Earnings: Slack Q2 loss narrows as revenue rises 58%; stock drops on weak outlook

Workplace messaging platform Slack Technologies Inc. (NYSE: WORK) reported better than expected results for the second quarter of 2020. However, the company’s stock lost sharply during Wednesday’s after-hours session as its guidance fell short of expectations.

On an adjusted basis, the company reported a loss of $0.14 per share, marking an improvement from the $0.25 per share loss reported last year. Unadjusted net loss widened to $359.56 million or $0.98 per share from $31.86 million or $0.26 per share in the second quarter of 2019. Analysts were looking for a wider net loss.

37% Subscription Growth

Revenues advanced to $144.97 million from $92 million last year and came in above the market’s estimates. At the end of the quarter, the company had more than 100,000 paid customers, which is up 37% from last year. Net dollar retention rate was 136%.

Also see: Safe Bulkers slips to Q2 loss

“This is an entirely new category of software enabling a once-in-a-generation shift in the way people work together. We believe channel-based collaboration is so superior to email-based communication for work, that this shift is inevitable,” said Stewart Butterfield, Chief Executive Officer of Slack.

Outlook

The management expects revenues to grow 46-48% year-over-year in the third quarter to the range of $154 million to $156 million. The estimate for adjusted operating loss is $49-$47 million. Slack is expected to record an adjusted net loss per share of $0.09 to $0.08 in the third quarter, which is wider than the estimated loss of $0.07 per share.

Also read: Palo Alto Networks Q4 results beat estimates

In the whole of 2020, revenues are forecast to grow between 51% and 52% to $603-$610 million. The company is looking for a full-year operating loss in the range of $180 million to $176 million and adjusted net loss between $0.42 per share and $0.40 per share. The market predicted a slightly narrower loss.

Wall Street Debut

Over the years, Slack achieved stable revenue growth by expanding its customer base. In June, it went public through a direct listing and the stock opened at $38.50. Since then, the shares have fallen about 5%. The stock lost about 12% soon after the earnings report during Wednesday’s extended trading, after closing the regular session higher.

Get access to timely and accurate verbatim transcripts that are published within hours of the event