Asana, Inc. — Q1 FY2022 Form 10-Q
Reporting period: Three months ended April 30, 2021, compared with the three months ended April 30, 2020, unless otherwise stated. Asana provides a cloud-based work management platform. The unaudited financial statements are prepared in accordance with U.S. GAAP.
Financial and operating highlights
| Metric | Q1 FY2022 | Prior-year quarter | Change or context |
|---|---|---|---|
| Revenue | $76.7 million | $47.7 million | Up 61%; growth attributed to new paying customers, larger contracts, and expansion within existing customers |
| Gross profit / gross margin | $68.8 million / 90% | $41.5 million / 87% | Margin improved as revenue grew and hosting costs were managed more efficiently |
| Operating expenses | $118.7 million | $70.6 million | Up 68%; R&D up 79%, sales and marketing up 57%, and G&A up 82% |
| Operating loss | $50.0 million | $29.1 million | Operating loss margin was 65%, versus 61% |
| Net loss / diluted loss per share | $60.7 million / $0.37 | $35.8 million / $0.47 | Net loss increased; per-share loss narrowed as weighted-average shares rose to 162.1 million from 75.6 million |
| Non-GAAP operating loss / net loss | $33.3 million / $33.8 million | $23.9 million / $23.7 million | Company-defined measures exclude specified items, including stock compensation; not substitutes for GAAP results |
| Operating cash flow / free cash flow | $(7.4) million / $(7.7) million | $(18.2) million / $(17.1) million | Cash use improved year over year; company-defined free cash flow adjusts for headquarters construction and direct-listing costs |
| Cash, cash equivalents, and investments | $398.4 million | — | At April 30, 2021; includes $263.9 million cash and cash equivalents and $134.5 million current and noncurrent investments |
- Customer and retention metrics: More than 100,000 paying customers, versus more than 77,000 a year earlier. Customers spending over $5,000 annually numbered 11,272, up from 7,345, and generated approximately 64% of quarterly revenue, versus 56%. Customers spending over $50,000 numbered 485, versus 252.
- Dollar-based net retention: Overall rate was over 115%, compared with over 120% a year earlier. For customers spending over $5,000, it was 123%, versus over 125%. The company said the overall decline reflected COVID-19’s disproportionate impact on smaller businesses; rates for larger spending tiers remained relatively steady. The filing reports over 140% for the over-$50,000 tier for the periods discussed.
- Liquidity: Current assets were $449.6 million and current liabilities were $185.1 million at April 30, 2021. Management said available cash, investments, and term-loan availability should be sufficient for working capital and capital expenditure needs for at least 12 months.
- Debt: The term loan had approximately $39.8 million outstanding. Related-party convertible notes issued to a trust affiliated with CEO Dustin Moskovitz had $450 million aggregate principal and a $361.3 million net carrying amount. They bear 3.5% interest, mature in 2025, and may convert into 17.0 million to 27.2 million Class B shares under specified conditions.
- Other balance-sheet items: Deferred revenue was $125.9 million; remaining subscription performance obligations were $145.8 million, with approximately 90% expected to be recognized over the next 12 months. Accumulated deficit was $602.1 million; stockholders’ deficit was $47.7 million.
Changes, outlook, and notable matters
- Revenue growth accelerated alongside substantial expense growth. Stock-based compensation was $16.0 million, compared with $4.0 million in the prior-year quarter, and was a significant noncash expense.
- Management expects to continue investing in product development, sales and marketing, hiring, infrastructure, and public-company operations. It expects expenses to increase in dollars; it anticipates relatively consistent subscription gross margin over the long term. The filing provides no specific quarterly or annual financial guidance.
- COVID-19 effects remained uncertain. The company cited possible impacts on IT spending, demand, sales-cycle length, customer renewals and spending, collections, and customer attrition, particularly among smaller customers.
- Significant contractual commitments include a five-year AWS hosting agreement requiring a minimum $103.5 million of spend, with $94.4 million remaining at quarter-end, and approximately $392.4 million of future minimum payments and capital commitments associated with the San Francisco headquarters. The company also had $21.7 million of lease-related letters of credit outstanding.
- The convertible notes are related-party obligations issued to a trust affiliated with the CEO. The company also disclosed related-party office rent and advertising payments. Investors should consider governance and dilution implications.
- In prior voluntary disclosures concerning apparent export-control and sanctions violations, BIS issued a warning letter in June 2020 and OFAC issued a cautionary letter in February 2021; neither pursued a civil monetary penalty in those matters. The filing notes those actions do not preclude future enforcement.
- The company reported no material pending legal proceedings, 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.
Key investor verification points
- Track retention and expansion trends, especially the overall net retention rate and performance among smaller customers.
- Assess whether revenue growth can absorb rising operating expenses and stock-based compensation while reducing GAAP losses and cash burn.
- Review the convertible notes’ conversion conditions, related-party terms, interest burden, maturity obligations, and potential share dilution.
- Monitor execution and total cost of the headquarters build-out, lease obligations, and AWS minimum-spend commitment.
- Evaluate the customer concentration in receivables: one customer represented approximately 29% of accounts receivable at April 30, 2021, although no customer accounted for 10% or more of quarterly revenue.
- Consider COVID-19 uncertainty, cybersecurity and service availability, competition, international data-protection and trade-control compliance, and the company’s dual-class voting structure.