Asana, Inc. (NYSE:ASAN) Q3 2024 Earnings Call Transcript

Asana, Inc. (NYSE:ASAN) Q3 2024 Earnings Call Transcript December 5, 2023

Asana, Inc. beats earnings expectations. Reported EPS is $-0.04, expectations were $-0.11.

Operator: Thank you for standing by, and welcome to Asana’s Third Quarter Fiscal Year 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the call over to Catherine Buan, Head of Investor Relations. Please go ahead.

Catherine Buan: Good afternoon, and thank you for joining us on today’s conference call to discuss the financial results for Asana’s third quarter fiscal year 2024. With me on today’s call are Dustin Moskovitz, Asana’s Co-Founder and CEO; Anne Raimondi, our Chief Operating Officer and Head of Business; and Tim Wan, our Chief Financial Officer. Today’s call will include forward-looking statements, including statements regarding our expectations for free cash flow, our financial outlook, strategic plans, market position and growth opportunities. Forward-looking statements involve risks, uncertainties, and assumptions that may cause our actual results to be materially different from those expressed or implied by the forward-looking statements.

Please refer to our filings with the SEC, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q, for additional information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements. In addition, during today’s call we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. Reconciliation between GAAP and non-GAAP financial measures and a discussion of the limitations of using non-GAAP measures versus their closest GAAP equivalents are available in our earnings release, which is posted on our Investor Relations webpage at investors.asana.com.

And with that, I’d like to turn the call over to Dustin.

Dustin Moskovitz: Thank you, Catherine, and thank you all for joining us on the call today. In Q3, we beat our top- and bottom-line expectations again and continued to build on our leadership in the enterprise. Q3 revenues grew 18% year-over-year, and non-GAAP operating loss margins were 5.9%, an improvement of over 30 percentage points versus the year-ago period. Top-line growth was led by our continued success in the enterprise. Revenues from our Core customers, or those spending $5,000 or more on an annualized basis, grew 20%, and revenue from our enterprise customers grew at an even faster clip. Dollar-based net retention rate from customers spending $100,000 or more on an annualized basis, which we view as an indicator of traction among enterprise customers, came in at over 120%, greater than the dollar-based net retention rate for our overall customer base.

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Q&A Session

As you can see, our investments in the enterprise are beginning to pay off as we further our partnerships with some of the largest companies across major industries. While the macroeconomic headwinds continue, especially impacting business in our renewal base, we are seeing signs of stabilization in new business. Overall, awareness and demand for work management continues to expand. Across our total customer base, we are at over 3 million paid seats, showing increasing adoption of Asana worldwide. From an operational standpoint, we have made great progress on improving our non-GAAP operating margins. On a nine-month basis, margins improved 34 percentage points year-over-year. We expect improvement in non-GAAP operating margin year-over-year for the full year, as we focus on operational efficiency and growth, which Tim will talk about more.

This year is an important transition period for us. In the past year, we have optimized our investments across our organization, making substantial year-over-year improvements in our margins each quarter. We have brought onboard enterprise software veterans to lead our go-to-market strategy and execution. And we are embarking on a new product cycle of innovation on our industry leading platform, leveraging AI. With that, let me turn to our progress on the product side. So, what have we announced? In early October, we rolled-out: Smart Summaries to identify action items and highlights from conversations, tasks, and comments; Smart Editor to write clearer, more compelling responses that strike the right tone; and Smart Fields to organize projects with auto-generated custom fields.

We also started rolling out two more features in November: first, Smart Answers to get timely answers and insights about projects, identify blockers, and determine next steps; and second, Smart Status to identify blind spots, open questions, and roadblocks with automatic status updates. We’ve had great early feedback from beta customers. Tens of thousands of users are learning our AI powered features. One of the most popular has been Smart Summaries that not only helps you identify action items and highlights from conversations, tasks, and comments but also automatically generates subtasks. This allows for more flexibility and much greater productivity. One of our beta customers specifically liked Smart Status. They told us that they currently spend two to two-and-a-half hours every other week reading context to do this manually.

They added “I am especially excited to see you roll this out at the portfolio level.” And I’m excited about that too, because it’s going to powerfully amplify the value you get from connecting work across levels in the Asana Work Graph, without requiring any additional work from customers. In contrast to some other approaches, we’re focused on integrating AI into existing user workflows to maximize their value, like creating a new project, building out the details of a task, including suggesting subtasks, or writing a new status summary for a project. And customers are really excited about some of our upcoming roadmap that uses all our Work Graph context to intelligently orchestrate work, like helping predict the time required for tasks so they can more easily plan and manage their work.

The interest and momentum when it comes to Asana and AI is growing. As you know, we had successful customer events in New York City and London last quarter with our Work Innovation Summit, focused on AI and the future of work. We expect to continue the marketing momentum into next year. As we shared at the Work Innovation Summit and our Investor Day, the way we have engineered our products with AI is more than a Co-pilot for individuals. We see it as both Co-pilot and Air Traffic Control for entire organizations. The Work Graph serves as a shared map, powering Asana Intelligence, helping to align human intention with AI guidance as they work together to achieve a customer’s goals. Unlike tools that are narrowly focused on individuals or specific teams and use cases, Asana maps the relationships across the entire company between individuals, teams, and the work they’re trying to achieve, ensuring you get reliable, accurate, and trusted generative output.

Simply asking open-ended questions about all the training data used to train a foundation model yields results that aren’t as useful, leading to hallucinations that decrease trust in and adoption of AI. With Asana, AI amplifies the power of connecting our customers’ work to their business goals, allowing them to accomplish things within the right context. This is a highly differentiated capability that customers are very excited about and the summit attendees reported an “Aha” moment on the value of the Work Graph when seeing our AI demos. We also recently hosted an Asana Intelligence training event with over 1,500 people from leading organizations in industries such as media, transportation, education, food and beverage and of course tech, illustrating how broad interest in Asana Intelligence is growing.