Slack S1

Slack just filed their initial S1.

https://seekingalpha.com/news/3454910-slack-reveals-401m-rev…

Some preliminary numbers

Revenue (M)

2018 43 51 58 69
2019 81 92 106 122

% growth

2019 89 79 82 78

gross margins between 87-88% every quarter

customers (1000’s)

2018 42 47 52 59
2019 67 73 81 88

customers > $100K ARR

2018 104 209 254 298
2019 351 412 491 575

net retention rate

2018 156 153 151 152
2019 149 146 144 143

They are doing a direct offering, meaning they are selling shares from current shareholders (vc firms, employees, etc), so the company isn’t getting any money from the IPO. They can do this because they don’t need the money, they have about $840 M in cash. Makes the IPO less costly for the company.

They have a negative free cash flow each of the last 3 years.

I am interested in this company.

Like the growth.
Think they have a huge market and they are the leader.
TEAM shutdown their product and partnered because Slacks product was better.

Don’t like

retention rate falling
negative cash flow that isn’t improving yet.

Jim

18 Likes

Hi Jim,

Agreed very impressive numbers. Even the “falling” retention rate is still a stellar 143%. The growth in customers, in particular the >$100k accounts is fantastic.
Losses are huge, but kind of par for the course with a hyper-hypergrowth company.

But the real deal breaker will be the market cap when they IPO. With revenues of $400mln (growing at 81.7% yoy) and calculated billings of $517mln (78.9% yoy), if it is anything like Zoom, they will likely open with at least a $12 billion market cap. I guess we can only hope for something in the $8 billion range - pricey but at least justifiable… maybe. I’d love to be an owner, but like with Zoom, it may turn out to be a “this is just nuts” kind of pricing.

Best,
Matt

6 Likes

if it is anything like Zoom, they will likely open with at least a $12 billion market cap. I guess we can only hope for something in the $8 billion range - pricey but at least justifiable… maybe.


They are already selling in private mkt at $17b range.

So they expect to end 2019 closer to $640m. Then expectations are close to $1b in revenues for the year ending Jan 2021 if they hold a 60% growth rate.
https://discussion.fool.com/as-for-slacksome-numbers-34192255.as…

Sorry…but their IPO will likely be around $20b on Day 1, if I had to guess, thanks to ZM.

Dreamer

4 Likes

I think the days of reasonable price SaaS IPOs are over.

Even pager duty opened at over 20x sales.

4 Likes

Let’s see. At least I’d be interested, at the right price. Unlike quite a few other stocks discussed here. They have completely taken over from Skype at my work. For a large part due to the fact it’s easy to hook into scripts and tools.

Mark

They have great growth and they own the developer and startup mindset. On the other hand, this is a very crowded space - there is a lot more risk than a company like MDB.

I’m interested in Slack, but I plan to be disciplined, and will be looking for a reasonably priced entry point.

3 Likes

For anyone dealing with SaaS companies, I believe that for background and understanding, you should have a subscription to Ben Thompson’s newsletter “Stratechery”.

His take is NOT the stock market/investment (in fact, he does not invest in individual companies to avoid perception of bias) but from understanding the environment.

He’s been talking about slack for a long time.
A list of various articles are here: https://stratechery.com/?s=slack
Most of those require a subscription, but he has a weekly public newsletter.
Here are a couple that touch on slack:
https://stratechery.com/2015/slack-and-the-state-of-technolo…

https://stratechery.com/2016/chat-and-the-consumerization-of… (This one compares approach of Slack and MS Teams - he also revisits at the end of 2018 in the subscriber email).

Anyway, if you are considering investing in Slack, Ben’s take is something you should read.

PalmettoDude

7 Likes

Here is a great article on Slack and the S-1, compared to ZOOM, and others at IPO.

https://tomtunguz.com/slack-s-1-analysis/

This is one I want to own if the valuation isn’t crazy. Might have to wait and be patient, like ZOOM.

Jim

4 Likes