Slack Shares Sink on First Earnings Report Since Debuting in Market

Shares of American software company Slack were headed lower on Wednesday after Wall Street digested the company’s first earnings report since it went public.

The maker of a workplace chat app saw its shares drop as much as 16% in after hours trading and even fell below the reference price from its direct listing briefly. It was in June that the stock debuted on the NYSE through a direct listing.

For the second quarter, the company reported a loss of 14 cents a share excluding certain items. Analysts according to Refinitiv were expecting 18 cents a share.

Slack reported that its revenue saw a growth of 58% YOY during the quarter ended July 31st.

The company’s main competitor is Microsoft and it was in July that Microsoft had shared statistics suggesting that Teams is more widely used than Slack.

“We see an equal opportunity for both Slack and Microsoft Teams to grow as alternatives to traditional e-mail and argue a duopoly-like market structure could form around the two most popular messaging-centric in platforms at maturity,” KeyBanc Capital Markets analysts led by Brent Bracelin wrote last month.

The company provides customers with credits for future use when uptime is below 99.99%. Those credits can impact revenue. For the second quarter, Slack said it was negatively impacted by $8.2 million of credits.
“This is a big area of investment,” Slack CEO Stewart Butterfield said. “We’ve made some great hires on the infrastructure side.”

Butterfield also said on the earnings call, “We had a quarter of record results with revenue growing 58% year-on-year. We exceeded 100,000 paid customers in the quarter and now have 720 customers with more than $100,000 of annual recurring revenue, a figure, which was up 75% since last year. I’ll talk more about our exceptional growth in the enterprise segment in a moment.”

“Last quarter, of course, we also completed our listing process. And I want to acknowledge the strength of our execution by accounting, legal, finance, business technology and communications departments along with hundreds of others across the company, and of course, our partners and advisers. The transition to being a public company is just one hallmark of what we see as the company entering a new phase. The next 5 years will be very different from the first 5 years.”

“We came out of the gate with near perfect product market fit for our very earliest customers who tended to be smaller and more technical teams. But over the years, as we launched the Enterprise good product, scaled the teams of over 100,000 users, added key features for our security, administrative control and compliance, we begin to see real product market fit for the large enterprise use case. Now that fit is clear. This quarter saw win after win in the largest companies in the
world. I want to start off by highlighting a few of those,” he added.

Looking ahead the company has forecast a loss of 8 to 9 cents a share for the third quarter excluding certain items. The company expects revenue in the range of $154 million to $156 million.

Analysts polled by Refinitiv had expected Slack to forecast a fiscal third-quarter loss of 7 cents per share, excluding certain items, on $153.2 million in revenue.

Disclaimer: We have no position in (Slack Technologies Inc. NYSE: WORK) and have not been compensated for this article.