Earnings

Slack Revenues Soar, But Less Than Competitor Zoom

Slack

Slack, the San Francisco-based workplace messaging app, saw its revenues surge in the first quarter as working from home became the new reality amid the COVID-19 pandemic.

Total revenue was $201.7 million, up 50 percent compared to the same quarter one year ago.

“Q1 was a phenomenal quarter for Slack,” said Co-Founder and CEO Stewart Butterfield in a statement, citing 12,000 net new paid customers. “We believe the long-term impact the three months and counting of working from home will have on the way we work is of generational magnitude.”

But the company’s stock tumbled 15 percent in after-market trading on Thursday (June 4) and 14 percent at the close on Friday afternoon (June 5) as the company acknowledged the global shift to work at home barely lifted its growth rate from before the pandemic, the Financial Times reported.

Slack’s Q1 results came two days after video conferencing app Zoom Video Communications Inc. reported booming demand. The San Jose, California competitor said its Q1 revenue grew 169 percent to $328.2 million from $122 million from the previous year as the coronavirus pandemic drove millions of new customers to the video calling service and Zoom became a household name, the report said.

Analysts surveyed by FactSet had expected adjusted earnings of 9 cents a share on sales of $230.6 million.

Butterfield told the FT the more complex nature of the Slack service had made it a “harder lift” for customers to adopt compared with Zoom, a simple video conferencing app.

Still, he predicted its new customers were unlikely to drop the service, and Slack was not seeing an uptick in its churn rate as more people returned to the office.

Angela Ashenden, an analyst at CCS Insight, told the newspaper Wall Street had hoped a jump in Slack’s users would translate into huge gains in revenue in the same way as Zoom. The different nature of the two software services made Slack a slower burn, she said.

“One of the biggest challenges for Slack is that its growth is slowing, and the market is spooked by that from such a newly public company,” Ashenden said

But Slack CFO Allen Shim said the firm is not giving up.

“We plan to continue to invest, as we see the current crisis accelerating digital transformation and the transition from email to channel-based messaging platforms over the medium term to long term,” he said in a statement. “At the same time, we will manage the business prudently and with a goal of showing consistent operating leverage and progression toward being free cash flow positive.”

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