Asana, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the ASANA fourth quarter and fiscal year 2021 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. During the question and answer session, please limit yourself to one question and one follow-up question. If you have additional questions, please rejoin the queue. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Catherine Bowan, Head of Investor Relations. Thank you. Please go ahead.

Good afternoon, and thank you for joining us on today's conference call to discuss the financial results of Asana's fourth quarter and fiscal year 2021. With me on today's call are Dustin Moskowitz, Asana's co-founder and CEO. Kim Wan, the company's Chief Financial Officer, and Chris Farinacci, the company's Chief Operating Officer and Head of Business. Today's call will include forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements regarding our financial outlook, market position, and growth opportunities. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results, performance, or achievements to be materially different from those expressed or implied by the forward-looking statements. Forward-looking statements represent our management's beliefs and assumptions only as of the date made Information on factors that could affect the company's financial results is included in its filings with the SEC from time to time, including the section titled Risk Factors in the quarterly report on Form 10-Q filed by the company for the quarter ended October 31, 2020. 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 is 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.

Thanks, Catherine. And thank you to everyone for joining us today for our Q4 and fiscal year 2021 earnings call. We're very excited about our results for the year. There were several highlights. We closed out the fiscal year with a growth rate of 59%, and our business is as strong as ever. Also, we now have over 93,000 paying customers and over 1.5 million paid users as of fiscal year end. And customers spending $50,000 or more grew 92% year over year. We had strong momentum in large customers and had a record quarter for expansion within our very largest. In fact, revenue from our current top 10 customers more than tripled in Q4 versus the previous year. We completed our direct listing on September 30th, and we were the first to accomplish this remotely. We also held our Vision for the Future of Asana event a few months ago, showing the world what work will look like when we achieve the full potential of Asana and the Asana WorkGraph data model. And over 24,000 people have watched it. The successes from the year are thanks to the hard work and resiliency of our team and their commitment to our customers' success. These results reflect the increasing demand for work management and the global need for team clarity. Most of the world's 1.25 billion knowledge workers struggle to coordinate work across their teams. They still rely on status meetings, spreadsheets, and sticky notes to answer basic questions such as who's doing what by when. The pandemic and shift to distributed work further exposed the pain of work coordination. We recently published our annual Anatomy of Work Index, an independent study of 13,000 knowledge workers. The study quantified what many of us know intuitively, Teams are working hard on things that aren't having impact. The study revealed that 60% of time is spent on work about work rather than work itself, 26% of deadlines are missed, and seven in 10 people experienced burnout in the last year. Teams that lack clarity experience a cycle of chaos. Work falls through the cracks and teams scramble to figure out what to do. This results in wasted effort and missed opportunities. Effective teams have the three Cs of collaboration. Content, communications, and coordination. Most teams have invested in content and communication technologies, such as file sharing, messaging, and video conferencing, but still rely on status meetings and spreadsheets for coordination. Asana is the platform for team coordination. It gives teams time back by bringing structure and clarity to their work. Team coordination is a universal need, and Asana is well positioned to capitalize on this secular trend. With 1.5 million paid users, Asana is a market leader, and yet we're less than 3% penetrated in our existing customer base. Simply put, our market opportunity is massive. To provide the best platform for team coordination, we built a proprietary data model, the Asana WorkGraph. The WorkGraph is a complete, fully connected, accurate, and up-to-date map of the work in an organization. It's what sets us apart from other companies in the market and is what enables Asana to provide clarity at every level of an organization, regardless of the size, structure, and complexity. The WorkGraph data model enables our three key differentiators. First, individuals cite Asana's ease of use and how it maximizes personal productivity and focus. The consumer ratings show up on G2, an independent review site where Asana was named the most highly rated company in the recent project management grade. Second, teams cite the ease of staying organized while coordinating complex cross-team work thanks to things such as multi-homing, a feature uniquely enabled by the work graph and used by over 97% of our customers spending $5,000 or over. And third, executives praise the real-time visibility that Asana provides into the status of their goals and strategic initiatives. This is possible because goals, portfolios, projects, and tasks are all connected thanks to the work graph. And we're the only solution that can provide clarity to the individual, teams, and executives based on a shared source of truth. Customers rave about this, and the work graph is what makes it work. Last quarter, I described task multi-homing as one of the most pervasively used features that illustrates one of the benefits of the work graph. Multi-homing gives people the ability to host a single task in multiple projects at the same time. An individual task is often relevant in multiple projects or process workflows. With multi-homing, you can share a single source of truth for one task in all of those contexts, even across multiple teams and departments. So the work graph mirrors the natural flow of work. And as a reminder, the alternative to this is a container model, which forces you to keep information about one task siloed in a single context. The next layer of the Asana work graph is portfolios. Portfolios are collections of projects, giving you the ability to see all the work related to a strategic initiative along the snapshot view of their current status. Multihoming shows up again here because a single project can be included in many portfolios. So customers have flexibility to accurately map how work is happening and organize the most helpful views for their workflows. Portfolios builds on all three of our key differentiators. First, they make Asana easier to adopt by providing new users to a workspace, as well as new employees to an organization, a guide to help them learn about and navigate each initiative. And they help maximize personal productivity, because anyone can create their own portfolio of projects to represent and personally manage work they care about. For example, your personal portfolio might be called My Projects. Second, like task multi-homing, project portfolio multi-homing helps facilitate cross-functional work. Projects can be included in multiple parent portfolios, which allows different teams to organize and track projects using their own taxonomy. For example, R&D teams might create portfolios that represent the way work is grouped within program teams, whereas product marketing might want to bundle projects into related releases. And perhaps they would additionally organize them according to customer value themes. There's no need to choose. This flexibility is enabled by the work graph. In the container model for portfolio management, all the cross-functional teams are forced to compromise on a single way to organize the work. Finally, as I mentioned above, they are a key way that work at the task and project level connects to higher-level strategic initiatives. This gives leaders throughout the company, including executives, an easy, real-time way to see how work is progressing at a high level. And now we've introduced nested portfolios, meaning a portfolio can be included inside another portfolio. or multiple other portfolios. These layers and nesting are key to how we make Asana easy to adopt while also being able to scale organically to support larger customers. Asana lets you start small with a simple structure of a single project. You can then progressively add powerful layers that bring structured organization and reporting over time. It's a simple, elegant on-ramp to as much sophistication that a customer might need to do their work. In contrast, container models leave employees and large organizations lost, swimming in a sea of siloed projects. As an example, I know many of you also follow important companies like Twitter and are familiar with their strategic objectives. More and more of our customers are turning to our capabilities within portfolios to drive cross-functional alignment as they grow rapidly in scale. Twitter chose Asana Enterprise in Q4 as their work management platform for their experience team, which includes design, research, product, and engineering. They standardized on Asana to bring those cross-functional teams and leadership together in one place to manage product road mapping, content creation, and inbound requests. Another benefit they're excited about is being able to connect technical and non-technical teams who previously struggled to collaborate using the Asana Jira integration. Listening to our customers has been the cornerstone to our product strategy. While constantly expanding and deepening the strength of our platform, we've been launching new features and capabilities for customers at a rapid pace. Before I hand it off to Chris, I just want to make sure I highlight that this year we were ranked the top best place to work by Inc., Glassdoor, Built in New York, and Fortune, including landing at number one best workplace in the Bay Area for the fourth consecutive year. Our culture is integral to our business success, and part of how we create a great culture is using Asana to ensure that everyone has real-time clarity about what's expected of them and how their work fits into our higher-level goals. So this year, as our revenue grew rapidly at 59%, we succeeded in scaling our culture as well and building an environment where our team can thrive as they create value for our customers. With that, I'll hand it off to Chris. Thanks, Dustin. We had a great fourth quarter. We finished the year really strong and even accelerated revenue to 57% growth in Q4 as we exited the fiscal year. Highlights from the quarter's business performance include a few things. First, growth in new paying customers to over 93,000 and record level top of funnel volumes. Second, strong expansion within our customer base. We now have more than 1.5 million paid users. Net retention rate for customers spending $5,000 or more with us annually was 125%, and for customers spending $50,000 or more with us was more than 140%. And third, some big wins and strong momentum in enterprise. The number of customers spending $50,000 or more with us annually grew 92% year over year, and our largest customer deployment in terms of paid users grew five times the size of our largest customer at the end of the prior year. We saw broad customer traction in Q4 across industries and departments, from high-growth leaders to enterprise digital transformation, and across global regions. Here are just five of the many examples. Danone, the leading dairy and plant beverage and specialized nutrition company headquartered in Paris, selected Asana's enterprise solution in Q4 as their standard for project and work management. But Asana, teams that have been known, from supply chain to finance to quality and food safety, now have the visibility they need to collaborate effectively, drive project ownership, and further strengthen their commitment to bringing health through food to as many people as possible. Spotify, a leading provider of digital music and podcasts, first began using Asana in 2015. Usage has steadily spread across the company over the years. And in Q4, they significantly expanded their use of Asana's enterprise solution as teams look to improve how they collaborate, manage projects, and run business processes. Now teams across the world are managing everything from the latest podcast ad campaign to engineering roadmaps to regional marketing and sales activities in Japan in Asana. Gojek, a super app that provides millions of users across Southeast Asia with on-demand access to more than 20 services, such as rides, upgrading to Asana's enterprise solution for the entire company in Q4. They chose their enterprise offering to further enhance security and user management controls, while also providing Gojek's executive team with the support and visibility needed to accomplish their key business objectives. Hotmart, a leading platform for digital producers and one of Brazil's leading startups, chose to go wall-to-wall with Asana's business solution for 1,000-plus employees in Q4. Now teams across the company are managing their projects and work in one place, from finance to marketing to business strategy and operations to talent acquisition. HubSpot, a leading CRM platform that provides software and support for scaling companies, has been using Asana across some of its marketing and sales operation teams for some time. In Q4, they upgraded to our enterprise solution and expanded their use to more teams within these functions, as well as to other teams like finance and HR. I credit our exceptional business performance in Q4 and in our fiscal year 2021 to first and foremost, the immense business value we provide to our customers, our differentiated product offering, our resilient hybrid business model and talented go-to-market team, and to the overall accelerating business imperative of the market. Looking forward to our fiscal year 2022 and beyond, there are three major areas where we are focused. Acquiring new customers, customer expansion in our base, and enterprise momentum. To give some color, first I'll start with new customer acquisition. This is a fast-growing emerging category with a vast, vast majority of 1.25 billion global information workers without work management tools and suffering from lack of clarity. For new teams, Asana is fundamentally a broad horizontal product. We see customer use cases within and across virtually all functions and departments, and often including collaboration externally with suppliers, partners, and customers. We remain focused on acquiring new customers, building upon our record top of funnel demand from Q4 with a blended paid, organic, and product-led growth approach. Over the course of this year, we are executing one of the largest new market expansion initiatives to date. We're planning to expand language availability for Asana from six to 13 languages over the course of the year to make Asana accessible to a significantly larger portion of the world's teams. Second, we are focused on customer expansion. We continue to see a large expansion opportunity in our existing base of now over 93,000 paying customers. This year, we are expanding our direct sales team in Asia, Europe, and North America. We're building on the strong departmental traction we see in marketing and creative, sales and strategy and operation teams, as well as other teams like product design, HR, and IT teams. This year, we are particularly focused on providing best-in-class solutions for key cross-team workflows. For example, global campaigns, product launches, and creative development. These are workflows we uniquely address and which bring more teams into Asana. Third, our last area of focus is enterprise, building on the tremendous enterprise adoption and momentum of last year. This year, we are investing significantly in our enterprise platform. Major investment areas include work draft visualizations and reporting, advanced administrative controls and broader compliance support, building out our technology and services partner ecosystem, and integrated goals management and cross-company use cases. This year, we are also continuing to grow and scale our enterprise sales organization. We have now brought in general managers in each region with enterprise leadership backgrounds from companies such as Salesforce, Qualtrics, LinkedIn, and NetSuite. We are investing heavily in our enterprise capabilities, and while we are still very much in the early days of this market, our enterprise motion and momentum is beginning to build. Asana is uniquely suited to scale as a trusted partner and provider of real-time clarity and alignment in and across large enterprises. Now I'll turn it over to Tim to go through our financial results. Thank you, everyone, for joining us today. We are very excited to report another great quarter with strong results across the board. Q4 revenue accelerated from last quarter to $68.4 million, up 57% year-over-year, driven by continuing strength from our customers spending $5,000 or more on an annualized basis. I'm also encouraged by the fact that we have maintained 55-plus revenue growth rate during each of the quarters throughout this difficult year. Demonstrates the category tailwind and the resiliency of our business model. We added over 4,000 net new customers and now have over 93,000 paying customers, representing a 24% year-over-year increase. We have 10,174 customers spending 5,000 or more on an annualized basis, up 55% year-over-year. Growth in larger customers is even stronger. We have 397 customers spending 50,000 or more on an annualized basis, up 92% year-over-year. Revenue from customers 5,000 or more represented 62% of our revenues in Q4 compared to 54% in the year-ago quarter. This segment of our business grew 81%. This further demonstrates our success with our land and expand strategy. Our overall dollar-based net retention rate was over 115%. As a reminder, our dollar-based net retention rate is a trailing four-quarter average calculation. Among customers spending $5,000 or more, our dollar-based net retention rate was 125%. And among customers spending $50,000 or more, our dollar-based net retention rate was, again, over 140%. Before turning to expense items and profitability, I would like to point out that I will be discussing non-GAAP results in the balance of my remarks. Gross margins came in at 88%, up from 87% in the year-ago quarter. R&D was 30.6 million, or 45% of revenue. We continue to invest heavily to fuel innovation at a high velocity. Sales and marketing was 49.2 million, or 72% of revenue. We are continuing to invest in both our self-serve and direct sales motion. GMA was 15.4 million, or 23% of revenue. Operating loss was $34.8 million, and operating loss margin was 51%. Net loss was $35 million, and our loss per share was $0.22. Now on to our fiscal year highlights. Fiscal year revenue was $227 million, up 59% year over year. We added over 18,000 net new paying customers for the full year. We also added 3,600 customers spending $5,000 or more on an annualized basis. This is an increase of 55% year over year. And finally, we added 190 customers spending $50,000 or more on an annualized basis. This represents an increase of 92% year over year. Moving on to the balance sheet and cash flow. Cash and marketable securities and long-term investments at the end of Q4 were approximately $405 million. Our free cash flow is defined as net cash from operating activities, less cash used in property and equipment and capitalized software costs, excluding non-recurrent items such as direct listing fees and the build-out of our San Francisco office. In Q4, free cash flow was negative $17.5 million. We also ended the fiscal year with 1,080 employees. We're very proud of the achievements and the business momentum during this unprecedented year. Now moving on to fiscal year 22. For Q1 fiscal year 22, we expect revenues of $69.5 million to $70.5 million, representing growth rates of 46% to 48%. Non-GAAP loss from operations of $44 million to $42 million. loss per share of 27 cents to 26 cents, assuming basic and diluted weighted average shares outstanding of approximately 161 million. Now looking out to full fiscal year 22, we expect revenue to be 309 million to 314 million, representing a growth rate of 36 to 38% year over year. Given the large market opportunity, we will continue to invest for growth to maintain our leadership position. We expect full-year non-GAAP operating margins to be flat to slightly up from fiscal year 21. Longer term, we believe that we can execute on a growth strategy and that our best-in-class close margins will provide the leverage and flexibility to invest into the enormous market opportunity. We believe this investment will provide durable and sustainable growth as we pursue this large market opportunity with the best-in-class product. Operator, let's open up the line for questions.