a Advance was Systems, as of Smartsheet which with as store a to company. multimillion-dollar in as capabilities, new present biotech QX is rollouts companies Advance, such Commvault a support help Fortune our network and associated

In also advanced upgrade major an that a QX, we saw airline. to included Platinum a expansion significant at

upgrade to able For access divisions units. Smartsheet Control give to capabilities Dynamic to such to the Advance. all of a implementing were products IT's our for other of a carriers years, ops under Advance, as of platinum and to all purview licenses View tier them their bring these Bridge. they of and consolidate flight Smartsheet Smartsheet growing and tech Smartsheet the departments, they from demand powered aspects Due has flightocks, to number decided By Center,

of Smartsheet management, scheduling. further $X.X opportunity maintenance an that increase an into empower visibility and This and and IT contract means like across greater in a a resource critical million efficiency that spend organization. it users as the opportunity X-year airline And to scale to activities to its consolidation total resulted has commitment Smartsheet brings the with value

The digital brands. drive in the of global was to to of Control scale a executive been $XXX,XXX reporting XX,XXX applications, service an management to rapidly and country's collaboration transformation also annual help deal one to By and implement the And number portfolio restaurant Smartsheet resource and at senior team. rendered of locations. the initiative Center for on its simplify multiyear transformation has is able doing company selected Smartsheet, ability company largest enhance using and projects day-to-day across a process so, key operating The quick and plan over obsolete. in other the

was Because divisions, customer projects looking expansion Smartsheet stack. parks company this projects. that and using portfolio positioned relating center manage was at work control its and Bridge its media tech entertainment their organization workflows example significant track scale events, is consolidation. across a to well to the went The of retail was to manage theme to Another already global and XX,XXX streamline to in XX,XXX that publishing and win

Going million. brought $X forward, of to the efficient technology ARR for projects, extend speed company's expansion initiatives. its the will cost to as over Smartsheet initiatives and controls such use improvement profit company market to This other improved management, headcount

started high-value believe adoption first will few have with drive just greater front, new use On we introduced way of capabilities and frictionless a the to results We early Smartsheet of premium of promising hundreds been customers offerings need discover and contact with first rep our the Smartsheet to capabilities of product months. within empowering for these partner. self-discovery without a premium trials in our QX, X or the

and One led storage into mid-cap clinical biotech occurred data Smartsheet from the of to significant directly at with data of amounts company systems. those a legacy purchase shuttle trials make to of

to disease launched a therapies. to use cancer research trial it utilized rare and customer automated While company's progress the on our never workflows been has premium had the of data they its discovering track for capability. data Once clinical company the import years, team shuttle,

a premium the allowing as to result closed with data these first to sources that were Over had for a time. now it in shuttle view data and with from positive a other by capabilities. of deals led impact that manage interest them found has and capability They centralize XX% disparate QX premium their self-discovery capability buying success these in customers were of

We this that generate power access enterprise skills directly will done to allow strides have platform. later our AI processes from users Both insight features and being across and sheets. to make to to content customers. AI make continue enterprise into the help AI-powered enterprise skills that be access quarter simple feedback any confirms in now in The these available will gain the early to users users XX,XXX We integrating work generally user Smartsheet approximately across their teams. early it for formulas

are outcomes even achieve desired more Smartsheet with These customers AI skills the helping platform. their rapidly

out adopters early roll eligible will month. skills AI-powered next to Additionally,

customers data internationally customers, we launch international to enable will requirements Germany instance demand. a in This for year. want be support data and and to We next the flexibility our them will they we continue residency to Smartsheet important with Smartsheet new invest hosted. where comply residency global requirements in to Australia response their instance launched to in platform offer increasing region Australian XXXX, an choose To in

We agencies will regional be have to information governance and and that meet Australian security organizations to demanding pursuing base, will a the requirements. serve right requirements. controls IRAP ensuring government growing it regulatory the including security with This and most customer certification, policies enables Smartsheet

travel a in the We QX large agency, quarter a a brought signed X-figure government its government U.S., reaching grant for workflows expansion to federal funding management productive across also and manage regional uses multiple Smartsheet notable which some up from at offices. our to managing $X.X management was business center to for million. milestones. ARR critical purchase to using control expense budgets its agency This

ARR departments with have over $X now U.S. XX X government have a agencies cabinet-level we Additionally, and presence in all million.

focused on closing, In enterprise we customer ARR approach as quarter, value product we both the innovation and the by to $X as continuing user billion preferred crossing milestone execute management leader. remain work this

turn Pete. over me let call Now to the

Pete Godbole

higher all quarters, Mark. of QX. our is the guidance our Similar of business growth of in large aspects and We enterprise to volume previous outperformed perform ARR customer in reflected tiers well, deals. you, cohort Thank continues our which to

continue We pressure SMB segments. see velocity and on to our our customer on transactions higher macro-related

QX prudent are Given guidance. maintaining full our year approach we to our and pressures, these

to results and through results that posted expenses stated, will our and the I are are our release results quarter. GAAP before in reconciled basis a call. operating presentation otherwise and on Unless our was now third go all non-GAAP the the for earnings to references financial

came up XX% made revenue was million, Services $XXX.X $XXX.X representing XX% revenue. XX%. up from Subscription subscription growth Revenue at revenue year-over-year year-over-year. quarter capabilities of million. of million, in revenue Third was $XX.X

Turning to billings.

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

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

grew the XXX%. full X,XXX. a dollar-based all customers XX% to our net churn inclusive of Next, of rate, We was our year-over-year domain rate average The ended quarter ACV X%. retention with

retention exit around XXX%. net We expect dollar-based 'XX rate with of a to FY

Now turning back financials. the to

Our total gross margin was XX%.

was margin gross subscription XX%. QX Our

at million Free $XX.X our expect of margin operating to remain gross or 'XX income We above for X% was was FY or million. cash quarter quarter in revenue. the $XX.X flow the in XX%. Overall,

Now let me move guidance. on to

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

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

revenue $XXX growth 'XX, For fiscal the we year full XX%. to $XXX of million, million now representing of expect

services expect We be revenue. to total of X%

year the income average to XXX million, X%. outstanding. income non-GAAP operating in to net representing be share to per the We $X.XX an And range diluted to on expect million margin weighted for operating $X.XX our of be shares million of $XX $XX based non-GAAP

billings the more partner of We XX%. invest reduction million, channel. billings $XXX to to around expect of more our This impact guidance in our a that of shift in 'XX will be services includes shifting decision QX delivery include will to The billings to $X our growth network our FY bringing this be this to million impact QX.

guidance free flow to cash FY for million. our 'XX raising are $XXX We

we all of the self-discovery incremental conclude, such capabilities of and drivers our To are as aspects and encouraged are new by QX in outperformed features. growth AI we the from seeing guidance our signals

to Now the let me over turn call Operator? operator. the

Operator

Scott Needham. Berg question take our with [Operator from We'll first Instructions]

Scott Berg

Really I on wanted nice start to the side. billing quarter here.

growth changes see You kind quarter either the do speaks pipeline of you've up from about saw some X? further? in what QX? we to similar into of seen last going down trends Or Do demand there. do you like and But environment kind any the and large how of normal some or quarter-over-quarter, think or acceleration deal they

Pete Godbole

is This Scott. Pete. Thanks,

composition the the at continuing is would SMB on on enterprise we're those basically trend we are what extending of looked into we're QX into rate, degradation and in as seeing closing we deals the in I a QX. the And a in QX strength As anticipating basis pipeline, it in call Obviously, expansion, QX, expansion deals. that well. was trended same out saw what the in we the which depends

Scott Berg

And it. sales lower and growth going are all sales kind a that other follow-up some aware that then expense, marketing little perspective, higher that's Is we the up Got you're see a of? relative activities I there operating and marketing partner quarters. last with of know Helpful Is there. from costs to the enablement Is bit subscription expense? related have rates little your your in of line couple to there. margins a guidance, the increased that down through? that

Pete Godbole

plays as the the in I and expense the QX investments that then that that marketing QX, ENGAGE machinery. marketing are in and a into of needed look trend, spending. there's, in and event right sales I the we function sales parts QX which and at when was making is you of what you the event market call, had And and think sales we that think of remember,

Operator

Fargo question We'll with Michael Securities. take our next Berg from Wells

Michael Berg

to of environment to to as is wanted SMB the the look How is to relate first the ask how into does improving? And outside renewable vertical, trending I point on it way. Anything different in half in the it the calendar a XXXX? dynamics we demand year? it

Pete Godbole

is the I well half environment in in our remember, our seen difference business are we've staying across first general, renewals pretty half. verticals. between the But There's all think strong. the that second and pretty diversified no big

benefit the get seeing the we So we're renewal in not that, changes big but environment. any of

Michael Berg

it follow-up quick anything of just in scrutiny. preventing of -- mid-XXs that, quarters can help driving high-value XX be there is whether think further one on and the And priorities, low Maybe seems Helpful. you to It's and equation, incremental budget us been home to adoption ROI about now, macro several budget the then product. for be capabilities. it proposition -- a type

can Just would that think any we way accelerate? how about

Mark Mader

at I driving or them one right been think this at the when for get is the when at growth in to this various phases we -- Mark, half area, in has big look how second we us time. we aware look of people more initiatives of the elements the do

self-discovery of effort. that So part the was

of years and is transaction of we see dramatically the next One also in year do accelerate do the that things increase can things. how but how not we types the we only discovery, on those out

do partner, rep to you we And direct can a the be think which visible how is the we've second phase whether good the of in in whether front see opening. is future do be get a with by that online. for a whether in variety to you we people continue speak see people and portfolio the But people. progress of a or game half So made first aperture utilized in speak that you that. And can on entire methods, with people, of you really also I transacted

Operator

next Josh our Baer take with from Morgan Stanley. Let's question

Josh Baer

capabilities, on I you of is Wondering to? your customers. the by up what percent follow capabilities apply do generated your can revenue of that base of to X/X like Mark. Wanted X% only think customer think

Just go? where that can wondering number

Mark Mader

I'm -- one. optimist I'm this on Yes. think I eternal the

single think our I every in relates to community. this person

do to system, portfolio. the reduce entering and bring every should low go system, all options all transact And it XX from able think up and start hurdle I well how effective a of person way our buying are into should with really the double takes sharing reduce our with We the It penetration next deployment, very be cost to with over what our And give way to height, X-year information system, our have you massive platform a things enterprise I over cost into our experience to -- to data These customers systems. our and us. -- yes, on think visualizing that I people wide has the virtually multiple digits. to at being think that the does. frame, when on capability median

Josh Baer

QX, some again shift QX, compare. to partners. off in upside the and like of on And even like gets helpful. in wanted just acceleration Really then comp you dig did show QX, one QX easier The for time more a in yet guidance but nice the billings, little in the decel easier an implies bit of adjusting

to else is QX just sort of and out anything of normal kind prudence So the type of embedding between QX guidance? call QX? Or

Pete Godbole

to sort data the our we've which over the year. for our seasonal our sort way billings. like our has it X in but quarter, the a sort billings see quarter consistent. to the provided we over in lumpiness been constant year. of full view guide. to been hit QX up XX% very is, our based timing hasn't of Josh, year many It's quarter, see term. approach actual of view of set quarters, of of past tend very full performance performance in of And It's It's irrespective deals. We the year on given of So year the we commentary this every materially changed The variances, Within the direction reasons a there's variability. offset we

that's So see the it. way we

Operator

our take We'll Jake Roberge from William with question next Blair.

Jacob Roberge

those seeing feedback of any been there for? outsized the in for few features those? demand hands on that solutions you're and customers. What's a had you've really the now Mark, beta early months AI in Are

Mark Mader

It's interesting.

features to think is who wild, of into CEOs market seeing the I what are these lower some have that is launched to the AI value I but people higher usage As signing frequency, peer talk lower things.

this being where daily. a a times company So really configurations advanced "Hey, not or the when a at to It's content look we assign of at ability large XXX our created something generate domain per value at We're generation." see configuration I away configuration XX, sort saying, day. through XX, we hammered formulas seeing being to

at but logic, having do then will and across I think like surface because I of had consistently. assistant that lower usage consistently people the actually little user bit the using negative, or ability or utilizing leading having not it's but people neutral I almost that's are And anticipated. And peers day to think a having investments I insights area. is an exclusively ability a single look as I So find in to grows, tells not area received are And it pretty us that speak long, invest lot an indicator us to it's this frequency frequency temples when than good encouraging there. say the creating probably out AI from only mechanism, favorable, across positive. really the quite with that we've continue the the and feedback neutral a all climb. But But through think every a I is of would

they will QX enterprise you cleanly. associate tie to be have we will in things in into giving into and can be really plans the time that a revalues, first first Heading about. very users which our something Like where features be IT governance often can foray past, available can business security very presented user business product, they the to the this get that something the and that excited enterprise out

feedback this really on So the definitely, positive -- inning no pleased pursued fully. being again, it's it's to neutral of game. like But the this. again, is days. I'm game And super see or first early the

Jacob Roberge

in have take that in still terms the as getting GA time the customers these before of really view today are you left of starting roll motion? a out. beta biggest that and Very obviously And the know what in of time hurdles upsell to will solutions just do hands line, some helpful. of product solutions lives then I But lot the kind and really and you

Mark Mader

in people, I time arena, is there this experience. first for many AI with are interacting think X this their especially One, factors. an

correct, importance having we being that. confidence of interaction, -- about So the customer the giving care deeply high in that

some a oven, think will, we in an these if it's month X, things or we think move. you as extra the about So really smart leaving for of

think the feedback opposed end skills we're And I getting really -- doing it each with drag for understand skills, the the say, to these of a what is well at and that for and X interaction first X X. the with of first QX. it's to So out scale do let's next right important the before that as the well, worked just skills,

I these another. have you to think of prosecute one really independent .

I think the is the is. piece equation what this of other buyer the posture of

Even I There have our about some when organizations early tens organizations, thousands in look and X,XXX taking policies really unbelievably users. largest are are. like So teams organizations extra across spending situations, program, internal is care are to don't what security data understand the those which we ship we procurement with contained, approach to our their at even the adopter AI, some of of the teams in of boundary.

as internal in it's are that So defined. clients who largest our customers their some that we've I controls wait will EAP of getting they're until being approach. prudent an approaches taking uber lot had out conservative very we a And of think of actually are

Operator

John DiFucci with next our from question take Guggenheim. We'll

John DiFucci

can in of comment you the the And to all guidance prudence give into of tracking? linearity deterioration beginning in at us how to be December I on kind read the this expansion seem relative quarter? the But and just November appreciate any SMB

Pete Godbole

Yes.

thing the have the quarter. always is in -- So first we seasonality

is to month smallest first all X the compared Our months.

And the expectations. trend in on went what it, strength SMB side of by enterprise that through of expansion we expansions our the see other we enterprise was expansion did we November impacted saw the buildup. be the I And the on pressures. call the SMB as continue to pressures quarter, see can, So into did side November. continue per We in

little a played of out. the the quarter that's So how -- bit

John DiFucci

prepared your all give on Okay. advanced us Mark, as the That's any on be example in at forward? as that Can you far thinking mentioned should helpful. self-discovery And metrics how I remarks of traction you about guess, features. moving we

Mark Mader

things. seeing I we have It's painted how at green year on But we'll think provide be more in more But ahead. picture million the mean, shoot, a in conversions, We're belt, pretty still of our in $X really early less tech about frame terms we're bookings to I that talking I year the looking confident $X able ahead John, for of these this mean, great our would as another for -- with little the hundreds results. QX that of I quarter. than give with quarter again the with right trials feel we positive contributing are say think to to million. a year accumulating innings. upcoming I feedback probably the we'll under now, nearly people

John DiFucci

look, And do job you I a nice people thought Great. would a of at billings, job. guys lot ARR don't too. nice this, and think but

Operator

We'll Enders with Citi. from take Steven our question next

Steven Enders

marketing to build want any international Australia residency. after expansion kind I investments, there go-to-market out to go campaigns international guess to how the thinking I Great. guess, see is opportunity. of I But mean, good ask kind of I about, partner going that or initiatives? broader you data further of to are about And into be Okay. for opportunity? the kind

Pete Godbole

is Pete. this Steve,

it found, a of for of a things. with huge of the making think clearly, after. the opportunity product PLG our to changes But one of combination go So have revenue. as we and It's of expand all to making be this we think able all us. on And the it international XX% we're we is those easier areas product

well, capability go-to-market treated. with data be other to customers would investing how combined the that as we're deal the their On want we with side, in

with So centers. data go-to-market think of it as

and just then the while invest to expand to a business take us. So start we'll small is our here going with international in they like But dimension. because customers continue us with

see. should the that's trajectory So you

Steven Enders

retention, at on I Perfect. a helpful incremental bottom little the guide. how the think about thinking fiscal that Okay. of thinking about And year context. for call I bit of you're net guess how I least then, guess, to at? be the secondarily, what's downtick there? for out we potentially out should anything could then where That's kind And a difference

Pete Godbole

Yes.

much of when between we've the net dollar Steve, was there. retention which So in out incremental quarters. generally, you're difference consistent the the pretty SMB only we that's The in laid rate, think were is things seeing number what included expansion,

Now first for, second part. part just need that of in total that's the go Mark direction through. And what the terms to the QX out. shoots asked how to to dollars this. of not you we what's kind the those execute play want about, We've got talked on, big green a go we But of of see the go

All inform QX in net what FY of 'XX. with retention really environment rate will will think see look combined the like we in we dollar that,

Operator

take We'll our Bora with next Pinjalim question from JPMorgan.

Pinjalim Bora

XXXX so far? do Congrats the kind customers, with how budgets your you you up set strengths can open bit on so enterprise the quarter. are ask might not I think or Mark, of Do much? for conversations based per you, on a getting think

Mark Mader

connect a largely value. and I of value understand it's a think how that helping they ability function provider's realize to to

be and greater they bigger back them a time organization in a I frame, benefit. ago, talking that to was where it and probably way, a an years realize could connect have with we able need articulate about pronounced we how they to the the certain and that in hire -- prioritized starting within were got goes think X this the really project the to pursuit

per product or gets tie of tighter where So deliver a value, of when loose. standpoint more standpoint, I investing, a think not a how into we just that or our is from partner we're gets articulation direct a whether string but

And things that are so to that. litany are can be I but one's a control there whole aware absolutely there that within macro that are things help adjust think it's of of, -- one needs

Pinjalim Bora

you to that one How capacity next follow-up. thinking for plan? the margin for how expect then the going year? And have your about build context capacity Do capacity think of are Do kind about higher? into year? improvement should sales you next potential we Understood. you of in And

Pete Godbole

Pete. is this Pinjalim, So

making we we've capacity We've So of of sales think continued of think to pretty we've capacity, been it the have on those we hired. fundamental. a several quarters. sort -- sales when productivity them sales team capable. invest of and first the We at reps needing shot think That's the improving, for you capacity and of is the the the that's well-trained professionals effort of see -- in you first

margin. will we resources as drag we I and will. roles, on a process be specific Now add will huge it don't we the sales But think enhance the

FY So expectations those look be What guidance of I we're as on the will function But margins, have. that should takes what you look you it growth gradient at overall way see you 'XX and at we margins, continue not to describe yet. giving would for is a improve. improvement slow that

Operator

from next We'll take McGinnis question UBS. Taylor the with

Taylor McGinnis

But one one earlier. that billings just on asked questions of press to Sorry, the follow-up again. was

any can more about So XQ? and did XQ in embedded seeing far in you're if maybe which the talk mentioned so assumptions know that variability guide? I in pulled timing, like back-end quarter And into trending linearity billings. any think Pete, you of you if then to in that that's there renewals see if bookings from that given loaded? forward there's -- strength you be But just the appreciate the I XQ, could all be that we And

Pete Godbole

called we're but unusual trend out this of normal on There's So that report and only bit was played pushes back Taylor, to SMB consistent. nothing I'd Every that seeing would linearity seeing, happen, the it. nothing quarter. delta in big bookings say bookings pulls there. side of a no quarter that very expansion out being I little the out. unusual sort has which the in was the I and was quarter go there say, we're

that we're some trend in trend that, we had expansions. assumption extending forward continues. And degradation So the QX that we're QX, on these seeing that into

Taylor McGinnis

in and really that and is, noisy. that sometimes into me be can And timing be guess helpful. one months, billings there that. XXs. last like if one quarterly low That's on for has low end you I a in somewhere so can been mid-XXs, it's trailing But maybe ARR XX of the But been growing it. there Got metric variability and growth look the hanging

what seeing. underlying we thoughts guys as leading these When metrics? difference the and just about momentum doing So we of you is better between any the are think is which X how we on indicator look business forward, about think the the

Pete Godbole

both when to of same in answer identical I answer. it's they you year. are you I if the close, think ARR, think lead an but you not pretty finish billings They're both think when the different, they

to thinking tend I'm elements better quarters, the ARR little you think of because pronounced. a the on when has a the year, sense timing they're same. So of rely But it full more less both about when I are

Operator

of take next We'll question Keith from Bank Bachman our with Montreal.

Keith Bachman

ask on to wanted one Pete, And is that I and a micro X things question. then bigger related. picture are

keep same? discovery ARR talk you is excitement. models customer about of advance be was opportunity, anything them FY think Can I'll already to gets think, addressed about formal in of we're are anything to you stays On from and the assume you growth? the in SMB ask just be a a from you when us follow-up clear, perspective, January assuming to continues. guidance? for the you micro, question, end 'XX what And that a Pete, about it out degradation or then you our want the you worse successfully. that just factor and in and Or think your contributing it When a to building for growth you the AI billings but seemed like in contribute at see growth else the lot else would want event margins, actually of I Seattle as Gen giving being us to to still, mind for more you point? demand potential be it And going 'XX. Do But

Pete Godbole

So asked questions Keith, your answer I'll you them. as

SMB degradation is you continued question we had in QX. are and assuming on that First a expansions, there was

it of worsens trend part first assumed So it in -- we taking so that have the it. line, moderately that's QX

to I early think It's sense EAP good a in little assumptions 'XX. we because a put through looks ready feedback. call in Gen The part opportunity little get call positive to sitting of We've we'll feedback But question second we've customers that your out got that of program. it got and few the of on I the in AI after FY what ARR GA, another what we bit like. I start into of quarter to a get this get as think a

it's to early little call a So think out. I

Keith Bachman

Okay. FY demand about you side the Pete, think model us to as in Anything else, want 'XX? we that

Pete Godbole

this a I to time. nothing No, think through out to specific call early 'XX, talk at it's little but

Operator

from next Tillman take with question We'll Truist. our Terry

Terrell Tillman

the quick Mark, Nice the the One self-discovery. question job and for on quarter cash I in on earnings flow. first you had, maybe

of billings I of $X there an think us nugget it million in shoot. early green a like you or terms bookings you gave and call

Is how it the to all given would you're that from doing the there work more add notably the of level or happen? $X just though that in of pretty in with more mean working follow-up. existing Just even and I seeds doing the to you more a expect in trials got self-discovery. trials the through -- there And kind ground ramp do XQ? then initially. you're or you maybe million put capabilities I have And the flow you're trials the

Mark Mader

you someone transacted Terry. existing how being learning. capability do not with Yes. serve It's It's And only It's but utilized upon. how customer, the we're those that prosecute do are utilize, moving help you from right? the that up multifaceted, the to it to then being motions to

we closed, deals of have further well who things like, people wow, other I of reduce that exposed there thousands for tens right. can So first found to are been got we from it And things scale the over friction. have And we're reduce. we to friction these to organizations, as where we totally that that expect would also that some XXX,XXX

would in, camp. going I over I to -- we're the think we bet So other things as improve continuing And portfolio and to in more I have bats. more the at is getting more on the at piece this of will look

not So organization. within trial. when people of one trials to organization, capability, it's that an multiple you organization It's opportunities have

So that on an miss neighbor organization, even start individual and first if capability. can trialing you the with opportunity their

opportunity that one of So to I organization deliver opportunity. sell That's the value. into it's and an about a to things this like really repeated

Terrell Tillman

But services, see on billings question, of or And over Pete. are follow-up hear. we enablement, partners. betting some know the is go the great this Got it. for My of That's terms if you the to in the -- to don't partner I where going to

So its explainable. I'm actually curious about sales enablement.

So I'll build on question. this

your quite last a lot. bit, year, million expanded X a have ], the [ customers Over That's XX

you $X paying customers million. got You've

others. think in I to the To partner interesting mentioned whether think and seem that. to ecosystem, it starts call, ones a better on me, it's I quarterly have GSIs you you

to So partners? potential types businesses and hear sales enablement influencing about like how new going with I would more different of

Mark Mader

came Yes, are build exciting opportunity, with well explicitly. oriented. very than And based, clients. engage different many what clarity the and of services of really in supporting they Terry, wanted getting to Smartsheet deliver our partners see line ours. the on them That's both partnering. them one intentions with versus go our as of which I customer market is our a broad utilized the elevations of both States to we to customers partner-first further is and go-to-market their whom to as as who hundreds really X as were growth service countries motion as well their in GSIs I different How as that are as a view huge very

targeting to a ways different newest client. build different their a out get it's back them which we book again, the then That's a to team is than serve introduced business figuring partner of them, multipronged it the of next which valuable with relationship to them remote in a they so where motion. is but and still to where clients And relationship. that on really We region the platform can as SMB, continue really Smartsheet

So we much broad-based catering program, have have targeting which different to we folks is partner population. our within GSIs. And a services team, team, our enterprise which the larger within are

Operator

from And Wolf with we'll Research. take next Zukin Alex our question

Ethan Bruck

on a customer seeing Zukin. for you're of number in the if XXX renewal it's I Kind I'm is Bruck This Ethan any the the on XQ. tiering what's Congrats Just for guide smaller more just we at co-term AI biggest question. behavior expansions. change Alex period. know the is the looking curious like to to renewal? for whether XQ, like little bit Gen and have paying

play started have in Just curious I'm one to have going how follow-up. conversations full out to those field.

Pete Godbole

differently. Ethan, going I don't renewal think those expansion any those are compensations and conversations

AI customers. EAP I a think there's limited about in number all that it's is pretty of Gen unusual Remember, nothing because early of with stage. and it

the spot environment? removed and think to playing because things, I with am present come yet you not do probably we're it? the it into a my into And you think that's directly renewals ties So bit to of all from How of those at when time. what that little conversation to it going going is

Ethan Bruck

Okay. you're not maybe we guiding think a guess, explicitly for And us Pete, I year of know I as way kind next and think year. about next derisk a about numbers. help to But from conservative

Just detest like, guidance? what think of fair is is the below kind outlook XQ of to way I a in kind guess, for building implied

Pete Godbole

call it's a is I said just little next to because QX early got a to it. before, out as think, execute quarter. I We've big year.

is get recently sure you pan, all place we've think QX. best call down like the a I That's things to we And lot in into the clearly the of fact of we we're outcome heads are in put the part it. part one if make can the other trying that just will. it

things those looks like. play what FY to be to let put a really out. to able do perspective 'XX got we've what on So those

Operator

take next Hynes DJ question Canaccord. our with We'll from

David Hynes

I obviously, different to would true. XK still start used it's threshold the see scaled the up? remember inflect Mark, I back as maybe business about But today. IPO, customer is and spend think to you much typically to at which we talk And that's a

qualify. enterprise or want or threshold where Or progression into see other look the you again? starts that you it up? a inflect to spend Is is you higher signal in that linear low As to there typically cohort spend up ever mid-market any more

Mark Mader

interesting ago. the about again, time about I was million of so to in we from it frame from phases our million. to to IPO. pointing And away $X inflection progress talking how from this what $X Pete $X.X will our up spoke radically changes isn't a to million I to average $X yesterday from different point acceleration of because from reference a Yes, our customer And game. years an one moves We're double our million. million stay again, customers. are seeing, of so to seeing $X.X many almost We're there X

a inflection on tempted company a a to as whenever So missed inflection been it's focus I higher known think focusing opportunity at gets an point. point, also

that the of exert just customer, I can there one are and of those view a we're don't is and of emerging very that your treat one, at one all one major, deliver higher partner as spoke recognize that to terms to them trying customer at will faster. which So compel but viewing value enterer, And or in view one we're points your really you you large as that to as move to important. have you're your which how enterprise, mid ecosystem multiple emerging energy

our the go after to we've and and resources trying over to years, those. arrange So I I -- we're learned last X think capital think it's our

David Hynes

Yes.

And sense. on question Makes then the self discovery. maybe Terry's to follow-up Okay. a quick

that the into roll would alluded in question answer you capabilities to you of that -- his motion. So kind to more

that technical Just easier enable perspective, couple to will done from it next product a them? be for a already you've now the of self-recovery

Mark Mader

Yes, it's a to environment, I visibility, absolutely. And who control we of self-discovery, elements. think simply the you confidence, the the responsible the not think about when for people those are ability it's enablement do give managing the how feature, that

you efficiently foundational framework early console And have heads-up confidence we're that way. modular holders building and within creating we're frameworks very administration that these is manage a administrators high adding rebuild Once investments. the that building that budget those to and in so -- don't set, of can some We're have these very displays one, next that and infrastructure. situations. upon these the making So

Operator

next question with our take from Thill Jefferies. We'll Brent

Joseph Gallo

don't any question was, know I Anything out? is tailwinds This activity there call to noticed, Thill. at as sort with unusual drivers Gallo Brent help, wondering My the any you've really had for from larger conference? the John if very are good enterprises notable of to first you ENGAGE I'm

Pete Godbole

enterprise. So the strength question is about your the the I think in

right the a happened what It's at a start that to with or way value these QX place for building with of sort a we've field enablement in of nature it's close grow and over happened the value an done compelling build of result opportunity opportunity, solutions time Engage. to find series transaction. and customer think then the just and the compelling in weren't the what describe that deals I happened the QX that just out, that then of to in the

running it's bullet, but what as So magic a special seen. just don't it. through think I we've

Joseph Gallo

bit That's previous your on of enabling helpful. kind of embedded in services terms -- talked in newer development? service guide was guidance -- a your already And a comments, you the I to in XX% billings. million then of of $X impact growth? little wondering, and about that for follow-up work Good. more that Or for do is maybe having

Pete Godbole

out. it It's a newer specifically development because called we

that to so as And it's prior of think -- incremental guidance. a

Operator

We'll our Capital take RBC Markets. Rishi next from Jaluria question with

Unknown Analyst

is This Jaluria. Rishi on Chris for

further prepared that expansion organization. more and you opportunity the do with really remarks there's large to that mentioned in still deal a So

just are that was still Or next really of drives customer they what with I leg So of that the what size? evaluating? expansion wondering features

Mark Mader

goes them of trajectory about at multiyear deal XX%, customer where today, utilizing years product many one is have Smartsheet started the with of that That's the have the then these platform. $X,XXX we're following The they thoughtful are do having speaking being the nice is they done And look But or confidence and And would argue who -- is when there key population. to thing the us you're there up. them upward in as yet for a $X,XXX years. a when are ago driver the a ops large And key using subset once as suit, with of not really multimillion away that driver that employee an there the large how nice, a over discounted we populations show and and are come. our years grow teams the dollar teams flight not you and customer very how you seeing carrier, I in users, all very is likelihood we're give it, what by in with seen still doing examples that serving language we've these of I other them things their adjacent but accounts. higher you the can we've

Unknown Analyst

follow-up. That's helpful. And just quick a

some the green industries have Going that back SMB flip call shoots? on out environment more to started macro on the show side to side. remained to Any the pressure or have

Pete Godbole

I across all call think when Those call I we've Obviously, seen I think the in of big of But focus come consistent. general, in in slices tech. vertical see. seen -- level what expansions. the I stayed the good good a pretty through seen the And and growth what vertical it's logo quarter we've utilities, year. strength what seen energy, in that some sort the is That seen pressure big for -- -- call -- have what we've quarter. retail, is, SMB, QX of some vertical pretty the on we I GOV. we we've really where SMB education the are the pressure,

it's sure make far start. to just So

Operator

concludes to like or over call today's I'd to for remarks. closing that Turner back the presentation. additional And turn Aaron any

Aaron Turner

and you Thanks, today. thanks, We'll again for speak quarter. with Great. next us Lisa, joining everyone,

Operator

Thank participation. you. That concludes today's presentation. Thank you for your

disconnect. now may You

Smartsheet (SMAR) 7 Dec 232024 Q3 Earnings call transcript