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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to                 
Commission File No. 001-38464
Smartsheet Inc.
(Exact name of Registrant as specified in its charter)
Washington20-2954357
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
500 108th Ave NE, Suite 200
Bellevue,WA98004
(Address of principal executive offices)(Zip Code)
(844)324-2360
Registrant’s telephone number, including area code
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, no par value per shareSMARThe New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes    No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No 
As of May 30, 2024, there were 138,341,751 shares of the registrant’s Class A common stock outstanding.



SMARTSHEET INC.
Quarterly Report on Form 10-Q
For the Quarterly Period Ended April 30, 2024
Table of ContentsPage


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including but not limited to, statements regarding our future operating results and financial position, our business plan and strategy, and market positioning, are forward-looking statements. We based these forward-looking statements on current expectations, estimates, forecasts, and projections as well as the beliefs and assumptions of management. Words including, but not limited to, “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “potentially,” “likely,” and variations of these terms or the negative of these terms and similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described under Part II, Item 1A, “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or events and circumstances reflected in the forward-looking statements will be achieved or will occur. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q or to conform these statements to actual results or revised expectations.


Part I. Financial Information
Item 1. Financial Statements
SMARTSHEET INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)

Three Months Ended April 30,
20242023
Revenue
Subscription$249,095 $206,001 
Professional services13,889 13,885 
Total revenue262,984 219,886 
Cost of revenue
Subscription35,772 33,167 
Professional services12,550 12,714 
Total cost of revenue48,322 45,881 
Gross profit214,662 174,005 
Operating expenses
Research and development62,437 56,190 
Sales and marketing125,239 114,952 
General and administrative38,115 34,978 
Total operating expenses225,791 206,120 
Loss from operations(11,129)(32,115)
Interest income7,826 5,217 
Other income (expense), net(377)(536)
Loss before income tax provision(3,680)(27,434)
Income tax provision5,178 2,436 
Net loss$(8,858)$(29,870)
Net loss per share, basic and diluted$(0.06)$(0.23)
Weighted-average shares outstanding used to compute net loss per share, basic and diluted137,428 132,542 
See notes to condensed consolidated financial statements.
4

SMARTSHEET INC.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)

Three Months Ended April 30,
20242023
Net loss$(8,858)$(29,870)
Other comprehensive loss
Net unrealized gain (loss) on available-for-sale securities(998)189 
Foreign currency translation adjustments12 (646)
Total other comprehensive loss(986)(457)
Comprehensive loss$(9,844)$(30,327)
See notes to condensed consolidated financial statements.
5

SMARTSHEET INC.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(unaudited)

April 30, 2024January 31, 2024
Assets
Current assets:
Cash and cash equivalents$333,502 $282,094 
Short-term investments336,015 346,701 
Accounts receivable, net of allowances of $5,579 and $6,560, respectively
156,818 238,708 
Prepaid expenses and other current assets83,423 64,366 
Total current assets909,758 931,869 
Restricted cash18 19 
Deferred commissions152,833 148,867 
Property and equipment, net43,533 42,362 
Operating lease right-of-use assets36,882 39,480 
Intangible assets, net25,251 27,960 
Goodwill141,477 141,477 
Other long-term assets5,979 5,445 
Total assets$1,315,731 $1,337,479 
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable$862 $2,937 
Accrued compensation and related benefits59,288 77,453 
Other accrued liabilities30,552 30,534 
Operating lease liabilities, current15,711 16,040 
Finance lease liabilities, current239 216 
Deferred revenue541,734 568,670 
Total current liabilities648,386 695,850 
Operating lease liabilities, non-current29,692 33,100 
Finance lease liabilities, non-current398 455 
Deferred revenue, non-current2,023 1,785 
Other long-term liabilities424 434 
Total liabilities680,923 731,624 
Commitments and contingencies (Note 12)
Shareholders’ equity:
Preferred stock, no par value; 10,000,000 shares authorized, no shares issued or outstanding as of April 30, 2024 and January 31, 2024
  
Class A common stock, no par value; 500,000,000 shares authorized, 137,665,227 shares issued and outstanding as of April 30, 2024; 500,000,000 shares authorized, 136,884,011 shares issued and outstanding as of January 31, 2024
  
Class B common stock, no par value; 500,000,000 shares authorized, no shares issued or outstanding as of April 30, 2024 and January 31, 2024
  
Additional paid-in capital1,507,602 1,468,805 
Accumulated other comprehensive income (loss)(1,132)(146)
Accumulated deficit(871,662)(862,804)
Total shareholders’ equity634,808 605,855 
Total liabilities and shareholders’ equity$1,315,731 $1,337,479 
See notes to condensed consolidated financial statements.
6

SMARTSHEET INC.
Condensed Consolidated Statements of Changes in Shareholders’ Equity
(in thousands, except share data)
(unaudited)

Three Months Ended April 30, 2024
Common Stock (Class A and B)Additional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Shareholders’ Equity
SharesAmount
Balance as of January 31, 2024136,884,011 $ $1,468,805 $(146)$(862,804)$605,855 
Issuance of common stock under employee stock plans781,216 — 692 — — 692 
Taxes paid related to net share settlement of equity awards— — (13,055)— — (13,055)
Share-based compensation expense— — 51,160 — — 51,160 
Other comprehensive loss— — — (986)— (986)
Net loss— — — — (8,858)(8,858)
Balances as of April 30, 2024137,665,227 $ $1,507,602 $(1,132)$(871,662)$634,808 

Three Months Ended April 30, 2023
Common Stock (Class A and B)Additional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Shareholders’ Equity
SharesAmount
Balance as of January 31, 2023131,845,028 $ $1,243,730 $101 $(758,173)$485,658 
Issuance of common stock under employee stock plans1,067,430 — 589 — — 589 
Taxes paid related to net share settlement of equity awards— — (621)— — (621)
Share-based compensation expense— — 52,666 — — 52,666 
Other comprehensive loss— — — (457)— (457)
Net loss— — — — (29,870)(29,870)
Balances as of April 30, 2023132,912,458 $ $1,296,364 $(356)$(788,043)$507,965 

See notes to condensed consolidated financial statements.


7

SMARTSHEET INC.
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
Three Months Ended April 30,
20242023
Cash flows from operating activities
Net loss$(8,858)$(29,870)
Adjustments to reconcile net loss to net cash provided by operating activities:
Share-based compensation expense49,920 51,779 
Depreciation and amortization6,618 6,410 
Net amortization of premiums (discounts) on investments(3,034)(2,028)
Amortization of deferred commission costs15,661 11,429 
Unrealized foreign currency loss55 381 
Non-cash operating lease costs2,598 3,155 
Other, net2,106 872 
Changes in operating assets and liabilities:
Accounts receivable80,028 45,746 
Prepaid expenses and other current assets(19,099)(6,981)
Other long-term assets(754)(267)
Accounts payable(1,939)(246)
Other accrued liabilities(89)1,581 
Accrued compensation and related benefits(22,896)(20,552)
Deferred commissions(19,627)(18,701)
Deferred revenue(26,898)(4,452)
Other long-term liabilities(10)210 
Operating lease liabilities(3,704)(3,895)
Net cash provided by operating activities50,078 34,571 
Cash flows from investing activities
Purchases of short-term investments(112,913)(62,010)
Maturities of short-term investments125,647 96,885 
Purchases of property and equipment(613)(853)
Proceeds from sale of property and equipment7 16 
Capitalized internal-use software development costs(3,751)(2,397)
Net cash provided by investing activities8,377 31,641 
Cash flows from financing activities
Proceeds from exercise of stock options693 532 
Taxes paid related to net share settlement of restricted stock units(13,055)(621)
Proceeds from contributions to Employee Stock Purchase Plan5,494 5,783 
Principal payments of finance leases(34) 
Net cash provided by (used in) financing activities(6,902)5,694 
Effects of changes in foreign currency exchange rates on cash, cash equivalents, and restricted cash(196)(108)
Net increase in cash, cash equivalents, and restricted cash
51,357 71,798 
Cash, cash equivalents, and restricted cash at beginning of period282,442 223,757 
Cash, cash equivalents, and restricted cash at end of period$333,799 $295,555 
Supplemental disclosures
Cash paid for interest$11 $ 
Cash paid for income tax984 69 
Accrued purchases of property and equipment, including internal-use software825 503 
Share-based compensation expense capitalized in internal-use software development costs1,212 803 
See notes to condensed consolidated financial statements.
8

SMARTSHEET INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

1. Overview and Basis of Presentation
Description of business
Smartsheet Inc. (the “Company,” “we,” “our”) was incorporated in the State of Washington in 2005, and is headquartered in Bellevue, Washington. Smartsheet, the enterprise work management platform, empowers organizations to innovate and achieve results quickly, securely, and at scale through effective collaboration and streamlined workflows. By uniting people, content, and work, Smartsheet provides powerful capabilities that revolutionize the way teams operate. Smartsheet makes outcomes reliable, keeps customer data safe, and ensures users are on the same page, making it ideal for organizations seeking efficient, impactful collaborative work management. Customers access their accounts via a web-based interface or a mobile application. The Company also offers professional services, which primarily consist of consulting and training services.
Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The condensed consolidated balance sheet as of January 31, 2024 was derived from the audited consolidated financial statements as of that date but does not include all of the information and notes required by GAAP for complete financial statements. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended January 31, 2024, filed with the SEC on March 20, 2024.
The condensed consolidated financial statements include the results of Smartsheet Inc. and its wholly owned subsidiaries, including those located in the United States, the United Kingdom, Germany, Australia, Japan, and Costa Rica. All intercompany balances and transactions have been eliminated upon consolidation.
In the opinion of management, the information contained herein reflects all adjustments necessary for a fair presentation of our condensed consolidated financial statements. All such adjustments are of a normal, recurring nature. The results of operations for the three months ended April 30, 2024 are not necessarily indicative of results to be expected for the full year ending January 31, 2025, or for any other interim period, or for any future year.
Use of estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. The Company continuously evaluates its estimates, which are based on historical experience and other current assumptions that its management believes are reasonable under the circumstances. Actual results could differ from those estimates. The Company’s most significant estimates and judgments involve the measurement of fair values of share-based compensation awards; determination of the amortization period for capitalized sales commission costs; and revenue recognition with respect to the allocation of transaction consideration for the Company’s offerings, among others.

9

SMARTSHEET INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
2. Summary of Significant Accounting Policies
For a summary of the Company’s significant accounting policies refer to Note 2, Summary of Significant Accounting Policies, of our Annual Report on Form 10-K for the fiscal year ended January 31, 2024.
Segment information
The Company operates as one operating segment. The Company’s chief operating decision maker is its Chief Executive Officer, who reviews financial information for purposes of making operating decisions, assessing financial performance, and allocating resources.
Concentrations of risk and significant customers
Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash, cash equivalents, short-term investments, and accounts receivable. The Company maintains its cash accounts with financial institutions where deposits, at times, exceed the Federal Deposit Insurance Corporation (“FDIC”) limits.
No individual customer represented more than 10% of accounts receivable as of April 30, 2024 or January 31, 2024. No individual customer represented more than 10% of revenue for the three months ended April 30, 2024 or 2023.
Recent accounting pronouncements
There have been no recent accounting pronouncements, changes in accounting pronouncements, or recently adopted accounting guidance during the three months ended April 30, 2024 that have had a material impact on our condensed consolidated financial statements.
Recent accounting pronouncements not yet adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The new guidance requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280, on an interim and annual basis. The standard is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact of adopting ASU 2023-07.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact of adopting ASU 2023-09.
3. Revenue from Contracts with Customers
During the three months ended April 30, 2024 and 2023, the Company recognized $222.2 million and $178.4 million of subscription revenue, respectively, and $5.4 million and $5.7 million of professional services revenue, respectively, which were included in the deferred revenue balance as of January 31, 2024 and 2023, respectively.
As of April 30, 2024, approximately $749.6 million of revenue, including amounts already invoiced and amounts contracted but not yet invoiced, was expected to be recognized from remaining performance obligations, of which $741.2 million related to subscriptions and $8.4 million related to professional services. Approximately 82% of revenue related to remaining performance obligations is expected to be recognized in the next 12 months.
10

SMARTSHEET INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
4. Deferred Commissions
Deferred commissions were $152.8 million as of April 30, 2024 and $148.9 million as of January 31, 2024.
Amortization expense for deferred commissions was $15.7 million and $11.4 million for the three months ended April 30, 2024 and 2023, respectively. Deferred commissions are amortized over a period of four years. The amortization expense is recorded in sales and marketing on the Company’s condensed consolidated statements of operations.
5. Net Loss Per Share
The following table presents calculations for basic and diluted net loss per share (in thousands, except per share data):
Three Months Ended April 30,
20242023
Numerator:
Net loss
$(8,858)$(29,870)
Denominator:
Weighted-average shares outstanding 137,428 132,542 
Net loss per share, basic and diluted
$(0.06)$(0.23)
The following outstanding shares of common stock equivalents as of the periods presented were excluded from the computation of diluted net loss per share for the periods presented because the impact of including them would have been anti-dilutive (in thousands):
April 30,
20242023
Shares subject to outstanding common stock awards11,774 13,902 
Shares issuable pursuant to the 2018 Employee Stock Purchase Plan370 378 
Total potentially dilutive shares12,144 14,280 
11

SMARTSHEET INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
6. Investments
All cash equivalents and short-term investments were designated as available-for-sale securities as of April 30, 2024. The following tables present the amortized costs, unrealized gains and losses, and estimated fair values of the Company’s cash equivalents and short-term investments (in thousands):
April 30, 2024
Amortized Cost(1)
Unrealized GainsUnrealized LossesEstimated Fair Value
Cash equivalents:
Money market funds$108,411 $ $ $108,411 
Total cash equivalents108,411   108,411 
Short-term investments:
Corporate bonds135,560 12 (286)135,286 
U.S. Treasury securities167,754 3 (432)167,325 
Commercial paper20,006   20,006 
Agency securities13,401  (3)13,398 
Total short-term investments336,721 15 (721)336,015 
Total$445,132 $15 $(721)$444,426 
(1) Excludes interest receivable of $2.1 million, which is included in Prepaid expenses and other current assets on the condensed consolidated balance sheets.

January 31, 2024
Amortized Cost(1)
Unrealized GainsUnrealized LossesEstimated Fair Value
Cash equivalents:
Money market funds$79,082 $ $ $79,082 
Commercial paper4,497   4,497 
Total cash equivalents83,579   83,579 
Short-term investments:
Corporate bonds99,547 158 (9)99,696 
U.S. Treasury securities169,825 123  169,948 
Commercial paper57,755   57,755 
Agency securities19,282 21 (1)19,302 
Total short-term investments346,409 302 (10)346,701 
Total$429,988 $302 $(10)$430,280 
(1) Excludes interest receivable of $1.5 million, which is included in Prepaid expenses and other current assets on the condensed consolidated balance sheets.
12

SMARTSHEET INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Company does not intend to sell, nor is it more likely than not that we will be required to sell, any investments in unrealized loss positions before recovery of their amortized cost basis. We did not recognize any credit losses related to our investments during the three months ended April 30, 2024 or 2023. The unrealized gains and losses on our short-term investments were primarily due to changes in interest rates subsequent to the initial purchase. There were no material realized gains or losses from available-for-sale securities that were reclassified out of accumulated other comprehensive income (loss) during the three months ended April 30, 2024 or 2023. None of the short-term investments held as of April 30, 2024 or January 31, 2024 were in a continuous unrealized loss position for greater than 12 months.
The following table presents the contractual maturities of the Company’s short-term investments (in thousands):
April 30, 2024
Amortized CostEstimated Fair Value
Due within one year$255,588 $255,285 
Due between one to five years81,133 80,730 
Total$336,721 $336,015 
7. Fair Value Measurements
Assets and liabilities recorded at fair value in the condensed consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The lowest level of significant input determines the placement of the fair value measurement within the following hierarchical levels:
Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2: Observable inputs, other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3: Unobservable inputs that are supported by little or no market activity.
Assets and liabilities measured at fair value on a recurring basis
The following tables present information about the Company’s financial assets and liabilities that are measured at fair value and indicate the fair value hierarchy of the valuation inputs used (in thousands):
April 30, 2024
Level 1Level 2Level 3Total
Assets
  Cash equivalents:
    Money market funds$108,411 $ $ $108,411 
Total cash equivalents108,411   108,411 
  Short-term investments:
    Corporate bonds 135,286  135,286 
    U.S. Treasury securities 167,325  167,325 
    Commercial paper 20,006  20,006 
    Agency securities 13,398  13,398 
Total short-term investments 336,015  336,015 
Total assets$108,411 $336,015 $ $444,426 
13

SMARTSHEET INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

January 31, 2024
Level 1Level 2Level 3Total
Assets
Cash equivalents:
Money market funds$79,082 $ $ $79,082 
Commercial paper 4,497 4,497
Total cash equivalents79,0824,497 83,579
Short-term investments:
Corporate bonds 99,696 99,696
U.S. Treasury securities 169,948 169,948
Commercial paper 57,755 57,755
Agency securities 19,302  19,302
Total short-term investments 346,701  346,701 
Total assets$79,082 $351,198 $ $430,280 
The carrying amounts of certain financial instruments, including cash held in banks, accounts receivable, and accounts payable, approximate fair value due to their short-term maturities and are excluded from the fair value tables above.
It is the Company’s policy to recognize transfers of assets and liabilities between levels of the fair value hierarchy at the end of a reporting period. The Company does not transfer out of Level 3 and into Level 2 until observable inputs become available and reliable. There were no transfers between fair value measurement levels during the three months ended April 30, 2024 or 2023.
Assets and liabilities measured at fair value on a non-recurring basis
See Note 8, Goodwill and Net Intangible Assets, of these notes to our condensed consolidated financial statements for fair value measurements of certain assets and liabilities recorded at fair value on a non-recurring basis.
The Company’s long-lived assets are measured at fair value on a non-recurring basis and are reduced if the assets are determined to be impaired. We have subleases for some of our operating lease right-of-use (“ROU”) assets. When applicable, the fair values of operating lease ROU assets and associated property and equipment are estimated as of the sublease execution date using an income approach by converting future sublease cash inflows and outflows to a single present value. Estimated cash flows are discounted at a rate commensurate with the inherent risks associated with the asset group to arrive at an estimate of fair value. As a result of the subjective nature of unobservable inputs used, these assets are classified within Level 3 of the fair value hierarchy.
14

SMARTSHEET INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
8. Goodwill and Net Intangible Assets
There were no changes in the carrying amount of goodwill or measurement period adjustments during the three months ended April 30, 2024.
The following table presents the components of net intangible assets (in thousands):
April 30, 2024
January 31, 2024
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Software technology
$28,491 $(21,655)$6,836 $28,491 $(20,231)$8,260 
Customer relationships
34,072 (18,112)15,960 34,072 (16,941)17,131 
Trade names4,100 (1,712)2,388 4,100 (1,601)2,499 
Patents170 (147)23 170 (144)26 
Domain names
44  44 44  44 
Total$66,877 $(41,626)$25,251 $66,877 $(38,917)$27,960 
The following table presents the components of acquired intangible assets (dollars in thousands):
April 30, 2024
January 31, 2024
Net Carrying Amount
Weighted- Average Life (Years)
Net Carrying Amount
Weighted- Average Life (Years)
Software technology
$6,836 2.0$8,260 2.1
Customer relationships
15,960 3.517,131 3.7
Trade names2,388 5.42,499 5.6
Total$25,184 3.2$27,890 3.4
Amortization expense related to intangible assets was $2.7 million in each of the three months ended April 30, 2024 and 2023. As of April 30, 2024, estimated remaining amortization expense for the finite-lived intangible assets by fiscal year is as follows (in thousands):
Remainder of Fiscal 2025$6,925 
Fiscal 20267,916 
Fiscal 20275,750 
Fiscal 20283,454 
Fiscal 2029721 
Thereafter441 
Total$25,207 
9. Shareholders’ Equity
The Company has issued incentive and non-qualifying stock options to employees and non-employee directors under the 2005 Stock Option/Restricted Stock Plan, the 2015 Equity Incentive Plan (the “2015 Plan”), and the 2018 Equity Incentive Plan (the “2018 Plan”). Employee stock options are granted with exercise prices at the fair value of the underlying common stock on the grant date, generally vest, based on continuous employment, over three or four years, and expire 10 years from the date of grant.
The Company has also issued restricted stock units (“RSUs”) to employees and non-employee directors pursuant to the 2015 Plan and the 2018 Plan. Employee RSUs are measured based on the grant-date fair value of the awards and generally vest, based on continuous employment, over three or four years.
15

SMARTSHEET INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Company has also issued market-based performance share units (“PSUs”) to certain executives pursuant to the 2018 Plan. The number of shares that can be earned range from 0% to 200% of the target number of shares, based on the relative growth of the Company’s total shareholder return as compared to the total shareholder return of the Standard & Poor’s (“S&P”) Software and Services Select Index. PSUs vest over a three-year period, subject to continuous service with the Company. Compensation expense for PSUs with market conditions is measured using a Monte Carlo simulation approach and recorded over the vesting period under the graded-vesting attribution method.
The target number of PSUs granted was 195,948 shares during the year ended January 31, 2024 and 194,624 shares during the three months ended April 30, 2024. These PSUs are measured over a two-year performance period ending in the fourth quarter of fiscal year 2026. PSU’s granted during the year ended January 31, 2023 have two separate performance periods. The first tranche of awards, which had a one-year performance period, vested during the year ended January 31, 2024. The second tranche of awards is measured over a two-year performance period starting on the date of grant and ending in the fourth quarter of fiscal year 2025.
Stock options
The following table includes a summary of the option activity during the three months ended April 30, 2024:
Number of Options
Weighted-Average Exercise Price
Outstanding at January 31, 20243,517,075 $24.77 
Granted  
Exercised(67,105)10.30 
Forfeited or canceled(37,893)57.19 
Outstanding at April 30, 20243,412,077 24.69 
Exercisable at April 30, 20243,092,340 21.49 
Restricted stock units
The following table includes a summary of the RSU activity during the three months ended April 30, 2024:
Number of Shares
Weighted-Average Grant-Date Fair Value
Outstanding at January 31, 20248,798,624 $45.41 
Granted532,653 41.07 
Vested(1,011,111)46.17 
Forfeited or canceled(456,826)45.03 
Outstanding at April 30, 20247,863,340 45.04 
Performance share units
The following table includes a summary of the PSU activity during the three months ended April 30, 2024:
Number of SharesWeighted-Average Grant-Date Fair Value
Outstanding at January 31, 2024321,463 $50.54 
Granted194,624 34.27 
Vested  
Forfeited or canceled(17,963)50.39 
Outstanding at April 30, 2024498,124 44.19 
16

SMARTSHEET INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
2018 Employee Stock Purchase Plan
The Company adopted the 2018 Employee Stock Purchase Plan (“ESPP”) on April 26, 2018, with the effective date of our Initial Public Offering. Under the ESPP, eligible employees are able to purchase shares of the Company’s Class A common stock at a discount through payroll deductions of up to 15% of their compensation, subject to plan limitations. Purchases are accomplished through participation in discrete offering periods. Each offering period is six months (commencing each January 1 and July 1), with a purchase date following the end of the period, unless otherwise determined by our board of directors or our compensation committee. Employees may purchase shares at 85% of the lesser of the fair market value of the Company’s Class A common stock on (i) the first trading day of the applicable offering period or (ii) the last trading day of the purchase period in the applicable offering period.
Shares available for issuance
The following table includes a summary of the activity of shares available for issuance under the 2018 Plan and the ESPP during the three months ended April 30, 2024:
2018 Plan
ESPP
Balance at January 31, 202418,985,254 5,572,546 
Authorized6,844,200 1,368,840 
Granted(727,277) 
Forfeited or canceled512,682  
Balance at April 30, 202425,614,859 6,941,386 
The aggregate number of shares reserved for issuance under the ESPP will increase automatically on February 1 of each of the first 10 calendar years after the first offering date. The increase of shares is equal to 1% of the total outstanding shares of the Company’s Class A and Class B common stock as of the immediately preceding January 31 (rounded to the nearest whole share), or such lesser number of shares as may be determined by our board of directors. The aggregate number of shares issued under the ESPP, subject to stock-splits, recapitalizations or similar events, may not exceed 20,400,000 shares of the Company’s common stock.
As of April 30, 2024, $8.1 million has been withheld on behalf of our employees for a future purchase under the ESPP and is recorded in accrued compensation and related benefits in the condensed consolidated balance sheets.
17

SMARTSHEET INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Share-based compensation expense
Share-based compensation expense included in the condensed consolidated statements of operations was as follows (in thousands):
Three Months Ended April 30,
20242023
Cost of subscription revenue$3,052 $3,459 
Cost of professional services revenue1,738 1,910 
Research and development18,056 17,432 
Sales and marketing16,595 19,054 
General and administrative10,479 9,924 
Total share-based compensation expense$49,920 $51,779 
The Company has excluded $1.2 million and $0.9 million of capitalized software development costs from share-based compensation expense for the three months ended April 30, 2024 and 2023, respectively.
As of April 30, 2024, there was a total of $338.0 million of unrecognized share-based compensation expense, which is expected to be recognized over a weighted-average period of 2.0 years.
Share Repurchase Program
In April 2024, the Company’s Board of Directors authorized the repurchase of up to $150.0 million of the Company’s outstanding Class A common stock. All repurchases under the program will be made through open market, block trades, and/or privately negotiated trades pursuant to 10b5-1 plans, in compliance with applicable securities laws and other requirements. The program has no minimum purchase commitment and it is authorized to extend over a period of up to 12 months. The timing, manner, price, and amount of the repurchase will be subject to the discretion of the Company’s management. The repurchase program does not obligate the Company to acquire any particular amount of Class A common stock and it may be suspended or discontinued at any time. When shares are repurchased, they will be immediately retired by the Company. We did not make any repurchases under the Share Repurchase Program during the three months ended April 30, 2024.
10. Income Taxes
The provision for income taxes for interim tax periods is generally determined using an estimate of the Company’s annual effective tax rate, excluding jurisdictions for which no tax benefit can be recognized due to valuation allowances, and adjusted for discrete tax items in the period. Each quarter the Company updates its estimate of the annual effective tax rate and makes a cumulative adjustment if the estimated annual tax rate has changed.
 The Company’s effective tax rate generally differs from the U.S. federal statutory tax rate primarily due to valuation allowances on deferred tax assets, U.S. Base Erosion and Anti-Abuse Tax (“BEAT”), state taxes, and non-deductible share-based compensation offset by tax credits and Foreign Derived Intangible Income (“FDII”) deductions.
The Company recorded a provision for income taxes of $5.2 million and $2.4 million for the three months ended April 30, 2024 and 2023, respectively. The provision is primarily attributable to BEAT, income taxes in foreign jurisdictions, and state income taxes.
18

SMARTSHEET INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
11. Leases
The Company has operating leases primarily related to corporate offices and finance leases related to computer equipment. Our finance lease ROU assets are included in property and equipment, net in the condensed consolidated balance sheets. Our leases have remaining lease terms of less than one year to five years, some of which include options to extend the leases for up to five years.
The components of lease expense recorded in the condensed consolidated statements of operations were as follows (in thousands):
Three Months Ended April 30,
20242023
Operating lease cost$3,307 $3,981 
Finance lease cost:
Amortization of assets55  
Interest on lease liabilities16  
Short-term lease cost114 180 
Variable lease cost711 851 
Sublease income(627)(547)
Total lease costs$3,576 $4,465 
Other information related to leases was as follows (dollars in thousands):
Three Months Ended April 30,
20242023
Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$4,411 $4,720 
Operating cash flows from finance leases16  
Financing cash flows from finance leases34  
Weighted-average remaining lease term (in years)
Operating leases3.74.3
Finance leases2.40.0
Weighted-average discount rate
Operating leases5.5 %5.2 %
Finance leases9.9 % %
As of April 30, 2024, remaining maturities of lease liabilities were as follows (in thousands):
Operating LeasesFinance Leases
Remainder of Fiscal 2025$12,108 $203 
Fiscal 202614,707 270 
Fiscal 202710,759 226 
Fiscal 20286,328  
Fiscal 20295,292  
Thereafter1,357  
Total lease payments50,551 699 
Less: imputed interest(5,148)(62)
Total$45,403 $637 
19

SMARTSHEET INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
As of April 30, 2024, the future total minimum sublease payments to be received were as follows (in thousands):
Sublease Receipts
Remainder of Fiscal 2025$2,058 
Fiscal 20262,154 
Fiscal 2027700 
Fiscal 2028 
Fiscal 2029 
Thereafter 
Total$4,912 
12. Commitments and Contingencies
Legal matters
From time to time, in the normal course of business, the Company may be subject to various other legal matters such as threatened or pending claims or proceedings. Although management currently believes that resolution of such matters, individually and in the aggregate, will not have a material impact on our financial position, results of operations, or cash flows, these matters are subject to inherent uncertainties, and management’s view of these matters may change in the future.
20

SMARTSHEET INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
13. Geographic Information
Revenue
Revenue by geographic location is determined by the location of the Company’s customers. The following table sets forth revenue by geographic area (in thousands):
Three Months Ended April 30,
20242023
United States$222,827 $185,595 
EMEA21,206 17,724 
APJ
9,004 8,207 
Americas other than the United States9,947 8,360 
Total$262,984 $219,886 
No individual country other than the United States contributed more than 10% of total revenue during the three months ended April 30, 2024 or 2023.
Long-lived assets
Long-lived assets by geographic location is based on the location of the legal entity that owns the asset. The following table sets forth long-lived assets by geographic area (in thousands):
April 30, 2024January 31, 2024
United States$42,579 $45,743 
EMEA2,197 2,266 
APJ
3,577 3,793 
Americas other than the United States536 573 
Total$48,889 $52,375 
The table above includes property and equipment, net and operating lease ROU assets and excludes capitalized internal-use software costs and intangible assets.
21

SMARTSHEET INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
14. Supplemental Condensed Consolidated Financial Statement Information
Prepaid expenses and other current assets
Prepaid expenses and other current assets consisted of the following (in thousands):
April 30, 2024January 31, 2024
Prepaid expenses78,701 $57,685 
Other current assets4,722 6,681 
Total prepaid expenses and other current assets
$83,423 $64,366 
Restricted cash
Restricted cash was $0.3 million as of April 30, 2024 and January 31, 2024, primarily related to Australian employee contributions to the ESPP.
Cash as reported on the condensed consolidated statements of cash flows includes the aggregate amounts of cash and cash equivalents and restricted cash as shown on the condensed consolidated balance sheets. Cash as reported on the condensed consolidated statements of cash flows consisted of the following (in thousands):
April 30,
20242023
Cash and cash equivalents$333,502 $294,946 
Restricted cash included in prepaid expenses and other current assets279 420 
Restricted cash18 189 
Total cash, cash equivalents, and restricted cash
$333,799 $295,555 
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended January 31, 2024. In addition to historical financial information, the following discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. These statements are often identified by the use of words including, but not limited to, “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including but not limited to those discussed in the section titled “Risk Factors” and in other parts of this Quarterly Report on Form 10-Q. Our fiscal year ends January 31.
Overview
Smartsheet, the enterprise work management platform, empowers organizations to innovate and achieve results quickly and securely at scale through effective collaboration and streamlined workflows. By uniting people, content, and work, Smartsheet provides powerful capabilities that revolutionize the way teams operate. Smartsheet makes outcomes reliable, keeps customer data safe, and ensures users are on the same page, making it ideal for organizations seeking efficient, impactful collaborative work management.
We generate revenue primarily from the sale of subscriptions to our cloud-based platform for work management. For subscriptions, customers select the plan that meets their needs and can begin using Smartsheet within minutes. We offer three paid subscription levels to new customers: Pro, Business, and Enterprise, the pricing for which varies by the features provided. Customers can also purchase capabilities a la carte or in a bundle through our Smartsheet Advance package options for Enterprise subscriptions, which provide capabilities that enable customers to implement solutions for a specific use case or for large scale projects, initiatives, or processes. These capabilities include Control Center, Dynamic View, Data Shuttle, Connectors, Bridge, and Data Table. Customers with additional security and governance needs can purchase Smartsheet Safeguard, which provides capabilities to support oversight, security, and ongoing policy management. Safeguard is available as an add-on to Enterprise plans and as a part of Smartsheet Advance Platinum level. Additional subscriptions that can be integrated with our cloud-based platform include Resource Management, a resource planning solution that helps businesses plan and allocate resources across their programs, track and manage time, and forecast hiring needs; and Brandfolder, a digital asset management platform that enables users to easily organize, discover, control, distribute, and share digital assets. Professional services are offered to help customers create and administer work management solutions for specific use cases and for training purposes.
Customers can begin using our platform by purchasing a subscription directly from our website, through our sales force, starting a free trial, or working as a collaborator on a project. Smartsheet also offers a free subscription plan for new customers looking to get started with task and project management.
Macroeconomic Conditions and Other Factors
Our results of operations may be significantly influenced by general macroeconomic conditions, including, but not limited to, the impact of interest rate fluctuations, inflation, geopolitical conflicts, instability in the global banking sector, and foreign currency exchange rate fluctuations. Inflationary factors, such as increases in our operating expenses, may adversely affect our results of operations, as our customers primarily purchase products and services from us on a subscription basis over a period of time. We monitor the direct and indirect impacts of these circumstances on our business and financial results. The implications of these macroeconomic events on our business, results of operations and overall financial outlook remain uncertain over the long term and may have an adverse impact in future periods. Refer to Part II, Item 1A, “Risk Factors” for further discussion of the potential impact of these general macroeconomic factors and other risks on our business.
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Key Business Metrics
We review the following key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.
The following table summarizes our key business metrics:
April 30,
20242023
Annualized recurring revenue ("ARR") (in millions)$1,056 $886 
Average ARR per domain-based customer$9,906 $8,520 
Dollar-based net retention rate for all customers (trailing 12 months)114 %123 %
Customers with ARR of $100 thousand or more1,970 1,569 
Customers with ARR of $50 thousand or more4,028 3,343 
Customers with ARR of $5 thousand or more19,977 18,483 
Annualized recurring revenue
We define annualized recurring revenue, or ARR, as the annualized recurring value of all active subscription contracts at the end of a reporting period. We exclude the value of non-recurring revenue streams, such as our professional services revenue, that are recognized at a point in time. We use ARR as one of our operating measures to assess the strength of the Company’s subscription services. ARR is a performance metric and should be viewed independently of revenue and deferred revenue, and is not intended to be a substitute for, or combined with, any of these items. Both multi-year contracts and contracts with terms less than one year are annualized by dividing the total committed contract value by the number of months in the subscription term and then multiplying by 12. Annualizing contracts with terms less than one year results in amounts being included in our ARR calculation that are in excess of the total contract value for those contracts at the end of the reporting period. The value of subscription contracts that are sold through third-party resellers, wherein we do not have visibility into the pricing provided, is based on the list price.
As of April 30, 2024, we had customers with ARR ranging from less than $200 to over $10.0 million.
Average ARR per domain-based customer
We use average ARR per domain-based customer to measure customer commitment to our platform and sales force productivity. We define average ARR per domain-based customer as total outstanding ARR for domain-based subscriptions as of the end of the reporting period divided by the number of domain-based customers as of the same date. We define domain-based customers as organizations with a unique email domain name.
Dollar-based net retention rate
We calculate dollar-based net retention rate as of a period end by starting with the ARR from the cohort of all customers as of the 12 months prior to such period end (“Prior Period ARR”). We then calculate the ARR from these same customers as of the current period end (“Current Period ARR”). Current Period ARR includes any upsells and is net of contraction or attrition over the trailing 12 months, but excludes subscription revenue from new customers in the current period. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the dollar-based net retention rate. Any ARR obtained through merger and acquisition transactions does not affect the dollar-based net retention rate until one year from the date on which the transaction closed.
The dollar-based net retention rate is used by us to evaluate the long-term value of our customer relationships and is driven by our ability to retain and expand the subscription revenue generated from our existing customers.
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Components of Results of Operations
Revenue
Subscription revenue
Subscription revenue primarily consists of fees from customers for access to our cloud-based platform. We recognize subscription revenue ratably over the subscription contract term beginning on the date access to our platform is provided, as no implementation work is required, assuming all other revenue recognition criteria have been met.
Professional services revenue
Professional services revenue primarily includes fees for consulting and training services. Our consulting services typically consist of platform configuration and use case optimization, and are primarily invoiced on a time and materials basis, with some smaller engagements being provided for a fixed fee. We recognize revenue for our consulting services as those services are delivered. Our training services are delivered either remotely or at the customer site. Training services are charged for on a fixed-fee basis and we recognize revenue as the training program is delivered. Our consulting and training services are generally considered to be distinct, for accounting purposes, and we recognize revenue as services are performed or upon completion of work.
Cost of revenue and gross margin
Cost of subscription revenue
Cost of subscription revenue primarily consists of expenses related to hosting our platform and providing support, including employee-related costs, third-party hosting fees, software-related costs, amortization of capitalized software, amortization of acquisition-related intangibles, and payment processing fees.
Cost of professional services revenue
Cost of professional services revenue consists primarily of employee-related costs for our consulting and training teams, costs of outside services to supplement our internal teams, allocated overhead, software-related costs, travel-related costs, and billable expenses.
Gross margin
Gross margin is calculated as gross profit expressed as a percentage of total revenue. Our gross margin may fluctuate from period to period as we continue to invest in and optimize our technology and infrastructure.
Operating expenses
Research and development
Research and development expenses consist primarily of employee-related costs, software-related costs, allocated overhead, and costs of outside services used to supplement our internal staff. We consider continued investment in our development talent and our platform to be important for our growth.
Sales and marketing
Sales and marketing expenses consist primarily of employee-related costs, brand awareness and demand generation costs, costs related to Engage, our customer conference, allocated overhead, costs of outside services used to supplement our internal staff, travel-related costs, software-related costs, and amortization of acquisition-related intangibles. Commissions earned by our sales force that are incremental to each customer contract, along with related fringe benefits and taxes, are capitalized and amortized over an estimated useful life of four years.
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General and administrative
General and administrative expenses consist primarily of employee-related costs for accounting, finance, legal, IT, and human resources personnel. In addition, general and administrative expenses include costs of outside services to supplement our internal staff and other professional services, software-related costs, allocated overhead, certain tax, license, and insurance-related expenses, bank charges, and bad debt expense.
Operating margin
We expect our operating expenses to increase in absolute dollars as our business grows and to decrease over the long-term as a percentage of total revenue due to economies of scale.
Interest income
Interest income primarily consists of interest income from our investment holdings.
Other income (expense), net
Other income (expense), net consists of foreign currency exchange gains and losses, interest expense, and other non-operating income and expenses.
Income tax provision
Income tax provision consists primarily of U.S. federal and state income taxes as well as foreign income taxes. We maintain a valuation allowance on our U.S. federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred assets will be realized.
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Results of Operations
The following table sets forth our results of operations for the periods presented:
Three Months Ended April 30,
20242023
(in thousands)
Revenue
Subscription$249,095 $206,001 
Professional services13,889 13,885 
Total revenue262,984 219,886 
Cost of revenue
Subscription(1)
35,772 33,167 
Professional services(1)
12,550 12,714 
Total cost of revenue48,322 45,881 
Gross profit214,662 174,005 
Operating expenses
Research and development(1)
62,437 56,190 
Sales and marketing(1)
125,239 114,952 
General and administrative(1)
38,115 34,978 
Total operating expenses225,791 206,120 
Loss from operations(11,129)(32,115)
Interest income7,826 5,217 
Other income (expense), net(377)(536)
Loss before income tax provision(3,680)(27,434)
Income tax provision5,178 2,436 
Net loss$(8,858)$(29,870)
(1)    Amounts include share-based compensation expense as follows:
Three Months Ended April 30,
20242023
(in thousands)
Cost of subscription revenue$3,052 $3,459 
Cost of professional services revenue1,738 1,910 
Research and development18,056 17,432 
Sales and marketing16,595 19,054 
General and administrative10,479 9,924 
Total share-based compensation expense$49,920 $51,779 




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The following table sets forth the components of our results of operations, for each of the periods presented, as a percentage of total revenue:
Three Months Ended April 30,
20242023
Revenue
Subscription95 %94 %
Professional services
Total revenue100 100 
Cost of revenue
Subscription14 15 
Professional services
Total cost of revenue18 21 
Gross profit82 79 
Operating expenses
Research and development24 26 
Sales and marketing48 52 
General and administrative14 16 
Total operating expenses86 94 
Loss from operations(4)(15)
Interest income
Other income (expense), net— — 
Loss before income tax provision(1)(12)
Income tax provision
Net loss(3)%(14)%
Note: Certain amounts may not sum due to rounding.
Comparison of the three months ended April 30, 2024 and 2023
Revenue
Three Months Ended April 30,Change
20242023Amount%
(dollars in thousands)
Revenue
Subscription$249,095 $206,001 $43,094 21 %
Professional services13,889 13,885 — %
Total revenue$262,984 $219,886 $43,098 20 %
Percentage of total revenue
Subscription revenue95 %94 %  
Professional services revenue%%
Subscription revenue increased $43.1 million, or 21%, for the three months ended April 30, 2024 compared to the three months ended April 30, 2023. Sales of user-based subscription plans and capabilities-based products contributed $24.8 million and $18.3 million, respectively, to the increase in revenue between periods.
Professional services revenue was consistent for the three months ended April 30, 2024 compared to the three months ended April 30, 2023.
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Cost of revenue, gross profit, and gross margin
Three Months Ended April 30,Change
20242023Amount%
(dollars in thousands)
Cost of revenue
Subscription$35,772 $33,167 $2,605 %
Professional services12,550 12,714 (164)(1)%
Total cost of revenue$48,322 $45,881 $2,441 %
Gross profit$214,662 $174,005 $40,657 23 %
Gross margin
Subscription86 %84 %
Professional services10 %%
Total gross margin82 %79 %
Cost of subscription revenue increased $2.6 million, or 8%, for the three months ended April 30, 2024 compared to the three months ended April 30, 2023. This was primarily due to increases of $2.1 million in hosting fees and $0.3 million in amortization of capitalized software.
Our gross margin for subscription revenue was 86% and 84% for the three months ended April 30, 2024 and 2023, respectively. The increase in gross margin was primarily driven by a decrease in employee-related expenses as a percentage of revenue.
Cost of professional services decreased $0.2 million, or 1%, for the three months ended April 30, 2024 compared to the three months ended April 30, 2023. The decrease was primarily due to a decrease of $0.4 million in employee-related expenses, offset by increases of $0.1 million in costs of outside services used to supplement internal staff, and $0.1 million in travel-related expenses.
Our gross margin for professional services revenue was 10% and 8% for the three months ended April 30, 2024 and 2023, respectively. The increase in gross margin for professional services was primarily driven by a decrease in employee-related expenses.
Research and development expenses
Three Months Ended April 30,Change
20242023Amount%
(dollars in thousands)
Research and development$62,437 $56,190 $6,247 11 %
Percentage of total revenue24 %26 %
Research and development expenses increased $6.2 million, or 11%, for the three months ended April 30, 2024 compared to the three months ended April 30, 2023. This was primarily driven by increases of $5.0 million in employee-related expenses due to increased headcount, of which $0.5 million was related to share-based compensation expense, and $1.1 million in software-related costs.
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Sales and marketing expenses
Three Months Ended April 30,Change
20242023Amount%
(dollars in thousands)
Sales and marketing$125,239 $114,952 $10,287 %
Percentage of total revenue48 %52 %
Sales and marketing expenses increased $10.3 million, or 9%, for the three months ended April 30, 2024 compared to the three months ended April 30, 2023. This was primarily driven by increases of $7.6 million in employee-related expenses due to increased headcount and labor costs, including a $2.5 million decrease in share-based compensation expense, $1.0 million in brand awareness and demand generation costs, $0.8 million in costs related to Engage, $0.6 million in costs of outside services used to supplement our internal staff, $0.5 million in travel-related costs, and $0.4 million in software-related costs. This was partially offset by a decrease of $0.6 million in allocated overhead costs.
General and administrative expenses
Three Months Ended April 30,Change
20242023Amount%
(dollars in thousands)
General and administrative$38,115 $34,978 $3,137 %
Percentage of total revenue14 %16 %
General and administrative expenses increased $3.1 million, or 9%, for the three months ended April 30, 2024 compared to the three months ended April 30, 2023. This was primarily driven by increases of $1.4 million in employee-related expenses due to increased headcount, of which $0.4 million related to share-based compensation expense, $1.2 million related to bad debt expense, $0.5 million in taxes, licensure, and insurance expenses, $0.4 million in costs of outside services to supplement our internal staff, and $0.2 million in travel-related expenses. This change was partially offset by decreases of $0.3 million in software-related costs and $0.2 million in allocated overhead.
Interest income
Three Months Ended April 30,Change
20242023Amount%
(dollars in thousands)
Interest income$7,826 $5,217 $2,609 50 %
Interest income increased $2.6 million, or 50%, for the three months ended April 30, 2024 compared to the three months ended April 30, 2023. This was primarily driven by an increase in interest income related to our short-term investments portfolio.
Other income (expense), net
Three Months Ended April 30,Change
20242023Amount%
(dollars in thousands)
Other income (expense), net$(377)$(536)$159 (30)%
For the three months ended April 30, 2024 compared to the three months ended April 30, 2023, the change in other income (expense) was primarily driven by a $0.2 million decrease in interest expense.
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Income tax provision
Three Months Ended April 30,Change
20242023Amount%
(dollars in thousands)
Income tax provision$5,178 $2,436 $2,742 113 %
Effective tax rate(140.71)%
(8.88)%
The income tax provision increased $2.7 million, or 113%, for the three months ended April 30, 2024 compared to the three months ended April 30, 2023. The change in the provision was primarily due to U.S. BEAT and an increase in state income taxes.
Liquidity and Capital Resources
As of April 30, 2024, our principal sources of liquidity were cash and cash equivalents totaling $333.5 million and short-term investments totaling $336.0 million, which were held for working capital and general corporate purposes. Our cash equivalents and short-term investments are comprised of money market funds, U.S. Treasury securities, corporate bonds, agency securities, and commercial paper.
We finance our operations primarily through payments received from customers for subscriptions and professional services, net proceeds received through sales of equity securities, contributions from our ESPP, and interest income from our short-term investments portfolio.
A significant majority of our customers pay in advance for annual subscriptions. Therefore, a substantial source of our cash is from our deferred revenue, which is included on our condensed consolidated balance sheets as a liability. Deferred revenue consists of customer billings and payments in advance of revenue being recognized from the Company’s contracts. As of April 30, 2024, we had deferred revenue of $543.8 million, of which $541.7 million was recorded as a current liability and was expected to be recognized as revenue in the subsequent 12 months, provided all recognition criteria are met.
Material cash requirements from known contractual obligations
Leases
We have non-cancelable operating and finance leases that expire at various dates through 2029. As of April 30, 2024, we had fixed minimum lease payments of $51.3 million, of which $16.5 million is due in the next 12 months. Refer to Note 11, Leases, to the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q for additional information on our operating and finance leases.
Other contractual obligations
In the ordinary course of business we enter into contracts with vendors for goods and services, some of which are non-cancelable. As of April 30, 2024, we had material contractual obligations of $83.2 million, of which $75.8 million is due in the next 12 months. These contractual obligations primarily consist of purchase commitments with our cloud-based hosting and data service providers. See Note 14, Commitments and Contingencies, to the consolidated financial statements contained within our Annual Report on Form 10-K for additional information on our commitments with our cloud-based hosting and data service providers.
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We believe our existing cash, cash equivalents, and cash provided by sales of our products and services will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Our future capital requirements will depend on many factors, including our bookings and renewals, the timing of our collections, the introduction of new and enhanced product offerings, and the continued market adoption of our product. Our capital requirements will also depend on the timing and extent of spending to support our development efforts, sales and marketing activities, and employee-related expenditures. We may, in the future, enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. We may be required to seek additional equity or debt financing in order to meet these future capital requirements. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us, or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in new technologies, our ability to compete successfully could be reduced, and this could harm our results of operations.
Cash flows
The following table summarizes our cash flows for the periods indicated:
Three Months Ended April 30,
20242023
(in thousands)
Net cash provided by operating activities$50,078 $34,571 
Net cash provided by investing activities
8,377 31,641 
Net cash provided by (used in) financing activities
(6,902)5,694 
Effects of changes in foreign currency exchange rates on cash, cash equivalents, and restricted cash(196)(108)
Change in cash, cash equivalents, and restricted cash$51,357 $71,798 
Operating activities
Our largest sources of operating cash are cash collections from our customers for sales of subscriptions and professional services. Our primary uses of cash from operating activities are employee-related expenditures, costs related to brand awareness and demand generation, and costs related to hosting our platform.
Net cash provided by operating activities for the three months ended April 30, 2024 was $50.1 million compared to $34.6 million for the three months ended April 30, 2023. The increase of $15.5 million was primarily driven by an increase in cash received from customers, partially offset by an increase in cash paid to vendors and for employee-related expenses.
Investing activities
Net cash provided by investing activities during the three months ended April 30, 2024 was $8.4 million compared to $31.6 million for the three months ended April 30, 2023. The decrease of $23.3 million was primarily driven by the net change in short-term investment activity.
Financing activities
Net cash used in financing activities during the three months ended April 30, 2024 was $6.9 million compared to net cash provided by financing activities of $5.7 million for the three months ended April 30, 2023. The decrease of $12.6 million was primarily driven by an increase in payment of employee withholding tax liabilities related to the net settlement of restricted stock units.
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Indemnification Agreements
In the ordinary course of business, we enter into agreements of varying scope and terms pursuant to which we agree to indemnify customers, vendors, lessors, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, services to be provided by us, or from intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with our directors and certain officers and employees that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers, or employees. There are no indemnification claims that we are aware of at this time that could have a material adverse effect on our condensed consolidated financial statements.
Critical Accounting Policies and Estimates
We prepare our condensed consolidated financial statements in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and operating expenses, and related disclosures. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting policies and estimates.
The Company’s significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements contained within our Annual Report on Form 10-K for the year ended January 31, 2024. There have been no significant changes to these policies during the three months ended April 30, 2024 except as described in Note 2, Summary of Significant Accounting Policies, in this Quarterly Report on Form 10-Q.
 Recent accounting pronouncements
For further information on recent accounting pronouncements, refer to Note 2, Summary of Significant Accounting Policies, in the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk 
Interest Rate Risk
We had cash and cash equivalents and short-term investments totaling $669.5 million as of April 30, 2024, of which $446.5 million was invested in money market funds, U.S. Treasury securities, agency securities, corporate bonds, and commercial paper. Our cash and cash equivalents and short-term investments are held for working capital and general corporate purposes. We do not enter into investments for trading or speculative purposes.
Our cash equivalents and our short-term investments are subject to market risk due to changes in interest rates. Fixed rate securities may have their market value adversely affected due to a rise in interest rates. Due in part to these factors, our future investment income may fall short of our expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates. As our short-term investments are classified as available-for-sale, no gains are recognized due to changes in interest rates. As losses due to changes in interest rates are generally not considered to be credit related, no losses in such investments are recognized due to changes in interest rates unless we intend to sell, it is more likely than not that we will be required to sell, we sell prior to maturity, or we otherwise determine that all or a portion of the decline in fair value is due to credit related factors.
As of April 30, 2024, a hypothetical increase of 100-basis points in interest rates would not have a material impact on the value of our cash equivalents or short-term investments in our condensed consolidated financial statements. This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur.
Foreign Currency Exchange Risk
Due to our international operations, although our sales contracts are primarily denominated in U.S. dollars, we have foreign currency risks related to revenue denominated in other currencies, such as the Australian dollar, British pound sterling, Canadian dollar, and European Union euro, as well as expenses denominated in the Australian dollar, British pound sterling, Costa Rican Colón, and European Union euro. We are also exposed to certain foreign exchange rate risks related to our foreign subsidiaries. Changes in the relative value of the U.S. dollar to other currencies may negatively affect revenue and other operating results as expressed in U.S. dollars. We do not believe that an immediate 10% increase or decrease in the relative value of the U.S. dollar to other currencies would have a material effect on our operating results.
We have experienced and will continue to experience fluctuations in net loss as a result of transaction gains or losses related to remeasuring certain asset and liability balances that are denominated in foreign currencies. These exposures may change over time as business practices evolve and economic conditions change. We have not engaged in the hedging of foreign currency transactions to date as our exposure to foreign currency exchange rates has historically been partially hedged by both our U.S. dollar and foreign currency denominated inflows covering our U.S. dollar and foreign currency denominated outflows, respectively. We may enter into derivative or hedging transactions in the future if our exposure to foreign currency should become more significant.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation and supervision of our Chief Executive Officer and our Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Our disclosure controls and procedures are designed to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
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Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, in design and operation, were effective as of April 30, 2024.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitation on the Effectiveness of Internal Control
The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, in designing and evaluating the disclosure controls and procedures, management recognizes that any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Part II. Other Information
Item 1. Legal Proceedings
From time to time in the normal course of business, we may be subject to various legal matters such as threatened or pending claims or proceedings. For further information on our legal proceedings, see Note 12, Commitments and Contingencies, in the notes to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
Item 1A. Risk Factors
Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” before deciding whether to invest in our Class A common stock. The occurrence of any of the events or developments described below could materially and adversely affect our business, financial condition, operating results, and growth prospects. These factors could also cause our actual business and financial results to differ materially from those contained in forward-looking statements made by management from time-to-time. In such an event, the market price of our Class A common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently believe are not material may also impair our business, financial condition, operating results, and growth prospects.
Risk Factor Summary
The following summarizes certain of the most material risks that make an investment in our Class A common stock uncertain, risk laden, or speculative. If any of the following risks occur, our b