Slack CEO Talks Tailwinds And Headwinds Ahead

Slack Technologies Inc WORK reported a "phenomenal" earnings report, highlighted by strong growth in new customers, Slack CEO Stewart Butterfield said on CNBC's "Squawk Box."

Strong Tailwind

More than 90,000 people started using Slack in the first quarter, which represents a level growth that is greater than all of 2019, Butterfield said. The company also recorded 12,000 net new customers versus 5,000 in each of the prior two quarters quarter

"We will realize the benefits of that over the next year and the year probably following," he said. "So there is a very strong tailwind."

Unknown Headwind

Despite a clear tailwind, Slack also faces a headwind that's difficult to quantify. During the current difficult environment highlighted by bankruptcies and layoffs, the "pain" felt by Slack's customers "has an effect on our top line," he said.

But we are certainly not on a "one-way path back to the dark ages" and when customers feel better, Slack will "also feel better."

Overall, there are "really strong signals for the year ahead."

Demand Pulled Forward, But...

The surge in demand for Slack's services is in part a function of demand merely being pulled forward, but this doesn't tell the whole story, the CEO said. Instead, all companies are accelerating their shift "down this path of inevitability" by three months or five years.

Regardless, the shift towards productivity software tools will be "generational" in the same way e-mail was.

Outlook

Slack guided a path to cash flow breakeven at the high-end in fiscal 2021 but management's priority is to offer greater flexibility to its customers in terms of payment options, the CEO said. Allowing some companies to rework payment terms also prompted management to withdraw its prior billings guidance.

"We really want that flexibility to earn goodwill and help our customers out in this period," he said.

Slack's stock closed Friday down 14% at $32.56 per share.

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