Asana 'investing to win' after posting 67% revenue growth in FY2022 earnings

We're investing to win

That's Dustin Moskovitz, CEO of work management vendor Asana, explaining his company's determination to maximize growth in the coming year. The company last night revealed its first full-year earnings since becoming a public company in late 2020. However Wall Street didn't like the company's guidance for growth in 2023 and punished the stock in trading today. 

Annual revenue for the year ended January 31st 2022 grew at 67%, and the company's guidance for the current year is for growth of 39-40%. That will push annual revenue comfortably past the half-billion-dollar mark, but losses will also grow. Moskovitz believes that's a price worth paying at this stage in the development of the work management category. He explains:

When you think about this big market opportunity, I'm a little less focused on what ... the optics of the operating margin are in the short run, and more focused on, how confident are we that we're going to get those investments back in the form of long term revenue? ...

When you're growing as fast as we are, you quickly catch up to the scale of the spend. And if you don't, then you can slow down on adding heads and grow into it. But if you're going much slower than you can't really make that kind of rationale.

Enterprise adoption

The investment is focused on building on Asana's rising penetration of large enterprise accounts across industries such as banking, media, retail, health care and telecom. The number of customers spending at an annual rate of $50,000 or more in Q4 went up more than double to almost 900. This cohort had a dollar-based net retention rate of 145%, indicating strong expansion in the overall average spend at each individual customer. Net retention among the subset of 340 customers who spent $100,000 or more in Q4 on an annualized basis is even higher, says Moskovitz. One customer is already spending above the $1 million mark, having expanded to more than 50,000 paying seats.

A quick rundown of the key figures:

• Q4 revenues were $111.9 million, up 64% year over year. Roughly 42% came from outside the US.
• Q4 net loss was $90.0 million on a GAAP basis, compared to $61.5 million in the same period a year ago. The non-GAAP equivalent was $46.9 million, compared to $35.0 million in Q4 2021.
• Free cash flow increased to negative $41.2 million, compared to negative $17.5 million a year ago. CFO Tim Wan says this figure reflects "our investment in growth and rapid onboarding of new headcount during the quarter."
• Full year revenues for FY2022 came to $378.4 million, up 67% year over year, an acceleration from last year's 59% growth rate.
• Full year net loss was $288.3 million on a GAAP basis, compared to $211.7 million in the same period a year ago. The non-GAAP equivalent $162.9 million, compared to $123.3 million in fiscal 2021.
• Free cash flow for the year was negative $87.6 million, compared to negative $76.0 million in fiscal 2021. Cash and marketable securities totaled $315 million at year end.
• At year end, there were more than two million paid users at over 119,000 paying customers, with an overall dollar-based net retention rate in Q4 of over 120%.
• Customers spending $5,000 or more on an annualized basis in Q4 grew to 15,437, up 52% year over year. Revenues from these customers in the quarter grew 82% year over year and accounted for 69% of total revenues, up from 62% a year ago. The dollar-based net retention rate was over 130%.
• The subset of customers spending $50,000 or more on an annualized basis in Q4 grew to 894, up 125% year over year, with a dollar-based net retention rate of over 145%.
• Guidance for the current fiscal year projects year-over-year growth of around 59-51% in Q1 and 39-40% for the full year. This would see annual revenues blow past the half-billion-dollar mark to reach $527 to $531 million.

Focused on the opportunity

Asana defines its opportunity within the wider digital teamwork and collaboration market, which it divides into three segments — communication, content and co-ordination. Its work management offering is clearly focused on the third of these, and it's happy to leave communication and content to others, such as Slack, Zoom, Mural and Figma. Moskovitz explains:

Collaboration software is obviously just really exciting writ large, but even work management itself is just such an enormous market opportunity, and still feels just incredibly untapped. We think about, the total addressable market is over a billion knowledge workers worldwide. Still, the vast majority of them are using the status quo of email, spreadsheets, long meetings, sticky notes on whiteboards, or digital whiteboards. We're really excited about staying focused on that opportunity, and then partnering with the best-of-breed products in the other ones.

He believes Asana's offering is particularly valuable to large enterprises because of its ability to support teams and processes that cut across functional boundaries. He explains:

The most common way we enter is through a marketing team, and then they're just immediately working with product and sales and legal on cross-functional workflows. I think it's accelerated over time, as we've built out more capabilities that service that exact need and have established ourselves as differentiated in being able to support cross-teamwork.

We're also just seeing more awareness of work management. As we move to larger deals, the topic is moving up higher in the in the org chart and the strategic chain. We're talking to more CIOs and C-level executives, who naturally have a cross-functional mindset to how they're going to deploy it.

Upcoming product announcements

Recent and upcoming product announcements will add to that appeal, he believes, as well as driving expansion within accounts as customers upgrade to take advantage of the new features. As an example, he cites the launch of Asana Flow last quarter, which added a workflow builder and template libraries that make it easier to build workflow automations. He says:

Workflows are really helpful for helping a customer adopt and stay retained with Asana. A lot of what we've built into the templates, and what we are helping the first set of customers do with Workflow Builder, is really very quickly implement workflow streams that they were otherwise doing by gluing together a set of features like the automation rules, or forms or task templates or custom API scripts they were writing to integrate with some of the other apps in their toolkit. This is really giving us a much faster way to deploy cross-functional use cases and workflows into new customers and help them just get started on a really good foot and expand faster.

Next quarter will see the launch of the new Employee Impact suite, which will help individuals get a clearer sense of how their work fits into the wider goals of the organization and also give more opportunity to recognize and value their contributions. Meanwhile, Asana continues to build out all of the housekeeping capabilities that enterprise IT expects. He sums up:

We're also investing in all the other things important for large enterprises too. Such things like making Asana accessible to all employees, improving our compliance capabilities, and adding integrations for data loss prevention and e-discovery. And scalability, to really be able to serve these very large deployments with tens of thousands of people working together in one instance. Finally, we'll also be increasing the depth and breadth of the core Asana platform by expanding our IT partner ecosystem.

My take

Asana is a company that has clearly mapped out its ambitions from the start and is now really hitting its stride. The acceleration in growth over the past year is impressive, particularly among large enterprise customers. We'd certainly agree that the market opportunity is huge. Asana seems to be on the right track to seize that opportunity, despite Wall Street's impatience to see it grow even faster.