WORK - Slack Announces First Quarter Fiscal Year 2022 Results

June, 03 2021 04:05 PM Slack Technologies Inc. Class A

Total revenue of $273.4 million, up 36% year-over-year
Added over 13,000 net new Paid Customers, for a total of 169,000
Over 950,000 connected endpoints on Slack Connect, up 265% year-over-year

Slack Technologies, Inc., (NYSE: WORK) today reported financial results for its fiscal quarter ended April 30, 2021.

Management Commentary:

“Companies globally are racing toward a digital-first way of working to attract talent and to win,” said Stewart Butterfield, Chief Executive Officer and Co-Founder at Slack. “Slack is not just embracing this trend, we are enabling it. In Q1 we saw a near-record number of Paid Customer additions, a record number of Paid Customers adopting Slack Connect, and approached 1 million active developers on our platform.”

“We saw rapid growth across segments in the first quarter, adding 13,000 net new Paid Customers and 102 net new Paid Customers spending greater than $100,000 annually,” said Allen Shim, Chief Financial Officer at Slack. “We also continue to drive substantial leverage. In Q1, we generated a record amount of free cash flow and expanded non-GAAP operating margins 1200bps year-over-year.”

First Quarter Fiscal 2022 Financial Highlights:

Total revenue was $273.4 million, an increase of 36% year-over-year.
Calculated Billings was $278.5 million, an increase of 35% year-over-year.
GAAP gross profit was $234.1 million, or 85.6% gross margin, compared to $176.0 million, or 87.3% gross margin, in the first quarter of fiscal year 2021. Non-GAAP gross profit was $238.0 million, or 87.1% gross margin, compared to $179.2 million, or 88.9% gross margin, in the first quarter of fiscal year 2021.
GAAP operating loss was $55.3 million, or (20.2)% of total revenue, compared to a $76.2 million loss in the first quarter of fiscal year 2021, or (37.8)% of total revenue. Non-GAAP operating income was $10.8 million, or 4.0% of total revenue, compared to a $16.6 million loss in the first quarter of fiscal year 2021, or (8.3)%of total revenue.
GAAP net loss per basic and diluted share was $0.05. Non-GAAP net income per diluted share was $0.08.
Net cash provided by operations was $62.8 million, or 23% of total revenue, compared to cash provided by operations of $8.7 million, or 4% of total revenue, for the first quarter of fiscal year 2021. Free Cash Flow was $62.7 million, or 23% of total revenue, compared to $3.7 million, or 2% of total revenue for the first quarter of fiscal year 2021.

Recent Business Highlights:

First Quarter Highlights:
- Over 169,000 Paid Customers, up 39% year-over-year.
- 122% net dollar retention rate.
- 1,285 Paid Customers with greater than $100,000 in annual recurring revenue, up 33% year-over-year.
- 113 Paid Customers with greater than $1 million in annual recurring revenue, up 45% year-over-year.
- Over 91,000 Paid Customers using Slack Connect, up from over 74,000 at the end of last quarter.
- Over 950,000 connected endpoints on Slack Connect, up over 265% year-over-year.

Non-GAAP Financial Measures:

This press release and the accompanying tables contain the following non-GAAP financial measures: Calculated Billings, Free Cash Flow, non-GAAP gross profit, non-GAAP gross margin, non-GAAP research and development expenses, non-GAAP sales and marketing expenses, non-GAAP general and administrative expenses, non-GAAP operating loss, non-GAAP operating margin, non-GAAP net income (loss), and non-GAAP net income (loss) per share. Certain of these non-GAAP financial measures exclude stock-based compensation and related employer payroll taxes, amortization of debt discount and issuance costs, and amortization of intangible assets.

Slack believes that these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to Slack’s financial condition and results of operations. Slack’s management uses these non-GAAP measures to compare Slack’s performance to that of prior periods for trend analysis, and for budgeting and planning purposes. Slack believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing Slack’s financial measures with other software companies, many of which present similar non-GAAP financial measures to investors. The non-GAAP financial information is presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies.

Management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in Slack’s financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. Slack urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures, which it includes in press releases announcing quarterly financial results, including this press release, and not to rely on any single financial measure to evaluate Slack’s business.

Reconciliation tables of the most comparable GAAP financial measures to the non-GAAP financial measures used in this press release are included with the financial tables at the end of this release.

Forward-Looking Statements:

This press release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our product development, business strategy and plans, market trends, and positioning. These forward-looking statements are made as of the date they were first issued and were based on current expectations, estimates, forecasts, and projections as well as the beliefs and assumptions of management. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond Slack’s control. Slack’s actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, risks detailed in Slack’s Annual Report on Form 10-K for the fiscal year ended January 31, 2021. Further information on potential risks that could affect actual results will be included in the subsequent periodic and current reports and other filings that Slack makes with the Securities and Exchange Commission from time to time. The forward-looking statements included in this press release represent Slack’s views as of the date of this press release. Slack undertakes no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Investor Presentation:

An investor presentation providing additional information and analysis can be found at investor.slackhq.com.

About Slack:

Slack has transformed business communication. It’s the leading channel-based messaging platform, used by millions to align their teams, unify their systems, and drive their businesses forward. Only Slack offers a secure, enterprise-grade environment that can scale with the largest companies in the world. It is a new layer of the business technology stack where people can work together more effectively, connect all their other software tools and services, and find the information they need to do their best work. Slack is where work happens.

Slack and the Slack logo are trademarks of Slack Technologies, Inc. or its subsidiaries in the U.S. and/or other countries. Other names and brands may be claimed as the property of others.

SLACK TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (In thousands, except per share data) (Unaudited)



Three Months Ended April 30,

2021


2020

Revenue
$
273,357



$
201,650


Cost of revenue
39,237



25,602


Gross profit
234,120



176,048


Operating expenses:



Research and development
103,602



91,225


Sales and marketing
123,947



110,320


General and administrative
61,848



50,654


Total operating expenses
289,397



252,199


Loss from operations
(55,277
)


(76,151
)

Interest expense
(12,029
)


(2,842
)

Interest income and other income, net
40,426



4,708


Loss before income taxes
(26,880
)


(74,285
)

Provision for income taxes
1,065



142


Net loss
(27,945
)


(74,427
)

Net income attributable to noncontrolling interest
—



784


Net loss attributable to Slack common stockholders
$
(27,945
)


$
(75,211
)

Basic and diluted net loss per share:



Net loss per share attributable to Slack common stockholders, basic and diluted
$
(0.05
)


$
(0.13
)

Weighted-average shares used in computing net loss per share attributable to Slack common stockholders, basic and diluted
581,550



557,414

SLACK TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)





April 30, 2021

January 31, 2021
ASSETS



Current assets:



Cash and cash equivalents
$
1,332,649



$
1,081,357


Marketable securities
308,464



505,895


Accounts receivable, net
141,543



237,439


Prepaid expenses and other current assets
58,446



59,702


Total current assets
1,841,102



1,884,393


Restricted cash
38,490



38,490


Strategic investments
114,026



68,161


Property and equipment, net
82,136



87,908


Operating lease right-of-use assets
212,479



219,195


Intangible assets, net
16,173



17,885


Goodwill
76,204



76,204


Other assets
41,720



41,464


Total assets
$
2,422,330



$
2,433,700


LIABILITIES AND STOCKHOLDERS’ EQUITY



Current liabilities:



Accounts payable
$
15,149



$
13,145


Accrued compensation and benefits
57,261



108,868


Accrued expenses and other current liabilities
25,401



29,864


Operating lease liability
36,023



34,930


Deferred revenue
515,573



510,311


Total current liabilities
649,407



697,118


Convertible senior notes, net
662,224



651,398


Operating lease liability, noncurrent
219,486



225,266


Deferred revenue, noncurrent
198



294


Other liabilities
2,145



2,183


Total liabilities
1,533,460



1,576,259


Commitments and contingencies



Stockholders’ equity:



Common stock
59



58


Additional paid-in-capital
2,453,908



2,371,676


Accumulated other comprehensive income (loss)
(109
)


102


Accumulated deficit
(1,564,988
)


(1,537,043
)

Total Slack Technologies, Inc. stockholders’ equity
888,870



834,793


Noncontrolling interest
—



22,648


Total stockholders’ equity
888,870



857,441


Total liabilities and stockholders’ equity
$
2,422,330



$
2,433,700

SLACK TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands) (Unaudited)



Three Months Ended April 30,

2021


2020

Cash flows from operating activities:



Net loss
$
(27,945
)


$
(74,427
)

Adjustments to reconcile net loss to net cash provided by operating activities:



Depreciation and amortization
7,480



6,700


Stock-based compensation
59,017



53,711


Amortization of debt discount and issuance costs
10,825



2,366


Non-cash operating lease expense
10,339



8,732


Amortization of deferred contract acquisition costs
5,060



3,143


Net amortization of bond premium on debt securities available for sale
1,001



171


Change in fair value of strategic investments
(39,893
)


(1,638
)

Other non-cash adjustments
676



592


Changes in operating assets and liabilities:



Accounts receivable
95,627



39,470


Prepaid expenses and other assets
(4,069
)


(6,561
)

Accounts payable
2,004



(3,746
)

Operating lease liabilities
(8,310
)


(8,671
)

Accrued compensation and benefits
(51,607
)


(13,328
)

Deferred revenue
5,167



4,359


Other current and long-term liabilities
(2,617
)


(2,144
)

Net cash provided by operating activities
62,755



8,729


Cash flows from investing activities:



Purchases of marketable securities
—



(100,302
)

Maturities of marketable securities
196,220



69,613


Sales of marketable securities
—



4,289


Purchases of property and equipment
(50
)


(5,046
)

Purchase of strategic investments
(5,972
)


(4,018
)

Net cash provided by (used in) investing activities
190,198



(35,464
)

Cash flows from financing activities:



Proceeds from issuance of convertible senior notes, net of issuance costs
—



842,016


Purchases of capped calls related to convertible senior notes
—



(105,570
)

Purchase of noncontrolling interest
(22,648
)


—


Proceeds from exercise of stock options
1,328



2,905


Payments of contingent consideration for acquisitions
(800
)


—


Issuance of common stock for employee stock purchase plan
20,459



16,610


Net cash provided by (used in) financing activities
(1,661
)


755,961


Net increase in cash, cash equivalents and restricted cash
251,292



729,226


Cash, cash equivalents and restricted cash at beginning of period
1,119,847



537,489


Cash, cash equivalents and restricted cash at end of period
$
1,371,139



$
1,266,715

SLACK TECHNOLOGIES, INC. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (In thousands) (Unaudited)


Calculated Billings


Three Months Ended April 30,

2021

2020
Revenue
$
273,357


$
201,650

Add: Total deferred revenue, end of period
515,771


381,073

Less: Total deferred revenue, beginning of period
(510,605)


(376,714)

Calculated Billings
$
278,523


$
206,009

Free Cash Flow


Three Months Ended April 30,

2021

2020
Net cash provided by operating activities
$
62,755

$
8,729
Purchases of property and equipment
(50)

(5,046)
Free Cash Flow
$
62,705

$
3,683
Operating cash margin
23%

4%
Purchases of property and equipment
(0)%

(3)%
Free Cash Flow margin
23%

2%

SLACK TECHNOLOGIES, INC. RECONCILIATION OF GAAP TO NON-GAAP DATA (In thousands, except per share data) (Unaudited)



Three Months Ended April 30,

2021

2020
Reconciliation of gross profit:



GAAP gross profit
$
234,120

$
176,048
Add: Stock-based compensation and related employer payroll taxes
2,879

2,572
Add: Amortization of acquired intangible assets
967

558
Non-GAAP gross profit
$
237,966

$
179,178
GAAP gross margin
85.6%

87.3%
Non-GAAP adjustments
1.5%

1.6%
Non-GAAP gross margin
87.1%

88.9%




Reconciliation of operating expenses:



GAAP research and development
$
103,602

$
91,225
Less: Stock-based compensation and related employer payroll taxes
(31,220)

(29,720)
Less: Amortization of acquired intangible assets
—

(150)
Non-GAAP research and development
$
72,382

$
61,355




GAAP sales and marketing
$
123,947

$
110,320
Less: Stock-based compensation and related employer payroll taxes
(15,489)

(15,264)
Less: Amortization of acquired intangible assets
(500)

(325)
Non-GAAP sales and marketing
$
107,958

$
94,731




GAAP general and administrative
$
61,848

$
50,654
Less: Stock-based compensation and related employer payroll taxes
(14,806)

(10,795)
Less: Amortization of acquired intangible assets
(245)

(125)
Non-GAAP general and administrative
$
46,797

$
39,734




Reconciliation of loss from operations:



GAAP operating loss
$
(55,277)

$
(76,151)
Add: Stock-based compensation and related employer payroll taxes
64,394

58,351
Add: Amortization of acquired intangible assets
1,712

1,158
Non-GAAP operating income (loss)
$
10,829

$
(16,642)
GAAP operating margin
(20.2)%

(37.8)%
Non-GAAP adjustments
24.2%

29.5%
Non-GAAP operating margin
4.0%

(8.3)%


Three Months Ended April 30,

2021

2020
Reconciliation of net income (loss) and net income (loss) per share:



Net loss attributable to Slack common stockholders
$
(27,945
)


$
(75,211
)

Add: Stock-based compensation and related employer payroll taxes
64,394



58,351


Add: Amortization of acquired intangible assets
1,712



1,158


Add: Amortization of debt discount and issuance costs
10,825



2,366


Non-GAAP net income (loss)
$
48,986



$
(13,336
)





GAAP net loss per share, basic and diluted
$
(0.05
)


$
(0.13
)

Add: Stock-based compensation and related employer payroll taxes
0.10



0.11


Add: Amortization of debt discount and issuance costs
0.02



—


Add: Dilutive securities
0.01



—


Non-GAAP net income (loss) per share, diluted
$
0.08



$
(0.02
)





Weighted-average common shares outstanding, basic
581,550



557,414


Effect of dilutive securities
34,003



—


Weighted-average common shares outstanding, diluted
615,553



557,414

View source version on businesswire.com: https://www.businesswire.com/news/home/20210603005867/en/

Jesse Hulsing
Investor Relations
ir@slack.com

Steve Sharpe
Media Relations
pr@slack.com

Company Name:	Slack Technologies Inc. Class A
Stock Symbol:	WORK
Market:	NYSE
Website:	slack.com

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