SMAR - Earnings call transcript Q4 2024

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Operator

Good afternoon. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Smartsheet's Fourth Quarter Fiscal 2024 Earnings Conference Call. Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Aaron Turner, Head of Investor Relations. ahead. go Please

Aaron Turner

Good Quarter Audra. welcome, to everyone, Thank Fiscal afternoon, Year Fourth of XXXX Smartsheet's you, and Earnings Call.

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

in will can being accompanies Events is for a the presentation be that replay be at on Investor call is also website There Today's our prepared investors.smartsheet.com. which remarks, Pete's viewed webcast and our website. of available Investor Relations section slide Relations

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

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

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

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

Mark Mader

first macro a fourth at Analyst frame culmination X,XXX cash by while afternoon, of call making And XXXX. over progress Day free everyone. you, original XXXX. fiscal while threshold our where year. we ability QX basis in demonstrated earnings on crossed considerable within Thank quarter milestone back our achieved of we QX challenging margins and our grow for Rule was ARR to set and We the $X and Welcome operating profitability we to second the this in flow. the points conditions year time good our in the year billion expanding Aaron, consecutive also for XX achieving

$X QX XX by on continued enterprise, customers by Our performance in In our progress opportunities. more with in We now quarter $XXX,XXX. we coupled have QX, more ago. Smartsheet million, the than their over and And XX highlighted key was the customers strength a million $X.XXX with ended expanded billion Smartsheet strong XX.X growth our revenue than XX recurring annualized ARR year users. from up with with ARR

selected has collaborative been world-class detailed a company Smartsheet for enterprise-grade solution, number quarter, at was of expanded of City with management the organization-wide such used multinational an network saw past for a within the marketing with Southern Queen, security. After process the for and of as RFP over a Genesis among Motor we Dairy others. QX, customers In This San Smartsheet expansion California, significant America, technology information Nutanix, and company. and Jose sales scale years. competitors we University departments

of their with high under upgrade them. been Gold. consolidate breadth and and replace electronics Adoption The marketing one governance security under an program a that a technology deal main for The These a underwent group been their consolidated company's expansion leveraging with have solution our business has of more. collaboration. management key manual licenses our thousands with to included selected enterprise-grade to X has leading a premium sciences, across and M&A Their the operations, implementation and expansion improve European-based project their processes, and an increase deal demand for life to of efficiency company extensive IT across units an one had was need health needs partnership Advance We and care. and Smartsheet of divisions company. users and transformation capabilities Smartsheet to of growing evaluation full Smartsheet science global

forward, efficiency company use extend in units of the to use its Smartsheet optimization. their drive and the other will Going towards

saw could value leading entertainment all they After the on repeatable We and and Previously, efficiently market customer team, outcomes manual how team ticketing engaging a the work, the and company. journey significant adapting relied by customer to high-budget expansion with automating world. our drive tours very high-profile greater to discovered with communication. processes Smartsheet manage improving global the changes around

all an operations integration using tailored concert and to Salesforce-based with their to tours a regards solution and record. marketing artists system the Now is in the from manage company benefiting of

the to efficiency implementation forward, additional and of tour with company management the to organization. already phases other the of expand marketing parts transformation has solution Going the and realized planned

with deliver teams. Smartsheet which We initial solution This platform. to recent all to a a to leveraging dollar ability key was East worked support will enterprises. solution the Middle focused The unit digital scale to expansion needed plan scalable reporting across scale provides to with corporation that their their team portfolio a global key rapidly regional delivery a international on consulting their solution APJ channel the element contracts projects, multimillion based of a with A region one involved transformation an for on multinational customers. at financials delivery delivery partner to

Gen big our beginning last available month. the year FY a generally our became for at AI our X 'XX enterprise platform. to customers features In of the was AI, first plan on area of

allows decisions. The capability from create to first up data-driven tailored formulas speeding customers our their input,

continue initiatives. results contribution and we we launched QX And leveraged to the Clearatech for February, these for been more from has of of FY our The the our The since have AI second tools. interprets encouraged both compounding new X/X beginning usage self-discovery small, perform translations. our 'XX, the our rates well. growth enterprise these than And in we're capabilities, customers strong. seeing while data by free of customer and to was plan summaries are and Also response of customer

plan, grown domains. of beginning the new which free FY free And fiscal we via free steady monthly in seen a of January, growth. thousands paying launched the has Through record. across customers 'XX at added plan plan, the XXX year, our Our new has

over than This drive QX, self-discovery up of million were QX million who of customers result our first purchased in QX, trials. to the exposure $X were to and less capability of the from bookings this is continues half for self-discovery the with $X capability time. more Nearly of In sales and our capabilities more customers. motion

FY we success, the will Given 'XX. approach apply to additional capabilities in this

today. this call less focusing per on Mike our When joined to surpassed an ARR X by customer platform our in earlier, needs. than out their years we who billion got and ago, year. is that building and in demanding customers Mike I mentioned Arms, Officer, like was As $X to scale enterprise-grade I'd to QX. can We Chief retiring point Smartsheet over $X,XXX average under contributed $XXX ARR our Revenue our million, most

and has Mike's consultant the contributions for all per grateful mid-May wish customers During I'm successor. by support transition his to to a retirement. remain him through and ARR XXx. tenure, his on the service grown Mike in as our will best

and will that next of tier proven potential ARR team for customer Max Adobe growth Executing experience announced including company, we Go-to-Market. Long offerings, strategy expanded. Today, be underpins over each growth of X [indiscernible] the be global to most diversified decades innovation NetApp, he will joined this we as as Max success. phase Commercial product with executives, motivated refined of commercial Officer. and strategy teams Microsoft the has where consisting President Smartsheet and of served As our companies for the and that Chief has serve the leading a and go-to-market tech recently, and enter of leadership

innovation Praerit Product under Garg, and unifying newly product unifying and be Max under Innovation. of appointed We and will Go-to-Market operations President

to at scale foundation And been leadership see enterprise Praerit Smartsheet efficient sophisticated management, more workflow of by XXXX, enterprise-grade Prior paired as it vectors as customers. representing a additional largest see for motions Amazon. innovation deployments category. opportunity market serving tremendous the in Smartsheet, has and the data leading informed platform next and go-to-market in of collaborative product win share Microsoft the We with served We're the under recognized era the at of joining our for solutions setting delivering leadership platform work significant to work number multiple profitable with cases. his product in roles I a by growth patterns customer AI-enhanced use of proven, decades opportunity growth. in

are design, of particularly segment, pricing effort in course the scalability, In no-code the platform critical and more positioned is we to of to significant deploy workflows. Enterprise slower security. onboarding our demand will more deploy efficient macro segment, year. no-code and Regardless solutions simplified expensive, alternatives. due drive category-leading during opportunity environment, capture to experiencing In SMB to the the performance, exists the workflow scalable to for this power our and an well productized solutions enterprise-grade Smartsheet undercutting

We are value. self-directed to to on for time remove a friction and to mission our experiences faster enable customers maximize

work We to organizations are of our platform world. steps enterprise-grade the the taking management around execute our sizes right strategy bring to to all and all

of well are next and phase We our beyond. positioned to for growth $X billion

Now let to call Pete. me over the turn

Pete Godbole

Mark. Thank you,

'XX growth We environment. in FY QX. our demonstrated in profitability outperformed with despite ability to durable drive our business a performance challenging Our guidance improving

pressure decline to segment we of 'XX a our reduce impact However, segment expecting the compensation structure. to The prior of spending took rate. environment and the to we than and QX to headwind to our a business. growth business in in macro 'XX. In the as our to our SMB FY compensation quarters, served worse our revenue of in see in segment resulted This current as expansion, 'XX, domestic be FY FY to under tighter tied negatively continue the use we year. from similar of SMB macro percentage was stock-based on steps continue This QX, previous our to particularly stock impact are overall in

to SBC expect percent 'XX a our to as of FY in decrease revenue continue beyond. and We

rather results to investor have our response references this go standardizing out. ARR the and or One was are through on feedback, basis earnings that operating we our better the past, nonfinancial will call a will bookings before guiding results in In in billings. of quarter Unless be metrics. release forward, revenue reconciled our recurring disclosing full the fourth reflection expenses a interchangeably year. we and than ARR. I on ARR our we GAAP in the now to all non-GAAP provides performance. call, posted additional net and for and used results call. financial the and and otherwise ARR, stated, to presentation Starting Additionally, going annualized ACV our quarterly will be

free and revenue XX% representing up year-over-year. of billion, flow 'XX, up $XXX.X Non-GAAP XX% year-over-year a operating cash ended fiscal income margin margin of $X.XXX an For of XX% $XXX.X free of billings $XXX.X flow million, total the operating XX%. cash full million, year with we was was representing million, and

Turning in now to subscription XX% our $XXX came million, growth made representing Services million, quarterly Subscription XX%. XX% capabilities revenue. up at results. $XXX.X $XX.X revenue Revenue year-over-year revenue million. was of revenue quarter from Fourth was of year-over-year. up

representing quarter billion. million, total. represented Annualized XX% were semiannual XX%. approximately about our Fourth X% quarter $XXX.X came billings revenue, recurring Quarterly the fourth with monthly. year-over-year at billings. or in XX% growth to annual to ARR, the and of billings Turning $X.XXX in subscription Approximately X% grew of of

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

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

Now financials. turning back to the

Our XX%. margin total was gross

$XX.X our XX%. of gross the $XX.X the operating XX% revenue. in flow new record quarterly Free for was million, Our QX in cash company. subscription Overall, income a margin quarter or was quarter was million

Now let me move on guidance. to

growth incremental electing macro in FY leadership, our to initiatives our the timing at influence guidance, given to our 'XX changes sales remain the are respect conservative and aimed with ongoing spending constraints. We driving of

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

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

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

expect of revenue. We around total services to X% be

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

FY XX%. 'XX to growth our ARR be expect We

last expect net beginning course retention similar we quarterly similar on our between trajectory higher Based the rate trend rates of year rate ARR and to a retention to the as follow expect year. relationship we Regarding ARR, the as a with the ARR year. growth growth of at rates seasonality, dollar-based the net through follow

We expect on in free 'XX 'XX, profitability FY while $XXX difficult our flow progress to FY and also our million. To significant flow made conclude, cash free economic climate. be we navigating a cash

Moving into 'XX, innovation. growth our driven we're team next committed to and position This phase FY enterprise efforts growing margins. of on energized streamlining will laser and expanding our focused product profit compelling by leadership go-to-market be further an

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

Operator

Truist Terry Tillman from We'll Instructions] [Operator question our take at first Securities.

Robert Dee

Dee Bobby on is for Terry. This

love for million Would with update scalability/infrastructure particularly the come this to related enhancement that larger X upcoming sellers to an some then have customers enhancements And opportunities and there I potential near-term of for me. road First those new follow-up. get on $X could are that, improvements? map expansion the year, one out

Mark Mader

had beyond the in year. that to in say our achieved they'll past customers of really We've -- actually has those. ourselves, those prospects decade-long enterprise that We're done of multiple with actually fulfill. and year. changes. for way job The really team And a is we're on going expansions where hitting well to would the news nice reflected commitments I able be today milestones setting bounds that in doing a some some was on is The getting of point Yes. Mark, this We're had the good those. to big we're set are changes that past the sort we've we of upper impact

of we the bound largest getting that both really push you're really scale of we're govern. to serve, where So to to are these also companies we see to it's as relates when really a think it. want in industries it's ability the it you to and north where And well far those combination capacity have point of about getting at to today. they administration remarkable And I how what a constraints but model talking always upper a XXx scale look

always huge supported. environments. it's context manage So engaged populations the dashboard links within these also cell and sheet counts we in these It's of and can

to and the So the kudos for the administer building also team these. to both set feature tooling required

Robert Dee

potential see Appreciate That's capital for the all the where color. and allocation moving FY platform fiber flow areas And nice how strong cash be 'XX. guide to great. then Any you still even attractive? Curious about are M&A. thinking forward could

Pete Godbole

So world. with our we got allocation in since want to strategic But a with adding it buyback largest of we focusing of I call consideration we're strategy, the to on capital set. what thoughtful right we a Obviously, the start in remains capital. where fairly sort companies balance now strength deal and sheet the we've our deploy

-- we potential drive that flexibility may part that to of are, consideration be where potential M&A be want adjacent consider the to will we a think to we set. some will I have

Operator

next MacWilliams at question our take from We'll Barclays. Ryan

Pete Newton

is on MacWilliams. This Pete for Ryan

demand, the looking and macro of sort your year your guidance color implies throughout [indiscernible] year. you so there the guidance terms implied can helpful. slight your on enterprise the for in just how 'XX, seeing we at would Despite trajectory SMB get what and slowdown, the add if you're what of FY on be what some Just looks can

Pete Godbole

cutting we're composite guide world. about but I think about the thinking think question of our I you little and a were out how your bit, is the

start I'll think there. I

is So the guide composite. a

in what with QX. we starts experienced it So

were think worsening, what think enterprise worsen our was in strong we QX, XXX%. X. did to growth over NDRR NDRR as rates SMB that when So And QX. you of The you experienced in of close it

expect continue we 'XX. this trend So to in FY

of kind the of So that's it. part first

visibility business go see the we obviously, we the trend business. year. back-end we're about a as thinking as essentially, and -- And loaded through, this the progressing enterprise very We it's through grows

of conservatism initial new talked incremental looked of focused sort our embedding we've Mark of part with the at guide. level given on about. the prudent being leadership it that is sales And -- just some So we're last

Pete Newton

And That Really to AI hear just then a the makes follow-up. commentary. pleased sense. of some

pretty positive upturn think customers. about terms that's when year. especially think you I And in of

seeing the smart Mark, what you're utilize to through maybe, looking front? customers So this sheet are are for? on AI you year? Just how about going What products feeling

Mark Mader

into Yes. on the Smartsheet X It's on really is primary configure to One logic being able solutions. dimensions.

that. someone And part simply quickly of So and our big can do value a is prop how velocity.

AI solutions. we've and spoke that of that automations these formulas, is workflows that I configure you our the logic and how So to in part enabled into

On analysis. that drive I can I'm insights How tracking? about the the from things second the side, it's

The customers weeks was skills using that. using see say say you'll enterprise AI release our high-frequency see in would residents release that and features continue to of I really seeing the its X/X will that would forward, I to or coming within of experiences. it, use, shift we it see are pleased higher I you'll announcement what use with

we which when to of count and on up is really a the I materially. for the released the dashboarding go insights, AI the popular our interactions So application, expect area skill

understand improving and you'll that So around how today. very see next is new platform. that get use about cases with The experiences the really it's how all can we phase on to the people enabling to exploit familiar they're

we that with think an we're is people and well really the what us how my alongside understand. solution forms pretty phase. So objective strategy capabilities And into initial intent, they far. That composite But right presented case, that's and doing I, served enrolling state dashboards a my with state can automation. things so is be of now and a second the

Operator

John question Guggenheim. Our from at comes DiFucci next

John DiFucci

Mike with before here, been lot has has when the there's look company as a needed changes led And of So the and right? of a scale. Arns changes the IPO and I here, you since lot

are that what guess your of next Max I anticipate the may Mark, you areas phase So some to accommodate growth? of do address

Mark Mader

John, growth in was in international the you of understood partner I huge than of had somebody XX% less was think ecosystems our we how than well, with I for us other than multiproduct of capabilities that When a traits cross-sell. is customers and rise was a with who about our -- looking our deep a it seat, of experience think world buying something from catalog a the fluent very strategy. few super fewer portion

to base So who it's you trying serve, has serve right, way really think someone the all -- find John, the world. when also, that market everybody somebody the we the dimensions, SMB experience and up important thing of pretty on I we who to really view is to an for. how has that Finding largest and was looking to comfort in who a go from point of companies informed on both

across Adobe that is experiences experiences Max's NetApp and bring pretty I he's going And good think Microsoft, collection past to of bear. a to

John DiFucci

away. things see you next year, actually makes talk little that to here. implies because like inflection end with little the big decline. as a metric NRR on just led the ARR everything, continues XX-month Pete. point necessarily a wouldn't a across better you could a I like follow quarterly a near it such seems Can about if opportunity lot sense, well, to I to I see And tend get is NRR basis is the international, follow-up is the Listen, a and more to guess trends similar could and metric it but Pete, especially way opportunity, that of bit that ask through you you year, right the going metric, of where which the this a just understand an

gets I questioning is thing throughout that is do you get that to worse know now. thing think get sense glad this could of what Do being I the Or does through -- you I guide growth or you're the to that it worse the guess sort the year? Is trying year just throughout implying? at gave ARR actually that. just our -- people But going -- -- continues that think why point? year? the I'm think you that's the the the "prudent", said of XX% -- get people are sort all some it you're because in it just you to are reasons even what better get or right stabilize I'm it's

Pete Godbole

Yes.

year. of SMB. absolutely back right, So -- the called underlying net that if the stay conversation, terms are happening it's out full John, look the of the underpinnings it enterprise I SMB what's dollar and what's of you remember, a the on to stable. we -- in But expect happening think retention don't in that you're rate in for a

continue We to worsen. expect to it

the that's on on So drag to be composite. that on it retention a build going and the net rate, will into

we better? think get we've we're and we're consistent that's things it water. about. the visibility which guide we on have what ourselves, could see things to. launched always But based And doing in can Now what I are what many we

what we're sort So as that's doing here well. of

John DiFucci

see how Listen, appreciate I and look the sales results progresses. we'll year that. good, the of

Operator

Our question Iwanyc from at Oppenheimer. comes George next

George Iwanyc

maybe Mark, year? self-discovery? the this we think on you us start with give as the color seeing And roll how out you capabilities, that about should pace you're fiscal of new more to traction could

Mark Mader

someone is ability our experience someone to having the there product are aspects team with -- actually it. the One Yes. without to of a for utilize we engage to X self-discovery it. to have, in from feature

actually portion. second it a that, The the of part from other is fulfilling booking standpoint

we So have of and thousands enabled people have of be good of exploring trialing tens utilize those done tools, really we to we're is seeing quarter-on-quarter to date those. and -- around able thousands to progression these what companies

second marrying motion a transaction this chapter The actually of a self-discovery with is motion.

where a those but those. only on to see starting transact lower-value them skating customers SMB not also are small So can we place

realm people exposed work quarter to our realm to we getting market. yet in are element, on focused of that convert not but that our will realm, we which terms our have realm, content commerce management We in elements resource within and set which is markers our

would Prior to resource released a ago, to few a or Advanced have customer weeks team automated, have to able our X in weeks with utilize That extraordinarily success we've and engage it. our that, people required. the enable fully that. who a setup And performance capability. been So of with releasing of to the terms to sales customer that or engage positive management now prospect is seen in have been number we

So we are side. a want to to our portfolio where moving being a place entire someone without for see being by we available almost human it gated on the

driving go-to-market, and when of long-term think and And focusing on think of I letting teams mature, I efficiency into how about back self-directed customers journey quickly your move our people success And growing it's and built in get a way customers early-stage on you your growing more large as this. your the possible. your do as super your

-- releases across capabilities. year in this our self-directed will So features see you it's existing

self-directed people was our see dimension in resource asset said, in year. self-directed on the a in to as come just few And will I management half the into digital management this ago. of You motion released a a the way -- first weeks later market

George Iwanyc

you're more Is And really and the this marketing? X Could Or [indiscernible]? sales across how you. question prioritizing you on investment balanced Pete, us is perspective it some R&D year? give towards and it for leaning

Pete Godbole

which experienced sort think making take call an We're highly to with about in complemented the We've help to investments talked already field I fortunate investments pretty next level. what things, Mark customers large capacity, and experienced are in that we most our I have our balanced. were not savvy of field place.

experiences kind self-directed there. and investments on focused in to taking of the And these targeted we've other and some there. series side, sort extending application new made getting we've a invested of out of them core products. So capabilities massively modernized on R&D we've And

across R&D. as balanced both So short as marketing and answer, well sales

Operator

next to move at Jake Roberge William Blair. We'll

Jacob Roberge

business I bit the transition through understand out what a you factors go-to-market the uncertain that year. reaccelerate and are you think in the But of you're an going heading potentially this help do later if side and still growth some over back, obviously could this in the take a of longer the stabilize house, especially NRR year step of we're that on macro, the SMB term?

Pete Godbole

So the mentioned stabilize mind, traction. that that initiatives could of the are in those NRR, Mark my factors gaining some and

are that part -- -- totally coming that's experience it's but but a from start That's launching about while out. to the could of these be it to experience. The application We've of core it. are going talked we modernized launched large, assess lift we early the take So that them. first through. launching to a this quarter, comes sort We're that

thing his can second the we think get would of is of of customers then The that -- The to would really deploy. think customers we can these I portfolio features I If is, And our get sort bring to opportunity. Max top bear that's enterprise-grade an taking largest for experienced be experiences customer, think quartile leadership our that's our most to median to I will customer where the helpful. rich.

one remiss stages, if the is wildcard I'd on bit not in mention some a plays So it's of elements upside how But as will. I The that to you little there. be AI, out those that's early of a are said, out.

Jacob Roberge

traction XX% self-discovery I do know penetrated less unlock the can base? revenue, direct What then customer in into base. they're the you deeper there will to more Is get you all entire be that a Helpful. portion solutions being still Okay. with on drive capabilities with help than that but the or driving a to going solutions? the go-to-market side do of those be think those anything And could that is differently good

Mark Mader

you're is self-discovery. than much It's absolutely I -- just more the It Yes, question. right. love

solution large sales opportunity we Like we start actually We serve, with tens on high-value a midsize I the of huge fairly a context with premium and how what of fashion. And us our we're on things enable a capabilities capability One the thousands which get or standpoint by that's of customer delivered. have organizations that we a from that many a in, we do substantive come in of paid is go the small. solutions. the we work date, to working state packaging in see a is, median a discuss ramped into customer within to of mean

sub-$X,XXX. So built motion. to capabilities a can how a XX it's, this an sales think, bunch we capability years. married I sub-$X,XXX, I planting assisted really we at of business seasons, had our over consume how And And

So into us capability. allowing packaging, on mechanisms when we introduced how this with get that much have same more of we our expect And think for should quickly. POG from people step do to year to that you release a seats you capabilities motion

able rate more up they significantly more to would to consume I penetration those. of then to on as of and in a the us So position see capabilities and be go put build that

again, them, the others and having So available one building making them, is them discoverable.

The how monetization which you them and people starting scale. who third have massive the a who do are those them using strategy, to are with out caters is at

Operator

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

Michael Berg

you building what's incremental those solutions? more the potential I follow under XX%. want jet it's do And off I and as on my from discussion to of going about are type being hood, the there? how it's year. of if the there on still rest the the nicely of Is meaningfully calculations rig of think those question? correct, down there constraints sales That think growing here. capabilities up anything kind Maybe enterprise because is seems pretty last

Pete Godbole

they buy But and in capability, the that capabilities in a the people performance that them but conversation say of they year-on-year the pushed as I general, continues or sign dollars simple composite to that would a experienced. be is I the rates that that macro affects as have around robust grow. in -- with a do of wanting carte we And la satisfied for continues customers that a we I you seeing will. a buy through, if you're think in think to the do is were package draft capabilities. It the growth pretty just Advance demand set

say it I'd So I'd there. leave

Michael Berg

Helpful. quick same then And on a the follow-up topic.

As the an you It this set there. will just revenue, proposition products, think given the it point that's not capabilities -- reasonable but at about that hand, part some the to at majority opportunity only the value the the story. underappreciated seems conclude of tied large overall is of be like

Pete Godbole

going to see is, and this I both So I I is, we're growth. and my think Mark share think belief

like you're but that capabilities where with sort continues it, on top it's you seats race and adding So it way. of this of in start as

we've I in potential market call experiences. the huge of these modernized core the a end what low with sort of So application think got I

the piece part think that of the seat builds portfolio. So of that

it's only that seats. mean Now doesn't

self-discover, You as get well. to capabilities

So do think view think that towards as percentage, part it time. as mix. be of wouldn't view over I capabilities it I lopsided being I being balanced capabilities. increasingly growing growing and an the I will

Operator

to Bora JPMorgan. come Pinjalim We'll next at

Pinjalim Bora

SMB weakness, way it about from February, Are deteriorate? talk full 'XX Has been FY March of And ARR you to QX? seeing to trends can QX, SMB going of demand understand the into so to can the the Pete, kind any the year similar it for far? you the kind headwind softness?

Pete Godbole

give February. I'll texture So you on my

the the to on we was pressure -- February So see month SMBs continue February. in of

pressure that actually So continued.

So we've play. our that in seen that's guide. And what's informed

February. of saw QX. QX, worse that We than that you further think continue than to If in we worsen saw pressure

continues all business, that's another quarter continue enterprise headwind had what of extrapolating strong, which the good that in QX to that sort the say is to which vein. is which the part that's other through year. So the business, and we're pretty the will of And in

So that's going in. assumption the

size question, each what's second the So your part the of one. of

our I hard earlier, X/X dollar think to of is to of an I Remember, give SMBs looked order magnitude in are size, And measure close if mentioned as X down expansion, our just of to at business. net you call you was to of a out. rate, which the retention QX. roughly it it's

see in So pressure that segment you can forward. the playing

Pinjalim Bora

the think your for you as we adoption customers capabilities that of paid could allowing power users on tasks. average to like kind users had One Do generator accounts reliance the makes your reduce time your of the power engaged. Mark, from existing accelerate that Understood. AI could maybe complex do it for up more of some much more frees average of productive use X seats within and help heard user's Helpful. tier enterprise and the Mark.

Mark Mader

I the part of thesis. That's do.

at able good support step And down, inquiries our leading that see we we're in some usage areas, of seeing looked and up, as the number inquiry is of had the things down enterprise indicators we to dynamic. in that segment, we're these desk that to of a our

think I that, something that is do So exist. will that

derive I start to commonly data trying AI other to super introduced will word think spread analysts organizations. doing get we are elements the dashboard are within I from who building, think as insights sets, that by that used to

weeks neighboring times, start this couple a we we an want see available. They from under someone get think achieve the point. of months they to into companies, want emerge. of lot these example our I this Again, success. I And pattern in way being are work seeing belt, folks group expect, as would within see a data to to a a

Operator

Wolfe We'll to Zukin next at Alex move Research.

Ethan Bruck

a This Bruck high level me on of guess I is Alex. on for bit Ethan more maybe for a Mark.

your subdiscovery think like embed the where of customers using then that go? improved pay up are you investments about next generative where as those using need see more you AI ROI as all is that mean, I that to single and we look to do like to as to about you for capabilities, And functionality, adoption of you the as go off success accelerating? for years? amount from monetizing capability basically? number digits What -- those I percent like continuing time, of over does kind over think for R&D inches the to Just customers XX% few

Mark Mader

R&D off I think paying the is today. well

see much I us penetration. is a think like what I'd to reach broader

that back ago, at median Mark, someone earnings expectation? an the so your we quickly derive XX%. should times value expectation X from or sell. multiple And on products very to customer My I X able is think snapped call I Smartsheet be what's

Max And the is partner users. the why They companies to dimensions. what to that look in accessible their companies back multiple I go-to-market. on software not at world, chose to to So again, as possible they're job as with When many offer customers on largest is their one-trick and ponies. to value is, you our make

And available you it how of of make part And that offer is that packaging part pricing the and them. I other then is what you standpoint. think to them a through

driver into our how organizations. judge we percent a of the So big those be portfolio will penetration

I them into organizations confused which hands other on as the remit, the available, organization. and make important not many what's contribution is is things The people think get possible. of now, per we're our part right these But

with NDRR dynamics retention deeply happen fronts. products, embedded multiple When good standpoint when you of look the things from an companies on that the connected multiple at are people are

hiring you. reasons this is this it's not one R&D and for simply making of by is so on pull hard again, is about the working So -- product more This done happen. And letting the people. it's

Ethan Bruck

How to No. but maybe Yes. makes as good perfect just Pete, embedded about about the if we've a talked in. you -- Just rate see between incredibly just there? know It's where outperformance? think That would do above areas of the you And go-to-market macro stack conservatism sense. anything for assumes better a there's biggest guide, of some you the of expectations? that layers I think execution different

Pete Godbole

the this brings us allow I So median with year. marketing operate drivers. go our one, efficiency about the the sort portfolio that and of the I'm the to that rep next rep started making is stack as modernized product sales -- Max top in bullish which that about our might I'm on launching quarter. I'm through leadership the I how in on and bringing of getting think the our what And theaters in most excited bullish the like after in that. that forward. think you application launch upside -- experiences We the different core we're

third the I up upside describe which X self-directed products, open to them wildcard, these all how in more play experiences producers. is of the we out as that is the going would to is of terms And

and it, X. are a the The change? and biggest the pieces always Could exactly a and parts make But I of one. It control. is parts at macro none quite could. the can look those predict on putting us and top it's which we So drive actually wildcard, the my it puzzle of the a -- weight can

Operator

move we'll Josh Stanley. Next, to Morgan Baer at

Josh Baer

bit talking wanted less SMB customer full like to I is and customers? contraction going churn then dig in can dig on? a not just talk macro as like or counts about like what to exactly little And and confirm actual the we from these about we're churn. I just disclosures It want what seat of in logo And that. it is expansion? between, are I behaviors looks

Pete Godbole

Yes.

to it in expansions propensity buy terms to these of lessor tick So in in. reductions of you describe are the their the that amount operating one I they're but you one I'll customers, to The stack That driver up, mentioned. it, the seeing is with it major contributor gross up. scale rank of #X but environment current -- have can first not that's like sort orders, in a is the of driver. the we not after The is they

Josh Baer

are then, but using there a what And like helpful. users are gross in having with less those those -- some and with I That's like when competitive might I Okay. both tougher organization guess, of like be replacement perspective, budgets what those or know faced like reductions, within is users other mind, tools, not expansion direct an using?

Pete Godbole

and is So I driver it buying biggest would -- gross the describe people remember, being expansion. as

and these there more would we that's that in I not enterprises suffering. say, companies isn't "I'm that's our a Everything in used just through and in People another pop adding that's call frankly, process. budget deciding detailed small transactional smaller companies need And and business. seat". happen, Things another business So saying, a part going review the of seat. is expansion the to

where there's happens what Now reduction. a

make some the can who leveraging in actually absolutely say, think somebody platform is model different can switch to smaller creator not and equation, from the convert I this person I a a times. are in but to Can It's without say, that's at happens. of of do That's being the it? a I ways, people a decisions what look I in collaborator? the around, to people generally product platform. most driver It needs

Operator

UBS. at We'll go next Taylor to McGinnis

Taylor McGinnis

have the deterioration significant what that exactly then pretty in And ARR get means? a assume comment of like seeing that or in it order growth you're you I just you'd in as year, know of seems to this DBNR. enterprise XX% curious follow-up, to a the said so was stable quarterly quantify or start if can means to far what So strong, at you but DBNR for

is and SMB the year? DBNR continue throughout quarterly that the assumption worsen to So enterprise

Pete Godbole

Yes.

these So parts through Taylor, it. I'll as answer in you your question went

enterprise is for one XXX%. over our QX retention net first dollar-based is The rate

of That's that first we the So part played by out. it. were pleased how

second you I our that. of X. was Remember, we're the SMB told to SMB it is making DBNR The of part close the is assumption portion what is

trends might an as element with macro out how over We've a taking go we So And conservative we're as part XXX. of way of evolve that portion significantly year. one doing think What more enterprise worsen as it. essentially of it the and wasn't the approach to might dealing the the to we're we roll the of through it. continues is also assumed that,

total Enterprise We're are sales bookings. is the as early back-end loaded year. cycles in the

those a thoughtful being and little how more could those and DBNR So prudent as big bookings and enterprise we determinations make be.

Taylor McGinnis

And quick it. follow-up. then a just Got as

of the the earlier mentioned weakness you're that just walk potentially seeing you in seeing initiatives might what help some of there in Can to think segment. that prevent that of place be curb some be? those weakness I us the might some initiatives some you or SMB you're through

Mark Mader

about and started. One X getting the the sign-up leading lowering doing. on There is that friction is things edge, we're are Yes. which

is it So that's say other this of customers a would the your the have sell quarter flight on side we both I quarters number we really been lot widening a for in the a little first from we've boy, of the of please? platform, being gotten that later of as is funnel. but modernize now, pieces the could as power which well like buy bit, side, feedback released

It been for customers ship That actually I X,XXX the X been working is view. now, business single going single enterprise smart and it. helps to up beautiful. And available new sheet new on views with coming of to months believe. love better. that has this data every large over plan. our quarter. plan, your of a every People fast. on evaluation on big It's It's quarter. drops one That understanding in this It's That's -- we've

way When want They the They SMB packaged beautiful in and it want think stabilization stuff. think new want about they a about buyer, we with that's stuff. accessible. resonating we

conservative this I one those haven't guide, of had? look So have, as yet. at yet. Yes, the hasn't massively to think which ship our launched what year going we've do. than pull released The are view things views we is harder Do modernized we existing new I the

both license see of a ability And on to things the is that users, I shipping license, to I or we've terms are can ready. all conversion continue them view grant see things, revoke and -- disciplined these What say the of to been where which things that reaction engagement administrator's tailwinds. uber the existing drives initial I those in rate, quarter until potential I when as those they're IT

be and they on So I happens again, engagement. And that basis in our of later that will of to you customers it. drop, out first quarter, now, quarterly terms this view a know thing what ready, love that be job what when launches to part will is report

nuanced the conversion. more big play one. one a out those on right we that vastness the on really will they report is from but sort drive I these it of be SMB the new see get doing do end We're because in conversion I lead experiences think The think of hero And a We'll the And role an as flow as now. retention conversion. I initial interesting views. of of would that piece the AI market, is metric, lower retention how can expect to

I'm really those So keying off are that of terms performance. the of in improved ones

Pete Godbole

on. things remember, we what the can that, have our said see is experienced based I'll add fact the one philosophy to guidance Mark And on we is of things

So part experience in market. features set to come in guide our these not included we Mark need mentioned because the that as the of are full see to bear the

Operator

Our from Steve comes Citi. at question Enders next

Steven Enders

to how what I you Okay. in. incremental you're coming of help leadership that Great. the or kind to spend does flexibility talking support mechanically about are in incremental change more much I building take sales in initiatives guess, of with there? new marketing conservatism guess guess, trying when mean kind to for And model? I that

Pete Godbole

there of today. That's a are thinking That's different. aside into already playbook our a returns. leader side good have our explore dollars a as we plan not built irrespective we've, of where on go the conservatism new Steve, set think that's part plan, of always the part to margin opportunities solid So on It's through. incremental arriving, we we

So that's what to. we've guided

it to cumulative And I that's sales effect conservatism relates transition we've sort of in the built guide provided. but one then item as we've not described into all as I'd have for how the leadership, certain in the has built value, items far a a it's say

Steven Enders

about I areas think be you increasing more prior guess, I out with in international And comment about helpful. means, change That's how change? partners. the this there's the built thinking are And Okay. what potentially fully the could those what I potentially and and more think on investment then focus in

Pete Godbole

which We're areas the about, to will, into investments. and the making brings you are the picture, Mark we're about already. think you making as talked Max So if important company important areas investments in which those

the For example, a on out Australia the international side of the building of things, in we're launching year. end market data in a We're center by Japan.

with are those of mindset. sort all investments the same So of progressing

built So that's already the into plan.

to a or and would would What on. things on perspective team opportunities have anything same we out that that Max investments add Mark, come would incrementally one? look if came perspective on from the those have at a that

Mark Mader

a from I opportunity the Yes, into the there. sales channel, I partner-enabled some think real shifting some think there's capital we of return investment as area team at direct look

deal call know-how their global not industry have gave my without would terms of The prepared on I the a happened firm. services this examples on expertise, essential on their in the of remarks our based success partner One partner. customer was was on large platform. That

be to when some those our are teams is partners, international who we doubling the that existing people about success our think of up going where team markets, we areas sales enabling are the and are we have -- a And with capacity We where our channel. have we teams.

time And also the for company's history. those we something enablement the our become allocation And formalizing is online first to the are in come that regions. partner to lead regions, really going capabilities, then really bolstering regions -- where we're which those the first in is

massive I of year? seats. we're this doubt contributor bookings meaningful a going are be Now planting it. a to on lot But those

those markets identified. have We

value, secured leverage those one I the think already number we a enter higher to done channel, enabled. be well We I the year. it's it our of partners look -- have and positions, as will enterprise we've things pretty that whether people we And or partner as of at this of higher shifting

Operator

to Jefferies. next go We'll Thill Brent at

Brent Thill

everyone's the of given to we curious is, margin scratching a more shouldn't a magnitude see the show Pete. for I I pretty little bit. rate head the RAP leverage, kind follow-up more of considerably? then Mark, think a Why And you could if year? quick improvement want our falling is had comment And just T-cell this you growth why I'm

Mark Mader

was On I question. Sorry, the what part of there? side, reference that missed margin the the

Brent Thill

increase is offset deceleration by revenue the Your margin. not in

not is given margin give improvement obviously Why more margin growth? Your modest. very of improvement deceleration massive the

Pete Godbole

I'll one. answer that

the look a balance. it's you the we've As at of always the guide at provided year, start

start a through of sort year, optimize we well. what continue year to sort go the through when things we and deliver to year So we with of of of we do. do you can And rigor and operational where started think set think the we go the need last we as we of

reasonable XX% probably starting XX% is margin. So our this to initial guide op It is point journey. for a

entered the 'XX. rule of we've for with year XX FY a So

at started at 'XX, If you FY rate, through needed this year to. to to where started look we the and about XX% XX%, we get where in we

Mark Mader

to also set we we teams how stage that of plan other And that certain deliver add in Yes, set for the our I I'd that we budgets, we terms think our against. expect we have thing the plan. year, our to gates

our And those to add stage the gates to hit. right more plan. we of stage a that through we market, go a performance us gates in these Pete on if as are continue aren't come capabilities inform to the So we're to certain met, if some AI, margin we're launching those those couple per have then drive of that. opportunities we to And new looking on we QX, of pullback expect of to back invest areas has

do to a So an the this today. investments have the have of we demonstrate plan mindset investment. we contribution think still that fact I of beyond some I have opportunity And we like in our what

Brent Thill

Okay. And a SMB. real just follow-up on then quick

up execution rather time of market. theories are seeing SMBs that not the maybe you is why spending? a you're for the seeing competitive issue of spending of many of One questions, is going and And a you're blaming more more this weakness that more lot than

Mark Mader

trying It's think do, to of way. to Yes, like, a the we're of buy. they a looking part you I capital, lowering where people in thousands that to friction, to reasons spend thousands we're to don't a of thousands lot of and things want the trialers and get discover getting want X human to things the point of getting self-directed those

packaging. where paid trying the not I Part think to our is flow way companies, free that X who month, open a that are of getting really plan in that Those and Part new we're ago. And we good bigger very is, aperture like in instantiation of continued state indicator is year organizations progress motions. connect pricing this plan that a purchase. our of had is and a lead the heavy of free then self-directed the of and of positioning of those a -- moved Part selling. are people features. they offerings XXX can enterprise get January, from to the

at performance it logos look at And edge, of leading that new the very remains when coming I in healthy.

orgs today who today on us platform pay We of thousands free the the have out engaged coming do of not of and conversions tens that.

free ago. a plan that launched year we Now

air didn't of could that to that. bit demand is waiting an convince yourself rest, -- model that you of yes, we're build, a of gap now, some demand you convert, drop say, and and there's for rest So well, can and absolutely that you free

I the customers on you to NDRR on those serve is sorry, conversion influenced up heavily -- think the though what by them. rate new SMB

these of like moving making enterprise-grade about a all the it's out we not it's an reporting this. And really the large look of dramatically body It's as doing is to there. one that. should we improve because enterprise. work It's both -- for again, And improvement enterprise we're to And investments alongside there's we're of focus. company forward student think opportunity edge SMB saying on as leading that well reasons we're on that right offerings the

Pete Godbole

that mentioned you And the will, if element, was follow-up. you competitive your

what talked are it, at looked just you I sort about we If of call SMB, what doing. NDRR

that probably set. of NDRR strongest peer on If you competitive the taking the NDRR, -- they're our is impaired look our at any

has an you business when at go to seeing So the somewhere expansion. look with Nobody's it, it.

it's it incremental describe of would how I in market they're to of the that what prosecuting as do. So as That's being it simple and adds as a more function they of sort in buyer is. want

Operator

next to We'll at Company. Needham & Scott Berg move

Unknown Analyst

Rob is on This Reilly Scott. for

into enterprise Just side, benefit provide Can how you trends maybe insight on and player consolidation any XXXX? With a continuing. the weather impacted X continues to scrutinization on high-level quarter, here. budget or be particularly a then the net you headwind how anticipate

Mark Mader

thousands I hundreds of dollars enterprise people settings investment. present where of have consolidation think more of remains in

of did standardize. scheme or my customer that frequency. prepared examples dramatic an very though, review small I look by the very, of said change, couple via the percentage. it's We in trying grand But transactions a haven't in in still when seen at you A rate is really IT remarks, to become organization a quarter, that a

Operator

session. And for this turn would time, that remarks. question-and-answer Turner At conference I does over closing to conclude our to like Aaron the

Aaron Turner

and for you this we'll Great. chat Thank again us quarter, quarter. joining next all you with

Operator

call. concludes Thank for you this And your participation. today's conference

now disconnect. may You

Smartsheet (SMAR) 14 Mar 242024 Q4 Earnings call transcript