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I've been back & forth on Slack for a while. Here's what has stood out to me. First, I looked at quarterly revenue vs. their high-side estimates to get an idea of where they might come in for Q3 2021.


Quarter Est. Rev - high side Revenue Beat $ Beat %
(millions)
Q2 2020 $141 $145.0 $4.0 2.8%
Q3 2020 $156 $168.7 $12.7 7.5%
Q4 2020 $174 $181.9 $7.9 4.3%
Q1 2021 $188 $201.7 $13.7 6.8%
Q2 2021 $209 $215.9 $6.9 3.2%
Q3 2021 Est. $225


The average beat % over the high side estimate in these five quarters was 4.9%. If they hit that average for the upcoming quarter, that'd be 236.5M, which would represent 40% YoY growth for Q3 (after being around 50% YoY growth for the past few quarters). Remember, though, that Q1 2021 grew sequentially by almost $20M when they set a record for new paid customers (see below). Q2 2021 did not keep up that pace.

We could ask ourselves if a more robust beat is coming due to possible tailwinds from the pandemic. However, as already seen, the last quarterly report gives caution. Let's check out total paid customer growth and paid customers who spend at least $100k/year. When looking at these tables, remember that Q1 2021 was February, March & April of this year, and that Q2 2021 was May, June, and July.


Quarter Paid Customers Q/Q Growth Q/Q Rate Y/Y Rate
Q2 2019 73,000
Q3 2019 80,800 7,800 10.7%
Q4 2019 88,000 7,200 8.9%
Q1 2020 95,000 7,000 8.0%
Q2 2020 100,000 5,000 5.3% 37%
Q3 2020 105,000 5,000 5.0% 30%
Q4 2020 110,000 5,000 4.8% 25%
Q1 2021 122,000 12,000 10.9% 28%
Q2 2021 130,000 8,000 6.6% 30%


Quarter Total Paid > $100k Q/Q Growth Q/Q Rate Y/Y Rate
Q1 2019 351
Q2 2019 411 60 17.1%
Q3 2019 492 81 19.7%
Q4 2019 576 84 17.1%
Q1 2020 645 69 12.0% 84%
Q2 2020 720 75 11.6% 75%
Q3 2020 821 101 14.0% 67%
Q4 2020 893 72 8.8% 55%
Q1 2021 963 70 7.8% 49%
Q2 2021 985 22 2.3% 37%


So, they got a real shot in the arm in the February - April quarter with 12,000 new paid customers. Oddly enough, that quarter did not result in an equally impressive bump in paid customers with $100K in ARR. Instead of those high revenue customers showing up the following quarter, they turned in the worst three month period of adding customers with $100K in ARR. That's May, June, and July of this year.

If Slack is experiencing tailwinds, I feel like we should've seen more strength in Q2 2021, but that didn't happen. Perhaps there are other metrics that paint a more complete picture. But for now I'm stuck on these metrics, and they don't have me feeling too confident going into the upcoming earnings report.


-ElonFeeNix
(currently no position in Slack)
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