Smartsheet(SMAR) - 2021 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q3 2021 was $98.9 million, representing a 38% year-over-year increase, while billings were $112.4 million, up 35% compared to the previous year [28][30] - The dollar-based net retention rate was 125%, and the domain average annualized contract value (ACV) grew 42% year-over-year to $4,665 [34][28] - Non-GAAP operating loss was $15 million, and free cash outflow was $8.8 million [28][38] Business Line Data and Key Metrics Changes - Subscription revenue reached $90.9 million, a 41% year-over-year growth, while services revenue was $8 million, growing 12% year-over-year [30] - The Brandfolder acquisition contributed $1.7 million to total revenue and $7.9 million to billings [30][31] - The number of customers paying $5,000 or more per year increased to 11,172, with 1,331 paying $50,000 or more, and 504 paying $100,000 or more [33] Market Data and Key Metrics Changes - The government segment saw over $1 million in federal bookings, marking the largest quarter to date [19] - The GSA expanded its use of Smartsheet Gov, becoming the second-largest federal customer [20] - The remaining performance obligations (RPO) increased 47% year-over-year, indicating a strong pipeline for future revenue [32] Company Strategy and Development Direction - The company is focusing on expanding product development and innovation, particularly in Collaborative Work Management (CWM) solutions [10][12] - Smartsheet aims to empower business units at the edge of organizations to improve digital-first workflows [21][22] - The integration of Brandfolder is expected to enhance Smartsheet's capabilities in content management and analytics [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term opportunity in the federal market and the potential for growth in the digital transformation space [19][21] - The company anticipates continued strength in large deals and a positive outlook for Q4 based on a strong pipeline [8][39] - Management noted that the shift to asynchronous work is becoming essential for productivity in a remote work environment [21][22] Other Important Information - The company completed the acquisition of Brandfolder for approximately $124 million net of cash acquired [28] - The transition to a new CFO, Pete Godbole, was announced, with expectations for continued growth and innovation [24][26] Q&A Session Summary Question: Changes in use cases towards workflow automation - Management noted that while workflow automation is becoming more central, project management remains a significant focus [44] Question: Net dollar retention expectations - The net dollar retention rate is expected to be in the low to mid-120s for Q4, reflecting ongoing COVID headwinds [45] Question: Federal business performance - The federal segment is still a small part of the business but is expected to grow significantly over the next few years [53] Question: Brandfolder's contribution to revenue - Brandfolder contributed $1.7 million to revenue and $7.9 million to billings in Q3 [47] Question: Enterprise license agreements - The company is seeing an increase in enterprise license agreements, which facilitate quicker scaling for customers [80] Question: Future growth outlook - Management is optimistic about the potential for stabilization and growth in the net retention rate next year [78]