Work from home future looks more like a 'hybrid world': Smartsheet CEO

Mark Mader, Smartsheet CEO, joins Yahoo Finance's The First Trade with Alexis Christoforous and Brian Sozzi to break down the company's latest quarterly report, the recent acquisition of Brandfolder, how the workforce has changed amid the coronavirus pandemic and much more.

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ALEXIS CHRISTOFOROUS: We have our eye on shares of Smartsheet this morning, off about 1% right now. The company fell short of Wall Street's estimates despite a significant jump in revenue. Joining us now is Smartsheet's CEO, Mark Mader.

Mark, good to have you here this morning. For those who don't know, this is a cloud computing company. And would love to know what's-- what's business looking like right now for you?

MARK MADER: It was a good quarter. We-- we've seen people-- we've seen the market stabilize. We had our second biggest quarter ever in terms of people making large commitments to Smartsheet. And that was really exciting to see.

And we're seeing that, you know, its-- as people make buying decisions, it's not that people necessarily need to get back to where we were, they need to have confidence in what tomorrow looks like. And it's really a predictability that they seek to be able to make those decisions. So we are seeing people have conversations wanting to innovate. They know that the future is not gonna be unlocked by simply having online meetings. So they're looking for technologies that can give them the edge tomorrow.

BRIAN SOZZI: Mark, you guys dropped this little nugget in your earnings call. August, you had the largest pipeline build of the year. That's certainly good to see. Does that include a lot more larger accounts?

MARK MADER: It does. People are making larger commitments. When they're looking at really having impact, they're not looking for incremental change. They're looking for, how do they activate their entire workforce? And I think so many people for so many years have thought about work in sort of a hand-to-mouth way.

How do you-- how do you get more people engaged in this digital transformation that's going on? How do you get people outside of just IT helping transform the business? And we're starting to see that happen now across all sized companies, not just large ones.

ALEXIS CHRISTOFOROUS: You know, during this very challenging time, Smartsheet just made its largest acquisition yet buying Brandfolder for about $155 million about a week ago. What is that gonna do for your overall business and for the bottom line, Mark?

MARK MADER: Well, one of the areas that is just so on fire right now is businesses are needing to transact online. And online, you have digital assets. What Brandfolder helps teams do is to manage the entire lifecycle of needing to plan for the development of an asset, to the approval of the asset, to the distribution of the asset.

So any online property that is managing content at scale will benefit from a product like Brandfolder. So we're looking at that whole digital lifecycle of, I have an idea for a concept and a campaign, to the development, to the throughput and putting that on a site somewhere. And it's amazing. Most companies today are still storing these assets in online shared folders. And while that may be digitized, it's not necessarily a transformational move.

BRIAN SOZZI: You know, I'm not surprised that this acquisition. You know, last time we actually saw you physically, we saw you in person in our studio. Feels like 12 years ago, but it wasn't.

I believe it was earlier this year. You still have a lot of cash on your balance sheet. Where else are you looking to make acquisitions?

MARK MADER: Well, when we look at the speed with which we want to serve our customers, we obviously have a-- we have a large team of 1,800 people developing. And when we look at the processes around automation, and integration, and really helping Smartsheet not just exist at a company, but exist in the context of the other systems they use, integration and interplay with these other core systems is fundamental to where we're going. So you should expect to see us to continue to develop organically and be acquisitive in areas like that.

BRIAN SOZZI: You know, Mark, if anything in the most recent quarter, I think the street did ding you guys a little bit on your billings growth, up 22%. Did slow from the first quarter, up about 30%. Anything you have diagnosed with that?

MARK MADER: Yeah. I think we look at things on a relative basis. With our larger accounts, we had a 90% year-on-year growth of customers over 100,000. We hit our-- we hit a milestone of 10 customers contributing over a million dollars of ARR recurring revenue. So these are really important markets to show that we're not just landing, but we're actually delivering significant value for those customers.

And, you know, there was a shock to the system. I think the companies reacted to say, how do we solve for the primitives, communications, and how we transact? And I think what we're gonna see here is we're gonna see in subsequent phases people starting to unlock those new investments and moving again beyond those primitives.

ALEXIS CHRISTOFOROUS: Talk to us about just what your workforce looks like right now. I know you're an inter-- you're an international company. Are you all working from home at the moment? How-- and if you are, how long do you see that lasting?

MARK MADER: We expect to really never go back to work as it used to be. And we have prepared ourselves over the years to be fully digital. Our systems run digitally. We're-- they're available from anywhere in the world.

And I do believe the future looks like more of a hybrid world where teams do still get together. But we have also found these unlocks where people can actually be hyper-productive in the setting they're in today. But I think it's a meld. I don't think it's one or the other.

BRIAN SOZZI: Does that hurt innovation at all, the fact that you can't be in the office and talk to people face to face?

MARK MADER: It can if you don't put the right platforms in place to actually drive that. So if you don't put the systems in place to free up the capacity for people to have time to innovate, that's a problem. So when you think about all the things that tax us, how do you disseminate information? How do you get that manual work done on your behalf so that you can actually have the capacity to engage with others to innovate?

That is important. The one piece that I think is still out there for all companies is, how do you generate that ad-hoc interaction that we so benefited from in the offices? That is still an unlock that we're all trying to find.