Asana, Inc. — Q2 FY2023 Form 10-Q
Reporting period: Three and six months ended July 31, 2022. Asana provides a cloud-based work management platform. Amounts below are in U.S. dollars; financial statement figures are unaudited.
Financial performance and liquidity
| Metric | Q2 FY2023 | Q2 FY2022 | Six months FY2023 | Six months FY2022 |
|---|---|---|---|---|
| Revenue | $134.9 million | $89.5 million | $255.5 million | $166.2 million |
| Gross profit / margin | $121.1 million / 90% | $79.6 million / 89% | $229.3 million / 90% | $148.4 million / 89% |
| Operating loss | $111.3 million | $60.1 million | $207.5 million | $110.0 million |
| Net loss | $113.0 million | $68.4 million | $211.8 million | $129.0 million |
| Net loss per share, diluted | $0.59 | $0.40 | $1.11 | $0.78 |
- Q2 revenue grew 51% year over year; six-month revenue grew 54%. Management attributed growth to new paying customers, a shift toward higher-priced plans, and expansion within existing customers.
- Operating expenses rose 66% in Q2 to $232.4 million and 69% for the six-month period to $436.9 million. Q2 research and development, sales and marketing, and general and administrative expenses rose 55%, 73%, and 72%, respectively. Stock-based compensation was $47.9 million in Q2 and $87.8 million for six months.
- Operating cash flow was negative $82.8 million for six months, versus negative $16.0 million a year earlier. Reported free cash flow, a company-defined non-GAAP measure, was negative $84.5 million versus negative $16.9 million.
- At July 31, cash and cash equivalents were $148.5 million and marketable securities were $90.5 million, totaling $238.9 million. This compares with $314.8 million of cash and securities at January 31. Accumulated deficit was $1.04 billion.
- The term loan had $36.7 million outstanding, with a five-year maturity in April 2025; the company reported compliance with its financial covenants. The debt note identifies $4.8 million as current and $32.0 million as noncurrent.
- Current liabilities were $305.1 million and total liabilities $547.5 million. Current deferred revenue was $207.1 million; total deferred revenue was $210.2 million. Remaining subscription performance obligations were $261.6 million, of which approximately 87% was expected to be recognized within 12 months.
Operating trends and material changes
- Paying customers exceeded 131,000, up from more than 107,000 a year earlier. Customers spending over $5,000 annually increased to 18,040 from 12,806; those spending over $50,000 increased to 1,141 from 598.
- Dollar-based net retention was over 120%, compared with over 118% a year earlier. It was over 130% for customers spending over $5,000 and over 145% for those spending over $50,000.
- Revenue growth outpaced cost of revenue, lifting gross margin to 90% from 89%. However, operating expenses grew faster than revenue, and quarterly and six-month net losses widened.
- Interest expense declined substantially year over year because the CEO-affiliated convertible notes had been converted in July 2021. This reduced expense did not offset higher operating losses.
- For the six months, 40% of revenue came from outside the United States; 21% of sales were denominated in currencies other than U.S. dollars.
Outlook, risks and unusual items
- The filing provides no specific numerical revenue or earnings guidance. Management said it expects research and development, sales and marketing, and general and administrative expenses to increase in dollars; it expects gross margin to remain relatively consistent over the long term and expenses to generally decline as a percentage of revenue over time.
- Management said cash, cash equivalents, marketable securities, and available term-loan capacity should be sufficient for working capital and capital expenditures for at least 12 months. This assessment predates the subsequent equity financing noted below.
- On September 7, 2022, after quarter-end, Asana issued 19.3 million Class A shares to CEO Dustin Moskovitz in a private placement for approximately $350 million. The company said proceeds would be used for working capital and general corporate purposes. This is a material subsequent financing and increases share count.
- Key disclosed risks include continued losses and cash burn, execution of growth investments, competition and customer retention, reliance on a single principal solution, cybersecurity and service availability, foreign-exchange exposure, and uncertain macroeconomic and COVID-19 effects. The company also notes that its dual-class structure concentrates voting control.
- Commitments include $69.5 million remaining for AWS hosting and $20.8 million for other primarily software-based services. Operating lease liabilities were $217.3 million; additional leases not yet commenced carried stated future minimum payments of $44.5 million. No material pending legal proceedings were reported.
- Management stated that disclosure controls were effective at a reasonable assurance level and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether customer growth, large-customer expansion, and retention rates continue to support revenue growth.
- Whether operating-expense growth and stock-based compensation moderate relative to revenue, and how quickly operating losses and cash burn change.
- The effect of the September 2022 share issuance on cash runway, dilution, and CEO-related governance considerations.
- The debt note’s current and noncurrent classifications against the balance-sheet presentation, and the company’s capacity to meet hosting, lease, and other commitments.
- Exposure to foreign-exchange movements, macroeconomic pressure on customer spending, cybersecurity or service disruptions, and risks associated with concentrated voting control.