Slack Plunges After Withdrawing Billings View on Uncertainty

(Bloomberg) -- Slack Technologies Inc. withdrew its annual billings forecast, citing business uncertainty, signaling the company isn’t confident it will benefit as much from the work-from-home era as investors expect. Shares fell 16% in extended trading.

Slack had earlier projected billings of as much as $1 billion this fiscal year. Investors closely track this metric for cloud-based software companies because it gives a view of the strength of the company’s pipeline.

Chief Executive Officer Stewart Butterfield has sought to strengthen his company’s market position during the coronavirus pandemic, which has forced millions of people to work and learn from home to prevent the spread of Covid-19. The software maker’s app is a combination of an office chat room and a workflow platform to automate tasks. In March, Slack simplified the design of the program in a bid to remain competitive with Microsoft Corp.’s Teams application. Slack has a growing rivalry with the world’s largest software maker, whose product bundles chat, video conferencing and other collaboration tools.

“Slack’s withdrawal of full-year billings guidance looks conservative to us and likely suggests a pull-forward of revenue amid faster new-customer additions due to remote work,” Mandeep Singh, a Bloomberg Intelligence analyst, wrote Thursday in a note. Microsoft is also pricing Teams cheaply, which may cause Slack to lose a higher number of customers than usual, he said.

Investors also were disappointed by Slack’s annual revenue forecast of $855 million to $870 million, up just slightly from the company’s projection in mid-March. Analysts, on average, estimated $856.5 million, according to data compiled by Bloomberg.

In the fiscal first quarter, sales gained 50% to $201.7 million, the San Francisco-based company said Thursday in a statement. Analysts estimated $187 million. The company reported a loss, excluding some items, of 2 cents a share, in the period ended April 30, compared with analysts’ projections of a loss of 6 cents.

Slack now has more than 122,000 paying customers, an increase of 28% compared with a year earlier. The company said the number of clients who spend more than $100,000 for the platform jumped 49% to 963.

Slack’s results were especially disappointing because Zoom Video Communications Inc., a video-conferencing software maker, on Tuesday projected soaring revenue for the rest of the year. Investors expected Slack to greatly benefit from the boom in remote work as well, but many of the company’s customers are small- and mid-sized businesses, which have struggled during the pandemic.

Shares fell to a low of $31.30 in extended trading after closing at $37.94 Thursday in New York. The stock has climbed 69% this year.