• Total Revenue: $183.9 million, up 10% year over year.
• Core Customers: 23,609 customers spending $5,000 or more annually, with revenue growth of 11% year over year.
• Customers Spending $100,000+: 683 customers, growing at 18% year over year.
• Overall Dollar-Based Net Retention Rate: 96%.
• Core Customers Dollar-Based Net Retention Rate: 98%.
• Customers Spending $100,000+ Dollar-Based Net Retention Rate: 99%.
• Gross Margin: 89%.
• Operating Loss: $7.6 million, with an operating loss margin of 4%.
• Net Loss: $4.8 million, with a net loss per share of $0.02.
• Cash and Marketable Securities: $455.3 million at the end of Q3.
• Remaining Performance Obligations (RPO): $405.7 million, up 21% year over year.
• Deferred Revenue: $282.1 million, up 10% year over year.
• Free Cash Flow: Negative $18.2 million, or negative 10% on a margin basis.
• Q4 Revenue Guidance: $187.5 million to $188.5 million, representing 10% growth year over year.
• Q4 Non-GAAP Operating Loss Guidance: $6.5 million to $5.5 million, with an operating margin of negative 3%.
• Full Fiscal Year 2025 Revenue Guidance: $723 million to $724 million, representing 11% growth year over year.
• Full Fiscal Year 2025 Non-GAAP Operating Loss Guidance: $46 million to $45 million, with an operating margin of negative 6%.

• Warning! GuruFocus has detected 5 Warning Signs with ASAN.

Release Date: December 05, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Asana Inc (NYSE:ASAN) launched AI Studio, marking a transformative moment as a multi-product company with significant customer demand across various sectors.
• Total revenues increased by over 10% year over year, exceeding guidance and reflecting stabilization in growth rate.
• Non-tech verticals grew faster than overall growth, up 15% year over year, accounting for over two-thirds of the business.
• Customer growth showed improving trends with core customer base and $100,000+ customers growing 11% and 18% respectively.
• Non-GAAP operating margins improved year over year from an operating loss margin of 6% to 4%.

Negative Points

• The macroeconomic environment continues to be a headwind, particularly affecting the tech sector.
• Free cash flow was negative $18.2 million in Q3, with expectations for positive free cash flow in Q4.
• Overall dollar-based net retention rate was 96%, indicating challenges in upselling and retaining customers.
• Sales cycles have lengthened, especially for larger enterprises, impacting deal closures.
• The impact of AI Studio on revenue is expected to be small initially, with meaningful contributions anticipated in future quarters.

Q & A Highlights

Q: Can you discuss the potential impact of AI Studio on seat growth and customer expansion? A: Dustin Moskovitz, CEO, explained that while AI Studio might initially seem like a headwind to seat growth, it actually opens up new use cases that could drive expansion. The initial use cases are often net new or replace tasks previously done by contractors, thus being incremental. Additionally, AI Studio could help unstick sales cycles, leading to both AI Studio sales and seat expansions.

Q: How are early use cases of AI Studio influencing your pricing strategy? A: Dustin Moskovitz, CEO, noted that the pricing system was designed with a power law distribution in mind, expecting some customers to stand out with high usage. The platform fee and included credits are designed to handle most customers, with incremental credit purchases for those with higher usage. The pricing strategy allows for budget predictability while accommodating customers' enthusiasm for deploying AI Studio across diverse workflows.

Q: What are the expectations for AI Studio's impact on revenue and net retention rates? A: Sonalee Parekh, CFO, stated that while AI Studio's current revenue impact is minimal, its growth potential is substantial. AI Studio is expected to be a mitigating factor for upsell challenges in the current macro environment and should contribute to improved net retention rates over time, as it offers a third leg for upsell and cross-sell opportunities.

Q: Can you provide insights into the non-tech pipeline and its contribution to business stabilization? A: Anne Raimondi, COO, highlighted that investments in verticals like manufacturing, retail, healthcare, energy, and government are driving non-tech growth. These efforts are leading to deeper relationships with larger enterprises and cascading benefits into the mid-market, contributing to overall business stabilization.

Q: What are the key areas for margin expansion and operational efficiency? A: Sonalee Parekh, CFO, identified sales and marketing as a significant area for productivity improvements, along with opportunities across R&D and G&A. The focus is on driving operational efficiency and productivity benefits to achieve significant margin expansion in the future.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.