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Asana (NYSE:ASAN) Q1 Sales Beat Estimates, Provides Optimistic Full Year Guidance


Jabin Bastian /
2022/06/02 4:17 pm EDT
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Work management software maker Asana (NYSE: ASAN) reported results ahead of analyst expectations in the Q1 FY2023 quarter, with revenue up 57.3% year on year to $120.6 million. Guidance for next quarter's revenue was $127.5 million at the midpoint, which is 1.68% above the analyst consensus. Asana made a GAAP loss of $98.8 million, down on its loss of $60.6 million, in the same quarter last year.

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Asana (ASAN) Q1 FY2023 Highlights:

  • Revenue: $120.6 million vs analyst estimates of $115.1 million (4.8% beat)
  • EPS (non-GAAP): -$0.30 vs analyst estimates of -$0.36
  • Revenue guidance for Q2 2023 is $127.5 million at the midpoint, above analyst estimates of $125.3 million
  • The company lifted revenue guidance for the full year, from $529 million to $538 million at the midpoint, a 1.7% increase
  • Free cash flow was negative $42.2 million, compared to negative free cash flow of $41.2 million in previous quarter
  • Net Revenue Retention Rate: 120%, in line with previous quarter
  • Customers: 126,000, up from 119,000 in previous quarter
  • Gross Margin (GAAP): 89.6%, in line with same quarter last year

“We reported strong revenue growth in the first quarter and we set a new record for the largest deployment in the company’s history at over 100,000 seats,” 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 incredible over the last year, growing from quarterly revenue of $76.6 million, to $120.6 million.

Asana Total Revenue

This was another standout quarter with the revenue up a splendid 57.3% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $8.69 million in Q1, compared to $11.6 million in Q4 2022. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates Asana is expecting revenue to grow 42.4% year on year to $127.5 million, slowing down from the 71.9% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 35.6% over the next twelve months.

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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 120% in Q1. That means even if they didn't win any new customers, Asana would have grown its revenue 20% year on year. Trending up over the last year, this is 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 Q1 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 $4.03 billion and more than $281.3 million in cash, the company has the capacity to continue to prioritise growth over profitability.

We were impressed by the exceptional revenue growth Asana delivered this quarter. And we were also glad to see the acceleration in customer growth. Overall, we think this was a strong quarter, that should leave shareholders feeling very positive. But the market was likely expecting more and the company is down 1.28% on the results and currently trades at $23.8 per share.

Should you invest in Asana 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.