Good day. Thank you for standing by. Welcome to the Smartsheet first quarter fiscal 2022 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. If you would like to ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Aaron Turner, Head of Investor Relations. Thank you. Please go ahead. Thank you, Mike. Good afternoon, and welcome everyone to Smartsheet's first quarter of fiscal year 2022 earnings call. We will be discussing the results announced in our press release issued after the market closed today. With me today are Smartsheet's CEO, Mark Mader, and our CFO, Pete Godbole. Our Chief Strategy and Product Officer, 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's a slide presentation that accompanies Pete'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 the federal securities laws. We have based these forward-looking statements largely on our current expectations and projections about future events, financial trends, and our expectations around the impact of COVID-19 on our business. 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 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. 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 you, Aaron. Thanks everyone for joining us today for our first-quarter earnings call. I want to start off by thanking our customers, whose belief in our vision motivates us, and our team members, who inspire me every day with their drive and dedication. Q1 was a strong quarter. Revenue grew 37% to $117.1 million. Billings grew 48% to $132.8 million, and our dollar-based net retention rate improved by 2 points to 125%. We ended the quarter with over 8.5 million users. In Q1, our average domain annualized contract value, or ACV, grew 41% year-over-year to $5,461, and expansion within our base included 305 companies increasing their annual recurring revenue, or ARR, by more than $25,000, up from 173 companies in Q1 of last year, 116 increasing their ARR by more than $50,000, up from 51 in Q1 of last year, and 29 increasing their ARR by more than $100,000, up from 15 in Q1 of last year. We also continue to see strong growth within enterprises, including UnitedHealth, Amazon, Home Depot, McDonald's, Netflix, CrowdStrike, Meditech, Stanford University, Hewlett- Packard, Peloton, VMware, Rivian Automotive, California Department of Transportation, Verizon, AbbVie, Arc'teryx, Cardinal Health, Under Armour, Vertiv, Sony Pictures, Comcast, Workday, United Natural Foods, Dexcom, Airbus, Intuit, AstraZeneca, Disney, Roche, TBS, Saint Jude Children's Research Hospital, Honeywell, Kaiser Permanente, Sage Group, Google, Booz Allen Hamilton, United Therapeutics, Equinix, Stanley Black & Decker, Charter Communications, HubSpot, Bed Bath & Beyond, VF Corp, McGraw Hill, F5, BlackRock, and Salesforce.com, to name a few. Our enterprise customer deployments demonstrate Smartsheet's momentum in serving the strategic needs of those customers. Enterprise customers demand and deserve capability-rich platforms that can scale to support mission-critical workflows while also meeting their requirements for advanced security and administration. With the Smartsheet platform, customers can manage execution and change at scale, run workflows across disparate systems, and bundle these enterprise-wide workflows into curated experience to support a broad range of use cases that cross departments and functions. We deliver this while also providing customers with the security, compliance, manageability, control, and trust that they expect from their enterprise partners. Over the course of this fiscal year, we will continue to invest in our offerings, executing on a platform strategy that delivers even more value for our customers. This is something that we are well-positioned to do based on our 15 years of operating experience, 15 years that have yielded thousands of insights and a deep understanding of the enterprise. We've taken this unique experience and perspective to evolve the Smartsheet platform and our vision for the future. Q1 was also a strong quarter for our government business, with expansions coming from agencies such as the GSA, NASA, the U.S. Department of Veterans Affairs, the Department of Commerce, the U.S. Department of Health and Human Services, and the Department of Defense. NASA's Jet Propulsion Laboratory deployed Smartsheet to support its Mars Perseverance Rover, choosing our platform for the scheduling and tracking of the 2,700 parts and 17,500 machining operations moving across 18 departments. With Smartsheet, this NASA team deploys process flows to drive efficiency, Kanban systems to streamline customer communications and resource allocation, as well as dashboards for management visibility of the frequent changes in priority involved with such a significant endeavor. Notably, NASA's flow of manufacturing data is supported by an integrated workflow connecting Smartsheet to other key systems like Oracle ERP and Power BI. Since day one, customers have relied on Smartsheet to empower individuals and enable teams to not simply get work done, but to reimagine and transform how work gets done. Today, that means customers are able to rapidly build new solutions that benefit the whole organization and enable them to do their best work, like managing corporate OKRs at Intuit, or delivering an end-to-end marketing solution at Snap. As a category-leading software company, we paid attention, we listened, and we've improved our solution to solve even bigger challenges. In fact, this year, we're evolving the design of Smartsheet to offer a cleaner, more modern, and accessible look, further simplifying the entire user experience. We've also introduced WorkApps, Smartsheet's no-code platform for building intuitive web and mobile apps, which further amplifies the power and usability of solutions our customers are creating on the platform every day. Many enterprise customer solutions that previously required resource-intensive development or modifications to costly legacy systems can now be quickly and efficiently solved using Smartsheet. Customers choose Smartsheet for our ability to deliver at scale, respond to and deliver on change, manage workflows across systems, and build a curated experience to solve strategic business problems. Uber uses Smartsheet across critical business units, including facilities, real estate, engineering, legal, and marketing. By employing WorkApps, Uber's performance marketing organization has been able to clarify and standardize team processes. In addition, the streamlined user experience that WorkApps provides has made it easier than ever for these teams to locate their priorities and take action. As we touched on last quarter, we've also taken a new approach to packaging to make it even easier for companies to acquire and deploy Smartsheet's premium capabilities at enterprise scale. We call this Smartsheet Advance. Smartsheet Advance responds to the demands of our growing customers by combining the ability to scale easily across departments and functions with access to premium capabilities that solve high-value business problems. The business receives robust no-code tools to automate workflows across systems, align global teams, and build scalable solutions, while giving IT the control to manage risk and maintain compliance. From skills-based resource and content management to core systems integrations, Smartsheet Advance is enterprise-ready, IT-endorsed, and built to unlock the true power of business, its people. Initial customer reaction to Smartsheet Advance has been very positive. Recently, Smartsheet Advance drove our expansion with a regional academic health system with over 13,000 employees and 1,500 doctors that serves a population of 1.9 million across New England. Over the past year, departments including QA, pharmacy, finance, M&A, and IT have used Smartsheet to improve process efficiencies and automate manual efforts. With Smartsheet Advance, this medical center's IT PMO will continue to leverage their Smartsheet investment to help manage the significant system implementation projects that have resulted from organic growth and acquisitions. We plan to provide additional details on Smartsheet Advance at our ENGAGE conference on June 8th. To be the enterprise CWM platform of choice, Smartsheet is focused on building meaningful integrations that integrate critical systems that most organizations depend on to deliver and differentiate their work. In May, we further bolstered our enterprise offering with a new McAfee integration, a product partnership that leverages McAfee's cloud security platform to provide threat detection and to comply with data loss prevention policies. As Smartsheet's customer base continues to expand within regulated industries, the need for insight into specific risk-related activities and data input is paramount. Customers need a way to identify and flag sensitive data across their entire Smartsheet environment in an easy and intuitive manner to help find and remediate sensitive data violations. Integrating with tools like McAfee provides assurance to our customers, including CIOs and IT leaders, that their Smartsheet environments are secure and in compliance. In closing, we've started the year off with strong momentum and a clear vision for our growth ahead. Now let me turn the call over to Pete to provide additional details on our financial results. Pete? Thank you, Mark, and good afternoon, everyone. We entered 2021 with continued momentum. Our Q1 outperformance relative to our guidance was a function of solid sales execution, large deal volume, and a demand environment that has been approaching pre-COVID levels. Many of the pressures we saw last year are dissipating. For example, relative to Q1 of last year, our sales cycle lengths have shortened, pipeline conversion has improved, and we saw significant growth in deals of all sizes. Another important milestone to call out, as disclosed in our 10-K filed after our last earnings call, all SOX material weaknesses were remediated as of the end of fiscal year 2021. I will now go through our financial results for Q1. 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 the presentation that was posted before the call. As previously mentioned, first-quarter revenue came in at $117.1 million, up 37% year-over-year. Subscription revenue was $108 million, representing year-over-year growth of 40%. Services revenue was $9.1 million, representing year-over-year growth of 9%. Turning to billings. First quarter billings came in strong at $132.8 million, representing year-over-year growth of 48%. Approximately 88% of our subscription billings were annual, with over 7% monthly. Quarterly, semi-annual, and multi-year billings represented over 4% of the total. Moving on to our reported metrics. We now have 12,655 customers paying us $5,000 or more per year, 1,674 paying $50,000 or more per year, and 661 now paying us $100,000 or more per year. These customer segments now represent 83%, 48%, and 33% respectively of total ARR. Next, our domain average ACV, Annualized Contract Value, grew 41% year-over-year to $5,461. We ended the quarter with a dollar-based net retention rate of 125%, a two percentage point improvement from Q4. The full churn rate improved further and now rounds down to 6%. Through the remainder of the year, we expect our dollar-based net retention rate to trend moderately higher. Turning back to the financials. Our total gross margin was 80%, one percentage point lower than the previous quarter due to a lower professional services gross margin. Our Q1 subscription gross margin was 85%, in line with the previous quarter. We continue to expect our gross margin for fiscal year 2022 to be between 79% and 81%. Overall operating loss in the quarter was - $12 million or 10% of revenue, an improvement from 16% of revenue a year ago. This margin improvement was a function of scale across our sales and marketing line inherent in our model. Free cash flow was - $8.2 million, which overachieved against our guidance. Let me move on to guidance. For the second quarter of fiscal year 2022, we expect revenue to be in the range of $125 million-$126 million, billing to be in the range of $133 million-$134 million, non-GAAP operating loss to be in the range of $18 million-$16 million, and non-GAAP net loss per share to be between $0.14 and $0.13 based on weighted average shares outstanding of 125 million. Our net free cash flow is expected to be in the range of negative $7 million to negative $5 million. Given our strong Q1 results and continued momentum in the business, we are raising our full year 2022 revenue and billing guidance. We now expect revenue to be in the range of $510 million-$515 million, representing growth of 32%-34%. Billings are expected to be in the range of $599 million-$604 million, representing growth of 33%-34%. We expect non-GAAP operating loss to be in the range of $55 million-$45 million and non-GAAP net loss per share to be between $0.44 and $0.36 for the year based on approximately 125 million weighted average shares outstanding. Our free cash flow margin expectation in fiscal year 2022 is to be between -6% and -4%. Consistent with Q4, this quarter has exemplified the strength in customer signal manifested in billings growth. This signal is about empowerment of work execution by users with enterprise-grade extensibility. This quarter saw excellent enterprise traction in larger deals with bigger volumes and saw early resonance with our Smartsheet Advance offering and the curation of workflows via WorkApps. We continue to see significant opportunities to invest behind this signal while managing the cash burn effectively. Let me turn it back to the operator for questions. Operator? At this time, I'd like to remind everyone, in order to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. We'll pause for a moment to compile the Q&A roster. Your first question comes from Mark Murphy from JPMorgan. Yes, thank you very much. Congrats on a very strong result and guidance. Mark, the list of enterprise logos you rattled off at the start is pretty spectacular, from Amazon to Home Depot to Verizon to Airbus. You mentioned what sounded like a handful of huge government agencies that you had done business with on top of that. How are you feeling about that depth of penetration there in the enterprise? I guess I'm just wondering, when we consider that list of customers, are you actually finding relatively less competition upmarket than you see whenever you're down at the SMB level? I think where we find ourselves in the journey, Mark, is we're still early in the journey, and we have now 15 customers paying us over $1 million, seeing increased value. I think that flight group that's coming up right behind them is indicative of us, our messaging landing, and them seeing value in what we're building. Most of these companies still represent massive opportunity for us to deliver more value to them. The things that I look for is continued penetration into the Fortune 100 and the Fortune 500. Those numbers continue to go up, where we almost have full coverage now, and now our job is to present value and deliver. We're really pleased to see it. When we highlight a handful of customers, it's in the context of thousands of customers that expanded with us in a quarter. Those happen to be some familiar names. The list is long beyond that as well. Okay. If I may, a quick follow-up, maybe for Pete. We had noticed, I think it was last month, that you had commissioned a survey, and it showed 71% of technology decision-makers are rethinking their decisions around workforce technologies. I guess my question is, are you sensing that somehow in the pipeline and with the billing strength? Are you sensing that companies decide on a hybrid workforce and then in tandem with that, they see that as a reason to use Smartsheet more broadly? Mark, this is Pete. As I look at what you asked, we would describe our pipeline for this quarter as being very strong. We found that the number of deals we did was larger. The conversion rates we found were stronger. What exactly the drivers are is hard to piecemeal out, but we definitely saw traction this quarter in how this played out. Yeah, Mark, let me add one comment to what you asked in terms of what we see at scale. I think the number of people who can offer the controls and security and the functional scale elements, that's something that we built over the last few years. When you're at that level, there are really hard requirements that you need to have as sort of pass go. I think we're really fortunate in that we believe we're the leaders there, and the innovation keeps happening fast and furiously. We have ENGAGE coming up on June 8th. We're releasing a bunch of stuff that's going to be super relevant to those super large environments. I think what's interesting about Smartsheet Advance, it's not just for the super large. It's how do you enable those growing companies who are not super large yet to capitalize on all that innovation? I think Smartsheet Advance is going to be a really interesting offering to cater to both smaller growth companies as well as those who are very established already. Excellent. Thank you very much. Your next question comes from DJ Hynes from Canaccord. Hey, thanks, guys. A great quarter. Maybe, Mark, just building off that last comment on Smartsheet Advance, just given the momentum with larger customers, maybe a slight shift towards more strategic bundled sales, do you see the composition of your sales force changing at all? Who you're hiring? Just curious how you feel like your staff to take on that kind of selling. We continue to have real diversity in that group. I think when you have the way we organize is across a commercial business. We have a large enterprise business. We see appetite for these solutions across both of those areas. I would say that as we look to fully capitalize on the opportunity with super large, hiring in the large enterprise space is very important to us. The areas that we're focusing on now is not just creating product and pitching product, but also helping people understand the journey of how you go from starting out with CWM to actually scaling with it. That is not just a selling motion. That is also a services motion, really almost a consulting advisory role in helping people hit those different stages at the right time with the right tools. This is not a self-directed go on your own and hope it works type approach. I think that's what we're getting really dialed in right now. Yeah, that makes sense. Maybe I could follow up with just a very big picture question. Look, obviously there's another vendor in the space going through an IPO process now. I think a lot of investors are contemplating competitive differentiation in the space, and you hit on some of this. Since it's a conversation I'm having a lot, maybe I could just throw it to you. What would you highlight as the two or three key areas where you think Smartsheet is really differentiated in the market? Yeah. DJ, this is Gene Farrell. I'll take this one. For us, as Mark and Pete both have talked about in their prior remarks and their answers, we've been very focused on being the enterprise leader in the CWM space, and we really feel like our ability to execute project, program, process, workflow at scale and across a diverse set of departments and use cases that really can support the entire enterprise is really a key part of our differentiation. I think that doesn't mean we don't continue to serve teams and small departments and smaller companies really well to help them be more effective in driving work. For us, it's really about having that ability to scale and then do it securely and with compliance. Very helpful. Thank you, guys. Congrats. Your next question comes from Stan Zlotsky from Morgan Stanley. Perfect. Thank you so much, guys. I wanted to go back to that very impressive list of logos that Mark, you mentioned at the very beginning. Maybe help us to contextualize just the scale of the new logo acquisition and especially these large logo acquisitions that you're seeing on the platform now versus what you were seeing, obviously, through 2020, it was challenged. What are you seeing from as far as just large logo lands now versus maybe one year ago? Well, I think as we've shared in previous quarters, when you serve the vast majority of companies in a certain segment, like the Fortune 500, for example, it's really not about landing more logos, it's about serving them more fully. Again, when you look at those mega caps, you look at diversifying into new departments and adding more value, so it's almost more like departmental lands as opposed to logo lands. That's really our runbook in terms of how we're diversifying, how we're looking for virality within companies, and how we coach and enable those mobilizers. That's really our primary runbook. I think logo lands, in terms of those next generation of mega caps, we target very carefully in terms of where we spend our capital, on who we try to bring to the platform, try and identify those fast growers and get them to choose us early. We feel good about how that's going as well. Got it. That makes a ton of sense. Maybe a question for Pete, just on the back of the core selling motion for Smartsheet is all about landing with your departmental deals and then expanding within them, and certainly sounds like the expand motion is really upticking very, very nicely with net revenue retention going up to 125%. How should we be thinking about net revenue retention as we go forward through the rest of the year? Do we think that there's a chance that maybe back half of this year or maybe into FY 2023 that we start to get back to pre-pandemic levels as far as net revenue retention? Stan, we're really pleased with where our net dollar retention rate came out for the quarter. It's the first quarter where the net retention rate has gone up quarter-over-quarter. That being said, as I stated in my prepared remarks, we expect that to trend up moderately as we go through the year, and that includes the fact that there's potentially a headwind in Q3 as we bring on Brandfolder, which will be lapping its first year of about one to two points. We expect that to grow through the year. Got it. Thank you. Your next question comes from Alex Zukin from Wolfe Research. Hey, guys. Thanks for taking the question. I'll start with, it's kind of the same question, but maybe a little bit different depending on the segment. Take us into what you're seeing right now in those sales cycles around why. Is it as simple as the pandemic kind of created a pause that has now become more clear in terms of the strategy these companies are taking with respect to their approach to the new way of working, or is it something you've found that's really working now post-pandemic in the sales cycle, both at the enterprise level, but then also on the federal side? This is a vertical we've talked about a lot, and you guys are, I think, much further ahead than some of your competitors getting traction here. Has this kind of unlocked, in a sense? Because we're hearing Federal has meaningfully quickened their pace of digitization over the past few months and even quarters, and it seems like that's coming to bear and coming to fruition from your results. Wanted to get more color on those two aspects. Yeah, I think in terms of last year, Alex, I would class it as expansion rates went from extremely robust to robust as opposed to a pause. They were still very favorable. Business continued to expand. It was really good to see in the last quarter across the major industries we serve, see acceleration in the expansion rate, tick up similar to our net dollar retention. I would say the clarity around, and confidence that people have in investing in technology, that seems to have improved. Again, it was not moving from a standstill. It was moving from already moving to something to be at a higher rate. I would say what's also helpful is when you have the ability to present to people a more cohesive story as to how they can derive value from something, they tend to buy more, as opposed to having to navigate 20 premium capabilities when you can say, "Okay, here's choose one of three paths, and here are the benefits, and here's how quickly you can move," it's easier for people. I think it's as much as market condition as it is to the inputs we're providing. I think on the government side, it remains a small but growing part of our business. What I was happy to see is the diversification in who was buying. It wasn't just an agency or two. We saw diversification or diversity across some of the non-military agencies in our first DoD transaction, which was on the backs of our IL4 authorization recently. Again, I think the table's setting up nicely there for continued growth. We're committed to that market, and that's been a multi-year investment, and I would expect that to hit new heights this year. Perfect. Pete, maybe just as a follow-up. First, congratulations on getting rid of those material weaknesses in kind of the 10-K, the disclosure that you gave. I wanted to ask, given the strength in billings, given the commentary in terms of the renewal base from last year, how should we think about billing seasonality as we go this year? You gave the full year number. Was there anything, either one time or an item to consider as we kind of look at our models for the balance of the year with respect to billings that we should take into account? As in my prepared remarks, as I stated, I've given you guidance for this quarter and for the full year. The only thing that I would tell you is the seasonality that you've seen historically has changed. We don't have seasonality that we can predictably count on, which is historical, that you carry forward. The only thing I would tell you is in Q3, we acquired Brandfolder, and you'll remember that as a part of the billings pick-up in Q3, there was one-time deferred revenue billings that we got, which won't repeat again in Q3 of this year. Perfect. Thank you, guys. Congrats on a great quarter. Thanks, Alex. Your next question comes from Rishi Jaluria from RBC. Hey, guys. Thanks so much for taking my questions. Wanted to start with going back to large customers and again, Mark, very impressive list of new logos and expansions. Pete, last quarter, you gave us some really interesting data points on the penetration rates and opportunity within large customers, and I think you talked 10K+ employees. Obviously, won't ask for an update on that every quarter, but can you maybe give us a sense for what progress you're starting to see with some of the initiatives that you laid out last quarter to grow the opportunity within those customers? I've got a follow-up. Rishi, as I mentioned last time, our investment was slated into what I call three areas, and one of them hits the 10,000 employee customers. It was about adding sales capacity. We have added sales capacity as we planned to for Q1, focused on all elements of enterprise sales team and across all our other sales teams. That goes to quota-carrying capacity. We've also invested in resources that support those sales teams, including people who help with the customer outcomes and journey part of that conversation. We've invested in those two on the sales and go-to-market side of it. Additionally, we've also invested in product capabilities, and those investments are progressing, where we're continuing to widen the competitive moat, as Mark described, in the things where we're just completely differentiated from our competition. We're making excellent progress on all elements of what I articulated last quarter. Got it. Thanks. That's helpful. Wanted to go to just a comment that was in the deck, which is around the ramping headcount in services. Putting margin implications aside, can you maybe talk a little bit about I guess what's driving that increase in services headcount? Are there certain areas that you want to focus on, or is this primarily just services, or it was running hot, and you're trying to get it back to a normal level? Thanks. Rishi, the simple answer to that is we finished Q4, as you remember, with a very sort of significant billings number, and that translates into just pure demand and needing to fulfill that demand. Hiring headcount on the services side is a way to fulfill that demand, and this quarter was about ramping that headcount. We're seeing broad-based demand, which was not only in Q4 but in Q1 as well, as I noted in my prepared remarks. All right, wonderful. Thank you so much. No problem, Rishi. Your next question comes from Arjun Bhatia from William Blair. Yes, perfect. Thank you for taking my questions, and congrats on the quarter. Mark, I wanted to ask about WorkApps a little bit. I think you gave some pretty impressive adoption metrics last quarter. In light of the enterprise strength that you're now starting to see, I would just be curious to know if this is playing a role in the conversation with your enterprise customers at all, or is it still too early to tell? How should we just think about the monetization that might result from WorkApps adoption? Yeah, I'll let Gene speak to that. I guess the one comment I would start with is it's an element, and it's an important element, but it by no means is the only thing that's driving it. I'll have Gene speak to how it coincides with Smartsheet Advance as well. Yeah. Arjun, the way to think about WorkApps is it really is the ability for a business user not having to rely on IT to build more curated app experiences, whether that be on desktop or mobile. What we're seeing, we launched in mid-January, what we're seeing is early signals from customers is they really love the ability to package a workflow into a complete app-like experience and bring in both elements of the Smartsheet platform as well as elements of third-party platforms, whether that be a dashboard from Tableau or a Google Doc into that overall experience. It really is at the solution level is where they're seeing the most value, and we're seeing continued enthusiasm and adoption as customers are understanding, building, and then starting to deploy solutions. We have a number of things in the roadmap that are going to enable our customers to actually scale that even more broadly through integration with Control Center and other new capabilities that we're hearing feedback from customers on. Importantly, WorkApps is that enabling technology that combined with Smartsheet Advance, which is really the premium capabilities that enable the workflow and consistency at scale, change management at scale, connecting workflows across systems, and not just in a data synchronization way, but also with things like data validation and more complex workflows across those systems via a Bridge. The launch of Data Shuttle, which we recently announced, which gives you the ability to both upload and offload data between Smartsheet and other big systems. Those capabilities included in Advance, combined with WorkApps really give us a pretty broad canvas to build solutions for customers across a really broad set of use cases. To speak to your [crosstalk] monetization question, the thing I would just add there is the way that Smartsheet Advance is designed, it's really designed to eliminate friction as customers grow and expand with us. Over time, as the number of users that they have using the platform increases, the cost of Advance goes up in connection with those connected users. Perfect. That's very helpful. If I can follow up on Rishi's question around the services business. Obviously, as you go deeper into the enterprise with WorkApps and Advance and a lot of these more sophisticated capabilities that you're building, I'd just be curious how you think the role of your partners changes over time, and would love to hear just where you are today in developing that partner ecosystem, especially for those larger enterprise customers that may want some more consultative services as they deploy Smartsheet. I think one of the things that Pete highlighted was with this demand wave that started in Q4 and that's continued, it's been an amazing opportunity for us to get our 600 partners activated. When we think about delivery, we don't think about just Smartsheet delivering standalone. We think about an opportunity to bring those people within the family and deliver alongside of us, seeding many of those services companies. In some cases, those are on our services contracts. We are paying them a very good rate, and we're seeding that knowledge within those teams, which then can go out and deliver standalone. We do have other partners like Slalom, who are developing capabilities where we fully expect them to be able to deliver high-value, large-scale deployments on Smartsheet. I think this demand, and my any concern in terms of tightening margins on services is muted by the fact that we're enabling those partners. I think next year, we're going to be in a very favorable position. We're going to have hundreds of partners delivering on our behalf. Perfect. Thank you, and congrats again. Thanks. Your next question comes from Scott Berg from Needham. Hi, everyone. Congrats on a fantastic quarter here. I guess I have two questions. First of all, don't know who wants to take this, but on the enterprise strength and I guess general upsell strength, we saw the net revenue retention obviously tick up two points. If you look at the company historically, most of that movement was around seat expansions as you penetrated your customers more. Mark, you spent a lot of time on some of the new modules and did some early adoption there. If we look out two or three years, how does that net revenue retention or upsell of the customer shift from all what was mainly seat-driven before to something that's more of a mix of module-driven along with seat-driven? I think it's going to be a blend, Scott. I think what we're not doing is putting a quota on ourselves saying we must adhere to a certain amount coming from users, a certain amount coming from capabilities. Listen to the customer, see where they assign value. The approach that we've taken to scaling WorkApps and monetizing is different from how we have licensed users in the past based on customer signal. I think we will continue to monitor it. I fully expect us to continue to growing the capabilities elements further. I think when you start introducing things like 10,000 ft and Brandfolder, and you have those elements selling alongside, those are big tailwind opportunities for diversifying the revenue streams. It's, again, early days on Smartsheet Advance, and we'll be able to more fully report on that in coming quarters. If I look at the income statement in the quarter, your sequential increase in sales and marketing is the largest in the company's history, excluding conference impact in prior third quarters. How should we view that increase in spend? It's about $6.5 million. If we were to break that up, how much of that is headcount versus maybe new marketing programs that you're targeting today? Thank you. Scott, you should think of this as sequential, first of all. It's a seasonal element of how these dollars come out. In Q1, typically, there's a fair number of expenses which are quarter-related. I think you would see that over time, you're going to see the headcount parts of this increase because sales and marketing is quota-driven. A large part of that's going to happen. We're going to see associated demand gen spend, which is going to make, as you think about this, sales and marketing as a percent of revenue climb as we go through the year. Excellent. I'll jump in the queue. Thanks again. Your next question comes from Brent Thill from Jefferies. Hey, guys. It's Joe on for Brent. Really appreciate the question. Mark, it was an interesting point you made on the McAfee integrations. I'm just curious if recent security breaches and concerns about third-party security postures have spurred an upsell to some of the tiers that include the access controls and governance capabilities, and if you view that as a competitive differentiator against some of your peers? I think some of these elements are relatively new to the portfolio. I would expect this to be an increasing frequency of conversation, as you noted, based on what's happening in market. Some of these things are difficult to respond to quickly. Again, in terms of things we got right, a few years ago when we started investing in these areas, it's put us in a strong position to have a really strong engagement when security and that high IT bar is presented to us to have to clear. As someone who's been with the business for over 15 years now, I remember vividly when, especially some of the institutions in the financial realm, were quite tentative in terms of adopting SaaS. Now that some of these controls and security measures are in place, we're starting to see movement. That's a really great sign to see those very critical companies giving us a passing grade and moving forward. That's awesome to hear. Pete, maybe just a quick one for you. Any sense of what Brandfolder contributed billings-wise in the quarter? We were just pleased with our Brandfolder performance. We're not breaking out Brandfolder because we've generally done that for the first year of acquisition, but in general, really pleased with Brandfolder's performance. Okay. Was it higher or lower than in 4Q? In general, I think Brandfolder did really well, and I would say it exceeded plan. In line with a lot of our other businesses, I said we were sort of reporting a really strong quarter, and it was consistent with that kind of a performance. Awesome. Appreciate the help, guys. Your next question comes from Michael Turrin from Wells Fargo Securities. Hey there. Thanks, and good afternoon. The 50k customer adds really stands out, as does the list of expansions previously referenced Mark went through on the call. Not going to ask you to read through all those again, but the strength certainly seems unique for a Q1. Just wondering if there's anything you can add around what drove that uptick. The Q2 billings guide calls for roughly flattish growth versus Q1, and so I'm just wondering if there's anything abnormal in the strength you saw here to call out that informs that sequential outlook, or if there's just maybe some conservatism in the Q2 outlook as well. Thank you. Michael, I'll start with the billings guide. Just as a recap, when we started the year, our year-on-year growth for Q1 represented approximately, call it 30%-31% year-on-year growth. Based on our guide for Q2, we're calling it 37%-38% year-on-year growth. The reason we see this confidence is because of what I stated in my prepared remarks for Q1, larger number of deals in the pipeline, shorter cycle times to close, and just a general strength across all what I call customer sizes and transactions. That's the way we're seeing it, and what we're also sort of emphasizing is when you look at the annual guide on billings, we've actually raised that in excess of the beat, and that's because we see this confidence parlaying through the rest of the year. For the second part of it, I'll let Mark take that one. Yeah, on the customer expansion side, it's really a continuation of what we saw in Q4. I think as we talked about last year, how our sales teams started to present value to people when people really were far more demanding in terms of being able to articulate the value that one derives from doing CWM implementations. I think the performance in Q1 is that we have multiple quarters now under our belts where we're talking and presenting in that way. Again, as I said quarters ago, I think that never goes out of favor. Now when you have confidence growing in business combined with the presentation of value, that leads to better things. I think there was nothing out of the ordinary. We've had thousands of customers expanding every quarter for the last few quarters. We simply shared some of those names with you today. It's all helpful. Thank you. Yeah. Your next question comes from Steven Enders from KeyBanc Capital Markets. All right, great. Thanks for taking my questions. I just wanted to check. I know the new UI has been out now for a couple of months, but I guess, have you seen any kind of early impact from that on the market, either driving better top-of-funnel conversion or driving existing customers to new use cases and quicker expansion there? Anything there would help. Yeah. Hi, Steve. I'll take this one. I would say that phase one has launched. We view the UI modernization is starting with a kind of a multi-phase approach over the course of this year, then will be ongoing. The biggest uptick we've seen has really been in engagement, user engagement, and overall kind of speed of learning and understanding the platform. I think we'll continue to see that as a net positive as we continue to make improvements and enhancements. That's really the big benefit that we've seen so far. Okay, great. I know you made a few acquisitions in the past couple of years, particularly focused on the marketing side and rolled out some newer modules there. I guess, what have you kind of seen as you go back into customers and try and drive them to the marketing department since you made those acquisitions? What kind of strength have you seen specifically for marketing use cases since these new products have been rolled out? I think you heard one of the examples in Mark's prepared remarks talking about Uber and using WorkApps in their marketing group. We've got countless other examples of customers that are using us for marketing use cases. As we have rolled out integrations with Brandfolder, improved integrations with 10,000 ft, we're seeing a lot of interest. It's obviously a very top-of-mind space. There's a lot of folks going after that segment, but we feel really good about our offering and the unique value that we can deliver combining Smartsheet and Brandfolder and 10,000 ft, and then a lot of capabilities we've added through proofing and content management and workflow. Okay, great. Thanks for taking my question. Your next question comes from Brett Knoblauch from Berenberg. Hi, guys. Thanks for taking my question. Maybe on the margin front, and I guess it goes to the revenue mix, how should we think about that panning out for the rest of the year? Should we assume services growth at a similar level to what we saw in this quarter and maybe reinvest incremental gross profits from higher subscription gross margins in the business? Brett, I think you've asked two questions. I'll try and answer both of them. One is about the outlook on margins. I'll start with that one first. We reported a quarter where we beat our op margin and our free cash flow guidance for the quarter. The quarter also gave us a lot of signals in terms of the size of the opportunity. We fully intend to invest based on our original guide for the year and take this amount we've overperformed and put it towards the investment capital we intended. That's one part of your question. The second part of your question was on services margin. I think you should see our services margin as we get through this initial period of ramping of headcount, start to approach where we've historically been, and that should take a few quarters to get through our ramp and utilization sort of new people and teams. Perfect. Thank you. Of course. Your next question comes from Terry Tillman from Truist. Hey, guys. This is Joe Meares for Terry. Thanks for taking the question. You've owned Brandfolder for a bit now. I'm just wondering, circling back to the question about how M&A has progressed and how that's helping you, how are you thinking about M&A going forward? What's your appetite? How's the pipeline? How do you feel about valuations right now? Joe, we acquired Brandfolder in, I guess it was the end of our third quarter of last year. We feel really good about the integration. We feel really good about the way the team's performing. We feel better and better about all of our acquisitions as we continue to see them come into our product offering and the synergy we get with customers. We feel really blessed there. I would say from a M&A going forward, we will continue to view M&A as both a lever to accelerate value delivery for customers, where we see key capabilities that enhance the utility we can deliver to customers and improve engagement or overall customer experience. We're also evaluating constantly and looking at are there more strategic M&A moves that we could make to accelerate growth in a more exponential way, I guess is the way I think about it, and create more of a step change. I would say that none of that is off the table. It's all of those things fit into how we think about our growth strategy over time. We also think that part of the value of M&A is ensuring both strategic fit and deals that make sense from a value perspective. The last part of your question, how do I feel about valuations? I think in some situations, there's great value to be had. In other situations, some of the multiples are pretty lofty right now, and you really have to be thoughtful and clear on what the combined entity is going to create for you long-term in order to really get comfortable with spending at those levels. I'm not signaling anything, just saying that's how we think about the landscape today. That you'll continue to see us be active. That's super helpful. Thanks, guys. Your last question comes from Boyoung Kim from Citigroup. Hi, this is Boyoung Kim for Tyler Radke. Just given the importance of advisory and consulting role that you mentioned for sales to both land large and drive upsell, how do you feel about the sales abilities for sales to execute in international markets, and how would you characterize sales productivity in international markets relative to what you've seen in more established U.S. markets? Yeah, I think one of the things that's a real attribute of this platform approach is that when you engage with someone initially in a comprehensive way, they become trained on how to deploy it. When we think about investing a services team with one of our large customers who's scaling with Smartsheet Advance, that team becomes operators. You don't have to go back to the services well every time you want to make a configuration or expand with another workflow. That's a big plus. As we think about international, we have a very good coverage on our partners today, and that's combining partner coverage with our 200 employees who are today based in the U.K. and Australia, and New Zealand. When we think about the seeds that have been planted, those have been planted over the next two years, and now it is really focusing on scaling. On June 8th, we will be introducing Smartsheet Regions, which will be the first of which outside of the U.S., which will be on the continent in Europe, is one of those things that further lets us unlock opportunity in those markets.. Smartsheet Regions plural, we don't anticipate ending with continental Europe. We will continue to go to other regions and pair that with our on-the-ground sales teams and services capacity. I think it is likely in international that we probably skew a little bit more towards partner as opposed to direct. Again, that will unfold more fully in the next year. Thank you. I will now turn the call back over to the presenters. Great. Thank you for joining us today, everyone. We'll speak to you again next quarter. This concludes today's conference call. Thank you for participating. You may now disconnect.