Why You Must Keep Asana on Your Watchlist

In this episode of Industry Focus: Tech, Dylan Lewis and Motley Fool contributor Brian Feroldi take a deep dive into Asana (ASAN -2.84%). They get into Asana's founding story and how the company is helping teams work more effectively together. They also talk about the management and work culture of the company, its financials, its land-and-expand strategy, its growth potential and competitive position, and much more.

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This video was recorded on Oct. 9, 2020.

Dylan Lewis: It's Friday, Oct. 9, and we are talking about Asana. I'm your host Dylan Lewis, and I'm joined by Fool.com's salty superstar sultan of stratospheric SaaS stocks, Brian Feroldi. Had to up the pace a little bit on that one, Brian, to make it through.

Brian Feroldi: You did. And you did a great job, as always. I continue to strike out with trying to get you to mess up. And that actual name suggestion came from Robotro5 on Twitter. So, if you can come up with a name for me that can get Dylan to mess it up, please hit me up.

Lewis: [laughs] One of my favorite recurring bits. And I always love opportunities to get the listeners involved in the show, for folks that don't follow Brian on Twitter already, @BrianFeroldi, hit him up there; we are @MFIndustryFocus on Twitter. Brian, I think that in all of the debuts that we've seen in 2020, there's one business, that we're going to be talking about today, that has kind of flown under the radar; which is surprising given the pedigree of its co-founder.

Feroldi: Yes. Asana, this is a company that was co-founded by Dustin Moskovitz. If that name sounds familiar, he co-founded a little company called Facebook. So, I totally agree, this is a company that did not get a lot of fanfare when it came public, probably a big chunk of that is because it was coming out public same time as Palantir, which got a whole lot of fanfare. Also, this is a direct listing, not an IPO.

Lewis: Yeah. And it's important to emphasize the difference there, this is not a capital-raising event for Asana, this is really just an opportunity for insiders to sell some of their shares. And we just continue to see direct listings, Brian. You know, Spotify kind of broke the mold a couple of years ago when they listed their shares. Theirs was one of the first times in a while that we had seen a really popular major issuance go the direct listing route. And we've seen so many companies follow suit.

Feroldi: I think that they make sense. There's not a big pop that has associated with them, pricing can be better, it's a lot cheaper for the companies to do. And if you just want your shares to have liquidity but you don't need to raise capital, I think we're going to see more and more companies choose this option.

Lewis: Yeah. And if you don't need the money, [laughs] it's a great approach. We talk about the various reasons why companies go public, capital raising is a huge part of it, but that incentive and that structure and really the whole underwriting process takes time, takes money. And if you can sidestep all of that, why not?

Feroldi: 100%. So, Asana here, I like that this is a mission-driven company, Dylan. They make it super-upfront that they are on a mission. Their mission is "to help humanity thrive by enabling the world's teams to work together effortlessly." That's a lot of words, but [laughs] I at least like that they're upfront with their mission statement and they reiterate it over and over again, I love seeing that.

Lewis: And what that mission statement gives you a hint of is the fact that this is a collaboration and team-based product. The focus for this business is making it easier for employees and teams to work together, it's really kind of a productivity software suite type of stuff.

Feroldi: And this is a founding story that we've heard over and over again. Dustin Moskovitz and his co-founder here, Justin Rosenstein, both were early engineers at Facebook. Dustin was a co-founder, Justin came on a few years later. As they were scaling Facebook, one of the challenges that they faced in doing so was trying to coordinate what was happening at the company. Dustin and Justin both found that they were spending an inordinate amount of time on really repetitive tasks that had nothing to do with building the company, such as answering emails, attending meetings that were all about status, gathering information, internal communication. That really bothered them, so they said, there has to be a better way. They left Facebook in 2008 to found Asana. And as you pointed out, they've created collaboration tools that are designed to solve those problems.

Lewis: Yeah. And they like to refer to what they're trying to solve the "work about work" problem that so many employees run into. And you know, Brian, I think if you look at it now, this is a pretty popular space, there are a lot of companies that are operating here, but back when they left Facebook to do this, we weren't using Trello, we weren't using all of these project management software solutions, so this was a really, kind of, groundbreaking idea. It's a space that has exploded over the last decade for a good reason, it helps us [laughs] declutter all of our workflows.

Feroldi: Yeah, and a McKinsey study provided this company with numbers to back up what they're saying. And if you're a knowledge worker, I'm sure these resonate with you. The McKinsey survey said that 28% of employees' time is spent answering email, 19% is spent gathering information, 14% is spent on internal communication; you add all that up and that's 60% of the average knowledge worker's time is spent on work about work. Clearly, there's room in there for improvement and that's what Asana is trying to do.

Lewis: Yep. I think anyone with an Outlook Calendar can [laughs] probably appreciate that one, Brian.

Feroldi: Yeah, 100%.

Lewis: So, let's talk a little bit about their core service and really what they're offering to people. We hinted at before, but it's work management and it's really, kind of, a focus on institutional knowledge.

Feroldi: Yeah. So, their big product is called the Work Graph, which is a unified view of all the tasks, projects, milestones, portfolios, goals that exist in a company. It's one unified place that employees and managers can go to see all the work that is being done at their company. With this platform in place, in theory, it eliminates the need to do a lot of communicating between teams, because if you want to see where a state of the status of a project is or get some information, you can just go right to Asana to see all that in real-time. They've done a great job at building this out. And they've already landed over 80,000 paying customers as clients. Clearly, there's something to this business.

Lewis: Yeah, I think to maybe back this out and give a really easy, simplified example of this for someone who isn't familiar with this type of software, Brian, anyone who watches Silicon Valley or a show that is tech-oriented, and they see the big board with all of the projects and all of the sticky notes on there, and the idea that you are moving the status of a project along in the workflows as things are being accomplished, perhaps adding notes, adding updates, so other team members can see it in a centralized location. That's basically what Trello does and that's what a lot of these types of software solutions are really trying to get at, is how can I find out what's going on without having to ask you, you have to write up a bunch [laughs] of copies for me explaining the update, and then, you know, two days later someone else from my team reaches out to you, too, looking for that same update, and you have to update based on the fact that we're two days further along in the project and some things have changed. So, trying to provide an easy at-a-glance for all of these different operations and making it really easy for people to just quickly get in touch.

Feroldi: Yeah. And you can imagine how useful this kind of collaboration software would be for big employers. I mean, keeping track of everything that's going on at your company or even specific projects rather than having to reach out and send email communications, wouldn't it be nice if there's just one centralized place [laughs] where you can click and get that information? You pointed out that we, at The Fool, use Trello. It's tremendously useful for helping us to manage projects. If I get assigned a project, it just goes right to my name and then I just use Trello to update it. And then, anybody that wants to see what's happening with my project can just click on that. That's extremely useful.

Lewis: Yeah. And Airtable is another really big name in this space; we'll talk about some of the competitors down the road. But really what all of these different software solutions are trying to do, what Asana is trying to do, is avoid duplicative work and avoid wasting time checking in on things, creating that central space for everyone to easily have a sense of what's going on.

Feroldi: Yeah. And they have some numbers to prove or at least showcase that employees and customers feel that their software is doing that. In the fourth quarter of their fiscal 2020, they commissioned a study to be done on over 3,000 of their active customers, here's some numbers that they came up with. 83% of their active customers said that Asana improves their job performance. 77% said it reduces wasted time, and 74% said Asana helps them accomplish tasks more quickly. That's some real feedback that is certainly an attractive number for potential customers to look at.

Lewis: Yeah. And I think something that will be familiar to people, even if they don't know the space very well, is the model that this business is operating on. They are using the freemium approach and they're using the land-and-expand approach, two things that we talk about plenty when it comes to software businesses, Brian, because it's such an effective model if you can get it to work and you can really get those free users to advocate for using that service when they are on the enterprise side. It seems like they've seen some success with that.

Feroldi: Yep. So, it's a hybrid model. So, there's both self-service and they also employ a direct sales force, but it's freemium. Any company can go on here and get a basic account up-and-running basically instantaneously. That allows them to try it out with a small team and see if they like it. From there, Asana tries to convince its customers to upgrade to get more advanced features and add more and more users. The starting price for this software is pretty reasonable. It's $11 per month per user at the most basic level, and it scales up from there. They do have three additional tiers all the way up to enterprise. So, it seems like an affordable price tag for even small businesses to try.

Lewis: Yeah. And as you might imagine with a freemium model, basically there are certain things that are not a part of that free service that you have to pay up for, and I think teams of a certain size need to start paying for the product. So, that's how they're able to start getting people to convert over to the paid side. But there's some pretty impressive customer growth numbers, and just kind of overall footprint numbers.

Feroldi: Yeah. And one of the metrics that they report to investors is what percentage of their free customers convert to being paid customers; that's a big part of the thesis here. So, last year about 3.5% of customers converted from the free model to the paid model, more recently that number jumped to 4.7%. That doesn't sound all that high in absolute terms. But if you can get a 4% or 5% conversion rate, that's actually a really impressive number.

Lewis: [laughs] And it's impressive comparing that number over time, you know, that's a huge jump in a relatively short period of time with that conversion rate. So, the hope is that that continues to tick up, but as we get into the financials, I mean, this business, especially if they're able to ratchet down their sales and marketing and some of their other expenses, should be a very profitable business fairly soon. [laughs]

Feroldi: Yeah, some of the numbers here are really exciting. So, last year, the company reported 86% revenue growth to just under $100 million. In the most recent quarter, that number declined a little bit, but still produced top-line growth of 57% to $52 million. A number that jumped right off the page at me was gross margin, Dylan, 87% in the most recent quarter. So, high top-line growth and very strong margins -- that's a good base to build off of.

Lewis: That's a good base to build off of. As you might expect, with a high-growth software company -- I think the listeners already know what's coming here -- they're losing money, Brian, [laughs] and they're losing money because they're aggressively spending on marketing and really trying to get out there. I mentioned before that it's a crowded space. It kind of makes sense that they're making those investments right now.

Feroldi: Yeah, and they're losing money at an impressive rate, unfortunately. So, $52 million in revenue last quarter. Net loss on a GAAP basis was $41 million; that's a huge delta between the two. On an adjusted basis, on a non-GAAP basis, it was about a $26 million adjusted net loss. That was double what they lost in the year-ago period. And unfortunately, we don't have free cash flow to save us in this instance. Free cash flow last quarter was negative $22 million. So, it's likely to be some time before they can switch over to generating cash. The good news is, they weren't in desperate need of money when they came public. As of July 31, they had $456 million in cash on their books. They do have $330 million in convertible notes that we should certainly knock them for and count as debt. The odds are good with companies like this that that will actually convert into equity down the road, but the numbers, the losses aren't great to see, but they clearly have plenty of liquidity to fund it.

Lewis: Yeah. I think this business, looking at the financials, has all the marks of a high-growth software company. There's nothing in here that really surprises me. The only thing I think that was a little surprising is that the gross margin number is as high as it is this early. You know, the fact that it's 86%, 87%, there's not a lot of room for that to continue to go up. They're already enjoying pretty good gross margins.

Feroldi: Yeah, but it's risen over time as they've continued to scale, and you know, [laughs] there's nothing wrong -- I mean, 87% gross margin in absolute terms is phenomenal. So, they could be profitable if they chose to, right now they are spending as much as they can to acquire customers. Given the numbers and the margins, that's a good move.

Lewis: And to be fair, Brian, that's a petty knock on my part [laughs] about the gross margins. It's more just that the picture is only going to improve so much, you know, what we're going to see from this business and profitability is really going to be a reflection of costs changing, not so much the business becoming more profitable.

Feroldi: Yeah, and they have clearly laid out a plan to scale over time to get their spending, as a percentage of revenue, lower over time and eventually producing, they're actually calling for 30% free cash flow margins at scale. With an 80% gross margin, that's entirely reachable.

Lewis: Yeah. And a big part of that is the fact that, that R&D, that sales marketing, those are currently 45% and 67% of their top line; I think it's their top line. Long term, they're targeting 22% to 25% and 30% and 33%, so that spend is going to ratchet down pretty dramatically. That's where you start seeing the money flow to the bottom line, that's where you start seeing cash flow, and that's what investors love to see.

Feroldi: You got it. Now, let's talk about our favorite metric when it comes to SaaS stocks like this: dollar-based net retention rate. Again, that's retention, that's the good one, it includes churn. And the most recent quarter that number was 115%. That's not the best we've seen, but in absolute terms, that's really good. And more importantly, if you drill down a little bit even further, that was their overall net retention rate. But for bigger customers -- so, those that spend $5,000 or more on the platform -- their retention rate was 125%, and for those that spent $50,000 or more, the retention rate was 140%. So, this is a case where I'm guessing this number was temporarily lower based on their smaller customers, but they're clearly winning and doing a great job with enterprises.

Lewis: Yeah. And let's highlight that and sync it up with the strategy for a second, Brian, because this is land-and-expand in action, right? Like, you get used by a team at a company, and then all of a sudden, other teams start realizing that this is a really valuable product. That's where you start seeing your big contracts growing even faster, because they have the scale, they have the budget to lay it out and say, you know, we're going to go relatively wall-to-wall across the enterprise with the solution, we're not just going to have marketing use it.

Feroldi: Yeah, it's the same kind of problem that faced Slack (WORK). How useful is Slack if there's one user in your organization? It's completely useless. How useful is it if everybody is using it? It's unbelievably useful. So, Asana has a similar problem. What they try to do is to target one small team at a time, just to get their foot in the door. And what the company sees over time is, Asana is used by a small team and then members are added over and over and over again. They actually think there's enormous room for them to grow just within their existing user base. They estimate that only about 3% of the employees in their existing user base are currently users. In theory, that gives them a tremendous runway to grow even if they don't add on any more companies, in general.

Lewis: Yeah. And I know in the past that we have occasionally criticized the freemium approach for some of these businesses, especially in the storage space, looking at some cloud companies. I think that this freemium model works really well if you have something that is sticky, that people can't get elsewhere. I am critical of it when it's something like cloud storage, and you know it's really just a place to put your files, but with this, it's functionality, it's streamlining operations. And if you get people to start seeing the value prop, the freemium model totally makes sense.

Feroldi: Yeah, I can see once a company converts to using this, gets used to using it and has it up-and-down the organization. I can see them being extremely reluctant to switch off or turn it off or switch over to something else. The exact same way The Motley Fool is with Slack. I mean, if you took away Slack from The Fool right now, we would all be extremely upset having to go back to email. I could see a similar level of switching costs for a company like Asana.

Lewis: Yeah. I think the test is, you know, some people might be familiar with the snap test; the idea that a company disappears and people realize it; it's can you get work done, you know? And if you remove these software solutions, no, you can't. Your operations and your workflows are so dependent on these types of software suite solutions, and that's a good thing if you're Asana, it's a great thing if you're Slack. And really, just it proves the value. If teams are that reliant on it, then they're going to keep using it and they have to use it even if things get a little bit tougher for them as a business; they have to make some tighter budgetary decisions. I think Asana has also been pretty smart over the last couple of years with some of the integrations and some of the partnerships that they've lined up.

Feroldi: They know that becoming a sticky and useful product is incredibly important to customer retention. So, like so many other high-growth SaaS companies we've seen, they have spent big to make their product integrate directly with other useful products. So, they have over 100 direct integrations, they just landed Microsoft Teams, for example, but they have plenty of other useful products. So, Asana integrates directly with Gmail, so Google Calendar, Chrome, all of the Microsoft products -- so, Teams, Outlook -- they integrate directly with Slack, with Dropbox, with Box, with GitHub, with Jira; over 100 third-party applications in total. That's exactly what we should want to see as investors. Once you get those integrations going, it's even harder to rip the software out.

Lewis: It just makes your product more and more useful, Brian. [laughs]

Feroldi: Yes, that's exactly right. And the good news here is there is a tremendous amount of room for this company to continue to grow. One of my questions is, well, how big is the potential market here? Well, according to IDC, they believe that the market for this kind of software is currently worth $23 billion. And that number is growing pretty fast. By 2023, they expect that market to be $32 billion. Importantly, that's IDC saying that, not management here.

Lewis: [laughs] Yeah. I think when we look at TAM [total addressable market], you basically look at whatever's in the prospectus and you say, "Yeah, sure." [laughs] And then you try to go find someone else that's saying that number, right? Brian, one of the things that I was surprised at, looking at this business is, based on their revenue total, I did not expect them to be very split out when it came to their customers, I was expecting a business that was going to be pretty reliant on a couple of really big accounts to be pushing their top line forward -- not the case here with Asana.

Feroldi: Not at all. Over 82,000 customers and growing. Last quarter they added 5,000 new ones, and this includes plenty of big-name companies, such as Alphabet, New York Times, General Electric, McKesson, Uber, Harvard, Okta, Coupa, etc., etc. So, these are not all small businesses, they do have some big businesses in there. Importantly, Dylan, when we look at customers, we want to check, is there any concentration risk that we should be aware of? In this case, there is none, great to see.

Lewis: Yeah. No single customer accounting for more than 1% of revenues and the top 100 customers accounting for 9% of revenues for fiscal 2020. That's pretty spread out. And I imagine that we are going to continue to see their big accounts get bigger. But if they [laughs] are all doing that in proportion, the business should be able to do just fine, especially because they continue to seem to resonate with these smaller businesses. And the freemium model lends itself so well to growing as your customers grow and really being in a position where you have a symbiotic relationship with your users.

Feroldi: Yep. The bottom line, for me, is this company has clearly caught on with a number of big companies, and they are diversified already. At this stage of the game, that's exactly what we should want to see.

Lewis: Usually when we do our breakdowns, Brian, I tend to be swayed by the financials. That tends to be the thing that I'm most interested in when I look at a business and I'm really trying to figure out whether or not it's investable. In the case of Asana, I think that the management and the company culture is actually probably one of the strongest points in this being a watch list worthy stock for me.

Lewis: Exactly. I would even wager, if you just said the name Dustin Moskovitz to the average American, a good chunk of them would actually know who that is. He is certainly a high-profile co-founder and he is heavily invested in this business. So, he still owns about a third of it; at current prices, that's more than $1 billion. His other co-founder, Justin Rosenstein, owns about 15%. And insiders, in general, own two-thirds of this company.

As we've seen numerous times, Dylan, two classes of stock here: A and B. B shares are owned by all the founders and insiders, which gives them complete control of the company, but wow, is there a lot of skin in the game here!

Lewis: A lot of skin in the game. And I think Dustin Moskovitz is firmly in the "doesn't need the money" camp, [laughs] you know? He was a co-founder of Facebook in his late teens, and was a billionaire in his early 20s. At one point, he was the youngest self-made billionaire in the world. Could have very easily left Facebook and just said, "I've got my money, I think I'm good," [but he] decided to leave and build this company. And what I really like, because I watched some of the interviews preparing for the show that he's given in the past -- he is a very calm, cool, collected, level-headed executive. And the ratings for him are absolutely incredible: 4.9 stars on Glassdoor. And it comes through in any of the interviews you watch of him. He is someone who really cares about his employees, he is really, really conscious of the tech burnout, and I think he's kind of a different executive for the tech space.

Feroldi: My jaw kind of hit the floor when I looked at the Glassdoor numbers here. Now, there are only 222 total reviews, so it's not like we have thousands we're working with here. But as you just said, 4.9 stars out of 5. [laughs] 100% CEO approval rating. Not 99%, 100%. And 99% of employees would recommend the company to a friend, it does not get any better than that.

Lewis: It doesn't. And I think he is one of those executives that is worth watching and worth hearing from if you are considering this business and you're even putting it on your watch list. And one of the first places I would recommend you go is, he wrote a piece in 2015 on Medium, If You Want to Work Hard, Live Well, and it's basically his reflection on tech. He is changing perspective on work/life balance and really how he's tried to shape Asana's culture. And I think that that becomes an employee-retention tool at a certain point. And he is someone who I think is on the right side of history when it comes to where tech is going and creating good workplaces for employees.

Feroldi: Yeah. One of the things I saw in their registration statement was that their employee retention rate in their engineering department was over 90%. That's incredibly high in general, but this is a company that's in Silicon Valley. Keeping engineers around and keeping them from job-hopping is unbelievably difficult. Culture is a weapon in Silicon Valley, and Asana has a good one.

Lewis: Yeah. And just to give a couple of small examples of the ways that they tend to look at the culture a little bit differently: There are a lot of firms out there that will make dinner available -- you know, in a period where you're actually able to go to the office -- they will make dinner available, but dinner will be served at 8 p.m. And the idea is, if you want that free dinner, you have to stay there till 8 p.m. I saw an interview with him where it's like, you know, they're targeting, like, 6 p.m. or 6:30 p.m. for those dinners. They've also done a lot to really change the way that equity compensation works and options work for their employees to make them more employee-friendly. So, I think that that's just a leadership team that's doing a lot to retain talent, understands the work/life balance and understands that it's a competitive advantage and it's a good thing to do for their employees.

Feroldi: You can't fake numbers like that. Clearly, employees love working at this company, that's fantastic.

Lewis: Now after all that praise, [laughs] we do need to talk about the risks and competition here, Brian. And I think the biggest one, and maybe listeners are anticipating this one already is, this is a crowded space. There are a lot of people that are trying to play here.

Feroldi: They have plenty of competition. I mean, right at the top of the show, what company does The Motley Fool use for this kind of thing? The answer there is Trello, that's made by Atlassian. So, I do think the opportunity here is massive, but there's no doubt they have plenty of competitors to worry about. Some of the big ones are Smartsheet, Wrike, Kanzen, Monday.com, Microsoft, ServiceNow, Workfront, Airtable, Planview, and Salesforce. That is a lot of competition.

Lewis: Yeah. And I think for this space, Brian, because there are so many players, at a certain point, [laughs] it comes down to who the advocate is internally that is trying to get people to use the software, how compelling and how accessible they make it to people. And the fact that they have a freemium model certainly helps their chances with a lot of the stuff, but I know, we know we're using Airtable out here at The Fool, and there's a pretty big upfront investment to learning how that software works, there are huge advantages to using it. But really, if you have someone who is going to be an evangelist for any of these systems, that is probably going to be the system that you wind up adopting internally if you're in a 100-employee operation or something like that.

Feroldi: Yep, I 100% agree. On the flip side, they're clearly doing something that stands out in the marketplace. You can't grow as fast as they are or have as high of a retention rate without doing something special. Now, they are recognized as one of the leaders in this space and they are not direct competitors for some of the big ones. As we said at the top of the show, they're actually integrated with companies like Salesforce.com and Microsoft. But, to me, no doubt, No. 1 risk here, competition.

Lewis: Competition. And, you know, it's a high-growth tech stock. The valuation is also up there -- that's a risk, of course, too. Though, the valuation probably isn't as crazy as [laughs] some of the other companies that we've talked about recently, Brian.

Feroldi: Yeah. Trading at about 20X full-year sales, roughly. Is that a high number in absolute terms? Of course it is. But again, this is a company that's growing its revenue 50% and has 87% gross margins. High, not outrageous, in my opinion.

Lewis: Yeah, I think it's almost reasonable, which [laughs] if you asked me two years ago, I'd be like, "Dylan, what are you talking about?" But that's just kind of where we are in tech these days. [laughs]

Feroldi: It is crazy. I mean, if you want to get your hands on a high-quality stock, you really have to pay through the nose these days. And Asana's valuation is not as extreme as we've seen from some other companies; that could be, in part, due because they came public via a direct listing as opposed to an IPO to create some kind of more excitement about the stock right out of the gate, but 20 times sales, very high, again, I don't think it's outrageous.

Lewis: Yeah, the expectation is this company is going to continue to grow over the next three, five years, and it will eventually become profitable. Those are, kind of, two core elements of the valuation that we see today. It's going to be losing money, I think, for the short-term foreseeable future, but the hope is that they're able to ratchet down some of that spend and make some significant money on the bottom line once they do so. That's a huge part of the thesis.

Brian, I'm curious, having gone through the company, where does this sit in terms of investable ideas for you?

Feroldi: To me, there's a lot to like here. The gross margin is fantastic, the high revenue is great, the integrations are great. The founding story here and the culture is probably the No. 1 thing that sticks out to me for its awesomeness. However, I am not exactly comfortable with where the company is in its money-losing cycle just yet. It's still losing quite a bit of money compared to its revenue opportunity. I would want to see them make a little bit more progress there before I would dive in.

On the flip side, Dylan, this company's market cap is only about $5 billion; that's not an incredibly high number. So, I could see this being a very successful investment from today, if you can be really patient with it. So, for me, watch list stock -- not something I'm screaming to buy, but I'm curious.

And your opinion?

Lewis: Yeah, I'll put it on the watch list. And I think it's something that I'm probably giving a little bit more weight to because of management's pedigree and how beloved the management team is. And they're probably punching a little bit about their weight class on my watch list because of that, but it's a company that I'm rooting for, because I think they're doing a lot of things right, doing right by their employees, they seem to be doing right by their customers. I'd like to see, in the case of most recent debuts, I'd like to see a couple of quarters, I'd like to see how the growth numbers hold up, I'd like to see if they have to continue to spend so much to bring people in even with that freemium model. But this is one I'd be watching. And it's nice that it's flying under the radar, Brian, because it means that that valuation is [laughs] only $4 billion or $5 billion, that leaves a lot of room for this company to multiply over time.

Feroldi: Yeah, definitely agree with you there. And as we've said over and over again. When a company goes from being private to being public, the culture can change. We don't know how management is going to react once it has a number over its head, if it has the skill to deal with Wall Street. That's why waiting a quarter or two at least before you dive in can make sense. Like you, I'm going to be watching their first couple of quarters with excitement.

Lewis: That's the kind of closing commentary you'd expect from the salty super superstar sultan of stratospheric SaaS stocks. Oh! I messed it up at the end there, Brian, but that's what I --

Feroldi: Yes, success! [laughs]

Lewis: [laughs] That's what I get for being cocky. Thank you again for hopping on, as always, with me to talk to tech.

Feroldi: Always fun, Dylan.

Lewis: [laughs] Listeners, that's going to do it for this episode of Industry Focus. If you have any questions or you want to reach out and say, "Hey!" shoot us an email at [email protected] or tweet us @MFIndustryFocus. Brian is @BrianFeroldi, I am @WilyLewis. If you're looking for more of our stuff, subscribe on iTunes or wherever you get your podcasts.

As always, people on the program may own companies discussed on the show, and The Motley Fool may have formal recommendations for or against stocks mentioned, so don't buy or sell anything based solely on what you hear.

Thanks to Tim Sparks for all his work behind the glass, and thank you for listening, Fool on!