Asana, Inc. annual report, FY2021

Business context and reporting period

Asana, Inc. filed this Form 10-K for the fiscal year ended January 31, 2021 (“FY2021”), with FY2020 as the primary comparable period. The filing does not provide standalone fourth-quarter results, so “2020 Q4” should not be read as the reporting period. Asana sells subscriptions to its cloud-based work-management platform through a hybrid self-service and direct-sales model.

Key financial metrics

Revenue grew 59% year over year, compared with 86% growth in FY2020. Gross margin improved one percentage point; operating expenses rose 54%, and net loss widened. Cash, cash equivalents, and marketable securities totaled $386.3 million at January 31, 2021. Total liabilities were $743.9 million, and stockholders’ deficit was $12.8 million.

At year-end, $31.0 million principal was outstanding under a Silicon Valley Bank term loan. Related-party convertible notes issued to a trust affiliated with the CEO had $450.0 million aggregate principal and a $351.2 million net carrying amount. The notes bear 3.5% annual interest, payable in kind; the filing states an aggregate $534.5 million is due upon settlement. The notes may convert into shares under specified terms.

Business trends and changes versus prior year

• Paying customers exceeded 93,000, up from over 75,000 a year earlier; customers spending at least $5,000 annually increased to 10,174 from 6,555, and those spending at least $50,000 rose to 397 from 207.
• Overall dollar-based net retention was over 115%, down from over 120%. Management attributed the decline principally to COVID-19 effects on smaller businesses and affected industries. Retention for customers spending at least $50,000 remained over 140%; the $5,000-plus cohort was 125%, versus over 125% a year earlier.
• International customers generated 42% of FY2021 revenue. No individual customer contributed more than 1% of revenue; the top 100 contributed approximately 11%, versus 9% in FY2020.
• Sales and marketing expense increased 67%, including higher personnel and advertising costs. R&D increased 35%, and general and administrative expense increased 63%, partly reflecting public-company and direct-listing costs.
• Cash used in operations increased; the $41.8 million rise in deferred revenue supported operating cash flow, while accounts receivable also increased. Investing cash outflow was $158.9 million, including marketable-security purchases and $57.3 million of property and equipment purchases, largely related to headquarters construction.

Outlook, risks, contingencies, and unusual items

The filing gives no numerical revenue or earnings guidance. Management expects continued investment in sales and marketing, product development, hiring, infrastructure, and public-company costs; it does not expect profitability in the near future. It expects gross profit to rise in dollars and subscription gross margin to remain relatively consistent over the long term, while several expense categories are expected to increase in dollars and decline as a percentage of revenue over time.

COVID-19 created uncertainty around IT spending, sales-cycle length, pricing, renewals, customer collections, and retention; management noted a disproportionate impact on smaller customers. Other material risks include intense competition, dependence on a single platform, security and service availability, data-protection regulation, international operations, and the ability to attract and retain employees. The company had $376.3 million of undiscounted operating lease commitments and $135.8 million of purchase commitments, including a five-year AWS hosting commitment requiring at least $103.5 million of spend. Headquarters construction and lease obligations are substantial; the CEO personally guarantees rent payments if the company defaults.

Unusual items include $18.0 million of FY2021 direct-listing expenses and $36.0 million of interest expense related to convertible notes. The company reported past apparent export-control and sanctions violations through voluntary disclosures; BIS issued a warning letter in June 2020 and OFAC a cautionary letter in February 2021, with no civil monetary penalties pursued in those matters. Management said there were no current legal proceedings expected to have a material adverse effect. The financial-statement audit was unqualified; management concluded disclosure controls were effective, but the filing did not include an internal-control audit attestation under the newly public company transition provisions.

Important facts for investors to verify

• Review the full-year reporting period and obtain separate quarterly filings for standalone Q4 results.
• Track revenue growth, retention—especially among smaller customers—and the conversion of free users into paying accounts.
• Assess the company’s path to profitability and cash use against its stated growth-investment priorities.
• Examine the convertible notes’ related-party terms, potential dilution, and the CEO’s voting control under the dual-class share structure.
• Evaluate liquidity against debt, the headquarters lease and construction commitments, and the AWS minimum-spend contract.
• Monitor COVID-19-related customer and sales trends, cybersecurity and privacy exposure, and ongoing compliance with export and sanctions rules.