Good day, and welcome to the Smartsheet third quarter fiscal 2024 earnings call. Today's call is being recorded, and I would now like to turn the conference over to Aaron Turner, Head of Investor Relations. Please go ahead. Thank you, Lisa. Good afternoon, and welcome everyone to Smartsheet's third quarter of fiscal year 2024 earnings call. We will be discussing the results announced in our press release issued after the market close today. With me today are Smartsheet's CEO, Mark Mader, and our CFO, Pete Godbole. Today's call is being webcast and will also be available for replay on our investor relations website at investors.smartsheet.com. There is a slide presentation that accompanies Pete's prepared remarks, which can be viewed in the event 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 and financial trends. These forward-looking statements are subject to a number of risks and other factors, including, but not limited to, those described in our SEC filings available on our investor relations website 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 or adversely, and/or 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 US GAAP financials, we will discuss certain non-GAAP financial measures. A reconciliation of the most directly comparable US 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, and good afternoon, everyone. Welcome to our third quarter earnings call for fiscal year 2024. Smartsheet revenue for the quarter exceeded our guidance and grew by 23% year-over-year to $246 million, and billings grew 22% year-over-year to $268.5 million. In Q3, we generated non-GAAP operating margins of 8% and free cash flow was $11.4 million. We ended the quarter with annual recurring revenue of $981 million and more than 13.9 million Smartsheet users. In Q3, 89 customers expanded their Smartsheet ARR by more than $100,000, and 256 companies expanded by over $50,000. Additionally, we now have 59 customers with ARR over $1 million, up from 40 a year ago. Our strength in the enterprise continued in Q3, with expansions at companies such as Cushman & Wakefield, Cintas Corporation, biotech company BeiGene and Commvault Systems, among others. Q3 was also a strong quarter for our suite of capabilities-based products. Similar to last quarter, capabilities were present in each of our top 10 expansions. Smartsheet Advance, which is our bundle of our capabilities, was included in 250 of our expansions in Q3. Advance played a key role in a multi-year, multi-million-dollar deal with a Fortune 500 specialty beverage company. Their expansion to Smartsheet Advance Gold will help support the company as it executes high-impact projects, including new product rollouts and associated equipment deployments, network upgrades, as well as new store openings and store improvements. In Q3, we also saw a significant expansion that included an upgrade to Advance Platinum at a major airline. For a number of years, Smartsheet has powered aspects of the carrier's flight ops, flight products, and tech ops units. Due to growing demand for Smartsheet from other departments, they decided to upgrade to a Smartsheet Advance. By implementing the Platinum tier of Smartsheet Advance, they were able to consolidate their licenses and bring them all under IT's purview to give these divisions access to all of our capabilities, such as Control Center, Dynamic View, and Bridge. This consolidation means that the airline has an opportunity to increase visibility into its IT spend and empower Smartsheet users as it brings greater efficiency to critical activities like Resource Management, maintenance, and scheduling. That resulted in a three-year commitment with a total contract value of $4.5 million and an opportunity to further scale Smartsheet across the organization. The ability to rapidly scale was also key to an $850,000 deal at one of the country's largest quick-service restaurant brands. The company is in the process of a multi-year transformation initiative and selected Smartsheet Control Center and Resource Management to help drive its global digital transformation and implement portfolio reporting on day-to-day and annual operating plan projects for the senior executive team. By using Smartsheet, the company has been able to enhance and simplify collaboration across over 30,000 locations, and in doing so, rendered a number of other applications obsolete. Another customer example relating to scale is the significant expansion at a global media and entertainment organization that was looking to streamline its tech stack. The company was already using Control Center to manage 14,000 projects and 12,000 workflows in Bridge to track and manage their portfolio of projects. Because that work went across its retail, events, theme parks, and publishing divisions, Smartsheet was well-positioned to win this consolidation. Going forward, the company will extend its use of Smartsheet to other initiatives, such as improved speed to market for technology projects, efficient headcount management, cost controls, and profit improvement initiatives. This expansion brought the company's ARR to over $4 million. On the product front in Q3, we introduced a new way for our customers to discover and use two of our premium capabilities without the need to first contact a Smartsheet rep or partner.... We believe empowering frictionless self-discovery of high-value Smartsheet capabilities will drive greater adoption of these premium offerings, and early results have been promising, with hundreds of trials started with just within the first few months. One of those trials occurred at a mid-cap biotech company and directly led to the purchase of Data Shuttle to migrate significant amounts of data into Smartsheet from legacy clinical storage systems. While the company's been a customer for years, it had never utilized a premium capability. Once discovering Data Shuttle, the company's clinical trial team launched automated workflows to import data they use to track the progress of its research on cancer and rare disease therapies. They found that it had a positive impact by allowing them to centralize, view, and manage data from these disparate sources. And their success with Data Shuttle has now led to interest in other premium capabilities. Over 40% of these deals in Q3 that were closed as a result of capability self-discovery were with customers buying a premium capability for the first time. We continue to make strides integrating AI across the Smartsheet platform. We now have approximately 50,000 enterprise users in early access to AI-powered skills that allow users to generate formulas and content directly in their sheets. Both these skills will be generally available later this quarter to enterprise customers. The feedback from early access users confirms that our AI features will help power enterprise processes and make it simple for any user to gain insight into the work being done across teams. These AI skills are helping customers achieve their desired outcomes even more rapidly with the Smartsheet platform. Additional AI-powered skills will roll out to eligible early adopters next month. We continue to invest internationally in response to increasing global demand. To support data, data residency requirement for our international customers, we launched a Smartsheet platform instance in Germany in 2021, and we will launch an instance in Australia next year. This new Smartsheet region will enable Australian customers to comply with important data residency requirements and offer them the flexibility to choose where they want their content to be hosted. We will be pursuing IRAP certification, ensuring that it will have the right policies and security controls to meet Australian government information security requirements. This enables Smartsheet to serve a growing regional customer base, including organizations and agencies with the most demanding governance and regulatory requirements. Q3 was also a productive quarter for our federal government business in the U.S., reaching some notable milestones. We signed a six-figure expansion at a large government agency, which brought its ARR up to $1.6 million. This agency uses Smartsheet for critical workflows, from purchase management to managing grant funding, to using Control Center to manage travel budgets and expense management across its multiple regional offices. Additionally, we now have a presence in all 15 U.S. cabinet-level departments and have two government agencies with ARR over $1 million. In closing, as we approach crossing the billion-dollar ARR milestone this quarter, we remain focused on both product innovation and customer value by continuing to execute as the user-preferred enterprise work management leader. Now, let me turn the call over to Pete. Thank you, Mark. We outperformed all aspects of our guidance in Q3. Similar to previous quarters, our enterprise business continues to perform well, which is reflected in the growth of our higher ARR customer cohort tiers and volume of large deals. We continue to see macro-related pressure on our higher velocity transactions and on our SMB customer segments. Given these pressures, we are maintaining our prudent approach to our Q4 and full-year guidance. I will now go through our financial results for the third quarter. 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. Third quarter revenue came in at $245.9 million, up 23% year-over-year. Subscription revenue was $232.5 million, representing year-over-year growth of 25%. Services revenue was $13.4 million. Revenue from capabilities made up 33% of subscription revenue. Turning to billings. Third quarter billings came in at $268.5 million, representing year-over-year growth of 22%. Approximately 94% of our subscription billings were annual, with about 3% monthly. Quarterly and semi-annual represented approximately 3% of the total. Moving on to our reported metrics. The number of customers with ACV over $50,000 grew 26% year-over-year to 3,719, and the number of customers with ACV over $100,000 grew 32% year-over-year to 1,779. These customer segments now represent 65% and 51%, respectively, of total ARR. The percentage of our ARR coming from customers with ACV over $5,000 is at 91%. Next, our median average ACV grew 16% year-over-year to $9,225. We ended the quarter with a dollar-based net retention rate, inclusive of all our customers, of 118%. The full churn rate was 4%. We expect to exit FY 2024 with a dollar-based net retention rate of around 116%. Now turning back to the financials. Our total gross margin was 84%. Our Q3 subscription gross margin was 87%. We expect our gross margin for FY 2024 to remain at or above 83%. Overall operating income in the quarter was $19.4 million or 8% of revenue. Free cash flow in the quarter was $11.4 million. Now let me move on to guidance. For the fourth quarter of FY 2024, we expect revenue to be in the range of $254 million-$256 million, and non-GAAP operating income to be in the range of $21 million-$23 million. We expect non-GAAP net income per share to be $0.17-$0.19, based on diluted weighted average shares outstanding of 140 million. For the full fiscal year 2024, we now expect revenue of $955 million-$957 million, representing growth of 25%. We expect services to be 6% of total revenue. We expect our non-GAAP operating income to be in the range of $82 million-$84 million, representing an operating margin of 9%, and non-GAAP net income per share to be $0.68 -$0.69 for the year, based on 138 million diluted weighted average shares outstanding. We expect our Q4 billings to be $339 million, bringing our FY 2024 billings growth guidance to 20%. This includes the impact of our decision to invest more in our partner network. That will include shifting more services delivery to this channel. The impact of this shift will be a reduction of around three million to billings in Q4. We are raising our free cash flow guidance for FY 2024 to $130 million. To conclude, we outperformed all aspects of our guidance in Q3 and are encouraged by the signals we are seeing from our incremental growth drivers, such as self-discovery of capabilities and the new AI features. Now, let me turn the call over to the operator. Operator? Thank you. If you would like to ask a question on the phone lines today, please press star one on your telephone keypad. If you would like to remove yourself from the queue, it is star one again. We'll take our first question from Scott Berg with Needham. Hi, everyone. Really nice quarter here. Thanks for taking my questions. I wanted to start on the, the billing side. You saw some acceleration in the growth quarter-over-quarter, speaks to some of the large deal environment there. But how do we think about kind of pipeline and demand trends going into Q4? Do they look kind of normal and similar from what you've seen in the last quarter or two, or do you see any changes either up or down from them? Thank you. Thanks, Scott. This is Pete. You know, as we've looked at the pipeline, we are seeing basically the same strength in enterprise continuing, continuing into Q4. Obviously, depends on the composition of deals and closing those deals. And what we're anticipating in Q4 is on the SMB expansion, the trend we saw in what I would call Q3, which was a degradation in the expansion rates, we're extending that out in a trended basis into Q4 as well. Got it. Helpful there. And then, from a follow-up perspective, your operating margins have trended lower the last couple of quarters. I know that's in line with guidance. Your sales and marketing expense is up a little relative to subscription growth rates that are down a little bit there. Is the higher sales and marketing expense all related to the partner enablement activities that you're going through, or is there some other increased costs there that we should be aware of? Thanks. I think when you think of the sales and marketing expense in Q3, and you look at that trend, remember, sales and marketing in Q3 is a function of the event we had in Q3, which was the Engage event. So that plays into that spending. And then there's, you know, what I call investments that we are making as needed in the right parts of the sales and marketing machinery. Got it. Helpful. Thanks for taking my questions, and congrats on the good quarter. Thanks, Scott. We'll take our next question from Michael Berg with Wells Fargo Securities. Hi, thanks for taking my question. I wanted to ask on the demand dynamics in a different way, anything to point to in the renewal environment outside the SMB vertical? Is it improving? How does it relate to the first half of the year, and how is it trending as we look into calendar 2024? Thank you. I think in general, our renewals are staying pretty strong. There's no big difference in environment that we've seen between the first half and the second half. But remember, our business is pretty well diversified across all verticals, so we get the benefit of that, but we're not seeing any big changes in the renewal environment. Helpful. And then one quick follow-up on capabilities. It's been in the 30, low-mid 30s for several quarters now, and seems to be a high-value proposition type of product. Maybe you can help us think about, is there anything preventing further incremental adoption of that, whether it be, you know, driving home the ROI equation, budget priorities, just macro and budget scrutiny? Just any way we can think about, how that adoption can accelerate? Thanks. ... I think when we look at, this is Mark. When we look at the various phases or elements of driving growth in this area, one of the big initiatives for us in the second half has been how do we get them more aware to people at the right time? So that was part of the self-discovery effort. One of the things that we can see in the next year, in the years out, is how do we not only increase discovery, but also how do we dramatically accelerate the transaction on those types of things? So, we see a future in which the entire portfolio is visible to people, can be utilized by people, and can also be transacted by people in a variety of methods, whether you speak with a partner, whether you speak with a direct rep, or whether you do that online. We continue to see that aperture opening. But the first phase of the game is how do you get it in front of people? I think we've made a really good progress in the second half on that. Helpful. Thank you. Thanks. Let's take our next question from Josh Baer with Morgan Stanley. Great, thank you. Wanted to follow up on capabilities, Mark. Just wondering, like, what percent of your customer base do you think capabilities can apply to? I think that the third of revenue is generated by only 6% of your customers. Just wondering, where that number can go. Yeah, I'm the eternal optimist on this one. I think this relates to every single person in our community. We have a wide portfolio. It has to do with being able to bring information and data into our system, with integrating our system, with visualizing our system, sharing our system. These are all things that virtually every person on our platform does. And I think when you reduce the cost of, and reduce the hurdle height on what it takes to experience, and give people multiple options on how to transact, at a very low cost, effective way to start, all the way up to really massive enterprise deployment, that penetration should go well into the double digits. I think over a five-year frame, I think our median customer should be buying capability from us. Really helpful. And then just wanted to dig in one more time on billings, Q3, Q4. Like, you did show some nice upside and acceleration in Q3 off of an easier compare. The comp gets easier yet again in Q4, but the guidance implies a little bit of decel, like, even adjusting for the shift in the partner. So anything else to call out between Q3 and Q4, or is kind of Q4 just embedding sort of the normal type of prudence and guidance? Thank you. So, Josh, you know, our approach this year has been very consistent. The performance every quarter, sort of irrespective of direction, hasn't materially changed our view of the year. Within a quarter, there's, you know, many reasons for variability. It's the timing of billing, it's the lumpiness of deals, it's seasonal variances, which tend to sort of offset over a full year term. We've provided commentary based on actual sort of data we see in the quarter, but we've been very constant in our view of the year. The way we see it is, you know, given our performance over the past two quarters, we like to set up in Q4 to hit our 20% full year billings guide. So that's the way we see it. Okay, great. Thanks, Pete. No problem. We'll take our next question from Jake Roberge with William Blair. Hey, thanks for taking the questions. Mark, now that you've had those AI solutions out in beta for a few months and in the hands of customers, what's been the early feedback on those? And are there any features that you're really seeing outsized demand for? You know, it's interesting, as I talk to peer CEOs who have launched AI features into the wild. I think what the market is seeing is that I think people are assigning higher value, but lower frequency, lower usage to some of these things. So when I look at a company saying, "Hey, we really assign value to the ability to generate configurations through advanced formulas or content generation," it's not something where we see this being hammered away at 10, 50, 100 x per day. We're seeing a configuration at our large domain, sort of a configuration being created daily. So it's not like every single user is using this all day long, but it's actually quite encouraging because people are utilizing it consistently. I think as the, as the surface area grows, not only from creating logic, but then having an assistant, and having the ability to do insights, and having the ability to find templates through an AI mechanism, I think that frequency will climb. I would say pretty consistently across the peers that I speak with, a lot of investments are out there, and I think the, the frequency of usage is probably a little bit lower than people had anticipated. When I look at the feedback we've received across favorable, neutral, or negative, almost exclusively neutral or positive, and that's a really good leading indicator that tells us, you know, continue to invest in this area. Heading into Q1 will be the first time where we have something available in our enterprise product, which can really be presented to a business user that they can associate to very cleanly. Like, in the past, very often, enterprise plans tie out to security features and things that IT and governance really values. This will be the first foray into giving the business user something that they can get excited about. So again, super early days. I'm really pleased to see the neutral or positive feedback on this, and it's like, it's the first inning of this game. Definitely the game is being pursued fully. ... Very helpful. And then I know a lot of the solutions are still in beta today and will obviously take some time to roll out, but just in terms of that timeline, what do you view as the kind of biggest product hurdles you have left before getting these solutions really GA and lies in the hands of customers and really starting that upsell motion? I think especially in this arena, there are two factors: one, for many people, this is their first time interacting with an AI experience, so the importance of being correct, giving the customer high confidence in that interaction, we care deeply about that. So as we think about leaving some of these things in the oven, if you will, for an extra month or two, we think it's a really smart move. So we're getting the first two skills out at the before the end of Q4. And I think with each of these skills, it's important to really understand what the feedback and interaction with that skill is, as opposed to doing a drag right and saying: Well, it worked well for the first three skills, let's just do that for the next five. I think you really have to prosecute these independent of one another. I think the other piece of this equation is what the posture of the buyer is. So when I look at some of our largest organizations, we have about 5,000 organizations in our early adopter program, spanning tens of thousands of users. There are some organizations, even with our approach to AI, which is unbelievably contained, like, we don't ship data across the boundary. Even in those situations, the, the procurement teams and security teams are taking extra care to really understand what their internal policies are. So we've actually had some of our largest clients who are taking an uber conservative approach, is that, "We will wait until it's out of EAP," as they're getting their internal controls defined. And I think a lot of customers are being very prudent in that approach. Great. Thanks for taking the questions. Yep. We'll take our next question from John DiFucci with Guggenheim. Thank you. I appreciate the prudence and guidance relative to the SMB expansion deterioration, Pete, but can you comment at all on the linearity in this quarter? And just give us any kind of read into how November and the beginning of December seem to be tracking. Yeah. So the first thing is we always have seasonality in the quarter. Our first month is the smallest compared to all three months. So as we went through the quarter, we did see what I call strength in the enterprise build up, and on the other side of that token, we did see the SMB expansions continue to be impacted by expansion pressures. We saw that trend in SMB expansion pressures continue into November, and on the enterprise side of it, November was per our expectations. So that's a little bit of the how the quarter played out. Okay. That's helpful. I guess, Mark, you mentioned the example in your prepared remarks on self-discovery of advanced features. Can you give us any metrics at all on how we should be thinking about that as far as traction moving forward? Hi, John. I think we'll probably provide more texture on that as we paint the picture for the upcoming year with our Q4 results. I mean, right now, we're looking at this contributing nearly $1 million of bookings in the quarter. It's a great green shoot. We have really positive feedback in terms of how people are seeing these things, but I would say still pretty early innings. We're talking about hundreds of trials with conversions, again, accumulating to a little less than $1 million. But I mean, I think with another quarter under our belt, we'll feel more confident and be able to frame that in the year ahead, for the year ahead. Great. And, listen, nice, nice job at ARR and Billings, too. I don't think a lot of people thought you guys would do this, but, nice job. Thanks, John. We'll take our next question from Steve Enders with Citi. Okay, great. Thanks for taking the question. I guess I want to ask about the international opportunity. I mean, good to see the expansion into Australia for data residency. But how are you thinking about, I guess, kind of broader international initiatives? And is there gonna be any kind of further, you know, go-to-market investments, you know, marketing campaigns, or partner build out to kind of go after that opportunity? Steve, this is Pete. So, you know, we think of international as a huge opportunity for us. It's 16% of our revenue, and clearly one of the areas we go after. But we think of it as a combination of all the changes we're making on the product with PLG and making it easier to have this product be found, be able to expand, all those things. On the other side, we're investing in the go-to-market capability as well, combined with how customers that we deal with would want their data to be treated. So think of it as go to market with data centers. So we'll continue to invest in the international dimension, but just like our business here, it's gonna take a while because customers with us start small, and then they expand with us. So that's the trajectory you should see. Okay, perfect. That's, that's helpful context. And then on the net retention, I think a little bit of a downtick, at least for how you're thinking about for the fiscal year guide. I guess anything to call out what's kind of the incremental difference there? And then I guess secondarily, how should we be thinking about, you know, where that could potentially bottom out at? Yeah. So Steve, you know, when we think of the net dollar retention rate, generally things were pretty much consistent between quarters. The only difference was the incremental SMB expansion, which is what you're seeing in the number we've laid out. That's included in there. Now, that's the first part, and the second part of what you asked for, what's the direction of this? You know, we've got a big Q4 to go, kind of go execute on, not just in terms of the total dollars we need to go through, but these green shoots that Mark talked about. You know, we wanna see how those play out. All of that, combined with the environment we see in Q4, will really inform what we think net dollar retention rate will look like in FY 2025. Okay, perfect. Thanks for taking the questions. No problem, Steve. We'll take our next question from Pinjalim Bora with JPMorgan. Oh, great. Congrats on the quarter, and thanks for taking the questions. Mark, can I ask you, based on your conversations with customers, how do you think kind of the enterprise budgets are getting set for 2024 so far? Do you think purse strings might open up a bit or not so much? I think it's largely a function of a provider's ability to connect to value and helping understand how they realize that value. I think, you know, and this, this goes back starting in a really pronounced way, probably three years ago, where the higher we got in an organization and the bigger, the bigger project we were talking with them about, the greater the need was to connect it to a prioritized pursuit that they had, and be able to articulate how they could, within a certain timeframe, realize that benefit. So when I think of where we're investing, not just from a product standpoint or a partner standpoint, but our articulation of how we deliver value, that is a direct tie into whether a purse string gets tighter or gets more loose. So, I think there are absolutely macro things that one needs to be aware of, but there are a whole litany of things that are within one's control that can help adjust that. Understood. Thank you. And one follow-up. How are you thinking about the sales capacity going into next year? Do you have the capacity for your plan? Do you expect to build capacity higher? And then how should we kind of think about that in context of potential margin improvement for next year? So Pinjalim, this is Pete. So when you think of sales capacity, and you think of needing sales capacity, you know, we think of it as we have a pretty well-trained team of sales professionals we've hired. We've continued to invest in making them capable. That's the effort we've been on for several quarters. We see the first sort of, the first shot as just the capacity and the productivity of those reps improving. That's the fundamental. Now, will we add, you know, resources as we enhance the sales process in specific roles? We will, but I don't think it'll be a huge drag on the margin. So as you look at, you know, FY 2025 and you look at margins, you know, we're not giving guidance on that yet, but the way I would describe it is, overall margins, you should see those continue to improve. What slope or gradient that improvement takes will be a function of what growth expectations we have. Understood. Very clear. Thank you. You're welcome, Pinjalim. We'll take the next question from Taylor McGinnis with UBS. Hi. Thanks so much for taking my question. Sorry, I wanted to press on billings again, but just one follow-up to one of the questions that was asked earlier. So Pete, I think you mentioned that there could be quarter variability in timing, which I know we all appreciate in billings, but just given the strength in Q3, did you see any renewals that pulled forward from Q4 into Q3? And then maybe you can talk about, like, the bookings linearity you're seeing so far and, you know, if that's trending to be more back-end loaded, and if that, you know, if there's any assumptions of that embedded in the guide? So Taylor, you know, there was nothing unusual in the quarter. Every quarter always has the normal pulls and pushes that happen, but nothing unusual this quarter that played out. I would go back and say, you know, we're seeing sort of bookings linearity being very consistent. There's no big trend to report out there. I'd say the only delta in bookings that we're seeing, which I called out a little bit, was on the SMB expansion side of it. So we're seeing some degradation that we had in Q3 on these expansions, and we're extending that trend forward into Q4, the assumption that that trend continues. Got it. That's really helpful. And one last one for me is. So appreciate that there can be timing and quarterly variability into billings, and sometimes that metric can be noisy. But I guess if you look on a trailing twelve, trailing twelve months, it's been growing somewhere in the low 20s, but ARR growth has been hanging in there and, you know, like the mid-20s, maybe low end of that. So just as we think about, you know, where what the underlying business is doing and the momentum you guys are seeing, when we look forward, any thoughts on, you know, which is the better leading indicator or how we think about, you know, the difference between these two metrics? I think when you think of billings and ARR, I think, you know, they both are different, but they both lead you to the same answer when you finish the year. They're pretty close, even if it's not an identical answer. So when I'm thinking about quarterly changes, I tend to rely more on, you know, ARR because it has a better sense of, the timing elements are a little less pronounced, but when you think of the full year, they're both the same. Great. Thanks so much. You're welcome, Taylor. We'll take our next question from Keith Bachman with Bank of Montreal. Hi, good evening. Thank you. I wanted to ask, two, two things that are related, and Pete, one's on micro and then a bigger picture, excuse me, question. On the micro, when you talk about- ... SMB, and you assume the degradation continues. But just to be clear, are you assuming it gets worse or just stays the same? And then for my follow-up question, I'll just ask them successfully. When you think about the GenAI opportunity, and I was out in Seattle for your customer event, seemed like a lot of excitement. Can it contribute to ARR growth and billings growth in what would be fiscal year end of January 2025? Do you see that actually being a contributing factor to potential growth, or is it still, you think, gonna be more discovery at that point? And Pete, anything else you want us to think about as we're building our models for FY 2025 from a demand perspective? You already addressed the margins, but anything else you want us to keep in mind, in advance of giving the formal guidance? Thank you. So, Keith, I'll answer your questions as you asked them. First question you had was on SMB expansions, and we are assuming that there is a continued degradation in Q4. So it, we have assumed it moderately worsens in Q4- Okay. taking that trend line. So that's the first part of it. The second part of your question on GenAI opportunity in the ARR assumptions in FY 2025. You know, it's a little early to call it out because, you know, we've got a few customers sitting in the EAP program. We've got good positive feedback. But I think after we get through another quarter of that feedback, and as we get ready to put this into what I call GA, I think we'll start to get a little bit of a sense of what that looks like. So I think it's a little early to call out. Okay. Anything else, Pete, that you want us to think about as we model the demand side in FY 2025? No, I think, you know, it's a little early to talk through 25, but nothing specific to call out at this time. Okay. Many thanks. Thanks, Keith. We'll take our next question from Terry Tillman with Truist. Yeah, good afternoon. Nice job on the earnings in the quarter, and the cash flow. One quick question I had, maybe Mark, first for you on self-discovery. I think you gave us a nugget there in terms of $1 million of bookings or billings, and you called it like an early green shoot. Just given the work you're doing there and all the trials you're doing there initially, I mean, do you expect that though, to ramp pretty notably from the $1 million level in 4Q? And how would that happen? Is it you just got to put more kind of seeds in the ground with more trials, or you're working through the flow of the existing trials, or maybe even add more capabilities in the self-discovery? And then I have a follow-up. Yeah, it's multifaceted, Terry. It's how do you not only serve up the capability to someone to utilize, but then how do you help prosecute that with the existing customer, right? It's moving it from being utilized to being transacted upon. And those are the motions that we're learning. So for these first deals that have closed, there are some things we're like, "Wow, we got that totally right." And we also found other things where we can further reduce the friction. And as we scale that from tens of thousands of people who've been exposed to it to well over a hundred thousand organizations, I would expect that friction to reduce. So I would be... I will bet the over on things continuing to improve in this camp. And, I think the other piece is as we look at getting more and more of the portfolio in, we're gonna have more at bats. So when an organization trials a capability, you have multiple opportunities to trial. It's not one organization, it's people within that organization. So even if you miss on the first opportunity with an individual at an organization, their neighbor can start trialing that capability. So it's a repeated opportunity to sell into an organization and deliver value. That's one of the things I really like about this opportunity. Got it. That's great to hear, and the betting on the over. My follow-up question, I don't know if this is for you or Pete, but in terms of the services, the partner enablement, we see where some of the billings are gonna go to partners, so it's explainable. I'm actually curious about sales enablement, so I'll build on this question. You know, over the last year, your million-dollar customers have expanded quite a bit, 59, that's a lot. You've got customers paying you $4 million. I think you mentioned on the quarterly call, I think you have bigger ones than that. To me, that starts to seem interesting to a partner ecosystem, whether it's GSIs and others. So I would like to hear more about how sales enablement and influencing new business is going with potential different types of partners. Thank you. Yeah, Terry, I really see two very, two very different elevations of partnering, and one is the broad base, the hundreds of partners who came to engage and wanted further clarity on what our intentions were to build our service line versus supporting them explicitly. That's a really exciting growth opportunity, both in the States as well as in, in countries which are partner-first oriented. I view that as very different than our go-to-market motion with the GSIs, and many of whom are huge customers of ours. How we go to market with them is both as a customer, as well as getting Smartsheet utilized as they deliver their services to their clients. So it's really a multi-pronged relationship where we serve them as a client, we team with them to get it introduced to their clients, and then figuring out ways where they can build a book of business on the back of the Smartsheet platform to continue that relationship. That's really different than the next newest partner in a remote region, which is targeting SMB, which is still valuable to them, but again, different motion. So we have different folks within our enterprise team, within our services team, which are targeting GSIs, and we have the broad-based partner program, which is catering to that much larger population. ... All right, and we'll take our next question from Alex Zukin with Wolfe Research. Hey, guys. This is Ethan Bruck on for Alex Zukin, and thank you for taking the question. Congrats on the nice numbers. I think the question is, you know, kind of we're looking to 4 Q as the biggest renewal period. I'm just curious if you're seeing kind of any change in customer behaviors, whether it's like less co-terminating smaller expansions, you know, if GenAI is playing a little bit more into this up tiering that renewal. Just, I know we have the guide for the 116 for 4 Q. Just curious how those conversations have started to play out in 4 Q. And I have one follow-up. Ethan, I don't think those expansion conversations and those renewal conversations are going any differently. I think there's nothing unusual about it because GenAI and all of that is pretty early stage. Remember, it's in EAP with a limited number of customers, so that's not playing into the conversation yet. Because the... When you think of renewals and you think of all those things, it ties directly to: What am I gonna do with it? How is it going to come into my environment? And we're probably a little bit removed from that spot at the present time. I got you. Thank you. And I just, you know, Pete, I know you're not guiding explicitly, you know, for next year, but I guess as we think about still maybe a de-risk or conservative way to think about next year, and, you know, kind of help us frame numbers, just fair to think, you know, like, I guess, a de-risked way, for kind of building outlook is kind of below what is implied in the 4 Q guide? You know, I think, as I said before, it's a little early to call out next year just because, you know, Q4 is a big quarter. We've got to go execute it. I think we're all heads down, trying to make sure we get the best outcome we can in Q4. That's one part of it, and the other part is clearly the fact that, you know, a lot of the things we've put into play are, like, call it just recently in the pan, if you will. So we've got to let those things play out, see what those do, to really be able to put a perspective on what FY 2025 looks like. Great. Well, congrats again, and thank you, guys. Thanks, Ethan. We'll take our next question from D.J. Hynes with Canaccord. Hey, good evening, guys. Mark, as I think back to the IPO, I remember we used to talk about $5,000 as the threshold at which you would typically see customer spend start to inflect up, and, and maybe that's still true, but obviously it's a much different and scaled business today. As you look into the mid-market or low enterprise, however you want to qualify it, is there a spend, a spend threshold in that cohort or any other signal that you see where spend typically starts to inflect up again, or is it, is it more linear progression higher up? Yeah, isn't it interesting how our frame of reference changes from five years ago? Right. I was talking to Pete yesterday about, you know, our average time to progress a customer from $500,000. And, you know, again, so radically different from what we spoke about on the IPO. And, you know, I will stay away from pointing to one inflection point because there are so many phases to this game. We're seeing an acceleration of our moves from $500,000 - $1 million. We're seeing, you know, again, almost a double up of our million-dollar customers. So I think whenever a company gets tempted to focus on an inflection point, it's also known as a missed opportunity when focusing at a higher inflection point. So we're, we're really trying to, as I just spoke to in terms of how we're viewing partner ecosystem, recognize that there are multiple points at which you can exert energy or deliver value to a customer, which will compel them to move higher and faster. And don't view that as one, but view that as you have one at your very large enterprise, one at your emerging enterprise, one at your mid-major, one at your emerging customer, and treat those all as important. So it's, I think we've learned over the last five years, and I think we're trying to, you know, arrange our capital and our resources to go after those. Yeah. Okay. Makes sense. And then maybe a quick follow-up to Terry's question on the self-discovery. So you kind of alluded to in the answer to his question, that you would roll more capabilities into that motion. Just from a technical perspective, will it be easier to enable the next product for self-discovery now that you've already done a couple of them? Yeah, absolutely. And I think when we think about self-discovery, it's not simply the enablement of a feature, it's how do you give the people who are responsible for managing that environment, the confidence, the visibility, the ability to control those elements? So we're creating these frameworks and these heads-up displays within our administration console so that the administrators and the budget holders can have very high confidence and very efficiently manage these situations. Once that framework is set, adding that next one, you don't have to rebuild that infrastructure. We're making. We're building that in a modular way, and building upon sort of those early foundational investments. Yeah. Okay. I appreciate the call. Thank you, guys. Thanks. We'll take our next question from Brent Thill with Jefferies. Hi, thank you. This is John Byun for Brent Thill. My first question was, you know, as you've noticed, you had very good activity with the larger enterprises at your upfront. I'm wondering if there are any notable drivers to call out, anything that really helped, I don't know, any sort of unusual tailwinds from the Engage conference? So, I think your question is about the strength in the enterprise. I think it's, you know, the compelling nature of the solutions and the enablement we've done with the field, in sort of building that out. These deals that happened in Q3 weren't a result of just what happened in Q3 or just what happened at Engage. It's a series of plays to start with an opportunity, build a compelling value for the customer, and then grow that opportunity over time, and then find the right way to describe that value to close the transaction. So that's what we've seen. I don't think it's, a special magic bullet, but just running through it. ... Good, it's helpful. And then, in terms of follow up, for, you know, in your guidance comments, you talked about enabling services to do more of the service work and having a $4 million impact on billings. I'm wondering, was that embedded already in the previous, you know, full year guide of 20% growth, or was that kind of maybe a little bit newer development? It's a newer development because we specifically called it out, and so it's an-- think of that as incremental to prior guides. Great, thank you. You're welcome. We'll take our next question from Rishi Jaluria with RBC Capital Markets. Hi, this is Chris Fountain on for Rishi Jaluria. Thanks for taking our question. You mentioned a really large expansion deal in the prepared remarks, and that there's still further opportunity to do more with that organization. I was just wondering, what features are they still evaluating, or what really drives that next leg of expansion with a customer of that size? The key driver there is we're serving a subset of their employee population. And one of the things that we've done in, in doing a multi-million dollar, multi-year deal with them is not do a discounted by 90%, give away all the users, but really being thoughtful about how we grow with them over the years. And when I look at that customer and how they started with us as, you know, a $5,000 or $6,000 customer years ago and where they are today, we're seeing that as an upward trajectory for many years to come. But the, the key driver there is there are still very nice, large populations who are not yet utilizing the Smartsheet platform. And the nice thing is, once you have, you know, flight ops and the product teams using it, you have these examples, then you can show these adjacent teams. When you're speaking the language of that carrier, the likelihood of them having higher confidence in following suit, I would argue, goes up. That's what we've seen with our other very large accounts. That's helpful. Thank you. And just a quick follow-up, going back to the macro environment on the SMB side, any industries to call out that have remained more pressured or on the flip side, have started to show some green shoots? Thanks. You know, I think, when I think of the vertical focus, what we've seen is we've seen good strength in sort of what I call the retail, the education vertical and some of the gov. Obviously, gov's a pretty big quarter. Q3 is a pretty big quarter for gov. And on the, what I call where we've seen some level of what I call pressure, it's come in energy, utilities, tech. You know, those are the vertical slices we've seen. But in general, across the SMB, we've seen, you know, really good logo growth all through the year, that stayed consistent. We have seen that pressure in SMB expansions, so just to make sure it's parsed out. Okay, great. Thank you, Pete. You're welcome, Chris. That concludes today's presentation. I'd like to turn the call back over to Aaron Turner for any additional or closing remarks. Great. Thanks, Lisa, and thanks everyone for joining us today. We'll speak with you again next quarter. Thank you. That concludes today's presentation. Thank you for your participation. You may now disconnect.