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Category: Stock Market and Slack
Date: 5 September 2019 Stock Price: $31.07 We take a look at the 2nd quarter earnings for their 2020 fiscal year of Slack Technologies, the collaboration hub group that connects working teams and businesses
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About Slack Technologies
Slack is the collaboration hub that brings the right people, information, and tools together to get work done. From Fortune 100 companies to corner markets, millions of people around the world use Slack to connect their teams, unify their systems, and drive their business forward. The image below shows a few key numbers in terms of Slack usage numbers.
Financial overview of Slack Technologies' latest earnings report
Numbers we are interested in for the quarter:
- Total revenue was $145.0 million, an increase of 58% year-over-year. Revenue was negatively impacted by $8.2 million of credits related to service level disruption in the quarter.
- Calculated Billings was $174.8 million, an increase of 52% year-over-year.
- GAAP gross profit was $113.9 million, or 78.5% gross margin, compared to $80.7 million, or 87.7% gross margin, in the second quarter of fiscal year 2019. Non-GAAP gross profit was $126.3 million, or 87.1% gross margin, compared to $80.7 million, or 87.7% gross margin, in the second quarter of fiscal year 2019.
- GAAP operating loss was $363.7 million, or 251% of total revenue, compared to a $33.7 million loss in the second quarter of fiscal year 2019, or 37% of total revenue. GAAP operating loss includes $307.0 million of stock based compensation and related employer payroll taxes, primarily related to the satisfaction of the performance vesting condition on outstanding RSUs in connection with Slack’s direct listing on June 20, 2019. Non-GAAP operating loss was $55.6 million, or 38% of total revenue, compared to a $32.0 million loss in the second quarter of fiscal year 2019, or 35% of total revenue.
- GAAP net loss per basic and diluted share was $0.98. Non-GAAP net loss per share was $0.14.
- Net cash provided by operations was $0.3 million, or 0% of total revenue, compared to cash provided by operations of $1.5 million, or 2% of total revenue, for the second quarter of fiscal year 2019. Free Cash Flow was $(7.9) million, or 5% of total revenue, compared to $(7.7) million, or 8% of total revenue for the second quarter of fiscal year 2019.
- Number of shares in issue: 368.533 million (up from 120.9 million for the same quarter of the previous year)
- Cash and cash equivalents: $498.279 million
- Cash and cash equivalents per share:$1.35
- Cash and cash equivalents makes up 4.4% of Slack's current market capital
- Cash and cash equivalents makes up 42.4% of Slack's total assets
- Accounts receivable: $72.538 million
- Accountants receivable makes up 6.17% of the group's total assets
- Total Stockholders equity: $749.783 million
- Stockholders equity per share: $2.03
Slack Technologies' management commentary on the results and earnings guidance
SAN FRANCISCO, September 4, 2019—Slack Technologies, Inc., (NYSE: WORK) the leading global collaboration hub that makes people’s working lives simpler, more pleasant and more productive, today reported financial results for its fiscal quarter ended July 31, 2019.
Management Commentary:
“This is an entirely new category of software enabling a once-in-a-generation shift in the way people work together. We believe channel-based collaboration is so superior to email-based communication for work, that this shift is inevitable,” said Stewart Butterfield, Chief Executive Officer and Co-Founder at Slack. “Customers are choosing Slack because we offer a great user experience, a rich application platform and ecosystem, and a growing network for inter-company collaboration via shared channels.”
“Revenue growth was 58% year-over-year, despite a one-time revenue headwind from credits issued in the quarter related to service level disruption,” said Allen Shim, Chief Financial Officer at Slack. “We remain focused on expansion within existing customers and growing our large enterprise customer base, and ended the quarter with 720 Paid Customers greater than $100,000 in annual recurring revenue, which is up 75% year-over-year.”
Financial Outlook:
For the third quarter of fiscal year 2020, Slack currently expects:
For the full fiscal year 2020, Slack currently expects:
Management Commentary:
“This is an entirely new category of software enabling a once-in-a-generation shift in the way people work together. We believe channel-based collaboration is so superior to email-based communication for work, that this shift is inevitable,” said Stewart Butterfield, Chief Executive Officer and Co-Founder at Slack. “Customers are choosing Slack because we offer a great user experience, a rich application platform and ecosystem, and a growing network for inter-company collaboration via shared channels.”
“Revenue growth was 58% year-over-year, despite a one-time revenue headwind from credits issued in the quarter related to service level disruption,” said Allen Shim, Chief Financial Officer at Slack. “We remain focused on expansion within existing customers and growing our large enterprise customer base, and ended the quarter with 720 Paid Customers greater than $100,000 in annual recurring revenue, which is up 75% year-over-year.”
Financial Outlook:
For the third quarter of fiscal year 2020, Slack currently expects:
- Total revenue of $154 million to $156 million, representing year-over-year growth of 46% to 48%.
- Non-GAAP operating loss of $49 million to $47 million.
- Non-GAAP net loss per share of $0.09 to $0.08, assuming weighted average shares outstanding of 544 million.
For the full fiscal year 2020, Slack currently expects:
- Total revenue of $603 million to $610 million, representing year-over-year growth of 51% to 52%.
- Non-GAAP operating loss of $180 million to $176 million, including approximately $30 million of one-time direct listing related expenses.
- Non-GAAP net loss per share of $0.42 to $0.40, assuming weighted average shares outstanding of 399 million.
- Calculated Billings of $740 million to $760 million, representing year-over-year growth of 43% to 47%
- Free Cash Flow net burn of $100 million to $110 million, including approximately $30 million of one-time direct listing related expenses and $21 million of one-time direct listing related cash taxes related to RSU vesting.
Slack Technologies (NYSE: WORK) stock price history
The image below shows the stock price history of Slack Technologies (NYSE:WORK) for the last year. And as the image shows its been a pretty miserable time for Slack shareholders in the last year, with the stock dropping from around $39 a year ago to the current $31 a share. Thats a 25% decline in the stock price over the last year. And based on the fact that the group is trading at a lot closer to its 52 week ow than their 52 week high shows that short term sentiment towards the stock remains negative.
Slack Technologies (NYSE: WORK) latest stock valuation
So based on Slack Technologies latest earnings report what do we value the group's stock at? Well it hard to value a company that is making a loss and that has negative cash flows. While revenue growth is strong and the growth in gross profit is encouraging its time top line growth starts feeding into bottom line numbers. We derived a potential earnings estimate for the group based on their gross profit and their revenue growth This was then used in our valuation models. Our valuation model sets a target price on Slack Technologies of $10.71 a stock. So we believe the group is completely overvalued and expect the negative sentiment around Slack Technologies stock price to remain. Unless the group starts turning strong operating profits into net income we cannot see why the stock trades at above $10 a share. We will continue to watch the group and adjust our valuation of them as they bring out new earnings reports.