Asana's (NYSE:ASAN) Q2 Sales Top Estimates, Stock Soars

Jabin Bastian /
2022/09/07 4:14 pm EDT

Work management software maker Asana (NYSE: ASAN) beat analyst expectations in Q2 FY2023 quarter, with revenue up 50.7% year on year to $134.8 million. The company expects that next quarter's revenue would be around $139 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. Asana made a GAAP loss of $112.9 million, down on its loss of $68.3 million, in the same quarter last year.

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Asana (ASAN) Q2 FY2023 Highlights:

  • Revenue: $134.8 million vs analyst estimates of $127.2 million (5.99% beat)
  • EPS (non-GAAP): -$0.34 vs analyst estimates of -$0.39
  • Revenue guidance for Q3 2023 is $139 million at the midpoint, above analyst estimates of $137.8 million
  • The company lifted revenue guidance for the full year, from $538 million to $545.5 million at the midpoint, a 1.39% increase
  • Free cash flow was negative $42.2 million, compared to negative free cash flow of $42.2 million in previous quarter
  • Net Revenue Retention Rate: 120%, in line with previous quarter
  • Customers: 131,000, up from 126,000 in previous quarter
  • Gross Margin (GAAP): 89.8%, in line with same quarter last year

“This quarter we beat our revenue guidance by 6 percent and non-GAAP operating loss guidance by 14 percent," 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 $89.4 million, to $134.8 million.

Asana Total Revenue

This was another standout quarter with the revenue up a splendid 50.7% year on year. On top of that, revenue increased $14.2 million quarter on quarter, a very strong improvement on the $8.69 million increase in Q1 2023, and a sign of acceleration of growth, which is very nice to see indeed.

Guidance for the next quarter indicates Asana is expecting revenue to grow 38.5% year on year to $139 million, slowing down from the 70.3% 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 30.9% 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 Q2. That means even if they didn't win any new customers, Asana would have grown its revenue 20% year on year. That 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 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 $3.59 billion and more than $238.9 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 excited to see that it outperformed Wall St’s revenue expectations. On the other hand, it was unfortunate to see the slowdown in customer growth. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is up 9.9% on the results and currently trades at $20.98 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.