Asana’s financial wins dimmed by warnings of economic challenges ahead

Shares in Asana Inc. plunged by over 12% in late trading today after the work management software company warned of a challenging macroeconomic environment for the second straight quarter, despite reporting beats in earnings and revenue in its fiscal third quarter and forecasting a better-than-expect outlook for its fourth quarter.

For the quarter that ended Oct. 31, Asana reported an adjusted net loss of $8.2 million, or four cents per share, up from a year-ago loss of $52.4 million, or 26 cents per share. Revenue rose 18% to $166.5 million. Both were beats, as analysts had expected a loss of 11 cents per share on revenue of $164.09 million.

Asana’s top-line growth was led by continued success in enterprise, with revenue from “core customers” — customers spending over $5,000 annually growing 20% — and revenue from enterprise customers growing even faster. The company’s dollar-based retention rate among customers spending $100,000 or more annually was over 120%.

Highlights in the quarter include Asana announcing on Oct. 3 that it was integrating artificial intelligence into multiple aspects of its work management platform. The embrace of AI was said to take advantage of Asana’s Work Graph architecture to maximize the impact, clarity, accountability and scale of various work-related projects.

The AI announcements, made at Asana’s annual Work Innovation Summit, are designed to maximize worker productivity and impact. In one example, auto-generated custom fields make it easier for projects to support cross-functional collaboration.

“Asana’s Q3 results beat expectations on the top and bottom line,” co-founder and Chief Executive Dustin Moskovitz said in the company’s earnings release. “Operating margin improved significantly year-over-year.”

For its fiscal fourth quarter, Asana expects an adjusted loss of nine to 10 cents per share on revenue of $167 million to $168 million. Analysts expected a loss of 16 cents per share on revenue of $166 million. It was a similar story with the company’s full-year outlook, with Asana expecting an adjusted loss of 26 to 27 cents per share on revenue of $648.5 million to $649.5 million versus an expected loss of 38 cents per share on revenue of $646.1 million.

With solid figures all around, typically, a company such as Asana would expect its share price to bounce and yet, the opposite occurre. The reason is in the company’s letter to shareholders with its C-suite warning of ongoing market issues.

In the letter, Moskovitz writes that “while the macroeconomic headwinds continue, especially impacting business in our renewal base, we are seeing signs of stabilization in new business,” but it doesn’t stop there. Chief Operating Officer Anne Raimondi notes in the letter that “deal cycles continue to be longer and budgets continue to be a significant factor” and then Chief Financial Officer Tim Wan added that “as Anne mentioned, we continue to see headwinds from a macro standpoint, which continues to impact our dollar-based net retention rates.”

Image: Asana