Good afternoon, and thank you for joining the Asana First Quarter Fiscal Year '24 Earnings Call. My name is Kate, and I will be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions-and-answers at the end. I would now like to pass the call over to our host, Catherine Buan, you may proceed.

Good afternoon, and thank you for joining us on today's conference call to discuss the financial results for Asana's first 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, our 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 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 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.

Thank you, Catherine, and thank you all for joining us on the call today. Asana had a good first quarter. Q1 revenues grew 26% year-over-year, customers over $100,000 grew faster at 31%, and non-GAAP operating margins had a 30 percentage point improvement year-over-year. Our growth continues to be fueled by some of the largest and most strategic companies in the world. In Q1, we closed and expanded some of our largest deals across industries such as media, professional services, healthcare, logistics, and financial services. Our largest deployment is now at 200,000 paid seats. We're really excited about this partnership and how much impact we've had across their organization and this is still the beginning of what's possible here. As far as we know, this is the largest deployment of collaborative work management from any provider. Our strategic customers are partnering with Asana to define what work management at scale looks like. These partnerships will be particularly critical as we move to the next generation of work management, which I'll talk about more in a moment. Despite more budget scrutiny in enterprises, our win rates remain strong. We continue to see an increase in multiyear commitments year-over-year. In Q1, we made great progress on improving our non-GAAP operating margins. We expect to build on this momentum and drive significant improvement in non-GAAP operating margin this year as we focus on operational efficiency and growth which Tim will talk about more. It's been a good start to the year and we continue to focus on our enterprise playbook, improving sales productivity and bringing on enterprise leadership. I know that artificial intelligence is top of mind for everyone, so let me start with that topic. I've been personally passionate about the short and long-term opportunities, as well as the complex implications to society.…

Thanks, Dustin. AI is impacting knowledge work first and our customers are turning to us to help make AI a reality for them. Our AI roadmap is quickly becoming a top request for executive briefings and customer meetings, and our intent is for our customers to leverage Asana AI capabilities to achieve their goals and objective more efficiently and faster than ever before. We're also already using AI to increase our own efficiency at Asana, both within our own product and by using complementary tool. For our paid ad campaigns, we've been using AI voices to generate international voiceovers. This library of voices takes one script and scaled it into multiple languages and markets in a few days. Historically, this process would have taken weeks, this change has accelerated our go-to-market timelines and reduced our creative production budget significantly. We're also using AI to serve our global customers more quickly. Customer support can now send automated replies to customers in supported languages, meaning that what used to take about 48 hours can now be addressed in an instant. Our translation cost is now a fraction of what it was and we have more AI initiatives ahead to help assist our customers better and faster and make our teams even more effective. Turning to our business, the macro headwinds continue to impact our expansions and created longer sales cycles in Q1. We expect to see similarities throughout fiscal year 2024. The good news is that pockets of the market have stabilized. For example, top-of-funnel demand and our free-to-paid conversion rate remained steady in the first quarter. Engagement with our product remains high and we continue to focus on out bounding to build and strengthen our enterprise capabilities. We're making good progress with more work to do. Collaborative work management is at…

Thank you, Anne. Q1 revenues came in at $152.4 million, up 26% year-over-year. Revenue from the US grew 31% year-over-year, accounting for 61% of our total revenue. International grew 20% year-over-year, accounting for 39% of our revenue. Revenue from customers spending $5,000 or more on an annualized basis grew 32% year-over-year. This cohort represented 73% of our revenue in Q1, up from 70% in the year ago quarter. We have 19,864 customers spending $5,000 or more on an annualized basis. Our largest customers remain our fastest-growing cohort. We have 510 customers spending $100,000 or more on an annualized basis and this customer cohort grew at 31% year-over-year. As a reminder, we define these customers cohort based on annualized GAAP revenues in a given quarter. Our dollar-based net retention rates were lower driven by lower expansion and downgrades but remained healthy across every cohort. Our overall dollar-based net retention rate was over 110%. Among customers spending $5,000 or more, our dollar-based net retention rate was over 115%, and among customers spending $100,000 or more, our dollar-based net retention rate was over 130%. As a reminder, our dollar-based net retention rate is a trailing four quarter average calculation. We continue to see stable logo churn rates overall and low churn in our largest accounts, demonstrating the value we deliver for our enterprise customers. Companies remain mindful of the near-term economic challenges and we expect our overall dollar-based net retention rates to trend lower, particularly in the lower end of the market. As I turn to expense items and profitability, I would like to point out that I'll be discussing non-GAAP results in the balance of my remarks. Keep in mind, non-GAAP results exclude stock-based compensation and one-time costs related to restructuring. Gross margins came in at 90.5%. Research and development was $51.8…

I'm very excited about the product development we have in flight. Customers are eager to adopt AI to help them work more effectively and efficiently and Asana will adopt the best-of-AI capabilities for them. Intelligence transformation is the second wave of digital transformation and this time it's a tsunami. The work management market is an enormous underpenetrated market, but I believe we're well-positioned to lead, especially given our underlying connected architecture. We have adequate investment and plenty of runway to do what we need to do. Asana with the power of AI can introduce our product for more users, address more use cases, and create more value for our customers. And with that, I'll turn it back to the operator for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question will be from the line of Andrew DeGasperi with Berenberg. Your line is now open.

Thanks for taking my question. I guess first, Dustin, in terms of the AI potential I know that you've been working on it with Warcraft (ph) for a while, but I'm just wondering in terms of the change in customer behavior that could occur as they adopt more AI tools, are you in any way concerned that certain end markets could be impacted -- impacting Asana in terms of seat count again from a long-term perspective?

Hey, Andrew, this is Dustin. Just to understand, you mean like because of like job replacements or what are you getting out here?

Yeah. More on, let's say, some markets like Hi-Tech or things like that could see some disruption in their employment trends and things like that.

I think a lot's happening with AI and I think change is inevitable. It's hard to predict exactly how that change is going to play out. Certainly in the next few years, I would not place a bet on there being fewer knowledge workers in tech companies, I think the flip side of that argument is that each of them are going to become a lot more leveraged, in fact, using things like Asana Intelligence inside Asana is part of how they become more leverage. So it's actually going to be even more valuable to have people working inside those organizations. Longer run, things could change, but I feel confident that we could adjust our pricing model to meet that change because really our pricing is about the value that we're delivering to customers, and so if the value we're delivering for customers is actually helping them scale their workforces further to get more from the same number of people, then that means we're providing more value and should be able to monetize more of it. Maybe that will mean that we need to have very different pricing per seats or maybe will have consumption-based pricing, but I'm not concerned that it means that our business shrinks.

That's helpful. And then maybe Tim, in terms of the macro impact you mentioned, I guess in terms of your framework for the guidance you've mentioned headwinds, you expect them to continue, do think things get worse? I know you mentioned some pockets of the market that's stabilizing. I guess, are you assuming status quo going forward?

Yeah. I mean, I think it's similar philosophy to kind of how we guided last quarter as well as the year. We just -- I don't see a lot of downside in the guidance, but I think it's still too early to bake in any upside at this point. I think it's a little bit of touch and go and we'll monitor the situation as we go. But like I said, we feel good about the guidance. We feel good about the bottom line. We feel good about getting -- delivering on the free cash flow timeline that we committed to.

Thank you. [Operator Instructions] The next question will be from Brent Thill with Jefferies. You may proceed.

Hi. Thanks. This is [indiscernible] on for Brent Thill. Just -- one more question on the macro. I mean you mentioned that there were areas where things stabilized, just wondering if you could maybe dig in a little bit more there and any color by geo or vertical. And then second on AI, if you could maybe touch on monetization and timing of when you could start to make a revenue impact? Thank you.

I'll take the first part. So in terms of like what we've seen just from a stabilization standpoint, what I would say is, it really depends on the segment. I think some of the names that Anne mentioned and we mentioned on the script, those are great names and many of those are not in tech. I think tech, the segment in tech is still kind of working itself out and I think we'll continue to see some pressure there. But kind of given the customer lands, the expansion that we saw, we feel really good about the traction that we're seeing in other pockets that's non-tech related.

I'll take the question about pricing and I think the question is really like what's the potential revenue uplift? So I think -- one way I think about this is that AI is not really one thing, so we're going to show up in a bunch of different ways in our product because we're really leaving it into the very architecture of Workflow and the Work Graph. So there are opportunities both to support adoption and so drive seat growth, as well as incremental revenue growth in ASP. The stuff that helps adoption, a lot of it will probably give away because it's providing more value to customers and helping us really get the long-term revenue opportunity, so really be balancing that ASP and seat growth. And then there are other things that are going be part of our existing functionality and higher-price tiers. For example, things that enhance goals will naturally be part of the business and enterprise tiers because that's where the Goals' functionality lives. And then, I do think at some point we'll have functionality that becomes part of an add-on. Again, per the prior answer potentially with consumption-based pricing, we're actively thinking through a plan for that, but it will depend on where customers see a lot of value in practice, as well as what it ends up being expensive to provide. So in terms of like timing to your question, the thing that I think will happen first will kind of be incentivizing more customers to move into the up tiers in order to get that additional functionality. Second, I'm hoping for a lot more seat growth because the adoption is going well with AI-powered features. And then third will be adding the SKU or adding an add-on to sort of directly package from the AI stuff, and I think that's the order in which I think things will play out. But one thing is for certain, there's been a lot of eagerness here, especially from our enterprise customers, so we've been really pleased with the response to the beta so far and we know that there is just massive potential here to drive the business to how much value that we're able to provide on top of the work graph. But it's really upside to our model. We don't have any specific expectations that we've baked into the guidance.

Thank you.

Thank you. The next question is from the line of George Iwanyc with Oppenheimer. Your line is now open.

Thank you for taking my question. Anne, earlier in the year you were targeting 20% increase in sales productivity by the end of the year, can you give us a sense of where you stand right now and how you feel about that target?

Hey, George. Thanks so much for the question. Yeah. We've been really focused on building and scaling our enterprise selling infrastructure, so this quarter, something that I'm very pleased with is we've added strong leadership to our sales operations and enablement team and have been really focused on consistently delivering data tools and training to the field that is needed to repeatedly and predictably land and expand in our larger accounts. The addition of strong enterprise sales leaders in our top priority markets, in Japan and DACH, UK is also strengthening our operational rigor. So we're continuing to focus on that, but Q1 really was about investing in the right leadership and then making sure we're prioritizing the right things that will pay off throughout the year.

Thank you.

Thank you. The next question is from the line of Steve Enders with Citi. Your line is now open.

Okay. Great. Thanks for taking the question here. I guess I just want to have ask on the profitability drivers in the quarter here, I mean it was particularly strong here. So I guess, what were the biggest areas of upside that led to that and I guess how should we think about what that looks like going forward and if there is any maybe shifting in expenses that moved into the rest of the year here?

Yeah. I think in terms of just kind of highlighting any potential shifts, Dustin mentioned this, and I hope you all can make it that will have both the customer as well as an investor event in Q3 in October and that will have a slight bump in our marketing expense, but really the drivers of kind of the profitability is really just the team and the company just being much more mindful around our resources and things that we work on, the things that are most important and the things that have the highest ROI and sometimes that's not doing certain things and sometimes it's really doubling down on things that we think will scale over time. So maybe some of the employees that are on the call, really just want to congratulate them on their hard work, because it's not -- it's not any one person that can deliver that type of savings.

Likewise, I'd just like to add some praise for Tim and the rest of the company planning team, I think they've just been really disciplined and diligent about looking for opportunities to save wherever we can and just being that much more intentional about every incremental investment. I think all that is added up to a good outcome here.

Thank you. The next question is from the line of Jackson Ader with SVB. Your line is now open.

Great. Thanks for taking our questions. Dustin, the discussion around the potential to change the revenue model if needed, just curious, do you have good enough data now or either on your ROI and the value that you create for your customers to be able to even kind of credibly say this is the value we're driving and we take a certain percentage of that currently and how do you measure it?

Yeah. It's a really complex question because I would say we do have data like that including reports that have been run by our third parties like IDC that kind of looking at what is the kind of work about work that we're helping eliminate or make faster, what kind of meetings we're saving, how much time we save whenever something gets automated in the product, but that's not the type of proof that would be relevant in this, imagine the future. So I think we'll have to play that by year if we're really playing out into a different revenue model, and I just want to be clear that like that's not something we're moving to do right now and that's not something that I think is likely future in the next few years.

Thank you. The next question is from the line of Alex Zukin with Wolfe Research. Your line is now open.

Hey. This is Ethan on for Alex. Thanks four taking my question. Dustin and Tim, I just -- can you talk a little bit about kind of what the shape of the demand environment look like throughout the quarter? And then, we're about a month into the second quarter now, as we think about like the guidance both for 2Q and how are you thinking about the rest of the year like what trends have you seen, I guess in the first month versus April in terms of buying behavior, customer conversations that begin stabilized, gone better or worse as you think about the last two months of this quarter and what kind of assumptions are you seeing there? Thank you.

Hi, Ethan. Its Anne. I can answer the question about buying behavior and what we're seeing in customer conversations. We're actually seeing really good steady pipeline build in all of our regions. I think if anything -- things have stabilized for many of our customers, some of the things that we do see as promising are more consolidation conversations, more multiyear agreements, a good customer example is a leading biotech company signed a three-year deal with us to standardized work practices across our organization and this really enables them to move more quickly and consistently to bring products to market around the world. And so, I do think we are seeing very positive conversations in our most strategic accounts, as well as in those industries outside of tech, where the decision-making does lead to longer deal cycles because you bought probably more measured and how they're making their investments, but that also means like once we close those deals, they have greater longevity and durability. So the diversification outside of attack is an area we've been really focused on and seeing really promising results in. Ultimately, we think those wins are great for us because they are innovative companies in industries where other companies will look to what they purchase in work management and so we think that's a really important investment on our part given where we are in the category development.

The next question is from the line of Jason Celino with KeyBanc. Your line is now open.

Hey, great. Thanks for taking my question. In the script, Anne mentioned, seeing some seven-figure deals, those opportunities start to emerge, it sounds pretty encouraging, just curious of those opportunities are those mostly enterprises without work management platforms looking to deploy a single vendor or those expansions of your existing customers? Thanks.

Yes. We're actually seeing both. We are seeing ones where it is RFP-based picking one vendor where there is no existing solutions or if there are they aren't -- it's really, really fragmented and the CIO offices is making a decision to pick one partner. So we are engaged in more of those, as well as ones that are expansion deals, where we've had strong deployments on a departmental level and then we are now partnering with the centralized buyer to expand. So the Navan example that I mentioned is going wall to wall. Our portfolios and our products in particular were the reason that they chose us and as part of that consolidation eliminated other products, that again widely adopted but still were displacing any existing tool.

Your next question is from the line of Josh Baer with Morgan Stanley. Your line is now open.

Great. Thanks for the question. For Dustin, you talked about the potential first time to become your customer's AI strategy, which is a really interesting concept and opportunity, I guess, thinking longer term, do you see knowledge workers using a single core AI tool for all things AI or is there a scenario where workers would use AI embedded within all the different apps and workflows, and then related where Asana does sit alongside Office 365, what are some of the reasons why you see Asana as that core customer AI strategy versus Microsoft's Office other co-pilots? Thank you.

Yeah. Thanks for the question. That's a great one. So, just stepping back, we still see overall collaboration software is being about like three major swim lanes. So there's the content tools like Office 365, communication tools like Zoom and Slack, and email, and then collaborative work management, which is all about managing work in progress, answering who is doing what by when. And I don't mean to position Asana as like the one tool that is going to sort of swallow all three of those and become the only part of your AI strategy, but I do think that companies are looking at how are they going to go through what is effectively a second wave of digital transformation? How are they going to integrate this into their workflows and how they use it to help teams day-by-day get their work done? I think that Asana can be an easy sort of out of box way to do that, especially if they're an existing customer, just like it's a big part of the puzzle. If you're trying to do the first wave of digital transformation of getting people to collaborate digitally instead of relying on meetings and whiteboards and sort of the analog ways of doing things. So, I think in the future Asana will be the hub that sort of coordinating the work across these systems, but you are likely to go into a document editor or creative tools like Adobe Creative Cloud when you're trying to produce a large piece of content and I'm sure that they will have their own sort of specialized AI tools within that, so it's more of a yes and there. In terms of why us, I think that the -- the Work Graph really amplifies the power of AI, especially for…

The next question is from the line of Brent Bracelin with Piper Sandler. Your line is now open.

Hi, everyone. This is Mauro (ph) on for Brent. Thanks for taking our questions here. So I just had one around these large language model features that you're testing in beta. Could you just share a little bit with us about how you're thinking about maintaining the integrity of governance, compliance, and trust capabilities as you layer in these features into the Asana platform, just considering the needs of your large and enterprise customers? Thanks.

Is there a specific concern you have within that?

No, just -- for just the general strategy that you have around kind of maintaining the capabilities for people to protect their data, considering the data needs of training these large language models. So I just wanted to little bit more color on how Asana can actually -- go about actually maintaining the integrity of customer data?

Yeah. So first of all, I think it's just really important to be transparent about where intelligence is showing up in the products. So even before we deploy these products into the beta we're communicating with the advent of these companies, giving them a chance to opt out before their employees are -- ever see it in the first place. And then additionally, the commercial relationships that we established with the labs include protections against using customer data to go back and training the model, I think there's -- the future for enterprise and language models is that there's going to be a training dataset and then once the model is trained, the customer data won't be part of that unless it's part of fine-tuning the model, but then that would be owned by the vendor, by Asana in this case, and wouldn't be content that is effectively license back to the major labs. I also think in the near future, customers are going to end up expressing a preference about which are the foundation models they want to use underneath because they have a point of view about what the compliance of the underlying cloud provider or the security capabilities of the underlying provider. So there is a stack here, but for example, if you're using Anthropic, it might be AWS is the cloud provider and Anthropic is providing the foundation model underneath, customer care about both of those choices. So I think we'll end up providing a lot of choice for them, as well as just being transparent about where exactly the data is going when and then making sure contractually that it's only used in the ways that customers expect and Asana wants.

The next question will be from the line of Robert Simmons with D.A. Davidson. Your line is now open.

Hey. Thanks for taking the question. So, I know you've been experimenting with some pricing and packaging changes. I wonder if you could give us any update on how those are going, any specifics you can share? And then, are you seeing good results so far that you'd want to scale up and might help out sometime this year, maybe company-wide results?

Yeah, Robert. So our pricing and packaging updates are really focused on our enterprise customers. We've got two primary goals we're working towards, first is landing better and then the second is creating an easier more frictionless journey for them to grow with us from there. So we're working very thoughtfully to align value and to more easily enable these customers to quickly add additional functions and use cases as they grow. So we're early in our beta testing with selected customers and getting good feedback. We're ultimately looking forward to sharing more at our investor event in October but working really hard right now to make final decisions on based on customer feedback and based on where we see the most value for our customers.

The last question will be from the line of Patrick Walravens with JMP Securities. Your line is now open.

Great. Thank you. Tim, a couple of related questions for you. So just as we look at revenues for the year-over-year growth of 26% is one thing, but the sequential growth is like the lowest that I think you've ever had. So if you could just comment on that a little bit on what's the right way to think about the right metric. And then, but then on a more positive note, the RPO growth is higher than the reported revenue growth, so is that just the enterprise, how do we think about that? Thank you.

No, you're spot on. So the -- we actually in terms of multi-year deals, we saw an increase of 65%, almost 66% year-over-year in the number of multi-year deals. So Anne kind of mentioned this on the call as well, just customers are starting to really commit to a work management platform. People, customers, and larger enterprises are thinking about consolidating if they have multiple platforms within their company, so I think these are encouraging signs. Our guidance takes into account kind of the macro backdrop, but I would say that we -- like I said, I think we feel really good about the guidance that we're providing both at the top-line as well as the bottom line, so hopefully that's helpful.

That concludes our question-and-answer session for today. I will now pass the call back over to Dustin for some closing remarks.

Yeah. Thanks. Just wanted to thank everyone on the call again for making the time to join today and we're really looking forward to seeing you at both our customer event and the Investor Day in New York City on October 3. So hope to see you there. Thanks, everyone.

That concludes today's call. Thank you for your participation.