Q3FY20 total revenue of $168.7 million up 60%
year-over-year
Non-GAAP operating margin improved 26
percentage points year-over-year
Added 101 Paid Customers with over $100,000 in
annual recurring revenue
Exceeded 50 Paid Customers with over $1 million
in annual recurring revenue
Slack Technologies, Inc., (NYSE: WORK) today reported financial
results for its fiscal quarter ended October 31, 2019.
Management Commentary:
“Shared channels went into general availability in mid-September
after an extensive beta period. Since then the rate of adoption has
accelerated,” said Stewart Butterfield, Chief Executive Officer and
Co-Founder at Slack. “This is our most exciting product release in
collaboration since we first launched Slack.”
“Revenue growth was 60% year-over-year, driven by strong growth
upmarket,” said Allen Shim, Chief Financial Officer at Slack. “We
ended the quarter with 821 Paid Customers greater than $100,000 in
annual recurring revenue, which is up 67% year-over-year. We also
exceeded 50 Paid Customers with greater than $1 million in annual
recurring revenue for the first time, an indication that large
enterprises are increasingly standardizing on Slack as their
primary collaboration platform.”
Board of Directors
Update:
Effective today, Slack appointed Michael McNamara to its board
of directors. Slack also announced that Chamath Palihapitiya will
be stepping down from its board of directors.
Third Quarter Fiscal 2020 Financial
Highlights:
- Total revenue was $168.7 million, an increase of 60%
year-over-year.
- Calculated Billings was $186.1 million, an increase of 47%
year-over-year.
- GAAP gross profit was $145.6 million, or 86.3% gross margin,
compared to $92.1 million, or 87.2% gross margin, in the third
quarter of fiscal year 2019. Non-GAAP gross profit was $148.9
million, or 88.3% gross margin, compared to $92.5 million, or 87.5%
gross margin, in the third quarter of fiscal year 2019.
- GAAP operating loss was $95.0 million, or 56% of total revenue,
compared to a $50.8 million loss in the third quarter of fiscal
year 2019, or 48% of total revenue. Non-GAAP operating loss was
$18.1 million, or 11% of total revenue, compared to a $39.6 million
loss in the third quarter of fiscal year 2019, or 37% of total
revenue.
- GAAP net loss per basic and diluted share was $0.16. Non-GAAP
net loss per share was $0.02.
- Net cash used in operations was $9.1 million, or 5% of total
revenue, compared to cash used in operations of $28.4 million, or
27% of total revenue, for the third quarter of fiscal year 2019.
Free Cash Flow was $(19.1) million, or 11% of total revenue,
compared to $(43.5) million, or 41% of total revenue for the third
quarter of fiscal year 2019.
Recent Business
Highlights:
- Third Quarter Highlights:
- Ended the quarter with over 105,000 Paid Customers, up 30%
year-over-year.
- Net dollar retention rate was 134%.
- The number of Paid Customers with greater than $100,000 in
annual recurring revenue was 821, up 67% year-over-year.
- The number of Paid Customers with greater than $1 million in
annual recurring revenue exceeded 50 for the first time.
- Announced general availability of shared channels and Workflow
Builder.
- Ended the quarter with over 26,000 Paid Customers using shared
channels, up from over 20,000 at the end of last quarter.
Financial Outlook:
For the fourth quarter of fiscal year 2020, Slack currently
expects:
- Total revenue of $172 million to $174 million, representing
year-over-year growth of 41% to 43%.
- Non-GAAP operating loss of $36 million to $34 million.
- Non-GAAP net loss per share of $0.07 to $0.06, assuming
weighted average shares outstanding of 550 million.
For the full fiscal year 2020, Slack currently expects:
- Total revenue of $621 million to $623 million, representing
year-over-year growth of 55% to 56%.
- Non-GAAP operating loss of $144 million to $142 million,
including approximately $30 million of one-time direct listing
related expenses.
- Non-GAAP net loss per share of $0.32 to $0.31, assuming
weighted average shares outstanding of 399 million.
- Calculated Billings of $745 million to $760 million,
representing year-over-year growth of 44% to 47%.
- Free Cash Flow net burn of $85 million to $80 million,
including approximately $30 million of one-time direct
listing-related expenses and $21 million of one-time direct listing
related cash taxes related to RSU vesting.
Non-GAAP Financial
Measures:
This press release and the accompanying tables contain the
following non-GAAP financial measures: calculated billings, free
cash flow, non-GAAP gross profit, non-GAAP gross margin, non-GAAP
sales and marketing expenses, non-GAAP research and development
expenses, non-GAAP general and administrative expenses, non-GAAP
operating loss, non-GAAP operating margin, non-GAAP net loss, and
non-GAAP net loss per share. Certain of these non-GAAP financial
measures exclude stock-based compensation and amortization of
intangible assets.
Slack believes that these non-GAAP measures of financial results
provide useful information to management and investors regarding
certain financial and business trends relating to Slack’s financial
condition and results of operations. Slack’s management uses these
non-GAAP measures to compare Slack’s performance to that of prior
periods for trend analysis, and for budgeting and planning
purposes. Slack believes that the use of these non-GAAP financial
measures provides an additional tool for investors to use in
evaluating ongoing operating results and trends and in comparing
Slack’s financial measures with other software companies, many of
which present similar non-GAAP financial measures to investors. The
non-GAAP financial information is presented for supplemental
informational purposes only, and should not be considered a
substitute for financial information presented in accordance with
GAAP, and may be different from similarly-titled non-GAAP measures
used by other companies.
Management does not consider these non-GAAP measures in
isolation or as an alternative to financial measures determined in
accordance with GAAP. The principal limitation of these non-GAAP
financial measures is that they exclude significant expenses and
income that are required by GAAP to be recorded in Slack’s
financial statements. In addition, they are subject to inherent
limitations as they reflect the exercise of judgment by management
about which expenses and income are excluded or included in
determining these non-GAAP financial measures. Slack urges
investors to review the reconciliation of its non-GAAP financial
measures to the comparable GAAP financial measures, which it
includes in press releases announcing quarterly financial results,
including this press release, and not to rely on any single
financial measure to evaluate Slack’s business.
Reconciliation tables of the most comparable GAAP financial
measures to the non-GAAP financial measures used in this press
release are included with the financial tables at the end of this
release. Slack has not reconciled its outlook as to non-GAAP
operating loss and non-GAAP net loss per share to their most
directly comparable GAAP measure because certain items are out of
Slack’s control or cannot be reasonably predicted. Accordingly, a
reconciliation for forward-looking non-GAAP operating loss and
non-GAAP net loss per share is not available without unreasonable
effort.
Forward-Looking
Statements:
This press release contains “forward-looking statements” within
the meaning of the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995, including but not limited
to, statements regarding our financial outlook and market
positioning. These forward-looking statements are made as of the
date they were first issued and were based on current expectations,
estimates, forecasts and projections as well as the beliefs and
assumptions of management. Words such as “guidance,” “expect,”
“anticipate,” “should,” “believe,” “hope,” “target,” “project,”
“plan,” “goals,” “estimate,” “potential,” “predict,” “may,” “will,”
“might,” “could,” “intend,” “shall” and variations of these terms
or the negative of these terms and similar expressions are intended
to identify these forward-looking statements. Forward-looking
statements are subject to a number of risks and uncertainties, many
of which involve factors or circumstances that are beyond Slack’s
control. Slack’s actual results could differ materially from those
stated or implied in forward-looking statements due to a number of
factors, including but not limited to, risks detailed in Slack’s
Quarterly Report on Form 10-Q for the quarter ended July 31, 2019.
Further information on potential risks that could affect actual
results will be included in the subsequent periodic and current
reports and other filings that Slack makes with the Securities and
Exchange Commission from time to time, including its Quarterly
Report on Form 10-Q for the quarter ended October 31, 2019. In
particular, the following factors, among others, could cause
results to differ materially from those expressed or implied by
such forward-looking statements: Slack’s recent growth rates may
not be indicative of its future growth; Slack may experience
quarterly fluctuations in its results of operations due to a number
of factors that make its future results difficult to predict and
could cause its results of operations to fall below analyst or
investor expectations or to fluctuate more than expected; Slack may
fail to manage its growth effectively and may be unable to execute
its business plan or maintain high levels of service and customer
satisfaction; real or perceived errors, failures, vulnerabilities,
or bugs in Slack could harm Slack’s business, results of
operations, and financial condition; a security incident may allow
unauthorized access to Slack’s systems, networks, or data or the
data of organizations on Slack, harm its reputation, create
additional liability, and harm its financial results; any actual or
perceived failure by Slack to comply with privacy, data protection,
information security, consumer privacy, data residency, or
telecommunications laws, regulations, government access requests,
and obligations in one or multiple jurisdictions could result in
proceedings, actions, or penalties against Slack and could harm its
business and reputation; the risk of interruptions or performance
problems, including a service outage, associated with Slack’s
technology or infrastructure; the market and software categories in
which Slack participates are competitive, new, and rapidly
changing, and if it does not compete effectively with established
companies as well as new market entrants its business, results of
operations, and financial condition could be harmed; a protracted
infringement claim, a claim that results in a significant damage
award, or a claim that results in an injunction could harm Slack’s
results of operations; adverse general economic and market
conditions; Slack’s ability to attract and retain qualified
employees and key personnel; changes in foreign exchange rates;
general political or destabilizing events, including war, conflict
or acts of terrorism; and other risks and uncertainties. Past
performance is not necessarily indicative of future results. The
forward-looking statements included in this press release represent
Slack’s views as of the date of this press release. Slack
anticipates that subsequent events and developments will cause its
views to change. Slack undertakes no intention or obligation to
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. These
forward-looking statements should not be relied upon as
representing Slack’s views as of any date subsequent to the date of
this press release.
Additional information regarding these and other factors that
could affect Slack’s results is included in Slack’s SEC filings,
which may be obtained by visiting our Investor Relations website at
investor.slackhq.com or the SEC's website at www.sec.gov.
Earnings Webcast:
Slack will hold a public webcast at 2:00 p.m. PST today to
discuss the results for its third quarter fiscal 2020 and financial
outlook. The live public call can be accessed by dialing (866)
211-3197 within the U.S., and (647) 689-6597 internationally. The
conference ID is 8097657. The webcast replay and audio download
will also be available on our Investor Relations website at
investor.slackhq.com.
Investor Presentation
Details:
An investor presentation providing additional information and
analysis can be found at investor.slackhq.com.
About Slack:
Slack is where work happens. Slack is a new layer of the
business technology stack that brings together people, applications
and data – a hub for collaboration where people can effectively
work together, access critical applications and services, and find
important information to do their best work. People around the
world use Slack to connect their teams, unify their systems and
drive their business forward.
Slack and the Slack logo are trademarks of Slack Technologies,
Inc. or its subsidiaries in the U.S. and/or other countries. Other
names and brands may be claimed as the property of others.
SLACK TECHNOLOGIES,
INC.
CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(In thousands, except per
share data)
(Unaudited)
Three Months Ended October
31,
Nine Months Ended October
31,
2019
2018
2019
2018
Revenue
$
168,725
$
105,648
$
448,519
$
278,585
Cost of revenue
23,140
13,540
72,820
35,002
Gross profit
145,585
92,108
375,699
243,583
Operating expenses:
Research and development
94,853
40,990
363,725
111,582
Sales and marketing
96,210
67,687
299,440
163,408
General and administrative
49,524
34,185
209,624
79,361
Total operating expenses
240,587
142,862
872,789
354,351
Loss from operations
(95,002
)
(50,754
)
(497,090
)
(110,768
)
Other income (expense), net
7,135
3,376
17,323
7,263
Loss before income taxes
(87,867
)
(47,378
)
(479,767
)
(103,505
)
Provision (benefit) for income taxes
(101
)
318
(504
)
753
Net loss
(87,766
)
(47,696
)
(479,263
)
(104,258
)
Net income (loss) attributable to
noncontrolling interest
1,395
(24
)
2,792
156
Net loss attributable to Slack common
stockholders
$
(89,161
)
$
(47,672
)
$
(482,055
)
$
(104,414
)
Basic and diluted net loss per share:
Net loss per share attributable to Slack
common stockholders, basic and diluted
$
(0.16
)
$
(0.39
)
$
(1.38
)
$
(0.86
)
Weighted-average shares used in computing
net loss per share attributable to Slack common stockholders, basic
and diluted
544,057
122,880
348,580
120,924
SLACK TECHNOLOGIES,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
(Unaudited)
October 31, 2019
January 31, 2019
ASSETS
Current assets:
Cash and cash equivalents
$
476,474
$
180,770
Marketable securities
297,632
660,301
Accounts receivable, net
84,977
87,438
Prepaid expenses and other current
assets
58,811
54,213
Total current assets
917,894
982,722
Restricted cash
38,490
20,490
Strategic investments
24,215
12,334
Property and equipment, net
109,806
88,359
Intangible assets, net
12,104
15,203
Goodwill
48,598
48,598
Other assets
33,745
31,250
Total assets
$
1,184,852
$
1,198,956
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
11,159
$
16,613
Accrued compensation and benefits
47,029
46,151
Accrued expenses and other current
liabilities
44,641
29,809
Deferred revenue
302,690
239,825
Total current liabilities
405,519
332,398
Deferred revenue, noncurrent
1,234
2,048
Other liabilities
30,868
22,904
Total liabilities
437,621
357,350
Commitments and contingencies
Stockholders’ equity:
Convertible preferred stock
—
1,392,101
Common stock
55
13
Additional paid-in-capital
1,879,601
105,633
Accumulated other comprehensive income
(loss)
13
(498
)
Accumulated deficit
(1,147,618
)
(665,563
)
Total Slack Technologies, Inc.
stockholders’ equity
732,051
831,686
Noncontrolling interest
15,180
9,920
Total stockholders’ equity
747,231
841,606
Total liabilities and stockholders’
equity
$
1,184,852
$
1,198,956
SLACK TECHNOLOGIES,
INC.
CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended October
31,
Nine Months Ended October
31,
2019
2018
2019
2018
Cash flows from operating activities:
Net loss
$
(87,766
)
$
(47,696
)
$
(479,263
)
$
(104,258
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
7,762
4,564
20,419
11,227
Loss on disposal of property and
equipment
—
—
—
2,165
Stock-based compensation
73,861
10,515
363,287
18,271
Amortization of deferred contract
acquisition costs
2,232
875
5,522
1,965
Net amortization of bond premium on debt
securities available for sale
(341
)
(1,024
)
(2,077
)
(1,589
)
Change in fair value of strategic
investments
(2,907
)
62
(5,791
)
(287
)
Other non-cash charges
(383
)
202
(742
)
500
Changes in operating assets and
liabilities:
Accounts receivable
(12,338
)
(6,181
)
2,920
(12,315
)
Prepaid expenses and other assets
(1,888
)
(27,205
)
(12,049
)
(38,053
)
Accounts payable
2,441
3,710
1,005
9,251
Accrued compensation and benefits
(18,879
)
6,820
879
7,488
Deferred revenue
17,401
20,809
62,051
64,719
Other current and long-term
liabilities
11,706
6,174
20,935
17,462
Net cash used in operating activities
(9,099
)
(28,375
)
(22,904
)
(23,454
)
Cash flows from investing activities:
Purchases of marketable securities
(143,342
)
(366,729
)
(202,895
)
(734,778
)
Maturities of marketable securities
133,304
132,100
402,255
479,291
Sales of marketable securities
—
4,638
166,074
11,271
Acquisitions of businesses, net of cash
acquired
—
(42,813
)
—
(45,313
)
Acquisition of intangible assets
—
(1,198
)
—
(2,382
)
Purchases of property and equipment
(10,007
)
(15,092
)
(38,276
)
(42,704
)
Sales of property and equipment
—
242
—
762
Capitalized software development costs
—
(415
)
—
(415
)
Purchase of strategic investments
(3,813
)
(710
)
(9,283
)
(1,610
)
Proceeds from liquidation of strategic
investments
—
38
2,858
190
Net cash provided by (used in) investing
activities
(23,858
)
(289,939
)
320,733
(335,688
)
Cash flows from financing activities:
Proceeds from exercise of stock
options
1,337
775
11,612
2,637
Payment of contingent consideration for an
acquisition
—
—
(5,000
)
—
Issuance of common stock for employee
stock purchase plan
7,351
—
7,351
—
Net proceeds from issuance of convertible
preferred stock
—
426,880
—
426,880
Repurchase of convertible preferred
stock
—
—
—
—
Capital contributions from noncontrolling
interest holders
3,840
—
3,840
—
Distributions to noncontrolling interest
holders
(1,372
)
—
(1,372
)
—
Issuance of common stock to third
party
—
—
—
6,084
Other financing activities
—
(32
)
(556
)
(47
)
Net cash provided by financing
activities
11,156
427,623
15,875
435,554
Net increase (decrease) in cash, cash
equivalents and restricted cash
(21,801
)
109,309
313,704
76,412
Cash, cash equivalents and restricted cash
at beginning of period
536,765
105,166
201,260
138,063
Cash, cash equivalents and restricted cash
at end of period
$
514,964
$
214,475
$
514,964
$
214,475
SLACK TECHNOLOGIES,
INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(In thousands)
(Unaudited)
Calculated Billings
Three Months Ended October
31,
Nine Months Ended October
31,
2019
2018
2019
2018
Revenue
$
168,725
$
105,648
$
448,519
$
278,585
Add: Total deferred revenue, end of
period
303,924
190,172
303,924
190,172
Less: Total deferred revenue, beginning of
period
(286,523
)
(169,363
)
(241,873
)
(125,453
)
Calculated Billings
$
186,126
$
126,457
$
510,570
$
343,304
Free Cash Flow
Three Months Ended October
31,
Nine Months Ended October
31,
2019
2018
2019
2018
Net cash used in operating activities
$
(9,099
)
$
(28,375
)
$
(22,904
)
$
(23,454
)
Purchases of property and equipment
(10,007
)
(15,092
)
(38,276
)
(42,704
)
Free Cash Flow
$
(19,106
)
$
(43,467
)
$
(61,180
)
$
(66,158
)
SLACK TECHNOLOGIES,
INC.
RECONCILIATION OF GAAP TO
NON-GAAP DATA
(In thousands, except per
share data)
(Unaudited)
Three Months Ended October
31,
Nine Months Ended October
31,
2019
2018
2019
2018
Reconciliation of gross
profit:
GAAP gross profit
$
145,585
$
92,108
$
375,699
$
243,583
Add: Stock-based compensation and
related employer payroll taxes
2,765
40
14,656
701
Add: Amortization of acquired
intangible assets
558
337
1,675
356
Non-GAAP gross profit
$
148,908
$
92,485
$
392,030
$
244,640
Reconciliation of operating
expenses:
GAAP research and development
$
94,853
$
40,990
$
363,725
$
111,582
Less: Stock-based compensation
and related employer payroll taxes
(41,189
)
(3,532
)
(205,859
)
(7,871
)
Less: Amortization of acquired
intangible assets
(150
)
(25
)
(449
)
(25
)
Non-GAAP research and
development
$
53,514
$
37,433
$
157,417
$
103,686
GAAP sales and marketing
$
96,210
$
67,687
$
299,440
$
163,408
Less: Stock-based compensation
and related employer payroll taxes
(18,085
)
(227
)
(87,788
)
(1,679
)
Less: Amortization of acquired
intangible assets
(325
)
(325
)
(975
)
(379
)
Non-GAAP sales and marketing
$
77,800
$
67,135
$
210,677
$
161,350
GAAP general and
administrative
$
49,524
$
34,185
$
209,624
$
79,361
Less: Stock-based compensation
and related employer payroll taxes
(13,794
)
(6,716
)
(78,167
)
(8,020
)
Non-GAAP general and
administrative
$
35,730
$
27,469
$
131,457
$
71,341
Reconciliation of loss from
operations:
GAAP operating loss
$
(95,002
)
$
(50,754
)
$
(497,090
)
$
(110,768
)
Add: Stock-based compensation and
related employer payroll taxes
75,833
10,515
386,470
18,271
Add: Amortization of acquired
intangible assets
1,033
687
3,099
760
Non-GAAP operating loss
$
(18,136
)
$
(39,552
)
$
(107,521
)
$
(91,737
)
Reconciliation of net loss and
net loss per share:
Net loss attributable to Slack
common stockholders
$
(89,161
)
$
(47,672
)
$
(482,055
)
$
(104,414
)
Add: Stock-based compensation and
related employer payroll taxes
75,833
10,515
386,470
18,271
Add: Amortization of acquired
intangible assets
1,033
687
3,099
760
Non-GAAP net loss
$
(12,295
)
$
(36,470
)
$
(92,486
)
$
(85,383
)
GAAP net loss per share
$
(0.16
)
$
(0.39
)
$
(1.38
)
$
(0.86
)
Add: Stock-based compensation and
related employer payroll taxes
0.14
0.09
1.10
0.15
Add: Amortization of acquired
intangible assets
—
—
0.01
—
Non-GAAP net loss per share
$
(0.02
)
$
(0.30
)
$
(0.27
)
$
(0.71
)
Weighted-average common shares
outstanding, basic and diluted
544,057
122,880
348,580
120,924
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191204005892/en/
Jesse Hulsing Investor Relations ir@slack.com
Karesha McGee Media Relations pr@slack.com
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