Asana (NYSE:ASAN) Posts Better-Than-Expected Sales In Q4

Radek Strnad /
2023/03/08 4:14 pm EST
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Work management software maker Asana (NYSE: ASAN) reported Q4 FY2023 results beating Wall St's expectations, with revenue up 34.2% year on year to $150.2 million. The company expects that next quarter's revenue would be around $150.5 million, which is the midpoint of the guidance range. That was roughly in line with analyst expectations. Asana made a GAAP loss of $95 million, down on its loss of $90 million, in the same quarter last year.

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Asana (ASAN) Q4 FY2023 Highlights:

  • Revenue: $150.2 million vs analyst estimates of $145.1 million (3.52% beat)
  • EPS (non-GAAP): -$0.15 vs analyst estimates of -$0.27
  • Revenue guidance for Q1 2024 is $150.5 million at the midpoint, roughly in line with what analysts were expecting
  • Management's revenue guidance for upcoming financial year 2024 is $643 million at the midpoint, missing analyst estimates by 0.45% and predicting 17.5% growth (vs 45.8% in FY2023)
  • Free cash flow was negative $34.2 million, compared to negative free cash flow of $48.5 million in previous quarter
  • Net Revenue Retention Rate: 115%, down from 120% previous quarter
  • Gross Margin (GAAP): 89.9%, in line with same quarter last year

“Revenues for the fiscal year were up 45 percent year over year and we reported significant improvement in operating margins,” said Dustin Moskovitz, co-founder and chief executive officer of Asana.

Founded in 2008 by Facebook’s 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 Growth

As you can see below, Asana's revenue growth has been exceptional over the last two years, growing from quarterly revenue of $68.4 million in Q4 FY2021, to $150.2 million.

Asana Total Revenue

And unsurprisingly, this was another great quarter for Asana with revenue up 34.2% year on year. On top of that, revenue increased $8.79 million quarter on quarter, a very strong improvement on the $6.54 million increase in Q3 2023, and a sign of acceleration of growth.

Guidance for the next quarter indicates Asana is expecting revenue to grow 24.7% year on year to $150.5 million, slowing down from the 57.4% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $643 million at the midpoint, growing 17.5% compared to 44.6% increase in FY2023.

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Product Success

One of the best things about software as a service businesses (and a reason why they trade at such high multiples) is that customers tend to spend more with the company over time.

Asana Net Revenue Retention Rate

Asana's net revenue retention rate, an important measure of how much customers from a year ago were spending at the end of the quarter, was at 115% in Q4. That means even if they didn't win any new customers, Asana would have grown its revenue 15% year on year. Despite it going down over the last year this is still a good retention rate and a proof that Asana's customers are satisfied with their software and are getting more value from it over time. That is good to see.

Key Takeaways from Asana's Q4 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on Asana’s balance sheet, but we note that with a market capitalization of $3.72 billion and more than $529.3 million in cash, the company has the capacity to continue to prioritise growth over profitability.

It was good to see Asana deliver strong revenue growth this quarter. And we were also excited to see that it outperformed analysts' revenue expectations. On the other hand, the revenue guidance for next year indicates a significant slowdown and the revenue retention rate deteriorated. Overall, this quarter's results could have been better. The company is down 1.71% on the results and currently trades at $17.49 per share.

Asana may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.