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)

Washington		20-2954357
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
500 108th Ave NE, Suite 200
Bellevue,	WA	98004
(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 class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, no par value per share	SMAR	The 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 filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller 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 Contents	Page
Part I. Financial Information	4
Item 1. Financial Statements (unaudited)	4
Condensed Consolidated Statements of Operations	4
Condensed Consolidated Statements of Comprehensive Loss	5
Condensed Consolidated Balance Sheets	6
Condensed Consolidated Statements of Changes in Shareholders’ Equity	7
Condensed Consolidated Statements of Cash Flows	8
Notes to Condensed Consolidated Financial Statements (unaudited)	9
1. Overview and Basis of Presentation	9
2. Summary of Significant Accounting Policies	10
3. Revenue from Contracts with Customers	10
4. Deferred Commissions	11
5. Net Loss Per Share	11
6. Investments	12
7. Fair Value Measurements	13
8. Goodwill and Net Intangible Assets	15
9. Shareholders' Equity	15
10. Income Taxes	18
11. Leases	19
12. Commitments and Contingencies	20
13. Geographic Information	21
14. Supplemental Condensed Consolidated Financial Statement Information	22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3. Quantitative and Qualitative Disclosures about Market Risk	34
Item 4. Controls and Procedures	34
Part II. Other Information	35
Item 1. Legal Proceedings	35
Item 1A. Risk Factors	35
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	67
Item 5. Other Information	67
Item 6. Exhibits	68
Signatures	69

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,
	2024		2023
Revenue
Subscription	$	249,095	$	206,001
Professional services	13,889		13,885
Total revenue	262,984		219,886
Cost of revenue
Subscription	35,772		33,167
Professional services	12,550		12,714
Total cost of revenue	48,322		45,881
Gross profit	214,662		174,005
Operating expenses
Research and development	62,437		56,190
Sales and marketing	125,239		114,952
General and administrative	38,115		34,978
Total operating expenses	225,791		206,120
Loss from operations	(11,129)		(32,115)
Interest income	7,826		5,217
Other income (expense), net	(377)		(536)
Loss before income tax provision	(3,680)		(27,434)
Income tax provision	5,178		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 diluted	137,428		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,
	2024		2023
Net loss	$	(8,858)	$	(29,870)
Other comprehensive loss
Net unrealized gain (loss) on available-for-sale securities	(998)		189
Foreign currency translation adjustments	12		(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, 2024		January 31, 2024
Assets
Current assets:
Cash and cash equivalents	$	333,502	$	282,094
Short-term investments	336,015		346,701
Accounts receivable, net of allowances of $5,579 and $6,560, respectively	156,818		238,708
Prepaid expenses and other current assets	83,423		64,366
Total current assets	909,758		931,869
Restricted cash	18		19
Deferred commissions	152,833		148,867
Property and equipment, net	43,533		42,362
Operating lease right-of-use assets	36,882		39,480
Intangible assets, net	25,251		27,960
Goodwill	141,477		141,477
Other long-term assets	5,979		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 benefits	59,288		77,453
Other accrued liabilities	30,552		30,534
Operating lease liabilities, current	15,711		16,040
Finance lease liabilities, current	239		216
Deferred revenue	541,734		568,670
Total current liabilities	648,386		695,850
Operating lease liabilities, non-current	29,692		33,100
Finance lease liabilities, non-current	398		455
Deferred revenue, non-current	2,023		1,785
Other long-term liabilities	424		434
Total liabilities	680,923		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 capital	1,507,602		1,468,805
Accumulated other comprehensive income (loss)	(1,132)		(146)
Accumulated deficit	(871,662)		(862,804)
Total shareholders’ equity	634,808		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 Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Shareholders’ Equity
	Shares	Amount
Balance as of January 31, 2024	136,884,011	$	—	$	1,468,805	$	(146)	$	(862,804)	$	605,855
Issuance of common stock under employee stock plans	781,216	—		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, 2024	137,665,227	$	—	$	1,507,602	$	(1,132)	$	(871,662)	$	634,808

	Three Months Ended April 30, 2023
	Common Stock (Class A and B)			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Shareholders’ Equity
	Shares	Amount
Balance as of January 31, 2023	131,845,028	$	—	$	1,243,730	$	101	$	(758,173)	$	485,658
Issuance of common stock under employee stock plans	1,067,430	—		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, 2023	132,912,458	$	—	$	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,
	2024		2023
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 expense	49,920		51,779
Depreciation and amortization	6,618		6,410
Net amortization of premiums (discounts) on investments	(3,034)		(2,028)
Amortization of deferred commission costs	15,661		11,429
Unrealized foreign currency loss	55		381
Non-cash operating lease costs	2,598		3,155
Other, net	2,106		872
Changes in operating assets and liabilities:
Accounts receivable	80,028		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 activities	50,078		34,571
Cash flows from investing activities
Purchases of short-term investments	(112,913)		(62,010)
Maturities of short-term investments	125,647		96,885
Purchases of property and equipment	(613)		(853)
Proceeds from sale of property and equipment	7		16
Capitalized internal-use software development costs	(3,751)		(2,397)
Net cash provided by investing activities	8,377		31,641
Cash flows from financing activities
Proceeds from exercise of stock options	693		532
Taxes paid related to net share settlement of restricted stock units	(13,055)		(621)
Proceeds from contributions to Employee Stock Purchase Plan	5,494		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 period	282,442		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 tax	984		69
Accrued purchases of property and equipment, including internal-use software	825		503
Share-based compensation expense capitalized in internal-use software development costs	1,212		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,
	2024		2023
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,
	2024	2023
Shares subject to outstanding common stock awards	11,774	13,902
Shares issuable pursuant to the 2018 Employee Stock Purchase Plan	370	378
Total potentially dilutive shares	12,144	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 Gains		Unrealized Losses		Estimated Fair Value
Cash equivalents:
Money market funds	$	108,411	$	—	$	—	$	108,411
Total cash equivalents	108,411		—		—		108,411
Short-term investments:
Corporate bonds	135,560		12		(286)		135,286
U.S. Treasury securities	167,754		3		(432)		167,325
Commercial paper	20,006		—		—		20,006
Agency securities	13,401		—		(3)		13,398
Total short-term investments	336,721		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 Gains		Unrealized Losses		Estimated Fair Value
Cash equivalents:
Money market funds	$	79,082	$	—	$	—	$	79,082
Commercial paper	4,497		—		—		4,497
Total cash equivalents	83,579		—		—		83,579
Short-term investments:
Corporate bonds	99,547		158		(9)		99,696
U.S. Treasury securities	169,825		123		—		169,948
Commercial paper	57,755		—		—		57,755
Agency securities	19,282		21		(1)		19,302
Total short-term investments	346,409		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 Cost		Estimated Fair Value
Due within one year	$	255,588	$	255,285
Due between one to five years	81,133		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 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Money market funds	$	108,411	$	—	$	—	$	108,411
Total cash equivalents	108,411		—		—		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 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Money market funds	$	79,082	$	—	$	—	$	79,082
Commercial paper	—		4,497		—		4,497
Total cash equivalents	79,082		4,497		—		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 Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net 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 names	4,100		(1,712)		2,388		4,100		(1,601)		2,499
Patents	170		(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		3.5	17,131		3.7
Trade names	2,388		5.4	2,499		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 2026	7,916
Fiscal 2027	5,750
Fiscal 2028	3,454
Fiscal 2029	721
Thereafter	441
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, 2024	3,517,075	$	24.77
Granted	—	—
Exercised	(67,105)	10.30
Forfeited or canceled	(37,893)	57.19
Outstanding at April 30, 2024	3,412,077	24.69
Exercisable at April 30, 2024	3,092,340	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, 2024	8,798,624	$	45.41
Granted	532,653	41.07
Vested	(1,011,111)	46.17
Forfeited or canceled	(456,826)	45.03
Outstanding at April 30, 2024	7,863,340	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 Shares	Weighted-Average Grant-Date Fair Value
Outstanding at January 31, 2024	321,463	$	50.54
Granted	194,624	34.27
Vested	—	—
Forfeited or canceled	(17,963)	50.39
Outstanding at April 30, 2024	498,124	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, 2024	18,985,254	5,572,546
Authorized	6,844,200	1,368,840
Granted	(727,277)	—
Forfeited or canceled	512,682	—
Balance at April 30, 2024	25,614,859	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,
	2024		2023
Cost of subscription revenue	$	3,052	$	3,459
Cost of professional services revenue	1,738		1,910
Research and development	18,056		17,432
Sales and marketing	16,595		19,054
General and administrative	10,479		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,
	2024		2023
Operating lease cost	$	3,307	$	3,981
Finance lease cost:
Amortization of assets	55		—
Interest on lease liabilities	16		—
Short-term lease cost	114		180
Variable lease cost	711		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,
	2024			2023
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 leases	16			—
Financing cash flows from finance leases	34			—
Weighted-average remaining lease term (in years)
Operating leases	3.7			4.3
Finance leases	2.4			0.0
Weighted-average discount rate
Operating leases	5.5		%	5.2		%
Finance leases	9.9		%	—		%

As of April 30, 2024, remaining maturities of lease liabilities were as follows (in thousands):

	Operating Leases		Finance Leases
Remainder of Fiscal 2025	$	12,108	$	203
Fiscal 2026	14,707		270
Fiscal 2027	10,759		226
Fiscal 2028	6,328		—
Fiscal 2029	5,292		—
Thereafter	1,357		—
Total lease payments	50,551		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 2026	2,154
Fiscal 2027	700
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,
	2024		2023
United States	$	222,827	$	185,595
EMEA	21,206		17,724
APJ	9,004		8,207
Americas other than the United States	9,947		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, 2024		January 31, 2024
United States	$	42,579	$	45,743
EMEA	2,197		2,266
APJ	3,577		3,793
Americas other than the United States	536		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, 2024		January 31, 2024
Prepaid expenses	78,701		$	57,685
Other current assets	4,722		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,
	2024		2023
Cash and cash equivalents	$	333,502	$	294,946
Restricted cash included in prepaid expenses and other current assets	279		420
Restricted cash	18		189
Total cash, cash equivalents, and restricted cash	$	333,799	$	295,555

22

Table of Contents

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.

23

Table of Contents

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,
	2024			2023
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 more	1,970			1,569
Customers with ARR of $50 thousand or more	4,028			3,343
Customers with ARR of $5 thousand or more	19,977			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.

24

Table of Contents

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.

25

Table of Contents

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.

26

Table of Contents

Results of Operations

The following table sets forth our results of operations for the periods presented:

	Three Months Ended April 30,
	2024		2023
	(in thousands)
Revenue
Subscription	$	249,095	$	206,001
Professional services	13,889		13,885
Total revenue	262,984		219,886
Cost of revenue
Subscription(1)	35,772		33,167
Professional services(1)	12,550		12,714
Total cost of revenue	48,322		45,881
Gross profit	214,662		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 expenses	225,791		206,120
Loss from operations	(11,129)		(32,115)
Interest income	7,826		5,217
Other income (expense), net	(377)		(536)
Loss before income tax provision	(3,680)		(27,434)
Income tax provision	5,178		2,436
Net loss	$	(8,858)	$	(29,870)

(1)    Amounts include share-based compensation expense as follows:

	Three Months Ended April 30,
	2024		2023
	(in thousands)
Cost of subscription revenue	$	3,052	$	3,459
Cost of professional services revenue	1,738		1,910
Research and development	18,056		17,432
Sales and marketing	16,595		19,054
General and administrative	10,479		9,924
Total share-based compensation expense	$	49,920	$	51,779

27

Table of Contents

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,
	2024		2023
Revenue
Subscription	95	%	94	%
Professional services	5		6
Total revenue	100		100
Cost of revenue
Subscription	14		15
Professional services	5		6
Total cost of revenue	18		21
Gross profit	82		79
Operating expenses
Research and development	24		26
Sales and marketing	48		52
General and administrative	14		16
Total operating expenses	86		94
Loss from operations	(4)		(15)
Interest income	3		2
Other income (expense), net	—		—
Loss before income tax provision	(1)		(12)
Income tax provision	2		1
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
	2024			2023			Amount		%
	(dollars in thousands)
Revenue
Subscription	$	249,095		$	206,001		$	43,094	21	%
Professional services	13,889			13,885			4		—	%
Total revenue	$	262,984		$	219,886		$	43,098	20	%
Percentage of total revenue
Subscription revenue	95		%	94		%
Professional services revenue	5		%	6		%

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.

28

Table of Contents

Cost of revenue, gross profit, and gross margin

	Three Months Ended April 30,						Change
	2024			2023			Amount		%
	(dollars in thousands)
Cost of revenue
Subscription	$	35,772		$	33,167		$	2,605	8	%
Professional services	12,550			12,714			(164)		(1)	%
Total cost of revenue	$	48,322		$	45,881		$	2,441	5	%
Gross profit	$	214,662		$	174,005		$	40,657	23	%
Gross margin
Subscription	86		%	84		%
Professional services	10		%	8		%
Total gross margin	82		%	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
	2024			2023			Amount		%
	(dollars in thousands)
Research and development	$	62,437		$	56,190		$	6,247	11	%
Percentage of total revenue	24		%	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.

29

Table of Contents

Sales and marketing expenses

	Three Months Ended April 30,						Change
	2024			2023			Amount		%
	(dollars in thousands)
Sales and marketing	$	125,239		$	114,952		$	10,287	9	%
Percentage of total revenue	48		%	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
	2024			2023			Amount		%
	(dollars in thousands)
General and administrative	$	38,115		$	34,978		$	3,137	9	%
Percentage of total revenue	14		%	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
	2024		2023		Amount		%
	(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
	2024		2023		Amount		%
	(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.

30

Income tax provision

	Three Months Ended April 30,					Change
	2024			2023		Amount		%
	(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.

31

Table of Contents

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,
	2024		2023
	(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.

32

Table of Contents

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.

33

Table of Contents

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.

34

Table of Contents

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 business, financial condition, operating results, and growth prospects may be impaired, the market price of our Class A common stock could decline, and you may lose all or part of your investment.

Infrastructure, data security, and privacy risks

•Security threats and attacks are common, increasing globally, and may result in significant liabilities.

35

Table of Contents

•Our or our vendors’ failure to sufficiently secure our products and services may result in unauthorized access to and use of customer data, a negative impact on our customer attraction and retention, and significant liabilities.

•We depend on public cloud service providers and computing infrastructure operated by third parties, and any disruptions in these operations could harm our business and operating results.

•If our platform fails to perform or if we fail to architect our platform to deliver on customer demand for scale, performance, and sophisticated use cases, then we could be subject to liability and our market share could decline.

•If we fail to manage our services infrastructure, or our platform experiences outages, interruptions, or delays in updates to meet customers’ needs, we may be subject to liabilities and our operating results may be harmed.

Business, industry, and product risks

•The market in which we participate is highly competitive, and if we do not compete effectively, our operating results could be harmed.

•Our business depends on a strong brand, and if we are unable to develop, maintain, and enhance our brand, our business and results may be harmed.

•Our forecasts of market growth may prove to be inaccurate, and our business may not grow at a pace similar to market growth.

•Failure to establish and maintain partnerships with complementary technology offerings and integrations could limit our ability to grow our business.

Commercial and financial risks

•It is difficult to predict future operating results.

•We have a history of cumulative losses, and we cannot assure you that we will achieve and sustain profitability in the future.

•If we are unable to attract new customers and maintain and expand sales to existing customers, our growth could be slower than we expect and our business may be harmed.

•We derive substantially all of our revenue from a single offering.

Operational and other risks

•We have recently experienced rapid growth and expect our growth to continue; failure to manage our growth effectively may harm our business.

•Our sales cycle may become longer, more complex, and more expensive as we continue to target enterprise and government customers, which could harm our business or results.

•Our growth depends on the expansion and effectiveness of our sales force domestically and internationally, and the failure to expand or maintain the effectiveness of our sales force may harm our business and results.

•We may not receive significant revenue from our current development efforts for several years, if at all.

•Contractual disputes or commitments, including indemnity obligations, may be costly, time consuming, and could harm our reputation.

36

Table of Contents

Risks Related to Our Platform and Infrastructure

Security threats and attacks are common, increasing globally, and they may result in significant liabilities.

Our platform and our internal corporate information technology systems have in the past been, and will in the future be, subject to cyber-attacks, credential stuffing, account takeover attacks, denial or degradation of service attacks, phishing attacks, ransomware attacks, malicious software programs, supply chain attacks, and other threats, any of which may result in adverse effects on the confidentiality, integrity, or availability of our information systems (collectively, “Cybersecurity Threats”). Further, we engage service providers to store and otherwise process some of our and our customers’ data, including sensitive and personal information, and these service providers are also targets of Cybersecurity Threats.

Cybersecurity Threats have been increasing in frequency and sophistication globally and may be accompanied by demands for payment in exchange for resolution, restoration of functionality, or return of data. Sources of Cybersecurity Threats range from individuals to sophisticated organizations, including state-sponsored actors and organizations. These attackers use a wide variety of methods to exploit vulnerabilities and gain access to corporate assets, including networks, information, or credentials. The types and methods of Cybersecurity Threats are constantly evolving and becoming more complex, and we may not be able to detect, combat, or successfully defend against Cybersecurity Threats. Attackers initiating Cybersecurity Threats may gain access to our corporate assets. Any vulnerabilities in our infrastructure or the success of any Cybersecurity Threats against us may not be discovered in a timely fashion or at all, and the impact of vulnerabilities may be exacerbated the longer they persist or remain undetected. While we utilize security measures and architecture designed to protect the integrity of our information systems, we remain subject to ongoing and evolving Cybersecurity Threats, and we anticipate that we will need to expend significant resources in an effort to protect against Cybersecurity Threats. We may not be able to deploy, allocate, or retain sufficient resources to keep pace with persistent and evolving Cybersecurity Threat landscape.

Moreover, many of our employees work remotely, and many of the vendors and other third parties we engage with utilize remote workers in various jurisdictions throughout the world, which may involve relying on less secure syst