Slack Plunges After Withdrawing Billings View on Uncertainty

(Bloomberg) -- Slack Technologies Inc. withdrew its annual billings forecast, citing business uncertainty, signaling the company isn't confident it will benefit as much from the work-from-home era as investors expect. Shares fell 16% in extended trading.

Slack had earlier projected billings of as much as $1 billion this fiscal year. Investors closely track this metric for cloud-based software companies because it gives a view of the strength of the company's pipeline.

Chief Executive Officer Stewart Butterfield has sought to strengthen his company's market position during the coronavirus pandemic, which has forced millions of people to work and learn from home to prevent the spread of Covid-19. The software maker's app is a combination of an office chat room and a workflow platform to automate tasks. In March, Slack simplified the design of the program in a bid to remain competitive with Microsoft Corp.'s Teams application. Slack has a growing rivalry with the world's largest software maker, whose product bundles chat, video conferencing and other collaboration tools.

“The second half of the year is just too complex,” Butterfield said in an interview. “There are significant tailwinds, there's some headwinds, and it's hard to know how that factors out. If you set that aside, I think this is a generational shift in how people work and we'll be able to play a major role in that going forward.”

Investors also were disappointed by Slack's annual revenue forecast of $855 million to $870 million, up just slightly from the company's projection in mid-March. Analysts, on average, estimated $856.5 million, according to data compiled by Bloomberg.

“Slack's withdrawal of full-year billings guidance looks conservative to us and likely suggests a pull-forward of revenue amid faster new-customer additions due to remote work,” Mandeep Singh, a Bloomberg Intelligence analyst, wrote Thursday in a note. Microsoft is also pricing Teams cheaply, which may cause Slack to lose a higher number of customers than usual, he said. Microsoft bundles Teams with its 365 productivity suite.

In the fiscal first quarter, sales gained 50% to $201.7 million, the San Francisco-based company said Thursday in a statement. Analysts estimated $187 million. The company reported a loss, excluding some items, of 2 cents a share, in the period ended April 30, compared with analysts' projections of a loss of 6 cents.

Slack now has more than 122,000 paying customers, an increase of 28% compared with a year earlier. The company said the number of clients who spend more than $100,000 for the platform jumped 49% to 963.

Slack's results were especially disappointing because Zoom Video Communications Inc., a video-conferencing software maker, on Tuesday projected soaring revenue for the rest of the year. Investors expected Slack to greatly benefit from the boom in remote work as well, but many of the company's customers are small- and mid-sized businesses, which have struggled during the pandemic.

The company also announced a major partnership with Amazon.com Inc., which will make Slack available to all of its employees. Some of Amazon's workers already use the service. Amazon Web Services, the cloud-computing arm of the retail giant, is now Slack's preferred cloud vendor. The appmaker will use a raft of AWS products, including Chime, an audio and video call service, to power the backend of Slack calls.

Shares fell to a low of $31.30 in extended trading after closing at $37.94 Thursday in New York. The stock has climbed 69% this year.

“I can't care about the stock price on the level of individual days,” Butterfield said when asked about the reaction to earnings. “I just wouldn't be able to do my job. I care about where the share price is five years from now and 10 years from now. This is just a very volatile time.”