Q4 2020 Asana Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the <unk> fourth quarter and fiscal year 2021 earnings call.
At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session.
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If you require any further assistance. Please press star zero and I would now like to hand, the conference over to your speaker today, Kathryn Miller head of Investor Relations. Thank you. Please go ahead.
Good afternoon, and thank you for joining us on today's conference call to discuss the financial results for us on its fourth quarter and fiscal year 2021.
With me on today's call are dust and Moskovitz Hassan as co founder and CEO, Tim <unk>, The company's Chief Financial Officer, and Christopher and not see the company's Chief operating officer and head of business. Today's call will include forward looking statements pursuant to the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995, including but not limited.
And two statements regarding our financial outlook market position and growth opportunities for.
And looking statements involve known and unknown risks and uncertainties that may cause our actual results performance or achievements to be materially different from those expressed or implied by the forward looking statements.
Forward looking statements represent our management's beliefs and assumptions only as of the date made.
Information on factors that could affect the Companys financial results is included in its filings with the SEC from time to time, including the section titled Risk factors and our quarterly report on form 10-Q filed by the company for the quarter ended October 31 and 2020.
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 Rec.
A reconciliation between GAAP and non-GAAP financial measures and a discussion of the limitations of using non-GAAP measures versus their closest GAAP equivalents is available in our earnings release, which is posted on our Investor relations webpage and investors thought Astana Dot com.
And with that I'd like to turn the call over to Dustin.
Thanks, Katherine and thank you to everyone for joining us today for our Q4 and fiscal year 2021 earnings call.
We're very excited about our results for the year.
For several highlights.
We closed out the fiscal year with a growth rate of 59% and our businesses and strong as ever.
Also we now have over 93000 paying customers and over $1 5 million paid users agile and fiscal year and.
And customer spending $50000 or more grew 92% year over year.
We had strong momentum and large customers and had a record quarter for expansion within our very largest and for.
Revenue from our current top 10 customers more than tripled and Q4 versus the previous year.
We completed our direct listing on September 30th and Weird and first to accomplish this remotely.
And also hold our vision for the future of Hassan and event a few months ago, showing the world what work will look like when we achieve the full potential of a sauna and yosano word dropped out a bottle and.
For 24000 people have watched it.
The successes from here, thanks for the hard work and resiliency of our team and their commitment to our customers' success.
These results reflect the increasing demand for work management and the global need for team clarity.
Most of the world's 125 billion knowledge workers struggled to coordinate work across their teams and they still rely on status meeting spreadsheets and sticky notes to answer basic questions such as who is doing what by when.
The pandemic and shift and distributed work further expose the pain of work coordination.
We recently published our annual anatomy and work Index and independent study of 13000 knowledge workers.
The study quantified what many of US know intuitively teams are working hard on things that arent having impact.
The study revealed that 60% of time is spent on work about work rather than work itself, 26% of deadlines for mist, and seven and 10 people experienced burnout and last year.
Keep the lack clarity experience a cycle of chaos.
Where it falls through the cracks and teams scramble to figure out what to do.
This results and wasted effort and missed opportunities.
Effective teams have the three CS of collaboration.
Content communications and coordination.
Most teams have invested and content and communication technologies, such as Filesharing messaging and video conferencing, but still rely on status meetings and spreadsheets for coordination.
Hassan as the platform for team coordination gives teams time back by bringing structure and clarity tutor and work.
Team coordination is a universal need and Sona is well positioned to capitalize on the secular trend.
And with 1.5 million paid users San as a market leader and yet were less than 3% penetrated and our existing customer base.
Simply put our market opportunity is massive.
To provide the best platform for T coordination, we built for proprietary data model Yosano work graph.
The word graph is a complete fully connected accurate and up to date Mac of the work and and organization.
It's what sets us apart from other companies and the market and it's what enables Hassan and provide clarity at every level of and organization, regardless of the size and structure and complexity.
Warcraft outer model enables our three key differentiators.
First individuals' site Hassan is ease of use and how it maximizes personal productivity and focus.
The consumer rating show up on G tube and independent review site, whereas thought and was named the most highly rated company and the recent project management great.
Second team site to ease it staying organized while coordinating complex cross team work things for things such as multi homing for future uniquely enabled by the work graph and used by over 97 per cent of our customers' spending $5000 or over.
And third executives praised the real time visibility and Hassan and provides into the status of their goals and strategic initiatives. This.
This is possible because goals portfolios projects and tasks are all connected thanks for the work Ralph.
And we're the only solution that can provide clarity for the individual teams and executives based on a shared source of truth.
Customers rave about this and the Warcraft is what makes it work.
Last quarter I described task multi homing is one of the most pervasive we used features that illustrates one of the benefits of the work at.
I'll buy home and gives people the ability to host a single task and multiple projects at the same time.
And individual task is often relevant and multiple projects or process workflows with multi homing and can share a single source of truth for one task and all of those contacts even across multiple teams and departments.
So the Warcraft mirrors, the natural flow of work.
And as a reminder, the alternatives business, a container model, which forces you to keep information about one task of Siloed and a single context.
The next layer of the Yosano Warcraft as portfolios portfolios are collections of projects, giving us the ability to see all the work related to a strategic initiative along with a snapshot view of their current status.
Also how many shows up again here because a single project can be included and many portfolios. So customers have flexibility to accurately map I'll work is happening and organized most helpful views for their workflows.
Portfolios builds on all three of our key Differentiators.
First they make us an easier to adopt by providing new users who workspace as far as new employees for an organization a guide to help them learn about and navigate each initiative.
And they help maximize personal productivity because anyone can create their own portfolio of projects to represent and personally manage work they care about for.
For example, your personal portfolio might be called my projects.
Second my task multi homing project portfolio and multi homing helps facilitate cross functional work.
Projects can be included and multiple patent portfolios, which allows different teams to organize and track projects using their own taxonomy.
For example, R&D teams might create portfolios that represent the way work is grouped within program teams for.
This product marketing might want a bundled projects and two related releases.
And perhaps they would additionally, organize them accordingly, and the customer value seems theres no need to choose.
This flexibility is enabled by the work RAF and and container model for portfolio management. All the cross functional teams are forced to compromise on a single way to organize to work.
Finally, as I mentioned above their key way that work at the task and project level cash to higher level strategic initiatives.
This gets leaders throughout the company, including executives and easy real time wait and see how work is progressing at a high level.
And now we've introduced nested portfolios, meaning a portfolio can be included inside and other portfolio or multiple other portfolios.
These layers nesting are key to how we make hassan and easy to adopt while also being able to scale organically to support larger customers.
So I'll, let you start small with a simple structure of single project.
And then progressively add and powerful layers that brings structured organization and reporting overtime.
It's a simple elegant onramp to as much sophistication that a customer might need to do their work.
And contrast container models beef employees March organizations lost swimming and a sea of Siloed projects.
As an example, I know many of you also fallen important companies like Twitter and are familiar with their strategic objectives.
More and more of our customers are turning to our capabilities within portfolios and drive cross functional alignment as they grow rapidly and scale.
Twitter Shosanna enterprise and Q4 is there work management platform for their experience team, which includes design research product and engineering.
They standardized on <unk> to bring those cross functional teams and leadership together in one place to manage product road mapping content creation and inbound requests.
Another benefit there excited about us being able to connect technical non technical teams and previously struggled to collaborate using the Astana Jarrod integration.
Listening to our customers has been the cornerstone to our product strategy.
And we're constantly expanding and deepening the strength of our platform, we've been launching new features and capabilities for customers at a rapid pace.
Before I hand, it off to Chris I, just want to make sure I highlight that this year. We were ranked the top best place to work by Inc. Glassdoor Dot and New York and fortunate including landing at number one best workplace in the Bay area for the fourth consecutive year.
Our culture is integral to our business success and part of how we create a great culture is using asada to ensure that everyone has real time clarity about what's expected of them and how their work fits into our hiring level goals.
So this year as our revenue grew rapidly and 59%, we succeeded and scaling our culture as well and building an environment, where our team can thrive as they create value for our customers.
With that I'll hand, it off to Chris.
Thanks, Doug.
We had a great fourth quarter, we finished the year really strong and even accelerated revenue to 57% growth and Q4 as we exited the fiscal year.
Highlights for the quarters business performance include a few things.
First growth and new paying customers to over 93000 and record level of top of funnel volumes.
Second strong expansion within our customer base, we now have more than $1 5 million paid users.
Net retention rate for customers spending $5000 and more with us annually was 125% and for customer spending $50000 and more with us was more than 140%.
And third some big wins and strong momentum and enterprise.
The number of customers spending $50000 for more with US annually grew 92% year over year and our largest customer deployment in terms of paid users grew five times the size of our largest customer at the end of the prior year.
We saw broad customer traction and Q4 across industries and departments from high growth leaders to enterprise digital transformation and across global regions.
Here just five of the many examples.
Danone, the leading dairy and plant beverage and specialized nutrition company headquartered in Paris.
<unk> selected <unk> enterprise solution and in Q4 as their standard for project and work management for.
For the Sana teamster known from supply chain to finance to quality and food safety and now have the visibility they need to collaborate effectively drive project ownership and further strengthened their commitment to bring health through food to as many people as possible.
Spotify, a leading provider of digital music and podcasts first began using a sauna and 2015.
Usage has steadily spread across the company over the years and and Q4, they significantly expanded their use of its non as enterprise solution as teams look to improve how they collaborate manage projects and run business processes.
Now teams across the world are managing everything from the latest podcast AD campaign to engineering Roadmaps for regional marketing and sales activities in Japan and a top.
No Jack a super App that provides millions of users across southeast Asia with on demand access to more than 20 services such as ride upgraded Tucson is enterprise solution for the entire company and Q4.
They chose our enterprise offering to further enhance security and user management controls, while also providing <unk> executive team with the support and visibility and needed to accomplish their key business objectives.
Hi, Mart, a leading platform for digital producers and one of Brazil's leading startups and chose to go wall to wall with dishonest business solution for 1000, plus employees and Q4.
Now teams across the company are managing their projects and work in one place from finance to marketing the business strategy and operations to talent acquisition.
Hub spot a leading CRM platform that provides software and support for scaling companies.
Has been using us on up cross some of its marketing and sales operation teams for some time.
And Q4, they upgraded to our enterprise solution and expanded their use to more teams within these functions as well as the other teams like finance and HR.
I credit our exceptional business performance, and Q4 and and our fiscal year 2021 to first and foremost the immense business value, we provide to our customers our differentiated product offering.
Our resilient hybrid business model and talented go to market team.
And to the overall accelerating business imperative of the market.
Looking forward to our fiscal year 2022, and beyond and there are three major areas, where we're focused.
Wiring new customers.
Customer expansion and our base and enterprise momentum.
To give some color.
First I'll start with new customer acquisition.
This is a fast growing emerging category with the vast vast majority of 125 billion global information workers without work management tools and suffering from lack of clarity.
For new teams. This on it it's fundamentally a broad horizontal product.
We see customer use cases within and across virtually all functions and departments and often including collaborations externally with suppliers partners and customers.
We remain focused on acquiring new customers building upon our record top of funnel demand from Q4 with a blended paid organic and product led growth approach.
Over the course of this year, we are executing one of the largest new market expansion initiatives today.
We're planning to expand language availability for us on up from 6% to 13 languages over the course of the year to make us Donna accessible to a significantly larger portion of the world's teams.
Second we are focused on customer expansion.
We continue to see a large expansion opportunity and our existing base of now over 93000 paying customers.
This year, we are expanding our direct sales team and Asia, Europe and North America.
And we're building on the strong departmental traction, we see and marketing and creative sales and strategy and operation teams as well as other teams like product design and HR and it teams.
This year, we are particularly focused on providing best in class solutions for key cross team workflows.
For example, global campaigns product launches and creative development.
These are workflows, we uniquely address and which bring more teams into Osaka.
Third our last area of focus is enterprise building on the tremendous enterprise adoption and momentum of last year.
This year, we are investing significantly and our enterprise platform.
Major investment areas include.
Aircraft Visualizations and reporting <unk>.
Advanced and administrative controls and broader compliance support build.
Building out our technology and services partner ecosystem.
And integrated goals management and cross company use cases.
This year, we are also continuing to grow and scale our enterprise sales organization.
We have now brought and general managers in each region with enterprise leadership backgrounds from companies such as Salesforce Qual tricks Linkedin and net suite.
We are investing heavily and our enterprise capabilities and while we are still very much and the early days of this market are enterprise motion and momentum is beginning to build Sarnia is uniquely suited to scale as a trusted partner and provider of real time clarity and alignment and and across large enterprises.
Now I'll turn it over to Tim to go through our financial results.
Thank you everyone for joining us today, we are very excited to reported another great quarter with strong results across the board.
Q4 revenue accelerated from last quarter to $68 4 million up 57% year over year, driven by continuing strength from our customers' spending 5000 or more on an annualized basis.
I'm also encouraged by the fact that we have maintained 55 plus revenue growth rates during each of the quarters throughout this difficult year demonstrates.
Demonstrates the category tailwind and the resiliency of our business model.
We added over 4000, net new customers and now have over 93000 paying customers, representing a 24% year over year increase.
We have 10170 for customers spending 5000 or more on an annualized basis up 55% year over year.
Growth and larger customers is even stronger we have 397 customers spending 50000, and more on an annualized basis up 92% year over year.
Revenue from customers and 5000 or more represented 62% of our revenue in Q4 compared to 54% and the year ago quarter.
This segment of our business grew 81%.
And further demonstrates our success with our land and expand strategy.
Our overall dollar based net retention rate was over 115% as a reminder, our dollar based net retention rate is a trailing four quarter average calculation.
Among customers spending 5000, and more our dollar based net retention rate was 125%.
And among customer spending 50000, and more our dollar based net retention rate was again over 140%.
Before turning to expense items and profitability I would like to point out that I will be discussing non-GAAP results and the balance of my remarks.
Gross margins came in at 88% up from 87% and the year ago quarter.
R&D was $30 6 million or 45% of revenue, we continue to invest heavily to fuel innovation at a high velocity.
Sales and marketing was $49 2 million or 72% of revenue.
We are continue to invest and both our self serve and direct sales motion.
G&A was $15 4 million or 23% of revenue.
Operating loss was $34 8 million and operating loss margin was 51%.
Net loss was $35 million and a loss per share was 22.
Now onto our fiscal year highlights fiscal year revenue was $227 million up 59% year over year, we added over 18000, net new paying customers for the full year.
We also added 3600 customers spending 5000 and more on an annualized basis.
This is an increase of 55% year over year.
And finally, we added 190 customer spending 50000 and more on an annualized basis. This represents an increase of 92% year over year.
Moving onto the balance sheet and cash flow.
Cash and marketable securities and long term investments at the end of Q4 were approximately $405 million.
Our free cash flow is defined as net cash from operating activities less cash used in property and equipment and capitalized software costs, excluding nonrecurring items, such as direct listing fees and the build out of our San Francisco office.
And Q4 free cash flow was negative $17 5 million.
We also ended the fiscal year with 1080 employees.
We're very proud of the achievements and the business momentum during this unprecedented at year.
Now moving on to fiscal year 'twenty two.
For Q1 fiscal year 'twenty, two we expect revenues of $69 5 million to $78 5 million reps.
Representing growth rates of 46% to 48%.
Non-GAAP loss from operations of 44 million to $42 million.
Loss per share of <unk> 27, since 2000, and <unk>, assuming basic and diluted weighted average shares outstanding of approximately $161 million.
Now looking out to full fiscal year 'twenty, two we expect revenue to be 309 million to $314 million.
Representing a growth rate of 36% to 38% year over year.
Given the large market opportunity, we will continue to invest for growth to maintain our leadership position.
We expect full year non-GAAP operating margins to be flat to slightly up from fiscal year 'twenty one.
Longer term, we believe that we can execute on our growth strategy and that our best in class gross margins will provide the leverage and flexibility to invest and to the enormous market opportunity. We believe this investment will provide durable and sustainable growth as we pursue this large market opportunity with the best in class product.
Operator, let's open up the line for questions.
Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or cash Keith Please limit yourself to one question and one follow up question.
Additional questions. Please rejoin the queue. Please standby and we compile the Q&A roster.
Your first question comes from the line of Brent sales from Jefferies. Your line is open.
Thank you good afternoon, I'm curious if you could just characterize the overall demand environment and how.
And your customers are behaving as we go through the lifting of this pandemic and I think dust and many are asking how does this change the company's approach as we returned to the office does anything change or is this just two two powerful of a tailwind.
And that we're going to continue to see that type of momentum that you are putting up.
Thank you.
And thanks for the question.
I'll start off by saying, even before Covid started.
I think that our growth was being driven by a long term secular tailwind and momentum and the category.
And we had clarity it's really difficult for teams even when they are in a regular office environment.
And there's just been a rising tide of the business imperative for clarity and alignment.
And I would also just point out even in the pre Covid times. When you have large companies. They are typically working and distributed ways a lot of the times and they are working across offices that they might have all over the world. They might have people and the fields that are checking and remotely.
So you had some elements and distributed there, but even when a team is working together and we face to face.
Very useful solution for achieving clarity.
So post Covid I think we're going to see some companies returned to those dynamics and be mostly back in the office, we're clearly going to see a lot more companies choose to be fully remote for remote first and we will have everything in between.
And I think and all of those all of those contacts Osama is going to play an important role in driving clarity and alignment and so we're really well suited to a moment, but also the growth is really being driven by those those longer term trends.
Great and just a quick follow up for Kim for thousand paying clients. I think you were running between five and 7000 and the last two quarters is there anything to read into that or is it just getting larger transaction, albeit a smaller number in anything to to read and on that number for the quarter.
Yeah, I don't think theres anything to meet and onto that number other than the fact that I think there are fluctuations quarter over quarter and Q4, and we do have a hybrid model, where there's a very sharp seltzer part of the business. So when during the holidays, you may see a little bit softer in terms of new customer adds but I think what we've talked about is.
Taking a look at the total customer base from a the growth from our overall basis and we grew our total customer about 24, 25% year on year.
Your next question comes from the line of <unk> Kidron from Oppenheimer. Your line is open.
Thanks, guys great numbers.
Chris I wanted to dig a little bit into your enterprise.
Focus heading into next year can you talk about.
The quota share.
Salespeople motion, how much you're investing and it's how do we think about the expansion of debt base mix.
First year and in what way.
Can you remind us kind of the emotion of how you move from sole serving too a little bit more of a and involved sales process in order to drive deeper and broader adoption.
Yes sure. Thanks for the question <unk> so.
So sort of enterprise last year and this year last year, we built a really strong foundation and investing in regional go to market leadership, and enterprise and infrastructure to support our success and the enterprise and as we mentioned we saw really strong enterprise adoption and momentum last year, particularly in the second half of the year.
We bought and those gms and each of the regions and each of the key regions that we focus and with enterprise leadership backgrounds from companies like Salesforce, and <unk> and Linkedin, and so forth and this year.
The plan is to continue to grow and scale, our enterprise sales organization as well as invest in.
And the enterprise platform.
Just to give you a little bit more color on that on the on the.
Platform side, we're making major investments in.
Some product areas like Warcraft visualization reporting advanced administrative controls and broader compliance building out our sort of technology and services partner ecosystem and continuing to invest and integrated goals management and some of those cross company used cases, and then on the business side, we are growing and scaling our direct and enterprise sales teams and.
Asia, Europe, and North America, and we've got the Gms and placed and we believe we're uniquely uniquely suited to scale as a trusted partner and provider of clarity to the whole organization. So yes.
So we'll continue to scale and the enterprise and we're really encouraged by the woman that I'm coming out of this last year.
That's great and maybe as a follow up and you've also talked about expanding the number of languages and that's a good was for six to 13, if I got that right.
Can you.
Give us some perhaps some math on what is the.
Population or what part of the global knowledge worker base, you'll be able to kind of Peel off with this addition.
Yes, I can give you some of that and we can follow up for some of the details. So we are expanding languages availability as you said from 6% to 13. So this is to make a final assessable to a significantly larger portion of the world's teams as you mentioned and expand our Tam.
These languages are all focused in Europe and Asia.
And we'll be doing it rolling over the course of the year.
And I don't I don't have the exact math and how much of the Tam and opens but it's particularly focused on languages and countries and markets specifically in Europe, and Asia that are sort of and next bats beyond the the languages and markets we focus on today.
Your next question comes from the line of Rob Oliver from Baird. Your line is open.
Great. Thank you guys very much for taking my questions are for.
First of all one for you Chris.
And just you you mentioned and one of your references and a weighted on the integrations, which was a technical and nontechnical.
When with the with the new jewelry integration and I was wondering if you could provide some color on those integrations you guys had announced earlier in the quarter and maybe some other use cases, you're seeing around there you know, particularly because some of them are viewed as your competitors. So it would be curious to hear a little bit more about how and how youre seeing those integrations play out.
Yes sure so.
The strategic integrations, we announced and the sort of second half of last year were largely with players like Microsoft Google Slack Zoom Adobe.
And from Atlassian and sales force most of those companies for which were pretty strong partners with in terms of some of the use cases I'll just maybe highlight a couple from some of the some of their customers I mentioned earlier in the prepared remarks, So Dustin mentioned Twitter as an example, where theyre experienced team, which is largely their R&D design and product teams.
Using a standard to manage things like product road mapping and content creation and there the integration and the integration, which is pretty typical of what we see where we're connecting technical and non technical teams through that integration. So we will tend to see that in a lot of cases, where the boundary between developers and broader teams and the broader team.
We're wanting to manage cross functional use cases with a sign of things like product Roadmaps product launches sprint planning and they want to integrate with sort of core development on the gyro side to enable those cross functional and use cases, and then there's a number of other.
Customers I mentioned, maybe I'll, just mention one or one or two more and.
The prepared remarks, and most of these involve various integrations that we talked about so.
Let's see hubs spots a good example of a company where.
And where we started and sales and marketing operations Im sorry, its marketing and sales operations and then expanded in Q4 it to enterprise two.
And to include not just more sales and marketing teams to include finance and HR teams as well and across those customers Youll find.
Some some level of at least one if not multiple of those integrations and all of those customers.
That's great Thanks, and deal costs and one follow up for you really appreciate the color Chris.
Chris.
You mentioned I think for use by R&D teams and it does sound as if this opportunity is expanding nicely outside the marketing Department for you guys. When you look at that those largest enterprise customers, which I think you guys said grew.
Free ex in the quarter, which is pretty astonishing.
And what are the patterns that youre discerning there as you know I imagine you're sitting at the top of the of the Warcraft looking down into sort of what other patterns, you're seeing that debt excite you about particular use cases and thank you guys very much.
Why don't I start destiny.
Yeah, I'll just start off by saying I think a lot of the growth and those customers. Just is really characterized by just being strong organic viral so really being driven by internal champions.
We're starting to use <unk>.
And on a particular teams and spreading out to the teams are adjacent to them.
And Christy, probably a better price and speak to exactly.
<unk> and used cases for cement.
Yeah. So just maybe just answer that exactly and and.
And I think you might know our direct sales team is really focused on those primarily segmented by by departments were functions and departments, where we're seeing the most traction.
And so building on that traction from last year and the second half of the year, it's largely and marketing and creative sales and account management strategy and operations teams, but we also see broader engagement and product design and HR and it teams and then going into this year, we're particularly focused on providing best in class workflows and best in class.
<unk> for particular cross team workflows that we see as.
We see as we uniquely address and which bring more teams into Santa so some examples and specifically our global campaign management product launches and creative development processes as an example.
Yes.
Your next question comes from the line of Mark Murphy from Jpmorgan. Your line is open.
Hi, Good afternoon, and this is Matt Coss on behalf of Mark Murphy can you comment on any rollout of competitors.
Among your customers, especially as you've seen success at the enterprise recently.
Yes, so from the competitive landscape perspective, and I'll, just remind everyone. There's a huge greenfield opportunity for most information workers. The vast vast majority of the world and information workers don't have work management tools yet so.
And that's why the business imperative of this category and accelerating so.
With that I think you were asking about the competitive landscape and if it's changed.
Our primary competitor remains it hasnt changed much at all and Q4, our primary competitor remains the status quo of spreadsheets and E mails meetings and in most deals that's who we're competing with.
And then when we do compete we don't we don't tend to see any particular competitor more than than we have and the past.
Thanks, and then a quick one for Tim gross margin is up nicely.
For fiscal 'twenty, one how should we think about that going forward.
Yes, I mean, I think you share I mean.
And we're pretty much I would say, we're kind of best in class gross margins and I think you should expect the business to stay at this level.
Your next question comes from the line of Sam Slutsky from Morgan Stanley. Your line is open.
Perfect. Thank you so much guys and congratulations on a very strong quarter a couple.
Couple of questions for my and our first one on on international growth.
And as <unk> mentioned the expansion from six languages, and 13 languages and believe will be important but how are you thinking about the support from our go to market perspective, as far as really attacking the international opportunity and the coming year and then I have a quick follow up.
Sure. So this is Chris I've got and let me give you a little color on that so we're very from a from a direct sales perspective, and these international markets, We're really focused on key markets to win.
And so by outside of North America, and Europe. For example, we have a hub based in Dublin and field offices in London, Munich, and Paris, which are our largest markets in Asia, we have hubs and Japan, and Australia and now field office in Singapore and those are those are our key our key markets that we focus on coming coming out of the year.
And then these new languages will turn on new markets over time over the course of the year as well.
They're primarily all languages focused and sort of the next sweet spots in Europe, and Asia, and then implied and that I think is like How's international growth going and it's pretty it's pretty balanced we're seeing pretty strong similar growth in both North America, and our core international markets and not get anything that Tim and I think that's exactly right.
That's very helpful. Thank you and now for.
Follow up question. So if we look at.
How much you are making per paying user right and if we look at it and yet.
At the end of this year versus at the end of 'twenty. It looks like that went up by about 25% to 26%.
Year on year, which is obviously very impressive and you when you combined with just the overall growth of your customer base. That's how you get to your overall.
Growth at the company, but specifically on the per user per paying user increase what's driving that is it.
Is it more just.
Just customers moving up into into the enterprise.
Anything else along those lines. Thank you.
Yes, so I think there's two things happening one.
Both natural adoption kind of the bottoms up natural adoption of small teams getting more of their team members onto the platform right. So thats one way, how we increased the ACB on a per customer basis and then the next lever is really around the functionality the features and functionality to both business and enterprise so when our customers generally start and.
Premium.
SKU, they can move up the value chain and to both business and enterprise, where we have higher asp's.
Yes, I might just add this is Chris and I might just add one thing and sort of like where we are and that evolution.
And of moving up tier in Q4 was the first quarter that over 50% of revenues came from a combination of the business and enterprise tiers and that's up from 42% for prior year. So it gives you a little mathematical flavor to how that's going.
Your next question comes from the line of Brent price Lin from Piper Sandler Your line is open.
Thank you and and good afternoon here I guess.
And here for Destin, and perhaps will take a step back and and get your view just on the broader opportunity you saw and exits the year with one and a half million paid users that compares to I think Microsoft 365 with commercial paid users over $215 million. My question. Here is is just you think about.
The broader seat opportunity for for this work coordination layer is there something unique about coordination that would apply to us just a smaller subset of these.
Paid users that Microsoft has and it work happens beyond Microsoft and Salesforce, and workday and lots of different applications, but just trying to get a sense of.
Given such the so much success that Microsoft has seen and.
And of that productivity space is there anything unique about these coordination apps that might be suited for a smaller subset of the market or would've address the full gamut of use cases that Microsoft for Russian today with all the street and 65.
And so when we think about the overall collaboration landscape.
And to talk about it in terms of the three CS So content communications and coordination and.
And we're really and coordination layer. So absolutely key question, who is doing what by win the deal for all collaboration market I think Microsoft and agree with us that for the addressable market and the long run as much larger even though there are 250 millions and we think of it as one 5 million knowledge workers globally.
And content and communications that those categories have been around a lot longer and so they're further adopted.
And really I think about office 365 is mostly and the content category and then teams is a little bit more and the communication.
Enormous greenfield opportunity to reach the rest of the Tam and all three categories, but coordination has the most niece and there's still just a very small percentage of teams using anything and that the.
For more coordination category, but they are doing work management. They are doing it with spreadsheets and with long email threads and with in person meetings.
And what's happening, but theyre and theyre not using purpose built tools for it and so I think there's a big opportunity for all of those knowledge workers to really cut down on and work about work and accelerate their productivity by adopting work management and so that's really the.
For long run our opportunities.
It's a big market.
Got it helpful color, there and then I guess a follow up for Tim here on the Q1 outlook.
And our guidance here is about 10 percentage points above what we thought it would be here and so youre looking at close to 47% kind of growth in Q1.
And what's giving you confidence and in.
And in the guide up here is the momentum that you saw exiting kind of year spilling over into the new year, just any additional color on the <unk>.
And it looks like a pretty meaningful guide up here for Q1, it would be helpful. Thanks.
Yes sure.
It's really a combination of what.
What duston and Chris kind of mentioned on the call in terms of.
And the growth drivers for our fiscal year and the momentum that we saw for Q4 just in terms of.
The new customer adds that we're seeing the expansion that we're seeing within the existing customer base as well as the momentum we're seeing with some of our and with our enterprise motion. So all those things make us.
And feel really really good about kind of the both the guidance and the outlook for this year.
Yes.
Your next question comes from the line of Yao Chu from Credit Suisse. Your line is open.
Hi, there congrats on a strong close with you and thank you for taking my question I have one for Chris and Tim and I wanted to dig a bit and to the go to market, specifically, how youre thinking about leaning into advertising and the efficacy of installers.
You all have a formula that obviously has been working well to some degree for the question is how that strategy may be impacted given ongoing privacy and platform changes from the larger tech platforms, whether it be <unk> changes of Google's Cookie deprecation.
How do you think about reallocating those dollars if needed as it more QC H.
Within the bucket and help us understand that decision process. Please.
Yes, I mean, I think that's a good question I think one other things I mean, I think some of that it remains to be seen and we'll obviously all.
Optimize based on whatever regulatory environment, we end up working and but I think it's really important to note one.
This is a greenfield opportunity two we have.
Over 30 million registered users. So we have a very large installed base of free users that we can that's already familiar with Astana and note notes about us and I think three kind of the the tailwind both in terms of just the category and.
And the need for teams to find to have alignment and clarity around the work.
I might just add one point, which is.
And our AD strategy is quite diversified there are many different channels and many different regions and for each of those channels and so I think.
Any given month one of the platform dynamics may change, but we still have all of those other channels, we can easily Munich re.
Allocate dollars to if needed.
And I don't think Theres, any one thing Mac and totally disrupt that customer acquisition strategy.
Yeah, and that's and if you don't mind items.
And just add one more point on top of that sorry, which is that our our top of funnel strategy is a blended paid organic and product led strategy and organic and word of mouth is the strongest driver of growth and that's.
So that blended approach gives us some flexibility.
Thank you so much for that two months are there just one quick follow up for Tim on net retention rate.
Should that how should we think about that trending throughout the year I think we started to see a little bit of stability and.
Possibly inflection and small business that 115 number used to be one 'twenty.
Should we'd be hopeful that that returns for that level.
Yeah, I think the way to think about it is obviously that the number we reported is a trailing four quarter average so theres probably still.
One or two more quarters of the cohorts.
Our year that we need to work through so I would say probably in the back half of the year that we would expect that number to tick up.
Your next question comes from the line of Andrew Tilapia from Bear and Burns. Your line is open.
Thanks for taking my question I, just had a follow up on the ACB per customer I mean, it appears it grew quite significantly in Q4.
I was just wondering in terms of the trajectory going forward should we expect that to continue to accelerate or could it plateau at these levels.
Yeah. That's a good question and Andrew I think the way we've kind of think about the business is that that the business needs to grow and a balanced way. So that the combination of total customer growth and I think customer growth has been anywhere from into the high teens to kind of the low.
Low twenties.
And that ACB, we would expect it to kind of growth and a similar range next year as well. So we don't want to over rotate on any one area, where if our customer basis and grow and we only go through ACB, but we want to see a balanced we have pretty much a balanced approach to that.
That's helpful. And then just a follow up on on the potential enhancements coming and the next 12 months I was just wondering is there anything that you would flag.
You are kind of excited about.
And for this year that we should we should be aware of coming in terms of time line.
Sorry, just to clarify you mean calendar timeline right now and our future time line.
Yes, correct, okay, Okay, sorry, yeah yeah.
Yes, there are a number of our big areas of investment debt really matched to our differentiator. So.
For the first differentiator is the song and it's very easy to adopt and it's designed to maximize personal productivity. It's we're actually doing a few key things. This year that will really focus on individual for.
<unk> experience.
Additionally, sonatas about platform for cross teamwork, and we talked about on the.
Our call last quarter.
A lot of our roadmap. This year is focused on helping to visualize and report on the amount of work graph.
And then we're also going to be investing in building out our workflow store and like we showed in the future Maisano event.
And a way to build those workflows. So that's going to be really exciting. We're also investing further in the goals functionality that we launched also at the future of us non event over the summer.
And as we've been talking about that part of what helps drive upgrades to our more premium tiers as well as expansions and large organizations.
And then finally, we're going to be investing a lot in the enterprise platform because it's <unk>.
Is.
And equally capable of connecting.
Work at the project level up to higher level goals and initiatives.
And that really makes it really well suited for executives and for for really supporting the needs of the entire organization. So that's going to look like.
And more of the integrations that Chris was talking about.
More in terms of workflow and automation as well as serving the needs of ITE and the form of enhanced administrative controls and compliance.
And and a slew of other features I think those are really day.
And the <unk> of our stores this year.
Your next question comes from the line of Patrick <unk> from JMP. Your line is open.
Oh, Great. Let me add my congratulations so does and I think my question is probably for you which is what what is your vision, maybe a little longer term here in terms of what.
You can do by applying AI and machine learning to this platform and.
Maybe in particular and you guys find a way to guide me and what I am supposed to being doing next and my day.
In terms of like what the highest value action is for my time at any given moment.
Yes, I mean, you're basically nailed it and that's kind of the pitch.
We've talked a lot about asada as the map for their work and your organization. So AI is really about being a navigation system for for that math and so at the individual level, yes, exactly it's about helping prioritize your work understand.
Where you may be blocked and your teammates understand maybe what the highest leveraged action and for you to take next so sorry, and sometimes described us as almost day Spotify playlists like experience, where you come in every day and the system just says here's the most important thing for your work on here's what you should work on next and you don't have to think as much about all of this sort of triage and.
And then at the team level.
We can similar we help optimize your workflows and help direct work. So if we understand you know.
And what your goals are with the steps or next next steps are between now and accomplishing the next call.
We can give you some guidance on perhaps who the work should be allocated to based on what we know about their skills and past experience as well as the workload.
And we can help unblocked dependencies and figure out exactly what the fastest path is between your current state and and reaching your goal.
Alright, that's your branching and if I can ask them.
Sort of a follow up.
What is your what's your philosophy about about us on it and getting back to work and.
And the central locations because on one hand.
And it ranked and such a great place to work and you guys use your own tool and I'm. Just wondering do you think it's important for people to be around each other.
Well I think that.
And there's going to be a lot of experimentation and the post Covid World. I think this is really spurred a lot of innovation is going to create a lot of different environments for our customers.
Path, we've chosen for <unk> and the near term is to return most of our employees for the office, even before Covid, though we did have some employees in.
And remote roles.
And as I was mentioning before we also have.
11 offices, all over the world so even when our employees.
And are working with their immediate team and an office and they are often working they are often communicating and and distributed way with their with their partners across the entire globe and so I think even though a lot of the time will be and the office.
We're also just we still have elements of remote cultures, and working and not distributed way.
Your next question comes from the line of Robert Symons from RBC capital markets. Your line is open.
Hi, Thanks for taking my questions first I was wondering if you could give us some color on the industry trends you saw over the year have you started to see the impact of the industries start to come back.
Yeah, why don't I start and yes, some color yes. So.
So what I'd say first is our primary mechanism for go to market I know some of your questions probably about COVID-19 and the affected industries and our primary mechanism for go to market is sort of functional and functional teams versus industry verticals and so.
And we've always sort of been focused that way and.
So you can see here to sort of see it over the course of the year. The traction we've had and those different functions and those kinds of things came out and know if you want to call and I would say you know I think certainly I think in combination and Q1 and Q2 those industries such as travel travel hospitality, we did see them, either downgrade or churn and primarily because of the.
Pandemic.
But for US I think what we've seen is some of those and we haven't exactly seen any of those particular like come back and expand yet, but I think what we've seen is that there are other.
New companies or smaller companies.
That are coming in or other companies try and different tools related primarily because of the pandemic because they need to get clarity and alignment and so.
I think it's probably more of a balanced view of both.
Those that were impacted and the tailwind.
Kind of the remote work and what we saw kind of and the numbers.
Okay, Alright, and then I guess can you talk about how currently are you seeing your customers adopt.
The full permanent clarity are you seeing that vision resonate with your customers.
Yes. This is Chris I can answer that so yes, we're starting to see it more and more I mean book.
Our business model as I think you all know is very bottoms up so it starts with viral self serve adoption and team by team and then we land and expand usually and it department or two and then overtime, we expand while the wallet deconsolidation and you know.
On that journey and those first two areas I described are going really strong and in terms of getting the wall to wall. We're starting to see that I mean, it's early days, but we're definitely starting to see that certainly and small and medium sized companies in fact, a number of the customers I E.
Talked about in the prepared remarks, just re mention them.
Actually wall to wall deployments, so go JAK and <unk>.
Asia upgraded to enterprise.
And it was.
Some of it was for the it security and user management controls, but a lot of it was to provide the executive team with the support visibility they need to connect and key business objectives to the underlying work of the teams. One. Other example, and there was hot Mart, which is a leading Brazilian startup and they went wall to wall with thousands and thousands plus are poised.
The connect everybody from finance to marketing to strategy and ops and talent. So yes, that's a trend that we're starting to see particularly debt, we're starting to get to a wall to wall, particularly in small and medium size companies.
And I would just add debt.
If you don't mind, just in terms of the top of the pyramid of clarity.
One of the key features that we think of is really addressing that that part of the clarity map is portfolios that was part of why I did a sort of deep dive earlier and the call and so we are looking at usage of that and you saw that among eligible customers for the ones that are using the business for enterprise tiers.
It's almost ubiquitously used for vast majority of our customers that are spending more than $5000 on annual basis are using portfolios and in fact.
One of the reasons, we mentioned debt as we just recently added this new feature of nested portfolios and being able to include one portfolio inside another launch that only six weeks ago and your.
We're surprised to see that more than half of the eligible customers are using that as well already so it's really seeing strong adoption of those top of.
Top of the pyramid of clarity features.
There are no further questions at this time I will turn the call back over to Katherine.
Well. Thank you everybody for joining us today, we really appreciate your time during a busy earnings season, and we look forward to seeing you soon thanks.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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