Smartsheet CEO on Q3 earnings beat, outlook

Yahoo Finance’s Julie Hyman and Brian Sozzi speak with Smartsheet CEO Mark Mader about the company’s Q3 earnings.

Video Transcript

JULIE HYMAN: It's called Smartsheet, and it competes in that work from home business when it comes to shared documents and other types of tools that people are using. Third quarter revenue at the company up 38%, and the shares got a big pop yesterday on that news. We are joined by the CEO right now. That is Mark Mader, to talk more about this in a "First on Yahoo Finance."

Mark, thanks for joining us. So first of all, obviously, we've learned this year that there are many, many tools that people have at their disposal when they are working from home. So if you could just outline for our viewers first of all, where Smartsheet fits in that universe of tools.

MARK MADER: Yeah, so when we look at the category, the tools we use every day are communication tools. And what people are realizing now, is that there is a huge category and market outside of communication. And when we think of the need to track and manage and automate work, that actually doesn't lend itself so well to a Google Meet or Zoom call.

So the mechanisms people have in place to actually track their programs, their projects, their initiatives and all the accountabilities around that, and then adding some automation to that, that is what we do every single day. And it's really in support of companies trying to get to this digital first operating model. And it's a multifaceted initiative.

BRIAN SOZZI: Mark, you surprised me a little bit on the earnings call, that small businesses, that revenue stream, I believe the word was stabilized. Why did it stabilize? And is that sustainable when really growth across the globe is starting to slow down again?

MARK MADER: I think what people are doing, when you look at the total investment dollars that are allocated by a company, while in some areas, people are pulling back, they're also trying to deploy their capital in areas where they can derive more yield. And I think technology continues to be one of those areas where people are trying to get more with either the same capacity they have, or less.

And I think technology will still have many years ahead of it where companies and operators who are coming up that maturity curve are going to be deploying that capital. And I think that's part of what we're seeing. So again, on a net basis, a company may be pulling back some of their investment, but in technology, we continue to see that increasing.

JULIE HYMAN: Mark, you all reported revenue of almost $99 million for the quarter. Looking out at the fourth quarter, you're looking at revenue of $102 to $103 million. As you start to head beyond that and into 2021, what's the magnitude of gains going to look like? Are you're going to see some moderation kind of coming out what has been a hot period?

MARK MADER: We have not provided guidance for next year. And I would say that it is as much a function of the macro situation as it is a function of the receptivity of some of the new things that are coming on. So I think investor response has been a combination of both really nice performance within both that mid and large enterprise space combined with a roadmap, that is really unlocking some new opportunities. So again, we'll be reporting out guidance with next quarters' earnings, but we expect that the market remains very vibrant in this category.

BRIAN SOZZI: Mark, since the last time we spoke, we've had a big deal in the space with Salesforce scooping up Slack. That's really one of the first transactions of a bigger company buying a smaller company in the work from home space. Do you expect a wave of consolidation now because of that deal? And how do you expect to, does that change any planning for your business?

MARK MADER: It really doesn't change the plan. I think when we look at a company like Salesforce entering the communication category, it seems like a logical extension. They're really serving principally sales and service representatives at companies today with Sales Cloud and Service Cloud. And letting them diversify into this communication realm and potentially helping that energize some of those other properties seems logical.

I don't believe that that one transaction causes this cascading effect. I think each of these are very situational. I think for Salesforce, they have their strategy and their approach. I don't think that necessarily maps to other large caps.

JULIE HYMAN: Mark, at the same time, do you think it makes it harder for you to compete when you have this consolidation where a Salesforce, for example, can offer a bigger suite of product offerings to its customers?

MARK MADER: I think when products are similar, I think that is a risk. I think when they are dissimilar, like in this case, we are a Slack customer. We're mutual customers of each other. They're very different products. So I think when you see synergies, like we partner with Slack, we partner with Salesforce, those products tie into one another with Smartsheet, I think there actually could be some benefits. I think it's a different case when you have a direct competitor teaming up with another company.

JULIE HYMAN: Gotcha. All right, Mark Mader, thank you so much for spending some time with us today. He's the CEO of Smartsheet. Thanks again for your time.