Shares of Asana (ASAN 3.15%) were down 16.3% as of 1:30 p.m. ET Wednesday despite a stronger-than-expected quarterly report from the work management software company.
Indeed, Asana's fiscal third-quarter revenue grew 18% year over year to $166.5 million, translating to an adjusted (non-GAAP) net loss of $8.2 million, or $0.04 per share. Analysts, on average, were modeling a wider net loss of $0.11 per share on revenue of $164 million.
Why Asana's quarterly beat just wasn't enough
Asana co-founder and CEO Dustin Moskovitz credited the revenue beat to a 20% increase in revenue from core customers -- or those spending at least $5,000 in annual recurring revenue (ARR) on Asana's platform. The number of core customers also grew 14% year over year to 21,346. Asana also saw momentum from even larger customers, with an 18% increase (to 580) in the number of clients spending $100,000 or more.
So why are shares falling today? During the subsequent conference call, Moskovitz noted that macroeconomic headwinds continue to impact the company's renewal base -- though he added Asana has seen "signs of stabilization in new business."
Chief Operating Officer Anne Raimondi noted that "deal cycles continue to be longer and budgets continue to be a significant factor."
Indeed, Asana's dollar-based net retention rate (DBNRR) during the quarter remained over 100%, meaning existing customers spent as much or more on Asana's solutions after their first year. But the metric also contracted significantly from last quarter's overall DBNRR of 105%. DBNRR remained higher for core customers at 105% in Q3 (down from 110% in Q2), and increased to 120% for those with ARR of at least $100,000 (down from 125% last quarter).
What's next for Asana stock?
For the current fiscal fourth quarter, Asana issued guidance for revenue of $167 million to $168 million, or growth of 11% to 12%, which should translate to an adjusted net loss per share of $0.10 to $0.09. Here again, both ranges were well above analysts' consensus estimates for a loss of $0.16 per share on revenue of $166.8 million.
As such, for the full fiscal year ending in January, Asana raised its outlook to call for revenue of $648.5 million to $649.5 million (up from $642 million to $648 million before), with an adjusted net loss per share of $0.27 to $0.26 (increased from a per-share loss of $0.39 to $0.42 previously).
With shares of Asana up 76% in calendar year 2023 to date leading up to this report, however, the market is clearly concerned over the impact of macro headwinds on Asana's renewal base and net retention rates. Until the company demonstrates more tangible signs of improvement to that end, I suspect Asana stock will remain under pressure.
