When great may just not be great enough.
Shares of Slack Technologies fell 13% initially in after-hours trading after the workplace productivity company posted first quarter results. To say expectations in the lead-up to the earnings report were sky-high may be an understatement given the new work from home paradigm that has erupted during the COVID-19 pandemic. Slack’s stock surged 31% in May alone in the hopes of a booming first quarter as the company’s technology has become mission critical to many organizations.
Slack whipped Wall Street earnings estimates and its own guidance on the back of more paying customers and existing customers spending more on the platform.
Here’s how Slack performed in the fiscal first quarter of 2021 versus expectations.
Net Sales: $201.7 million vs. estimates for $188.1 million (guidance: $185 to $188 million)
Operating Profits: Loss of $16.7 million vs. estimates for a loss of $38.9 million
Diluted EPS: Loss per share of 2 cents vs. estimates for a loss of 6 cents (guidance: loss of 6 cents to 7 cents a share)
And this is where Slack’s guidance came in.
2Q Net Sales: $206 to $209 million vs. estimates for $198.6 million
2Q Diluted EPS: Loss per share of 2 cents to 3 cents a share vs. estimates for a loss of 6 cents a share
Full Year Net Sales: $855 to $870 million vs. estimates for $856.5 million (prior guidance: $842 to $862 million)
Full Year Diluted EPS: Loss of 17 cents to 19 cents a share vs. estimates for a loss of 23 cents a share (prior guidance: loss of 19 to 22 cents a share)
“Q1 was a phenomenal quarter for Slack, with the addition of 12,000 net new Paid Customers and 50% revenue growth year-over-year,” said Slack co-founder and CEO Stewart Butterfield in a statement. “We believe the long-term impact the three months and counting of working from home will have on the way we work is of generational magnitude. This will continue to catalyze adoption for the new category of channel-based messaging platforms we created and for which we are still the only enterprise-grade offering.”
Then why the knee-jerk sell-off? It may boil down to a few factors, which we plan to get more clarity on during the earnings call this evening at 5 p.m. ET. First, the company’s closely watched calculated billings growth clocked in at 38% year-over-year — cooling from a 47% pace in the first quarter. Paid customers did grow 28% from the prior year to 122,000.
While the growth numbers here are impressive, it’s likely the Street was expecting more in light of the fundamental shift in how we are all working. Dare we say the market was positioned for Slack to record a slight surprise profit in the quarter and more aggressively raise its full-year bottom line outlook? Quite possibly, hence the selloff in the early going.
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