Thank you for standing by, and welcome to Asana's Third Quarter Fiscal Year 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the call over to Catherine Buan, Head of Investor Relations.

Please go ahead..

Good afternoon, and thank you for joining us on today's conference call to discuss the financial results for Asana's third quarter fiscal year 2024. With me on today's call are Dustin Moskovitz, Asana's Co-Founder and CEO; Anne Raimondi, our Chief Operating Officer and Head of Business; and Tim Wan, our Chief Financial Officer.

Today's call will include forward-looking statements, including statements regarding our expectations for free cash flow, our financial outlook, strategic plans, market position and growth opportunities.

Forward-looking statements involve risks, uncertainties, and assumptions that may cause our actual results to be materially different from those expressed or implied by the forward-looking statements.

Please refer to our filings with the SEC, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q, for additional information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements.

In addition, during today's call we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP.

Reconciliation between GAAP and non-GAAP financial measures and a discussion of the limitations of using non-GAAP measures versus their closest GAAP equivalents are available in our earnings release, which is posted on our Investor Relations webpage at investors.asana.com. And with that, I'd like to turn the call over to Dustin..

building pipeline, retention and C-level customer engagement. And now, I'll turn it over to Anne.

building pipeline for new enterprise ARR with targeted events and executive meetings around the world; improving expansion rates through customer success programs and strategic initiatives, such as the introduction of AI in our new product tiers; enhancing our professional services offering which will deepen our partnerships within our most strategic accounts; and increasing adoption of our differentiated enterprise capabilities.

And with that, I'll hand it over to Tim..

expansion from our Core customers, which will be a tailwind to our NRR; our focus on moving upmarket, so moving more of our customers to the $100,000 spend levels; and our new packaging which will help with more lands, improve adoption and new expansion. And with that, I'll turn it back to the operator for questions..

[Operator Instructions] Our next question comes from the line of Josh Baer of Morgan Stanley..

Great. Thank you very much for the question. I wanted to talk about the shift of upmarket and focus on the enterprise.

And just wondering, like, where you think you are, what inning as far as the investments in product go-to-market, just thinking through the packaging strategy, leadership changes, Tim, that you just referenced, and anything else as far as initiatives and focus there?.

Hi, Josh. This is Anne. Thanks for your question. Yeah, I think we're feeling good about the investments that we've been making to go upmarket. You called out a couple of different things, so I'll address those.

We're really excited that all of our key leadership roles across go-to-market are now filled, and these leaders have been adding great talent to the team where we've needed additional enterprise expertise. We have more ramp reps and reps with greater tenure than this time last year, so we're feeling good about that as well.

And we'll continue to invest appropriately to support growth in priority markets so we can reach and serve customers well. On packaging, we're seeing really early positive feedback and interest from customers. In particular, customers really appreciate our approach to providing AI in every paid plan.

That's clearly tied to value and supported by our guiding principles for AI. We've only been fully rolled out now for a few weeks, but with two enterprise plans now available, we're already seeing dozens of customer migrations up to those packages that include additional investment in Asana.

So, we're excited about that, excited about the quality of the sales conversations with executives and greater velocity in helping these customers choose the right strategic plans for both value and growth.

So, more to do, but excited that the investments that we've been making both in go-to-market, the team and product and our plans are starting to have good traction..

Great, thank you. And a quick one for Tim, just on the target for positive free cash flow.

Just wanted to confirm, is that, without regard to the macro, meaning if it gets better or stays the same, no matter what the growth trajectory is, we're still looking for positive free cash flow by the end of 2024?.

Yeah, I mean, I think we kind of said our outlook hasn't really changed. Things haven't gotten noticeably better nor noticeably worse. So, we're still committed to delivering free cash flow by the end of calendar '24..

Great, thank you..

Thanks, Josh..

Thank you. Our next question comes from the line of Alex Zukin of Wolfe Research..

Hey guys, thanks for taking the question. So, maybe just two for me. One on the -- thus far in the renewals that you're seeing in some of your largest customers, it seems like you're pretty confident about that NRR crossing at 100% plus or minus.

So, what has kind of been some of that dynamic or activity, or maybe just give us a sense for the visibility that you have there, what you've seen play out today? You mentioned some of the larger deals, but what's happening on renewal with a competitive environment? And then, just a quick follow up for Tim..

Hey, Alex, it's Tim. So, I think what we're seeing is obviously we have pretty good line of sight in terms of the utilization of many of our large accounts.

What I would say is similar to what we shared at the -- on the Investor Day, most of the net retention rate is impacted by seat adjustment or seat reductions, primarily from companies that either had a layoff at this time last year and their renewal is up and they're just readjusting their own footprint.

So, I feel like we have -- we know which companies are likely going to renew, we know their utilization, so we have a pretty good handle in terms of what the outlook will look like. Obviously, there can always be surprises, but I think we feel pretty confident about the current line of sight..

Perfect. And then just maybe on the cRPO balance, it was down sequentially.

Was that, again, a result of that heightened down-selling pressure? And any way to think about cRPO for Q4, and kind of how to tie that with where we are at a high level for growth next year?.

Yeah. I mean, I think we -- I think from an RPO or cRPO perspective, it did grow, I want to say, 21% on a year-over-year basis. And there's some -- certainly some lumpiness in terms of some of the shape of the deals.

I would say the RPO number is also impacted kind of by the renewals, and that's kind of what we've been seeing pressure on in terms of the business..

Okay, great. Thanks, guys..

Thank you. Standby for our next question. Our next question comes from the line of Taylor McGinnis of UBS. Please go ahead, Taylor..

Yeah, hi. Thanks so much for taking my question.

So, maybe first, could you give us a sense of the growth or NRR expansion activity outside of the impacted verticals like tech and where you're seeing the most rationalization or optimization activity? Just perhaps it could help give some visibility to the growth we could see coming on the other side of the [tech] (ph) renewal activity?.

Yeah. I don't know if we shared this on the call, on this call or the call earlier, but I think we did make a comment in the past that what we've seen is that, like, if you segment our business across tech versus non-tech, that the non-tech sector is actually growing faster than our tech business.

And most of the pressure that we've seen on both the renewals and expansion is coming from the tech. Many of the customer logos and stories that Anne highlighted, such as healthcare and media, those are non-tech businesses and I think we're really encouraged by the footprint.

Now, the other thing that's also -- the other positive that I would want to point out is that where we've had new leaders for about a year in regions in about -- for about a year, we've seen better performance out of those reps and out of those geographies. So, I'm really encouraged by what we see in Asia and some early signs from Europe as well.

So, I think we're encouraged both by the regions and the non-tech sectors that we've gained foothold in..

Perfect. And then, my second question is going off of Alex's question that he asked earlier. So, if you look at billings and bookings growth the last like two quarters, I think it's been in the low teens.

So, how should we think about those metrics being leading indicators as we think about growth going forward? And then, as we look into 4Q and 1Q, is there any additional color you can provide on what the renewal bases look like in those quarters? And if there's anything to keep in mind from one to the next and how that might compare to what we've seen more recently?.

Yeah, I mean, I think at this point we're not giving fiscal year '25 guidance, but what I would encourage you all to think about is just like we want to be stay as conservative as possible until we have more line of sight into the new year and how the year will shape up. So -- but we'll provide an update on our Q4 earnings call..

Thank you..

Thank you. Our next question comes from the line of Pat Walravens of JMP Securities. Your question, please, Pat..

Oh, great. Thank you very much. Dustin, I'm going to go really big picture here.

Do you think the changes in the governance of OpenAI is bad for the future of humanity?.

Yeah, that is really big picture..

I know. I have one for him after, but I'm going to start with that..

I mean, honestly, I sort of don't feel like we know what the changes to the governance of OpenAI are. My understanding is they have a temporary Board whose goal is to create a new governance structure and elect a new Board. And I think we'll have to judge it based on that.

I do want to maybe just echo some of the comments I've seen from smarter pundits though of like, I don't think I ever really thought that trying to govern the private companies to act differently was going to be the thing that that most de-risked problems with AI.

And so I really think it just underscores the need to solve it with higher level regulation rather than government structures..

Yeah, agreed. And then, Tim, much more practically, in your script you commented that some of the underlying drivers were not as strong as we'd hoped. I mean, I think you've touched on some of that.

But can you just sort of summarize what you were referring to there?.

Yeah, I would say two things. I think we're still seeing pressure on renewals. So, I think there is compression kind of in our net expansion rates, that's one.

And I do think we'll lap those by the end of Q1, primarily because we do -- like if you kind of look back at layoffs in tech, there were a number of large companies that were still doing layoffs at the beginning of Q1. And I think once we kind of get through that period, I think we'll have some more tailwinds in our NRR.

The other piece, obviously, is I think like the regions that I spoke about that are performing, EMEA and APAC, those have been nice surprises, but I think we still have more work to do in Americas..

I just want to add too, since layoffs have been in the news again recently, but just by the numbers, I think it's just important to put them in context of the proportion. So, like the cycle we're seeing now from some of the recent announcements, if you just add it up, all up, it's about one-tenth or less than what we saw a year ago.

So, those are still headwinds with those specific customers, but it's not nearly the same as what we're sort of trying to lap and cycle out of the numbers..

Okay, great. Thank you..

Thank you. Our next question comes from the line of George Kurosawa of Citi. Please go ahead, George..

Thanks for taking the question. I'm on for Steve. You talked about stabilization in new business.

I'm wondering if you could just double-click a little bit into what you're seeing there? Any color on what metrics seem to be improving?.

Yeah. Just in terms of new bookings that we're seeing and the consistency that we've seen over the last two, three quarters, I feel like, especially in some of the geographies that I mentioned, both from a predictable standpoint, from a pipeline standpoint, and from a closed standpoint, I think those have been really encouraging.

I would say if we were sitting here last year, we were seeing deceleration in bookings, but sitting here today, it's much more stable, and I think that's a sign, and that we're optimistic that we build our bookings business -- our new bookings up from this level..

Got it. Super helpful. And I think during the Analyst Day, Ed talked a lot about some of the execution improvements in EMEA and then trying to replicate that success in the U.S. Sounds like EMEA is still doing pretty well, but maybe just an update on how those changes to the U.S.

go-to-market organization are going and when you expect to see some improvements? Thank you..

Yeah, George, it's Anne. I'll answer that. It's been great to have Ed on board a full quarter. Things that we're seeing him do both in America and around the world are continuing to create a really strong culture of winning, especially upmarket, driving a lot of operational rigor across the team.

He's also been instilling a culture and a discipline of building strong executive relationships with customers. So that's been great to see.

And then, just a tight partnership with our global marketing organization, so the executive events we mentioned, getting our customers together with one another to share innovative work management practices, all of that, I think, is improving performance, and we'll see that pay off in the coming quarters.

But it's been -- and then we'll have more to share, but as he's been working really close with the AMER team, I think we're also seeing some great momentum there..

Awesome. Thanks for taking the questions..

Thank you. Our next question comes from the line of Rishi Jaluria of RBC Capital Markets. Your question please, Rishi..

Hi, this is Chris Fountain on for Rishi Jaluria. Thanks for taking the question. So, I realize the new packaging strategy only went into effect back in November, but just wondering if you could expand a little bit more on the feedback you've heard so far..

Sure. Hey, Chris. I think the feedback that we're hearing both from our field who are having conversations with our customers, our renewals team, our customer success team, and from customers directly themselves is they do really appreciate how we've made AI very accessible in the product in every paid plan.

I think that is something that differentiates our approach to AI, AI designed directly into the workflows that employees and leaders are using. So that's actually brought forward some renewal conversations in some cases.

We've been, as I mentioned earlier, just pleasantly surprised to see just the level of engagement, even though we're only a couple of weeks out, in terms of customers choosing to move to our enterprise package.

And now that we've got two of those choices, I think there's also more robust conversations that we can have with customers who are interested in those features and functionality. But we anticipate we'll continue to share more with you and have more updates in the next quarter, but the first few weeks have been really positive..

Great. Thank you..

Thank you. Please standby for our next question. Our next question comes from the line of Brent Thill of Jefferies. Your question, please, Brent..

Dustin, you put together this public plan to buy 30 million shares by the end of December. I think the last filing had you close to 9 million. So, a long way to go. Can you just talk at a high level of how you're thinking about this kind of -- the plan is only 30% filled.

How do you think about that trajectory in the shape of that plan?.

Yeah.

So, I'll just confirm the 10b5-1 is still filed, and gosh, when did we originally file it? March?.

March..

Okay. So, all I can say is like the way I thought about that trajectory was locked-in in March, and I had to try and forecast the future at a really volatile market, and so did the best I could, and now things are playing out. But -- yeah that's basically all I can say about it at this point..

Okay. That's great.

And Tim, just to follow up on the renewal, kind of, when you expect that to get more base underneath it? I mean, is there -- in the next couple quarters, is there an event or something that happens that you think you'll get a better basing on the renewals or how do you think about that specifically?.

Yeah. I mean, I think when we look at the renewals that we have coming up and the companies that were impacted at some point this year due to layoff and looking at their utilization, we feel like we have a pretty good handle and plan and understand what that renewal will look like. So, I think we have line of sight.

There's always surprises, but I feel like we have a pretty good handle in terms of lapping the difficult comps that we'll have probably by the end of Q1..

Great. Thank you..

Thanks..

Thank you. Our next question comes from the line of Jason Celino of KeyBanc Capital Markets..

Great. Thanks for taking our question. This is actually Devon on for Jason today. I wanted to ask about the early renewal deal that you called out. I believe this is the second quarter you're seeing this trend.

I'm assuming this is customer driven, but any other details you can share, what the reasons are from the customer side and are you expecting more of these early renewals happening in the coming quarters?.

Yeah. Hey, Devon. So in that case that we mentioned, it's a global transportation and food delivery company, which I actually happen to be a very loyal customer of. But we'd been talking to them about just strategically all the use cases where they wanted to expand.

And so, what we really saw is both the combination of our AI features, the investments that we had made in scalability and security, and their business priorities and needs really just resulted in early renewal so that they could again roll out much more quickly.

Do we anticipate seeing more of those? I think it's still early, but I do think with the conversations our teams are having with customers with our new plans, those could create opportunities for customers to early renew. But again, we'll have more of that to share as we have more traction with the new plans.

But again, early conversations are driving good velocity in helping customers choose the right options for them as they plan for growth over the next year..

Got it. That's helpful. And then maybe just one quick one. I just want to ask about the 4Q revenue guide. I think at the midpoint you're sort of assuming a decel in sequential growth. Is that just mainly conservatism or any other reasons there would be helpful. Thanks..

Yeah, I mean, I think it's the forecast is kind of based on our current what we're seeing in the business right now. And hopefully, over the last -- probably since we've been public, hopefully we've been in a position where we've over-delivered. We try to do the best that we can on the forecast..

Thank you. I would now like to turn the conference back to Catherine Buan for closing remarks.

Madam?.

Thank you. And we just want to thank you again for joining us today. We know that earnings is a very busy season for you. We appreciate your time, and we look forward to seeing you on the road this month and in January. Thank you..

And this concludes today's conference call. Thank you for participating. You may now disconnect..