Financial Performance

Slack Shares Slump on Disappointing Guidance

The full-year forecast fell below “high investor expectations for team collaboration and communication names amidst this [work from home] era.”
Matthew HellerJune 5, 2020

Chat service Slack beat quarterly earnings estimates but its shares had their worst single-day decline on record, reflecting investor disappointment over its full-year guidance.

Like other software-as-a-service companies, Slack got a boost in the first quarter from business demand for tools that allow employees to work from home amid coronavirus lockdowns. Revenue rose 50% to $201.7 million as the company attracted 12,000 new net paid customers.

Slack posted an adjusted net loss of 2 cents per share compared to 23 cents per share in the year-ago period. Analysts had expected a loss 6 cents per share on revenue of $188.1 million.

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CEO Stewart Butterfield said it was a “phenomenal” quarter, adding, “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.”

“This will continue to catalyze adoption for the new category of channel-based messaging platforms we created and for which we are still the only enterprise-grade offering,” he said.

But in trading Friday, Slack shares sank 14.2% to $32.56.

“Slack’s earnings come after Zoom, a SaaS video communications company, and CrowdStrike, a SaaS cybersecurity firm, both posted outsized growth due in part to an accelerated digital transformation and remote work’s necessities for new tooling,” TechCrunch reported.

Bernstein analyst Mark Moerdler said Slack’s full-year guidance was also “not enough” for the investment community as there were “high investor expectations for team collaboration and communication names amidst this [work from home] era.”

For 2021, Slack barely raised its forecast to an adjusted loss of 19 cents to 17 cents cents per share on $855 million to $870 million in revenue. The consensus among analysts was an adjusted loss of 20 cents per share and $860.3 million in revenue.

“Our pipeline remains very healthy, but on balance, there’s less visibility into how IT spending will trend for the remainder of the year, particularly if the economic effects of the COVID-19 pandemic persist or worsen,” Slack CFO Allen Shim said.

(Photo by Drew Angerer/Getty Images)