Smartsheet Inc.

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 fourth quarter fiscal 2024 earnings conference call. Today's conference is being recorded. 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 during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I'd like to turn the conference over to Aaron Turner, Head of Investor Relations. Please go ahead.

Thank you, Audra. Good afternoon, and welcome everyone to Smartsheet's fourth 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's CEO, Mark Mader, and our CFO, Pete Godbold. 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 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 U.S. GAAP financials, we will discuss certain non-GAAP financial measures, 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. With that, let me turn the call over to Mark.

Thank you, Aaron, and good afternoon, everyone. Welcome to our fourth quarter earnings call for fiscal year 2024. Q4 was the culmination of a year where we demonstrated our ability to grow in challenging macro conditions while making considerable progress on our profitability and free cash flow. We crossed the $1 billion ARR threshold in Q4 within the original timeframe we set at our first analyst day back in 2018. And we achieved this milestone while also expanding operating margins by over 1,500 basis points and achieving a rule of 40 for the second consecutive year. Our performance in Q4 was highlighted by our continued strength in the enterprise coupled with strong progress in our key growth opportunities. In Q4, 98 customers expanded their Smartsheet ARR by more than $100,000. We now have 65 customers with ARR over $1 million, up from 45 a year ago. And we ended the quarter with annualized recurring revenue with $1.031 billion and more than 14.3 million Smartsheet users. In Q4, we expanded with customers such as Nutanix, University of Southern California, Genesis Motor America, the City of San Jose, and Dairy Queen, among others. This past quarter, we saw significant expansion with a multinational information technology company. Smartsheet has been used within the marketing and sales departments at the company for a number of years. After a detailed RFP process for an organization-wide collaborative work management solution, Smartsheet was selected over competitors for enterprise-grade scale and world-class security. Adoption has been high, with a growing demand for licenses and implementation across marketing operations, M&A, and more. These units have been leveraging the full breadth of premium capabilities of Smartsheet to replace manual processes, increase efficiency, and improve collaboration. We had an expansion deal with a European-based leading global science and technology company. Their need for enterprise-grade security and governance was key to our expansion deal that included an upgrade to advanced gold. The company's IT group underwent an extensive evaluation to consolidate their project management needs under one solution across their three main business divisions of life sciences, electronics, and healthcare. The company selected Smartsheet and has consolidated their thousands of users under a one Smartsheet program in a transformation of our partnership with them. Going forward, the company will extend the use of its Smartsheet use to other units in their drive towards efficiency and optimization. We saw significant expansion with the leading global entertainment and ticketing company. Previously, the team relied on very manual processes to market the high-profile and high-budget tours they manage all around the world. After engaging with our customer outcomes journey team, the customer discovered how Smartsheet could drive greater value by automating repeatable work, efficiently adapting to changes, and improving communication. Now the company is using a tailored solution to manage all marketing operations in regards to their concert tours and artists, and benefiting from an integration with their Salesforce-based system of record. Going forward, the company has planned additional phases of implementation to expand the transformation and efficiency already realized with the marketing and tour management solution to other parts of the organization. The ability to rapidly scale was a key element to a recent international expansion at an APJ-based multinational corporation that provides digital transformation consulting to enterprises. A unit focused on their Middle East delivery region needed a scalable solution for reporting on financials across their portfolio of projects, which involve multimillion-dollar contracts with their customers. We worked with a key channel partner to deliver a solution leveraging the Smartsheet platform. This initial solution will support one regional delivery team with a plan to scale to all their global delivery teams. FY24 was a big year for our platform. In the area of Gen AI, our first two AI features became generally available to customers on our enterprise plans at the beginning of last month. The first capability allows our customers to create tailored formulas for their input, speeding up data-driven decisions. The second interprets customer data for clear text summaries and translations. The customer response and usage for AI has been strong. And since the beginning of February, more than a third of our enterprise customers have leveraged these new tools. Also in FY24, we launched our free plan and the self-discovery of our capabilities. Both continue to perform well. And while contribution to our Q4 results was small, we are encouraged by the compounding growth rates we're seeing from these initiatives. Our free plan, which launched at the beginning of FY24, has seen steady growth. Through the fiscal year, our free plan has grown across thousands of domains, and in January, we added 500 paying new customers via the free plan, a new monthly record. In Q4, over $2 million of capability bookings were the result of self-discovery trials. This is up from less than $1 million in Q3, and this motion continues to drive exposure of our capabilities to more and more customers. Nearly half of our Q4 self-discovery sales were with customers who purchased the capability for the first time. Given this success, we will apply this approach to additional capabilities in FY25. As I mentioned earlier, we surpassed $1 billion in ARR in Q4. We got to this point by focusing on our customers and building an enterprise-grade platform that can scale to their most demanding needs. I'd like to call out our Chief Revenue Officer, Mike Arntz, who is retiring today. When Mike joined Smartsheet over seven years ago, our ARR was under $100 million and our average customer contributed less than $1,000 per year. During Mike's tenure, our ARR and contributions per customers has grown by 10x. I'm grateful for his service and wish him all the best in retirement. Mike will remain on as a consultant through mid-May to support the transition to his successor. As we enter the post-$1 billion ARR growth phase of the company, the strategy that underpins our go-to-market and product and innovation will be refined and expanded. Executing this strategy will be a leadership team consisting of proven executives, each motivated for the next tier of growth and customer success. Today, we announce that Max Long has joined Smartsheet to serve as president of go-to-market. Max has over three decades of experience leading commercial teams for global tech companies with diversified offerings, including Microsoft and Adobe, and most recently NetApp, where he served as Chief Commercial Officer. We will be unifying go-to-market operations under Max and unifying product and innovation under Prerod Garg, newly appointed President of Product and Innovation. Prior to joining Smartsheet in 2019, Prerod served in leadership roles at Microsoft and Amazon, And under his product leadership at Smartsheet, our platform has been recognized as the leading enterprise platform in work management, serving the largest number of sophisticated scale deployments in the category. We're setting the foundation for the next era of profitable growth with proven, more efficient go-to-market motions paired with enterprise-grade product innovation informed by decades of data, work patterns, and customer use cases. We see a significant opportunity to win additional market share by delivering AI-enhanced collaborative workflow solutions for customers. I see it as a tremendous opportunity representing multiple vectors of growth. In the enterprise segment, productized and scalable no-code workflow solutions are undercutting more expensive, slower-to-deploy alternatives. Regardless of the macro environment, significant demand exists for more efficient solutions to power critical workflows. Smartsheet is well-positioned to capture this opportunity due to our category-leading scalability, no-code platform, and enterprise-grade security. In an effort to drive performance, particularly in the SMB segment, we will deploy our simplified design, pricing, and onboarding experiencing during the course of the year. We are on a mission to remove friction and maximize self-directed experiences for our customers to enable faster time to value. We are taking the right steps to execute our strategy and to bring our enterprise-grade work management platform to organizations of all sizes all around the world. We are well positioned for our next phase of growth to $2 billion and beyond. Now let me turn the call over to Pete.