EX-99.1 2 d10416dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

Slack Announces Strong Third Quarter Fiscal Year 2021 Results

Total revenue of $234.5 million up 39% year-over-year

Added 12,000 net new Paid Customers, up 140% year-over-year

Over 520,000 connected endpoints on Slack Connect, up 240% year-over-year

SAN FRANCISCO, December 1, 2020—Slack Technologies, Inc., (NYSE: WORK) today reported financial results for its fiscal quarter ended October 31, 2020.

Management Commentary:

“We had a phenomenal quarter, headlined by continued acceleration in new paid customer growth, with 12,000 net paid customer additions, up 140% from the same quarter last year,” said Stewart Butterfield, Chief Executive Officer and Co-Founder at Slack. “The accelerating growth is partly driven by increased awareness and demand due to the work from home environment, but we believe the larger portion comes from continued product momentum which shows up in the new user experience and, especially, from Slack Connect driving viral growth. Finally, we’re thrilled by the continued momentum in the enterprise segment where we’re seeing market leaders overwhelmingly choosing Slack for its unmatched security, scalability, flexibility, and user experience.”

“We saw improving trends in the overall buying environment and large enterprises continue to standardize on Slack. We ended the quarter with 1,080 customers spending more than $100,000 annually, up 32% year-on-year,” said Allen Shim, Chief Financial Officer at Slack. “Our focus remains on investing as we help define the future of work. We also continue to drive leverage and delivered record free cash flow in the quarter.”

Third Quarter Fiscal 2021 Financial Highlights:

 

  •  

Total revenue was $234.5 million, an increase of 39% year-over-year.

 

  •  

Calculated Billings was $252.4 million, an increase of 36% year-over-year.

 

  •  

GAAP gross profit was $202.0 million, or 86.1% gross margin, compared to $145.6 million, or 86.3% gross margin, in the third quarter of fiscal year 2020. Non-GAAP gross profit was $205.7 million, or 87.7% gross margin, compared to $148.9 million, or 88.3% gross margin, in the third quarter of fiscal year 2020.

 

  •  

GAAP operating loss was $65.7 million, or 28.0% of total revenue, compared to a $95.0 million loss in the third quarter of fiscal year 2020, or 56.3% of total revenue. Non-GAAP operating loss was $3.1 million, or 1.3% of total revenue, compared to a $18.1 million loss in the third quarter of fiscal year 2020, or 10.7% of total revenue.

 

  •  

GAAP net loss per basic and diluted share was $0.12. Non-GAAP net income per diluted share was $0.01.

 

  •  

Net cash provided by operations was $33.5 million, or 14% of total revenue, compared to cash used in operations of $9.1 million, or 5% of total revenue, for the third quarter of fiscal year 2020. Free Cash Flow was $32.6 million, or 14% of total revenue, compared to $(19.1) million, or (11)% of total revenue for the third quarter of fiscal year 2020.

Recent Business Highlights:

 

  •  

Third Quarter Highlights:

 

  •  

Over 142,000 Paid Customers, up 35% year-over-year.

 

  •  

123% net dollar retention rate.

 

  •  

1,080 Paid Customers with greater than $100,000 in annual recurring revenue, up 32% year-over-year.

 

  •  

Over 64,000 Paid Customers using Slack Connect, up from over 52,000 at the end of last quarter.

 

  •  

Over 520,000 connected endpoints on Slack Connect, up over 240% year-over-year.

Earnings Conference Call:

As a result of the earlier announcement that Salesforce plans to acquire Slack, the conference call previously scheduled for December 9, 2020 to discuss Slack’s financial results has been canceled.

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 financial outlook, product development, business strategy and plans, market trends and market size, opportunities, and positioning, and the proposed acquisition of Slack by Salesforce. 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 Quarterly Report on Form 10-Q for the quarter ended July 31, 2020. 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, including its Quarterly Report on Form 10-Q for the quarter ended October 31, 2020. 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.

CONTACTS:

 

Jesse Hulsing

    Jonathan Prince

Investor Relations

    Public Relations

ir@slack.com

    pr@slack.com

SLACK TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

     Three Months Ended
October 31,		     Nine Months Ended
October 31,		  
     2020     2019     2020     2019  

Revenue

    $ 234,498   $ 168,725   $ 652,012   $ 448,519

Cost of revenue

      32,528     23,140     86,517     72,820
  

 

 

    

 

 

    

 

 

    

 

 

  

Gross profit

      201,970     145,585     565,495     375,699

Operating expenses:

         

Research and development

      96,024     94,853     281,450     363,725

Sales and marketing

      119,345     96,210     338,787     299,440

General and administrative

      52,268     49,524     155,710     209,624
  

 

 

    

 

 

    

 

 

    

 

 

  

Total operating expenses

      267,637     240,587     775,947     872,789
  

 

 

    

 

 

    

 

 

    

 

 

  

Loss from operations

      (65,667 )      (95,002 )      (210,452 )      (497,090 ) 

Interest expense

      (11,742 )      (258 )      (26,136 )      (579 ) 

Interest income and other income, net

      12,644     7,393     24,304     17,902
  

 

 

    

 

 

    

 

 

    

 

 

  

Loss before income taxes

      (64,765 )      (87,867 )      (212,284 )      (479,767 ) 

Benefit for income taxes

      (1,162 )      (101 )      (1,101 )      (504 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net loss

      (63,603 )      (87,766 )      (211,183 )      (479,263 ) 

Net income attributable to noncontrolling interest

      4,799     1,395     7,278     2,792
  

 

 

    

 

 

    

 

 

    

 

 

  

Net loss attributable to Slack common stockholders

    $ (68,402 )    $ (89,161 )    $ (218,461 )    $ (482,055 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Basic and diluted net loss per share:

         

Net loss per share attributable to Slack common stockholders, basic and diluted

    $ (0.12 )    $ (0.16 )    $ (0.39 )    $ (1.38 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

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

      570,374     544,057     564,095     348,580
  

 

 

    

 

 

    

 

 

    

 

 

  

SLACK TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

     October 31,
2020		     January 31,
2020		  

ASSETS

     

Current assets:

     

Cash and cash equivalents

    $ 1,099,807   $ 498,999

Marketable securities

      475,690     269,593

Accounts receivable, net

      122,780     145,844

Prepaid expenses and other current assets

      59,500     55,967
  

 

 

    

 

 

  

Total current assets

      1,757,777     970,403

Restricted cash

      38,490     38,490

Strategic investments

      63,132     28,814

Property and equipment, net

      93,541     102,340

Operating lease right-of-use assets

      225,771     197,830

Intangible assets, net

      19,597     13,530

Goodwill

      76,204     48,598

Other assets

      36,745     41,701
  

 

 

    

 

 

  

Total assets

    $ 2,311,257   $ 1,441,706
  

 

 

    

 

 

  

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities:

     

Accounts payable

    $ 20,214   $ 16,893

Accrued compensation and benefits

      77,611     65,196

Accrued expenses and other current liabilities

      28,380     32,123

Operating lease liability

      33,009     30,465

Deferred revenue

      400,606     375,263
  

 

 

    

 

 

  

Total current liabilities

      559,820     519,940

Convertible senior notes, net

      640,767     —    

Operating lease liability, noncurrent

      231,105     196,378

Deferred revenue, noncurrent

      674     1,451

Other liabilities

      1,883     38
  

 

 

    

 

 

  

Total liabilities

      1,434,249     717,807
  

 

 

    

 

 

  

Commitments and contingencies

     

Stockholders’ equity:

     

Common stock

      58     56

Additional paid-in-capital

      2,309,771     1,945,446

Accumulated other comprehensive income (loss)

      269     (71 ) 

Accumulated deficit

      (1,455,082 )      (1,236,621 ) 
  

 

 

    

 

 

  

Total Slack Technologies, Inc. stockholders’ equity

      855,016     708,810

Noncontrolling interest

      21,992     15,089
  

 

 

    

 

 

  

Total stockholders’ equity

      877,008     723,899
  

 

 

    

 

 

  

Total liabilities and stockholders’ equity

    $ 2,311,257   $ 1,441,706
  

 

 

    

 

 

  

SLACK TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)

(Unaudited)

 

     Three Months Ended
October 31,		     Nine Months Ended
October 31,		  
     2020     2019     2020     2019  

Cash flows from operating activities:

         

Net loss

    $ (63,603 )    $ (87,766 )    $ (211,183 )    $ (479,263 ) 

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

         

Depreciation and amortization

      7,557     7,762     21,198     20,419

Stock-based compensation

      58,600     73,861     169,599     363,287

Amortization of debt discount and issuance costs

      10,440     —          23,059     —     

Noncash operating lease expense

      9,931     —          27,274     —     

Amortization of deferred contract acquisition costs

      4,146     2,232     11,044     5,522

Net amortization of bond premium (discount) on debt securities available for sale

      657     (341 )      1,038     (2,077 ) 

Change in fair value of strategic investments

      (12,268 )      (2,907 )      (18,088 )      (5,791 ) 

Other non-cash adjustments

      (203 )      (383 )      (421 )      (742 ) 

Changes in operating assets and liabilities:

         

Accounts receivable

      (10,926 )      (12,338 )      22,622     2,920

Prepaid expenses and other assets

      (4,757 )      (1,888 )      (9,296 )      (12,049 ) 

Accounts payable

      7,617     2,441     3,579     1,005

Operating lease liabilities

      (1,550 )      —          (17,921 )      —     

Accrued compensation and benefits

      9,456     (18,879 )      12,411     879

Deferred revenue

      17,873     17,401     23,576     62,051

Other current and long-term liabilities

      572     11,706     (1,749 )      20,935
  

 

 

    

 

 

    

 

 

    

 

 

  

Net cash provided by (used in) operating activities

      33,542     (9,099 )      56,742     (22,904 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Cash flows from investing activities:

         

Purchases of marketable securities

      (350,445 )      (143,342 )      (450,747 )      (202,895 ) 

Maturities of marketable securities

      90,158     133,304     238,071     402,255

Sales of marketable securities

      250     —          5,900     166,074

Net cash acquired from a business combination

      —          —          6,571     —     

Acquisition of intangible assets

      (2,375 )      —          (2,375 )      —     

Purchases of property and equipment

      (938 )      (10,007 )      (9,681 )      (38,276 ) 

Purchase of strategic investments

      (6,040 )      (3,813 )      (15,065 )      (9,283 ) 

Proceeds from liquidation of strategic investments

      337     —          1,126     2,858
  

 

 

    

 

 

    

 

 

    

 

 

  

Net cash provided by (used in) investing activities

      (269,053 )      (23,858 )      (226,200 )      320,733
  

 

 

    

 

 

    

 

 

    

 

 

  

Cash flows from financing activities:

         

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

      —          —          841,329     —     

Purchases of capped calls related to convertible senior notes

      —          —          (105,570 )      —     

Proceeds from exercise of stock options

      5,780     1,337     10,379     10,275

Payments of contingent consideration for acquisitions

      —          —          (5,250 )      (5,000 ) 

Issuance of common stock for employee stock purchase plan

      13,143     7,351     29,753     —     

Capital contributions from noncontrolling interest holders

      —          3,840     —          —     

Distributions to noncontrolling interest holders

      —          (1,372 )      (375 )      —     

Other financing activities

      —          —          —          (556 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net cash provided by financing activities

      18,923     11,156     770,266     4,719

Net increase (decrease) in cash, cash equivalents and restricted cash

      (216,588 )      (21,801 )      600,808     335,505

Cash, cash equivalents and restricted cash at beginning of period

      1,354,885     536,765     537,489     201,260
  

 

 

    

 

 

    

 

 

    

 

 

  

Cash, cash equivalents and restricted cash at end of period

    $ 1,138,297   $ 514,964   $ 1,138,297   $ 536,765
  

 

 

    

 

 

    

 

 

    

 

 

  

SLACK TECHNOLOGIES, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(In thousands)

(Unaudited)

Calculated Billings

 

     Three Months Ended
October 31,		     Nine Months Ended
October 31,		  
     2020     2019     2020     2019  

Revenue

    $ 234,498   $ 168,725   $ 652,012   $ 448,519

Add: Total deferred revenue, end of period

      401,280     303,924     401,280     303,924

Less: Total deferred revenue, beginning of period

      (383,407 )      (286,523 )      (376,714 )      (241,873 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Calculated Billings

    $ 252,371   $ 186,126   $ 676,578   $ 510,570
  

 

 

    

 

 

    

 

 

    

 

 

  

Free Cash Flow

 

     Three Months Ended
October 31,		     Nine Months Ended
October 31,		  
     2020     2019     2020     2019  

Net cash provided by (used in) operating activities

    $ 33,542     $ (9,099 )    $ 56,742     $ (22,904 ) 

Purchases of property and equipment

      (938 )      (10,007 )      (9,681 )      (38,276 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Free Cash Flow

    $ 32,604     $ (19,106 )    $ 47,061     $ (61,180 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating cash margin

      14.3 %      (5.4 )%      8.7 %      (5.1 )% 

Purchases of property and equipment

      (0.4 )%      (5.9 )%      (1.5 )%      (8.5 )% 
  

 

 

    

 

 

    

 

 

    

 

 

  

Free Cash Flow margin

      13.9 %      (11.3 )%      7.2 %      (13.6 )% 
  

 

 

    

 

 

    

 

 

    

 

 

  

SLACK TECHNOLOGIES, INC.

RECONCILIATION OF GAAP TO NON-GAAP DATA

(In thousands, except per share data)

(Unaudited)

 

     Three Months Ended October 31,     Nine Months Ended October 31,  
     2020     2019     2020     2019  

Reconciliation of gross profit:

         

GAAP gross profit

    $ 201,970     $ 145,585     $ 565,495     $ 375,699

Add: Stock-based compensation and related employer payroll taxes

      2,758       2,765       8,050       14,656

Add: Amortization of acquired intangible assets

      967       558       2,220       1,675
  

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP gross profit

    $ 205,695     $ 148,908     $ 575,765     $ 392,030
  

 

 

    

 

 

    

 

 

    

 

 

  

GAAP gross margin

      86.1 %      86.3 %      86.7 %      83.8 % 

Non-GAAP adjustments

      1.6 %      2.0 %      1.6 %      3.6 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP gross margin

      87.7 %      88.3 %      88.3 %      87.4 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

Reconciliation of operating expenses:

         

GAAP research and development

    $ 96,024     $ 94,853     $ 281,450     $ 363,725

Less: Stock-based compensation and related employer payroll taxes

      (30,178 )      (41,189 )      (90,489 )      (205,859 ) 

Less: Amortization of acquired intangible assets

      (125 )      (150 )      (424 )      (449 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP research and development

    $ 65,721     $ 53,514     $ 190,537     $ 157,417
  

 

 

    

 

 

    

 

 

    

 

 

  

GAAP sales and marketing

    $ 119,345     $ 96,210     $ 338,787     $ 299,440

Less: Stock-based compensation and related employer payroll taxes

      (16,192 )      (18,085 )      (47,361 )      (87,788 ) 

Less: Amortization of acquired intangible assets

      (500 )      (325 )      (1,208 )      (975 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP sales and marketing

    $ 102,653     $ 77,800     $ 290,218     $ 210,677
  

 

 

    

 

 

    

 

 

    

 

 

  

GAAP general and administrative

    $ 52,268     $ 49,524     $ 155,710     $ 209,624

Less: Stock-based compensation and related employer payroll taxes

      (11,600 )      (13,794 )      (33,733 )      (78,167 ) 

Less: Amortization of acquired intangible assets

      (205 )      —         (455 )      —    
  

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP general and administrative

    $ 40,463     $ 35,730     $ 121,522     $ 131,457
  

 

 

    

 

 

    

 

 

    

 

 

  

Reconciliation of loss from operations:

         

GAAP operating loss

    $ (65,667 )    $ (95,002 )    $ (210,452 )    $ (497,090 ) 

Add: Stock-based compensation and related employer payroll taxes

      60,728       75,833       179,633       386,470

Add: Amortization of acquired intangible assets

      1,797       1,033       4,307       3,099
  

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP operating loss

    $ (3,142 )    $ (18,136 )    $ (26,512 )    $ (107,521 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

GAAP operating margin

      (28.0 )%      (56.3 )%      (32.3 )%      (110.8 )% 

Non-GAAP adjustments

      26.7 %      45.6 %      28.2 %      86.8 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP operating margin

      (1.3 )%      (10.7 )%      (4.1 )%      (24.0 )% 
  

 

 

    

 

 

    

 

 

    

 

 

  

     Three Months Ended October 31,     Nine Months Ended October 31,  
     2020     2019     2020     2019  

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

         

Net loss attributable to Slack common stockholders

    $ (68,402 )    $ (89,161 )    $ (218,461 )    $ (482,055 ) 

Add: Stock-based compensation and related employer payroll taxes

      60,728     75,833     179,633     386,470

Add: Amortization of acquired intangible assets

      1,797     1,033     4,307     3,099

Add: Amortization of debt discount and issuance costs

      10,441     —         23,060     —    
  

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP net income (loss)

    $ 4,564   $ (12,295 )    $ (11,461 )    $ (92,486 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

GAAP net loss per share, basic and diluted

    $ (0.12 )    $ (0.16 )    $ (0.39 )    $ (1.38 ) 

Add: Stock-based compensation and related employer payroll taxes

      0.10     0.14     0.32     1.10

Add: Amortization of acquired intangible assets

      —         —         0.01     0.01

Add: Amortization of debt discount and issuance costs

      0.02     —         0.04     —    

Add: Dilutive securities

      0.01     —         —         —    
  

 

 

    

 

 

    

 

 

    

 

 

  

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

    $ 0.01   $ (0.02 )    $ (0.02 )    $ (0.27 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Weighted-average common shares outstanding, basic

      570,374     544,057     564,095     348,580

Effect of dilutive securities

      29,394     —         —         —    
  

 

 

    

 

 

    

 

 

    

 

 

  

Weighted-average common shares outstanding, diluted

      599,768     544,057     597,465     348,580