Yeah. Yeah. I was thinking about going last minute, and,
No, no, no, no.
I called my assistant. She was like, "I'm booking this flight for you.
Yeah.
There's no chance. Well, we just celebrated Colin's first birthday, and that was not his or not my first rodeo for the birthday party. And this is now my second fireside. So, we're getting broken in here, but I just wanna say thanks again to the Asana team for being here today. I'm Ryan MacWilliams, mid-cap analyst here at Barclays. With me from Asana is CFO Sonalee Parekh and Chief Operating Officer and Head of Business Anne Raimondi. For those who are in the room and on the webcast, we won't be taking questions directly. So you can email me at ryan dot macwilliams at barclays.com.
Mm-hmm.
We can get those questions in. Sonalee, great to see you. How are things?
Really great, and it's wonderful to be here. And thank you for having us. And, yeah, I have been in the seat officially. Literally, today is my three-month anniversary. I started September 11th. It's December 11th, so, you know, it's been a wild ride so far.
Yeah. I mean, you're the Asana good luck charm. I mean, I like to say.
Yeah.
It's mid-cap software is back, but you guys had a great earnings result. Last earnings season stock up.
Thank you.
Stock up 20% plus. I mean, love just to hear from your point of view kinda what that last three months has been like.
Yeah. Sure. So, as I said, you know, it was. It's been three months. And, you know, the first month, you're really getting to know the teams and getting to know the product.
Yeah.
What I really tried to do was immerse myself in that product and really see the value that it brings, not only to my day-to-day work but like speaking to customers. Funnily enough, one of our largest enterprise customers, the CTO happens to be a good friend of mine. She helped me get up to speed as well. You know, to quote her, "If it doesn't happen in Asana, then it hasn't happened." I think that's pretty compelling when you hear a customer say that.
I’ve really tried to spend time with customers and the team broadly. Anne here, who is our COO, so all of revenue reports up into Anne, you know, building strong relationships with her and our CRO and our CMO, who are also not as new as I am but fairly new to the business, sort of in the last 18 months. But really what I found is, there is a huge amount of opportunity, in a very fertile space to grow, you know, a lot of greenfield opportunity and a category where, you know, we are in truly early innings of penetration. So, I see an opportunity to both continue to grow and to hopefully accelerate growth while at the same time being a lot more judicious around, driving efficient growth. And again, some pretty clear opportunities.
As you can imagine, if you're a CFO, you come in and you benchmark everything, right? You benchmark against your collab peers. You benchmark against enterprise software, and within those benchmarking exercises, I found areas where, you know, myself and the team are double-clicking. And I found a team, my peers, who are very, very, open and willing to engage in those discussions, which just makes it so symbiotic, so it's been great. And hopefully you saw in earnings, you know, we've outlined the type of financial profile that we'll be targeting. And I think, you know, it resonated well with all of you, and we believe that there's, you know, an ability to create outsized value in this category and in this sector where we're so early in the opportunity.
Absolutely. Yeah. I joined Barclays and launched coverage in October 2021, and we were supposed to do a lot of IPOs, and it was a much healthier time for software. And then, you know, I joke around. I even joined my team a couple of months later, and we entered a much different environment for software in 2022 and 2023. And as folks shifted to profitability, Sonalee, that was one thing that investors kinda highlight that you did a great job at, at your last role of, like, really driving, you know, maintaining efficient growth during that rougher period but, you know, improving operating margins, like, you know, over 10% during that time.
As you look at your past experience relating to your new experience, like, you know, what do you think are some things you think you could bring to the table and some levers you could tweak at Asana?
Yeah. Sure. Great question. And, you know, I do, it's funny. We did a shareholder perception study when I first arrived at Asana, and that was something that came out loud and clear. So I do have a playbook.
Sure.
You know, it's a very different category, UCaaS versus collaborative work management, and a very different gross margin profile in many ways. So what I would say here is I actually think the opportunity to drive operating leverage here is significantly higher and better. You know, we're, I think it was 89.4% gross margin this past quarter. Areas where, you know, I'm double-clicking right now, clearly sales and marketing. We are pretty far off of benchmark, and I do see scope for us to start to move closer to benchmark. It's not something that happens overnight, though, because we do want to preserve growth. You know, we value and the market values growth more than anything else. So we need to ensure that we continue to make the right investments to drive growth. But we see an opportunity to drive growth in a more productive fashion.
And that's both on the marketing side, and that's really around the efficacy of our marketing spend. As you all probably know, we have a product-led growth side of the business. We also have a sales-led growth side of the business. And I'm sure Anne will speak more to this. But we have a CRO now who's been in his seat for about 18 months. And that operational cadence around driving that sales-led motion is really coming into its own. And we want to make sure that we have dollars to invest for him to be able to go and deliver on that strategy. And we've already seen great success there, and you probably saw in our earnings. But I'm going to say it again.
Mm-hmm.
You know, our 100,000-plus-customer cohort grew 18% year over year in dollar terms, so that's significantly above our corporate average, so again, it's about not just cutting the investment dollars. It's about reallocating them into areas where we see maximum potential for leverage, and you know, you talked about the margin improvement or expansion. I'd drive it higher. I would see at least as much scope to drive improvements here at Asana, and the other you know big bucket I would talk about is R&D.
Yep.
One thing I think is really important to clarify is, yes, we have had, you know, fairly high R&D spend, but we have also now established ourselves as a multi-product company. We launched AI Studio. If you couldn't tell, we're pretty excited about it.
Yeah.
Again, I think Anne's gonna talk a lot more about this.
She'll go next. Yep.
But you know, AI Studio was many years in the making. You know, we've been working on this. Dustin has been working on this for several years. So when you think about that R&D spend, as I look ahead, you know, we're amortizing that former spend over the last several years over the next couple of years where we're gonna generate, you know, very high ROI from that spend. And you shouldn't now expect that we've launched this new product that our R&D spend is going to go up to be able to support it. A lot of the spend is behind us. I think that's a really key point to make. The other point I really wanna make is that innovation and product orientation and product leadership; it's one of the reasons I joined this company. Like, I will never forget meeting Dustin for the first time.
And he could barely stay in his chair when he was talking about AI Studio. And it was funny. He was sitting, and then he'd go to the whiteboard, and then he'd come back and sit down and go to the whiteboard. He was so excited. And that's, you know, probably the main reason I wanted to join Asana was because I feel like what we are doing in AI and also the advantage we have from building it on top of our work graph just makes it such a compelling value proposition to our customer base. So I would say watch the sales and marketing and R&D, you know, spend buckets. Then you should see positive progress there. And then G&A.
Yep.
You know, so I think across the board, we can drive significant, significant margin expansion and free cash flow.
That sounds like you definitely have a lot to work with. Yeah. From your prepared remarks, it said financial efficiency while maintaining strong growth. I was like, "That sounds like Sonalee." So fingerprints already on Asana. Anne, before I go too far down the rabbit hole of AI Studio, your core and 100K-plus customers, like you mentioned, reaccelerated in the quarter. I guess, like, just for your core business growth, what's kinda driving better momentum at this point?
Yeah. Well, one, I think we've shared we've worked through some of our large known contractions. We've been spending a lot of effort in really building out more discipline around vertical and vertical focus outside of tech. So, manufacturing, energy, we are pursuing FedRAMP, so government and heavily regulated industries. Retail in Europe has been really strong for us. And then, you know, healthcare. So the diversification outside of tech, I think we're starting to see that across the board. I think, as Sonalee mentioned, it's also just been great to, you know, finally have a full go-to-market team from a leadership perspective in every region. And that's not just all our sort of sales leaders and GMs, but it's all the operational folks, enablement.
And so really, you know, higher efficiency, higher, really higher productivity team globally, and that we're starting to see payoff and a lot of focus on, you know, larger deal conversion, and sort of all that discipline. I wanted to just follow up on what Sonalee said about marketing, just to give some more perspective, which is our CMO, well, is coming up on two years. And a lot of our spend historically is on digital and demand gen, you know, just given how Asana has grown up.
We needed to have a couple of cycles as she and her team built out revenue marketing, so our events, our thought leadership, and really look at the ROI of those investments compared to digital demand gen, which, you know, we had a great history on and could sort of see that return and really be able to have a couple cycles where we can compare the ROI on the investments, especially because enterprise, you know, sales and marketing can be more expensive, but it also lands in larger deals. And so that now we have more confidence around and more track record on. And so as she is looking at, you know, how she adjusts her portfolio to drive more efficiency, we can have confidence in that, you know, based on the data that we got.
Excellent. So your go-to-market motions have got more seasoned.
Yeah.
And they're in a better place. And your product investments, it's, you know, resulted in AI Studio, which, you know, got a lot of buzz in the first recent quarter. Love to hear from your view, kinda like the strategy behind AI Studio and what customers initially, feedback you've gotten from them.
Yeah. So, as Sonalee mentioned, the way for us to think about sort of our AI investment is it is built on top of what we've been building, the Asana platform, to deliver for customers over the, you know, last number of years. So the AI can only be reliable and useful if the data that it is based on is reliable and consistent. And so the architecture of Asana, which is a Work Graph, which allows our customers to understand who's doing what by when and how it ties to the company goals, that kind of content is really what AI, AI Studio is built on top of. And so what we're seeing with customers is, you know, first and foremost, I think customers see this as an opportunity to accelerate what they already wanted to do with Asana and make that sort of simpler and easier and faster.
And then what we're seeing with customers, and so we built this with a cohort of our top customers, and really iterated with them. And what we saw that we were particularly excited about is not only were they accelerating what they were already doing with Asana, it sparked ideas of additional workflows to bring into Asana. And I think that's what got us really excited about the opportunity to even just expand use cases. And then I think the other thing that we're, you know, early indicators that we're excited about is we really had originally designed this as it for enterprise customers, you know, given that we're moving upmarket. We are seeing maybe even sort of faster excitement and adoption around mid-market and then also seeing the self-serve motion.
So some of our hypotheses of like, "Oh, you know, we're it's gonna be a combination of platform and some services," that may be true for enterprise customers that, you know, want that level of support. But we're seeing that smaller customers are just as happy to do it on their own. So that, that means just from like a product and customer-based standpoint, this product can reach, you know, all of our customers.
Sorry. I just wanna follow up on that.
Yeah.
Yeah. I thought it was a really interesting point on your earnings you talked about. This is not just agents.
Right.
So, like, there we can add more complex use cases as a part of that. So I guess as a part of that go-to-market, do you think there'll be a little more hand-holding with, as you go into the enterprise for AI Studio, but that ultimately, like, result in, like, you know, more extensive use cases and, like, maybe bigger ACVs?
Yeah. I do think that for some of our enterprise customers, they want the partnership on the services side so that they're implementing AI Studio and the workflows in a way that can really be scalable. I think what we're seeing with mid-market customers is if they have, you know, talent, and it's just even one or two people on the team, whether in, you know, IT or more technical, those folks can actually very quickly deliver value for much larger teams. Like, so we talk about it as you only need one or two builders who are in the product, and they're really building scalable workflows that can serve, you know, the entire company, or certainly entire departments at scale. And that's a little bit of a different dynamic for Asana in a good way, right?
In the past, I think you really needed an entire team or, as we scaled, an entire department to be using it to increase value. And now just a few people within an organization can create that outsized value for a large swath of the organization. Maybe to make it more concrete, you know, one of our financial services customers who is in the pilot program and, you know, was iterating with us, their IT team has built out a couple of, you know, intake workflows. So IT gets, you know, thousands and thousands of requests for enhancements, you know, new technology, all of that. They had built in Asana, but it took people triaging the requests, prioritizing them, deciding what resources. Now AI is doing all of that based on their criteria.
And so the speed to response, as well as just the volume of intake that they can do, has just accelerated. And then they brought in additional workflows that this sparked where it's like, "Oh, if it works this well, a large part of their business is also making sure customer requests, and feedback get routed to the right experts in the organization." They have a big portfolio of financial services products that require sort of subject matter experts much of the time to answer these questions. They've automated all of that using AI Studio. So those questions, you know, it's also another type of intake process, all get routed through Asana. The large swathes of documentation that they've had that these experts have built up take a first pass at answering the questions. Harder questions do get routed. So we talked about having human-in-the-loop.
But this has sort of transformed the speed of response to customers, which is, you know, core to their business. So the more work and again, it only took a couple people to build these. It's not entire teams.
I mean, you explained that better than I could, but to get on my soapbox real quick, like, that's a vein that we're doing a lot of research on right now in the sense that, like, we published that if an enterprise themselves wanted to do AI, it would cost them like $75 million today, right? So they don't really have in-house expertise. So they're relying on their existing SaaS vendors to provide them AI tools. The problem is if you go functional area by functional area, now you have all these different agents that are in different parts of your business, something like Asana, that lands across your entire business, right? Then you connect use cases across your different departments, different functions. So I think that makes sense of like adding value beyond like individual department use cases, to like a bigger scale.
Yeah.
So does that make sense or do you think?
It does. It does. And then, like, peeling a layer, layer deeper, what we hear from our customers both in North America, and then we just spent a bunch of time with customers in Europe who have even higher sort of security and data and compliance. The other thing that enterprises are really dealing with is, you know, every software vendor has an AI solution, but not all software vendors are as transparent and open on which models are being used, when and how, as well as not all vendors are using multiple models, and designed in a way where if an organization wants to bring their own model, they can. That is actually what a lot of enterprises tell us they value about how we've built out AI. So, you know, customers can choose the models.
It's transparent if they don't wanna choose the models, they can still see which models are being used. That helps them manage costs, but there's also transparency on data and security and privacy. If their security team does not allow them to use, that can be configured and changed in Asana, and then ultimately, some of the larger enterprises will want the option to bring their own model for certain workflows and use cases. All that is possible, and so there were a couple of customers in Europe that said right now, of all their software partners, Asana actually is the only one that was approved for deployment.
Excellent. Well, Sonalee, we've been through a tougher environment for software, right? Hopefully, it sounds like the core business stabilizing, a lot of new things from a product standpoint at Asana. Just on AI Studio, you know, this is one of the, you know, first consumption-based pricing products for Asana. Could you just talk about what that means? And we'd love to kinda hear your view on the overall pricing strategy for AI Studio.
Sure. So, it hasn't gone into GA yet. So we go GA at the end of Q1, just FYI. So right now, it's still very much a pilot. But the intention is to have both a platform fee, as well as a consumption fee. And the platform fee really, from my perspective as a CFO, you know, I think about it as way more than offsetting any potential gross margin degradation that could come as a result of that. And I'm sure that's a question that you may have.
Yeah. We can do it. That's fine.
But like, you don't need to model it in any degradation. It way more than offsets it. I don't wanna say the actual percentage because it's very high, but we expect in the early days for many of the customers to live within that platform fee. And we haven't disclosed the amount of the platform fee, but, you know, in the case of a mid-market customer, the platform fee itself could be multiples of the ACV.
Excellent.
But again, you know, it's, it's not a seat-based model. So you could have this customer paying the platform fee and having broad, broad applicability and benefits across the entire organization. And then in terms of the consumption fee, if you think about the ROI that customers who are using up all their credits, because with the platform fee, you get a certain amount of credits. And the reason I say that most customers will live within that platform fee is the amount of credits that we give you with that fee on a quarterly basis, which actually won't be. You don't get to roll over your credits. It's kinda use them or lose them. It's, it's sufficient to do, you know, thousands and thousands and thousands of workloads. So, workflows.
But, you know, over time, we would expect our larger enterprise customers to really enter into this consumption part of the model. But the amount that they would be paying on a per-unit basis would be, you know, cents.
Sure.
So it's not. I think a lot of, quite a few people have asked me about this sort of agentic model that I think, you know, Salesforce is talking about, which is like, I think $2 a transaction, something like that. It, ours is very, very different from that. And what we wanna do first and foremost is, like, we really wanna encourage adoption. We want as many of our customers to actually, you know, take this on and see the value from it. And then ultimately, I do think it will be something as a type of product that will have pricing power, you know?
Absolutely. And so that's a great point. Like, a lot of pain points we hear about initial AI adoption is, "How do I know if I don't turn this on if it'll be 100K the first week or something?" Right? So it's like, "Look, here's a bulk of credits that you'll start with.
Yeah.
And then you'll have a better sense when you go get through those, what your spend will be like.
And that is, that was exactly the feedback that we got when we were piloting with customers. So we were not only piloting the features and what values they could get out of it, but they were giving us input on just pricing compared to other offerings. And to you know follow up on what Sonalee said, a lot of customers are telling us predictability is really hard in this environment. And they understand it 'cause the you know intellectually they understand it because things are changing so quickly. And just from a pragmatic standpoint, they value budget predictability.
So the putting the offering together in a platform fee was really based on the customer insights that we got on how do we reduce that friction upfront on not wanting, you know, not knowing what workflows are gonna be the most valuable and wanting to experiment. And so this is a really good way for customers to feel really confident, "Hey, they're not gonna go above the budget that they have allocated right now. They have visibility into usage. They have cycles to see which are the most valuable, what else they wanna bring in, and then they can grow accordingly.
Excellent. I definitely would love to continue to go on the rabbit hole, but since Sonalee, we have you here, I have to ask, like, I know it's early days. It'll come out in the fiscal first quarter, 2026 next year. Should we think about it as being additive to growth next year or it'll have to take time to deploy throughout your customers and get used to it? Like, how do you think about the revenue distribution?
Yeah, so without guiding.
Sure.
Because you're absolutely right. You know, you'll have to wait till March for that. But we certainly see it as additive and incremental, not to Q4. I mean, in Q4, it will be very, very, very small. And we're currently actually debating, you know, how we should disclose, you know, our progress because we do wanna update you on key milestones because it's a new product. And I think it's really important to be able to give you all a way to judge the success of it. You know, internally, we'll be monitoring it. You know, we have our own ARR targets for this new product, as well as, you know, a certain degree of adoption and penetration of the base. But, you know, it's small today, right? So, and we're close to a $750 million ARR business. So in order to make a dent on that.
Sure.
You know, it does take time, but we would view it, certainly as incremental for next year.
Excellent. Yeah. And the platform fee will help you give initial visibility. So from your seat, it'll hopefully be a little easier than,
Exactly. To predict.
Yeah. For consumption.
I think it's also something that is really straightforward for the field to sell. Yeah. That's actually a really important point.
And that's where I wanted to go next, actually. And you've been at Asana or you've seen some competitors of Asana be taken out by private equity. There's a whatever large competitors, you know, just saw a buyout as well. I mean, is there a strategy there to, you know, or what's the playbook you think going forward? Like, is there opportunities that you guys could, you know, maybe gain an incremental share?
Yeah. I think, there's definitely the opportunity with the changes, you know, in the competitive landscape, largely because customers are also telling us, both customers and prospects are telling us that they are looking for opportunities to consolidate. That some of that is driven by AI wanting, you know, some of it was driven even previous to AI in sort of this buying environment, not wanting different departments using different tools ultimately if they're trying to collaborate cross-functionally. And so valuing Asana's ability to scale the size of the deployments that we have, compared to competitors, the integrations that we have with their core technology stack.
And so now with some shifts in the environment, I think that in some cases accelerates customers looking to consolidate just so they can, you know, be working more closely with one partner and then also confidently deploy AI, because they what they've said is like, "Hey, we're, you know, if we continue to have sort of multiple tools within our organization, we're not gonna get the benefit of AI on top of the collaboration stack.
Excellent. Sonalee, I just have to ask, you know, you hear about companies and then you get, you start working there and, you know, everything might not be exactly how it seems or you're like, you're surprised by how things work. Like, as you're probably still in the honeymoon stage for sure, but is there anything that has been exciting, or even surprised you from before you took the role at Asana?
Yeah. So AI Studio has surprised me, like, just in terms of how quickly our customers started engaging with it. And again, Dustin's jumping out of the seat. But that's been a really pleasant surprise. I had the opportunity of, you know, during the interview process, meeting my team, including Anne. And what I have to say is, like, it's been amazing in terms of collaborating with this team. They've just been so open-minded and, you know, really keen to lean into thinking about doing things differently, which I love because you never quite know, as you say.
Yeah.
But I've seen a real openness. And the other thing I would say is, like, specifically on Dustin, you know, I came in and of course you meet directors and board members as well. And, you know, people, and I saw this with the shareholder perception study, have a view on how Asana has been run. And what I will say is I've been very pleasantly surprised. And hopefully you saw this in the earnings call. You know, when I dig in or make suggestions around doing things where, you know, we might be either reallocating investments or looking even at the geo mix of where our people sit, which is another big opportunity. You know, at a company of our size and scale, ultimately, you know, as we continue to grow, it would make sense for more people to be in lower-cost geos.
And like, again, hopefully you saw this on the earnings call when I talked about productivity and efficiency, he came over the top saying like, "I'm aligned. This is what I want too." So that's been a really pleasant surprise. And as you say, you never quite know.
Yeah.
Because when you're in the interview process, it's also like a little bit of courting. But what I've been very, very pleasantly surprised there.
Yeah, and I'm sure you're also just looking at the 89% Gross margin. Like, there's a lot we can do here.
Yes. Yes.
And I kinda wanna wrap up just on one of your points you made that, like, the AI Studio is like really activated your go-to-market. I think it's like that's a maybe not, I don't wanna go too far, but like, it's a natural upsell to their existing customer base and the key stakeholders at the clients that they're familiar with. Like, do you see them like, "Okay, now we can have a new thing to sell on top?" And like, you're seeing like a more motivated sales force.
Yeah. Absolutely. Salesforce is really exciting 'cause if you think about it, you know, prior to having AI Studio, we've had packages. It's like packages and seats. And the team, you know, obviously has been, you know, trained on that and excited about being able to deliver value, move people into the right packages, expand. But now this is, you know, something that they can bring to all existing.