Dustin Moskovitz: And this is Dustin. This is an important topic. I just want to add one other angle on that, which is just I think you sort of said this in the way you framed the question too, but we’re sort of seeing the decelerations flow. It feels like we’re approaching the nadir when we look at, sector by sector basis. And in terms of green shoots, I think that’s like partly about the external environment as well. Just saw a great State of the Union. President said we’re headed for a soft landing, maybe even it’s a little better than that. But inflation seems to be getting under control and a lot of other things look good. And when you look at the tech sector specifically, I think we’re in the middle of what I think is still is a rising tide of AI growth, and a lot of the relevant players are core customers of ours.
And even when we’ve seen major tech companies retrench, like Apple canceling the car project, they’re redirecting those resources to generative AI. And so, that is its own kind of green shoot that I think we’re well positioned to take advantage of.
Operator: Thank you. Our next question comes from the line of Steve Enders of Citi. Your line is open, Steve.
Steve Enders: Okay, great. Thanks for taking the questions here. I guess maybe just to start, I want to dig into a little bit more about the incremental growth probably coming more from expansion versus net new. And I guess as we kind of like peel back the net retention assumptions moving forward, both this year and kind of beyond that, how are you thinking about what mix of that is coming from up-tiering, what mix of that is coming from some of the higher prices or kind of the new use cases coming on if you capture more of those consolidation opportunities within accounts?
Anne Raimondi: Hey, Steve. It’s Anne. I’ll start with that. So, we’re investing both — you asked about expansion. We definitely again see as we are driving more strategic tops-down adoption in partnership with CIOs and executives that, that adoption happens faster in the organization, especially as we’re also investing in our post sale services and customer success. We are also focused on new logo lands in every region and that’s part of the investment with our sales leadership team globally. So, in that case, we’re — earlier there was a question about kind of smaller deals. What we’re still focused on is seeding teams within larger enterprise organizations. So, we’ll continue to invest in that motion. And then now with our global sales team being able to work with the right seeded accounts to drive expansion.
And then with the new pricing and packaging, I think the whole goal there is to make that upmarket motion and the up-tiering a lot smoother and a lot more predictable. So, it’s all of those combined that are driving growth in every region and every market.
Steve Enders: Okay. That’s helpful. And then maybe just on kind of the investments you’re making for fiscal ’25. I guess, want to get a better sense for, how should we be thinking about, I guess, maybe the pace of those — I guess, in context of the 2Q or sorry, 4Q EBIT margin be maybe just a little bit smaller than what we’ve seen through the rest of the fiscal ’24. So, I guess how should we be thinking about what that means moving forward in terms of the guidance assumptions and maybe how they may be similar or different from the past quarter?
Tim Wan: Hey, Steve, it’s Tim. So, I would say the way to think about the investment, they’re probably more linear. We did, I would say, for Q4 increase our sales capacity, hire new leadership and on the sales side. And I think it will take the team a little bit of time to ramp. But I would expect us to continue to make progress on the operating margin as we move towards this year. Now, we made huge progress year-over-year, I want to say like 29 percentage points. I don’t expect us to make that amount of progress this year, but you should expect us to kind of make a modest improvement there. But then from an operating margin perspective, make incremental progress quarter on quarter.
Operator: Thank you. Our next question comes from the line of Rishi Jaluria of RBC Capital Markets. Please go ahead, Rishi.
Rishi Jaluria: Wonderful. Thanks so much for taking my questions, guys. I wanted to start off on the cash flow positive guide. Tim, great to hear you reiterate that target. For clarification, when you say being free cash flow positive by the end of the year, are you saying that you’re going to be free cash flow positive for FY ’25 for the full year or is that just a Q4 number? And maybe more importantly than that, how should we be thinking about cash flow from there? Is your goal to kind of continue investing aggressively and operate kind of at a cash flow breakeven to slightly positive level? Or should we kind of is a priority on seeing continued free cash flow margin expansion from there? And then, I’ve got a quick follow-up.
Tim Wan: Let me try to answer it this way. I would say certainly we will be positive free cash flow exiting the year. And depending on a growth rate, how — if we see that our sales capacity, sales productivity is meeting the ROI hurdles that we’ve set in place, then there would definitely be a conversation about some increased investments relative to the guide. But the guidance right now I would say is, hey, let’s make sure we exit the year free cash flow positive, but also give us room to operate with some flexibility.
Rishi Jaluria: Got it. Okay. Thanks. That’s helpful. And then when you’re making the comment that AI demand was accretive to growth already, really great to hear that. Can you maybe help us understand how are you measuring and quantifying that internally to get that statement? And maybe the larger question that translates to is how should we be thinking about your strategy around monetizing AI and some of the increased productivity that you’re offering your customers? Thanks.
Anne Raimondi: Yeah, Rishi, I’ll start with that. The way that we are measuring it in the first quarter is just looking at the up-tiering compared to kind of year-over-year and then just the movement from our legacy tiers on to an upper tier in the new packages versus renewing on the same equivalent tier. And so that’s really how we’re measuring the accretive is looking at what customers are buying as they grow and expand with us and that the net the total spend is increasing as they move up tier. So, and again, it’s early in the first quarter of having the new plans, but we saw more of that in terms of that motion of choosing, a more advanced package because of the AI functionality.
Dustin Moskovitz: This is Dustin. I’m going to give you a little bit more of a philosophical answer. So first of all, I think there are a lot of possibilities in front of us. There are a number of different kinds of add-ons we’ve discussed, nothing currently on our roadmap. But, I think there are some that could be charged in tranche pricing or per user or as, like, one-off reports even. An example so I talked through, in the script my experience using our AI Smart Answers to help me with our performance reviews internally, but a bigger version of that process is the company engagement survey. And I could imagine every time you run an engagement survey, you also get this, like, $10,000 AI summary of sentiment in your workspace.
And then we use that to sort of automatically give you pulse checks across the year because we can calibrate the scores. Anyway, that’s just a random idea, but something I could imagine charging, in just like a totally different way from our current pricing. So that’s the first part. That’s the stuff I think you wanted to hear. The philosophical thing is I think that the market has gone off in a really weird direction by considering AI as a feature and charging people for copilot add-ons. I think far more the potential of AI is when it’s integrated straight into workflows and straight into features. And so, we intend to be an AI-first collaborative work management system, and that means that AI is inextricable from our most important features, especially portfolios, goals, and managing workflows.
And so, we much more see the potential of AI in our packaging as really exponentially increasing that value and thus our pricing power. And again, I think we’re uniquely positioned with by having the Work Graph because AI plus the Work Graph is really more than the sum of the parts. So, we think that we can have a special advantage there, in being able to, yeah, just pricing power across our normal packages. And then later, there may be more sophisticated packaging that allows us to better differentiate price to value, but I think that’s strictly an optimization and the high order bit is really just the power of AI to amplify our core value proposition.
Operator: Thank you. Our next question comes from the line of Rob Oliver of Baird. Please go ahead, Rob.
Rob Oliver: Great. Thanks. Good afternoon. Thanks for squeezing me in. I had two. Dustin, first for you. Appreciate your commentary on the macro and on some of the improvements or modest improvements we’re starting to see in the macro, makes a lot of sense. I’d be curious to hear — and those are helpful to you guys. There’s also a lot of things you guys have done internally and you’re just coming off a sales kickoff right now and Ed has been in the seat now multiple quarters and you’ve really revamped the team globally as Anne also alluded to. So, I’d love to hear your perspective emerging from sales kickoff. Clearly, a much more optimistic tone here from you guys on the call. I would love to hear kind of what caught your attention and what most excited you coming out of sales kickoff?
Dustin Moskovitz: Yeah, that was a great question and great summary of our strengths right now. I think that it’s a little hard to say. We’ve been talking about as executive team, it’s like it’s partially a vibe thing, it’s partially a contrast from last year, but things feel very different. We feel better positioned. We feel like we’re getting traction in all the execution areas where it matters. We’re seeing the green shoots in certain regions and certain sectors. And we’re seeing the approach of the nadir even when we’re not already seeing the bottom. And so that’s just giving us, yeah, a different sort of stance on the future. And I’ll just reiterate the timing of that is a little more in question, but the we have two goals this year.
One is to follow through on our promise of free cash flow positive by the end of the year. And then, the second is to reaccelerate growth. And that is not something I would have said last year, but really excited to have as a goal this year.
Rob Oliver: Got it. Helpful. Thank you. And then, Anne for you, just to probe a little bit, there have been a lot of questions on the comments around stabilization. I just wanted to ask around you guys called out a lot of different verticals where you’re having success, which is clearly great to see and it sounds like you’ll be leaning on some of those verticals here as you emerge kind of from this trough period. When you look at the verticals that you called out, are there any in particular where you’re seeing particular strength? I know you mentioned healthcare, financial services, industrial. And then I know you were clear early in the call that sales cycles were still long. Has there been any change in sales cycles in some of those industries that are newer for you guys or perhaps they had not invested or perhaps where there’s a reason to consolidate on Asana? Thank you.
Anne Raimondi: Yeah. Thanks for those questions. We are continuing to focus on healthcare, financial services, manufacturing, logistics and transportation. Something I’ll pause to just say is, given the caliber of the customers that we have, the more we focus in each of those verticals and really are working with top tier customers, I think that is also just driving greater success as we reach out to additional customers in those verticals. And so that’s a huge reason we’re focused so much on our leadership position. We think that that not is only paying off right now, but will in the future as well. And so, those are the verticals that we’ll continue to invest in, when we’re excited to continue to do that. Also, we have amazing customers in tech.
We mentioned Indeed as one of them. And we’re continuing to partner with them as they kind of retrench and are looking at growth in the future. So, we’re excited about those possibilities as well where they’re continuing to be loyal customers.
Operator: Thank you. Our next question comes from the line of Alex Zukin of Wolfe Research. Please go ahead, Alex.
Ethan Bruck: Hey, guys. This is Ethan Bruck on for Alex Zukin. I just wanted to ask around the sales capacity. And you guys made a comment you’re going to be increasing quota capacity throughout the year. I guess, what were the signals that you saw throughout the quarter and as were a few months into the year that gave you the confidence to continue increasing sales capacity?
Anne Raimondi: Yeah. Our confidence in our ability to continue to add capacity really comes from we’ve been seeing a consistent ability to build pipeline. We’ve been seeing productivity improve. We’re very focused on making sure we can absorb capacity in a predictable manner. And so, having new leaders in place who are really focused on that and measuring those metrics and managing to that is giving us the confidence on being able to add capacity predictably.
Ethan Bruck: I got you. And then just quickly, there was a great chart from yesterday just kind of decomposing the dollar-based net retention between users, ARPU retention. I’m just curious as we think about the comments around stabilization and then sequential reacceleration in the back half, how much of that is between some of the new go-to-market motions? How much of that is AI factored in ARPU uplift motion [indiscernible]? I’m just kind of curious how would you [indiscernible] the stabilizing macro, AI benefit and just better go-to-market execution upmarket?
Dustin Moskovitz: This is Dustin. I honestly, I think the way I think about it is the timing is more macro and the scale is execution. Is that fair?
Ethan Bruck: Yeah. That is helpful. Thank you, guys.
Operator: Thank you. I would now like to turn the conference back to Catherine Buan for closing remarks. Madam?
Catherine Buan: Yes. Thank you. Just thank you again, everyone, for participating in the call today. We always appreciate you taking the time. We look forward to seeing you on the road. We’ll be in New York this week, and hopefully, we’ll see some of you out there. Thank you so much. Bye-bye.
Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
