Hello everyone and welcome to Asana’s Third Quarter Fiscal Year 2025 Earnings call. At this time all participants are in a listen-only mode. After the speaker’s presentation, there would be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. Now I will pass the call over to the head of investor relations, Catherine Buan. Please proceed.

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 2025. 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 Sonalee Parekh, our Chief Financial Officer. Today's call will include forward-looking statements, including statements regarding the expected benefits of our product offerings, including AI Studio, and our expectations for revenue to be generated by AI Studio, our expectation 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 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.

Thank you Catherine, and thank you all for joining us on the call today. This quarter marks a transformative moment for Asana. With the launch of AI Studio, we're officially entering a new era as a multi-product company. This represents more than just a new revenue stream - it's an entirely new way to create value for customers as AI transforms how work gets done. We believe AI Studio has the potential to eclipse our current revenue scale over time. The early momentum has been exciting, with significant customer demand across various sectors including media, financial services, manufacturing, healthcare, professional services, and technology. We're seeing customers experience meaningful productivity gains as they integrate AI directly into their everyday workflows, where it can drive measurable impact at scale. Beyond these product achievements, we delivered a solid quarter, exceeding our guidance on top and bottom line, highlighted by stability across the board and pockets of acceleration in our most strategic areas. Total Revenues were up over 10% year-over-year, above our guidance and reflecting stabilization of the growth rate versus last quarter. As you know, our tech vertical has been disproportionately impacted by the macro and our efforts to diversify more broadly into a diverse array of industry verticals are paying off. Non-tech verticals grew faster than overall growth and were up 15% year-over-year, a slight acceleration from last quarter and accounted for over two-thirds of our business. Some of our fastest growing verticals this quarter included Manufacturing and Energy, Consumer Retail, and Media. Customer growth showed improving trends. Our Core Customer base as well as our $100,000 and over customers grew 11% and 18% respectively, both accelerating over last quarter. Retention is also a good story with stability in Gross Retention and an uptick in our in-quarter NRR across all customer cohorts.…

Thanks Dustin. As Dustin mentioned, our success with the Work Innovation Summit programs in New York and around the world is an important milestone in our journey up market. With almost 1,000 attendees, including customers, partners, investors, analysts, and press in New York alone, it was the most successful event in Asana's history, so far. The event showcased our commitment to innovation and our ability to deliver cutting-edge solutions that meet the evolving needs of modern enterprises. In addition to our AI Studio announcement, we unveiled new innovations like our new Strategy Map, a powerful visualization of the Work Graph, which shows how all of the work happening inside an organization ladders up and contributes to company-wide goals. We also unveiled our new view-only licenses to expose even more team members to the power of Asana. And finally we introduced new executive reporting and request tracking and work intake capabilities, which strengthens a use case that one-third of our Asana customers rely on us to power. We received significant media coverage on our launch of AI Studio, new thought leadership from our Work Innovation Lab, and our innovative approach to embedding AI directly into workflows where the work happens. Building on this success, we brought the Work Innovation Summit experience to Europe in November, with events in London and Frankfurt where we saw huge enthusiasm for AI Studio and all of our latest innovation from our customers. I'm constantly inspired by how our platform is transforming work for global enterprises. For instance, the Chief Marketing Officer from a leading European technology company shared how Asana helps ensure their teams stay strategically aligned on initiatives that drive measurable business outcomes. They also highlighted Asana as the only AI vendor they trust and have approved for deployment, citing our approach to transparency…

Thank you Anne, thank you Dustin, and thank you to the entire Asana team for such a warm welcome. In my first 90 days I’ve immersed myself into the business and built critical partnerships across the organization. Here are some initial observations. As a daily user of Asana, I have experienced first-hand the power of the platform. By aligning my team’s work with the overall goals of the company and strengthening the coordination and engagement with my team, I have been able to free up a significant amount of my time from manual work, which is leading to more impactful work. I hear this same feedback from the many customers I have had a chance to speak with thus far -- our value proposition is clear, and the benefits our customers are realizing from using Asana are significant and demonstrable. The pace of innovation at Asana is rapid and focused. The combination of new features and targeted use cases being introduced in the core platform and the launch of AI Studio, unlocks new TAM, increases the value proposition and stickiness of our offering. Our investments in go-to-market and our transition up market are beginning to pay off and are positioning us well to capitalize on the large and growing market opportunity in front of us. We are just starting to scratch the surface with respect to channel-led growth, traction in key verticals, and becoming a multi-product company. Asana has the ability to re-accelerate growth, while both materially expanding operating margins and scaling free cash flow. I am confident in this given the operating leverage I see to drive efficiency and increase productivity of spend throughout the business. I’ll share more in a moment on the initial levers we are targeting to expand margins. Let me highlight the financial results for…

Thank you so much. [Operator Instructions] Please stand by for our first question and it comes from the line of Josh Baer with Morgan Stanley. Please proceed.

Great. Thanks for the question and welcome. Sonalee, thanks for all the commentary on leverage into next year. Want to come back to AI Studio though and the business model there with the platform fee, consumption credits, all that's really exciting. Appreciate how that's going to change the economics of customer expansion. I'm wondering what your expectations are on seat growth and that trend for existing customers. On the one hand, is there potential for headwinds to seek growth just from all the value from AI and AI Studio? On the other hand, is there an opportunity as that opens up new use cases for broader expansion? Thanks.

Hey this is Dustin, thanks for the question. Definitely something we're thinking a lot about, but I think that the headwinds part of this doesn't manifest for a while longer. Like the initial use cases we're seeing are often sort of net new things that they weren't doing in Asana before, or in a couple cases, things that they were using contractors for that wouldn't have had Asana licenses. So it feels incremental. Additionally, we still have quite a lot of under penetration in our existing customer base, so even if there are changes to headcount overall, that doesn't mean we're out of expansion opportunities on the seat side or that. Yes, or that that results in removing an Asana license. But then to your last point, yes, it could also be a tailwind for seat expansion. A couple of the initial deals that we've seen have kind of taken that shape. We've talked in recent quarters about sales cycles lengthening, especially for the larger enterprises, and this could be a way to sort of unstick some of those conversations. So you get both the AI Studio sale and the seat expansion.

Yes, Josh, I'll just give. It's Anne, I'll give an example. One of our customers that was part of our pilot program for AI Studio and had been implementing workflows and seeing the benefit already just did a three year renewal with us with seat expansion. It's a combination of seeing the value they're already getting in AI Studio and seeing the incremental workflows that they want to roll out across their organization to even more teams. So again, early, but that was a great example where a customer had seen direct value and then as part of growing with us, committed to a significant number of incremental seats.

And if I can just add one thing. Sorry, if I could just add one thing there. I think in terms of benefits, we also see AI Studio as being not just incremental, but also helpful in terms of expansion and stickier customers. So not only do you get the upsell, but you also get a stickier customer and higher lifetime value.

Great, thank you.

Thank you so much. Our next question comes from the line of Rob Oliver with Baird. Please proceed.

Great, thank you. Good afternoon. And also suddenly welcome from me as well. My first question is for Dustin or Anne. I'd be curious if you guys could talk a little bit about, you mentioned and Dustin, some bold numbers relative to the opportunity for AI Studio versus the current seat based business. So clearly some of the signs you're seeing are pretty exciting internally. Can you talk a little bit about if the -- what the early drivers are of use cases internally? Are you seeing any benefit from say for example, the rollout of View only and the rollout of AI Studio and Workflow Builder, where it enables a broader subset of perhaps non seat based users to leverage Asana's AI technology. Any color there would be helpful. And then I had a follow up for Sonalee.

Yes, so this is Dustin. The initial thing we're seeing is really customers are taking existing workflows and adding AI Studio automations to them. And so that ends up being really sticky because it doesn't require a behavior change. You might have a workflow that starts with a form being filled out or perhaps an alert coming from a system you're integrated with and then that triggers an AI interaction. And so it doesn't require, unlike a chatbot, it doesn't require people to kind of come back to it and remember to use it again. It's just part of the existing workflow that's sort of been lit up. So a lot of the use cases have looked like that. And then the thing that's exciting, it's sort of a hard thing to get at. But one of the things we saw when we were using it ourselves internally is there were just a few people in the organization that kind of got like the bug. They figured out that this was a power tool they could take to many different use cases and started, activating many, many different workflows. And the customers that are jumping out to me can literally see them kind of pop out of the charts. Have one of those people internally, somebody who tried it, had their eyes light up, moment, found a powerful workflow, and then kept expanding. So one of the ones I mentioned earlier in the call did 4,500 workflow executions in their first month. Now they're up to over 20,000. And the reason they had multiple months is they're part of the pilot. So they're sort of like further in the funnel than everybody who's joined since the Work Innovation Summit. And so that's a really good sign because there's only a handful of companies that were in the pilot. And to see one really compounding their usage week over week and finding more and more use cases and getting into an amount of usage that's clearly beyond the platform fee is hopefully a sign of things to come for the others once they get into their second and third months. So really seeing that sort of viral activation within with an individual customer and really seeing the leverage of it really only takes one builder, two builders to create a tremendous amount of value and results in a big incremental revenue opportunity for us. So I do think View only will help in the long run to give us even more opportunities for that kind of value creation. But to some extent, you don't actually need a lot of the people in the organization to be involved in an AI workflow for it to be very valuable.

That's very helpful. Thank you for that, Dustin. And then suddenly just one for you. And I appreciate that we're going to get more detail on this headed into FY26 and appreciate you laying out some of the points of leverage that you see. One of the ones you mentioned was sales and marketing. And I'd just be curious for your initial perspective there. Asana is a company that after hiring Ed, I think have been trying to move up market and do more in enterprise. Nice. And then work with partners. And you guys call that a nice partner led win? I think it was in Japan or Asia as well. So clearly there's momentum there. Great logos you guys have added. On the other hand, there's a lot going on and it now seems like the sales force may have to add a new skill set of selling consumption in addition to selling logos and seats. So just curious just how you might think of that from a high level knowing we'll get more detail next quarter. Thank you very much.

Yes, thanks. And you're absolutely right, it's a bit early to sort of guide specifically but I can speak to it in general terms and it's a great question. We do believe we can achieve great traction from AI Studio by leveraging our existing resources and driving productivity benefits to scale AI Studio. And that's both from a go to market perspective. But I'm also just. You didn't ask. But I'm going to also add in R&D perspective. And then you heard me in my prepared remarks call out. There are many other opportunities that I've identified for operational efficiency across marketing program spend, even the way where our employees sit today. The high cost, low cost employee mix, contractor spend, sales force, productivity and all of those things combined I believe can drive significant margin expansion as we look ahead. But as you said, more to follow when we provide full year guidance at the end of the year.

Thank you. One moment for our next question, that comes from the line of Brent Bracelin with Piper Sandler. Please proceed.

Thank you. Good afternoon. Anne, I wanted to start with you here. The Q4 guide would mark the third straight quarter of 10% growth. That certainly implies stabilization in the business. Wanted to drill down into the non tech part of the business where you're seeing some momentum here and improving growth. Can you frame the non-tech pipeline activity that you're seeing and maybe provide a little color on the type of profile of non-tech deals? Is this a broader number of smaller non-tech lands? Are you starting to see large enterprise non-tech lands? Walk us through what's driving the momentum there and stabilization overall. Thanks.

Yes. Hi Brent, thanks for that question. Yes, I think where we're seeing that traction in non-tech wins and growth is really the investment that we've been making in going deeper in verticals in particular manufacturing, retail, healthcare, energy and government. And so a lot of that focus, it's both the larger enterprises and going deeper with them and building longer term relationships. But all of that work also cascades into the mid-market. The more that we are really tailoring how customers in these verticals can get direct value quickly from Asana, that has a halo effect down market as well. And then we've shared that we are making investment and commitment to FedRAMP. I think that is going over really well not just only with government, but also with not just the government agencies, but also with sectors that are heavily regulated. So I think that's also going to have a great effect for financial services and our healthcare customers. So all of that we're going to continue to focus on. But it's really been those deep investments in the verticals and a team in particular in our EMEA [ph] region that's really been piloting and then expanding how we approach our vertical customers.

Helpful color there, Sonalee for you. I know it's early and really look forward to hearing more about the cost rationalization plan, but you do have a bogey here for Q4. Can you walk us through the path to positive free cash flow? I asked because there was an $18 million burn here in Q3 and I'm just trying to think through the rationalization and ability to get to positive free cash flow here in Q4.

Yes, sure. So as you saw, there was some positive movement on sales and marketing and R&D spend in the current quarter. And part of that actually was due to the timing of some of our hiring. But we do expect to get a continued benefit there, again in terms of timing of hires, which is helpful. And then secondly, there are steps we've already started taking around some rationalization of spend, third party spend, which you should see come into Q4. But what I would really urge you to do is Q4. We've reiterated the positive free cash flow, but I think where you'll really start to see the meaningful improvements in operating margin and cash flow is as you look ahead to next year, where we'll provide more detail in March.

And this is Dustin. I just wanted to add on to that. I mean, we're really looking at, free cash flow is always a little bit lumpy. So we're really looking at the progress on the operational leverage and how things trend from here into next year. So feel good about Q4, but the real goal is to build up a margin through next year, not to just arrive at the free cash flow.

Thank you. One moment for our next question. That comes from the line of Steven Enders with Citi. Please proceed.

Okay, great. Thanks for taking the questions here. I guess I'm going to go back to AI Studio, but maybe ask more about how that maybe comes together from a model perspective. And I guess it sounds like it may be beginning to have an impact on revenue today. But can you just maybe help us think about what the timeline would potentially look like for monetization, how you're kind of thinking about that and if maybe we're seeing any impacts to numbers today, either in RPO or some other of the metrics here?

Hi, it's Sonalee here. So you're absolutely right. At the moment it's very, very small, not material at all. But in terms of as we look forward, obviously the growth will be substantial, but off of a very small base. So you won't really see any meaningful impact in Q4. But we're extremely encouraged by what we're seeing from a usage engagement. Dustin and Anne both talked about the diversity of the use cases and early customer feedback on the benefits they're seeing and the ROI that they're driving. And I think more and more of our top customers are using it every day. And so we're really encouraged. But to actually see it come through and be a meaningful contributor to revenue, that will take time. And the only other thing I would call out is we see AI Studio as being a very big mitigating factor to some of the challenges we've seen in upsell in the current macro. And we see this as one of the third leg of the upsell stool, so to speak. And not only will we see the benefits on upsell and cross sell, but I'm going to come back to my point earlier about these customers likely to be much stickier and again, a factor in helping us not only stabilize but improve net retention over time.

And I just want to add on something there too. We've talked a little bit about, early access versus general access. So right now the product is kind of in this in between state of we've exposed it just to our enterprise customers and we're not really marketing it and we're not doing any sort of like outreach board at all. We've just sort of got the select early adopters we thought could be most successful early. But we were honestly surprised we found customers engaging that weren't part of that group. We thought it would be very focused on our largest customers, but we're seeing a lot of smaller ones engage and they can actually move a little quicker. And so we shifted our strategy for Q4 to try and sort of bring more of what we plan to release in GA earlier so that we could actually start selling it to customers now. But just in terms of timing, I think Sonalee is absolutely correct. It's not going to show up in revenue in Q4. I hope at the next earnings call we'll have some other kinds of stats for you about the forward looking commitments that we'll have signed by then. But yes, I think Q1 is when I hope that it will really start adding to the growth rate and I'm also excited because as an add on it will kind of flow straight through to NRR and should be a huge tailwind for all next year building quarter-over-quarter. So yes, Q4 I want to soften expectations on it sort of showing up in any of our top line numbers and I think that's reflected in our guidance. But we're really learning quite a lot week over week about how much demand there is, how high the willingness to pay is and we've been surprised in good directions. And so I think with another 12 weeks of those learnings we should be able to have a much more calibrated model ourselves for guidance and be able to give you more details about that timing and the exact trajectory.

Okay, perfect. No, that's great to hear in helpful context there. I guess if I could squeeze one more in here just on net retention. Good to hear it stabilize in quarter I guess. When should we maybe begin to see that impact some of the reported net retention numbers and begin to see that metric stabilize a little bit and I guess if we kind of peel back some of the underlying metrics of net retention, I guess what is it that's helping support that? Is it just fewer down sells on the tech side and kind of getting through that or are you starting to see a little bit more of the expansion initiatives support those metrics there. Thanks.

Yes, so I'll take that one. I think one point I would make, and you've heard us make this point before, we're lagging some tough comps so as those fall off it becomes easier, sorry, lapping tough comps so that over time that, that just shows improvement from those falling off. Then we've also made and talked about some post sales investments which are starting to pay off and that should continue to drive improvement. And then of course AI Studio over time like going back to my point about its upsell and cross sell and ultimately a tailwind to net retention. And the other thing I would say is, we've been talking about the non-tech what we've seen there, which has been really encouraging but also we've seen a stabilization in the tech vertical as well which is about 15% of our business or so or sorry a third of our business or so. So I think those all combined together will help to ultimately drive the overall net retention number up.

Thank you. One moment for our next question that comes from the line of Michael Funk with Bank of America. Please proceed.

Yes, thank you for the questions tonight. First one for you Dustin and thank you again for the details in AI Studio and good to hear that it's going as well or better than expected. You mentioned some early learnings on power users and enterprises and so just wondering how the actual and projected usage trends are affecting your thoughts around pricing token bucket size and how you might adjust that over time trying to kind of weigh in and balance profitability.

Sorry, I don't know if I'm getting the salience of your question. What you're asking about like what margin we're building into.

Yes, no, even prior to that you had mentioned that the initial launch, you'd have buckets of credits that you sell the incremental tranches for heavier users. But then later you mentioned that you've seen power users at some specific early adopters and even internally. So just wondering how that's influencing your thought about the sizing of those buckets in the price and if you try to project usage patterns across your customers.

Well, I think generally the reason we design the pricing system this way is I was really expecting a power law distribution of how customers use workflow. So some customers will really stand out and maybe we'll be spending six figures on incremental consumption next year. And so for them the bucket sizes are kind of irrelevant. I mean they will be buying some number of tranches, but really we'll be calibrating to the overall volume. The sort of unit size we're landing on right now is about $500. Just to give you a sense of the increments and how big the tranches will be. But we really expect most customers, we really designed the platform fee and the included credits to really handle most customers. So there was a question earlier about sales, selling consumption. I think they're mostly in terms of the number of deals going to be selling a sort of platform fee for an add on. And then hopefully within each book there will be some customers that are standing out and getting into the incremental credit conversations. And I think those will look like similar and sort of negotiated terms from other consumption based businesses. So looking out, over a quarter or multiple quarters at a minimum, commit and agreeing to a volume discount, things like that. But we're not. This is sort of in contrast to, if you're using the labs APIs directly and we're literally paying sort of a la carte metered cost, it doesn't really work like that. So I don't think anything is inconsistent with how we built it. And really I think all the assumptions were quite validated.

Great, thank you Dustin.

I just wanted to add a reason we designed it was really based on the feedback from our pilot customers. We designed it so that we could both meet customers desire to have budget predictability, but then also their enthusiasm and excitement to try and not only try, but deploy AI Studio across many different diverse workflows. Our ability to allow customers to choose which LLMs, to be able to transparently see what was working and the results that they were getting and then to be able to measure the ROI was well matched to having a predictable platform price. And then for those customers that are seeing outsize value, then their willingness to pay and increase through tranches was then matched. But as Dustin said, our anticipation is the vast majority of customers are going to get a ton of value just through the platform and then they can really predict the budget certainly over the next period of time. And that was something that they shared with us, was lacking in other offerings that they were either considering or had already had negative experiences with.

And one more if I could please. Hey Sonalee, how are you doing?

I'm great.

Good to talk to you again. You mentioned NRR improving during the quarter and I heard the add in comments on some of the reasons for the improvement. But do you believe the improvement is now sustainable, that we're on an upward trend or will there be some quarters maybe where some of those factors once again weigh on NRR on a quarterly basis?

Yes, so I think my comments around NRR, particularly in quarter NRR, I do expect that to continue to improve the in quarter. The overall NRR, obviously that's a four quarter trailing. So if you look four quarters back, there are still some very high NRR numbers in there. As those come off, the overall NRR number should start to improve. But I think, yes, confident that the in quarter NRR number should continue to improve and that's because of all the reasons we called out and AI Studio definitely being one of those.

Thank you. One moment for our next question. That comes from the line of Brent Thill with Jefferies. Please proceed.

Thanks Dustin. Maybe if you could just give us your sense of what's happening over the next six to nine months in terms of the demand environment? It feels like things are getting better, routes are opening up, Fed seems a little better and it seems like tech is starting to feel like it's come back a bit. I know you haven't commented but can you just characterize what you're seeing also on the just tech specific install base and what you're seeing there?

Yes, I don't think we're seeing as rosy a demand change as you're implying there. I think what we're saying is mainly things feel stable, they've bottomed out and depending on the maybe subsector there are some areas of strength. But yes, I don't know. I think on the macro side, I generally think there's a lot of volatility and it's going to be hard to predict. The Fed looks good now, but maybe there will be different inflation expectations over the next few months. So I'm not really banking on a sort of like bullish year next year from a macro perspective. I think the strength we're signaling is really about the things we can control and being able to be in the market with multiple products.

In inside tech, how would you characterize that base?

Yes, I mean that's kind of what I was getting at with the subsectors. I mean, obviously if you're an AI company, you're hiring quite rapidly and you have enormous budgets and if you're maybe at the risk of being disrupted by an AI company, things are maybe harder. And I certainly think a lot of the sort of pre public companies still seem like they're struggling with budget constraints. But that's just sort of yes. Impression from talking to entrepreneurs mostly rather than talking to customers. And that's very much like a Silicon Valley sort of take on tech as well. But yes, I don't quite see the rip bad time signal yet.

Thank you. Our last question comes from the line of Lucky Schreiner with D.A. Davidson. Please proceed.

Thanks for taking my questions. Congrats in the quarter and looking forward to working with you Sonalee. I wanted to follow up on the macro question actually. Last quarter you called out a little bit of a tougher macro on longer sales cycles, but it sounds like that might be starting to flip a little bit. You mentioned the customer skipping their POC entirely. What's your sense on where sales cycles are maybe going? Is it fair to say that they're starting to contract a little bit more?

Yes, it's Anne. I'll answer that question. Quarter-over-quarter I think we're still seeing the sales cycles remain about the same, but for us I think it's that we've got a better understanding of the landscape, definitely better pipeline inspection driven by our GMs and our sales management. And so and certainly we've focused a lot on improving our consistency and speed in deal closure, especially for our larger deals. So I would say quarter-over-quarter, while we think the macro backdrop hasn't changed significantly, our go to market execution is definitely improving. And so that's what we've been focusing on.

Great. And then Sonalee, I know it's early, but to the extent that you can say of the three key areas you talked about for efficiencies, is there one that stands out as maybe the biggest opportunity for margin expansion?

I would say it's quite evenly spread out. I think in terms of driving productivity, sales and marketing probably stands out more than anything. But as I said, we see opportunities, Dustin, Anne and myself across the board and we are going to be diving deep in all areas. So watch this space.

Got it. Thanks for taking my questions.

Thank you so much. And this concludes the Q&A session. And I will turn the call back to Dustin for his closing comments.

Yes, just a real quick one here before we end the call. I just wanted to recognize that this is Catherine's last earning call with us as she's moving on to another adventure. It's truly been a pleasure working with her over the past few years. So thank you to Catherine for her many contributions.

Thank you everybody. Thank you so much, Dustin. And thanks to Anne and thank you to Sonalee. It's a pleasure to be here and an honor, absolute honor. The last four and a half years have been wonderful. Thank you. And we'll hope to see you guys all soon on the road.

And thank you all who participated in today's program. You may now disconnect.