Slack (WORK) reports earnings today after the bell, and it must show investors that it is indeed inching closer to profitability.
Slack is down 25% in its entire existence, which began in late June of this year, but the shares were rallying 1.56% to $29.91 in premarket trading. Analysts polled by FactSet are looking for a loss per share of 19 cents on revenue of $141.3 million.
Here are the particular achievements Slack must be able to boast on its earnings report.
Currently, only about 15% of all Slack customers pay for the platform. Investors would like to see that percent progress toward 100% at some point in the future. The 15% number certainly suggests huge revenue upside for the company, as analysts have noted, but Slack is going up against Microsoft's (MSFT - Get Report) similar messaging platform. If Slack can continue to keep its platform a valuable one, it can get more paying customers. Slack will likely grow its user base hugely from here.
But on the earnings print Wednesday, investors certainly want to see signs that a higher portion of customers are paying for the platform.
Analysts expect Slack to generate $100 million of free cash flow in 2022, which would mark the company's first profitable year.
Slack needs to show it's moving in the right direction on that front. Many newly public companies that are unprofitable like Uber (UBER) and Lyft (LYFT) are nowhere near turning a profit, both on an earnings and free cash flow basis. Slack must show solid revenue growth and a plan for controlling its cost structure in the future.
Analysts have recently highlighted that, for the likes of Slack, Uber and Lyft, investors must see earnings reports show results in line with or better than expectations, as these young companies, new to the public market, must gain credibility with investors.
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