Smartsheet Inc (SMAR) 2019 Q1 法說會逐字稿

Good afternoon.

My name is Jesse, and I'll be your conference operator today.

At this time, I would like to welcome everyone to Smartsheet Inc.

first-quarter fiscal 2019 earnings conference call.

(Operator Instructions).

Thank you.

Aaron Turner, Head of Investor Relations, you may begin your conference.

Thank you, Jesse.

Good afternoon and welcome, everyone, to Smartsheet's first-quarter of fiscal year 2019 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, Jennifer Ceran.

Our SVP of Product, Gene Farrell, will also be available during the Q&A.

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 Jennifer'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 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 at investors.smartsheet.com, 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 US GAAP financials, we'll discuss certain non-GAAP financial measures.

A reconciliation of these measures to the most directly comparable US GAAP measure 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 welcome, everyone, to Smartsheet's first-quarter fiscal year 2019 conference call, our first as a public company.

We had a good quarter.

We transitioned into the public market and did so while maintaining a high rate of growth.

Revenue grew 63% year on year to $36.3 million in Q1.

Our dollar-based net retention rate was 130%, and we added more than 1,500 net new domain-based customers in the quarter.

At the end of Q1, we had over 3.9 million Smartsheet users across our paid users and free collaborators.

And Smartsheet is now present in 92 of the Fortune 100, and two-thirds of the Fortune 500.

Every day, thousands of knowledge workers from organizations around the world come to Smartsheet seeking solutions to a broad range of business challenges.

For years, they have relied mostly on email, docs, and spreadsheets to manage their work, resulting in slow, error-prone, sub-optimal processes.

With no end in sight to increasing volume and velocity of work, these knowledge workers feel the pressure both from internal and external stakeholders to deliver work at scale and faster and with greater impact.

Staying competitive and achieving both individual and organizational goals requires a platform that is flexible, easy to access, shareable across company lines, reportable, and, increasingly, automated.

At Smartsheet, our software empowers business users to deliver work at scale faster and with better visibility.

Our no-code work execution platform enables them to successfully configure, deploy, and enroll others in their work without the need to always enlist the help of their IT teams.

This focus continues to resonate with our prospects and customers, and demand for modernizing thousand of use cases in this way remains robust.

From managing large-scale events to reporting on the progress of an organization's digital transformation, from facilitating customer on-boarding to managing a commercial real estate portfolio, Smartsheet can enable any team in any industry to take better control of their work.

We saw healthy growth in domain-based customers this quarter and are experiencing higher initial annualized contract values, or ACV, with those new customers.

For example, in Q1 we landed an initial deal over $50,000 with a large hospitality company.

Prior to Smartsheet, this customer was using a legacy process that was ill-equipped to handle the constant changes inherent in new hotel openings.

Smartsheet's control center provides this customer with automated dashboards and reports, delivering real-time project visibility to multiple levels in the organization, ranging from individual hotel GMs up to the senior leadership team.

This enhanced level of visibility speeds decisionmaking and significantly reduces the risk of each project.

We also continue to expand our presence within our customer base.

This quarter, we had 21 customers that increased their ACV by $50,000 or more.

There was strong representation across industries, including manufacturing, software, healthcare, education, and financial services.

Companies that expanded with us this quarter included Fortune Brands, Marketo, Pearson, and Cisco.

Pearson, a leading provider of educational content, turned to Smartsheet to streamline the digital content production process of their US higher education portfolio of titles, including [ET 2], Revel, and other digital products, a process they repeat thousands of times per year.

By leveraging Smartsheet, Pearson is able to significantly shorten the timeline of this process.

We also expanded with a global digital payments company this quarter.

Their operations have scaled significantly over the last few years, necessitating a shift from static spreadsheets to a more collaborative platform.

Smartsheet usage now spans multiple groups including security operations, remittance, global project management, product development, and engineering.

Another notable expansion this quarter was with a large audio technology company that engaged our professional services team to configure control center for their marketing operations team.

This company has been a Smartsheet customer for seven years, and their deepening engagement with us highlights not only the value our customers find in our new solutions, but also our ability to expand with long-term customers.

We continue to invest in improving the capabilities of our platform.

Over the past quarter, we made enhancements to the user interface that improved the discoverability of high-value capabilities, and we also introduced dashboards with charting and data visualization.

Smartsheet dashboards provide managers and executives with improved insights and visibility into the working [manage] in Smartsheet.

Dashboards helped us land a sizable initial deal this quarter with a large real estate management company.

This company is using Smartsheet to provide their execs with real-time views into the status of real estate acquisitions.

We also launched the Smartsheet Solution Center, an in-app gallery that prominently displays use case templates, add-ons, and service offerings to anyone on the platform, licensed users and free collaborators alike.

Providing visibility of the new use cases both promotes the expansion of Smartsheet at our existing customers and serves as a mechanism for improving the onboarding during experience for new customers.

A core element of Smartsheet's market differentiation is our ability to beneficially work with other leading productivity application suites and business systems.

We believe that in today's diverse, cloud-based world, no application succeeds in isolation.

To that end, we extended our chat integration capabilities this quarter by launching our integrations with Slack in April, and Workplace by Facebook in May.

The Workplace integration also showcases the natural language capabilities developed via our acquisition last year of Converse.

AI, a UK-based pioneer in the field of intelligent bots in business automation.

By leveraging Converse.

AI's development capabilities and platform, we were able to improve the time to market for this offering by over 50%.

Enabling popular messaging platforms such as these to dovetail with Smartsheet's work execution platform is an area of emphasis for Smartsheet.

We believe we are uniquely positioned to be the neutral fabric that enables our customers, their clients, suppliers, partners, and other stakeholders to productively work and communicate with one another regardless of their corporate messaging platforms.

In the first quarter we also enabled a new integration with Service Cloud from salesforce.

Service Cloud joins a growing list of premium connectors that provide our customers two-way data syncing between Smartsheet and Sales Cloud, JIRA, and Service Now.

It's just another example of our ability to work alongside cloud providers like Microsoft, Google, Facebook, and others.

Before I turn it over to Jenny, I want to tell you that we are committed to growing the business and fully capturing the significant opportunity before us.

We will do that by continuing to build great products for our expanding customer base by enhancing the capabilities of our sales and services organizations, and by continuing to hire and develop great talent.

I am grateful for the position Smartsheet is in, and for the continued support of our more than 93,000 customers.

We have an industry-leading solution, growing awareness of our value proposition in the marketplace, and an energized team with a strong sense of purpose.

Thank you to our more than 800 team members whose passion and commitment to serving those customers makes me proud to work with them every day.

With that, Jenny?

Thanks, Mark, and welcome, everyone.

Overall we delivered $36.3 million in revenue for the quarter, up 63% versus a year ago, driven by strong demand for our platform from our existing customers, continued adoption by new customers, and growth in professional services.

Billings came in at $45.4 million, up 50% versus the same quarter a year ago.

First-quarter non-GAAP operating loss was $11 million, as we continued to make (technical difficulty) and go-to-market capabilities.

And non-GAAP net loss per share was $0.12.

Free cash flow was negative $9.7 million, driven by these investments, as well as the February payout of our fiscal year 2018 bonuses.

We ended April with a cash balance of $49.7 million.

And on May 1, we strengthened our balance sheet with an additional $163.8 million from proceeds from our initial public offering.

Before I provide our outlook for the second quarter and the remainder of the year, let me provide you more details on the first quarter, starting with revenue.

Of our $36.3 million in total revenue, subscription revenue was $32.1 million, a 57% increase versus the year-ago quarter.

Services revenue came in at $4.3 million, up 129% versus the year-ago period, driven by demand for consulting and training.

Services revenue represented 12% of our total revenue, and we expect it to be between 9% and 11% of total revenue for the remainder of the fiscal year.

I'll now turn to our quarterly business metrics.

When viewed collectively, these measures provide insight as to the progress we are making against our land-and-expand growth strategy.

Our total domain-based customer count at the end of the first quarter was 75,642, a net gain of just over 1,500 versus the end of the prior quarter.

These customers now represent approximately 96% of our total ACV.

ISP customers, which represent individuals and very small teams using an ISP-based domain, represented the other 4%.

4,349 customers now pay us $5,000 or more per year, and 239 customers now pay us $50,000 or more per year.

These customer segments grew year-over-year by 78% and 139%, respectively, and now represent approximately 57% and 20% of total ACV.

As of the end of the quarter, and our average ACV per domain-based customer was $1,808, an increase of 47% compared to the same period a year ago.

And finally, our dollar-based net retention rate was 130% as of the end of the quarter, consistent with the prior quarter and up from 124% in the same quarter a year ago.

For modeling purposes, we expect dollar net retention rate to remain above 125% on average for the trailing four quarters for the remainder of this fiscal year.

Next I will provide color on the rest of our income statement and a few highlights from our balance sheet.

Unless otherwise stated, all references to our expenses and operating results are on a non-GAAP basis, and are reconciled to our GAAP results in the earnings release that was posted before the call.

The first quarter, overall gross margin was 80% versus 80% a year ago and 82% in the prior quarter.

Subscription gross margin was 87%, down 2 percentage points from the prior quarter as we added planned headcount to scale our tech support function.

Professional services margin was 29%, higher than our annual target of 20%, driven by increased customer demand and the timing of hiring.

We expect our professional services margin to vary quarter to quarter, depending on the timing of consulting and training hires, and customer utilization of these resources.

Turning to our operating expenses, general and administrative costs in the first quarter were $6.2 million, representing 17% of total revenue, up from 16% of revenue both in the same quarter a year ago and the prior quarter.

The increase was driven primarily by higher costs associated with operating as a public company.

Research and development was $12.2 million or 34% of total revenue.

This compares to 29% of revenue a year ago and 28% of revenue in the prior quarter.

The increase in R&D expenses reflects the hiring of additional developers and incremental professional services expenses to support investments in our platform.

And finally, sales and marketing expense was $21.9 million or 60% of revenue, versus 65% of revenue a year ago and 60% of revenue in the prior quarter.

The scale in sales and marketing versus the same quarter a year ago was driven primarily by lower professional services costs and a modest increase in marketing spend, partially offset by higher personnel costs.

Over time, we expect to realize leverage across all of our operating spend categories as we scale the business.

But our near-term focus continues to be enhancing our product and driving growth in market adoption.

Turning to operating loss and free cash flow.

Operating loss was $11 million, representing a negative operating margin of 30%.

Approximately 67% of our total expense is headcount-related, and we added 83 employees across the organization during the quarter.

Free cash flow was negative $9.7 million, which includes CapEx spend and principal payments on leases totaling 4% of revenue.

Now turning to billings.

Our first-quarter billings were $45.4 million, up 50% versus a year ago.

Approximately 87% of our subscription billings are annual; and the remainder are monthly, with quarterly and multi-year billings representing less than 1% of the total.

Our quarterly billings trends are impacted by the timing of large customer renewals and the size of new and expansion deals.

We will provide additional color on billings trends as they arise.

I will now provide guidance for the second quarter and the full year of fiscal year 2019.

This guidance reflects our plan to reinvest the majority of upside back into the business, specifically in our product capabilities and in our sales and marketing effort.

For the second quarter of fiscal year 2019, we expect total revenue of $38.5 million to $39.5 million, representing year-over-year growth of 44% to 48%.

We expect non-GAAP operating loss to come in between $14 million and $13 million, and non-GAAP net loss per share to be between $0.14 and $0.13 based on weighted average shares outstanding of 102 million.

For our full fiscal year 2019, we expect total revenue to be in the range of $159 million to $162 million, representing growth of 43% to 46%.

Non-GAAP operating loss is expected to be between $58 million and $54 million.

We expect non-GAAP net loss per share of between $0.59 and $0.56 for the year based on approximately 99 million weighted average shares outstanding.

And while we do not plan to guide to quarterly billings and free cash flow, given the uncertain timing impacts of closing and renewing larger deals, and the timing of cash collections and payments, we will be providing annual guidance for these numbers.

For fiscal year 2019, we expect billings to be in the range of $193 million to $196 million, representing growth of 42% to 44% versus last year.

For modeling purposes, we expect billings in the second and third quarters to follow a similar sequential cadence as fiscal year 2018.

We also expect full-year free cash flow to be up to negative $25 million, with our highest cash burn in the first quarter, followed by sequential step downs in the subsequent quarters.

However, it's important to note that while $25 million is our targeted cash burn for the fiscal year, we will continue to read demand signals over time and lean in with investments where we think it's appropriate to capture our considerable growth opportunities.

To recap, we were pleased with our first-quarter results as demand for our work execution platform remained robust.

We continue to make Smartsheet even more valuable with new features such as dashboard visualizations, Solution Center, and integration.

And as we look to the future, we see significant opportunity to help organizations work faster, better, and smarter.

And with that, we'll now turn it back to the operator to take your questions.

Operator?

(Operator Instructions).

Stan Zlotsky, Morgan Stanley.

Congratulations on a really strong way to start the year.

So the first one I wanted to dig into is the [hyper] growth of the larger customers is really, really impressive.

What's been the driver of that?

And that I have a quick follow-up.

Hi, Dan.

This is Mark.

We're seeing a couple things.

One is the continued expansion of use cases across companies.

And when you look at what the Company was built on initially, it was to serve a diverse set of needs.

And as the Company is able to reach more divisions and teams within companies, that is propagating this growth.

That, however, is combined with also delivering capabilities.

So as opposed to simply selling licenses to an organization, how do we provide them higher value offerings through things like Control Center, which are typically taking on more substantive workloads that they are investing behind.

And those capabilities come with licensing opportunities for us, as well.

Got it, perfect.

And then a quick follow-up on sales productivity.

You guys had a really big hiring ramp last year.

How's sales productivity trending thus far?

And how are you thinking about hiring for the rest of the year?

And that's it for me, thank you.

Yes.

So if you look at LTV to CAC, if you look at payback, the numbers were in line with where we've been in the past.

Payback was up about half a month to 15 months at rounded, but it is still doing well.

You know we're making investments.

And over time, those investments are going to be paying off, and we feel good where we came out.

And how are you thinking about the rest of the year?

So for the rest of the year, my expectation is they will stay right where they're at.

They may degrade a little bit, but it is all dependent on where we come out on subscription revenue, so TBD.

Okay, got it.

Thank you.

Mark Murphy, JPMorgan.

I'll add my congrats on the strength in the quarter.

Following on the same thread, Mark, I wanted to ask you: where are you in executing some of your changes in the sales org and that go to market?

I believe you were going to be working on the application itself or the in-app experience, but also the realignment of the sales teams.

Just wondering, what inning are you in with those changes?

And the results are quite strong overall, so I guess I'm just wondering, within the strength, is any element of that sales reorg constraining everything -- anything like new customer growth?

Or do you feel like it's kind of smooth sailing through these changes?

Well, Mark, thanks.

We're in the bottom of the third.

And what I would say is that what we were able to achieve in Q1 was our territory mapping.

We've spoken to really aligning our resources, both sales and service and the success, against highest potential accounts.

And while the remapping was achieved in Q1, reps are still getting to know some of their new books.

So that process will extend throughout the year.

I would say in terms of the enterprise team that we're investing in, we're going to be adding -- really looking to double that team this year, from nine reps to in the high teens.

That is underway.

We were successful in making a number of hires in Q1.

And we expect those ramps to be achieved over the next -- in the coming quarter, quarter-and-a-half.

I would say in terms of smooth sailing, you earn it every quarter.

So, in terms of it's not sort of a fire-and-forget type model.

It's -- you have to continue working it, continue engaging with customers.

And what we do believe is given that we have an $1,808 ASP -- or ACV average across the domains, we have an extraordinary opportunity to engage with our customers.

And we're still learning a lot.

Out of our 75,000-plus brands, we have 239 who pay us over $50,000.

So we have a long way to go to continue to serve our customers.

Okay.

And thank you.

That's the most specific definition of what inning a company is in that I think I've ever heard, so I appreciate that (laughter).

And you didn't hesitate at all, so you've been thinking about that.

Jenny, I wanted to ask you: are you able to comment at all on net dollar retention rates by ARR bands, and how those trended during Q1?

And for instance, could you talk to us about how the retention trended for that band that's over $25,000, or any of the other bands?

Yes.

We had obviously a retention rate of 130%, which we're very happy about, and it was the same rate as we had in Q4.

And so when you look at the expansion in our customer segments, they were really kind of overall steady of puts and takes; but overall very, very steady.

And the churn rates also were really stable.

So there wasn't anything that was extreme to point out, to be honest with you.

Okay.

Thank you very much for taking my questions.

John DiFucci, Jefferies.

And I guess my question is for Mark.

Mark, along the lines with what's been asked -- but for international sales, I know you've had some pretty decent exposure for the size of the Company, and for not having any international salespeople.

But now that you have some, have you -- and I know it's really early -- but have you seen any inflection in international exposure or in the sales because of that international exposure at this point?

I would say that the reaction from customers has been -- again, I wouldn't call it a huge pattern that we are identifying yet.

But ad hoc remarks from customers who are engaging with reps who are assigned to them now is that they're really happy that we are engaging with them.

I mean, this is sort of basic blocking and tackling.

Customers who have -- who are trying to achieve improvement in their business, there is a great opportunity to self-manage that with Smartsheet.

But the benefit of engaging with people who have expertise and opinions on how to accelerate that, that is really well received.

But again, we are less than a quarter in, in terms of having our UK and Continental European territories established.

So in out quarters, I expect us to have a more informed opinion on that.

Okay, great.

That's great.

Well, you're in the game now, so -- actually I think you were in the game without being there, so that's interesting.

(laughter) But I guess my second question and final question has to do with the unassisted sales motion.

I know you were making some changes to the website.

And one of the things that's interesting about your company is the amount of sales you get where salespeople don't even touch it, touch the customer.

I'm just curious, any of these changes to the website -- have you seen any impact on those unassisted sales?

I can take that.

We are actually still in the very early innings of making our changes to unassisted in the online app area.

For Q1, basically a little over a quarter of our bookings were in unassisted, which is consistent with where it was last year.

So I think there's still room to grow in that area.

Okay, great.

Thanks, Jenny.

Thanks, Mark.

Nice job.

Ross MacMillan, RBC Capital Markets.

My congratulations as well.

Just a question on product maybe either for Mark or Gene.

You delivered on the integrations with Slack and Facebook in the quarter.

I'm just curious, as you think about the balance of this year, what are the key milestones you're looking to deliver on from a product perspective?

Well, Ross, thanks for the question.

I think there's a couple of different areas that we're looking at for the balance of the year.

And I think I would probably break them down into how do we improve user engagement/user experience?

How do we complete the play on messaging and the neutral fabric for work execution across enterprise?

And then how do we continue to build on helping our customers scale?

And specific to the integrations that you saw with Slack and Facebook, you'll see further integrations with the other most popular platforms.

And we anticipate having those -- that first round of integrations, which will really include our Converse.

AI technology, being completed by the calendar Q4 of this year.

And then you'll continue to see improvements and enhancements to the user experience to make it easier to discover our most powerful capabilities, and really make the in-app experience more powerful and easier for users to learn how to do more with the platform.

And then you'll see a number of enhancements that we'll be launching to support our largest customers, whether it's deployment at scale, or compliance, and visibility into how users are actually engaging with the platform.

And then you'll see us start to introduce some more packaged solutions, things that we talked about a little bit as part of the roadshow.

That's great.

And then maybe just a short follow-up really for Jenny.

I noticed the strength in professional services in Q1, and normally wouldn't really focus on that, but I'm just curious as to what's driving that.

It sounded like a consulting and training.

Is that just a function of some of the success you're having with these bigger ACV deals?

Or are there some other things that are pulling through that much higher professional services content?

Well, I think as more people use our product, they have interest in expanding use cases.

And so we've seen professional services across all areas, and particularly the larger customers would be interested in purchasing professional services.

I think the other thing that happened in the first quarter is that we introduced some new training packages.

And they really tailor to all different sizes of customers, and those have been really well received.

And so that was part of the reason why we saw strength in professional service this quarter.

Great.

Thanks again, and congratulations.

Terry Tillman, SunTrust Robinson.

I'll echo that congrats on this opening act here.

I'm tempted to ask if there's nine innings in this game or if you'll have extra innings, Mark, but if we could discuss that later.

But yes, just two questions for me.

I guess the first question is -- and Mark, this is for you -- as we've talked to investors, they categorically have been impressed with just the growth in your monetization.

Sometimes I feel like there's a bit of a -- to them it feels ill-defined in terms of the work execution space.

And I'm not saying that's my view; but just I want to pass that along.

But what I'm curious, since you've gone public, have you seen any kind of benefits or surprising benefits from now being a public company as it relates to either the business, potential partnerships, or just other things that could help around branding of this work execution market?

I think the category continues to be increasingly well defined.

I wouldn't say that the going-public event was the catalyst for that.

I think it's a matter of time where people have taken other parts of the business to the cloud and they've recognized that, especially on the front office side, that authoring and messaging and telephony -- all those in the top actually haven't answered the bell completely.

And that's one of the opportunities that we now find ourselves in.

So we work with all of those things; but the fact that business users are still struggling to report out, to automate, to better track, all these things -- that is what's creating the opportunity for us.

And I think it's one of the challenges, but also the great opportunities we face.

But if you go to a business user and you say, hey, what did you use to use [Excels] for your tracking?

Be prepared to have a multi-hour conversation.

And in each of those use cases, there is opportunity for us to deliver something in an ad hoc manner.

And when people assign more value to it, to Gene's point, we can build solutions behind it.

So I think the category, though, of work execution and how businesses perceive it, that is becoming formalized now.

You're starting to see other software companies talk about it.

You're starting to see analyst reports come out about it.

And that, I would say, will help us in the years to come.

Got it.

And Jenny, maybe -- I don't know how much you can provide here.

But in terms of value added solutions, it sounds like they can provide a nice uplift in these larger accounts.

But anything you could talk about in terms of quantifying the impact from either the Solution Center or these packaged integrations that you have to pay for.

Thank you.

I would say that, in terms of revenue, it's still a single-digit percentage of revenue, but it is growing.

But in terms of our bookings for Q1, slightly over 10% was related to those particular new products that we've been selling.

So we expect that to continue.

Thanks.

Nice job.

Richard Davis, Canaccord.

It's actually DJ on the line for Richard.

Good first quarter out.

Mark, inasmuch as the initial touch point is generally self-serve, I'm curious -- Terry kind of got at this, but is the IPO -- did that help from a branding perspective?

I mean, the metrics that you track in terms of site traffic or whatever they may be, any color, post-IPO, what you're seeing in terms of branding Smartsheet?

With the majority of our bookings coming from our existing customer base, I would say our customers were very pleased to see that Smartsheet is a very healthy company with good metrics, a strong balance sheet.

These are all things that give them much more confidence to lean in.

So I think as they go to their VPs, their IT leadership, and they say, hey, we want to really get behind Smartsheet at scale, these are all things that help.

But I would say in terms of site traffic and such, we've already been flipping along at north of 100,000 trials per month.

While I would say the quality of traffic has improved, I would say the raw count of people showing up at the doorstep hasn't changed that materially.

Yes, yes.

And then you talked about some of the packaged integrations that you'll bring to market.

I'm curious, just as the go-to-market evolves and you look at your customer base, and you see the use cases that are most common or most valuable, I mean do you see a day where Smartsheet goes to market with more predefined use cases that I guess either makes it easier to onboard or that you guys can better monetize?

Just what's the strategy there longer-term?

DJ, this is Gene Farrell.

I'll take that one.

I think that what we're seeing is a really strong demand signal for customers for a number of different specific use cases where we can pull together packaged solutions and speed the onboarding process, but also speed the time to implementation considerably for the customer.

And so we've actually started to engage with customers on the first three solutions that we plan to introduce later this year.

And the first three of those packaged solutions we're kind of doing with beta customers at this point.

And the response has been really favorable.

So we would expect to see us to continue to build on that portfolio, and then continue to focus on enabling both our existing customers and third parties to configure solutions on top of Smartsheet as a platform.

And we'll have more to talk about there, later in the year.

Great.

Okay, very good.

Thanks, guys.

Bhavan Suri, William Blair.

Congrats; and like everyone said, just a great, great start as a public Company.

I guess my question is off of DJ's a little bit, which is: you've got a pretty open platform today to go build anything.

And when we look at the use cases, the ones you've listed, the ones we've dug into customers, you know [punch lists], project management, things like that.

Is the ability to sort of build more custom complex applications -- sort of you know this idea of zero-code development, not just to address stuff that's falling through the cracks or stuff that email and Excel was used for, but really to develop some really sophisticated customer applications.

Are you seeing that happen at all today?

Or is that still a ways away as you build out the AI and other components?

Or do you have customers that have sort of said, hey, (technical difficulty) really sophisticated in a simplistic fashion, but sophisticated for what it does perspective.

I'd love to shed some color, sort of use cases where what you're seeing in that space.

This is Mark.

I think one of the things to note is when we say no-code platform, that means no code is a possibility.

Like you can actually get stuff done in a no-code manner.

It doesn't mean that we don't support coding.

So we have an API that's heavily exercised.

Some of our largest clients are doing bespoke projects with bespoke UIs that sit on top of that API and work in concert with our standard offering.

Now again, what we're doing in terms of investing in the platform attributes, as Gene will report out in future quarters, is we're going to continue to invest in those areas.

Again, when we talk about who can be supported by the platform, again we want to empower business users.

We also need to be able to support people who have that appetite for customization.

So, it's very much within our sights, but we don't want to do that at the expense and ever box out that business user from being effective.

Yes.

Super, that's really helpful.

And then one quick follow-up for me here.

Obviously there's a really interesting go-to-market motion here.

But especially when you think about these more complex use cases and you look at shifting maybe professional services to third parties, folks like that -- well, I guess, two questions.

One, have you thought about sort of someone building something really cool with Smartsheet and then sort of acquiring them as a product?

Has that ever come into play, or do you think about that?

And then two, where do the professional services guys sit in your go-to-market?

Thank you.

Yes, can you -- I want to just make sure I heard the first part of that question.

You said, if somebody built something on top of us, did you say acquire?

Yes.

So say I was a small tech company and I embedded Smartsheet and something, and I built it, and I sold it into a vertical marketplace or something.

Would that be something you guys would look at?

Or is that something it's part of sort of your inorganic strategy?

If you think about like salesforce has bought stuff that's built on the platform.

Atlassian has bought stuff on their platform.

And I think it's sort of the flexibility what you guys have built that really for a third-party to embed it, build a charge on it -- sort of is that something that would appeal to you?

Yes, absolutely.

I think -- but we take probably a balanced view there, right?

We believe that it's important to build an ecosystem of partners around the platform that can bring expertise and their own IP to create enhanced value for customers, and we'll benefit in that process.

But when we see capabilities that third parties have that are really accretive to what we're doing, and we think can be applied across a big portion of our customer base, we will absolutely look at how can we partner better with them, or potentially acquire them, to accelerate how we deliver that value.

So I think it's a balanced approach.

And the services team, this quarter already, we have been working with third-party consultancies.

And I think the degree to which these more robust capability-based licenses are delivered, we're going to be finding more and more opportunities to work with outside services firms.

And this is a pattern we've seen for decades, right?

Work with external services firm; develop a competency; get those enabled services firms to introduce a Smartsheet platform into their client base.

That's something that we are well aware of and looking to work towards.

Great.

Yes, it's also making things to reach.

Super.

Thanks, guys.

Congrats, and very helpful.

Thank you for taking my questions.

Those are all the questions I have for today's call.

With that, I'll turn the call back over to Aaron Turner.

Great.

Well, thank you all for joining us on our first-quarter conference call.

We look forward to speaking with you again next quarter.

This concludes today's conference call.

You may now disconnect.