No. of Recommendations: 33
Slack’s IPO is scheduled for June 20, 2019, and it appears to me to be right up the alley of this group’s interests. I thought I would take a look at it and post here. I’ve lurked in the shadows for a bit…so it’s time to try to give back.

Just for the record, I am not a Slack employee. I have never used the product. If anyone here has used it, I would be interested in hearing your experiences.

Most of the info here was taken from the MD&A portion of their S-1…let’s take a look.

What Slack Is:
(Management's words, not mine)
At its heart, Slack is an instant messaging and collaboration system on steroids. Slack is a new layer of the business technology stack that brings together people, applications, and data – a single place where people can effectively work together, access hundreds of thousands of critical applications and services, and find important information to do their best work.

Integration is what takes Slack from a normal online instant messaging and collaboration system to a solution that enables you to centralize all your notifications, from sales to tech support, social media and more, into one searchable place where your team can discuss and take action on each.

Ultimately, Slack is more than email replacement. It is a new layer of technology that brings together people, applications, and data. Just as an operating system coordinates the flow of information and resources of a computer in a centralized fashion, using Slack inside an organization creates a hub into which critical business information flows, is acted upon and transformed, and is then quickly routed to its desired destination. Slack streamlines our users’ workflows, increases the beneficial return on the time they spend communicating, and creates a powerful point of leverage for increased productivity.

By the Numbers:
Revenue (thousands)

Year	Apr	Jul	Oct	Jan	Total		Growth			
FY2018 42,719 51,320 58,046 68,459 220,544 120% 113% 118%
FY2019 80,919 92,018 105,648 121,967 400,552 118% 114% 115% 115%


Gross margin appears to hold quite steady in the 77% - 78% area.

Total operating expenses
Year	Apr	Jul	Oct	Jan	Total		Change			
FY2018 63,479 68,589 78,167 127,796 338,031 108% 114% 163%
FY2019 97,146 114,343 142,862 149,108 503,459 76% 118% 125% 104%

R&D appears to be quite variable, and accounts for the large jump in January 2018 operating expenses.

Free Cash Flow
Year	     Apr Jul	Oct	Jan
FY2018 (10,977) 5,237 (1,388) (50,533)
FY2019 (14,969) (7,722) (43,467)(31,081)
This appears to be quite variable, with no discernable progress as yet toward a consistently positive number.

Customer Base
	                    2017	2018	2019
Paid Customers 37,000 59,000 88,000
Paid Customers >$100,000 135 298 575
Net Dollar Retention Rate 171% 152% 143%

The number of large customers appears insignificant, but those 575 customers in 2019 would have contributed at least 26% of total revenue ($57.5 million / $220 million total FY19 revenue)! It’s nice to see their large customer numbers growing at the rate they appear to be.

Competitors
Collaboration tools seem to be a popular thing these days, and there are no shortage of competitors in this area. Microsoft probably is the leading competitor with their Teams product. The question might be how well other products "play well" with the information sources you need to integrate. I'm not sure if Slack has any sort of moat...maybe someone else can answer this?

Conclusion(?)

I don't buy IPOs, so I'm not ready to make a conclusion. I'll be waiting six months or so before I make any sort of buy decision. Their customer growth appears to be impressive, though, especially the large customer sector. This may be one to watch as time progresses.
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No. of Recommendations: 4
Jomo,

The numbers all look pretty impressive, but then I glanced at the percentages and they don't seem to add up...

Year	Apr	Jul	Oct	Jan	Total		Growth			
FY2018 42,719 51,320 58,046 68,459 220,544 120% 113% 118%
FY2019 80,919 92,018 105,648 121,967 400,552 118% 114% 115% 115%


Since none of the 2019 numbers are more than double the 2018 numbers, I'm not sure how you got all the 100%+ growth numbers? The same goes for the next table of operating expenses...or am I looking at something wrong (wouldn't be the first time)?
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No. of Recommendations: 0
Are Slack users replacing parts of Microsoft Office/Business applications like Outlook and Skype, or are they supplementing with Slack products?
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No. of Recommendations: 2
In our office Slack is a partial replacement for Outlook, and along with Zoom, a total replacement for Skype. If I think a little deeper it's also a partial replacement for Facebook.
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No. of Recommendations: 1
The numbers all look pretty impressive, but then I glanced at the percentages and they don't seem to add up...

Year Apr Jul Oct Jan Total Growth
FY2018 42,719 51,320 58,046 68,459 220,544 120% 113% 118%
FY2019 80,919 92,018 105,648 121,967 400,552 118% 114% 115% 115%


Since none of the 2019 numbers are more than double the 2018 numbers, I'm not sure how you got all the 100%+ growth numbers? The same goes for the next table of operating expenses...or am I looking at something wrong (wouldn't be the first time)?


------------
He is using Q/Q change rather than Y/Y growth.
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No. of Recommendations: 1
He is using Q/Q change rather than Y/Y growth.

Neither results in over 100% growth. 2018Q1 at $43m to 2019Q1 at $81m is not 118% growth.
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No. of Recommendations: 9
Thanks youngc,

You're right, he's trying to use Q/Q, but to do that, he needs to remove the "1" in the hundreds field, as it's not 120% growth, it's 20% growth.

Year	Apr	Jul	Oct	Jan	Total		Growth			
FY2018 42,719 51,320 58,046 68,459 220,544 120% 113% 118%
FY2019 80,919 92,018 105,648 121,967 400,552 118% 114% 115% 115%


Should be the following for Q/Q growth:

Year	Apr	Jul	Oct	Jan	Total		Growth			
FY2018 42,719 51,320 58,046 68,459 220,544 20% 13% 18%
FY2019 80,919 92,018 105,648 121,967 400,552 18% 14% 15% 15%


And Y/Y growth would look like:

Year	Apr	Jul	Oct	Jan	Total		Growth			
FY2018 42,719 51,320 58,046 68,459 220,544
FY2019 80,919 92,018 105,648 121,967 400,552 89% 79% 82% 78%


Still impressive...but will depend on what value it IPOs at if it is impressive enough.
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No. of Recommendations: 4
Some stuff here:
https://boards.fool.com/slack-ipo-34207382.aspx?sort=whole#3...

Just to summarise:

Moat - Half a million registered developers with 450,000 third party apps created

They have a moat as much as Shopify has a moat. Their ecosystem of integrated aps is a very high hurdle for any new upstarts. I believe their only competitor that's worthy of discussion is Microsoft Teams. Slack is an extremely popular ap with a fantastic word-of-mouth following. You just need one fanatical advocate in an office to slowly but surely get their colleagues moved onto it.

They also released preliminary Q1 2019 results. On the topic of growth slowing down...it's not good. 110% in 2017, 81% 2018, and now this latest quarter is at 65%

From private market selling, it looks like they'll open anywhere from 16-20 billion. That's a very high P/S.

I think the real question we need to be looking into is how big their market it. They say 28 billion. Is there any way to validate this? We really can't be expecting long-term 100+% growth for our stocks - that's unrealistic. But growth settling into the 40-60% range is, so long as there is enough market opportunity left.
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No. of Recommendations: 1
Foodles, invain, et. al.,
I think the big problem was my use of the word "growth." Foodles has it right...I needed to subtract 100 from my percentages to show my Q-Q GROWTH numbers...thanks for the correction.

Are Slack users replacing parts of Microsoft Office/Business applications like Outlook and Skype, or are they supplementing with Slack products?

NCMeatyFool answered this for his office, but I have read other places where Slack wants to replace email entirely at some point, so that would obviate the need for Outlook. Skype, OTOH, wouldn't seem to be in their crosshairs.
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No. of Recommendations: 0
Slack is direct listing so not, technically, an IPO.

Among other distinctions, by and large this means there will be no lock-up expiration, and no dilution.

Insiders are selling from the get-go.
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Among other distinctions, by and large this means there will be no lock-up expiration, and no dilution.

Insiders are selling from the get-go.


Also no fresh cash to support the company. Are they flush with cash, cash flow positive?

Denny Schlesinger
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No. of Recommendations: 2
Cash and equivalents = 840 million.

Annual net loss = 140 million.

So they've got a current run rate of several years left in them. Hence the direct IPO.

They are forecasting 64% revenue growth for this year and I think we have to believe this guidance.


Q1 Q2 Q3 Q4 Total % Growth

Revenue
105
2017 43 51 58 68 220 110.48%
2018 81 92 106 122 401 82.27%
2019 134 151 174 200 659 64.34%


Numbers in italics are what they'll need to hit that target.
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