Asana (NYSE:ASAN) Q4: Beats On Revenue But Stock Drops 18.5%

Radek Strnad /
2022/03/09 4:34 pm EST
Add to Watchlist

Work management software maker Asana (NYSE: ASAN) reported Q4 FY2022 results beating Wall St's expectations, with revenue up 63.7% year on year to $111.9 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $115 million at the midpoint, 3.18% above what analysts were expecting. Asana made a GAAP loss of $90 million, down on its loss of $61.5 million, in the same quarter last year.

Is now the time to buy Asana? Access our full analysis of the earnings results here, it's free.

Asana (ASAN) Q4 FY2022 Highlights:

  • Revenue: $111.9 million vs analyst estimates of $105.1 million (6.43% beat)
  • EPS (non-GAAP): -$0.25 vs analyst estimates of -$0.28
  • Revenue guidance for Q1 2023 is $115 million at the midpoint, above analyst estimates of $111.4 million
  • Management's revenue guidance for upcoming financial year 2023 is $529 million at the midpoint, beating analyst estimates by 4.3% and predicting 39.7% growth (vs 66.6% in FY2022)
  • Free cash flow was negative $41.2 million, compared to negative free cash flow of $29.4 million in previous quarter
  • Net Revenue Retention Rate: 120%, in line with previous quarter
  • Customers: 119,000, up from 114,000 in previous quarter
  • Gross Margin (GAAP): 89.6%, up from 88% same quarter last year

“Our fiscal year revenue growth accelerated versus the previous year, led by strength in the enterprise and strong demand across the customer base," 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 $68.3 million, to $111.9 million.

Asana Total Revenue

This was another standout quarter with the revenue up a splendid 63.7% year on year. On top of that, revenue increased $11.6 million quarter on quarter, a solid improvement on the $10.8 million increase in Q3 2022, and happily, a slight acceleration of growth.

Guidance for the next quarter indicates Asana is expecting revenue to grow 49.9% year on year to $115 million, slowing down from the 60.7% 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 $529 million at the midpoint, growing 39.7% compared to 66.6% increase in FY2022.

There are others doing even better than Asana. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 150% since the IPO last December. You can find it on our platform for free.

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 Q4. 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 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 $8.52 billion and more than $312 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 that the revenue guidance for the rest of the year exceeded expectations. On the other hand, the revenue guidance for next year indicates a significant slowdown and there was a slowdown in customer growth. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. But the market was likely expecting more and the company is down 18.5% on the results and currently trades at $39.75 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.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

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