Smartsheet(SMAR) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q3 2023 was $199.6 million, representing a 38% year-over-year increase [11][25] - Annual recurring revenue (ARR) increased by $56 million, totaling over $792 million [11] - Non-GAAP operating loss was negative $4.3 million, showing a 7 percentage point sequential margin improvement from Q2 [12][28] - Total gross margin was 81%, with subscription gross margin at 87% [28] Business Line Data and Key Metrics Changes - Subscription revenue reached $186.1 million, a 40% year-over-year growth [25] - Services revenue was $13.5 million, reflecting a 12% year-over-year increase [25] - The number of customers with ARR over $50,000 grew 43% year-over-year to 2,962 [27] - Customers with ARR over $100,000 increased by 55% year-over-year to 1,346 [27] Market Data and Key Metrics Changes - Billings for Q3 were $219.6 million, a 36% year-over-year growth [26] - The dollar-based net retention rate was 129%, with a full churn rate below 4% [27] - The company expects the overall dollar-based net retention rate to be in the mid-120s by year-end [27] Company Strategy and Development Direction - The company is focused on improving operational efficiency and delivering measurable ROI for customers [10][22] - Investments in project and portfolio management (PPM) capabilities are being deepened, including new resource management features [19] - The launch of new capabilities and experiences at the ENGAGE conference is aimed at enhancing customer engagement and satisfaction [17][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver long-term durable growth despite macroeconomic challenges [22] - The current macro environment is impacting customer budget spending, leading to a prudent outlook for future guidance [51] - The company is seeing improvements in pipeline conversion and sales rep productivity, which are expected to positively influence future performance [34][94] Other Important Information - The desktop application launch received positive feedback, indicating a strong demand for easier access to the platform [63] - The integration of Brandfolder and Outfit is providing significant value to customers, enhancing digital asset management capabilities [21][82] Q&A Session Summary Question: Pipeline conversion and future expectations - Management noted improvements in pipeline conversion and sales rep productivity, with a strong month in October [34][94] Question: Go-to-market messaging evolution - The company is emphasizing ROI-driven discussions and helping customers achieve cost savings and revenue growth [37] Question: Competitive environment and performance - Management highlighted the strength of their offerings and customer relationships as key factors driving business success compared to competitors [58] Question: Stock-based compensation trends - Management expects stock-based compensation to decline as a percentage of revenue due to moderated hiring plans [76] Question: Demand trends in different market segments - The enterprise segment has shown strength, while mid-market and certain verticals like technology have faced challenges [75]