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SAN FRANCISCO – The reality of a public company is becoming a reality for the most start-up companies in Silicon Valley. The latest to have a taste of that: Slack.
In its first earnings report since its initial public offering in June, Slack recorded a larger loss than a year ago and a 58% increase in revenue due to higher expenses, partly due to because of the costs associated with the IPO. The company, which manufactures management software, also predicted that its losses for the current quarter would be greater than those expected on Wall Street, its shares plunging more than 15% in transactions after normal business hours.
Stewart Butterfield, President and CEO of Slack, said in an interview that the market would take a long time to understand his business because it had created a new category of software, unlike soft drinks or cars.
"Everyone understands what these things are and why they need them," he said. Over time, he added, "people will develop a more mature understanding" of Slack.
The results follow months of skepticism about Slack's business. Since the company became public in a direct list, his shares have steadily declined. It faces fierce competition from bigger and better-funded competitors, including Microsoft. Slack tried to distinguish himself by saying that he was not distracted by old products or by other priorities and that he was entirely focused on creating software allowing employees to collaborate and communicate.
Slack's recent performance echoes that of other early-stage startups such as Uber and Lyft, which were also released this year and have stumbled since their offers. Last month, Uber recorded its largest quarterly loss, $ 5.2 billion, and its slowest growth rate ever recorded. Investors have wondered if some of these companies, mostly unprofitable, could ever make money.
Still, this did not temper the hype around the I.P.O. start-ups related to technology. WeWork, the unprofitable start-up in the real estate sector, and Peloton, the fitness company that is also losing money, are part of the preparations for listing their shares in the coming months.
Rohit Kulkarni, a senior analyst at MKM Partners, said investors were still eager for young, fast-growing companies, although the combination of slowing revenue growth and Uber and Lyft's cost inflation had frightened some people.
"As a private company, you can grow at any cost. As a publicly traded company, you have to evolve at a reasonable cost, "he said.
Slack sells subscriptions to companies whose employees use their software to send messages and work together. Its product has been widely used by new technology companies before becoming known by large companies. In his bid documents, Slack estimated that the entire workplace collaborative services market accounted for $ 28 billion.
For its second fiscal quarter, Slack posted a loss of $ 364 million, more than 10 times the $ 32 million loss of the previous year. This included stock-based compensation of $ 307 million and taxes related to the company's direct listing. Revenues reached $ 145 million against $ 92 million a year ago. Slack said it has more than 100,000 paying customers, an increase of 37% over last year.
But the company said it expects a loss of 8 cents to 9 cents a share in the current quarter, which is above analysts' expectations of a loss of 7 cents a share.
Allen Shim, Slack's chief financial officer, said Slack was moving towards profitability, but was focused on investing in growth.
"This growth trend is paying off over the quarters," said Butterfield.
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