Slack's Q1 revenue climbs 50%

Slack said that it ended the quarter with over 122,000 paid customers.
Written by Natalie Gagliordi, Contributor

The work from home tailwind drove a solid first quarter for Slack, with results handily topping market expectations. However, the company's stock fell nearly 15% after hours after its revenue growth and guidance failed to impress Wall Street. 

The workplace collaboration player reported a first-quarter net loss of $74 million, or 13 cents per share. On a non-GAAP basis, Slack posted a net loss of 2 cents per share on revenue of $201.7 million, up 50% year over year. 

Wall Street was expecting a non-GAAP net loss of 6 cents per share on revenue of $188.12 million. 

"Q1 was historic in its impact, both for Slack and for the world," said Slack CEO Stewart Butterfield. "We believe very strongly the impacts that the COVID crisis will have on the way we work are of generational magnitude and just beginning to be felt. It's too soon to understand the impact with any precision, but it reinforces our conviction around this business and our long-term trajectory."

Slack hasn't issued an updated user count since October, when it claimed to have 12 million daily active users. Instead, the company's first quarter financial report puts the focus on paid and enterprise customers. Slack said that it ended the quarter with over 122,000 paid customers, up 28% year-over-year, with 963 of those paid customers bringing Slack annual recurring revenue greater than $100,000. A record 12,000 new paid customers were added in the first quarter.

Overall, Slack said it has roughly 750,000 organizations on either a free or paid subscription plan, up from over 660,000 at the end of last quarter.

"Over the last few quarters we have observed significant momentum in some of the largest and most security conscious companies in the world," Butterfield said. "The all-at-once shift to work from home concentrated multiple quarters of Slack adoption into a few weeks."

In March, Butterfield said in a series of Tweets that Slack reached new user records for simultaneously connected users, defined as the number of people who are active on Slack at one time. Butterfield said simultaneously connected users increased from 10.5 million on March 16 to 12.5 million on March 25. No update was provided on Thursday.


Slack has been billed as a future of work beneficiary amid the global health crisis and shift to remote work. Still, the company lags behind its biggest rival, Microsoft Teams, when it comes to DAUs. 

Last month, Microsoft expanded its lead over Slack and announced it had 75 million daily active users on its Teams platform. The DAU scrutiny has intensified during the coronavirus pandemic and heightened the collaboration-chat war between the two companies. Slack's CEO has tried to distance Slack and Microsoft as direct competitors, and in April rolled out a beta of its Microsoft Teams Calls app, which lets Slack integrate directly with Microsoft Teams calling.

Nonetheless, Slack said in its recent 10-Q SEC filing that Microsoft was its main competitor. 

In terms of guidance, Slack expects second-quarter revenue in the range of $206 million to $209 million, with a net loss per share between 4 cents and 3 cents. Analysts expect Slack to deliver revenue of $199.8 million with a non-GAAP EPS loss of 6 cents. 

For the year, Slack is expecting a loss from 19 cents to 17 cents with revenue between $855 million to $870 million. Analysts were expecting a full-year loss of 20 cents on revenue of $860.2 million.

"How the world works is changing right now,' Butterfield said. "This shift will significantly increase what our customers need from us. It will also likely accelerate the adoption of both our category and software more broadly over the medium to long-term. The timing is hard to predict, but the secular trends are very clear in our view."

Shares of Slack were down more than 14% after hours.

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