WORK - Earnings call transcript Q3 2020 | Slack Technologies, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Slack Technologies Third Quarter earnings call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Jesse Hulsing, Head of Investor Relations. you. Thank sir. ahead, go Please

Jesse Hulsing

afternoon, and conference XXXX us today's for results. thank to discuss you call fiscal joining Slack's on Good third financial quarter

On and Butterfield, Allen have Chief the Officer; Shim, Executive and Co-Founder Officer. Financial call, we Chief Stewart

and compete should upon on and assumptions today's any effectively. regarding and may to are and the current statements management's results materially development, make based date, forward-looking Actual obligation vary limited guidance These forward-looking not growth to statements demand, plans, from update views and product statements. and statements. attract any future we subsequent ability prospects, we as statements. During call, and disclaim any customers may relied strategies forward-looking but ability be Including, to of retain today's of not market business course our to, financial performance,

uncertainties release that from the concerning other website. press earnings these Information information of Investors the statements company's section cause differ company's are forward-looking and risks, contained in posted on and results filings, to the our factors supplemental SEC could

isolation measures. GAAP will not a financial considered in certain for non-GAAP in financial as non-GAAP discussion today or should Our addition measures include to, measures. These substitute be from

effect the Our non-GAAP results compensation of stock-based certain our measures exclude other of GAAP and items.

regarding You website Relations Investor reconciliations with can at our measures, non-GAAP and investor.slackhq.com. disclosures find our on comparable earnings additional including these GAAP release measures in

to Chief Slack's I would and over Stewart? turn now Co-Founder call to Officer, conference Stewart like Executive the Butterfield.

Stewart Butterfield

And XX the Non-GAAP new continue We We in year-over-year. leverage. quarter, operating more was million, year-over-year. $XXX today's customers points Thank added above the show margin you, total to Revenue everyone, net X,XXX up for had improved XXX,XXX. bringing a quarter. percentage call. we great joining than XX% paid

Today, I three on hit points. want to

revenue segment, enterprise XX First, in recurring customers annual $X we the surpassed continued outstanding momentum the paid for first with in over where million our time.

some side of new on the exciting pace launches. accelerating our product innovation with Second,

on through we're channels, what which time spend I'll seeing launched shared halfway quarter. the some Finally, with

for this For we is me first launched personally, the happen exciting Slack. thing collaboration since to most

That's paid with a So a enterprise increase XXX of included outside year, XXX, our QX another XX proxy starting over record customers the of growth the this enterprises, set XX% more customers of we the than by $XXX,XXXcustomers. for a customers annual recurring XXX,XXX with a-third as those Enterprise. adding total Fortune of over We of new $XXX,XXX a were and our quarter, large last the new use customers. revenue In in largest XXX strong international for and of in in business U.S.

saw great also customers just revenue. the Last broader growth base ending we're over to see and of We million paid tracking with year time, the $XXX,XXX growth end high $X XX we of with in range, annual over at to XX, this more happy this than customers. number had recurring this at, the in

alternative committed which of scales breadth their and fans. open is attention because In the software the the experience, they because these majority overwhelming that business, it The They customers to deeply choose choose bundled integrated with pay creates and is loyal having despite Office customers, use customers. tremendous of Slack the of see we suite. across as their and XX%, complexity adoption are enterprise They we OfficeXXX general, continue also user of to a marketed all free. nearly Slack it across because to careful million-plus and

choose logistics, financial in services, enterprise segments. all manufacturing. Dartmouth education, Healthcare, such companies Vodafone, GlaxoSmithKline, These SiriusXM, retail, Slack. QX nearly wins and as Innovative to and media, companies included IMAX, across continued

lead to product. on new to important and industries; customers user performance, onboarding compliance strength simple of reliability; down Moving the Slack platform We've to number by on, and improvements our and our we've Builder, extended non-technical allowing features of manage application develop made can of users and on create increases workflows. launch the in Workflow people we've which the who the doubling regulated been with basics,

free. launched month, overlapping use created and those mid-October, of also over and was close end on workflows to many in effectively multiple Platform access so by particularly were tools unique the Workflow and customers who legacy the quarter, among XX,XXX use Slack. won we have instrumental helping in in Builder contracts million-dollar-plus was of collaboration active who for this OfficeXXX

Zoom, on another most of companies them in custom Let's Concur. moving one tens like An thousands was have XXX using to Europe nearly Fortune the with X,XXX contracts of OfficeXXX million-dollar-plus largest a ServiceNow, of many one-third Slack to on those its of integrations of retailer expanded among on and technology Also population. over They a global thousands rely customers. expanding look to was is customers employee They of Jira, integrations, the Midwestern users tools of who users, at Slack. use insurer, tens and OfficeXXX built.

compliant. a won that regulated using Slack, feature with million-dollar-plus over contract despite being also the applications Midwest firm highly to OfficeXXX based has be customer bots with management integrated XXX customer. We key an This remain custom trading in will encryption our a and

momentum we regulated fact, In seeing industries. are significant across

XXX This healthcare and at financial Global and companies. quarter, XXX and we Fortune landed expanded multiple services

OfficeXXX is, federal million also customer that government largest plus you our it, date, deal $X closed to deal at a an customer. guessed a also We

apps platform making continues choice. the increasingly We over quarter developers' because Slack. Our In the strength the use of Slack and strategy valuable platform use over app for they to of with is more drive we the our developers. XXX,XXX software ended crossed they by the X,XXX customers directory. in ecosystem active value November, our

a we value for We're for XXX and customers. features launched few next QX, quarters. excited strong of drivers become new the over new roadmap business In have keep innovative to our delivering important features that

side, we still like On the at beginning. product we're very the feel

two between and the channels channels in availability companies organizations. messaging create this to in that at shared All Shared and category That mid-September. the happens we been a us extensive important to Growth Shared reporting, administrative allow brings Slack-using has most launched, extend first functionality. with them channel general users an Slack compliance channels. After into the two between innovation since explosive. launched beta period, is control, shared

fact quarter clients. shared XX,XXX similar market. with that to with released channels. to on closing and salespeople channels through of brought a on recruiters, are marketers customers channels, was the professional Slack. up the their working shared using success No shared by channels that are customer it ended with supporting We customers. paid working anything variety creative That's team HR Shared channels alone. see unique teams Despite we serving halfway has external services QX, in their quarter XX% Shared deals competitor firms agencies, broad used and

the in Not surprisingly, to started has an have this impact field.

channels channels external will were The partners. multi-thousand to for shared a with use example, a an agency win a reason communicate at agency user healthcare shared focused key vendors As uses OfficeXXX. that federal and

of to enterprise of in the All network innovation, drive organizations business shared of using pace forward. the momentum, this, growth combined the channels and the the

can for We're post novel it of sense Adoption extensively and a the are The everyone understand visualizations descriptions. network, and larger power with can partners, to new of XX% in collaborate how platform built has now specifically to of we see get used, shared hard dynamics being channels. be the and channels shared customers of customers shared customers with of really use to our more. starting to you been vendors, this merely verbal some from been I We rapid, network XXX,XXX check applications channels a blog encourage shared channels on recently saw especially out.

escalation competitive Finally, for teams around we back first over now announced to before expected in that base. this. of shutdown want million that narratives. Microsoft people active XX in Skype to Microsoft Lync XX% users. their million user had announced Business, XXXX, has the handing way things All Office the Allen, XXX they XXX announced acknowledge When of are they I the using

We reason was for of to any that as Skype Business. rebranded when have were those Lync no lost, assume

The phones users VoIP end rooms. and desktop product conference drove still

same. months within reasonable snag, they more Business forced to next then Unless, we'd million Now million year. users it's in six and a XX hit the expect to Skype being for next teams, expect of are announced to the XXX the migrated them

markets tools, no doubt in different markedly and this results. different practice teams for different there's customers a causes the in used marketplace, these competitor are Although confusion Microsoft Slack achieve purposes has and our

at of engagement Just teams our numbers themselves the look you engagement users. Microsoft of level Slack report that deeper week a among much see and

enterprise you work deeply closely reminder when a using which it. at million with and need know you the software customers and can we've opens a video level calendar that environment call, you continued to colleagues for of regardless plus to click there choice $XXX,XXX level. if customers all Office clear the in is app new Slack add XXX with an a on integrate That's represents why at $X category plus software and of use, a our

Just as expect for Business these more the users of teams, from can more you us you expect wins over well. can customer forced as Skype

With over to that, Allen it I'll hand

Allen Shim

quarter XXXX. And detail, through results and to fiscal for everyone fourth year in fiscal I again thanks guidance Stewart. our you, full the third to us. Thank go joining for will before quarter on moving

year-over-year. revenues in million, Total were third quarter growing XX% the $XXX

calculated Trailing month million Our XX% year-over-year. billings $XXX year-over-year. billings XX% $XXX were grew and QX million, calculated were growing XX

Our in uptime the was quarter. XX.XXX% or five nines

taken $XXX length in greater XX% are year RPO in expedient captured our and practical contracts of performance quarter-over-quarter. in one invest and contracts, annual than under XXX, reflective disclosure monthly million, a were we to continue revenue. We Remaining maintaining Because have uptime. industry-leading deferred excludes obligations up which ASC is

enterprise decision deals standardize to by Slack. growth RPO our and Accordingly, on customers to in be larger license primarily multiyear a multiyear reflect often is driven agreements. growth These by tend

came from of in from geographic the last of terms year. which XX% total our up XX% In is breakdown, U.S., QX revenue outside

to Munich, Osaka Sydney opened particularly open we sales year, to invest offices an in expansion, office our December. in We plans in organization. continue and within in direct This international Paris,

surpassed As XXX,XXX the we of year-over-year. paid of QX, customers, up end XX%

customer the Atlassian X,XXX net acquisition, from in As XXXX. second growth half the second of in half approximately reminder, paid which contributed last of fiscal benefited a year, the new customers

large on XXX is customers quarter revenue, expansion customers annual and growing paid than our focused in $XXX,XXX recurring ended year-over-year. XX% customer which enterprise base up remain with with the within We and existing greater

This is exceeded we be will for $X a mentioned, with time greater disclosure up in a Million from with year first forward. million also XX. Stewart recurring customers customers going dollar annual XX revenue milestone As ago. the than XX

exceed we sales growth as We expect total large success. for paid foreseeable the growth enterprise to customer invest in customer more future, customer and

customers ARR, in of represented ago year from the revenue third the with greater quarter. XX% quarter, in $XXX,XXX up Paid XX% than in

expand was dollar retention of existing the net a high retention third within customer quarter. which ability Our customers end strong rate, consistently at and to in resulted have XXX% our

Gross margin a year or XX% $XX measures. XX% financial forward, million Moving non-GAAP was versus revenue. I'll expenses were discussing be of ago. R&D XX%

invest We and and continue revenue shared with our to into expect experience, in quarter. roughly expenses new features grow scalability, R&D channels Slack's line platform in to fourth the growth as user such

$XX Sales were and XX% marketing million of expenses revenue. or

continue sales in While and campaign this is see we in of the quarter, third to timing spend. marketing marketing to the in due leverage part

expect percent million expenditures as revenue. of sales of quarter. XX% revenue $XX over marketing were G&A a marketing We higher to fourth bring and or XX% the expenses in

decline continue We percentage of to as G&A moving expect a forward. to expenses revenue

Our quarter $XX cash margin flow listing capital million cash million cash expenditures Free space. Free operating in $XX operating the the was XX%. collected representing related negatively but was the to office of flow million, $XX in an paid by QX negative payroll were to negative impacted direct taxes QX. of Free $XX in that build-out related includes loss flow, million. was of of

positive the Excluding those we in flow payroll taxes, free quarter. cash were

has the employer taxes our to $XX public. note important compensation and Stock-based first after recognition quarter. due stock-based the related performance vesting in compensation the RSUs, condition going year payroll in that It's based million were to of accelerated

year. We percentage of compensation, a over expect meaningfully the stock-based to as down trend revenue next

Now I'll to turn guidance.

the of For million the XX% in revenue growth $XXX midpoint. fourth quarter, to million, at $XXX representing a range of we expect

million. operating non-GAAP of range $XX million expect in We $XX a loss to

revenue marketing and of QX to XX% percentage sales as expect revenue. exceed and a We increase of in

in EPS non-GAAP expect of negative to negative We $X.XX. a range $X.XX

We outstanding shares are of modeling QX XXX approximately million. basic

a midpoint. the year, range For to full are revenue at of million XX% of representing to $XXX the we million, raising $XXX guidance growth our

There our of calculated at to low are range a We XX% are billings midpoint. and full for keep fourth the of mind now $XXX guidance dynamics year or the to expect $XXX in million growth million end quarter billings. calculated two the raising

back-end The become first deal quarter driven. weighted quarter fourth enterprise our fourth that business grown, The is also is as has the most quarter year. our of increasingly large has the

pipeline year-over-year. coverage and is quarter-over-quarter Our higher

to the our a are raising But them due size end the and projecting billings the range of close. deals these calculated to we outcomes to high of are maintaining, not factors, wider when Due we pipeline in the but is guidance. bit of

credits to headwind million related a continue billings. that to we to disruptions year level expect service We calculated $X issued the QX provide will in full

QX calculated negatively we billings from million by estimated quarter. an credits issued last were impacted $X.X the

these outstanding from bills, to the the are credits are reduced. of disruptions are applied their As customers with service credits and billed second balance quarter, level credits

We year $XXX are of million, raising our million to $XXX non-GAAP guidance onetime it negative range expenses our approximately related negative includes to $XX direct full loss operating to of a million listing.

related payroll and taxes expect million. year $XXX of compensation We stock-based employer full expense

negative negative $X.XX are EPS We full raising of a range to $X.XX. year in

shares $XXX outstanding approximately are basic modeling of weighted full average We million. year

flow We of free expect cash a $XX million negative million. year $XX range negative in full to

year, onetime expenses expected the be do are million. For listing fourth cash in expect the related related and to fees not direct cash total quarter. full listing expenses about the We taxes $XX to direct any

year office predominantly expenditures, our to of to capital growth. related now build-out XXXX space new $XX CapEx, accommodate fiscal expect For million of approximately we the

We We’ll phase growth make fourth flow steady continue earnings free on positive. our targets quarter towards progress the becoming related timing an on update to cash call. to provide

to With that, back I'll it turn Stewart.

Stewart Butterfield

Allen. Thanks,

at to previously right Sheila Disney our brings members Jordan transformation the the positions is CIO we Q&A, and voice welcome has Directors: on Board she of LifeLock Walt Norton two Before get customers and of fantastic digital Cisco I'd senior boardroom. World. of the to perspective new our Sheila held and like to into

years brings that perspective immensely for Mike Board to the Director XX the Flex over value The operator's second business new Mike grew an is revenue. was McNamara. of He billion in and $XX CEO I to annual

him, announced stepping is contribution also that he a Slack. our you Chamath wisdom and growth for kind. And time, from of one Chamath the we invaluable was Chamath down you be Slack. a if will early today know in Last, very Palihapitiya of Board. investor you Thank know your; to

questions. With that for Operator, ready we're

Operator

is first Davis line [Operator go the ahead, comes Canaccord. your of Instructions] open. from Please with Your line Richard question

Richard Davis

one. Hey thanks. Simple harder and question, then maybe a

that years? the So announced your X partner talk you where to in question about simple services to could if you Maybe X just program. is, like see you'd

think classic talked And you you're things I about one, the reached Stewart, this, don't -- a and one then that, about against did we did of that, the lot rather think understand they people all in that, of second your of kind is can replace, the non-consumption scale. but Linkedin application I Facebook company selling really than

but an about against? that that's that there mass question, you're for really an remember that you're you you people scale? competing way Is at that almost impossible guys when to I we it's as Thanks. should think think reach I critical know that's a just non-consumption And know – outsider important

Stewart Butterfield

Yes.

of thing. or maybe think I one, second inefficient an same slightly the e-mail doing non-consumption way differently, just of with the starting and So the consumption

from we it's And good scale mean, the customers way X is think more now, are really a XXX,XXX U.S. there employees. or have paid perspective because our I have long just that of customers, they're millions right I off. a in -- point.

and using earlier, and and a Slack to Slack many. addition it enterprise see for continue -- of to then will see dentist works wins administrations. one police florists all If that talked detail, we city and in can tax we work those, it we and departments in preparers We the office

and really dramatic. but I make consumption question, a comparison influence smartphone out your a is part and and way is to the So pretty don't I go social transformative. is I think non-consumption the there want on media it to think culture, scale long to off, of

we're day, If average Slack. day, you talk a XXX messaging XX at employees, payroll. they by mediated week, you XXX,XXX of your is out hours that customer time hours about proportion an minutes impact XXX,XXX of you billion to people million a have people of if XX Slack-using think a what usage products. when around X.XX of a think like employees' completely And active million switching have might is XXX,XXX hours probably of That in

Richard Davis

it. Got

Stewart Butterfield

we'd and Slack, buy. for smoothly, use integrations is them flow of to the what workflows the see consultants all, their easier in and and we whatever software working record, have better first actual experience a -- sorry, delivers of happier with big we're community I'm simplified and present, products those it are SIs customers our of as approvals, the do you those way, services way, generally just increasingly more like tools that a want Slack tools clear the And of same the customers that in We to SI program, like they notifications hope partner the way and on realize those a with lot third-party applications scale. can want it make to to we help to the giving because systems make their in tools.

and this which workflows simple, application. So we establish a it. up step workflow anyone obviously, introduced next people quarter, simple really the can code, The there, developing new interfaces, programmatic so of is to them Slack to use no save the open trouble in builder very can was it

less value SI ideal by is community to customers delivered the both time. more in So, the the

So, exciting very still interesting good there early results some partnerships exploratory. and It's and discussions.

Allen Shim

strategic just on benefiting. developers ecosystem in over apps Richard, our customer us. the over Yeah. to XXX,XXX and add that, broadly for X,XXX app real open-platform seeing the Allen. XXX,XXX strategy you're advantage continues I'll overall it's more applications. over a And directory, be got We've

kind of having strategy this go-to-market on just So, building including and open-platform the really element. investments of the strategy,

Richard Davis

so much. Super. Thank you

Operator

Stanley. line from Keith Weiss of Morgan go ahead. question next from Please Your the comes

open. line Your is

Keith Weiss

additions nice impressive taking sort Really than and a for of question those very guys customer the you Thank is greater quarter. enterprise customers, to the $XXX,XXX. Excellent.

one, general in sort sort of question kind [ph] of have of acting number customer impact base, conflating that events? enterprise the am or availability of of as that terms So more two did channels, I street of across any the [indiscernible] for pushing customers did shared sort the coincidental

customer, And impact number customers average $XXX,XXX, percentage we user? customers and about should I the about of that's the think think how large revenues that for coming we price into should per there when for the when coming Because you How like our of between revenue percentage trade-off think go expectation bigger volume. discount the be over was a kind should from versus enterprise really two, from on a growing of ARPU? about that we going know $XXX,XXX over forward what

Stewart Butterfield

would going definitely enterprise that to upgrades we channels availability be major to added great customers shared because now. the I them, channels shared and the to late minor probably by so don't that's to think some say because the on really people but beta So was enterprise, questions. of general a impact resist had Grid saw important any measure driver I usage were

going their for scale years out a to just shared upgrade for the someone when stories driver more results, sharing providers a we’ll driver paying really we about we're a we to they excited and something week. feel There's while then see see make as broadly, obviously because And and usage. service channels like of they very better shared three service a think next business channel, that Slack at we interesting some I difference that's is some way. early promising be opposed that's deliver like create to the think actually about a five this But immediately usage can customers'

shared to not better By we're dynamics early of too this impact channels just QX a point, the be it's able results, even the because modeling ourselves to at but give idea there, say. should of we

second maybe two I at was it. the question, mean, For it's just to look --

and results. We business we we have focus, had enterprise over lot of invest the and last see years a see the focus three where progress, on we we and where

the customers, which great earlier not management compliance international encryption to starting product line, continually One happen of people's expectations. bar of how first is, the key and degree And literally, data focus but a along scale divinely thinking just the are raised the for business is consumers in help and important really lot of administrative way, self-serve of bring year. just host performance of have is of tools the to the at enterprise because there's I final a to some to on stands residency, onboarding things features Yesterday, but releasing time. you go The it's that the need, bass it that on whole this that clients discontent. with two release So love same about like that. usability characteristics the

we're broader also much audience. to But a just moving

simplify market, people. the it's and to more So, and to a mass to experience we do more have make accessible

in I the the think enterprise focus demonstrated business. results, just that real like same in we'll the had see self-serve thing we've

Allen Shim

Yes, think that enterprise tens of Allen. the would I Keith, side of are there out there. still things, say it’s on we enterprises of thousands

So, still expanding customers. within those and adding our focus is customers

the right degree I a big efficiency that of expects. customer there's you think customer, that you're as get within a

So, -- us pricing adding focus to within customers. an staying output still customers those the relative on is and our for

about So, of for kind a we're that, the in that driving pattern. sense, prudent given buying makes way enterprise efficiency customers

that we're results. I delivering add at we So, had results continue and to there. setting in quarter invest those again, store upon this to, going record expect we're against keep to investing enterprise continuing would continue to

Keith Weiss

Thank it. guys. you, Got

Operator

Your next open. go comes Brent Bracelin of Please Piper from line question the is line Jaffray. from your ahead,

Brent Bracelin

was to for Thank taking talked quarter. roll it a and wins Stewart Stewart, channels. to channels? shared follow-up in My really of Allen. it's the the kind but relative for shared some technology One is help new know here. question having around for enterprise I out there? How you questions some early, the hard you about

then to us you follow-up out to of roll and the Just overcome competitors again, what some Allen. what would that for technology were be hard it for how hurdles of your there? to one doing And remind had some quick copy you're

Stewart Butterfield

Sure.

really, really last and the hard. would this subtleties. short bunch a years the mean, working I two We answer be is, there's of it on spent So,

sides They message the to to loss of want relationship, is of one So, eDiscovery holds and the want have both this of digital They they and prevention we want kind availability to all have and for policies. that how want ability retention thing control. -- stuff. understand legal the

you retain relationships But on then these the both and sever and create be data sides. still to able want to

You also want and shared be appropriate incorporate to able to have are both that by applications permissions have sides. them

lifting. So, there's technical heavy a lot of

And obviously, about we to Slack you let's say, shared channel model have there's go create to more where a company people people can X, because from the worry using in XX,XXX million potentially, where, worry people or anyone. we have XX,XXX they about with to less --

carrying would legacy we're not would relatively base. starting think from all, dozen replicate code I average, new that different a that half be old, if to products about difficult on were XX very years technical debt. a we We're And very, strapped this. to I point of were out a it

Allen Shim

is to channel that, atomic us, add for the the mean Yes. to unit. Brent, just I

And And You're I purpose-built Arnold us. starting out allows industry. that the not a means that is it's to the see put this. that this very proprietary channel. for in architecture the It's think described having being team, in recognized to that that the report

And systems. of can't legacy together with a stitching this you at so accomplish kind different

build way. specific have intent You this a have to to really

Brent Bracelin

then, And you. a Allen, helpful. Right. Super quick flow for just

kind just into transactional what I enterprise, mass there? a was the As transactional And customer you smaller like the think factors net reaccelerate as didn't slowing of on customer of know are do happening your number about enterprise what's paid there. the function a business, the competition, can the customers space? self-serve of adds kind new what's net back kind there But on customers, of record lot of the you things that kind the market focus there if adds of Thanks. I the outside If what Are of to a a of cohort, function about it of if are think we productivity, side of it's function there. enterprise of was that a on side. happened

Allen Shim

I where will of us echo what we years. seeing area last the we we enterprise we And we're and couple earlier, for primary I been customers. focus has that Yes. and enterprise where mean go-to-market Stewart and of know winning more think results. to deliver product you're invest, that over And said on both a quarter, more every focus

Asia, alone, in SiriusXM -- the in U.K. GlaxoSmithkline U.S., this We the in Grabtaxi quarter it was

it seeing globally bunch of different across you're a So, sectors.

pleased that. So, we're very think with I

-- I think the adds, to I ton you're the I opportunity. that on is net terms we see And very corollary this is, side, think very, our in type investment. of educate, the mean do market. of of multi-year a in and self-serve still time for stakeholders, large build a a quarter. obviously to a seeing when trying We're we're that to over here. make for will kind for trying that this to something know it of build different We And the multi-quarter, to results reaccelerate, to really all type for takes and but of this people to level platform see transformative work. quarters. off do a invest here lot and intent the we'll both this coming as think investors, about there's guide we easier a those that customers, to lot can understand, And we more that's it us thinking category, there we're a

Brent Bracelin

color. Thank you. Helpful it. Got

Operator

Bernstein Moerdler ahead. line with from Please go Your Research. next Mark question of comes the

Your line is open.

Mark Moerdler

on Thank my question congratulations the you for and quarter. Two questions. taking

Slack you maybe too -- Can channels? getting early is adopt on channels And great. I due are some hearing them follow-up have you their is The and customers. within largest the of to it's have customers quickly partners a color, the which give starting channels, obviously customers shared first shared one adopted to and impact question. to your then shared Are they

Stewart Butterfield

Yes, absolutely.

user success I our and product. mean, market. And that we're we a of And we've because teams -- obviously customers. maker sales a has in seen software So the using really have is own with our enterprise it penetration heavy had what great

starting the happening over all that to we're Generally, place. see

give I'll premium success delivering customer support just getting But deals are People faster. re-story. you people programs. So and one super closed

noticed post invited company We that have testing small in called testing center. audiology We coming software had broad Smart Care XX audiology this. about a

So were setting in Slack. York, much their administrators to it we their it Wyoming, had tested, satisfaction to presumably a users that creating there's who in Vegas, up, places and be then it, where of you're new in New thought higher. It customers the and just going inviting that so obviously become knew instance, and to customers use they what They was because they crazy the hearing that were they're to wasn't bringing that's paying that. customers

And were out our one for there. another in would conference anecdotal London Frontier's

legal the I of in were digital-first who was to clients a requests centers London-based was briefing over that banking channels? their they from hearing increasingly shared firm, them serve executive participated One getting

And the Slack we thing -- it. what can use how is we best and

So thing there's platform, is those just are starting is we're getting of not are kind cases exciting There like discovered mean, really the us are hundreds those a to I of creating we're usage, very it's by and a customers. started. and Those inventive generative that for -- and see are things use emerge. exciting anecdotes. thousands But those, lot or the of we're

Allen Shim

terms more work more just expect road here, the of but one-to-one, the how map become these these and one-to-many and mean, in of to use people transforming I not is cases norm stores Yes. see Slack. Mark, from are with of

Mark Moerdler

follow-up. then a And

Is completed, or additional had stock confirmation, the guided employee a of in effect has the the that base through to. significant we stock should employee any change comp? see increased as comp distribution Just you

Allen Shim

I expect two now as through would the that the and pre-listing, noted that call, the work think accelerated over grants to say, Well, right listings. then were in it take, time. I It year we will to another would normalize or existing post I really has

Mark Moerdler

you. Thank Much Perfect. appreciated.

Operator

comes go Please Bhavan Blair. line of Your with next William from Suri question the ahead.

is open. Your line

Bhavan Suri

Hey, guys. wanted here. my Thanks Nice to for premium a little little question. bit. taking the job opportunity on I touch bit a

go. in or terms users months in few a high the in of past the pretty That's XX% mentioned we're paying. a models You of active daily number maybe ago, premium

two, premium picture, And maybe conversion? not this think there's XX%, that you so think for how maybe you sticks years, let's pricing adding quarter do around the think opportunity three bit, changes? increasing to think increase number about do as or ratio a changing to more little say, years, next do a Again, by five but, or few the this you we

Stewart Butterfield

I because usage a side, like organizing stocking model that think wedding don't the kids to lot events, or the time-bound it in for things a go continue I of up. their premium is renovation have project home season. for that we there's or planning will mean, like

to XXs, tend It's they new increase And customers, because tended But years. clear, to to that. the Slack we to and users than XXs very it's been just It first the XXXX, introduce have that was XX%. to At companies. is time, reported there, and we over increase it their paid to around be XXXX, to conjecture high my like maybe in active Would was brings XX% it’s and now XXs going intend probably great. love in and and daily seats. it cross

Allen Shim

in you as, enterprise we out expand doing, particular, Yeah. base, as are an started in organic But expansions are capes. so what of, of customers larger at I the these sales fact even well as and a off motion, large reflection and they all the think the expand, I think their that more it's

mark. that of over they So free DAU kind skip

seeing you're enterprise, happen seeing that's towards why because starting percentage more these trend mix percentage towards pay, higher off shift as they're So of that paid as because a really you're paid. on expansions that

Bhavan Suri

plus, long one's Got get When guess, it. how average, it's take that X – ACV then you question. again, there, get to that it. ACV XXX,XXX, no to Thanks. know to Got One, leads million of sort expect does is? when those $X look I those, – at but all there more into the two my for And to exactly the are which them is Actually, you customers, look XXX,XXX $X candidates on – next customers, think say, north them room I above million? million it at never parts. those you go there as I of

Stewart Butterfield

going. a It that invite candidates while are them They them of many not can yet. someone. a are at later of get mean, big They enough, and are, I of But candid, up $XXX,XXX Slack. all it. just It stage long they're time. don't totally get for signs take that them on to are aren't takes many in busy. team that someone but as for really would say, candidates even all there's I

people five have you people. than eight Now,

there getting there's best we six change license the management In agreement So is too, an case, years. program like can and from take have a and take can there, team people enterprise XX,XXX success is our months. ground. and on it That the

of over is while why it a another – think big to see because it really a little I increase paid is you takes percentage transformation. time So the that's reason

Allen Shim

when customer's, what The was looked particularly, TAM said, at large low the existing last this, time our the we the, within is percentage. in double-digit we it

kind existing Xx give X, opportunity of just another at that expansion higher it's to angle in So of X, base it. terms you within

Bhavan Suri

Yeah. Thanks questions. at. what guys you for That's That's taking was I my nice getting helpful. job. Thank very exactly and

Jesse Hulsing

Yeah.

Stewart Butterfield

Thank you.

Operator

of Baird. Your from Will ahead. Power go Please comes next line with question the

open. is line Your

Will Power

of questions. to strong customer Great. $XXX,XXX Thanks come some driven logos thinking want how driving about mean, I the growth, understand, of continuing really to new I last additions users? the a productivity acceleration, versus in lot. Yeah. I two couple guess, I combination sales by I Enterprise in the and what's trying guess quarters. just much I'm that's just back the just that am to of drive to quarter.

Allen Shim

more traction seeing I it's were been also customers more – for Will, of we're things. our years, enterprise we Yeah. of this investing and mean, and saying, as just function We've understanding a in of with Slack.

they digital as us, network their We enabling with something give They're channels. give the platform. transformative, appreciate we're them transformation competition. time this now seeing We and relative value the the the beyond communication. spend can difference value far not of to this customers them As share in providing that

seeing you're both over relationship understanding seeing. with that strength out the then and these capacity time sales intersect think new understand where is enterprise building I it category, leading more there driving and things the you're to So expansion of product, the the

Will Power

Okay.

a question, fronts? provide two improvement and can free guidance of in on you just relative nice those And to for flow. profitability there cash guidance the further Any financial just a outperformance then the Okay. both, source on color prior I guess, operating

Allen Shim

think is and model. very fundamentals, have of strong I we mean, it's a reflection retention SaaS this high gross – strong I a Well, margins dynamics. software

part think So to to the of invest I phase, growth, that. in the invest think priority we've as growth and We're leading effort is first drive in in our of as in growth. you're to I seeing is always going areas. see invest And continue efficiency growth, and part really continuing more you're we're said the to business we deliberate to to in going innovation, continue leverage. those to in more But a this also invest

been goal kind both dual-track always and executing for a So that. we're have against really just of I us, think

Will Power

Okay. Thank you.

Operator

Barclays. line of next ahead. Lenschow Your Please with question from the Raimo comes go

Your go ahead. open. line Mr. Lenschow, please is

is line Your open.

Raimo Lenschow

Sorry, sorry.

on was I Sorry mute.

a a it that you of without – if main how are – that? false users. If the about naming so out look you almost the also it you like, how levels there, to Slack the engagement reacting kind you way way But like higher. kind terms just there in the in a I'm for look or level – looks the you. thinking what's engagement like, see the at the about – doesn't wondering seems to communicate usage you is you marketing lot that and do number what of message competition tell active Thank at field you But because is that's around of really anything

Stewart Butterfield

for we're you because love lot communicate, to of trying would hear ideas I stuff. to If a have it, how

just I I we it's make And the that. to undercount mean, take and -- about appreciate think mistake is deliberately created. little take some think to quarters more a to people confusion the bit. I a really couple you mean, it's going for I it. But time, of difference going any can't it's not

about engagement and here less just makes it like, more there's talk I that a purely just little think, here where, bit you it's quantitative a because difference. If quality

lot is people for achieved. of work Business VoIP have and who a that now are Skype There desktop phones

the up they and call do they team with has what nothing are So pick a to -- phone people user a do. make and

are Slack, or strength to platform that. people any of the of You Slack for why switching the

carry haven't candid way So be right message I we mean and say, I the to want out that. just to

million get I daily the think that trying it active XXX the million ahead people XXX announcement to XX and using to million link. active daily were going XX to and day user user announce, active understand announcement hear get people million and user you of because

get course, they're there. of So, going to

these because customers, too of population they couple continuing we population and into getting transformed head have be integrations familiar and with I they on going don't kind where think built and to of to not to X,XXX that teams to that us there's free. take years. a distraction. people our who couple ultimately can it Getting do were, priority that, if a very aren't broadly. a that to go -- or we a to get have the say shoulder love Slack to are is that already customers, past would people week or drawn outside in months teams a failed their But that it valuation we when talk can People customer their can and really fanatical, have usage. where shrug to you way of incredible expanded all it's inside people roll done and this think of reach they serving take a get multiyear out of a day, we they’ve a or and happening and that figure we And back out gone month have

Allen Shim

they communication, I tools mean, comers that and transformation us of the what can difference XX clear appreciate provide that legacy have. already office XX% the our XXX the when the It's see to customers, we we top Office customers. versus -- our more also that

that continue more will and agile. become to time invest to in that's customer that invest So something in think organization's their culture continue success, we to may continue invest stores. want want we in how to that, change And take to people as

new know time we have it's way of a a spending and So lot We're we to in category. still long go. education, a

Raimo Lenschow

you. Thank Perfect.

Operator

comes question line go from of ahead. Mizuho. next Your Moskowitz Please the Gregg with

Your line is open.

Gregg Moskowitz

most of successful guys. channels Thank has Shared that at my adoption. the taking software, programs first by recall you I had question, I good Stewart. the user one for one least in is much can Okay. measured data as for very guess and afternoon

I rate realistic thinking just have be we from how channels, Allen. a three So what a And years or be for so follow-up say, might that? penetration shared for now, about should

Stewart Butterfield

Yeah.

I don't not. it dynamics talking inside because understand Slack don't we So XXX%. adoption approach if customers, said, even it mean you're like internally totally about But the will I we model will

So already users. customers shared channels XX% are of our largest

help there. The that. get they it existing can explain reason make and it an They they their setups all consistent them can our can cases, for to They that give of help are use teams with success people, is can compliance up. set

there's customers don't independently The they And we it. say. plus but have that are luxury, should two other things discovering XXX,XX

early in product the the very to workspace scariest hidden wanted the which you desktop of to in we're shared in And company app, named that, you app. invite hidden person the stages mean, the the it's kind the the one, but know is by So out commercialization I it's URL, around channels. of of kind beta, IOS in slack.com, had base work of

of You have to it. kind of your way out to find go

to walking now lot that a up. broken So get customers set That's talked over in about it glass easier. our the order as tomorrow, CPO,

invitee, You correspond. inviter someone to includes want usage link the in, a experimenting begun for barely send go of kicks I their approval the offers that. for look and pay the process for that. Slack then it option the But we to includes before, administrative but free much farther just mentioned than the can That with trial

think for I driver. of be a and So also way the a feature growth both convenience actually customers as has to

channels or is But more. as mean think the you two the your architect, that about and you this between the is, Come use as involve customer. many the I I now, engineering enormous set organizations. right up second are cases There say Slack-using firm three thing would just want. of

to an time there channel share gets That of and someone invite to be times is a driver an going likely themselves. many, more because many a send invite are every to spread adoption

So that over time. there is and kind of a network effect compounds

but could huge want people And can have for about for three we hours, that, boon. that beyond sure whole to or there's if a participating, roadmap time a questions. I have five literally I other you So that's talk make

Gregg Moskowitz

very Allen, revenue you upside billings Okay. That's although very then quarter Stewart. had only helpful. was above. modestly Thanks for And this the good

consensus your was remarks. your grew in where XX% prepared you sequentially noted RPO think strong, by was. Conversely I as

be impact the there the is in QX, duration that that other should from credits from anything aside call of you would in here, aware or any puts terms we out of? So takes and

Allen Shim

in Nothing particular.

think been momentum has strong been the I enterprise. as we've the in highlighting

self-serve. We opportunity in have more

area that we're to So to well. in going as think I invest continue

So I think we next you'll see the of results talk that year. as about more

Gregg Moskowitz

Great. Thank you.

Operator

Ryan comes Stephens from MacWilliams question from of line the Inc. go next Your Please ahead.

Your line is open.

Ryan MacWilliams

question. Thanks the taking for

Just one me today. for

and with With Thanks. shared paid success your think about big how your could so instead workflow channels rollout, the initial feature builder, do bolting offering? upsell the next a versus you existing provide feature potential opportunity, new

Stewart Butterfield

That's a great question.

as way a -- actually, the so thinking those that new think offering products market about away we're long big, right. is just are drive if ARPU, because we're intended from products to I

amount want existing the they're and money, IT a have administer saving. how single-digit recommend job, by easy and good, people we time want of the our it be want to next team If productivity we've thrilled value penetrated focus fanatics be same how we more get increases. percentage all these more so to executive them on want be to thrilled Answer it focus their and to continuing to to is on with Department at to got the to their much for them they to we in we get value customers. that, deliver We

that's focus mean run. long I for the So the

you'll think choose what customers. what different in some or whatever. you or get a product past a is choose horizontal, an you a team companies whole Slack you workers, whole new software see old dynamic It's seen enterprise you've sell a the whole across organization the because I is you within where and whole or slightly to vertical extending the customers, than division And adjacency

it future. it's that little adjacency. degrees, different thinking XX you're doesn't in that, when things and for about around for us, a And running. making and principally for to applications that's that I you and But us get systems it's a integrators. the I'm bit not making turn It's for workflows, horizontal platform around saying easier happen up about new what's easier customers it's think

with win a a and that there's customers. new So easier, software. integrations in XXX,XXX to developed also and were real huge real think for think app for of integrate a win us number that apps internal a by their But I our That's about X,XXX which if make the we custom that amount a works is if can record. you customers the directory, activity that's

and So new They get to have things running. they a can those server. don't up provision

that of the as especially great server that to developing. approach applications relatively are function forward, development simple for the kinds think a I step is people

for us them then of you because looking to distribution And imagine around your you're our think huge Slack. the for brand-new partners you're are for company SaaS opportunity XX I there's a going and first XXX if customers, be using

or front can a So, if buy we you can help big one, get in of that's win. them you

Allen Shim

in thing, that near-term that to continue significant be to priority payout. to obviously, Yes. we payoff we and invest point. think that for take very network compound. going mean the effects that And think channels that's just I significant. share definitely time the we're will to us reiterate believe And what is a the possible, But think they we on for are for long-term we

Ryan MacWilliams

the for thanks Perfect, quarter. Great color.

Allen Shim

you. Thank

Operator

of Walter with line ahead. from Your go the Pritchard next Please comes question Citi.

open. is line Your

Walter Pritchard

was for just Allen. I -- if wondering

you QX. And a of kind last peak And into same about but Could had On help like happen incredible might then you've you sort mean more a QX? had guidance, the of different that little year? this last an come the a us be I managing bit the here? from closely. QX. ramp maybe understand or hard what in the I where billings seasonality follow-up. pretty may that for Things you then how you're be the And thinking down year, quarters how given in

Allen Shim

relative is even to how set in you've seeing as I the year, well. we billings. prudent of want the you're really this to distribution heavy that setting what QX And think we year. there's a we an more lose expectations visibility pronounced enterprise think had more pipeline, just we approach year And Walter, seasonality in last kind a fact are exceptional we I to going quarter of stronger be of think got that this think and to you guide the kind up what

balance bit with of momentum lead does it the visibility And so less to great, well we're a trying in this enterprise that that term to little timing. fact

is is So I Sales think is good. capacity momentum up. up. Pipeline the

So driven that the we're we're going just to with the the out quarter nature of more but confidence, balancing out, of given enterprise results.

Walter Pritchard

on the question a economics the guess I then, And it. enterprise Got customers. of

customers? last again How adds? with go acquisition trying larger there. you to think be might bit more talked to economics sort feels of comfortable this Is of get little do more the get the about that that more how And you spending recent a this, And these are those and case? with as focus you customer of you about costs quarter, on it thinking forward customer talking you're the about quarter. I like enterprise

Allen Shim

of tremendously as and It's to and think, balance out that's strength to with Slack. going aggressive. a as a enterprise the scale, machine to soft-serve we business, continue even had We've think more with. more efficient we be feeding to I grow want But, we continue to be we

earnest. We just And much Paris our and office in We opened just opportunity started Europe we're Western see in Munich. in there. so in out getting

Tokyo just about Our is a office year over a old. in little

markets of U.S. internationally, a the even opportunity amount still see developed tremendous we in So in and itself.

opened as the of larger presence U.S. We Chicago. We just opened a up just in well. other parts

to there that a those in a still of we do see are lot want that. acquire still we we of more dynamic terms to our here, approach sure to efficient So, very make of and customers, accelerating ability see our and we opportunity

Operator

MKM ahead. [Operator Instructions] Your go next question Rohit comes Kulkarni of with from line Partners. the Please

Your line is open.

Rohit Kulkarni

wanted to cash the congrats you're several why than kind quarter. we Street to why of guide. and profitability another whether flow Okay. modeling. know next But probably of on wondering been next Thank faster three comment you have much not fiscal quarters the on wait have ramping for positive free great I as year? year's what wouldn't you months or is the I've you

and builder And extent large talking the about then conference, talk and by very I shared workflow the that? affected and know cool about at feature. was using kind add-on can builder? are And is everybody a a what the workflow stickiness And how the very is to cool channels, enterprises being is Spec adoption of I you

Stewart Butterfield

everything. take there's workflow seeing We'll I'll And handle for We're Sure. those spectrum. the real question. I a reverse. builder interesting in it think

need On hand, stuff one a have loved. system if you you'd and you a and official the to record run that chain be supply have manage, reports real of able all of the to officially to kind database against

Most companies by captured any or they're have whole many other this convention, so which of in ways of more database. like workflows, are host kind not

it's by deals discounts them. contracts the You desk. can't get approved But run How how sales approved. on reports get and

We security own reporting a builder It room, or in where campus. can our workflow conference like center. attributable actually be operation incident, security the on as extensively a booking a intruder there's use

there. I we there's really of adopted So host for And opportunity think seeing never a imagined. things that whole we're customers

people. our surface next make area, to it software, more inside to need we it of, is to kind visible What give more

So and triggered. the kinds made that of kind branching those creators logic more be give when there for are specific need also are of and more events workflows of channels visible, the for can that those to workflows workflows, are set tools up we

to I But more would generally, the important because workflows the last be able you say there's invoke is, to tie-in thing should programmatically. real platform a those

back. the your from and own post that's not internal software of tools Slack, result So have those of also part then outside or from workflows

you on. focused we're great this that. obscure. -- mean, more gets that think and I little So a It's I'm great, I something that's noticed think a that if went you glad really it And it's back, bit I is

market on and little adopt little I take excited, we're while, very it really to been it. them take customers that, a been they've but can So think and the where catch happy. and We've will a it seeing

Allen Shim

side we on both of to acquiring we're go-to-market first It investing question, growth. Rohit, as And phase, front ties of previously. in nicely is the as R&D And profitability growth well customers. question, the priority on as seeing more on about think focused I you're the the that the Walter's actually kind things. mean,

cash prudent for invest, large we them is more go to as really, that, other that Stewart the acquiring so more And talked of believe building reason we specifically really share and see in and opportunities that, the to the and do to after why we channels as it's we're you're thing early is out continue so us is capabilities most the more customers, the flow highlight about, to breakeven this opportunity work. target areas we builder of innovation to that continue and category, growing whether hearing workflow

of to to So flow cash continue indicate. a hear going we and to to that us, that breakeven we're getting want from the would the I you're we investing -- that's in growth, that degree efficiency many think see really balance priority, and of so leverage that's balancing opportunities that really with but out really

Rohit Kulkarni

guys. Thanks Okay.

Operator

D.A. of is Jaluria open. line with ahead, Your your question Davidson. line comes the next from Rishi Please go

Unidentified Analyst

[ph] Thanks Hi guys. today. the This Hannah is for taking Rishi. questions for on

solely First, where time. just wondering was of small see I know of the doing guys to you that such -- like encourage you is Slack, are anything rent VC-backed there built companies? there trending companies on are applications as this number a companies over I number And are with

Stewart Butterfield

Yes.

is So, all over big platform doing, that all our the the relations two the say, team I is time. broadly, just One maybe road and paths. efforts of the we're on developer development it's mean, the place

input able deliver from and functionality a also Asia, still better the need also of we're and process early this they experiences to lot across educate taking So, in on helping features developers be the Europe end still U.S., kind look to to and thought of what in them but to in users.

We have to Slack be the Fund, last was one also been else. someone which companies that first nine invested has we by December, but acquired being might successful. an There heard Slack tremendously update in I

interest of of there lot those efforts. So, kinds a there's out in

of more the on that makes bit like world either it thing real between systems platform to a enhancers intersection platform. Slack there's outside interesting a little also And call the kind a experimental and integration

So, StdLib S-T-D-L-I-B. company, it's spelled

makes up Just running. released new people a integration and to new applications and get it for easier

which one-hand are internal there the developers, between continuum a really there's So, of XXX,XXX registered followers.

Allen Shim

XXX,XXX.

Stewart Butterfield

the the the to want like able XXX,XXX, mentioned integration, products, to their -- doing sorry. for of are customer of ones third-party that's directly, Many those like support you them. good those sold it's systems that companies we inside own and obviously be because

both of If the help are good of obviously buying, course, and tool it's of that. that ecosystem for customers, for And us. an then the develop good on customers it's sides

integration. people and internal better deliver developers better will help help develop So, tools third-parties

Unidentified Analyst

difficulty] [technical cycles seeing team, such longer the given sales then as any on And changes buying great. you're Okay, from? behavior, impacts, in

Stewart Butterfield

mean, up. it It I definitely come doesn't always up. So, comes

all that almost been reality have superior And it's concentrators, to Enterprise those think just customers The big tend we companies do to who we in big such who use last I market. in of do great, but our world in think companies Office still companies to all Microsoft, has great. almost use All because wins in world and competition the world world, we out, Microsoft, the we the great. them the we the do say have All don't still that that we companies three enterprise think the of of of terms Grid, population. use launched great. years is enormous I helpful there's the been an that. Big XXX in we the do all are product team like since understand specifically, -- and in

I my for we or happily the of it's population say, like I definitely because impression to is conversation. long. work does my time us not don't can, it force at usage. I said to X,XXX X,XXX Slack people give And see or often what earlier, want a to extend equivalent be a least there's to that by and for force inconvenience that about; are quite line $X told This I'm really that a company and understand it. whoever this takes inside a evaluation these Slack and using they're I of that, need we we it, think teams, it's people to get because we've products, a talking is but approach. have all evaluate don't people partner, It that new budgeting I'm evaluation, quick, more wrap item. got and doesn't channel sure and not people

a it’s of bit So, both. little

Allen Shim

with, top maybe I would use XX our XXX. XX% just again, customers of conclude Office

now really can Slack, that the a in right. So, And kind the particularly architecture we have those we're and we no with customers us of legacy don't that back. buy holding and take differences marketplace then is only here. scale, a about that the because it appreciate lot difference understand on, option there like There there's

we in value a our So, front we're focused for and and compete, very driving ability to opportunity confident think customers. in on of there's us huge we're

Unidentified Analyst

Great. Thanks guys.

Stewart Butterfield

Thank you very much.

Allen Shim

you. Thank

Operator

There this you for call. and Thank are this further today's no at questions concludes gentlemen, Ladies time. participating. conference

You may now disconnect.

Slack (WORK) 4 Dec 192020 Q3 Earnings call transcript