Slack reports Q1 FY20 results ahead of next week’s direct listing; loss widens despite customer growth

Slack Technologies Inc., which is going to list its Class A common stock directly on June 20 with a ticker symbol WORK on NYSE, reported its financial results for the first quarter ended April 30, 2019, on Monday after the market closed. The workplace collaboration platform also provided the outlook for its second quarter of 2020 ending July 31, 2019, and the fiscal year 2020 ending January 31, 2020.

Slack’s non-GAAP loss for the first quarter widened to $0.23 per share from a loss of $0.16 per share in the prior-year quarter. Revenue surged 67% to $134.8 million with 37% of total revenue coming from outside of the US. On a GAAP basis, the San Francisco, California-based firm’s loss increased to $0.26 per share from a loss of $0.21 per share in the quarter ended April 30, 2018.

Slack ended the first quarter with more than 95,000 paid customers and the number of paid customers greater than $100,000 in annual recurring revenue (ARR) soared 84% annually to 645. At the end of FY19, the company had more than 88,000 paid customers and the number of paid customers greater than $100,000 in ARR was 575. Calculated billings of $149.6 million grew 47% from the first quarter of fiscal 2019.

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For the second quarter of the fiscal year 2020, the messaging app expects adjusted net loss of $0.20 to $0.19 per share. Revenue is estimated to be between $139 million and $141 million, representing year-over-year growth of 51-53%. Slack expects to register about $32 million of one-time expenses related to direct listing fees, which included banking advisory, accounting, and legal fees.

For the fiscal year 2020 ending January 31, 2020, Slack expects adjusted net loss per share of $0.44 to $0.41. Revenue is touted to be in the range of $590 million to $600 million, representing an annual growth rate of 47-50%. The company expects calculated billings to grow 40-44% and be between $725 million and $745 million. One-time cash expenses related to direct listing is predicted to be about $34 million for the full year.

Slack, which was founded in 2014, had grown its user base rapidly since launch. During the three months ended January 31, 2019, daily active users exceeded 10 million with more than half of the daily active users are outside the US.

As of January 31, 2019, Slack had more than 600,000 organizations with three or more users, comprised of more than 500,000 organizations on the free subscription plan. The company has got more than 65 Fortune 100 companies in the paid customers list.

Through its SEC filing, Slack had said that prior to any sales of its Class A common stock, registered stockholders who hold Class B common stock must convert their shares of Class B common stock into shares of Class A common stock.

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Shares of Slack’s Class B common stock have a history of trading in private transactions. The low and high sales price per share of Class B common stock during the period from February 1, 2019, through May 30, 2019, was $21.00 and $31.50, respectively. The volume weighted average price per share for the period from February 1, 2019, through May 30, 2019, was $26.38.

However, Slack added that its recent trading prices in private transactions may have little or no relation to the opening public price of shares of Class A common stock on the NYSE or the subsequent trading price of shares of Class A common stock on the NYSE.

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