Smartsheet Inc.

Ladies and gentlemen, thank you for standing by. My name is Brent and I will be your conference operator today. At this time, I would like to welcome everyone to the Smartsheet first quarter fiscal 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star 1. Thank you. It is now my pleasure to turn today's call over to Mr. Aaron Turner, Head of Investor Relations. Sir, please go ahead.

Thank you, Brent. Good afternoon, and welcome, everyone, to Smartsheet's first quarter of fiscal year 2023 earnings call. We will be discussing the results announced in our press release issued after the market closed today. With me today are Smartsheet CEO Mark Mader and our CFO, Pete Godwell. Today's call is being webcast and will also be available for replay on our investor relations website at investors.smartsheet.com. There's a slide presentation that accompanies Pete's prepared remarks, which can be viewed in the event section of our investor relations website. During this call, we will make forward-looking statements within the meaning of the federal securities laws. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends. These forward-looking statements are subject to a number of risks and other factors including but not limited to those described in our SEC filings available on our investor relations website and on the SEC website at www.sec.gov. Although we believe that the expectations reflected in the forward-looking statements are reasonable, our actual results may differ materially and adversely. All forward-looking statements made during this call are based on information available to us as of today. We do not assume any obligation to update these statements as a result of new information or future events, except as required by law. In addition to the U.S. GAAP financials, we will discuss certain non-GAAP financial measures. A reconciliation of the most directly comparable U.S. GAAP measures is available in the presentation that accompanies this call, which can also be found on our Investor Relations website. With that, let me turn the call over to Mark.

Thank you, Aaron, and good afternoon, everyone. Welcome to our first quarter earnings call for fiscal year 2023. Today I'd like to focus on three key areas, a solid Q1 with healthy growth in both revenue and billings, our strengthening leadership position in collaborative work management, project and portfolio management, and digital asset management markets, and how we are investing to deliver shareholder value in the years ahead. While Pete will provide additional details, I do want to highlight a few standout areas of our Q1 performance. Smartsheet revenue for the quarter grew 44% year-over-year to $168.3 million, and billings grew 36% year-over-year to $180.1 million. We continue to see success on each of the land, expand, and climb aspects of our go-to-market motion. On the land dimension, our previously discussed investments in simplifying packaging and the onboarding process are paying off. Q1 was a record quarter for new customer bookings and the highest net logo growth we've experienced since our IPO. On both land and expand dimensions, the net new plans added in Q1 increased by more than four times versus Q1 of last year. And on the climb dimension, we saw 57 domains expand their Smartsheet investment by $100,000 or more in Q1, up 97% year over year, including an expansion of over $1 million. Additionally, we saw our churn rate in Q1 improve to a record low of 4%, and we finished the quarter with more than 10.5 million Smartsheet users. We now have 33 customers with ARR over $1 million and three customers that have over 125,000 Smartsheet users. Smartsheet continues to provide the best-in-class value in the category as our collaborator model allows Smartsheet to achieve broad reach in a way that is both frictionless for the user and cost-advantageous for the customer. As customers realize the value generated from their Smartsheet deployments, many uplevel their usage to include high-value, data-intensive workloads. This is evident in our market-leading dollar-based net retention rates, which were 133% across our entire customer base and 149% for our customers with ARR over $500,000. Our investment strategy is predicated on proven ROI with a focus on both near and long-term free cash flow generation. People are core to this investment strategy, and people want to work at Smartsheet. In Q1, we exceeded our hiring objectives in both R&D and sales, positioning us well for continued execution in FY23. We're looking at a tremendous long-term market opportunity, and we will continue to strategically and thoughtfully invest. With that said, we're mindful of the current macroeconomic environment and have taken steps to ensure we maintain a high rate of top-line growth and reach free cash flow breakeven this fiscal year. As we've discussed on previous calls, Smartsheet has a proven ability to expand across and climb up the value chain within organizations. But also, very important, we continue to land new customers at an accelerating rate. In the first quarter, we saw significant wins across a number of industries, with companies looking to up-level work management, including Assured Partners. This Smartsheet Advance deal with one of the nation's fastest-growing insurance brokers, will help the company deploy a best-in-class project and portfolio management solution for their IT project management office, their retail PMO, and their security team. We also saw new wins at companies such as the premium resort and residence brand, Amman, the online bank, MoneyLion, Santander, second home ownership innovator, Picasso, Vulcan ePowersports, and the Department of the Interior. Looking at expand deals, we closed a mid-six-figure expansion deal at a large European talent acquisition and management solution provider. The leadership team overseeing the company's deployment efforts needed to transform the company's global delivery process. Struggling to standardize on our approach across 12 regions and with little real-time visibility across their projects, overruns were cutting into service margins. Smartsheet will dramatically improve their ability to manage and plan projects and capacity. With their move up to Smartsheet Advanced Gold and resource management, they're building a solution that will integrate with their existing enterprise business applications to enhance collaboration, engagement, and visibility across the company. And with the help of Control Center, they will have a standardized and integrated approach to managing complex client engagements in a consistent manager that will bubble up into regional and portfolio dashboards. This allows executive stakeholders to view resourcing plans and resource availability and get a real-time preview of the impact of those changes throughout the project lifecycle. In the U.S., we closed on a seven-figure expansion at a major U.S. healthcare and insurance provider. This customer scaled up to tens of thousands of connected users on our Advanced Platinum offering. For a highly regulated customer like this, Smartsheet's Platinum features were key to deepening that relationship. This customer also partnered with us on building out custom Smartsheet solutions that replaced some existing tools in their tech stack. This group has generated over $10 million in savings by building solutions in Smartsheet according to their internal company survey. We also closed Q1 expansion deals with Mass Mutual, Alaska Air, Marriott, and Nielsen, among many others. Whether we're talking about one of the country's biggest healthcare companies or one of the world's largest insurers, I'm encouraged by the executive level buy-in we're seeing throughout these organizations, which speaks to our climb motion. In April, I was in Sydney at a customer roundtable, and at a certain point, an executive responsible for digital transformation at a multi-billion dollar gaming company explained to the CFO of a food distributor precisely how he should set up his analyst team to maximize value with Control Center. This exemplified Smartsheet's ability to drive engagement and deliver real value up to the C-level in enterprises. Our competitive strength remains Smartsheet's ability to scale alongside our customers' existing business systems. Our enterprise-grade CWM and PPM capabilities allow us to integrate equally well with both current and legacy systems of record, as well as collaboration tools like Slack, Teams, and WebEx, data visualization solutions like Tableau and Power BI, visual collaboration tools such as Miro and Figma, and productivity solutions like Microsoft 365 and Google Workspace. And while Smartsheet's powerful collaborative work management capabilities continue to be a strong growth driver, with brand folder or integrated digital asset management platform, we've added yet another important growth engine. In March of this year, we launched a deep integration of our brand folder digital asset management platform with Smartsheet. By combining the best in modern work management with best in class digital asset management, the integrated Smartsheet platform aligns marketing and creative work streamlining asset discovery and delivery, and optimizing value through unified team and asset performance analytics. Let me tell you about a value from one of our customers, McLaren Racing, and what they're realizing from this Brandfolder integration. McLaren adopted Smartsheet with Brandfolder at the start of the 2022 Formula One racing season to streamline how they store, manage, and distribute race day content. With thousands of photos and videos taken at every race, McLaren's team was spending countless hours manually organizing and distributing assets to their partners. Now, photographers and videographers upload assets directly to brand folder, and machine learning models automatically identify which logos are in each asset and sort them into collections, saving McLaren's team hours of work each week. Partners then access their respective collections to use McLaren-approved assets for their own marketing efforts, while McLaren can track the usage of more than 100 terabytes of assets. For years, digital asset management systems were used almost exclusively in advertising and media production. And while those industries still make up the lion's share of the customer base, almost any organization that creates and stores digital assets of any kind, photos, videos, PDFs, architectural drawings, or 3D models, is a potential customer. Brandfolder is already simplifying digital asset management at tech companies like Zoom and Auth0, a division of Okta, financial services firms like LPL Financial, consumer goods companies like the Cookware Company, and healthcare organizations like Care Oregon and Envision Healthcare. In the future, I believe we'll see digital asset management systems used in functions far beyond creative in every industry. Architecture, construction, manufacturing, legal services, healthcare, really anywhere digital assets need to be tagged, stored, searched, and accessed efficiently. We continue to make Smartsheet not only more powerful, but easier to get people up and running quickly with our product-led growth focus. This quarter, we introduced an onboarding experience that lets new and existing users get their project management system set up and shared with their team in just a few clicks. This new experience guides users in quickly building and sharing projects. A simple interface walks users through creating their project and automatically creates reports in a dashboard, organizing them within a team workspace. This experience will be applied to support hundreds of work management use cases in the quarters to come. On the international front, our expansion is continuing, with 100 team members now on board in our Sydney location, staffing underway in Japan, and EU bookings growing steadily. One of our EU customers is the European arm of a global medical technology company focused on medical diagnostics, medical imaging system, and surgical devices. They needed a solution to help improve consistency and collaboration on their major R&D initiatives. The evaluation team chose Smartsheet, and the solution would help improve their visibility and make collaboration much easier compared to their legacy PPM system. Moving into Q2 with solid momentum, I remain very optimistic about fiscal year 2023 and beyond. We have a strong category-leading position and high confidence in thoughtfully investing to capture the enormous market opportunity in front of us. Our focus remains leading in for our customers while making investments that deliver a high rate of growth and free cash flow performance that enables us to control our destiny. I look forward to talking with you later in Q&A, but for now, I'm going to turn it over to Pete. Pete?