The COVID-19 crisis has led to a rapid shift to working from home and a surge in the use of digital collaboration tools in the enterprise. Enterprise communication platform Slack (NYSE: WORK) last month reported a strong first quarter that beat estimates.
Slack’s Q1 revenue grew 50% to $201.7 million. Non-GAAP net loss per share was $0.02. Analysts expected loss of $0.06 per share on revenue of $187 million.
During the quarter, Slack added 90,000 net new free and paid organizations, bringing the total to over 750,000. It added 12,000 net new paid customers, bringing the total to over 122,000 paid customers.
The number of paid customers spending over $100,000 annually was up 49% to 963. These include Centers for Medicaid and Medicare services, the UK Ministry of Justice, Harvard University, Virgin Media, CISA, Recruit Holdings, West Japan Railway Company, and Credit Saison.
Slack scored a major win this quarter by signing up Verizon and investment firm Man Group as new Enterprise customers. It won another enterprise-wide agreement with Amazon across all its businesses.
For the second quarter of fiscal year 2021, Slack expects revenue of $206 to $209 million, representing y-o-y growth of 42% to 44%. Non-GAAP net loss per share is expected to be $0.04 to $0.03. Analysts expect net loss of $0.03 on revenue of $208.9 million.
For the full fiscal year 2021, Slack expects total revenue of $855 million to $870 million, representing year-over-year growth of 36% to 38%. Non-GAAP net loss per share is expected to be $0.19 to $0.17.
Slack’s New Offerings
Slack’s top priority for this fiscal year is Shared Channels, which was launched in 2017. Shared Channels provides a secure productive environment for customers to communicate across organizational boundaries. To build on its Shared Channels feature, Slack last month launched Slack Connect, which allows users to send messages to 20 external organizations, both in channels and as direct messages.
Designed to replace email, Slack Connect extends channel-based messaging to everyone that you work with – both inside and outside your organization. Teams can use it to work faster with vendors, strengthen client relationships, provide top-tier enterprise support and manage supply chains. Slack Connect is already being used by over 41,000 customers including Autodesk, Airbnb, Box, Time, and Wayfair.
Slack’s Partnership and Integration Strategy
Integrations and partnerships are the sticky factor for Slack, and it continues to boost this strategy. Slack’s robust partner ecosystem includes GSuite, Salesforce, Workday, Atlassian, Zoom, Box, Dropbox, and Zendesk. It also integrates with leading security and compliance providers such as Okta, McAfee, and Symantec.
Slack recently expanded its strategic partnership with Amazon Web Services, which includes robust integrations between Slack and several AWS services, including AWS Chatbot, AWS Chime, AWS Sandstone, AWS Cloud Formation, and AWS Key Management Services. Slack will also use AWS Chime to support Slack’s native calling capabilities.
Slack platform with its integration and app ecosystem offers a piggyback ride for startups. Slack has over 2,200 apps and integrations across several verticals on its platform. Developers can use its platform to automate workflows and customize Slack apps. Several startups use the Slack platform to drive user engagement and adoption. A CB Insights report counts 115 private venture backed startups that offer integrations with the Slack platform across categories like Analytics, Team Culture, Sales, Finance, and Security.
Slack’s Acquisition Strategy
Last week, Slack acquired corporate directory startup Rimeto for an undisclosed sum. Rimeto was founded in 2016 by ex-Facebook employees Neville Bowers, Maxwell Hayman, and Ted Zagat and bootstrapped for three years before raising funding last year. It raised $10 million from investors including US Venture Partners, Floodgate, Ray Dalio, and Bow Capital at an estimated valuation of $42 million.
With the acquisition, Slack will be able to beef up employee profiles, which currently include just basic information. Rimeto provides details like area of expertise and projects the person is working on. Slack plans to rename the service but Rimeto will operate as a standalone app for non-Slack consumers.
Slack’s main competitor is Microsoft Teams and with this acquisition, Slack will also take on Microsoft’s LinkedIn feature. Slack is reportedly eyeing more acquisitions in the near future. It ended the quarter with over $1.5 billion in cash and marketable securities.
Slack’s stock is currently trading around $33.84 with a market cap of $19 billion. It hit a 52-week high of $40.07 in June before its earnings report. Its 52-week low was $15.10 in March this year. Slack went public last year at a list price of $38.50 and valuation of $19.5 billion. Slack had raised $1.3 billion from investors including T.Rowe Price, Wellington Management, Dragoneer, General Atlantic, Thrive Capital, Social Capital, GV, Kleiner Perkins Caufield & Byers, Accel, SV Angel, Andreessen Horowitz, DST Global, Horizon Ventures, Index Ventures, IVP, Jeff Weiner, and Slow Ventures.
This segment is a part in the series : Cloud Stocks