CNBC Disruptor 50

Slack CEO says the company will use its $800 million cash pile to focus on growth

Key Points
  • "Growth is the priority," Slack CEO Stewart Butterfield tells CNBC.
  • In its first earnings report as a public company, Slack beat on the top and bottom lines.
  • But it projected wider-than-expected losses for the current quarter, which sent shares tumbling.
Slack CEO Stewart Butterfield: Growth is the priority

Slack CEO Stewart Butterfield said Thursday the company is laser-focused on investing in growth, as it spends more on creating new features for customers and attracting additional businesses to its workplace chat service.

Shares of Slack closed down more than 3% on Thursday, representing a significant recovery from when they slid as much as 15% in pre-market trading. At one point, its share price almost touched the $26 reference price from its direct listing in June.

Investors continue to raise concerns around Slack's ballooning costs, with MKM Partners analyst Rohit Kulkarni saying in a recent research note that companies can take a growth-at-all-costs view as private companies, but once they go public they have to grow at "reasonable costs."

During an interview on CNBC's "Squawk Box," Butterfield was asked what Slack views as reasonable costs.

"We're in a strong cash position," Butterfield told Andrew Ross Sorkin. "When we see opportunities, growth is the priority. I don't mean growth at all costs, but at reasonable costs."

Slack has about $800 million in cash on hand, Butterfield said, which is one of the reasons the company went public earlier this year with a direct listing rather than an initial public offering.

Butterfield highlighted Slack's "win after win in enterprise" as a bright spot in the company's first earnings report since going public. The company now counts 100,000 paid customers as of the fiscal second quarter, many of which have "hundreds of thousands of people, tens of thousands of people," Butterfield said.

While the company beat on the top and bottom lines for the fiscal second quarter, Slack said it expects sales growth to continue to slow, alongside wider-than-expected losses for the current quarter, which sent shares tumbling.

For the quarter, Slack reported a loss of 14 cents per share and $145 million in revenue, compared with analysts' expectations for a loss of 18 cents per share on revenue of $140.7 million. Slack noted its revenue for the quarter was negatively impacted by $8.2 million of credits issued to customers after outages during the period. On the company's earnings call, Butterfield said the company is making big investments to prevent future service disruptions.

The company said it expects to report a fiscal third-quarter loss of 8 cents to 9 cents per share, which is wider than the 7 cents per share forecast by analysts. For the full year, Slack is projecting a loss of 40 cents to 42 cents per share, compared with the consensus estimate of a loss of 40 cents per share.

Like the recent debuts of unicorns Uber and Lyft, Slack has had a rough time on the public markets since its direct listing on June 20. The stock has fallen about 20%, reflecting investors' increased skepticism about its business, which depends on selling workplace chat software subscriptions to businesses.

Slack CEO Stewart Butterfield on the company's first quarterly earnings after its IPO