Smartsheet Inc Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Terry Tillman - Truist Securities - Analyst : Yeah. Hey, Mark, Pete and Aaron. Good to see the ongoing progress on the enterprise side of the business. My first question just relates to -- I know that it's FY26 when this is going to be instituted in terms of the new pricing and packaging for existing customers, but you've got a lot of new innovation. You've got a lot that you're going to announce that engage new experience, et cetera. Have you thought about potentially some of these existing enterprise customers going ahead and starting to leverage the new pricing ahead of time, just given you have a lot of reasons to be talking to them about capabilities and could that drive upside to ARR? And then the second question and less long-winded than the first one is, with this kind of new provisioning model for the administrators, do you potentially see some sales leverage as they can really turn this on themselves? Thank you.

Question: Josh Baer - Morgan Stanley - Analyst : Thanks. Wanted to stick on this topic of the new pricing model. Just hoping you could provide a little bit more context on the initial customer behavior around the new model. Any rule of thumb for how much of what you typically expect would just be the free users are now monetized? Any update on the assumptions around the benefit from pricing changes both this year or longer term from some of these initial usage here and just wondering how the price per paid seat is evolving under this new model?

Question: Josh Baer - Morgan Stanley - Analyst : Got it. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 8:30PM, SMAR.N - Q2 2025 Smartsheet Inc Earnings Call

Question: Jackson Ader - KeyBanc Capital Markets - Analyst : Great. Thanks for taking our questions. So some reports out about the company possibly being in play for an acquisition. I'm just curious if we can get your thoughts on those reports first.

Question: Jackson Ader - KeyBanc Capital Markets - Analyst : Yes, that's fair. I had to ask. Okay. So I guess a follow-up question is that the share repurchase program. Is the company still in the market acquire repurchasing shares in the -- I guess this is now the third fiscal quarter?

Question: Jackson Ader - KeyBanc Capital Markets - Analyst : All right. And then I'm sorry, if I can just squeeze one more in. On the AI capabilities like giving people access for the next couple of months, will there be any like gross margin impact to that where you're providing these capabilities? I assume that's going to draw on some compute resources, but not really recognizing any uplift in revenue.

Question: Jackson Ader - KeyBanc Capital Markets - Analyst : All right. Thank you very much.

Question: Alex Zukin - Wolfe Research - Analyst : Hey, guys, thanks for taking the question and congrats on a solid quarter here. Maybe just the two for me. I wanted to ask about just bookings linearity trends in the quarter, how it progressed? How it kind of ended up and how that compares to the prior quarter? And then just any thoughts about NRR trends through the second half and any comments about -- you made a couple of competition comments winning some bake-offs against other work management vendors. Curious if you could dive a little deeper there as well.

Question: Alex Zukin - Wolfe Research - Analyst : Just NRR trends for the second half. Do you expect it to be stable or further decline expanding?

Question: Alex Zukin - Wolfe Research - Analyst : Okay. And the genetic counselor competition -- yes, just a competition question. Double clicking on that a little bit what you saw in the quarter, both in the higher end of the market and then the lower end?

Question: Alex Zukin - Wolfe Research - Analyst : Perfect. Thanks, guys. Congrats.

Question: John DiFucci - Guggenheim Securities LLC - Analyst : Thank you. I have a question also on the new pricing. And the P times Q math works really nicely. But Mark, I think like we do expect the number of paid users to increase, which is logical. And I think you've said that they could double. Well, first of all, is that true? And then Mark or Pete, or both of you. I get that you're moving to industry standards for pricing. But if this math all works out, like at least a simple math in my head, customers would be paying more, and I'm not sure why they'd be eager to switch and frankly, not maybe even resisted and perhaps even threaten the leave. So is this sort of a logical question. And I just wonder how we should be thinking about this.

Question: John DiFucci - Guggenheim Securities LLC - Analyst : And that makes sense, Mark. But what exactly is that value? Are there new features and functionality? Are these things on the come relative to the old pricing? Or I mean, is that just the pricing model, right?

Question: John DiFucci - Guggenheim Securities LLC - Analyst : Got it. Okay. So the actual level of usage has gone up in a more sophisticated way. Got it. Thank you.

Question: Michael Berg - Wells Fargo Securities LLC - Analyst : Hi. Thanks for taking my question. I just had a quick one on the increase in churn. You mentioned from smaller customers, but I want to get some clarity if there's any other dynamics to point to in other segments of the market, whether it's mid-market, enterprise or any verticals in particular?

Question: Michael Berg - Wells Fargo Securities LLC - Analyst : Thank you. And then One quick follow-up. Anything new to point to in terms of paid users on the P times Q math with the new pricing model?

Question: Michael Berg - Wells Fargo Securities LLC - Analyst : Thank you.

Question: Michael Funk - Bank of America - Analyst : Yes, thank you for the questions. I think you mentioned it earlier, but can you reiterate what you're seeing like-for-like customer spend under the new model versus the previous model?

Question: Michael Funk - Bank of America - Analyst : Okay. Very helpful. And then the free trial, if you will, of AI through the end of December, what is the plan after that? How do you plan to engage with customers to move them forward with AI functionality, the monetization plan there?

Question: Michael Funk - Bank of America - Analyst : Okay, great. Thank you so much.

Question: George Michael Kurosawa - Citi - Analyst : Thanks for taking the question. This is George on for Steve. First one on the revenue guidance. Pete, you gave some helpful color in the services shifting over to partners about 0.5 point of revenue change there, which, by my quick math is like a $5 million to $6 million headwind. So is it right to think about your revenue guide, excluding that, would have been up somewhere in that ballpark?

Question: George Michael Kurosawa - Citi - Analyst : Okay. That's helpful. And then you guys continue to find really great leverage in the middle and cash generation. Maybe just a little more color on kind of like where you're finding those efficiencies? Are there any OpEx areas you're pulling back from and how we should think about margin going forward?

Question: George Michael Kurosawa - Citi - Analyst : Thanks for taking the questions.

Question: Brent Thill - Jefferies - Analyst : Mark, there's been a lot of questions about the health of the enterprise spend environment. I'm curious if you could give us your view. I know growth is slowly decelerating. It doesn't look like there's a massive deflection, but what you're seeing between enterprise, SMB, anything notable that you could highlight from a 40,000-foot view.

Question: Brent Thill - Jefferies - Analyst : And did you have any differences between SMB and enterprise? Was there a difference in growth or adoption? Or what was the sense downstream versus upstream?

Question: Keith Bachman - BMO Capital Markets - Analyst : Hi, thank you. Mark, in the introductory remarks, you commented that you thought next year would be a transformative year, and I'm really focusing on the word transformative. Maybe you want to talk a little bit about what you mean there? And we, as shareholders, how do you think we'll note it?

Question: Keith Bachman - BMO Capital Markets - Analyst : Right, right, right. Interesting. Okay. My follow-up question, one of the previous questions was asking about a press release or rumors in the market, and I understand you can't answer that question. What I want to pose is more philosophical question. Remember, you are on the Board, and you used the word transformative next year. But how would you sort of as a Board member, depict pros and cons or the friction, if you will, on selling the company at this juncture? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 8:30PM, SMAR.N - Q2 2025 Smartsheet Inc Earnings Call

Question: Keith Bachman - BMO Capital Markets - Analyst : Thank you.