Smartsheet : Earnings Document

Corrected Transcript

02-Dec-2021

Smartsheet, Inc. (SMAR)

Q3 2022 Earnings Call

	Total Pages: 20
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Smartsheet, Inc. (SMAR)	Corrected Transcript
Q3 2022 Earnings Call	02-Dec-2021

CORPORATE PARTICIPANTS

Aaron Turner	Pete Godbole
Head-Investor Relations & Treasury, Smartsheet, Inc.	Chief Financial Officer & Corporate Treasurer, Smartsheet, Inc.
Mark Patrick Mader
President, Chief Executive Officer & Director, Smartsheet, Inc.

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OTHER PARTICIPANTS

Brent Thill	Joseph Meares
Analyst, Jefferies LLC	Analyst, Truist Securities, Inc.
Mark R. Murphy	Steve Enders
Analyst, JPMorgan Securities LLC	Analyst, KeyBanc Capital Markets, Inc.
John David Godin	Keith Bachman
Analyst, Needham & Company	Analyst, BMO Capital Markets Corp.
Allan Verkhovski	George Iwanyc
Analyst, Wolfe Research LLC	Analyst, Oppenheimer & Co., Inc.

Arjun Bhatia

Analyst, William Blair & Co. LLC

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MANAGEMENT DISCUSSION SECTION

Operator: Good day, ladies and gentlemen, and welcome to the Smartsheet Third Quarter Fiscal Year 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question- and-answer session and instructions will follow at that time. [Operator instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Aaron Turner, Head of Investor Relations. Thank you. Please go ahead.

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Aaron Turner

Head-Investor Relations & Treasury, Smartsheet, Inc.

Thank you, Blue. Good afternoon and welcome everyone to Smartsheet's third quarter of fiscal year 2022 earnings call. We will be discussing the results announced in our press release issued after the market close today. With me today are Smartsheet's CEO, Mark Mader; and our CFO, Pete Godbole.

Today's call is being webcast and will also be available for replay on our Investor Relations website at investors.smartsheet.com. There is 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

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Smartsheet, Inc. (SMAR)	Corrected Transcript
Q3 2022 Earnings Call	02-Dec-2021

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 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 on 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.

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Mark Patrick Mader

President, Chief Executive Officer & Director, Smartsheet, Inc.

Thank you, Aaron, and good afternoon, everyone. Welcome to our third quarter earnings call for fiscal year 2022. Today, I'd like to focus on three key areas: our strong Q3 results which saw an acceleration of our revenue and billings; our continuing momentum in both enterprise and SMB; and how Smartsheet is driving innovation in more departments across more industries than ever.

While Pete will give you the details, I do want to highlight a few standout areas of Q3 performance. Smartsheet revenue for the quarter grew 46% year-over-year to $145 million, and billings grew 50% year-over-year on an adjusted basis to $162 million. We also exited the quarter with more than 9.5 million Smartsheet users, and in October we set a Smartsheet record for licenses bought by new customers in a month. Overall, we increased our ARR 10% quarter-over-quarter. Our reacceleration, our aggressive investment posture, and our new high watermarks and pipeline and large deal volume make me more bullish than ever on the prospects of the company.

As many of you know, Smartsheet is a cloud-based platform for dynamic work that empowers employees and teams to transform how they work. Through a combination of a no-code platform, a global community, and a broad service offering, customers unlock business value by transforming projects, programs and processes at scale. Rather than being just a task-oriented tool, Smartsheet can scale from a simple project used by a five- person firm to an enterprise SaaS platform that enables work across critical business systems at the largest companies in the world. That extensibility is a huge factor, driving the momentum we are experiencing in this emerging global work management market.

That momentum often gets started when a specific team or department - let's say, performance marketing deploy Smartsheet to streamline campaign management. As work is shared with other departments via Smartsheet, those departments begin to understand the value of the platform and viral growth occurs. This low-friction method of trusted growth occurs across companies and is amplified by Smartsheet's work from anywhere accessibility.

As customers graduate from basic productivity use cases to transforming operational workflows, we see rapid uptake and acceptance across more departments. For example, in Q3, we had wins within marketing departments at companies like USA TODAY, United Airlines, and Turner Broadcasting; HR departments at companies like Sonos, Avalara, and University of Southern California; in sales departments at Robert Half and Juniper Networks; in legal departments at [ph] Kerros (04:47), NetApp, and Ambev; in operations at Estée Lauder

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Smartsheet, Inc. (SMAR)	Corrected Transcript
Q3 2022 Earnings Call	02-Dec-2021

and Piedmont Healthcare; and at government entities including the U.S. Department of Agriculture, the U.S. Department of Health & Human Services, and the FAA.

A couple of use cases I'd like to call out. We saw expansion at Hewlett Packard Enterprise and Aruba, an HPE company, where the marketing and sales departments are tracking events and consolidating input gathered from various sheets, Smartsheet forms and update requests into a global calendar used by field sales and executives.

And at Autodesk, the legal department is using Smartsheet Salesforce Connector to [ph] pull in (05:22) deal data to track negotiation points, fallbacks used, and security issues. With Smartsheet, Autodesk reduces the manual effort related to inputting their deals, which allows managers to track and report on recurring issues, monitor team bandwidth, and improve strategic decision making. This continued momentum in the enterprise where we build deep relationships with customers at more senior levels is driving bigger deals and positioning Smartsheet as the preferred choice for work management across the enterprise.

All of which ties back to our bookings for the quarter. Q3 saw both a new quarterly record of 203 deals of more than $50,000 and a new quarterly record of 77 deals of more than $100,000, up 92% and 114% respectively year- over-year.

And this is recurring while we invest in high potential markets like Europe, Asia Pac, and the federal government. Smartsheet Regions, our regional Smartsheet offering, is now available in the EU and enables customers to establish plans with their content hosted in Germany.

On the federal government front, we continue to make progress scaling this long-term, highly sticky opportunity. While government is small percentage of our total ARR, the ARR growth rate coming from the government entities grew in excess of 125% year-over-year in Q3 with a significant ramp in logos landed.

Beyond the numbers, I'd like to talk for a minute about our Smartsheet innovations that are driving customer uptake. Our investments in WorkApps no-code solutions and content management are paying off. With the pace of innovation quickening on WorkApps, configuration and distribution, the table is setting up nicely for WorkApps to become a major driver in shaping how people interact with Smartsheet.

More than 50,000 WorkApps have been created to-date, providing evidence that strong demand exists within - for creating composite solutions across the company Smartsheet deployment while also helping them maximize yield from existing cloud investments such as Microsoft 365 and Google Workspace.

Content creation and collaborative review is also going mainstream. With nearly a quarter of a million PDFs, images and videos proofed within Smartsheet in the quarter, new muscle is being developed around how people enroll others in content review. With the integration between Smartsheet and Brandfolder deepening, new and existing customers choosing Smartsheet for digital asset management have a more flexible and powerful way to securely store, customize and share assets.

Our platform and differentiated capabilities allow us to attach to a variety of workflows, placing us in the upper right of the Leaders quadrant for both the G2 Project and Portfolio Management and Digital Asset Management grids. And customers consistently score Smartsheet highly in the CWM and PPM markets. In fact, in those categories, we have the most five star reviews in Gartner Peer Insights compared to all other vendors.

The combination of providing simplicity at the end user level and flexible capabilities to manage programs at scale, plus security and governance controls required by enterprise IT is what sets Smartsheet apart. In PPM, we

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Smartsheet, Inc. (SMAR)	Corrected Transcript
Q3 2022 Earnings Call	02-Dec-2021

bring a modern approach that connects bottoms-up project and process management with portfolio level views that give senior leaders organization-wide visibility to define standards, manage resources, and align on priorities. Smartsheet's ability to integrate equally well with both current and legacy systems of record gives our enterprise customers the ability to use the Smartsheet platform both wide and deep across their organizations.

In the digital asset management space, we've unified two market leading solutions, Brandfolder DAM and Smartsheet CWM. By creating one platform for marketers and creatives, shared visibility is achieved and teams are positioned to respond quickly to asset performance.

Our digital content lifecycle and asset management capabilities enable Smartsheet customers like McLaren Racing to accelerate content workflows for planning, creation and distribution using that single platform. For example, McLaren Racing's partners and fans will now be able to easily locate, access, and share content from race days. Photographers and videographers on the racetrack can uphold their content directly into Brandfolder and McLaren - for the McLaren team to approve and distribute in real time.

In Q2, we launched Smartsheet Advance, a new tiered way for customers to unlock the full potential of Smartsheet at scale. At the entry tier, Advance Silver enables businesses to orchestrate sophisticated programs, projects, and processes at scale using premium capabilities like Control Center. Advance Gold has the ability to connect Smartsheet solutions to other systems of record via Data Shuttle and Bridge as well as connectors to platforms and tools like Salesforce and Jira. At the top tier, Advance Platinum adds capabilities for organizations that desire additional levels of compliance, governance and advance policy management.

With Smartsheet Advance now in the market for two quarters, we have seen that our packaging approach that enables customers of any size to benefit is hitting the mark. One notable customer win was with USA TODAY where the marketing team's executive leadership was charged with solving challenges of cutting inefficiencies, eliminating budget overrun, and reducing employee turnover in order to scale their events business. Smartsheet Advance will support the phased implementation of multiple solutions, beginning with Control Center, Data Shuttle, and the Salesforce Connector.

But Advance is more than a mechanism for expansion. 46 Advance deals in the quarter were sold to new customers of Smartsheet. The offering helps accelerate discussions with those who want to start big and start now. [ph] Sansone Group (10:59) was able to hit the ground running with Advance Silver, migrating workloads from legacy tools into an end-to-end project and portfolio management solution. From project intake to execution to executive reporting, [ph] Sansone Group (11:11) uses Smartsheet Control Center to ensure that construction projects are deployed with consistency, and key information is automatically surfaced to executive leadership of this rapidly expanding business.

Advance is resonating with customers of all sizes, not just enterprise customers, with 51 of the Advance deals coming from organizations with 200 employees or fewer. One of those customers, [ph] Sofos Consulting (11:34), is using Advance to standardize their professional services offerings around client onboarding, project management and service requests. The centralization and visibility of key information has allowed the executive team to have true insight into client projects, in particular on resource allocation and capacity. Overall, this was a very successful quarter with 160 Advance deals closed.

Before I pass the mic to Pete, I'd like to touch on the leadership appointments we announced a few weeks ago. The promotion of three senior executives, Jolene Marshall, Stephen Branstetter, and Andrew Bennett to C-level roles, brings deep institutional knowledge and proven innovation into central roles for our next phase of growth. Each of these decisions is grounded in our commitment to empower anyone to drive meaningful change and

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