Asana, Inc. — Form 10-Q Summary
Reporting period: First quarter of fiscal 2023, the three months ended April 30, 2022; unaudited results compared with the three months ended April 30, 2021. Asana provides a cloud-based work management platform.
Key financial results
| Metric | Q1 FY2023 | Q1 FY2022 | Change |
|---|---|---|---|
| Revenue | $120.6 million | $76.7 million | Up 57% |
| Gross profit / margin | $108.2 million / 90% | $68.8 million / 90% | Margin unchanged |
| Operating expenses | $204.4 million | $118.7 million | Up 72% |
| Operating loss | $96.2 million | $50.0 million | Loss increased |
| Net loss | $98.9 million | $60.7 million | Loss increased |
| Net loss per share, diluted | $0.52 | $0.37 | Loss per share increased |
| Cash used in operating activities | $41.1 million | $7.4 million | Cash use increased |
| Free cash flow, non-GAAP | $(42.2) million | $(7.7) million | Cash use increased |
Revenue growth reflected new paying customers, a shift toward higher-priced Business and Enterprise plans, and expansion within existing customers. Research and development, sales and marketing, and general and administrative expenses rose 63%, 69%, and 96%, respectively; increased headcount and related personnel costs were major drivers. Stock-based compensation was $39.9 million, up from $16.0 million.
Liquidity, debt and operating indicators
- At April 30, 2022, cash and cash equivalents were $197.3 million and marketable securities, including noncurrent investments, totaled $85.2 million. Management reported total cash, cash equivalents and marketable securities of approximately $282.5 million.
- Current assets were $397.0 million and current liabilities were $289.3 million. Deferred revenue was $202.0 million, of which $198.9 million was current.
- The Silicon Valley Bank term loan had $37.7 million outstanding, with maturity in April 2025. Asana reported compliance with its financial covenants.
- Remaining performance obligations were $250.4 million; Asana expected to recognize approximately 87% as revenue over the next 12 months.
- Asana reported over 126,000 paying customers, versus over 100,000 a year earlier. Customers spending over $5,000 annually numbered 16,689, and those spending over $50,000 numbered 979.
- Dollar-based net retention exceeded 120%, compared with over 115% a year earlier; it exceeded 130% for customers spending over $5,000 and 145% for customers spending over $50,000.
Material changes and management outlook
Revenue grew substantially, but expense growth outpaced revenue growth and losses widened. Gross margin remained 90%. Operating cash use increased materially year over year; the company attributed part of the operating cash outflow to higher prepaid expenses and receivables, partly offset by increased deferred revenue and accounts payable. The prior-year period included significant interest expense on convertible notes that were converted in July 2021, reducing reported interest expense in the current period.
Management said it plans to continue investing in product development, sales and marketing, hiring, and international operations, and expects operating expenses to rise in dollars. It expects research and development and sales and marketing expenses to decline as a percentage of revenue over time, while sales and marketing remains its largest operating expense. Management expects subscription gross margin to remain relatively consistent over the long term. It stated that available liquidity and the term loan facility should meet working capital and capital expenditure needs for at least 12 months. The filing provides no specific quarterly or annual revenue or earnings guidance.
Risks, contingencies and unusual items
- Key risks include sustaining customer growth and retention, competition and pricing pressure, continued losses and cash burn, and the possibility that recent growth rates will not persist.
- Management highlighted uncertainty from COVID-19 and the broader economy, including effects on customer spending, sales cycles, collections and office-return costs. It also cited foreign-exchange exposure, geopolitical uncertainty, cybersecurity, service availability, privacy regulation and dependence on AWS.
- Purchase commitments not recorded on the balance sheet included $75.8 million for AWS hosting services and $20.7 million primarily for software services. The AWS agreement includes a $103.5 million minimum spend over 60 months, subject to qualifying credits.
- Operating lease liabilities totaled $220.8 million; future undiscounted lease payments were $368.7 million. Letters of credit related to leases totaled $20.1 million.
- One customer represented approximately 30% of accounts receivable at April 30, 2022, though no individual customer accounted for 10% or more of quarterly revenue. Asana reported no material pending legal proceedings and no known claims expected to materially affect its financial position or results.
- Class B shares carry ten votes per share versus one vote for Class A, concentrating voting control. Asana also cited possible dilution from equity awards and future capital raising.
Important facts for investors to verify
- Whether customer additions, expansion, and retention continue to support revenue growth, particularly among larger customers.
- Whether operating expense growth and stock-based compensation moderate relative to revenue, and how losses and operating cash use trend.
- How the company’s reported liquidity compares with cash requirements, debt service, lease obligations, and hosting and software commitments.
- The extent of customer concentration in receivables and any change in collections or credit-loss assumptions.
- How non-GAAP loss and free cash flow reconciliations compare with GAAP results, including the effect of excluded stock-based compensation and other adjustments.
- The impact of foreign exchange, macroeconomic conditions, AWS dependence, and the dual-class voting structure on results and shareholder rights.