Q1 2021 Slack Technologies Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by and welcome to put the Flash technologies first quarter earnings Conference call. At this time all participants are in the listen only mode. After the speakers presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone if you look.
Choir any further assistance. Please press star Zero I would now like to hand, the conference over to your speaker today, Jesse Helsing Vice President of Investor Relations. Thank you. Please go ahead.
Good afternoon. Thank you for joining us on today's conference call to discuss blocks first quarter fiscal 2021 financial results on the call. We have store Butterfield co founder and Chief Executive Officer, Alan Shim, Chief Financial Officer.
During the course of today's call, we may make forward looking statements, including but not limited to statements regarding our guidance in future financial performance market demand product development growth prospects business strategies, and plans ability to attract and retain customers and ability to compete effectively we will also make forward looking statements regarding the potential impact.
The global covert 19 pandemic on U.S. and global economies and our business. These forward looking statements are based on management's current views and assumptions and should not be relied upon as of any subsequent date and we disclaim any obligation to update any forward looking statements actual results may vary materially from today's statements information concerning our risks are.
These and other factors that could cause results to differ from these forward looking statements are contained in the company's SEC filings earnings press release, and supplemental information posted on the Investor section of the company's website.
Our discussion today will include certain non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to not as a substitute for or an isolation from GAAP measures.
Our non-GAAP measures exclude the effect of our GAAP results of stock based compensation and certain other items you can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP measures in our earnings release and on our Investor Relations website at Investor day package to dotcom.
I would now like to turn the conference call over to Flex co founder and Chief Executive Officer, Stuart Butterfield Stuart.
Thanks, Jesse and thank you all for joining today's call.
Before we begin I want to take a moment you acknowledged the second human crisis, we are living to right now.
When does not cause by silent Unpicking virus, one that has caused by us.
People.
Hi generations of systemic racism and like supremacy, but now wed really manifest itself in violence in poverty and in the impression of black people.
This is a crisis of our own making not natures and it will take all of us to apparent demand that it is repaired.
That's why it's important for me to highlighted now because silences luxury we cannot afford us.
I know, we're here to talk about slack, our business and our quarterly results.
But on the company's perspective that was something that needed to be said.
So now moving onto the business side.
Q1 was a phenomenal quarter by most metrics what are the strongest ever for slack.
Revenue for the quarter was $202 million up 50% year on year.
We added a record of over 90000, net new free and paid organizations using slack in the quarter, bringing the total to work in 750000.
We also added a record 12000 net new paid customers in the quarter, bringing total to more than 122000.
And finally, we continue to show leverage non-GAAP operating margin improved 17 percentage points year over year.
Q1 was historic and its impact well for slack and for the World.
We'll be very strongly the impacts that the global crisis will have on the way, we work or generational magnitude.
Just beginning to be sold.
It's too soon to understand the impact with any precision reinforces our conviction around this business and our long term trajectory.
Today I want to cover three topics.
First I'll start the call by providing more detail on the work from home surge and our plans to lead our customers to what we see as a permanent shift to a more fluid work environment.
Second I will give an update on our three priorities for the rest of fiscal 2021.
Continuing leadership in the enterprise accelerating growth in small medium business and self serve.
And growing the usage of stock for communication across organizational boundaries.
I will finish by walking through how we plan to balance investing for growth versus profitability in what remains a very volatile macroeconomic backdrop.
Beginning with the work from home surge.
Q1 was simultaneously intense productive overwhelming and exciting for slack.
We went fully remote in early March and much of the working world followed over the next month.
The all at once shift to work from home concentrate as multiple quarters of slack adoption into a few weeks tens of thousands of new organizations and millions of new users adopted slack most of them trying to track for the first time on our free plant.
Existing users also began to rely on slack more for our paid users average time spent active of using stock exchange increase from just under 90 minutes at the end of Q4, two over 120 minutes per day at the end of Q1.
Time spent connected dislike also increased for the nine hours to well over 10 hours per day.
We saw similar increases across all related metrics.
Slide is not specifically a tool for remote work.
As a channel based messaging platform, we improved communication to help organizations create alignment become more productive and ultimately become more agile wherever their employees are.
And I'd like to many video conferencing solutions in the markets such as in Ringcentral, Google meat, Microsoft teens, Amazon chime in Blue jeans.
Digital substitute for physical in person meeting.
Dead Sluch acts more like a digital office persist in place for users to connect and find information.
Good luck is a multiplier on the productivity of users and the value of their software wherever work is happening.
During this crisis the work being done on slack is diverse and in many cases inspiring.
A great example of organizational agility is frontline foods, a grassroots organization that provides food from local restaurants to frontline workers and impacted communities.
They have a network of hundreds of volunteers, we're organizing and communicating on stock.
They've delivered over 450000 meals and partner with more than 1100 restaurants across dozens of cities in the United States.
I wonder if they're founding organizers Frank Barbieri said, when they've accomplished and the speed with which we've done it would not have been possible without slack.
He also said it's impossible to imagine a fully distributed team who have never worked together before and never even by the person tackling critical real time communication on any other platform.
Let me talk to other Ceos talk to our customers reviews survey data and just follow the news it's clear to me that remote work will be a much bigger part of the working world moving forward.
Business leaders everywhere are beginning to realize the potential financial talent and employee wellbeing benefits of offering a more fluid work environment millennium offices and their network.
There are also beginning to realize that in order to make this transition they need the right enabling technology.
Email and legacy collaboration tools won't cut it.
This reality will continue to catalyze adoption for the channel based messaging platform category, we created and for which we are the only enterprise grade operator.
Turning to the enterprise business. The first of our fiscal 2021 priorities Q1 was another exceptional quarter. We finished the quarter with 963 customers spending more than $100000 annually.
49% versus the end of Q1 fiscal 2020.
New and expansion deals for the quarter demonstrate our growing breadth of penetration across industries.
They include centers for Medicaid and Medicare services.
UK Ministry of Justice, Harvard University, Virgin Media FISA, the cyber security and infrastructure Security Agency, you accrued Holdings West, Japan Railway company and credit sales on it.
Over the last few quarters, we've observed significant momentum in some of the largest and most security conscious companies in world.
These companies are standardizing inside your stock is the only enterprise grade solution in the market.
The global investment for men group was able to swiftly transition to all the mode in less than two weeks with the help of Sac.
As a financial services provider company and client data security our top priorities.
Flex enterprise mobility management meet the from security and compliance needs, giving them control over how their company did is used and accessed on mobile devices.
Another big win this quarter was adding Verizon as a new enterprise customer rising the leverage luck as a component of a digital workplace.
We want another enterprise wide agreement with Amazon across all of its businesses.
Q1, Amazon chose slot because of scalability the strength of our platform and unique ability to securely and productively collaborate with customers and partners using share channels.
We also expanded our strategic partnership with Amazon Web services, which includes robust integrations between slack a number of AWB services, including Kws chat bought Kws chime AWB sandstone SWS cloud formation and Mws key management services.
Slack will also use a ws chime to support our needed calling capabilities. Finally, we're excited to announce at ADW asked is now slacks preferred cloud provider.
It's exciting to see the progress and momentum across our enterprise business since I mentioned it as a focus area on our last call moving on our second fiscal 21 priority is accelerating the SMB self serve business.
Many organizations begin their slack journey on our fleet plan.
In the quarter, we added over 90000 net new organizations using slack more than we added in all of our last fiscal year.
Also added 12000, net new paid customers more than any other quarter in the history of the company.
I would love for us to be able to take credit for all this but obviously the global situation had an impact.
However, we responded rapidly to the changing market dynamics ramping that promote where consultations for customers accelerating the launch of a new user interface and introducing a new onboarding experience. As a result, we saw improved rates engagement for new free and paid team added in the quarter.
That's important because there are millions of organizations in tens of millions of users in the United States alone Who's working lives are mediated by email and all of them will be better off using slack.
And they come to a website and download stock we want them to be successful to have that I'll hop moment and to get value from stock as quickly as possible.
This remains personally my biggest focus area, particularly because of the large number of organizations new to slack, who if we do our job in showing the value could become larger paid customers down the road.
Im pleased with the progress on our second fiscal 21 priority in the quarter, but there remains much more to do.
Our final top priority for this fiscal year is share channels, which provides a secure productive environment for our customers to communicate across organizational boundaries.
Sure channels adoption accelerated in the corner with over 41000 paid customers now using share channels Upper 32000 at the end of Q4.
We saw emerging network effects that drove growth in connected endpoints to over 250000 in the quarter of triple digits year over year.
The breadth of use cases, and ingenuity displayed by our customers and share channels continues to surprise us ranging from software vendors, providing premium support to food delivery companies coordinating with a restaurant partners.
Increasingly share channels or blending the powerflex platform with external collaboration.
Last week Adobe release, an updated creative cloud integration that will now allow users to share creative cloud assets get notifications and stay up to date and design projects in a share channel.
For many joint customers planning marketing campaigns or developing new creative content with external partners. This will be incredibly powerful and with all that we're still just getting started in Q1, we entered the pilot phase the multi organ share channels, which will take share channels from being a one to one connection between two collaborating organizations to connection that can support as many 20 distinct.
Organizations, working together securely each with their own compliance areas such as message retention policies.
For me personally the experience has been kind of magical I'm in a multi organ share channel with the Ceos of 15, other SaaS companies, including Shopify, Twilio Splunk and last in Africa.
In the channel we have help each other navigate this unprecedented times my CEO network is now in slack as is Alan CFO network.
As soon we are channels of communication created between the Cmos, who can discuss how they were thinking about pipeline generation and world without field marketing another for Chr hours and had to people who supported one another and working to benefits and policy changes the challenges of recruiting and Onboarding in a world where none of the participants have met face to face in the same thing happened for IR leads and emitters among others.
Yes.
There is no other way these conversations can happen is effectively outside of slack.
Companies, a poor alternatives when they want to collaborate outside their organization.
So using email list, it's two disorganized jumbled for meaningful conversation if they use a consumer messaging service the sacrifice security or compliance channels give all the benefits that our customers have gotten from channels organizing information and creating context, but now for their external communications in an environment that they control.
This capability is unique to slack takes advantage of our purpose built architecture to handle the complex considerations required to connect different organizations, all while maintaining the enterprise grade security at scale that only slot can provide.
It's a big step forward for collaboration across organizations and at the same time, a big step forward in security and compliance.
Stay tuned for more on this very soon.
I'll conclude with some thoughts on how we plan to navigate and invest in the current environment.
Our customer base looks a lot like the global economy with nearly F. segment vertical and geography in the world represented.
Accordingly, as Alan will discuss in more detail, we're not immune from our customers bankruptcies downsizing or other negative macroeconomic effects.
Due to these factors the range of outcomes as we move through the years also significantly wider than is typical.
We don't know with any confidence with the second half of the year will look like from a world health or macroeconomic perspective, and how that will impact our customers.
These are challenging times for everyone.
However, we also see a generational shift occurring how the world works is changing right now.
This shift will significantly increase what our customers need from us. He will also likely accelerate the adoption of both our category and software more broadly over the medium to long term.
The timing is hard to predict but the secular trends are very clear in our here.
So we'll continue to invest.
We'll market aggressively we will hire more engineers designers product managers and salespeople.
We will pursue opportunistic M&A, where we see opportunities to expand our portfolio of offerings.
While we invest we will continue to manage the business towards free cash flow breakeven.
With that I'd like to turn it over to Alan for more detailed commentary on the quarter and our guidance.
Thank you Stewart and thanks again, everyone for joining us.
We'll go through our fiscal first quarter results in detail before moving off the guidance for the second quarter and full year fiscal 2021.
I'll also discuss the expected impact from Carbonitesafe on the rest of year.
Total revenues were first quarter or $202 million growing 50% year over year.
Our Q1 calculated billings were $206 million growing 30% year over year calculated billings. This quarter were impacted by approximately $17 million of headwinds, which impacted year over year growth rate first as we discussed in the fourth quarter call. There were $10 million of billings that occurred in the first quarter fiscal 2020 that will be renewed in the latter three core.
Orders of fiscal 2021.
Second there were a number of cobot 19 related headwinds support distressed customers. We've offered credits installment billings and billings duration of less than one year Weve. Similarly book of reserve to account for potential credit issues, which has a negative impact of deferred revenue.
These cover 19 related billings headwinds totaled $7 million in the first quarter. We plan to continue to help customers Master. This unique time and expect calculated billings to be less useful as a measure of underlying growth during the quarter 19 crisis.
Trailing 12 month calculated billings were $822 million and grew 46% year over year.
Many performance obligations were $379 million up 16% quarter over quarter, and 97% year over year.
Because we have taken the practical expedient under AOCI six so six RPR disclosure is reflective of contracts greater than one year in life and excludes annual and lumpy contracts, which are captured and deferred revenue.
Accordingly, our appeal growth is driven primarily by growth in multiyear enterprise license agreements. These multiyear deals tend to be larger and offer to reflect the decision by our enterprise customers to standardize on swap.
In terms of geographic breakdown, 30% of our total revenue came from outside the U.S, which is up from 37% in Q1 last year, we continue to invest in international growth, including expanding our direct sale footprint and additional languish localization.
As Stuart mentioned, we ended the quarter with over 750000 total free and paid organizations musing slack up from 660000 at the end of Q4. The over 90000 net new organizations added in the quarter was a record for slot.
As of end of Q1, we surpassed 123000 paid customers up 28% year over year, representing a net addition of 12000 customers quarter over quarter also a record for slot.
Due to the unique nature of the work from home surge I'll give additional detail about paid customers added this quarter.
Customers added in the quarter had a similar distribution to our customer base as a whole from a geographic and the segment perspective. Moreover, the average annual recurring revenue of customers added in the quarter was up slightly year over year.
The transition to work from home was obviously a major tailwind this quarter that we expect net new customer additions to moderate through the remainder of the year to quarterly levels closer to those observed in fiscal 2000.
We remain focused on expansion within existing customers and growing our large enterprise customer base and ended the quarter with 963 paid customers with greater than $100000 in annual recurring revenue, which is up 49% year over year.
Paid customers with greater than $100000, an annual recurring revenue represented 49% of revenue in the first quarter up from 43% of a year ago quarter.
Our strong customer attention and ability to expand within existing customers have resulted in a consistently high net dollar retention rate, which remained flat at 132% at the end of the first quarter.
Moving forward I'll be discussing non-GAAP financial measures.
Gross margin was 89% versus 87% a year ago.
R&D expenses were $61 million or 30% of revenue.
We continue to invest in slacks user experience scalability, our platform and new features such as share channels and expect R&D expenses to grow roughly in line with revenue growth in fiscal 21.
Sales and marketing expenses or $95 million or 47% of revenue, we increased marketing spend in the quarter due to the work from home surge and plan to invest as what we see as a major secular trends for the shift to remote work.
As such we expect sales marketing as a percentage of revenue for fiscal 21 to be similar to Q1 levels.
Gionee expenses were $40 million or 20% of revenue. We continue to expect Jana expenses as a percentage of revenue to decline moving forward.
Our operating loss for the quarter was $17 million, representing an operating margin of negative 8%.
Free cash flow was $3.7 million free cash flow includes $5 million of capital expenditures related to the build out of office space.
Stock based compensation and related employer payroll taxes were $58 million look quarter or 29% of revenue.
I'd like to spend a moment unexpected impact from Carbonite, Jade and how we have factored it into guidance.
We are fortunate in that slack enables remote work due in part of this growth in the first quarter accelerated and it was above our expectations. We've also continued to see stronger than normal top of funnel activity in April and May.
However, there are potential headwinds to our business, we estimate that about a quarter of our business is derived from companies with less than 100 employees within this SMB base, we saw churn trend a bit higher than historical norms in March and April, albeit off a low base.
When I look at the breakdown by industry, our customer distribution as highly diversified however, some of our customers have been impacted by cover 19.
We estimate that less than 20% of our business is derived from the most directly impacted industries, such as travel hospitality commercial real estate ride sharing and retail.
In the enterprise segment, some sales cycle of accelerated due to work from home, but others have slowed particularly in impacted industries. Our pipeline remains very healthy but on balance there is less visibility is how I to spending will trend for the remainder of the year, particularly if the economic effects of the Covre 19, pandemic persist or worsen.
As mentioned previously we also plan to accommodate certain distressed customers during the crisis via the use of flexible contract structures and billing terms. While this is less of our revenue impact directly impacts calculated billings the free cash flow when we guided for the full year in early March we accounted for some of these headwinds thus far in the first half the tailwinds have outweighed.
Headwinds however, we believe that macroeconomic uncertainty significantly greater today than it was that take into account the puts and takes of above we continue to our visibility to guide to quarterly and full year revenue or withdrawing our calculated billings guidance.
Now onto guidance.
For the second quarter, we expect revenue at a range of $206 million to $209 million representing growth of 43% at the midpoint.
We expect non-GAAP operating loss in a range of negative $22 million to negative $80 million, we expect non-GAAP EPS in a range of negative four cents to negative three cents. We are modeling Q2 basic shares outstanding of approximately 564 million.
For the full year, we're raising our revenue guidance to a range of $855 million to $870 million representing growth of 37% at the midpoint.
Expect full year non-GAAP operating loss guidance to a range of negative $110 million to negative $100 million, we expect full year non-GAAP EPS in a range of negative 19 cents to negative 17 cents. We are modeling full year weighted average basic shares outstanding of approximately 567 million.
We are maintaining full year free cash flow guidance in a range of negative $20 million to breakeven.
To close we are obviously operating can very unique times now more than ever our customers depend on slack to continue to push the envelope of innovation. We plan to continue to invest as we see the current prices accelerating digital transformation and the transition from email the channel based industrial platforms over the medium term to long term at the same.
Time, we will match the business prudently and with the goal of showing consistent operating leverage and progression towards being free cash flow positive with that I'll turn it over to the operator for questions.
To ask a question. Please press star one on your telephone keypad. The first question is from Alex Zukin of RBC capital markets. Please go ahead. Your line is open.
Hey, guys congratulations on a on a great quarter, and some definitely moving in powerful words or sort of beginning.
I wanted to I wanted to dive in maybe maybe just one for for Steward and then quick follow up if you think about the selling environment right now for slack given this.
Given the this move to a more fluid work environment has has it moved up the priority curve in are you seeing the value propping easier to sell understanding your customers and then from a competitive perspective, given the pressure on IP budgets, maybe we'll just level set what you're seeing as you talk to customers.
Around the various options they have in weather issues in slack and equivalent brown.
Our Stewart's new to just one second.
Just taking the bucket of page at on Eric's Buck.
On the.
On the perception of value or getting people to understand it I think there's been a big improvement there are people are.
Just more aware and pay more attention the bigger difference I think in the speed at which decisions are getting made.
Thats out that's been a big Berlin and.
Inside of a large organization, we already have things actual thunder approval process and security in the commercial negotiations MSR all that stuff happening faster. So there's definitely a sense of urgency, which we kind of expect to continue.
In terms of.
The.
I'm sorry, what was the second question.
Competitive.
Okay.
The competitive.
Yes.
Why aren't you these local machines.
Yeah, just given the but given where you're seeing with kind of like the budgets being pressured you're moving up the priority list the overall pie.
Things are shrinking so I'm curious, how that's changed in real time with competitive dynamics.
Right. So I remember when it does is trying to get back you mentioned it budgets, we haven't seen contraction that is something that we can.
Imagine happening in the back half the year.
It hasnt as far as we're able to concern at this point affect competitive dynamics.
So.
Yes, that's is that the positive trends, obviously, there's a lot to untangle here.
And there's a lot of.
Again factors, including the changes that we made.
Driven by Microgrid or are those the macro changes changes to the per lease in the user experience.
And new product launches, which do have a difference in adoption retention engagement.
So I think we're probably can have a little bit more insight on that in next quarter and the one fine.
Urban outfitters images.
I will just let me just quick progressive Diamond Cobot, clearly boosted pipeline for us that made it validates this category, it's clearly more important and you see that show up because.
Customers are much more motivated to get you will start.
These large enterprise wins, you saw in the quarter, others, Amazon Horizon Man group and so on and that's a real indication that these people were motivated to solve a problem that we could solve for them not just for today, but over the longer term I think just in terms of how that than the flex the competitive they walk the best solution out there good enough is not good enough that.
Farm and want to make sure that you've got a strategic investment and the best tools that will enable this remote work environment facing.
Totally understood and then maybe just.
Technical or financial question I on obviously.
ARPO and RPL booking 97% in 78% were significantly more than double.
The billings growth.
So.
Do you have any is there any way to kind of contextualize, what you're seeing what's the right forward looking.
At the growth rates for the business could be and then from its current RPL.
Are there any numbers you can share in that number closer with our growth rate perspective, total RPL billings right.
There are couple of moving pieces, there I think RPL for us using the practical expedient it really is not necessarily.
Be triangulated back to billings growth in a very live euro clean way. It is reflective of these multiyear deals and I think thats again indication of the enterprise momentum multi year wall to wall traction that you're seeing overall I think on terms of billings itself. There were specific quarterly dynamics, which we sleep flag, Alex and I think thats more what's happening here.
Some of the seasonality, which we've talked about and obviously some of the investments, we're making customers to support them. During this time.
Understood. Thank you guys.
Your next question comes from Raimo Lenschow of Barclays. Please go ahead. Your line is open.
Hey, Thanks, and the again securities or other things for me for the comments at the beginning.
Can you talk a little bit about chats channels like we have like that's products in the market now you talked about the adoption. What are you seeing in terms of customers doesnt have that.
And then Alan like.
You kind of reiterate it to cash flow guidance 40 year, but you're also seeing that you kind of giving you are kind of more lenient or working with customers from payment.
So can you talk a little bit about like how you're managing that in between there. Thank you.
Thank you and.
So.
Yes on share channels that we saw that a little bit at the in the in the early stages piloting the launch of London share channels.
Those new user or new team adoption, but also maintained adoption, sometimes driven by the person doing the inviting because there's so much easier to work with their customers.
Okay.
There's a lot of work happening right now to remove some of the friction we wanted to give a lot of administrative control.
And we're making a lot easier for people to create them. So I think that we'll we'll see an uptick there.
Multiline pure channels I think our qualitatively.
Different it's not just at the number went from two to three or greater.
Creates a different kind of dynamic, which frankly I was surprised by on on the upside.
Establish like a small private network.
Okay.
Equally well be used over long run to create larger networks in a different than just one customer and one supplier.
It can be many organizations, who are working together like our six regional PR agencies global PR agencies internal team.
But that they use case that I mentioned on the call.
Private networks for the CEO CFO Cnos had to people.
Just something that you can't do any other way and.
We did have one.
The one CEO, who wasn't using slack.
Could you has signed up for slack in order to get access to that.
To that channel. So I think you'll see a lot more that we're going to be pretty aggressive on on the marketing side over the next couple of months.
And it could be we put a lot of effort into realize that follow.
Okay RMR just.
On the cost side.
Before you that we've already seen onshore channels, if you're on a share challenger four times more likely.
On an invite so these are the early sign but this is really starting to move along.
And now to the cash flow side I think what you should take away from there is we've got a lot of momentum in terms of the this ongoing growth phase progress that we expect this may towards cash flow bright breakeven, so thats leverage and kind of momentum in driving leverage everything is continuing we feel very confident about the what you're hearing from me is a lot of uncertainty and volatility in the.
Second half and visibility as a result is pretty limited from it. So we are customer for forward, we're thinking about how to support customers. During this time and so it's unclear to me the magnitude I wish that that will play off I think thats, what youre kind of what you're seeing balanced out here.
Okay. Thank you congrats.
Your next question is from Brent Bracelin of Piper Sandler. Please go ahead. Your line is open.
Thank you are one for Stuart as a follow up for Alan Stuart The average minutes of usage of slack has hovered over the last year at this 80 590 minutes, but jumped meaningfully this quarter to 120 minutes in the in a post cobot environment. My question is how is slack usage changing in a post.
But as you look at kind of the trends there in and is that changing anything as you think about the product road map here that you plan to accelerate.
But it's a great question Hello.
I'll now be ahead, I don't think of.
Well that changes as a result of it but I think what you're seeing is a greater percentage of the users. So that will bring up the average a greater percentage of users coming to really rely on Soc for.
Being where what happened to be in their digital work place.
I think there was always a benefit to having that kind of vigor and disciplined about communication to make sure things are in writing to make sure things like channel and communicated well.
But that doesn't come.
Naturally I guess it doesn't come for free.
As always a population of people using stock in a very attentive way I think what we saw was a much into that more of a true usage category.
Which is.
Great to see it and hope for adults.
The next Sinclair and that will spread.
Got it makes sense and then Alan just on the billings, obviously ARPU growth accelerated revenue 17 million dollar kind of.
Impact to the renewal timing and customer credits. My question is this kind of a one time headwind to differ.
As you kind of work with customers extend kind of additional payment credits that were going to get more noise going forward around deferred and billings.
There for that might not be useful the number just trying to understand that onetime or or could there be additional.
Adjustments as you think about.
Morning customers at this time.
Yeah, absolutely Brent I think the short answer is because we don't know I mean, I think when I look at the performance in the quarter. There's so much momentum in the business are investing very aggressively there's a huge opportunity ahead of us. That's all systems go we were in the growth phase want to keep investing in that way at the same time, we look at customers that are pretty impacted by us right now thankfully less than 20%.
But I think we're going to watch how that held up.
Plays out over time, and just a separate kind of impacted 10 million is it sort of the timing on seasonality. We fly got last quarter. When we were selling the guide for the year on for the quarter.
But in terms of the 7 million I think that number is I'm not sure and I think some short what I mentioned to Raimo.
We've got a lot of momentum and driving leverage in this business, but the same time you've got this.
Happened in the economy, and how that may translate to our customers. So we just want to be very thoughtful about how to manage that frankly.
Makes sense. Thank you.
Your next question.
Yes. Please go ahead your line is open.
Great. Thank you very much Stuart your comments about what you offered not being a substitute for in person meetings.
But more providing a digital office and being a multiplier on the productivity of users and the value of the software that they use wherever work might be happening makes a lot of sense and and resonates really well from a a product perspective.
Cements and user experience Scott.
Realty and platform, but but you also talked.
Sure channels and multi year.
Sure in front of us and really exciting as you think about division.
Yes that multiplier effect many.
Years out how should we think about this product perspective, when you look out in the home.
It's a great question and I think.
People's ideas about what.
Collaboration software when enterprise software should that experiencing kind of backward looking.
If I communications were really trying to think about what is the next 20 years going the grain and how can we help accelerate that so the movement from inbox as the channels as you've heard me talk about probably too much at this point.
That's an inevitability that's a huge advantage by Hicks slack really comes into its own when it's also a lightweight fabric for systems integration. So there's a lot of intersection between these features as we extend the reach and increased the usage of share channels, which by the way we used for our kids to put together that converts offering all we had the bankers and everyone in there.
Yes.
Well I don't know if you were the first 201st Big one to happen in the post posted world closed.
Roadshow and everything is coordinated that way, but as we see increased adoption. There there's increased opportunities for platform usage that crosses organizational boundaries and that could be purchased earlier statements of work contracting signed.
Service tickets going back and forth and we're very well and discipline that we understand it really.
I think we had a huge advantage we first started and.
Currently we haven't made as many advancement over the last by gates as rich we should have to keep up to date, so really kind of pushing ahead on the user experience you restriction, making it.
More of a delightful experience and not just because that makes people happy but because when you remove the fiction. It makes it easier for the communication to happen, that's where where people get into value. So there's a couple things about ready they talk about but the intersection of platform and share channels I think is going to be really.
A significant one for us.
And.
Allowing more.
More parties, but also more content more applications and more were close to two come into the environment. I think is going to be hugely beneficial. It doesn't mean that we want to bring all of your software in the second part of our thesis as the proliferation is going to continue more last forever.
What we want to do is conducted in a way to make it easy as possible efforts for to get too much.
Thank you Stuart if I could just follow up with with another presumably for Alan the 90000 total customer adds a record really impressive.
And obviously, a huge funnel of opportunity to see play out going forward.
If you look at that funnel as its built it and I appreciate that theres. So many unknowns from here through to the ended the year, which has caused you to to withdraw your billings guidance, but is there any observations that you can share about that massive opportunity and maybe some patterns that you are beginning to see.
Just in the in the last couple of months even.
That might provide any insight into how that might convert over time could be helpful. Thank you.
Yes, Brad I, when I see 90000 record amount of customers, both free and paid in a quarter that was more than what we brought in all of last year to me. There is a real shifted understanding and awareness of this category right. This is not just some new category kind of interesting five project for folks out as part of the core I to spend and I think what you're seeing now with.
Cool is obviously 12000 those converted right away you had this kind of compression of pilot we were very motivated obviously, given the environment to do that but over the longer term, but that's a really rich for for us to tap into over time, whether at continue to commit Americans have paid or continue to build out the network through share channels as as we can bring them up the adoption curve.
So I think for us when we look at it is broad based to a different type all kinds of size of companies all regions of the world I think that's been pretty unique and to me a much more stronger validation I think the long term runway, we have with this and how to continue to navigate and feed that in the mid so volatile environment ahead of us.
Great. Thank you so much for the buffer on this.
Yes.
Your next question is from Michael Turan of Wells Fargo. Please go ahead. Your line is open.
Hey, there. Thanks. Good afternoon. Appreciate you taking the questions I want to spend just a minute on on Brad's question. There on the 90000 networks at it because I mean, I think obviously, what you're speaking to make sense in terms of just more of Angela some happening in the market is there more you can do.
Just kind of influence those works to ensure that they have an optimal experience to start off and then you mentioned the generational shift that's happening within the market is there are there other things you could you just kind of lean in to this sort of remote were motion and take advantage maybe play some offense around whats happening today.
Yeah, I'll take that of the product one.
For the follow up.
Those the average of you're talking about to get make it easier for people to get started are ones that have always been important to us and recently, we've been able to make some exciting progress on said that's more of a coincidence and timing as opposed to specifically because of this but.
It is hard I mean, one of the reasons.
Slack has such high retention I think it because it's a real cultural shift yet 100000 employees and people are using stock for two hours a day, that's 10 million hours employ times a week.
So when you're talking about that that can change there's a lot of people have to understand how many channels should be what we set up channels for which the public cushy private how did the integrations work and so really thinking about.
Unfolding the experience of using the product in a sequence thats going to make it easier for people to understand that and more likely they take advantage of the full feature set. It's I mean, it's just it's really important to us we have.
Phenomenal team working on that now and there's a lot of momentum. So you can expect it to you a lot of changes and obviously that will benefit this is crew.
90000, but it will also benefit everyone, who signed up later.
Yes.
Sense.
Go ahead on.
Yeah Michael.
Okay.
Hearts up or accelerating just on the of the business side of things. So we are accelerating marketing spend we saw in Q1 rig continued to be very aggressive in market here I think maybe some of the adds new seen recently.
But the whole company us mobilize around us whether it's how does one on one consultations webinars.
Website changes and I think the biggest advantage we have there's a lot of these customers on a remote only that will remote first from the beginning where get lab wordpress. They Ron slack right. So there are a lot of stories and expertise that we can share already because we have the right customer set that knows about this because they pick the best in class platform to make this happened in the neighborhood within there or.
Positions.
Makes sense and there was a lot to squeeze and on the call here, but wanted to go back to the U.S. partnership you mentioned because that press release came through during the call on it it looks like there was some interesting integrations there in terms of chime with flat calls, we can and some other pieces. So I think it'll be great. If you could just spend another minute kind of walking through those pieces the vision, there and how that potentially in.
Actually reach as well thanks.
So yes ill take that there's.
There's a bunch of just.
Relatively simple utility we can offer.
As a lot of the disease VW asked if you're.
Network operations engineer if your developer.
There's a lot of kind of.
Putting out a lot of you're doing things and you're getting results back you're getting applications are getting alerts use running tests and getting the results of that just aspect to the deeper that integrated the Soc.
The better off the work because notifications and coming to channels that have been sent to individuals in could offer which are experience.
You are thinking a little bit further hubs.
We really want to allow people to create did kind of very simple.
Applications that you find inside the company is that if you go back in the time machine a little bit you would've seen people trading with pediatric and access databases 20 years ago.
And working with Kws.
That is something that side.
But more forward looking beside the integrations, we do now.
Obviously.
A lot of develop as any of the less.
After they popular tool that developers will be going about to ensure that we keep that population happy.
Looking forward adapt to off so extend some of the benefits to.
Outside of the realm of software engineering and technical hurdles.
Got it makes sense. Thank you.
Your next question is from arson body of William Blair. Please go ahead. Your line is open.
Okay.
Hey, guys. Thanks for taking my questions and congrats on a quarter.
[music].
On on enterprise.
I want to you I think it's great to see the wins and Verizon and Amazon and some of the traction that you're getting on our K plus customers I think last quarter. When we talk it seemed like you were maybe little bit concerned about pulling reps from the field and what what that might do to enterprise sales Nelson motion. So can you maybe just give us a.
Walk us through how you've adjusted that selling motion and how some of these larger deals are coming to fruition, especially with new enterprise customers are they reaching out to this and outbound.
Outbound effort, just maybe help us walk through some of those dynamics.
Yes, alogent, saying a lot more time on kind of good the modeling there and trying to build a forecast, but I will say yes.
For developing personal relationships is obviously, a disadvantage to not be able to meet in person but for.
Getting them getting done it is just that enormous advantage I can I can very easily do by south.
Five or 10 customer calls and weak, whereas if I had to travel or they had to travel to us to be much harder to engine back just logistically difficult to see the same thing with our state what our sales team with our solutions engineers, who wish to our customer success team all of that motion at least to date I think has been.
Accelerated stop element only speak more to add.
Yes, I would just echoed in.
Regarding when we looked at only kind of went into the quarter and we did the call three months ago definitely add more concerns around new deals and what was surprising for me is just the the surge in interest.
And relevance that what we do is for everybody right and especially if you had no solution in this area, you're just not much more motivated to try to figure this out and I think that was something that was probably different them expectations. We've had this kind of compression of time that stores, describing here and I think going forward. It's more of a working through the leads that we felt.
Over through the search and then also kind of navigate and what's going to be a more challenging macroeconomic environment.
Perfect. That's very helpful. And then on the honest shared on the share channel usage, I see that's increasing pretty dramatically as well which is.
Again again, great to see is there any way you can you can help us understand whether share channels is being adopted by existing customers or if it's being used as kind of a top of funnel activity, it's actually drawing new customers to slack and maybe we're not we're not looking at producer.
It's definitely been existing customers up to now the.
The majority of them sub 90% of our 100000 plus customers are already using channels.
We only very recently.
Probably booking lost six weeks your 78 weeks.
Lunch features to make it easy to invite people, who aren't already using flak Intuit I shared channel I think there's a long way to go there in optimization and kind of how you unpack.
And you stock exchange for someone who is coming in with the share channel Thats actually a big advantage modeling how they should you get and understanding the value of slack. So he's room for optimization, there and has not.
In a significant driver as new.
Team acquisition to to this point, but I believe it can be in the end.
In the end in it.
Even in the initial kind of short to medium term I think you'll start to see some results from that but it's an area that we're going to lead into obviously one of the thing, but if I just didn't ship channels.
John Arjun just to remind our work during the month Youre in the near term here and we'll talk about out anyone thats ready to be announced I think the confluence of that what the invite what will really be through some pretty interesting opportunities to promote more variety in network effects will then customer base.
Alright, perfect. Thank you about.
Your next question from Kevin wife, or Keith Weiss of Morgan Stanley. Please go ahead. Your line is open.
Excellent.
Thank you guys and I. Thank you for for for taking the question.
I wanted to dig into.
The new customer add numbers, both on on the free and the paid division were.
Huge I think.
Number that investors are probably more disappointed with if you look at like the after hours reaction is been net dollar retention rate because we've seen in a lot of companies and ability to really accelerate upsell into the existing installed base keytruda or.
Are there any like inhibitors are kind of transmission mechanisms that Nick so to the increased usage that youre seeing in your existing installed base not translate better into a higher net dollar retention rate or more of a sequential increase in that net dollar retention rate than I have a one one follow up for Alan.
Oh, sorry, if you want me take that but yes.
Okay. So if you want yes, sorry.
You know just keeps us I feel it's you're talking about just from the mechanics of it our enterprise adoption net dollar retention rate continues to be very strong I think what you're seeing here is again, our net dollar retention rate is a reflection of all of our customers. So the vast majority of customers recipes that we saw a slight tick down in that.
All retention rate quarter over quarter, but the mix shift I think it was over where it become a bigger dragon typically is just given a number of customers and we brought on board and about two story.
Yes, it maybe almost a standpoint, but articulated in a slightly different way.
It's always going to be bigger earlier.
Like 130 twos is pretty great. So there's going be bigger earlier, because you land and expand at the enterprise side.
But.
Because it there's a huge spike of brand new customers you don't have much of a chance to expand so thats going to bring the average down a little bit as well.
So I think that's an area that we're we're pleased with and.
Yeah. It's.
Theres no inhibitor both than we previously there's no substantive difference that we've been able to to uncover yet between this cohort.
Coming in Q1, and the behavior that we've seen the historical cards.
Got it and then the the.
Strictly financials related question with more on the gross margin side of equation.
That was.
200 basis points on year on year basis. Despite.
Thank you, Jim flux or three customers coming into the basin huge spike in overall usage, that's pretty impressed that you talked about kind of the dynamics on how that occurred have gross margins go up when usage is off the going up the weighted.
Yeah, Keith So remember for the free portion of our server cost customer care costs technology costs.
That is actually is captured in marketing.
Marketing.
So part of it is that dynamic, but I think in general Youre right. We did continue to drive leverage their biggest benefit was the lots of a drag from the small amount of revenue we do professionals professional services, but there is continued improvement that we're making on overall kind of this software subscription margins as well and I think.
I think the with the growth phase you talked about kind of music's 80, but probably still the right target over time, and we'll see kind of how these neto.
Excellent. Thank you guys.
Your next question from Derrick Wood of Cowen and company. Please go ahead. Your line is open.
Oh, Thanks, So I wanted to drill into the customer count in a little different way and if I have my math right you guys side.
Nearly 80000 free customers in Q1 versus 50000, and all of last year.
Obviously that has a big impact your top of funnel on your pipeline of targets you convert.
Two questions first of all why do you what do you think that three mix was up so much.
And then I mean, do you view that as being a boost your pipeline conversion opportunities for for the rest of the year or what's your view of that cohort of free customers that came on board over the last three months.
Hi.
Great question and the answer is yes, you that as a.
He's going to the top of funnel.
The mix.
A free to paid there is actually slightly better than we've seen historically, it's just not as much time has elapsed. So people are more likely to convert upfront.
Then people people decide that they three months ago, but it's always taken some time for slack usage.
Well up and typing organization for people to get to hang in there to invite there their peers and colleagues approach to spread.
So.
I mentioned already no no significant differences.
Between this cohort and historical ones. So I think will we expect to be able to convert a large number of those over the course of the here.
Great.
Second question to clearly seems like work from home is gonna be a permanent strategy in some form or fashion.
Obviously work collaboration will be important to support that Joe.
Do you start as you're looking at your prospects and your customers are you seeing or top down led engagements versus bottoms up in and what can you do to engage more with the C suite.
Yes, so I wouldn't say that weve some more in absolute terms, but we're seeing more than we have historically because there is helpful. Yes, you got to imagine certainly in second half of March 1st half as of April. If your job was VP of end user applications are VP of productivity or something like that you had a mandate and dealer had.
A lot of pressure on the two on.
To get something done so that at that you had a lot more attention.
Theres some combination of.
Work from home not having to travel it's much easier to get meetings, it's much easier to to get attention from the cc.
Right now I don't know if that is.
As if demo, but I think it's seen as strategic.
By a broader range of players today than it might have been 369 months ago.
I think that elevate age attention is probably something that we can expect to continue.
Even if it's not as easy to get a meeting even if that curious like this this moment, where there is very intense level of interest.
Yes.
I think that's that's true and in different cases, we have seen folks look to us.
To be a thought leader here because this is something that with this in our core capability. This is really but what we do and and this categories and that we are kind of the leader on expert and so I think it's important for us to continue to invest behind that and I think as you. As you described those dynamics I think that the gravitational pull the trend it's definitely very favorable.
People come to appreciate what we're doing to support this will not work environment.
Great. Thanks for the color.
Your next question is from David Hynes of Canaccord. Please go ahead. Your line is open.
Hey, guys. This is linked gone for DJ.
Thanks for taking the question.
So video has obviously become a huge scale lately and we've seen guys like Microsoft.
Yet more active in that area through teams have you noted.
A change in how Microsoft physicians itself in competitive situations given its tool capabilities and chat video and then could you talk a bit about your exists existing capabilities in video today now your partnerships and perhaps how you think about that market aspirationally.
Does it make sense for you to ever develop your own native capabilities on that front.
Thanks.
Yes, yes ticket.
Do you look at some.
We definitely interested in video in the broader sense that we do have some built in calling features that it's slightly different this is for calling inside of the stock authorization of course outside it's not about conference room integration during calendar.
Where we're particularly interested is kind of more lightweight asynchronous video and the use of video communication button.
Not the competence.
You'll indulge me just for a second.
Generally when we're selling or selling into new categories, which has its challenges that it has its advantages too I.
I think when I mentioned earlier.
People's imagination is largely determined by but they've seen in the past last 20 years of unified communications as the category.
Is that.
It's important and everyone has made a choice. So now the sales motion would be.
Instead of pure stock that you category and by the way it integrates seamlessly with what whoever you are using that integrates with zoom that integrates osisko it integrates a team.
Now we have to say here's this operators in the category and by the way like you to switch on providers for for the economic thing I don't think.
There's any advantage to us there I don't think theres on a per customer revenue advantage I don't think theres an increased win rate advantage.
So we we'd rather.
Not.
Not to have to make customers choosing not to compete in that category and instead to think about.
The future.
Yes, and that May have interest to.
Just a couple of thoughts there.
Again, the pop in strategy is to make all the software that use better because we're using it on slack so being about digital office, not just offering people together, but bringing all these applications together and that includes wasn't video and the good news is that we do have a video offering that.
There are primarily SMB customers take advantage of we saw a huge surge in that the usage as well and that you know that provide a lot of those customers, but the stores went on the enterprise side of things, it's really different and I think just in general the way to look at this voice and video conversation at that unified communication is a 20 year old category, we're trying to build and progress towards the future.
Sure works I think it's important for us to continue to invest in things like sure channels and innovation that we've talked about here that drive towards that outcome and I think though we've got an opportunity our responsibility to to help people along the way and help them to appreciate the from the operators out there or not apples to apples in terms of but the value that can bring not just which saved over the long term for the organization.
Yes, I am just add one more final point there I think it's really what you saw with zoom lease our teams.
It's a great indication that this is not apples to apples and that the products are naturally competitive of one another.
You just can't adopt stock, but quickly you can't move from email to channel based messaging in that short amount of time.
Yeah, which is.
I wish to that.
Whole cultures could change overnight.
But I think what you really saw from Microsoft consumes wise the emphasis on voice the emphasis on video.
Calling.
Product.
Moving people over from from Skype for business. So.
So that sat.
I think where I hope any rate makes it a little declared to people that the products are not truly compact there might be a competitive dynamic at that at the company level.
Because if we're attracting email them learn a threat to the.
The franchise.
But it it is a fundamentally different thing and I think that the fact that instant messaging kind of one to one or a group messaging was tied to voice and video historically.
Kind of suggest to people that that's going to it should be as opposed to.
Channel based messaging platform that integrates yeah.
2003rd Party apps that have had 600000 or 700000 custom integrations built by by end users that's different and it should integrates seamlessly watching videos and not necessarily container.
Got it Thats very helpful guys. Thank you very much.
Your next question is from Willpower of Bard. Please go ahead, Sir your line is open.
Okay, great. Thanks for yes, thanks for squeezing me and maybe just to come back to the implied.
Second half.
Revenue guidance I mean, it sounds like the pipeline remains healthy whether it's free user conversion opportunity onboard enterprise trends et cetera, I know.
Alan I think you referenced.
Our churn in SMB, So I guess, where the question is have you started to see a more meaningful pickup in that SMB churn kind of as you trends.
Through may is that inform into guidance or is it more build around just.
Some conservatism given water clearly a number of macro no macroeconomic uncertainties, just trying to make sure I kind of understand a different pieces that are impacting that that thought process.
Yeah for sure well I think.
First and foremost guys, it's hard to visibility for me and I think what you're seeing is I, we're guiding to a number that we feel like we've got high visibility into.
Because of the trends that you're seeing and just to kind of clarify the point around churn. It I think you've got to remember slack is built on engagement right. So when we talk when we look at bringing on customers. They adopt them engage and then they become very sticky in our retention rates are super high right. So.
Our churn baseline is super low as a result, and so when we see an uptick is off a very low base I think the good news is that over the last few weeks signal that number.
It is more.
Turning out stabilizing there, but is there were watching I think that's really.
Focus of mine pay a lot of attention to it and making sure that those trends don't don't reverse again.
Yes, I just want to bigger.
One quick on it it's just a distinction because.
As a leader of a fast company churn is scary words, because typically when people say they need you lost the customer to a competitor or would you just you lost because the product wasn't meeting their needs. When we talk about churn on this call. We're talking specifically about churn that can do to to the macro we don't expect any difference in the rates of attention either at the high end or then I'll end over.
I'll turn but obviously.
Still on businesses are shrinking.
And some of them are disappearing.
Yes that makes sense. Thank you.
Your next question from Rohit Kulkarni of MKM Partners. Please go ahead. Your line is open.
Great. Thank you.
During my question.
Couple of them as in Big picture ones as and you hide a fresh new use it interferes new home.
Sure It sounds in many different things and launched over the last few months wondering whether you could quantify or even qualitative feedback as to what.
And they have led to the adoption of from new customers and that's me in front of into a higher conversion from the depleted.
Whether you see any evidence of that and second just one for the new Watson for human and all that offering any any color around the why want around.
The extra cash that you have problems and so.
Sure so.
The changes that we're making specifically to the new user experience and then maybe some subset of the other product changes things like adding a single button done that you can pose a message, which im more familiar environment.
With the big editing of tax to be a better tax planning tools that kind of absolutely makes a difference a lot of those changes happened in Q1, and some continued into the first month here.
It's.
Super hard honestly to tell the difference or start to tease apart the factors here because.
Global pandemic, obviously made a huge deference to the number so it's possible I mentioned earlier, we feel we're seeing increased rates of conversion when I say that I mean like going from creating team to actually being successful years, our sustained basis or from that successful state to I'm.
To pay conversion those are increased.
I can't say right now whether that's because of changes that we made or because of the endemic in it.
Over time, we'll be able to better discern those but we're still investing and we still believe.
That there's enormous upside.
In getting people familiar with this model.
Communication and helping make them successful faster.
Okay.
And grow it on the on the convert.
No I think just referred county anecdotally done. This was in early April when everyone thought the world, what's going to collapse and prohibit market as thought otherwise since then but.
But we were able to do a convertible offering and 10 days at the end because we've had this multi yorkshire channels future and so being able to fluidity flexibly.
Raise that money across bankers and lawyers and all these different stakeholders. While it was working remotely is only possible because on flat. So in terms of what we're doing with our money. It's because we see an opportunity here an unprecedented once in a lifetime opportunity here to really lean into where.
This category is now becoming much larger a much more important much more relevant here and that's an opportunity that we'd have a responsibility to really invest into as well as we see our customers want to make sure that they feel that we've got a really strong balance sheet that we can whether any kind of macro volatility, but more importantly at these back to making sure we maximize opportunities.
Out of us because I think if you're in part of US right now and where mission we see that.
Okay. Thank you.
Your last question is from Mark Moerdler Bernstein Research. Please go ahead. Your line is open.
Thank you very much in congratulations look quarter my peers that number the questions, but have a couple variance.
To quickly if you don't like have you seen.
Both the tailwind and that two usage and monetization from Covidien 18, whereas the tailwind from usage, there, but that ability to convert from and hate to paid or increased monetization. You think still ahead of you and then a follow up.
So almost the almost the opposite we have seen increased.
Conversion again, because I think people or the middle of picking the transition to work from home Center.
More top of mind or pay more attention that they're making decisions more quickly.
But still we expect that there's many many more customers that were going to convert at about population. So that the tailwind I think.
Have a couple of factors one is just awareness its.
New teams discovery in Soc and beginning to try it out it's increase in the paid usages becomes essential to People's.
To those teams working lives.
And then expansion and increased engagement among existing customers. So.
All of that Didnt, it's still a little early.
Trying to to make comparisons.
As deeply as you can given that the my time the task, but all all early indications are that dishes.
Evolve cohort.
Excellent and then related to that very impressive yet it almost 10% customer growth and look Q over Q.
And that looks like and it was greater than the revenue. Obviously, so it's more downmarket anything you've done the chain drove that or is that really.
The second of all the factors we've discussed earlier.
That's a.
Yeah. That's it I think it reflects its sort of looked again market that it reflects the kind of mix that you see in the early stages and same thing.
Yes people tend to start using pockets of the smaller team and their pay monthly on a credit card and takes time for that to expand its actually invoices in annual contracts.
And larger numbers of users so.
And from an average.
Most of our large enterprise customers, we're talking about like a big names.
Yes, Amazon and rising you mentioned today by Vodafone target Starbucks Alden started off.
That kind of individual group level decision just trying to improve their communication, we are seeing a little bit more top down now, but it's not that the mix has shifted from from enterprise to SMB. It's just that date.
The enterprise and always kind of starting on small.
Hi, gentlemen, I'm going ask one other quick one ARPU has become a real.
Bellwether, everyone watches your IPO definition is more conservative removing the monthly and quarterly can you give some color why you made that decision.
At the time that that was what we thought was with best reflected the business at the time, we did not habits on a multiyear deals.
I think that trend has has since change as weve begun to getting a lot more traction in the enterprise and I and I think.
Yeah, we can revisit and look out but I think overall I think enforcement is because you know proposal that was very good you're seeing more and more multi year deals wall to wall the option.
For slack in these large companies that store already highlighted and so some data we can we can revisit.
It's an interesting one and then interesting approach. Thank you very much and congrats again.
Thank you.
This completes the allotted time for questions I will now turn the call over to Stewart Butterfield for closing remarks.
Alright, Thank you everyone for your time and attention.
It was it was a good quarter and.
Obviously, a very exciting time for the business, so looking forward to keeping in touch and.
And we'll see you again in three months.
Thank you.
This concludes today's conference call. Thank you for your participation you may now disconnect.
[music].