Asana, Inc. Q1 FY2023 earnings

Asana posted first quarter fiscal 2023 revenue of $120.6 million, up 57.4% from the prior-year quarter. Gross profit was $108.2 million, up 57.4%, and gross margin was 89.7%, flat year over year. Growth at the top of the income statement did not carry down the page. Operating loss was $96.2 million, and operating margin was negative 79.8%, down from the prior-year quarter. Net loss was $98.9 million, and diluted net loss per share was $0.52. Operating expenses rose faster than revenue, with research and development up 63%, sales and marketing up 69%, and general and administrative up 96% year over year.

On a non-GAAP basis, the company reported an operating loss of $54.7 million, or 45% of revenues, and a net loss of $57.4 million. Non-GAAP net loss per share was $0.30. The gap between the two sets of numbers is stock-based compensation and related employer payroll taxes, which Asana strips out of its non-GAAP measures.

Cash use stepped up sharply. Operating cash flow was negative $41.1 million, down from the prior-year quarter. Capital expenditures were $1.0 million, down 93.8%. Free cash flow, a non-GAAP measure that also deducts purchases of property and equipment and capitalized internal-use software costs, was negative $42.2 million. The 10-Q attributes the operating cash use to the net loss, adjusted by non-cash items such as stock-based compensation, non-cash lease expense, depreciation and amortization, and amortization of deferred contract acquisition costs, plus net inflows from changes in operating assets and liabilities, including higher billings for subscriptions. Deferred revenue, current portion, was $198.9 million, up 61.9% from the prior-year quarter.

Customer metrics leaned toward larger accounts. Asana ended the quarter with over 126,000 paying customers. Customers spending $5,000 or more on an annualized basis grew to 16,689, up 48% year over year, and they contributed approximately 70% of revenues. Revenue from that group grew 73%. Customers spending $50,000 or more rose to 979, up 102%. Overall dollar-based net retention rate was over 120%. It was over 130% for the $5,000 group and over 145% for the $50,000 group. Management pointed to a record deployment of more than 100,000 seats as evidence that the push into larger accounts is working. The company announced a partnership with Align Technology, added Indonesian for a total of 14 languages, and published its third annual Anatomy of Work Index.

Guidance points to slower growth than the quarter just reported. For the second quarter of fiscal 2023, management guided to year over year revenue growth of 42% to 43%, along with a non-GAAP operating loss and a non-GAAP net loss per share. For the full fiscal year, which ends January 31, 2023, the company guided to the same 42% to 43% revenue growth. Asana says a reconciliation of the forward-looking non-GAAP measures to GAAP is not available without unreasonable effort, since the excluded costs are uncertain.

Risks remain familiar. The 10-Q lists the ability to sustain growth, attract and retain customers, release new products and scale the platform, expand through the self-service model, keep strategic partners, and grow internationally. It also flags a highly competitive and rapidly evolving market and the ongoing COVID-19 pandemic. Asana has a history of losses and negative operating cash flow, and it expects to keep a full valuation allowance against deferred tax assets. Management still sees significant greenfield opportunity among addressable customers worldwide and plans to keep investing in research and development and sales and marketing.