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Slack forecasts significant losses in debut results

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Workplace chat app and Silicon Valley darling Slack posted strong revenue growth on Wednesday in its first results since going public, but its shares fell sharply in after-market trading after it predicted bigger future losses.

In the three months to July 31, sales climbed 58 per cent to $145m, above expectations for $141m, according to Factset, though a slower pace than last year’s growth rate of 82 per cent. Revenue was hit by $8.2m in costs relating to service disruption in the quarter.

Adjusted losses per share came in at 14 cents, better than the 19 cents forecast by analysts.

At the same time, the company forecast slightly higher adjusted losses per share for the third quarter of between negative 9 to negative 8 cents compared to analyst expectations of negative 7 cents.

Operating expenses more than trebled to $478m, as the company ramped up investment in marketing and research and development, and general administrative costs rose as a result of the listing. Net losses were $360m, compared to $32m last year.

Since going public, Slack’s shares have suffered a similar fate to car-booking giants Uber and Lyft, hovering below their list price and hitting all-time lows in August. Shares were down more than 15 per cent in after-hours trading on Wednesday, although they had risen more than 8 per cent in the formal trading session before the results.

Slack was upbeat about growth and the roll out of its Shared Channels feature — which allows customers to securely communicate with external partners and suppliers while maintaining internal controls — that it said would soon come out of beta testing mode.

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Stewart Butterfield, chief executive and co-founder, said: “This is an entirely new category of software enabling a once-in-a-generation shift in the way people work together. We believe channel-based collaboration is so superior to email-based communication for work, that this shift is inevitable.”

The second-quarter results are Slack’s first since it listed in June at a valuation of $20bn. The company unusually opted for a direct listing, saying it did not need to raise money and so did not need to dilute existing shareholders.

The messaging service said it was focused on expansion, and hoped to grow its large enterprise customer base in particular. The company said it ended the quarter with 720 customers that paid more than $100,000 per year, a 75 per cent rise year on year. It added that it had more than 100,000 paying customers at the end of the period, up 37 per cent compared to last year.

Mr Butterfield said the company was entering a “new phase”, in which it planned to spend more on marketing to grow its customer base and persuade existing customers to upgrade their subscriptions.

Shared Channels should have a competitive “pull effect”, he added. As more organisations depend on it, their partners are likely to join and it will become difficult to use an alternative system.

Slack forecast revenues of between $603m and $610m for the full year, indicating a slower growth rate of 51-52 per cent, and non-GAAP net losses per share of between 40 and 42 cents — both slightly ahead of analysts’ expectations.

Via Financial Times

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