U.S. markets closed
  • S&P Futures

    +2.75 (+0.06%)
  • Dow Futures

    +39.00 (+0.11%)
  • Nasdaq Futures

    +6.00 (+0.04%)
  • Russell 2000 Futures

    +2.40 (+0.11%)
  • Crude Oil

    +1.57 (+1.84%)
  • Gold

    +0.80 (+0.04%)
  • Silver

    +0.02 (+0.10%)

    -0.0005 (-0.05%)
  • 10-Yr Bond

    +0.0930 (+5.25%)
  • Vix

    +3.60 (+18.76%)

    +0.0002 (+0.01%)

    +0.0690 (+0.06%)

    +123.48 (+0.29%)
  • CMC Crypto 200

    +1.83 (+0.18%)
  • FTSE 100

    -47.68 (-0.63%)
  • Nikkei 225

    -384.28 (-1.36%)

Slack Tumbles After Quarterly Billings Miss Estimates

  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

(Bloomberg) -- Slack Technologies Inc. reported quarterly billings that fell short of analysts’ estimates, reflecting the software maker’s dependence on small- and mid-sized businesses that have been hurt by the coronavirus pandemic. Shares declined more than 19% in extended trading after the report.

Billings were $218.2 million in the period ended July 31, the San Francisco-based company said Tuesday in a statement. Analysts, on average, estimated $232.9 million, according to data compiled by Bloomberg.

“We’re landing with more customers, but the time it takes for that growth to show up in expansion will take some time to play out,” Slack Chief Financial Officer Allen Shim said on a conference call with reporters. “Given this economic backdrop, you are seeing some tighter budgets and a more cautious IT buyer right now.”

Chief Executive Officer Stewart Butterfield has tried to make Slack’s workplace software more appealing to large companies, including by emphasizing technology that allows businesses to communicate with partners, vendors or clients using the app rather than email. The software maker’s service is a combination of an office chat room and a workflow platform to automate tasks. Slack’s customer base of 130,000 organizations features many small- and mid-sized businesses, which generally pay for a subscription on a monthly basis. These clients have been hit hard by the pandemic-fueled recession. Demand from the Americas region, Slack’s largest market, was “softer,” Shim said.

Slack’s shares fell to a low of $23.40 after closing Tuesday at $29.32 in New York. The stock has climbed 30% since the start of the year.

Slack’s billings deceleration “could be temporary given traction with large corporate deployments,” Mandeep Singh, a Bloomberg Intelligence analyst, wrote in a note. “Its paid customers with over $100,000 in annual recurring revenue increased 37%, suggesting to us there could have been some pull-forward in billings and order closings” from the previous quarter, he said.

In the fiscal second quarter, Slack reported revenue jumped 49% to $215.9 million, beating analysts’ projections of $209.2 million. Excluding some items, the company broke even, while analysts, on average, estimated a loss of 3 cents.

Shim said there continues to be a retreat from clients in industries negatively affected by Covid-19, including retailers and hospitality companies.

Slack has also faced intensifying competition from Microsoft Corp.’s product Teams. The smaller company formally filed a complaint against Microsoft to the European Union in July, alleging that the world’s biggest software maker “illegally” bundles Teams with its dominant productivity suite to create an unfair advantage. Microsoft has denied any wrongdoing.

Butterfield said Tuesday he’s “confident” the EU will agree with Slack and hopes European regulators will force Microsoft to unbundle Teams from other applications and charge a market rate for the product.

“It’s almost textbook definition of what they’re trying to prevent with these regulations and they’re a pretty aggressive regulator,” Butterfield said in a press briefing. “They’re the judge, they’re the jury and they can kind of carry out the impact right away.”

Looking toward the rest of the year, Slack expects some of the macroeconomic challenges of the pandemic will be balanced by growing demand from large organizations that want to communicate with other Slack users on the platform. The software maker raised its annual revenue forecast to as much as $876 million from an earlier projection of as much as $870 million. In the period that ends in October, Slack expects sales of $222 million to $225 million, in line with analysts’ estimates. Still, the company’s estimated year-over-year growth rate of as much as 33% is a decline from Slack’s second fiscal quarter.

(Updates with comments from analyst in the sixth paragraph.)

For more articles like this, please visit us at bloomberg.com

Subscribe now to stay ahead with the most trusted business news source.

©2020 Bloomberg L.P.