Asana, Inc.

Thank you for standing by, and welcome to Asana's second quarter fiscal year 2024 earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. To remove yourself from the question queue, you may press star 1-1 again. I would now like to hand the call over to Kathleen Blunt, head of investor relations. Please go ahead.

Good afternoon, and thank you for joining us on today's conference call to discuss the financial results for Asana's second quarter fiscal year 2024. With me on today's call are Dustin Moskowitz, Asana's co-founder and CEO, Anne Raimondi, our chief operating officer and head of business, and Tim Wan, our chief financial officer. Today's call will include forward-looking statements, including statements regarding our expectations for free cash flow, our financial outlook, strategic plans, market position, and growth opportunities. Forward-looking statements involve risks, uncertainties, and assumptions that may cause our actual results to be materially different from those expressed or implied by the forward-looking statements. Please refer to our filings with the SEC, including our most recent annual report, Form 10-K, and quarterly report on Form 10-Q, for additional information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements. 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 are 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.

Thank you, Catherine, and thank you all for joining us on the call today. We reported Q2 results beating the top and bottom line expectations. Q2 revenues grew 20% year-over-year as we continued to close large deals in the enterprise segment. Non-GAAP operating margins improved 40 percentage points year-over-year, while we attained positive free cash flow in the quarter at $14.6 million. Our growth continues to be fueled by some of the largest and most strategic companies in the world choosing Asana. In Q2, we closed and expanded deals across industries such as manufacturing, professional services, healthcare, logistics, media, and financial services. Our most strategic customers are modernizing the way they work, and they're turning to Asana for work management at scale. And as we look toward the next generation of work management and implement AI even further, these relationships will be increasingly valuable. Even with continued macro headwinds and heightened budget scrutiny in the enterprise, sentiment seems to be stabilizing. Customers are looking for ways to consolidate their vendors, getting more ROI out of everything they're doing, and they're turning to Asana. Asana can help to achieve their goals and objectives more efficiently and faster than ever before. In fact, we've seen an increase in multi-year commitments both year-over-year and sequentially in the quarter. In Q2, we made great progress on improving our non-GAAP operating margins. We expect significant improvement in non-GAAP operating margin year-over-year for the full year as we focus on operational efficiency and growth, which Tim will talk about more. In the first half of the year, we've been working through the macro headwinds, and we continue to focus on our enterprise playbook, improving sales execution and building substantial enterprise leadership, most recently announcing the arrival of our new CRO, Ed McDonald. I'd be remiss to start with anything but artificial intelligence, given the opportunity it presents for Asana and our customers. So let me jump right in. In short, I'm extremely excited. I've been deeply involved and passionate about AI for a very long time. Asana has the good fortune of sharing a backyard with many of the leaders in AI, including companies like Anthropic and OpenAI. And I personally have been embedded in this community and working with these companies since their founding days as an early supporter of both OpenAI and Anthropic. AI really entered the zeitgeist and captured people's imaginations in November of last year with the launch of ChatGPT. But as the novelty for some has worn out, so has their enthusiasm. My view is that people aren't thinking big enough, and they're underestimating how quickly the foundation models themselves will improve. I believe chatbots are just demos. They're not really the end game. And the real potential of AI is going to manifest when it gets deeply integrated into other software. making it possible for end users to get great results without themselves becoming prompt engineers, and for developers to radically accelerate their productivity. There's also a lot of skepticism around AI that I understand and acknowledge. Many folks have rightly called out the hallucination or black box problems. Folks just don't trust that AI is providing accurate or useful guidance all of the time. They want to be able to trust that they're getting good recommendations, which means they need to understand the thinking process and assumptions that underlie them. Encountering the now infamous hallucinations erodes trust, especially when you can't trace how the AI came up with it in the first place. We've been architecting Asana's WorkGraph data model for over a decade, and we believe it will become increasingly valuable in this AI-powered future, thanks to what it allows us to achieve with Asana Intelligence. The WorkGraph ensures that you have a single source of truth for work data, structured in a way that is scalable and maps to how work actually gets done inside organizations. With the work graph, data is connected across the whole enterprise. Work, functions, teams, and people. And this data connection is powerful because it captures the sum and the parts. AI can use the underlying pieces of the work to more accurately draw conclusions at multiple levels of altitude. And with the Asana work graph, we believe we're best positioned in the work management category to solve the black box problem because we can show its work and unpack its assumptions from facts and analysis of the work across all teams at all levels of granularity. Here's a tangible example. Let's say a company is preparing for a global product launch, and multiple teams across R&D, marketing, product marketing, and sales are involved. They each have their own projects and work streams that support the overall launch effort, and each lives in one portfolio of work in Asana. Asana Intelligence will be able to analyze all elements of the work supporting the product launch and flag key risks and bottlenecks using granular information from supporting tasks. Before, these hidden blockers would have been a blind spot for the organization and would have taken many conversations to uncover. But now with the work graph and AI, this can be surfaced immediately, and Asana Intelligence will help show its work by pointing how it came to that conclusion based on the work data and the work relationships at its disposal. Asana will highlight where and how this unseen but critical dependency will impact launch timelines visually. The work graph makes how work gets done in your organization highly legible to the AI, but it's also going to make the AI's underlying assumptions to its conclusions legible to your organization and the people within it. This is critical for key enterprise requirements like permissions, access control, and accountability. Asana Intelligence, powered by the WorkGraph, will serve as a shared map that helps align human intention with AI guidance as they work together to achieve a customer's goals. We believe Asana is the only work management platform built for enterprise scale, with proven capabilities of scaling to 200,000 seats and company-wide deployments, and our enterprise customers agree. As Asana adoption grows across the enterprise, the value we provide increases. And the cross-functional nature of the WorkGraph data model is even more important with AI, because information silos isolate context that could otherwise be used. Even if you use AI to find the context in another silo, you have to infer how they're connected, whereas the relationship is explicit in the WorkGraph data model. AI gives us yet another way of giving customers increasing returns to scale in their Asana adoption. In sum, Asana will capitalize on an enterprise's work graph to deliver a more useful, accurate, and insightful user experience at every level, especially the executive level. AI is the ultimate accelerant of one of Asana's core value propositions, which is to help companies thrive by connecting company-wide goals to the strategic initiatives, departments, teams, and work needed to achieve them. We see ourselves as creating entirely new software interfaces between teams of humans working together and the powerful AI models that make getting their work done easier. This is the core of our innovation focus right now. We've already announced a slew of new AI features that are currently in beta that help individuals and teams improve their productivity, like Writing Assistant, Instant Summaries, and Work Organizer. Other features in beta include health checks that drive greater clarity and accountability, and Ask Asana Anything that maximizes impact. Further down the product roadmap, we're also planning features such as goal-based resource management and AI-assisted smart workflows. And we're just getting started. You'll see us unveil an exciting new lineup of innovation at our Work Innovation Summit on October 3rd in New York City. This will be our most exciting customer event of the year, with a visionary keynote, luminary speakers, industry leaders across operations, IT, and marketing, as well as a special investor session to talk more about our product plans, go-to-market initiatives, and financial outlook. We'll also be hosting customers at our Work Innovation Center, where we'll share their Work Innovation Score, a cutting-edge benchmark developed by industry-leading experts. The score is powered by the WorkGraph and AI, designed to assess organizations' potential for innovation, both now and in the future. The Work Innovation Score highlights our customers' innovation potential, allowing them to clearly identify strengths and overcome obstacles. This is a unique offering in our market, and it's only offered by Asana. It's extremely popular, especially with our largest and most strategic customers. So we're excited to include even more customers in the program. We look forward to seeing you in New York City on October 3rd. In closing, in spite of significant headwinds, we've made measurable progress in the first half of the fiscal year. We continue to see traction with some of the largest companies in the world and look forward to partnering with these companies as we look toward the future product roadmap. Now I'll turn it over to Anne.