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No. of Recommendations: 6
Slack reports on 12/3.
First a little review of the numbers:

Q1WORK. 49.6%. 87.3%.
custs +28%, custs>100k +49%, $NER 132%; ;RPO+92% ;Guidance FY21 $863m
CalcBill$206m+38%y/y
Q2. 49%. 88%
Custs.+30%, cust>100k. +37% y/y, $NER 125%; RPO +80%; Guidance FY21 $873m 38.5%
Cust >1M 87 up 78% y/y;Calc Bill$215m +25%y/y (11m or10% in COVID concessions

Best Article I’ve seen seen on Slack, and current, is behind paywalls at Seeking Alpha: Slack: The Bulls Are Typing... (NYSE:WORK)
TLDWR
For now, Slack needs to take Discord seriously and steal its tricks in order to truly become the meta-layer that enhances people's ability to do their best work instead of the distraction that it can often become. It should do three things to improve its customers' ability to do work and dig a deeper moat to prepare for the inevitability that Discord, or a similar work-focused product, comes after it.
First, it should consider opening up its API to power the next wave of collaborative productivity tools. Call it Slack-as-a-Service ("SlaaS"). Imagine Airtable or Webflow with Slack voice calls and chat built in, for example. Teams could chat directly within the software while working in it, and even employees who aren't in the software could participate in the conversation from inside of the Slack app, just like Discord users can be a part of the conversation with their friends whether or not they're playing the game.

Extending its position as the hub for thousands of integrations, it might even serve as the pipe that allows products that integrate with Slack to integrate with the products that embed Slack-as-a-Service. So, if Loom integrates with Slack, and Airtable uses Slack-as-a-Service, Loom could integrate with Airtable via Slack.
Second, like Tencent (TCEHY), it should double down on leveraging its position in the value chain to identify the workplace collaboration and productivity tools that its customers love the most, and provide capital via an expanded Slack Fund and traffic via its app directory and integrations.
Finally, it should double and triple down on Slack Connect to acquire more customers more quickly and efficiently, and create network effects that new entrants can't compete with. If Slack can serve as both the connective tissue among companies, and between companies and the products that they use, all within their existing workflows, it will be in a position to compound its advantage for years to come.
(Update: Butterfield went on 20 Minute VC with Harry Stebbings this morning (!!) and said that Slack is working on Huddles, always-on audio channels (like Discord!), Stories (like Instagram) and allowing companies to host code within Slack. He said, "Slack five years from now will function much more like the lightweight fabric for systems integration that we've always believed it can be on the platform side, and will come to encompass most of the people you communicate most frequently with even if they're outside of your organization, because that's something that's exploding right now." Slack is executing on points one and three - smart!)
Picking Up the Slack.

I've been wrong on Slack so far. I have no idea if I'm right now, and if I am right, I don't know if that will express itself in the stock price in the next week, the next month, or even the next year. Compounding is slow before it gets fast.

Jason
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No. of Recommendations: 1
All the number from Buyandholdisdead. Thanks for this.

https://boards.fool.com/slack-work-q121-34536495.aspx
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No. of Recommendations: 3
I believe the article is available on substack: https://notboring.substack.com/p/slack-the-bulls-are-typing

I've started nibbling at Slack over the past few weeks. It's a 50% grower being held down by

1) The drop in billings last quarter
2) MSFT Teams

The article dives into #2. Yes, Teams is a threat but maybe not as big as some believe it to be. Per the article, Slack has tripled its revenue since Teams was released in 2017.

I tend to agree with the author. Keeping my position small, but the fundamentals are there. The stock just hasn't followed suit. At some point, continued 50% growth will be rewarded.
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No. of Recommendations: 7
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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No. of Recommendations: 1
I don’t think weighting Guidance in most cases is useful, less so during the pandemic.

ElonFeeNix-
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.

I can’t argue with your reasoning; although, their customer adds did stay above average.

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.

Slack does have a somewhat slower expand period, relative to other companies discussed here, following the landing of new customers. I don’t have an explanation of the lack of adding enterprise customers at a greater clip, that you pointed out so well.

This could be another case of an amazing product that will only grow when the economy itself is growing. I don’t believe either that Slack’s stock price will hold up better than any so called ‘WFH’ stock either.

I do believe that at some point Slack’s customer base will reach a critical mass that when reached the customer adds will accelerate quickly (mostly because Slack has the ‘Stong’ network effect, of needing to be a paid subscriber to benefit from other paid subscribers). When that critical number of paying customers is reached, when Slack becomes not only the standard which Bert Hotchfield says it is already; but, Slack will be an expected part of doing any kind of business anywhere (anywhere using Google Docs instead of Office365 perhaps). When that happens this companies value will align with a much higher share price.

I've been wrong on Slack so far. I have no idea if I'm right now, and if I am right, I don't know if that will express itself in the stock price in the next week, the next month, or even the next year.

I’m betting that with the awareness of CEO’s the world over realizing that empowering a remote workforce, albeit possibly out in the field needing Slack more so than those working from home, being advanced six years in the last six months the time to critical mass will be reached sooner than later.

Jason
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No. of Recommendations: 5
I've been wrong on Slack so far. I have no idea if I'm right now, and if I am right,

I think that says a lot Jason.

Whatever we think about Slack and whatever positions we have taken or not taken, we have to admit that this statement and underlying sentiment says everything about the lack of conviction we hold in this stock. There's just no getting away from that.

If we are considering conviction as part of our growth investment criteria or even allocation then we should acknowledge accordingly.

Ant
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No. of Recommendations: 14
ElonFeeNix: 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.

WillO2028: I can’t argue with your reasoning; although, their customer adds did stay above average.

ElonFeeNix: 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.

WillO2028: Slack does have a somewhat slower expand period, relative to other companies discussed here, following the landing of new customers. I don’t have an explanation of the lack of adding enterprise customers at a greater clip, that you pointed out so well.



While Slack is a very useful product, management all but told us a couple quarters ago it was slow to take hold and the future might be a grind. Here's what I wrote when I sold in June. I still feel much the same way.


WORK – Oh well. I wrote last month I saw Slack’s earnings becoming a binary event. The stock would either grab the same premium as other names with recent tailwinds or likely end up relegated to grinding it out in SaaS’s second tier. Long story short, I believe WORK posted a mild disappointment despite what seemed to be an almost perfect environment for proving its worth to the broader business world. The headline numbers were within expectations, and I was initially excited by the Q2 guide. However, after digging deeper I thought the secondary metrics lagged and the call was lackluster. Even though management noted the “all at once shift to work from home concentrated multiple quarters of Slack adoption into a few weeks”, that uptick sure didn’t seem to stand out in the quarter’s results, the FY guide or the rest of management’s comments.

Paid and $100K+ customer growth were both OK but not nearly as impressive as many others in the thick of today’s digital transformation. Slack continues to battle the fact “it’s always taken some time for Slack usage to kind of grow up inside of an organization, for people to get the hang of it, to invite their peers and colleagues for it to spread.” That doesn’t sound like frictionless, viral adoption to me. The kicker was when the CFO stated, “The transition to work-from-home was obviously a major tailwind this quarter and we expect net new customer additions to moderate through the remainder of the year to quarterly levels closer to those observed in fiscal 2020.” He also noted uncertainty in the sales cycle and “less visibility into how IT spending will trend the remainder of the year.” So, in the end this was just a one-shot deal?!? That doesn’t strike me as a disruptive communication platform. Rather, it sounds like a product still fighting to prove it is mission critical rather than useful tool. That puts it closer to the SMAR’s and PLAN’s of the world than CRWD or DDOG. Frankly, that is not what I was looking for.

Despite what I viewed as a wide-open shot on goal, I feel Slack clanged one off the crossbar. Heading into earnings, I viewed this as a good risk/reward scenario. Coming out I feel Slack’s thesis is still a bit more hope than execution. When I get that vibe, experience suggests it is time to move on rather than attempt to rationalize my misjudgment. Therefore, I booked the small gains from my March purchase and put the funds toward a new position in Fastly and a tiny add to LVGO. That’s been an awesome move so far. In total fairness, this switch was just as much FSLY pounding on my portfolio door as any dislike for what WORK might become. WORK goes back to my watch list instead.

[Epilogue: WORK formally launched its Slack Connect program shortly after earnings (https://slack.com/resources/using-slack/slack-connect?utm_me...). YAY! This could greatly expand their use cases and by extension their addressable market. We also saw Salesforce say it was going to veer away from its Slack integration and produce its own solution (https://www.theregister.com/2020/06/25/salesforce_anywhere_c...). BOO! A customer deciding to move to its own solution is never good, at least in the short term (think TWLO and Uber). Slack clearly seems to be onto something. However, as management stated adoption continues to be a grind. Let’s see what kind of traction Connect can get the next couple of quarters.]
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No. of Recommendations: 1
I don’t have an explanation of the lack of adding enterprise customers at a greater clip, that you pointed out so well.

Slack had a net increase of 22 customers over $100k as was pointed out earlier. They gained 72 new customers to that cohort while 50 fell out. According to the company, 50 was a high rate of customers dropping out of that cohort. The comparable quarter last year had 10 drop out.

I don’t have the link handy, but that information was in the prepared remarks from the CFO. That can be found on Slack’s IR site.

I have a small position in Slack that I’m considering increasing a bit before earnings.

A.J.
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No. of Recommendations: 0
(https://www.theregister.com/2020/06/25/salesforce_anywhere_c...). BOO! A customer deciding to move to its own solution is never good, at least in the short term (think TWLO and Uber). Slack clearly seems to be onto something. However, as management stated adoption continues to be a grind. Let’s see what kind of traction Connect can get the next couple of quarters.

Well rumor has it Salesforce might buy Slack now. Slack up 30%. I think the market is acting like it’s a done deal. I sold 1/2 of my 8% position today, mostly due to wanting more Zoom before earnings.

Jason
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No. of Recommendations: 3
A reader here asked my why I sold if CRM interest is a good thing? This is what I said. Please tell me where my logic is wrong:


Yes it’s validation of the tech Slack has, if the rumor is true. If it’s true how much of a premium is CRM gonna pay? I took the 30% over yesterday’s price that the market offered as what likely Salesforce would pay. Maybe they’ll pay more, that’s why I kept half. If they do buy Slack, I do not want to own Salesforce?

I understand that I shouldn’t buy a company if I don’t think it’ll double in the next year. That’s my benchmark. I don’t believe Salesforce, if they do buy Slack, will gin up 100% premium. These are reasons for selling today; but, I wouldn’t sell if I didn’t have some other company that believed would increase in value more.

I wanted to own more Zoom at what I consider a discount price I think Zoom will go up 40-50% next week.

If my allocation of Zoom raises above 30% which I believe it will, I’ll likely sell to get back down to 20% - that’s where I feel comfortable/ sleep well.

My trading is usually only around the edges 10-20% of an allocation; but, I was thinking of doing the above trade prior to today’s 30% pop (see my post on the Slack premium boards yesterday). So my trading 50% of a position is reasonable only because I feel I really know the companies and how they trade and are confident in my sleeping well, if that makes sense.

Jason
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No. of Recommendations: 2
I have a small position in Slack that I’m considering increasing a bit before earnings.

Darn it! Shame on me for thinking Slack didn’t have a catalyst until earnings. Guess you should buy when you feel the time is right. I chose to do a bit more research. Even emailed Investor Relations a question early this morning hoping for some insight on what was probably a completely inconsequential item in the long run. My guess is Slack IR had better things to do today than answer my question.

Media is reporting the deal with Salesforce may go through as early as next week. It does seem like a very good fit for both companies. It will take some time to pay off for Salesforce, but enhances their position against Microsoft significantly. On the Slack side, Butterfield will get to see his baby take off. Seems like a win-win.

A.J.
Kicking myself a bit...
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