Slack posts slowing quarterly sales, company shares dropped 16 percent in extended trading

ReutersJun 05, 2020 10:57:24 IST

Slack Technologies Inc on Thursday posted slowing quarterly sales growth, disappointing investors who had expected a surge in demand for its workplace messaging app as companies rapidly adopt remote working tools and technology.

Slack also withdrew its 2021 billing outlook citing uncertainty driven by the COVID-19 pandemic, and said it had seen sales from some large customers slow down in the worst-affected industries, such as travel, hospitality and ride-sharing.

"There's less visibility into how spending will trend for the remainder of the year, particularly if the economic effects of the COVID-19 pandemic persist or worsen," Chief Financial Officer Allen Shim said in a post-earnings call with analysts.

Slack logo.

Shares of the company, which had surged nearly 80 percent this year, dropped 16 percent in extended trading.

Social distancing protocols have led many companies to shift to remote work, expanding the market for apps that allow workers to stay in touch and boosting Wall Street expectations for companies such as Zoom Video Communications and Slack.

But unlike Zoom, which earlier this week nearly doubled its expectations for annual sales, Slack's lukewarm guidance and revenue growth underwhelmed investors who were expecting a blowout quarter.

The company's first-quarter sales rose 50 percent, compared with a 49 percent increase in the fourth quarter and a 67 percent jump in the first quarter last year.

On Thursday, Slack forecast 2021 sales between $855 million and $870 million, representing a growth rate of 38 percent at the top end of the range.

Investors had heightened expectations going into the quarter, and may have expected growth to be higher than reported, said DA Davidson & Co analyst Rishi Jaluria.

Slack's revenue of $201.7 million came in above analysts' average estimate of $188.1 million (149.2 million pounds), according to IBES data from Refinitiv.