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Asana (NYSE:ASAN) Surprises With Strong Q2, Lifts Full Year Guidance


Radek Strnad /
2021/09/01 4:12 pm EDT
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Work management software maker Asana (NYSE: ASAN) reported strong growth in the Q2 FY2022 earnings announcement, with revenue up 71.9% year on year to $89.4 million. Asana made a GAAP loss of $68.3 million, down on its loss of $41 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) Q2 FY2022 Highlights:

  • Revenue: $89.4 million vs analyst estimates of $82.2 million (8.77% beat)
  • EPS (non-GAAP): -$0.23 vs analyst estimates of -$0.26
  • Revenue guidance for Q3 2022 is $93.5 million at the midpoint, above analyst estimates of $86.6 million
  • The company lifted revenue guidance for the full year, from $338 million to $358 million at the midpoint, a 5.91% increase
  • Free cash flow was negative -$9.27 million, compared to negative free cash flow of -$7.67 million in previous quarter
  • Net Revenue Retention Rate: 118%, up from 115% previous quarter
  • Customers: 107,000, up from 100,000 in previous quarter
  • Gross Margin (GAAP): 88.9%, in line with previous quarter

“In the second quarter we accelerated total revenue growth, continued to report strong customer growth and increased dollar-based net retention rates across the board," said Dustin Moskovitz, co-founder and chief executive officer of Asana.

Founded in 2008 by Facebook’s co-founder Dustin Moskovitz, Asana is a cloud-based project management software, where you can plan and assign tasks to employees and monitor and discuss progress of work.

As work is becoming more digitized and distributed, the demand for project management software has been rising.

Sales Growth

As you can see below, Asana's revenue growth has been incredible over the last year, growing from quarterly revenue of $52 million, to $89.4 million.

Asana Total Revenue

This was another standout quarter with the revenue up a splendid 71.9% year on year. On top of that, revenue increased $12.8 million quarter on quarter, a very strong improvement on the $8.3 million increase in Q1 2022, and a sign of acceleration of growth, which is very nice to see indeed.

Analysts covering the company are expecting the revenues to grow 33.5% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

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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 118% in Q2. That means even if they didn't win any new customers, Asana would have grown its revenue 18% year on year. Significantly up from the last quarter, this 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 Q2 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 $13.6 billion and more than $373.5 million in cash, the company has the capacity to continue to prioritise growth over profitability.

We were impressed by how strongly Asana outperformed analysts’ revenue expectations this quarter. And we were also excited to see the really strong revenue growth. Zooming out, we think this was a great quarter and we have no doubt shareholders will feel excited about the results. The company is flat on the results and currently trades at $77 per share.

Asana may have had a good quarter, so should you 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.