Smartsheet Inc.

Good afternoon, ladies and gentlemen. Welcome to the Smartsheet first quarter fiscal 2024 earnings conference call. At this time, all participants are in a listen-only mode, and please be advised that this call is being recorded. After the speaker's prepared remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 1 on your telephone keypad. And if you would like to withdraw your question, simply press star 1 again. And now at this time, I would like to turn things over to Mr. Aaron Turner, Head of Investor Relations. Please go ahead, sir.

Thank you, Bo. Good afternoon and welcome everyone to Smartsheet's first quarter of fiscal year 2024 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. Relations website at investors.smartsheet.com. There is 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 or 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 US GAAP financials, we will discuss certain non-GAAP financial measures. A reconciliation to the most directly comparable US 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.

Thank you, Aaron, and good afternoon, everyone. Welcome to our first quarter earnings call for fiscal year 2024. While Pete will provide additional details, I'd like to highlight a few areas of our Q1 performance and share continued progress in our leadership of the enterprise collaborative work management market. Smartsheet revenue for the quarter exceeded our guidance and grew by 31% year-over-year to $219.9 million and billings grew 20% year-over-year to $215.5 million. In Q1, we generated non-GAAP operating margins of 10%, more than double the high end of our guidance range, and free cash flow was $31.3 million. We ended the quarter with annual recurring revenue of $886 million and more than 12.8 million Smartsheet users. We continue to see strength with our larger customers, with 59 customers expanding their Smartsheet investment by more than $100,000 and 188 companies expanding it by over $50,000 in Q1. These expansions contributed to a net addition of 85 customers in our greater than $100,000 ACV customer cohort. Enterprise expansions for the quarter included Eli Lilly, Motorola Solutions, Foxtel, and NovoCure, among others. And we saw new customer wins at companies such as Liberty Media, Hostess Brands, and 811 Group. We also saw strength in our portfolio of capabilities-based products and our advance offering. with 143 customers either purchasing Advanced for the first time or upgrading to a higher tier. Additionally, we are on track to launch the self-discovery of two of our most popular capabilities at the end of Q2. This will lower the friction required for our customers to experience these products, which should result in a faster time to value for our customers as well as for our sales team. A leading financial services company upgraded to Advanced Platinum this quarter. This meaningful expansion was driven by employee demand for our core platform, as well as the premium security and governance capabilities they receive with Advanced Platinum. Over the past year, their user growth has increased 52%, and they have created nearly 180% more work apps, 240% more data shuttle workflows. And the company's marketing department is now transitioning from another CWM platform to Smartsheets. In addition to the momentum we've seen with Advance and our premium capabilities, we're seeing significant traction with our new free plan. In Q1, we launched our free plan worldwide and the initial results are promising with high engagement and conversion to paid in every customer size segment. These free engaged users should be an impactful component of our user acquisition strategy going forward. We continue to win due to Smartsheet's position as the enterprise CWM platform that enables organizations to effectively track and manage three critical dimensions of work, people, content, and the work itself. The people dimension reflects the deployment, assignment, and capacity planning of those engaged in the execution of work. Content represents the videos, images, documents, and other assets that are inputs or outputs of the work being done. And work is the information about day-to-day activities, milestones, and workflows that underpin an organization's projects, programs, and processes. By connecting these three distinct dimensions of work, the Smartsheet Enterprise Platform enables customers to drive efficiencies across their entire Smartsheet ecosystem and allows them to extend value of the platform to their partners and customers. For example, one of the world's largest retailers is using Smartsheet to connect work and people management to unlock value. Nearly a dozen business units across five countries are using Smartsheet to manage their portfolios and resource management to help them more accurately staff projects. This tighter alignment between managing work and people allows this retailer to adapt quickly to the changing project needs and gives them new insights into their team's capacity and performance. And a large online travel company chose Smartsheet over other CWM solutions because of our ability to help them comprehensively connect the three dimensions of work. The company's global marketing department is going through a major transformation and adding a significant number of employees this year. A combination of our core offering, resource management, and brand folder will help them manage the transition, establish a new unified process for managing campaigns start to finish, and ensure leadership has the right level of insight across the company's brands, products, and programs. They see Smartsheet as an essential way to scale as their department grows, ultimately helping them achieve their marketing goals. To further support our large customers, we continue to make investments in scalability of our platform, greatly improving sheet performance, formula execution, and cross sheet data processing. While every user benefits from these enhancements, they are especially valuable to portfolio managers and their teams using Control Center. We've enabled Control Center to support thousands of parallel projects already, and we're on track to be able to support tens of thousands of projects per Control Center instance by the end of the fiscal year. And we look forward to sharing more about how we lead the category in scale and manageability at our Engage Customer Conference in September. Furthermore, we've seen a major increase in data being transferred from other systems to Smartsheet with Data Shuttle. In Q1 of last year, Data Shuttle ran about 25 million workflows, importing and exporting customer data. And in Q1 of this year, we executed over 53 million workflows, transferring tens of billions of rows of data. Additionally, we have added unified login support in Bridge, up-level administration capabilities for Data Shuttle and Data Table, and doubled the Bridge workflow scale to support customer demand. We've expanded our content automation offering for our brand folder product with a leading self-serve templating capability. This is the result of the successful integration of our acquisition of Outfit, which is enabling customers to innovate faster in content production and distribution at scale. We continue to make improvements in our dashboard capabilities. Hundreds of thousands of licensed users create dashboards to inform stakeholders and drive positive outcomes by centralizing, organizing, and presenting real-time data and statuses on a customizable canvas. We've also introduced policy controls for cross-functional collaboration and launched the Plan Insights Dashboard, which gives customers a live view of the value they derive from Smartsheets. We're experiencing a significant moment for our industry, our customers, and our company. Generative AI, or Gen AI, tools and technologies are rapidly evolving. The way that work gets done from insights to execution can change materially as a result of Gen AI, and we are using it internally and actively developing features to benefit our customers. We believe these changes will create new, higher-value work for people, opening up opportunities for innovation and more impactful work. On the product side, we continue to make progress on expanding the AI-based capabilities on our platform and are well-positioned to enable valuable customer use cases. This year, we have focused investments in three areas of Gen AI that will help our customers work smarter, faster, and more effectively. The first is an intelligent assistant that allows users to quickly find answers that help best use, configure, and extend Smartsheets. The in-app assistant will help customers with everything ranging from early product discovery to understanding the full impact of the Smartsheet platform across sheets, dashboards, reports, automations, work apps, and more. This will drive adoption of additional capabilities and enhance the overall Smartsheet experience for our users. Second, project and portfolio intelligence. By harnessing the power of large language models, we will further differentiate by allowing users to leverage data within their sheets and use natural language to generate charts and calculate key metrics that they can save to their dashboards with the click of a button. These features, combined with Control Center's portfolio capability, to quickly absorb data across thousands of active projects to provide portfolio-wide key metrics, trends, and actionable insights. And third is image manipulation, auto-generation of video captions, and image descriptions. Brand Folder can auto-generate image descriptions and video captions and detect various elements within an image. This makes for easy, natural language searches and also allows users to separate foreground and background elements to remove or replace them. Brand Folder will be able to comb terabytes of customer-specific content to bring customers high-value capabilities that train AI models and generate content that is unique to their brand. As our customers experience the value of our GenAI features, we intend to pursue multiple monetization avenues. Our premium features will serve as a catalyst to compel customers to consider moving to a higher tier of licensing. For these premium GenAI capabilities, we plan to provide a base tier of consumption beyond which greater volumes can also be purchased. Additionally, we see this as a mechanism to drive user licensing, as some AI features will be only available for licensed users. Select customers will be invited to experience our GenAI features in beta next month, with broader enrollment planned after our customer conference in September. While we have not built any material contributions from GenAI into guidance for this fiscal year, we do anticipate additional revenue opportunities in FY25. In closing, as a company approaching a billion dollars in ARR, we are optimistic about fiscal year 2024 and beyond. As the leader in enterprise collaborative work management, we will continue to thoughtfully invest in our platform, go to market initiatives, and GenAI to capitalize on the sizable market opportunity in front of us. Now, let me turn the call over to Pete. Pete?