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 third quarter fiscal 2023 earnings conference 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 one. 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 third 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 Godwold. 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 events 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, and we do not assume any obligation to update the 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. Reconciliation to 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. And with that, let me turn the call over to Mark.

Thanks, Aaron. Hello and welcome to our third quarter earnings call for fiscal year 2023. Today I'd like to focus on three topics. Our solid performance in the quarter, how we're improving our operational efficiency in the current macro environment, and how delivering measurable ROI for customers drives our durable long-term growth. While Pete will provide additional details, I want to call out some of our strong financials from the quarter. Revenue for the quarter was $199.6 million, up 38% year-over-year. We added $56 million in annual recurring revenue, bringing our total ARR to more than $792 million. We added many new customers in the quarter, such as recruiting software provider SeekOut, Monster Energy, the social good empowerment platform Bonterra, and Arizona Beverages. And we expanded Smartsheet's footprint significantly at Picasa, AGC Biologics, and Seattle Children's Hospital, among others. Our strong expand and climb motion within our customer base continued, with 235 customers expanding by $50,000 or more and 79 customers expanding by $100,000 or more. We also now have 40 customers with ARR over $1 million. And we ended the quarter with more than 11.7 million Smartsheet users. Last quarter, we discussed how our new sales reps were ramping more slowly than sales reps from previous years. This quarter, we saw improvements in quota attainment and pipeline generation from our newest reps. We exited the quarter with a record pipeline and saw our pipeline conversion rate improve after macro-related softening in Q2. We also made significant improvements to our profitability in Q3. Our Q3 non-GAAP operating loss was negative $4.3 million significantly better than our guidance and a seven percentage point sequential margin improvement from Q2. This improvement is a function of the adjustments we've made to our hiring plan for the year, a heightened focus on operational rigor and financial policies, and inherent economies of scale in our business model. We expect these margin benefits to persist, allowing us to improve our non-GAAP operating income and free cash flow guidance for the year and beyond. The growth we experienced in the quarter came in large part from Smartsheet's ability to provide measurable ROI for customers as they navigate the macro backdrop. For example, in Q3, a Fortune 50 healthcare company expanded its Smartsheet investment by over half a million dollars, bringing their total Smartsheet ARR to nearly $2 million. Since moving to Advanced Gold a year ago, they've seen a 56% increase in license growth as more teams across the organization leverage advanced capabilities to manage programs and processes at scale. Their data shuttle usage has increased almost 300% over the past year, and they now have 85 workflows powered by our Bridge integration product. One of the biggest benefits this customer is seeing from Smartsheet is improved efficiency, leading to measurable ROI. For example, one team used a workflow powered by Bridge to automate a complex manual process for managing staff changes and application requests. decreasing the amount of time spent on it by more than 50%. We also saw a leading provider of customs brokerage and logistics upgrade to Smartsheet's enterprise licensing and advanced gold platform after determining that advance would save them nearly 3,000 hours of labor each year. Those hours saved are delivering more than $300,000 in ROI for the company, while giving it the ability to handle a larger volume of quick win transactions and improve employee engagement. In another Q3 advanced deal, the leading integrated reporting platform provider, Workiva, moved up to advanced so the professional services group could leverage Control Center and the Smartsheet Salesforce connector to implement a new project and portfolio management solution. They chose Smartsheet as their PPM platform because it offers both introductory and professional grade tools for project management that can scale to enterprise levels. The solution also gives project managers insight into project risks and timelines and makes it easy for them to see all assignments in one view, helping reduce project cost overruns. They estimate that in over three years, they will earn a 340% return on their Smartsheet investment. On the innovation front, we launched several Smartsheet capabilities and experiences at our September Engage conference, where we welcomed thousands of Smartsheet customers and partners in person for the first time in three years. It was incredibly energizing and gratifying to connect with customers face-to-face and hear their Smartsheet stories. HP, WebEx, AbbVie, and many more presented during breakout sessions and shared how Smartsheet is empowering them to solve tough problems, deliver on promises, and drive tangible results. At Engage, we launched Portfolio Work Apps, which combines the power of Control Center for managing large portfolios with the end-user simplicity of Work Apps. A global food services company recently chose Portfolio Work Apps as the PPM solution for its global transformation initiatives. The company has a complex global operating model, and Portfolio Work Apps gives its portfolio managers the ability to create portfolio views tailored to specific organizational roles that span multiple regions, countries, and segments. By leveraging Portfolio Work Apps, the company now has a clear line of sight into any given initiative across its global matrixed environment, allowing leadership to drive a strategic roadmap and achieve KPI targets. We're also deepening our investment in the PPM space by launching new resource management capabilities such as Capacity View that gives resource managers increased visibility of their capacity for planning and deploying talent. We're continually refining our governance and security controls to meet customers' current and future needs. At Engage, we share details on data egress, a new layer of control over how Smartsheet data can be exported outside of an organization. Such robust security and governance capabilities, which protect confidential information via granular control, are a key reason many companies choose our platform. For example, in Q3, a large mortgage lender chose Smartsheet over another CWM solution when the competitor's solution was unable to comply with certain mandatory requirements. This customer was impressed with Smartsheet's enterprise-grade security and liked how easy it was for teams across various lines of business to start using the platform. Ultimately, they felt Smartsheet was the best platform to help them meet their COO's goals for managing the business more securely and efficiently. We also announced our new desktop application, which was enthusiastically received by people, as were the new ML-powered home and reimagined search functions. These investments streamline the daily Smartsheet experience for all users by enabling them to find and act on their work quickly. On last quarter's earnings call, I mentioned our acquisition of the Outfit brand management templating and creative automation platform, which we have integrated with Brandfolder. The synergy of the Brandfolder output solution is already providing its value for customers in a meaningful way. In Q3, we landed a $300,000-plus deal with a major appliance manufacturer that will be using Brandfolder Plus Outfit as their single source of truth for digital asset management and production. Each brand within the company will use Brandfolder to track and manage assets, helping reduce asset sprawl. Outfit will provide a self-service model for building automated asset templates that they can distribute to wholesalers and retailers to ensure consistent brand marketing. This outfit-powered content automation solution will help the company reduce a 14 to 16-week creative and distribution process to four weeks, driving a 400% faster time to market for their marketing campaigns. By providing transparent and efficient content creation, distribution, and tracking capabilities, the new system allows the company to utilize its existing in-house creative team while eliminating significant outside agency-related costs. As you've heard today, despite the current macro environment, we had a strong quarter and remain well positioned for continued growth. Just last month in their Q4 2022 report, Smartsheet was named the leader in the Forrester wave for collaborative work management tools. The report recognized that Smartsheet continues to provide an extremely broad set of use cases among the leaders in this Forrester wave, and that Smartsheet strengths are the extensive availability of work types, flexible use case creation, and end-user automation capabilities. With people under greater pressure to choose the right CWM solution for their needs, reports like this are important in helping guide their decision-making. In closing, Q3 was another solid quarter for our company, especially considering the global macro headwinds. With our performance in the quarter, a continued focus on operational efficiency and the way we're delivering ROI for customers, I remain confident in our ability to deliver long-term, durable growth with improving profitability. Now, let me turn you over to Pete. Pete?