Q2 2022 Smartsheet Inc Earnings Call
Yeah.
Okay.
Operator.
<unk>.
Thank you for your patience.
Okay.
<unk>. Please stay on the line for the next available operator.
Uh huh.
Hum.
[music]. Thank you for your patience.
<unk>. Please stay on the line for the next available operator.
Okay.
[music].
C C website at Www Dot SEC Dot Gov.
Thank you for your patience.
Reflected in the forward looking statements are reasonable.
Operator.
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 U S. GAAP financials, we will discuss certain non-GAAP financial measures a reconciliation to the most directly comparable U S. 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.
Thank you earn in.
<unk>.
[music].
Okay.
[music].
Thank you for your patience. Please stay on the line for the next available opera.
Thank you for calling me have been he was a conference you are joining.
Hello.
If you're on mute please UN mute.
Hello.
Hi, P. You know the name of the countries who are joining.
Smart sheet, Inc.
Thank you and May noticed spelling of your first and last name. Please.
Rachel are a C. H E L. Smith S M I T H.
No your company name as well.
Our euro a I E R E.
Yeah.
Thank you and your phone number.
2129603697.
Thank you. Your line you will not be joined at a conference.
Okay.
Expansions at NBC, Universal and the New York Times.
<unk> and manufacturing with Johnson controls and whirlpool.
Our customer acquisition was strong in Q2 as well thousands of new customers chose smartly this quarter, including wins at Sky News, Australia, Momentous space SMG, New Hampshire Department of Health and human services, Kestrel coal and unified field services.
What these customers have in common is a shared belief that <unk> is ideally suited to meet their broad and ever changing needs at its core <unk> is an enterprise grade dynamic work management platform designed to empower business users to transform how they work.
We go to market using a land and expand model that often starts with the team or department choosing smartly to solve a transactional use cases like project management task tracking our goal management.
The solution then grows through low friction viral motion when users share their work and engage with those inside and outside of the organization.
Where we excel is our ability to enable customers to extend beyond transactional use cases to support transformative operational workflows across their business.
In part this is made possible by our flexible data model, our advanced premium platform capabilities and workouts No-code solutions.
Our flexible data model combines the agility of a spreadsheet with the power of a database.
Smart sheet advance enables customers to configure and execute workflows between smart heat and other systems of record execute high volume processes and change management at scale and empowers it to centrally manage compliance and security across multiple smart she plans.
And work apps empowers business users to configure no code apps and share these curated solutions, while maintaining visibility and control for I T.
In Q2 with the launch of Smart sheet advance, we saw immediate resonance with prospects and customers signing over 100 deals that included advance. One example of a customer that expanded was mine cast mine cash enterprise PMO uses smart she to support objectives related to growth in digital transformation and with advance will now leverage smart.
She to optimize programs and processes outside of that PMO, including marketing operations channel partner Onboarding sales Rep, Onboarding and large customer account planning.
<unk> Cas considers this investments as a way to remove friction and accelerate the speed of deployment for future smart solutions that leverage premium capabilities.
In Q2, smart sheet advance influences significant expansion with a leading provider of equipment and services for data centers.
This customer's new product development and marketing departments are at the core of this enterprise wide deployments with.
With the advanced platforms premium capabilities, the customer will drive additional value and end to end cycle time improvements across critical parts of the business.
Smart heat advance is also resonating with customers outside the U S.
One example hit holds a large German container packaging manufacturer deploy smart sheet advance to increase productivity by doubling project capacity and to capitalize on growing ecommerce trends by providing visibility across complex ever evolving project needs a key selling point for the customers' adoption of advanced with the benefit of extending our platform to cat.
New use cases, and further simplifying the implementation process.
Beyond advance we continue to see customers using our platform at scale.
Data shuttle, which enables scheduled trip data transport between smart sheet and other systems of record processed over $8.0 billion records in the past 30 days growing close to 20% month over month proofing was used by customers to collaborate on the creation of digital content 370000 times in the first half of the year.
Renting year over year growth of over 350% cut.
Customers have created 40000 work absence, the launch without writing a single line of code and.
And customers leverage brand forward manage over 50 million digital assets as of Q2 at 200% increase year over year and content delivery views in Q2 averaged 1.4 billion per month.
And we continue to innovate for our customers and launched new capabilities to support our global and non U S. Customers' data privacy compliance requirements, we will announce the availability of smart heat regions this quarter.
The first region located in Frankfurt, Germany enables customers to instantiate smart heat plans in region and does not require any customer content to be shared or routed through our U S region.
In the wake of changing regulations and heightened awareness on this subject. Our recent research indicates that enterprise buyers are increasingly sensitive to fully not partially solving for data residency.
We look forward to announcing the availability of additional smart heat regions in the coming quarters.
Our partner ecosystem continues to thrive as well in Q2, we launched integration with hub spot, making it even easier for customers to enable bidirectional realtime sync of data between hub spot and smart sheet.
And we also expanded our partnership with meal soft with meal Sops connector for smart sheet customers can manage a variety of business processes ranging from sales pipelines to events schedules.
In addition to technology partners, our channel partner program is ramping well, we now have 650 channel partners and in Q2 partner influence bookings grew 93% year over year.
Okay.
I'm proud of the way our growing team continues to execute across the many dimensions of the business around the world people are choosing smart heat for simple to sophisticated use case, whether mobilizing a team of creators or scaling a data intensive workflow with embedded calculations or reporting on data from disparate internal systems and they do that at enterprise scale.
Using a no code interface that every single person can engage with.
In the near future everyone using your computer at a desk a device in the field or a combination thereof will interact with Cwm's software every day as the category leader pursuing one of the largest available tamsin software and coming off our record Q2 performance. We are confident in our approach and will maintain a forward leaning investment posture to.
To drive results for our customers shareholders and team.
Now, let me turn the call over to Pete to provide some additional detail on our financials.
Thank you Mark and good afternoon, everyone as Mark mentioned Q2 was another strong quarter.
Q2 outperformance relative to our guidance was a function of strong execution by our sales team significant enterprise expansion a.
A record number of larger deals.
And early success of our advanced offering.
We have now surpassed pre COVID-19 levels across most aspects of our business.
I will now go through our financial results for Q2.
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 and presentation that was posted before the call.
As previously mentioned second quarter revenue came in at $138.0 million up 44% year over year.
Subscription revenue was $122.0 million representing year over year growth of 45%.
Our momentum as reflected by the sequential increase in subscription revenue of $14.0 million.
The highest quarterly sequential increase in the company's history.
Services revenue was $16.0 million.
Representing year over year growth of 40%.
Turning to billings second quarter billings came in strong at $151.0 million representing.
Representing year over year growth of 47%.
Approximately 91% of our subscription billings were annual with 6% monthly.
Quarterly semi annual and multiyear billings represented over 3% of the total.
Moving on to our reported metrics the number of customers with <unk> over $50000 grew 64% year over year to 1856, and the number of customers with <unk> over $100000 Skus grew 73% year over year to $55.0
These customer segments, now represent 50% and 36% respectively of totally IRR.
Next our domain average ECB grew 42% year over year to $5915. We ended the quarter with the dollar based net retention rate of 128%.
Three percentage point improvement from Q1.
The full churn rate dropped further and is now below 6%.
As a reminder, in Q3, we will lap the brand further acquisition, which will result in a one to two point headwind on our dollar based net retention rate.
Inclusive of this headwind, we believe we will exit the year with the dollar based net retention rate above 128%.
Now turning back to the financials. Our total gross margin was 82% two percentage points higher than the previous quarter.
Our Q2 subscription gross margin was 87% also two percentage points higher than the previous quarter.
We continue to expect our gross margin for fiscal year 'twenty two to be between 160%.
Overall operating loss in the quarter was negative $7.0 million or 4% of revenue an improvement from 8% of revenue a year ago.
This margin improvement was a function of scale across our sales and marketing and R&D lines inherent in our model.
Free cash flow was negative $8.0 million.
Which over achieved against our guidance due to strong collections.
Now, let me move on to guidance for the third quarter of fiscal year 'twenty. Two we expect revenue to be in the range of $138 million to $139 million billings to be in the range of 140, $1890.0 million non-GAAP operating loss to be in the range of $15 million to $12 million.
And non-GAAP net loss per share to be between 12, and 10 cents based on weighted average shares outstanding of $126 million.
Our net free cash flow is expected to be in the range of negative 17 to negative $15 million.
Given our.
Our strong Q2 results and the continued momentum we see in our business, we are raising our full year fiscal year 'twenty to revenue and billings guidance.
We now expect our revenue to be in the range of $530 million to $533 million.
Representing growth of 37% to 38%.
Billings to be in the range of $619 million to $622 million representing.
Representing growth of 37% to 38%.
We expect non-GAAP operating loss to be in the range of $55 to $45 million.
And non-GAAP net loss per share to be between 44 and.
<unk> 36 for the year based on approximately 125 million weighted average shares outstanding.
Our free cash flow margin expectation in fiscal year 'twenty, two is to be between negative 6% and negative 4%.
To conclude we were pleased with this quarter in several fronts among them. The residents of our dynamic work platform offering that is apparent by our early success with advance our billings outperformance, which indicates a strong demand environment in the quarter across segments and geographies and enter.
Apprise traction evidenced by the record number of expansion greater than $100000.
The sequential increase in customers with IRR of over $1 million.
Yes.
We see a big opportunity in front of us and are investing behind the signal.
Now, let me turn it back to the operator for questions operator.
Yes.
As a reminder to ask a question you will need to press star one on your telephone.
Withdraw your question press the pound key.
By while we compile the Q&A roster.
Okay.
And your first question is from the line of Brent Thill with Jefferies.
Good afternoon, Mark just on large enterprise I'm curious if you could spend a little time drilling in on the traction Youre seeing and also I know Pete mentioned, it's early on in advance.
Type of impact does that have any and then Pete adequate follow up.
Hey, Brent it's yeah, it's really a combination of seeing growth on two dimensions. The first is on the seat dimension people enrolling more people on the platform. The second is elevating what theyre doing with the platform and I think advance is giving people a really nice composite offering where they can do everything from scaling a certain process.
Implementing better in import routines from legacy system. These are things that are.
I think fairly different than what I would say sort of transactional work management, which may be sort of team task coordination and event planning and I think what advances doing it's giving people a much faster way to access the entire suite of the entire suite of offerings.
And for Pete just.
47% billings down to low <unk> on the guide many will ask why <unk>.
<unk>.
Maybe just bridge whats happening in Q3, and I know, there's some one time M&A that's perhaps.
Having some impact can you just.
Walk through that the discipline.
Why perhaps that's maybe not as to the areas.
As it looks.
Sure Brad this is Pete.
Comparison points on a quarter by quarter represent different economic reality the comp in the first half as compared to a COVID-19 impacted base in the second half represents a recovery starting to have a recovery from that base. That's one part of it the second part of it is in the first half of fiscal year.
'twenty one we had no brand further in the bank.
Now in terms of your specific question about Q3.
You'll recall in Q3 of fiscal year 'twenty, one we had a $11.0 million, one time acquired deferred revenue pickup, which when you sort of put into our guidance are factored into our guidance would make our guidance about a 38% 39% year on year growth.
Great. Thank you.
And your next question is from the line of Mark Murphy with J P. Morgan.
Hello. Thank you very much this pendulum on behalf of Mark Congrats on the quarter guys.
One question.
It has been a few quarters now since you launched bridge what has been the uptake of that product. So far in terms of feedback are you seeing a lot of customers build kind of a cross functional workflow automation such that small changes, becoming more deeply embedded into the business processes is that part of the enterprise traction as well that youre seeing.
Yes.
<unk> it.
You really have to think about it across all of our connectors not just bridge. So it's a combination of bridge data shuttle and then our purpose built connectors and those are included in our advance offering.
And so with that availability of bridging those other connectors we are seeing.
Significant increase in the number of workflows and the amount of data being transfer between spark sheet and other systems of record.
And importantly, it's enabling us to connect to both other cloud or SaaS offerings as well as a significant number of on Prem legacy systems and so many of the solutions that we see out there today or are where customers are pulling data from multiple sources into smart sheet to manage a work for our process.
So we believe that definitely.
Embeds us into the core workflow of the organization.
Really great example of that is we have a leading sportswear manufacturer that's actually using data shuttle to pull.
Data in two smart sheep from multiple legacy systems to manage product lifecycle management of their sportswear offerings and so it helps them manage inventory logistics and actually make better decisions about when to change out and recycle water products.
Understood just to double click a little bit the two expansions that you talked about over $1 million I think you said.
Is that if you think about between seats and other offerings capability based offering how do you how does that mix looked at $1 million sequentially is that more driven by seats or more driven by some of these other products.
I think it will be notable to speak to us out of our top 10 deals this quarter seven of them contained advance.
So these are all these are all hybrid deals where he of seed consumption as well as capabilities consumption, but I think that's probably the best marker to point to.
Understood. Thank you.
Okay.
Oh.
And the next question is from the line of Kerry tailwind with curious securities.
Hey, guys. This is Scott our Bachelor I'll on for Terry Thanks for taking my questions and congrats on the quarter I just wanted to go back and talk about the international wins, we had.
Quickly so one of the things that we were kind of curious about was.
You mentioned there is some different use cases between maybe the U S and international markets. What were those use cases that you could maybe expand expand there.
Conor this is Pete the use cases, we see internationally a very consistent there as the same kinds of use cases, we see in the U S play out internationally as well we saw that demand vector play out as strong internationally as it was domestic.
Perfect and then just one quick follow up so as you continue to land. Some some bigger deals seven figure and above are there any changes in linearity for forecasting in terms of these larger deals and how should we think about those.
Does going forward. Thank you.
So I think we are closing larger transactions at the <unk>, what you should expect in the back half is.
As these transactions grow we'll start to see a larger wait for Q4 and you can start to see in enterprise software seasonality play out.
Great. Thank you.
And your next question is from the line of Scott Berg with Needham.
Everyone. This is John Godin on for Scott Berg and I. Appreciate you, taking my questions and congrats on the quarter.
Just curious you know given that the market is very much still in its early stages.
Coming out of the pandemic are you guys starting to see customers seeking more to standardize on <unk>.
<unk> solution versus multiple.
PWM vendors any color there would be helpful.
Yes, we still see a huge opportunity, which is which we consider greenfield when we look at when we consider direct competition competitors in category, we're talking very low teens like 10%, 12% of our opportunities we would consider quote contested.
So the vast majority of our not so when we think about transactional use cases, there are so many teams individuals within businesses that it's quite common in those scenarios where team might choose a different solution, where we see less sort of diversity is when it elevates within an organization and it is asked to.
Formally approved so that would mean it making sure that we have consistency and policy, making sure that its aligned with the authentication mechanisms all of those pieces, that's where we are seeing.
Make a decision for one however, I would say those numbers of opportunities are still quite few as people as the market is forming and we were talking low single digit percentage of an available Tam that's been penetrated we do expect that to change over time and one of the reasons. We've invested so heavily on the enterprise dimension.
Okay.
Great. Thank you guys very much.
And your next question is from the line of George <unk> with Oppenheimer.
Thank you for taking my question Mark just following up on those competitive.
Answer that you just gave Dave do you see very many head to head.
Contested deals right now or is the majority of the opportunity is still green Greenfield.
And when are you displacing what tools are you displacing.
But as I said about roughly 10%.
Deal you would you would hear of another competitor early or not named.
Sort of status quo.
As you move up the ladder in terms of simplification of what the customer is expecting that number falls precipitously.
So again, if you're looking for basic use cases cast tracking team coordination.
We're going to see more players there and as you move up whether it's on the dimension of combining work management with digital asset management the brand Fuller smart he'd combo, there just aren't a lot of options in market for that so you see almost no competition there.
And in terms of the companies that are that are being displaced.
Think of think of certain markets that are maybe considered legacy like the traditional ppm providers. The plan views of the world I think there's a really need opportunity to take significant share in markets like that and the team's done a great job of getting US ranked number one in the ppm G to.
Our ranking recently, so we see really need opportunity there to also to take share.
Okay and then.
The new customer generation continues to be.
Pretty solid.
How do you feel about that going forward how are your partners contributing there and do you expect the incremental leverage now that mark sheet region.
Got it would be available.
Yes.
Yes, I think this is gene as we called out on the call, we're seeing a nice uptick in partner contribution to overall.
Our our growth.
And I think that we are we are absolutely looking at how we can <unk>.
Support customers to land more often and discover what's possible with smart sheet and then as they learn what they're capable of graduate and move up to a higher level.
Deployments and capabilities and so we think it's important to vote.
Continue to land pretty aggressively as well as drive the expansion motion I think regions will be a nice.
Way for us to reach markets, where data residency has been a concern for customers, particularly when you look at markets like Germany, where.
The regulatory environment makes it really challenging for local companies to host and manage all of their their information in the United States and so we see the launch of our first region in Frankfurt.
As the unlock for us and there'll be more to come.
Thank you.
And your next question is from the line of Keith Bachman with BMO.
Hi, Thank you I had two questions if I could.
The first is I wanted to try to understand how youre thinking about your longer term.
It targets, including free cash flow, which you've previously given.
How do you think about the path to realizing those targets of call. It 20 plus percent.
Margins at a time when both yourself and your competitors are growing very fast but.
None of which are generating positive free cash flow or are generating positive operating income how do you think about the growth.
Trying to realize those targets or how should investors thinking about that and then I have a follow up if I could.
So Keith this is beat the guidance, we gave them the total revenue was.
In fiscal year 'twenty, three 'twenty five we'd get to $1 billion of full year revenue, we expect that to be in the back half of the year.
When we get to that we expect that to be an FY 'twenty five so when we get to that number. We believe our model is capable of generating free cash flow at scale. So that's kind of the statement. We've made we think it's completely possible and to invest in the meantime, as we get there. So we're sort of taking advantage of all the opportunity.
Is to invest and the huge Tam that's ahead of us.
Okay. Okay.
Let me jump to my second question, though is your average.
<unk> per customer is still growing very rapidly 40, 42% year over year.
And yet it still represents a relatively small for us.
<unk>.
Spend so to speak for your average client base what are the main sources of friction that you see to keep growing that number over the next 12 months and what are the main strategies and tactics that were taken.
To keep growing that average <unk> CV per customer if not accelerating.
Yes.
We've grown I think north of 40% for quite a few quarters in a row now.
We're feeling a lot of friction on that with.
With the advance with the advanced introduction really making it easier for customer for.
For customers to understand what's available to them and then give them a very straightforward mechanism for engaging with US I think there is I mean, it's one of the reasons why you see 158% growth rate on the over $100000 deals.
It's landing with customers right now and we serve tens of thousands of organizations today. So our job is.
To really understand to make sure that our customers understand what their pathway is and as we think about improving both the entry point into our platform as well as the presentation of the full suite I think it's a lot on us to how do we really product market that extremely well, but I think the.
Roy on some of these implementations is so high we're not seeing sort of challenge in terms of well we're not sure. There is value here, it's more helping people quit coexist among their CRM investments the ERP investments and there are other integration platforms that they have.
So, but we're very pleased with the progress.
Okay alright, thank you.
And your next question is from the line of John <unk> with William Blair.
Yes, Thank you and congrats on the results.
Mark maybe one for you I'd love to understand the role that advance is playing in new customer acquisitions, and if thats a part of the conversation at all.
New customers are if it tends to be more of an expansion point as customers graduate from that transactional use case to the more transformational deployments that you talked about.
I think one of the really neat observations from the first quarter was that we had more advanced sales within our commercial quota carrying rep group than we had in our large enterprise. So the message of advanced resonates all up and down this all up and down the spectrum.
And what we're finding is as customers are assessing which company.
Go to go to market with they are in which to buy theyre, saying what are my immediate needs and then if I'm successful what is going to be asked of me in six months a year a year or two years out and I think the understanding of advanced in the presentation of advance not just from a capability standpoint, but from a governance and an it security dimension that is something that is key.
Up more and more and more so even if someone's already in the first month to say, Okay. I wanted to have full control center data shuttle full integration with Salesforce, it's important for them to know that because they don't want to do is paint themselves into a corner and say Oh My gosh, we have tremendous success with 200 people and were collaborating really well and then find out that they hit a roadblock with some type.
Of it.
Requirement.
So it is part of almost every one of our discussions now and we have enough confidence in the pathway to not have to force someone into advanced out of the gate is like we've all witnessed since the beginning it's been around the earned enterprise.
Sell someone with a need you will educate them on what's available and then you will support them throughout that journey.
And that is what we're now starting to see accelerate.
Wonderful that's it's very helpful.
And then Pete maybe one for you just on the guidance I think we saw.
Almost 20 million dollar increase to both revenue and billings for the full year I don't know I don't think we've seen that level of.
The rays before can you maybe just walk us through what Youre seeing for August and the pipeline that gives you the confidence to raise guidance on meaningfully.
Arjun you know as we've looked at the quarter. We were really pleased to see some really strong demand signals emerge. The first one was on the transactional business, which we consider sub 50, which came back to pre COVID-19 levels.
It was in the number of transactions that came through as well as the cycle time to close those deals so positive and therefore.
The second thing we saw was the greater than 100, K deals, which we consider large deals those grew 158% year on year, So really strong momentum there as well.
Then the last signal, which was very meaningful to US was the first quarter out of the gate with our advanced pricing and packaging. We saw that gained traction after being announced in June we booked over 100 deals and it was in seven of our top 10 transactions. So that's the confidence that we are seeing as we build our guide.
And revenue and billings that we've shared with you.
Wonderful thank you very much.
And your next question is from the line of Steve Enders with Keybanc.
Great. Thanks for thanks for taking the question here just wanted to touch a little bit more on the strength that youre seeing and is in the 100 day deals at $2 million.
Deals.
When I get a better sense for kind of what you think the biggest drivers are but then within that part of the market do you think its improved execution within your sales team or.
Is there something fundamentally that's changed in the market.
For the past over the past year now.
It is helping to drive and support this.
I think what we're observing is when we thought about how we were going to Orient, our offering with advance we always talked about customers customers customers how are they going to perceive it how can they understand it and then after talking about customers. So much we said hey isn't the sales can be a huge benefit for our sales team.
So as youre hiring ups.
Uptick ing I think 30% more quota carrying reps the impact of having a more easily understood offering with value statements has a massive impact and I think we are at the beginning of that and we are hiring very assertively throughout this year, but again that combination of both great for customer much better for that new Onboarding sales Rep is.
Well and I would say again, both on the commercial dimension and large enterprise.
Okay, that's great to hear and just I guess follow up on that.
Good to hear that the continued sales execution and hires there, but how are we thinking about the channel opportunity in health and having that augment.
That go to market motion and how does the channel I guess kind of changing the types of customers and the opportunities that you're bringing.
Bring it in here now.
I think what we are.
<unk> is that the channel is not just about who brings leads to you. It's about who can who can also provide expertise in certain areas and solutions that youre trying to solve for so if you have someone who's steeped in manufacturing steeped in healthcare steeped in technology best practices those can be super additive to your to your sales business. So when we talk about.
The 93% year on year increase it is both a combination of people, bringing us deals and also assisting on deals. So I think that hybrid go to market of smart sheet team combined with partnering field who's the trusted source already we see that is actually a very significant portion of that what we call the channel business.
Okay perfect. Thanks for taking my questions.
And your next question is from the line of Michael <unk> with Wells Fargo.
Hi, This is Michael Berg on for Michael churn I wanted to kind of piggyback on some of the last few questions along the success in large enterprises. When you think about both the impact of the.
The channel as well as advance how can we quantify maybe the increase in <unk> for some of those other partner led deals or deals with advance obviously theres a 710 largest.
Transactions in the quarter, our metrics. So I'm just kind of curious how to put some more color around that.
So I think when we look at advance it's a driver of it as a sign that somebody is making a more substantive advance investment in the platform.
We do we do expect that all advanced transactions will be north of five K right. So everything that you have is going to be accretive to that to that measure in terms of when partners are involved I think partners are often very well suited to have larger solution discussions. They may know the business more deeply they may.
No what that business is looking to software, which I think lends itself really well to a more against substantive solution that they are that they are presenting very often those larger solution recommendations require the strength in the platform that advanced better advance offers I would say if youre looking to sell.
A very significant solutions, it's probably going to be more than seats. It's one of the key indicators that we see when somebody is really looking to do something again beyond that transactional work management work.
Yes, I think in terms of I think it's a.
I think we will keep it there in terms of additional texture about we're very pleased to see that the growth.
We'll continue to be shaped by or just flat out usage and then also the suite offering that we've been speaking about.
Very helpful. Thank you very much and a quick follow up.
When you think about your business longer term, obviously you've stated.
Sizable tam, but with lots of Greenfield with a technologically speaking.
We keep hearing RPI is coming into the workflow automation type use cases, how can you talk about your platform in either using RPI or coming up against that potentially competitively just dramatically as it pertains to the smart shoe business.
Yeah, Hi, Michael This is Jim and I would say that today, we really see <unk> as being a complement to where we are I mean RK.
<unk> vendors are moving beyond just trying to automate kind of rote process and starting to move more into orchestration and you saw us I think last quarter, we announced.
Our integration with you Ipass and we're seeing the ability to engage with customers as they think about their whole software suite and really think about what are the workflows.
Maybe we'll originating RPI and then move over into smart sheet.
To engage with their teams and it's really not a <unk>.
And either or it's really a both from what we've seen.
And I think that's part of why we're building bridges, there and alliances because we hear that signal from customers that it's being part of that strategic software stack really requires you to be able to interact with <unk> and the other big systems of record whether it be ERP or your HR systems and so that's what we're building for.
If I could add one pieces I think one of the hallmarks of our category also is it provides the interface.
The platform that it only the platform that processes, it's the interface that people configure and and actually utilize to update that information and trigger events.
That interface takes years and years to develop and tuned to get aligned with the user preference.
And I think Thats, one thing that will keep our category very relevant as people are looking to solve.
And your next question is from the line of Oh, Hey, Galeria with RBC.
Wonderful. Thanks, Thanks, so much for taking my questions guys nice to see continued improvement in here first.
First I'd like to actually start exactly on that so so by all metrics business continues to improve.
To get a sense of how much of the acceleration and improvement in the underlying metrics. So far is just a recovery.
Some of the headwinds, stating that we saw during during the pandemic SMB coming back versus factors longer term secular tailwind things like work turning more being more hybrid turning more asynchronous in nature have those tailwind started to show up in the business or have those you know you really yet to play out and then I've got a follow up.
Everybody I really feel like we've surpassed where we were heading into COVID-19.
It's really refreshing to see in the offering has changed right I think people's fluency around what they need and what is possible has fundamentally changed over the last 18 months.
So this is not about getting back to where they were this is I think people are in a much stronger position today to make informed calls.
Pete anything to add.
I think what I would say is universe, starting to see that recovery go beyond where we would COVID-19 times and you can see that in the metrics, whether it's the transaction of the volumes, where do you see that in the cycle times Youre seeing that in Spain. So I think you're starting to see that and I think as it relates to the.
Rvs systemic beneficiary of it I think that's a longer term question, but clearly over the last 12 or 18 months the fluency with the space has gone up and Youre seeing that in transactional volumes.
Okay, Great. That's helpful and then Pete for you on the billing side.
It looks like there was a big uptick.
The mix of billings that are that are annual kind of.
Actually higher than even it was pre COVID-19 I know during the pandemic. There was some talk of customers wanting to go to shoulder duration deals right go monthly.
Versus the annual deals can you talk a little bit more about that mix or are you seeing more willingness to sign upfront annual deals versus that monthly or what's going on there and how should we be thinking about the billings mix going forward. Thanks.
I think Rishi D. If you looked at the mix we had the head.
Think of the pandemic, we saw a little bit more from the monthly sort of plans, we signed place but since then we've been probably consistent in the amount of a new plant it might vary a little bit by 1% plus or minus and that's kind of the trend we're seeing.
Okay wonderful. Thank you so much guys.
And your next question is from the line of Tyler Radke with Citi.
Hey, good afternoon. Thanks for taking my question you talked a lot about data residency this call and just really wanted to expand on that topic, a little bit just give us a sense for how significant of a breakthrough that capability was and maybe why.
Wasn't released earlier, just give us a sense for maybe some some pent up demand that you could see internationally.
From from Rolling this feature out.
Yes, Tyler this is gene.
The real unlock for us in data residency was transition we completed last year to public cloud.
We really needed to move our infrastructure into the public cloud to enable.
The ability to extend to different regions around the world and so the first region in the area, where we've seen the most customer interest has been in.
The EU and specifically resins residency requirements in Germany.
And that really became an unlock for us after we completed that cloud transition, we do here significant customer.
Feedback around the need to have a local resident.
They are having their smart data being in country.
For a broad set of use cases, and it doesn't mean that we don't get adoption in the EU today, but.
But we definitely believe there will be a lot less friction.
Once we have that unlock.
And Germany in particular, there are a number of data regulations that prevent certain types of data to be stored outside of the country you have a similar scenario in.
EMEA, Australia for example, any government.
Customers have a requirement that all of their data would be in.
In resident as well our in country as well and so we see it as a natural extension and as.
In the coming quarters will have more to talk about the things we're doing to expand our footprint and grow internationally and we believe Archie regions are going to be a key contributor to that strategy.
Great.
To ask a follow up just on the guidance certainly.
Most metrics revenue billings were raised but I look at operating income.
You outperformed by over $10 million in the quarter relative to your guide, but despite the raise in revenue it looks like you're keeping your full year operating guide.
The same so I was just curious if that's timing related.
I think most companies we've seen just in terms of the budget for teeny, returning and return to offices.
He has to get pushed out, but just any color on kind.
Kind of where that incremental spend is coming from thank you.
So we are investing aggressively in an opportunity. We see ahead of us so all of the over performance or Delta as we apply into the investment capital.
And that's been the thesis of our of how we've operated.
That's kind of what youre seeing across the board, we are committed to the $55 to $45 million and often income that we've guided to and we're investing to delta and negative the negative.
Thank you.
Once again, ladies and gentlemen, if you would like to ask a question. Please press Star then the number one on your telephone keypad again that is star one.
And your next question is from the line of Alan Falkowski with Wolfe Research.
Hey, there thanks for taking my question.
Wanted to ask how was the linearity in the quarter, how does it compare to prior periods as well in terms of how the pipeline progress is there anything in there that could be exciting from an upside perspective, such as federal activity going forward.
And I've got a quick follow up.
So the linearity we saw in the quarter was very consistent with the previous quarter. So no real change there I think in general we were pleased with how the pipeline converted both in quarter generated pipeline as well as pipeline before the start of the quarter, we had similar metrics across the region and segment it seemed very consistent.
Got it and you had also mentioned that gross churn is getting better could you talk about what is necessarily driving that is that a result of the market or what you're pursuing and how much better can it get.
<unk>.
So we saw gross churn improve and the prepared remarks, we said it dropped below 6% I think we're seeing two elements drive that the first one is yes.
A year ago, we were hearing a lot more about COVID-19. The number of mentions in Covid and all of our accounts has gone down significantly which is the first item and then the second item is we're seeing that our platform. The new UI, we launched it very engaging and customers are really resonating with what the UI does for them and we believe.
That's a contributor to seeing a lower level of churn.
Yeah.
And there are no further questions. Mr. Turner do you have any closing remarks.
Great. Thanks, Tabitha. Thank you. Thank you everyone.
For joining us today, and we will speak with you again next quarter.
Yes.
This concludes today's conference call. Thank you for participating you may now disconnect.
[music].
Okay.
[music].
Okay.
Okay.
Okay.
Yes.
[music].
Yes.
Yes.
Yes.
[music].
Yes.
Yes.
[music].
Sure.
Yes.
[music].
Yes.
[music].
Yes.
[music].
Yes.
Yes.
Okay.
Yes.
[music].
Okay.
Yes.
Okay.
Okay.
Yes.
Yes.
Okay.
Yes.
[music].
Okay.
Yeah.
Okay.
[music].
Yes.
Yes.
[music].
Sure.
Okay.
Okay.
[music].
Okay.
Sure.
Okay.
Yes.
[music].
Yes.
Please.
Yes.
Sure.
Okay.
Okay.
[music].
Okay.
[music].
Yes.
[music].
Yes.
[music].