Greetings – I have been a longtime fool and lurker on this board and probably made my original post when I first found the board in 2018. My investing mindset has changed with everything I have learnt and continue to learn on this board.
Coming out of my shell I decided to do a post on Slack (WORK) after its recent earnings in attempt to contribute and learn through the feedback. It is not a Datadog or Zoom by any means but I believe will be a disruption to enterprise communication & collaboration.
SLACK –
Numbers Revenue Q1- $202 million | 50% growth YoY.
Net Dollar Retention rate – 132% (flat)
Gross Margin 89% vs 87% a year ago (improving)
Calculated billings were $206 million, growing 38% YoY (approx. $17 million of headwinds due to COVID accommodations to customers)
Q2 guidance - Revenue $206M-$209M, representing growth of 43% at the midpoint.
Full year guidance - $855 million to $870 million, representing growth of 37% at the midpoint
I picked up Slack sometime during the March lows. My initial understanding of Slack was that it was a competitor to Microsoft Teams. I work for a small med device company in operations and we have been using TEAMS for all our meeting since it is free with the Microsoft Office. I previously worked for a large med device company where this was true as well. I have never used Slack and my understanding was that it was similar to TEAMS but had this thing called “channels” for collaboration. Reading through the recent transcript my opinion of channels is that it is a powerful tool for collaboration both internal and external. It is basically trying to get you out of using emails/inbox to collaborate using a channel. They call it the “Digital office”
“<So the movement from inbox to shared channels, as you’ve heard me talk about probably too much at this point, that’s inevitability. That’s a huge advantage. “
“Slack is not specifically a tool for remote work. As a channel-based messaging platform, we improved communication to help organizations create alignment, become more productive, and ultimately become more agile, wherever their employees are. And unlike the many video conferencing solutions in the market such as Zoom, RingCentral, Google Meet, Microsoft Teams, Amazon Chime and BlueJeans, we aren’t a digital substitute for physical in person meetings. Instead, Slack acts more like a digital office, a persistent place for users to connect and find information**.”**
The big piece here is the use of channels for “external” collaboration that I seemed to miss before that is on the uptick.
“Companies have poor alternatives if they want to collaborate outside their organization. If they use an email list, it’s too disorganized and jumbled for meaningful conversation. If they use a consumer messaging service, they sacrifice security or compliance. Shared channels give all the benefits that our customers have gotten from channels, organizing information and creating context but now for their external communications, in an environment that they control.”
“Increasingly, shared channels are blending the power of Slack’s platform with external collaboration. Last week, Adobe released an updated Creative Cloud integration that will now allow users to share Creative Cloud assets, get notifications and stay up-to-date on design projects in the shared channel. For our many joint customers planning marketing campaigns or developing new creative content with external partners, this will be incredibly powerful. And with all that we’re still just getting started.”
User Growth –
The stock took a hit after the earnings call maybe because they were expecting a Zoom like scenario and the run up driving this expectation. However, they have had their best quarter in their history by far! I’m not sure if the 12k /90k (13%) is a good conversion but believe this is a step in the right direction and is the CEO’s personal focus, he expects to convert a large number in the next year.
“In the quarter, we added over 90,000 net new organizations using Slack, more than we added in all of our last fiscal year. We also added 12,000 net new paid customers, more than any other quarter in the history of the Company.”
“For our paid users, average time spent actively using Slack each day increased from just under 90 minutes at the end of Q4 to over 120 minutes per day at the end of Q1.”
I added to my position and plan to continue learning about Slack. It is up against Microsoft, but I don’t believe TEAMS sees it much beyond a voice and video chat tool. It’s a feature for Microsoft and Zoom, Slack, Smartsheet seem to be coming at it with a best of breed solutions and a laser sharp focus.
Foolonely