And I think the Gen AI work is quite interesting because it really enables those people who are manipulating, trying to get insights from the data giving them a mechanism to do their work faster and more cheaply. And I think when you have that dynamic, I would say the ability to argue for a license is quite compelling. I mean in the grand scheme of the total cost of an employee the Gen AI license costs or the license is quite trivial. So I really love the fact that we are moving away from this notion of only creators need licenses to if you really want to be effective in the most high impact way, you should also get a license. And I think that will bode really well. We have a huge population measured in millions of people who are actively engaged, who do not pay us today, and we are giving them reasons to subscribe.
Pinjalim Bora: Got it. Thank you very much.
Operator: Your next question comes from the line of Alex Zukin with Wolfe Research. Your line is open.
Ethan Bruck: Hey, guys. This is Ethan Bruck on for Alex Zukin. Congrats on the quarter. I just — I appreciate the color around the ARR exit rate. I’m just curious if this is also how you think about where ARR trends potentially a troughing if it’s kind of a bottom and as you called out, some stabilization you saw in enterprise in the quarter.
Pete Godbole: Ethan, I think when you think of what our future outlook on NDRR is, it really comes down to sort of what is our future projection on growth. That’s something that we have to play out essentially this year. We have to see the impact of the actions Mark talked about in terms of AI, self-discovery, and that’s really going to determine in a lot of ways where the NDRR goes. So it’s a little premature to sort of call out at this point.
Ethan Bruck: Okay. I got it. That’s helpful. And kind of a follow-up there, the monetization strategy and the timing around the Gen AI features was very clear. I was just curious, when do you expect that to start becoming an impact on net retention as customers kind of stay more to the platform and just also as well on growth retention, which is still holding very strong.
Pete Godbole: So, Ethan, when you think of the net retention impact of AI features, I think it comes down to people actually getting their hands on those features, using those features in context of the work. So I think when you get more real data on what customers are doing with it, it informs the exact things you’re asking about, which is what do I think about net dollar retention rate do I expand? Which people expand, what use cases they expand to all of that comes about as kind of, I call it, the second order impact of them trying the product.
Ethan Bruck: Okay. That’s great. Thank you very much and congrats on the quarter.
Pete Godbole: Thanks, Ethan.
Operator: Your next question comes from the line of Brent Thill with Jefferies. Your line is open.
Brent Thill: Thanks, Mark. I’m just curious if you could characterize the selling environment. I know Q1, it was a little slower of the gate. It seems like that snapped back in Q2 and I mean how much of this is just snap back from things that slipped from Q1 to Q2 versus a better environment, if you will.
Mark Mader: I think the environment plays — absolutely plays a role. But I would also say, as you go through the year, the account plans that you put in motion and started to define in the Q1 and Q2 should start to produce more fully in the second half. So I think the convenient answer is to always say, well, the macro does this macros that? I think if you run your playbook well, you should see those things that you’ve set up in the first half start to contribute in the second. So I would say we are benefiting from right now, and we started to benefit in Q2 from some of that planning we had done early in the year. You start solution selling, framing, framing the value of these things, I would expect that to continue in Q3 and Q4.
Brent Thill: And then just a quick follow-on to that. This whole theme of consolidation. There are a lot of point solutions out there. You have COVID effectively bought one of everything. Are you now seeing any tailwind to we’ve got to get in this consolidation move and move everything over to Smartsheet from the five other tools we cobbled together during the pandemic.
Mark Mader: I would say consolidation, Brent, is more common if an environment has multiple substantial subscription agreements in place. Very often, I would say, our largest transactions are someone basically anchoring on us for sort of their strategy for the next x years. In the context of there being a small deployment of some other provider, that’s really not the payoff. The payoff is hey, how can we save $32,000 by powering something down. It’s all about how do we drive yield from a very big Smartsheet investment. There have been a few cases over the years where there’s been a few hundred thousand dollar deployment of company X and us, where we’ve won, where it is a displacement. But I would say companies are more focused on making the decision on the platform they want to bet on and then containing the existing usage of another tool as opposed to eradicating it.
The yield on eradication is just not that high. And I think a lot of people don’t want to sort of unseat a division or a small team just because the payoff isn’t that great. So I would say still hyper focused from our largest clients on making platform choices for future growth. And consolidation, we haven’t really seen tick up that much in terms of the theme that’s driving these big deals.
Brent Thill: Just a quick follow-up for Pete. Any downsizing in the largest deployment customers are out there? There’s been some noise in the channel. I just wanted to clarify that. We’ve been giving many questions. Simple yes or no is fine.
Pete Godbole: No.
Brent Thill: Very clear. Thank you.
Operator: Your next question comes from the line of Scott Berg with Needham. Your line is open.
Scott Berg: Hi, everyone. Nice quarter. Two questions for me. Pete, I wanted to start with your comment on macro stability. I think you said there was “some macro stability”. Can you help us unpack that a little bit in terms of what you meant there, in particular? Thank you.
Pete Godbole: Yes. I referenced the macro stability in the context of the enterprise customers. As I said, some of this is our selling efforts getting sort of more refined in approach, and the second is, as you build out plans with customers, just the enterprise play these things develop as customers put together plans at the start of the year and grow those through the end. So we saw that manifest itself in higher sales productivity and attainment of the enterprise team. So that’s what we saw play out.
