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Work management software maker Asana (NYSE: ASAN)
announced better-than-expected results in Q2 FY2024, with revenue up 20.4% year on year to $162.5 million. The company also expects next quarter’s revenue to be around $164 million, in line with analysts’ estimates.
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Asana (ASAN) Q2 FY2024 Highlights:
Founded in 2008 by Facebookâs co-founder Dustin Moskovitz, Asana (NYSE:ASAN) is a cloud-based project management software, where you can plan and assign tasks to employees and monitor and discuss progress of work.
The future of work requires teams to collaborate across departments and remote offices. Project management software is both driving this change and benefiting from it. While the trend of collaborative work management has been strong for a while, the Covid pandemic has definitively accelerated the demand for tools that allow work to be done remotely.
Sales GrowthAs you can see below, Asana’s revenue growth has been impressive over the last two years, growing from $89.5 million in Q2 FY2022 to $162.5 million this quarter.
This quarter, Asana’s quarterly revenue was once again up a very solid 20.4% year on year. On top of that, its revenue increased $10 million quarter on quarter, a very strong improvement from the $2.18 million increase in Q1 2024. This is a sign of acceleration of growth and great to see.
Next quarter’s guidance suggests that Asana is expecting revenue to grow 16% year on year to $164 million, slowing down from the 41% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 14.3% over the next 12 months before the earnings results announcement.
Product SuccessOne of the best parts about the software-as-a-service business model (and a reason why SaaS companies trade at such high valuation multiples) is that customers typically spend more on a company’s products and services over time.
Asana’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 105% in Q2. This means that even if Asana didn’t win any new customers over the last 12 months, it would’ve grown its revenue by 5%.
Despite falling over the last year, Asana still has an adequate net retention rate, showing us that it generally keeps customers but lags behind the best SaaS businesses, which routinely post net retention rates of 120%+.
Key Takeaways from Asana’s Q2 Results
Although Asana, which has a market capitalization of $4.69 billion, has been burning cash over the last 12 months, its more than $537.5 million in cash on hand gives it the flexibility to continue prioritizing growth over profitability.
This was a mixed quarter. It was good to see Asana beat analysts’ revenue expectations this quarter and generate positive free cash flow,. On the other hand, billings (another important topline metric) missed, and net revenue retention both fell from last quarter’s levels and was below expectations. On a positive note, we were glad that next quarter’s revenue guidance came in higher than Wall Street’s estimates. Full year revenue guidance was raised slightly, but full year non-GAAP operating profit guidance was reduced. Zooming out, we think this was still a decent, albeit mixed, quarter, showing that the company is staying on track. The stock is flat after reporting and currently trades at $21.5 per share.
The author has no position in any of the stocks mentioned in this report.
