Asana, Inc.

Hello, everyone, and welcome to Asana's third quarter fiscal year 2025 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 participate, you will need to press star 11 on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press star 11 again. Please be advised that today's conference is being recorded. Now I will pass the call over to the Head of Investor Relations, Katherine Bourne. Please proceed.

Good afternoon, and thank you for joining us on today's conference call to discuss the financial results for Asana's third quarter fiscal year 2025. 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 Sonali Parekh, our Chief Financial Officer. Today's call will include forward-looking statements, including statements regarding the expected benefits of our product offerings, including AI Studio, and our expectations for revenue to be generated by AI Studio, our expectation for free cash flow, our financial outlook, strategic plans, our 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 on 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, Kathryn, and thank you all for joining us on the call today. This quarter marks a transformative moment for Asana. With the launch of AI Studio, we're officially entering a new era as a multi-product company. This represents more than just a new revenue stream. It's an entirely new way to create value for customers as AI transforms how work gets done. We believe AI Studio has the potential to eclipse our current revenue scale over time. The early momentum has been exciting with significant customer demand across various sectors, including media, financial services, manufacturing, healthcare, professional services, and technology. We're seeing customers experience meaningful productivity gains as they integrate AI directly into their everyday workflows, where it can drive measurable impact at scale. Beyond these product achievements, we delivered a solid quarter, exceeding our guidance on top and bottom line, highlighted by stability across the board in pockets of acceleration in our most strategic areas. Total revenues were up over 10% year over year, above our guidance and reflecting stabilization of the growth rate versus last quarter. As you know, our tech vertical has been disproportionately impacted by the macro, and our efforts to diversify more broadly into a diverse array of industry verticals are paying off. Non-tech verticals grew faster than overall growth and were up 15% year over year, a slight acceleration from last quarter and accounted for over two-thirds of our business. Some of our fastest growing verticals this quarter included manufacturing and energy, consumer retail, and media. Customer growth showed improving trends, Our core customer base, as well as our $100,000 and over customers, grew 11% and 18% respectively, both accelerating over last quarter. Retention is also a good story, with stability in gross retention and an uptick in our in-quarter NRR across all customer cohorts. Non-GAAP operating margins improved year-over-year, from an operating loss margin of 6% to an operating loss margin of 4%, as we continue to progress towards non-GAAP profitability. During the quarter we continue to execute on our enterprise strategy we accelerated growth and key verticals and we marked a significant milestone as we established ourselves as a multi product company. Now let me turn to our progress with customers and the momentum we're seeing with Ai studio. In October we hosted our work innovation summit in New York, which was a landmark event for sauna as our largest and most strategic executive event to date. we hosted nearly 1,000 attendees, representing almost 4x growth in attendance since our inaugural Work Innovation Summit a year ago. The major announcement at this event was, of course, AI Studio, an AI-powered workflow builder that empowers teams to design any workflow, embed AI agents without code, and deploy these workflows where their teams are already working. The enthusiasm was palpable, with lines of customers stretching around the room, eager to learn about potential use cases, and engage with our team of workflow specialists. AI Studio leverages our unique work graph to deliver AI capabilities exactly where teams work, providing the essential context and structure that AI needs to be effective. Unlike standalone chatbots, with AI Studio, teams can seamlessly coordinate work between humans and AI teammates within their existing workflows, all powered by our deep understanding of the relationships between people, work, and processes. The key thing to understand about AI Studio is that these are not chatbots. You don't talk to them. These are workflows with AI agents embedded within them that are automatically initiated in reaction to things people are doing, like filling out forms or changing task statuses. While other AI studios focus on creating agents that are expected to take on a wide variety of tasks and autonomously execute plans, Asana gives you a way to outline an explicit step-by-step workflow that includes pieces that are completed by AI while being heavily anchored by the human intention from start to finish. This ensures consistent, high-quality results. It also doesn't require the end user to adopt new behavior with some new AI tool. The AI capabilities are automatically initiated based on the smart workflow that the program manager created. AI Studio is not only elevating Asana's profile at customer meetings, it's unlocking exciting new use cases. It's being leveraged for translating global communications across dozens of languages, to autonomously executing complex work requests, to automating creative asset production and more. It also marks a significant milestone as our first product with consumption-based pricing. Let me walk through that new pricing and how we believe it will drive incremental revenue opportunities. First, there will be a recurring platform fee, which includes initial allocation of credits for variable consumption. That's enough to execute hundreds or thousands of workflows per month, depending on the use case. When customers identify high ROI use cases that exceed the base allocation, they can seamlessly scale with additional credit tranches. While we expect most customers to only pay the platform fee, we're already seeing strong evidence from our early access customers that many will scale beyond the base allocation as they discover transformative AI use cases. What's especially powerful about our consumption-based model is that revenue potential isn't tied to seat-based licensing. We're finding that just a small number of activated workflow builders can create a large amount of value on their own, in contrast with traditional seat-based models where we need entire teams on board before we can add a lot of value. This fundamentally changes the economics of customer expansion. AI Studio is also very sticky. Once embedded in critical workflows, it becomes an essential part of our customers' operations, driving both adoption and consumption. This stickiness, combined with the consumption-based model, creates a powerful dynamic. We expect AI Studio revenue from some customers to exceed their core seat-based license revenue in the near term, a pattern we believe could extend across our customer base in the medium term. The initial adoption and feedback from early access customers have been extremely encouraging. We've already sold paid AI Studio packages to industry leaders in technology, cybersecurity, and financial services. One of our largest enterprise customers moved straight to purchase shortly after seeing the product, bypassing our pilot phase entirely. It's only been available for weeks, but the momentum within our top 100 customers is remarkable. Each week, we enable a significant number of large customers on AI Studio. We're also seeing strong demand in the mid-market. which is leading us to accelerate our strategy to accommodate them sooner than initially planned. Let me give you some examples of the transformative potential we're seeing. A leading outdoor advertiser has already created AI-powered workflows across their organization, demonstrating the broad capability of our solution. The impact has been substantial. Their creative team has reduced manual work and request intake by 60%, achieving time savings of 15 hours per request, while decreasing overall request processing time by 69%. Another example is a mid-market customer that specializes in helping small online businesses grow. Despite already having a wall-to-wall deployment of 700 seats, they're demonstrating how AI Studio can drive significant new value independently of seat count. They've implemented two AI-powered workflows in their IT operations, intelligent ticket prioritization and automated FAQ responses, with over 4,500 workflow executions in just their first month, and now there are over 20,000 workflow executions. What's particularly powerful about this example is how a small IT team is creating leverage across their entire organization. Even with full seat penetration, their consumption-based AI usage represents a substantial new revenue opportunity as they continue to expand their AI-powered workflows. This illustrates our thesis that AI Studio's revenue potential isn't constrained by traditional seat-based metrics, but rather by the value it delivers through automated workflows. We anticipate their rapid adoption will lead to a meaningful expansion of new use cases across their business, which will deliver considerably more value for the customer and substantial new revenue for Asana. A few of our early customers have shared compelling ROI data from their AI Studio workflows. From our initial quantified examples, customers are saving one hour of work for every one to five cents in the cost, including our margin on top of the LLM cost. These early customer examples demonstrate how AI Studio is fundamentally reshaping the value we can deliver for our customers and the growth potential of Asana. As a top analyst at one of the leading research firms said, AI Studio puts Asana at the cutting edge when it comes to AI in the collaborative work management space. None of Asana's competitors come close. The launch of AI Studio is part of our broader vision to better serve our customers by evolving Asana from a seat-based pricing model to a flexible, value-aligned approach. To summarize, our pricing will include a combination of seat-based pricing, persona-targeted add-ons, and third, consumption-based pricing from AI Studio. As we scale AI Studio and future add-ons, we expect to see these value-based products take on a larger proportion of our revenue mix compared to our core seat-based license. We believe this approach will reduce friction for seat expansion while allowing customers to pay for the specific value they receive. While we're excited about the early success of AI Studio and our strategic shifts, we're just getting started. We're scaling our enablement efforts throughout Q4 to support broader adoption. We're now preparing for the general availability launch of AI Studio by the end of Q1 fiscal 26, which we expect will further accelerate adoption and cement our position as the leader in AI-powered work management. As we look towards Q4 and fiscal 26, our primary focus will be on improving our financial efficiency while maintaining strategic investments and growth. We'll re-accelerate growth by investing in our highest impact areas, Elevating customer success through deeper engagement and mission-critical use cases that span across departments and organizations. Winning new customers, especially in our key verticals, such as manufacturing, consumer retail, healthcare, and now government with our recent commitment to FedRAMP. Accelerating revenue growth with new add-ons and services. This cross-sell will help expansion as well as stickiness. I'll also reiterate that we're committed to sustained positive free cash flow by the end of Q4. We'll achieve this by further optimizing our investment allocations across all of our operations, which Sonali will talk about more in a moment. And with that, I'll turn things over to Anne.