Q4 2022 Asana Inc Earnings Call
Situation in the region.
We had a strong Q4, which capped off a great fiscal year.
I continue to be really proud of our team our mission driven culture and what we've achieved together.
As you can see from our results our product led strategy and execution drove accelerated revenue growth of 67% year over year versus 59% last fiscal year.
We saw continued strength in the enterprise with 340 customers spending $100000 or more on an annualized basis.
Those with the biggest investments also significantly increased their footprint with the dollar based net retention of this cohort much higher than the $50000 or more cohort in Q4.
For example, our largest customer is now spending well into eight figures with more than 50000 paying seats and growing.
There are continued investments speaks to the power of the <unk>, our proprietary technology that enables cross functional teams to work together at a global scale.
Customer adoption is at record levels with well over 2 million paid users.
We partner closely with our customers to help them succeed at their missions and co create our product roadmap through channels like <unk> voice of the customer program.
Speaking of products, we launched more than 200 features last year a rate of more than four features every week.
We also have a large and rapidly growing this honest together community now representing more than 3800 is Han ambassadors around the world.
Our talent and culture is what makes these results possible.
Proud to share that <unk> has grown to over 600 employees and earned a record of 16 total workplace awards in 2021 with three awards ranking us number one.
These included Fortune's best workplaces in the Bay area in Tech and for Millennials.
We're entering the new year with incredible momentum and as companies look to drive their most critical initiatives they are increasingly turning to us.
While others are building suites of collaboration products for small teams our strategy is different.
Pure play work management company committed to leading the category and building the most comprehensive platform capable of serving organizations of all sizes around the world.
Teams are organized functionally, but most work gets done cross functional.
That's also where the greatest opportunity is for reducing friction and increasing impact.
<unk> is a great platform for cross teamwork, thanks to our ability to serve as the system of record across different projects. This is one of our big Differentiators and the key to supporting large complex organizations.
The larger the team and more cross functional use cases, the faster Sonic and expand.
These trends give us the confidence to invest aggressively particularly in the enterprise.
We're initiating topline guidance for Q1, representing 50% growth year over year.
We're also initiating fiscal 2023 revenue guidance at 40% growth year over year at the midpoint of the guidance range.
As we enter fiscal year 2023, we have a strong product cycle ahead.
We will continue to focus heavily on our enterprise Warcraft, improving on an expanding functionality required by the largest and most complex organizations.
We're already off to a fast start to the year launching products out of the gate.
On February 15th we introduced the Sana flow.
We have new features purpose built to enable workflow automation across the entire organization.
It used to be that only or system administrators can bill Burke close these.
We've democratized that power with workflow builder appointing quick tool that makes it easy for every knowledge worker to create automated workflows.
Importantly, you can also add everyday apps like slack Adobe creative cloud Salesforce in June right into their workflows.
Two new additions based on our partner's network narrow in Joplin.
This means a sonic and serve as the connective tissue across existing best of breed collaboration tools.
Our customer base is already fanatical about this launch we had a combined 12000 people registered for our recent <unk> and <unk> demo.
And in only three weeks 200000 users have tried workflow builder with 42000 rules created.
Our redesigned template library is where you can save share and reuse. Your most successful workflows. It also features the industry approved templates made in collaboration with leading organizations around the globe.
This year, we'll build on this launch with part of our roadmap dedicated to adding more partners and more capabilities.
Our next big product moment is <unk> employee impact suite in Q2, which will give leaders a blueprint for how to better leverage the power of their people.
We'll be announcing several product enhancements to help employees operate with clarity of purpose, either most impactful work and fuel valued for their contributions.
These enhancements will help them buying flow and limit distractions and keep them in sync with their team members.
Yes.
Our investments in creating high level clarity also means building on the adoption and capabilities and features like reporting and goals and the ability to better track. The time spent on the work done in support of these goals.
We're seeing incredible early adoption of our goals products by existing customers like the inevitable zero. These.
These companies care deeply about employee engagement and actual result, and chosen to go wall to wall.
Our work platform of choice.
Youll see even more enhancements to Goldman functionality to better support larger enterprise companies over time.
The ties us all together as an emphasis on helping large organizations get clarity around the warcraft and simplify workflows something Astana is uniquely capable of doing.
In addition to the functionality that helps those teams organized we're investing in all the other things important to large enterprises to like Youre, making a sona accessible to all employees, improving our compliance capabilities, adding integrations for data loss prevention and discovery and scalability.
We'll also be increasing the depth and breadth of the course on our platform by expanding our partner ecosystem.
I want to wrap up by saying that this virtually untapped market opportunity for work management and our differentiated ability to deliver value gives us increased confidence in investing further in the enterprise.
We're still in early innings, and we're investing to win.
And now I'll turn it over to Anne.
Thanks, Duncan I wanted to join you in congratulating our teams to accelerating growth during a period of dramatic change in the world and our market.
We achieved an amazing milestones this past year, our pharma is now.
13 major languages, meaning our product now to talk about the majority of the population in their native language.
The new offices in Paris, Singapore, and Chicago to better reach and serve our customers growing our customer facing teams around the world.
Our significant pop a final investment paid off with new records in both.
Topic and final.
We hosted thousands of attendees from all over the globe are focusing flow and scalable generating significant pipeline, while increasing our ability to reach larger customers on building relationships with local ethanol.
The tremendous traction we made in some of our most strategic and backbone of proven that we not only have the right product. We also have the right. Okay on strategy.
The number of customers spending $50000 or more.
125% in Q1.
And as Duston mentioned, a number of customers spending 100000 online of 340 in Q1.
We've been closing seven figure deals on early.
Ali.
We've accomplished so much on are still just getting started.
Full year 'twenty, three we will see our largest top of funnel investment.
I will focus on solving our customers' most strategic cross functional knee.
Grow and scale the value we deliver them.
Let's talk about some other customer wins in Q4.
We have one big deals across all industries, including banking media retail healthcare and telecom.
This quarter one of the largest banks in Canada that consolidated on Opana to increase their operating agility to improve cross functional work across wealth management marketing mcl and to eliminate the time consuming Bakken Carnival.
<unk> on spreadsheets to coordinate work and there are a bunch of it.
One of our largest global media and marketing conglomerate signed a multiyear contract for autonomous enterprise solution and added 1000 feet.
The agencies around the world using <unk> to manage their clients media and marketing campaign grow their businesses and gain market share.
Many of our expansions are also accelerating one of our largest this quarter was with Morningstar, a global investment research company.
First began using <unk> enterprise solution to streamline global marketing campaign, and managed strategy and global account.
After realizing click efficiency gains in just two quarters more than tripled to bring other departments throughout the business until final.
It was the ability to scale eliminate silos and orchestrate work across different lines of business one local cap.
Next I'm sure many of you benchmark to show or two over the past few years I definitely did this quarter one of the worlds, leading Jamie services upgraded from our business to enterprise solution.
Studio and production divisions rely on <unk> to help with real time team support so they can hit their production deadlines and ambitious with sharper call with this upgrade their corporate teams will now also be able to utilize the <unk> to manage their work.
T mobile the industry leader in <unk> is known for their unwavering obsession with offering the best possible service today.
To do this teams need to be on the same page, which is why they chose to expand their use of <unk> enterprise solution map partner.
Now their emerging product and digital teams can collaborate cross functionally in one platform to develop strategies and business plans for consumer market co create digital products for emerging markets and deliver digital technology programs for business and government.
Another inspiring impact customer who upgraded to <unk> enterprise solution this quarter with pharma the basics apparel company with a mission to help those experiencing homelessness.
I only have a few favorite bomber styles, including their pride collection and Princess collection. Upon this they donate a product for everyone solid and have donated more than 60 million items to more than 3500 community organizations and shelter to date.
Number of Thomas' teams use <unk> to manage internal projects and communicate request.
An update within the platform. This allows for easy cross functional collaboration and connections.
We also saw success with channel partners and some of our fastest growing international geography.
PC home is now the leading integrated E Commerce service group in Taiwan, providing E Commerce, Fintech and web portal services. They chose us honest business solution this quarter to manage product development.
They were initially looking for a tool for the it and engineering teams to manage their fast paced product development cycle, but with the help of our local partner Master concept. They decided to also bring in their marketing customer service and operation team and Telefonica as well so everyone would have a system of record for the development process to help launch products faster.
Not only are we adding big customers, but we're also helping customers to serve their own customers faster. This quarter, we're launching a strategic partnership with one of our existing customers a major global medical device company to bring a new HIPAA compliant workflow solution to the healthcare industry.
Instead of relying on manual processes and disconnected systems across our vast network.
Using <unk> to power, a workflow that connected processes and team to real time update to improve operational efficiency and customer care.
<unk> they seek to serve more customers support them in growing their business and create consistent experiences for those receiving treatment.
By solving the pain point for their global network of organization, we have the opportunity to reach hundreds of thousands of offices worldwide over the life of this partnership.
This partnership is just the beginning and one example of how they found a platform can support coordination at scale across many industries organization types from franchises to supply chains and much more.
Also excited to announce that to further support our finest enterprise advancement a broader HIPAA offering will soon expand to other customers in the health care industry later this year.
Sure.
As Duston said the major fiscal 'twenty two wins, we had with customers like Warner music, Viacom CBS and the largest automotive manufacturer in the world give us increased confidence to invest further in the enterprise in fiscal 'twenty. Three this will include making our biggest investment increase ever in pipeline build to support lead generation.
<unk> sales development reps account based marketing and customer engagement program.
We will be focusing on our sales infrastructure solutions selling customer success and everything that supports customer expansion.
Major levers for adoption and expansion.
Our global Enterprise go to market sales organization, especially quota carrying sales headcount will grow faster than overall head count.
And we will be expanding our ecosystem of technology partners channel partners and co selling network.
An example of a successful partnership has been vimeo.
Well that just yesterday Astana in Vimeo, we're named a top three joint venture among fast company's annual list of the world's most innovative companies.
In conclusion, we are investing to win especially in the enterprise, we're growing adoption and expansion with our product led strategy and we're going to market focused on customer success and adoption.
And with that I'll pass it to Tim.
Q4 revenue growth represented continued momentum in the business.
Revenues were $111 9 million up 64% year over year.
This puts us at an annualized quarterly run rate of $448 million.
Revenue from customer spending 5000, or more annualized grew 82% year over year.
This cohort represented 69% of our revenues in Q4 up from 62% in the year ago quarter.
We now have over 119000 paying customers at the end of Q4 up five.
<unk> 5000 in the quarter.
This represents a 28% year over year increase.
We have 15437 customers spending 5000 or more on an annualized basis up 52% year over year.
And growth in our larger customers is even stronger we now have 894 customers spending 50000 or more on an annualized basis.
125% year over year.
And as Dustin and Ed mentioned, we have 340 customers spending 100000 or more on an annualized basis as of Q4.
As a reminder, we define these customer cohorts based on annualized GAAP revenues in a given quarter.
Our dollar based net retention rates remained strong across every cohort.
Overall dollar based net retention rate was 120%.
Among customers spending 5000 or more our dollar based net retention rate was over 130%.
And among customer spending 50000 or more our dollar based net retention rate was over 145%.
As a reminder, our dollar based net retention rate is a trailing four quarter average calculation.
Yes.
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 90% improved from 88, 2% in the year ago quarter.
Research and development was $37 7 million or 34% of revenue we.
We continue to invest heavily to fuel innovation on our proprietary technologies that work graph.
Sales and marketing was $75 6 million or 68% of revenue, reflecting the investments in growth for both our self serve and sales led motion.
For example, our customer facing teams grew faster than our overall company head count growth in Q4.
G&A was $31 3 million or 28% of revenue.
Operating loss was $43 9 million and operating loss margin was 39%.
Net loss was $46 9 million and our net loss per share was <unk> 25.
Now onto the full fiscal year highlights.
Fiscal year revenue growth accelerated to 67% year over year to $378 4 million.
42% of our revenue came from outside the United States.
Both U S and international revenue growth for the year was 67% year over year.
We added over 26000, net new paying customers during the year.
We also added over 5000 customers spending 5000 or more on an annualized basis during the year.
And we added almost 500 customers spending 50000 or more on an annualized basis during the year.
Importantly, our unit economics remained strong throughout the year.
Our net expansion rates across all segments increased.
Sales and marketing payback was less than 15 months at the end of fiscal year 'twenty two please.
Please refer to our SEC filings for the calculation.
With strong gross margins and compelling unit economics, we feel confident in our ability to continue to invest further in durable long term growth.
Moving onto the balance sheet and cash flow.
Cash and marketable securities, including long term investments at the end of Q4 were approximately $315 million.
Our remaining performance obligations or our Po was $218 1 million up 78% from one year ago.
85% of our <unk> will be recognized over the next 12 months, which grew 70% from the year ago quarter.
Our free cash flow is defined as net cash used in operating activities less cash used in property and equipment and capitalized software costs, excluding nonrecurring items, such as the build out of our San Francisco office.
In Q4 free cash flow was negative $41 2 million, reflecting our investment in growth and rapid onboarding of new head count during the quarter.
We also ended the fiscal year with over 6500 employees.
We are very proud of the business momentum, especially our success with very large scale deployments at great reference several accounts and the velocity of innovation of this year.
Now moving onto our fiscal year 2023 outlook for Q1 fiscal year 2023.
We expect revenues of $114 5 million to $115 5 million.
Presenting growth rates of 49% to 51% year over year.
We expect non-GAAP loss from operations of 68 million to $66 million.
And we expect net loss per share of 36 to 35, assuming basic and diluted weighted average shares outstanding of approximately $189 million.
For the full fiscal year 2023, we expect revenues to be 527 million to $531 million.
Representing a growth rate of 39% to 40% for the full year.
In terms of the shape of the quarterly progression, we expect to see a more traditional enterprise sales seasonality with our sales capacity ramping towards the second half of the year as our mix continues to evolve towards the sales motion.
Given the large untapped opportunity ahead and along with the success, we've seen in fiscal year 'twenty two.
The work graph scaling to 25000 50000 seats and beyond right.
Increasing our investments to expand the functionality required by large and complex enterprises and further investments in our go to market motion in the form of increasing our sales capacity and customer facing teams to support adoption and expansion within many of our larger enterprise customers.
We expect full year non-GAAP operating loss margins to be in the mid 40 percentage range for fiscal year 2023.
We believe the investments we are making in fiscal year 'twenty three reflect our ambition to be the category leader.
Our drive towards durable long term growth.
And with that I'll turn it back to the operator for questions.
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The first question comes from Alex Zukin with Wolfe Research. Please proceed.
Hey, guys. Thanks for taking the question.
Look I think the <unk>.
Gratulation was in the quarter, obviously very strong result.
And a great guide I would say the question that I'm going to get most of all tomorrow is if we look at the incremental.
Operating margins of the business and the investment profile that you're thinking about as we look at next year unpack for us maybe both duston.
Like what are where are the primary areas of investment and focus in how are we going to see the ROI on those investments is it going to be more enterprise lans faster expands because you seem to be doing really well landing the enterprise customers today, so what what isn't there yet that you want to.
Sure and take this year to invest in to get to and how should investors think about that.
Yes, that's a great question I think you framed it really well.
I think the big picture is the categories maturing really quickly, but our view is it's still really early days and vast majority of teams out there are still on the status quo of spreadsheets and email.
And so we're excited to continue investing to build out our differentiated vision and reach more of the market.
So I'll go through.
There's really two big areas, we're making the largest investments I'll talk about the R&D side first and then maybe hand off to and actually to sort of double click on go to market.
But in R&D, we have a really strong product cycle ahead, if youre going to continue.
We focus heavily on our enterprise Warcraft, so improving on an expanding functionality required by the largest and the most complex organizations as you said, where we're already quite successful with them, but there is.
If there is a lot of cumulative needs across all the different organizations out there and more value that we can deliver to help them be even more successful.
So we already started started off the year just a couple of weeks ago with aerosol flow launch.
And I mentioned in a lot of calls last year that that was one of the things I was most excited we're working towards towards building throughout the year, but theres a lot more to do so a big part of our roadmap for fiscal year 'twenty three is dedicated to adding more capabilities to the workflow builder further developing the template library, and adding more and more partners to integrate.
The workflows.
And then in Q2, we're launching our employee impact suite. So that's going to help everyone on the team get clarity of purpose find focus and flow to do their work and really fuel recognized and valued for their contributions.
And then throughout the year, we're making more investments in creating high level clarity. So this is part of the way that <unk> is most differentiated from other work management solution.
That really means building on the adoption and capabilities or features like reporting goals and portfolios.
The ability to better track the time spent on the work done in support of those goals.
And in addition to hope for the functionality that helps teams organized we're also investing in all the other things important for large enterprises to set things like making us an accessible to all our employees, improving our compliance capabilities and adding integrations for data loss prevention and Ediscovery.
And scalability to really be able to serve this very large deployments with tens of thousands of seats.
Tens of thousands of people working together in one instance.
And then finally, we will also be increasing the depth and breadth of the course on our platform by expanding our partner ecosystem. So it really ties that altogether from a product perspective is an emphasis on helping larger organizations get clarity around their work graph and simplify workflows.
And then on the go to market side, we're excited to put more resources towards areas, where we're already seeing strong performance and that enable us to reach and serve our customers faster. So starting with our top of funnel. We're continuing to see strong performance in all regions were also making big investments in pipeline building, including scaling our global sales developing.
<unk> and increasing account based marketing and customer engagement program.
Hiring standpoint, our quota carrying sales head count will grow faster than overall head count and there what we see is when our team is able to partner early with our larger customers, we're able to serve more of their employees and make a faster impact on their most strategic cross team initiatives. We're also investing a lot in customer success and post sales programs.
And our larger customers, we are seeing a step function.
Change in adoption and expansion and this is because we're not only helping their teams adopted on a platform. We're also helping the organization codify and implement their best practices for cross team work. So this is the work many of our biggest customers are asking us to help them with given our 10 plus years of experience partnering with some of the world.
Most innovative teams that just this week and one of our efforts in 10 customers are seeking our advice on best practices for updating how their organizations sets and managers call across their enterprise and we're just seeing that demand and a lot of our larger customers and so we're excited to invest in places where we're already seeing results.
Got it perfect and then maybe just as a follow up.
With.
A good proportion of the revenue coming from international or outside of the U S any thoughts or.
Incorporation into the guidance.
Around headwinds if there are any out of Europe , western or eastern and just in general how do we think about the conservatism in the guide with respect to that.
Hey, Alex this is Tim.
It's probably too early to fully assess the impact of the Ukraine crisis on the broader implications right now.
Now revenues from customer based in Ukraine, and Russia, not a material part of our business, but again, it's really just difficult to predict both the short and long term implications sitting here today and I would say like many of you on the call and other companies I mean, we're monitoring the situation closely.
<unk> of the euro falling increased gas prices inflation and supply chain issues in how companies and customers are thinking about and the investments.
Certainly concerning we're monitoring it but it's it's not factored into our guidance at this point and we're just going to monitor this.
Hock.
Perfect. Thank you guys.
Thank you Alex.
We have a question submitted by email. Please proceed.
Hi, This is Katherine I'm going to read a question from Rob Oliver of Baird.
Strong billings this quarter you guys rolled out a ton of enterprise specific functionality at your scale event in late 'twenty. One I wanted to ask if those announcements drove larger deployments in the quarter and how they have impacted the enterprise expansion pipeline.
Yeah, Greg I'll go ahead and answer that so we're seeing more customers choosing enterprise, including some of our largest customers who upgraded in Q4, including one of the largest global sports apparel manufacturers, a fortune 10 company and a global streaming service provider. So the revenue combined from our business and enterprise tiers represents more than <unk>.
60% of our revenue in fiscal year 'twenty, two and the revenue from those two tiers grew over 100% year over year in fiscal year 'twenty, two so strong demand for our business and enterprise tiers.
Thank you. The next question comes from Steve Enders with Keybanc. Please proceed.
Great. Thanks for thanks for taking the question I think you mentioned in the prepared remarks that you saw record record web traffic and new sign ups coming onto the platform.
I guess I'm wondering how are you seeing pay conversion at this point and how should we kind of think about that.
The new customers.
New customers potentially coming in going forward here.
Yeah. So.
The way, we think about our top of funnel investments is really based on payback and the quality of the customers and lifetime value. So we see and given our strong product led growth motion many of our enterprise customers actually come in through that funnel and then our sales team.
<unk> them and work with them to expand so we.
We invest based on seeing those results.
Okay. That's helpful and then on reporting in Angola, you mentioned in the remarks as well as seeing good adoption, there, but I guess how.
How are those driving.
Driving customers up to higher priced tiers at this point.
Well generally I think the larger the customer the more value they are going to get out of.
Trying to achieve clarity, what we call the top of the impairment of clarity so thinking about larger portfolios of work our strategic initiatives.
And goals is literally about modeling.
Your highest level objectives and mapping them to the work and reporting is about getting that high level of clarity.
That is most useful to the senior team leads are executives.
And so a lot of that functionality is just literally part of our business to your SKU.
So.
It will be part of an upgrade conversation, but I think sort of more qualitatively.
Part of what is exciting and any sort of sales cycle conversation when we are demoing the product and helping.
Blaine to potential customers for <unk> is differentiated from competition.
And so one thing I'll also add to that.
Sorry, I was just going to say something to add onto that is it's also those features are also helping us drive wall to wall and our upper mid market customers and so one of the fastest growing community platforms.
1000 seats and Theyre going to double in size this year as a company or more and every employee gets an instance of <unk>. It's.
It's just how they do work so those those are leading not only to upgrades in terms of the tiers, but adoption across an entire company.
Just a quick follow up on that last comment you had about one.
One option I guess, how prevalent is that becoming at this point and how should we kind of think about the increasing mix of those conversations versus maybe.
A year ago.
Yes, we are seeing that much more prevalent, especially in our upper mid market customers, which really we see as these high growth companies are the future of enterprise customers and so with the functionality that we just talked about and the investments in workflow and the investments in security and scalability, we are seeing many more.
<unk> about wall to wall and companies wanting a way that all of their employees to work together.
And this is duston, one thing I always like to add color on this too is even in the larger enterprise customers, but we often see is a division or a business unit is using us on a wall to wall. So using it cross functionally this is often.
Our subsidiary subsidiary with its own brand inside a larger conglomerate maybe came in through an acquisition.
And so yes mid markets, where we see it most literally but then if you look a little closer to enterprise customers. They also often look like that.
And I'd also just tie this back to the prior question about web traffic because.
It can be a little deceiving to look at that just as a funnel into new logos showing up new customers, because it's often actually generating sort of new land trust inside a large enterprise and so thats also part of how we see the ROI of that those investments.
Okay perfect very helpful. Thanks for taking the questions.
Thank you Steve.
The next question comes from Mark Murphy with Jpmorgan. Please proceed.
Oh, yes, thank you very much Tim.
You commented that you expect more traditional enterprise sales seasonality towards the second half of the year and I was just wondering when you say more do you mean more than more than other companies or do you mean more than you saw last year I'm just trying to.
I'm trying to understand if you mean, it's going to be a little more backend loaded in terms of the bookings patterns. This year.
Yes.
Mark was more than what we historically saw Amazon are primarily because of all the incremental sales capacity. We ended up there at the at.
At the end of the quarter in Q4, and the new adds in terms of the new capacity that we're building in the first half as well as building the infrastructure to support those salespeople. So you can kind of.
Compare it relative to how we've where our investments were for a sales led motion last year to where it's going on a go forward basis.
Okay understood.
Justin.
How is the usage and the actual engagement of this on our product trending.
Do you see employees begin to return to the office for.
For instance, I don't know what the typical usage looks like but let's say.
If someone is using the app for 20 minutes per day when their remote.
Are you able to track how does that change at all when they return to the office.
Yes.
I haven't explicitly looked at session time, but I've seen some of the just frequency metrics like how often people log in and those those look totally unchanged.
Im not sure how acutely you'd be able to see something like that since people are returning office and on different timelines around the world, but even aside from that I wouldn't expect to see a change because work management.
Something that was a rising category, even before remote work heads and.
And we really see us on us in a central platform to use whether you're working in a distributed way or from an office.
And even when you're working from an office you are often also working in a distributed way because a lot of our customers.
Work across many offices.
Even before the pandemic had I think 13 locations all over the world.
And so even though in each of those locations. We are working in an office, we are still having to collaborate in a distributed way and even within one building youre working across floors are working across one large floor plates still very useful to have shared source of truth in a database like us on it.
Thank you.
Thank you Mark. The next question comes from George <unk> with Oppenheimer. Please proceed.
Thank you for taking my question Duston, maybe you could provide some more color on flow and workflow builder with the customers that have already launched I know, it's early but have you noticed anything different in the way that they're using this honor.
Yes, it's still a little too early for that hopefully at the next earnings call. We can we can bring some some great anecdotes.
I did in the prepared remarks, I mentioned that there have been over 200000 individual people, who have tried to workflow builder and about 60000 rules that they've created with it.
That's a really great start we've seen a lot of excitement from customers, who want to learn more so there's been a ton of.
Thousands of people signing up for our Webinars to learn about it and reaching out to.
Their customer success reps and sales reps.
There's clearly a lot of excitement around it and the next.
A few months, we'll be about helping users really get the most value internally I can tell you that we've started adopting it in earnest and have been able to use it.
Really streamline our most complex workflows that involve.
Multiple groups around the company that needed to have shared contacts, especially around things like product launches where.
Where there are just all these many different constituents within the company and we want to make sure that we have really high fidelity processes that always execute correctly to get all of them in the loop at the right time.
Alright, and then maybe in the context of the.
The new capabilities that you're adding.
And the wall to wall expansion can you give us a bit of an update on the competitive environment are you seeing any displacement going on are you seeing any price changing.
Yes, I'll take that one we're not really seeing a material change in competition, but rather an overall increase in awareness of and interest in work management. So I think what we're seeing also is like our dedicated focus on innovating, specifically and work management the caliber of our customers and our ability to deliver and measure value quickly.
Is what kind of contributing to us being able to attract new customers.
When those customers and then expand with the ones that we have.
Thank you.
Thank you George the next question comes from Brent <unk> with Piper Sandler. Please proceed.
Good afternoon.
My question here is really around just.
<unk> of the trends here on work management, which historically has been a departmental land.
Encouraging to see more wall to wall you guys were talking about more cross functional being a driver here is the is the is the.
History shifting here, where youre seeing a bit of a tipping point towards wanting more of a cross functional tool than than we historically have seen or are those expansions happening faster any color around.
Some of the wall to wall activity, Youre, seeing and as the land profile changing here. Thanks.
I think that it's always been more typical for us to land cross functionally and certainly expand cross functionally so I think since the beginning of the company we talked about the most common way we enter through a marketing team.
Then theyre just immediately working with with product and sales and legal on cross functional workflows.
I think it's accelerated over time as we built out more capabilities that service that exact need and have established ourselves as differentiated and being able to support cross teamwork. We're also just seeing more awareness of work management and so as we move to larger deals. The the topic is moving up higher in the north.
Chart in our strategic chain. So we're talking to more <unk> and C level executives, who naturally have a cross functional mindset, how theyre going to deploy it.
So I think of it.
Yes. So it is a long term trend that is accelerating some.
Great. So it sounds like the lands are similar the expand seem to be accelerating helpful color. There Tim My last question for you is.
Just really around the aggressive aggressive investment plans for this year it looks like Opex growth will outpace revenue growth based on the guide.
As you think just about the philosophy of operating leverage.
Is there a pull forward of investment this year with the intent to drive maybe more leverage next year, just trying to think through.
At what point would you start to who will be willing to show a little bit more leverage in the business model. Thanks.
No. It's a great question I think thats right Brent too.
That you would expect to see more leverage in the following year.
One of the things.
I'm not sure we mentioned on the call was we did.
I mentioned this we accelerated growth and we actually grew faster this year than we grew last year.
And then when we look at the unit economics, and our gross margins gross margins being north of about 90% and that our unit economics, both on on payback and the unit economics on the larger deployments like the 50 K or the 100 K there net expansion rates being very healthy gives us a lot of confidence in our ability to continue to invest both on the product side as well.
Sales and marketing side to enable unlock many of those customers. So I think what youll see is the model that we've shared maybe about a year and a half ago at the at our direct listing how do we think about the growth phase in our longer term model those haven't changed how we define the growth phases as long as we're growing at a healthy clip that's kind of that's kind of.
The sweet spot of what we're looking for and that really hasnt changed and two additional points I want to make there. So in addition to revenue overall accelerating when we look at our largest customers. So revenue from customers spending more than 5000 annually that actually grew 90% in fiscal year 'twenty, two that's growing even faster than revenue overall.
A lot of the head count that we're adding conceptually really needs to keep pace with that part of the growth because.
A different motion to support those larger customers.
And then additionally on the marketing side, we have really great analytics on the specific channels and markets that we're investing into to acquire new customers or acquire additional seats in existing customers and that gives us a lot of confidence that we can further invest into those and and <unk>.
Back to get expect to get the return not necessarily immediately but on looking out over the longer payback period, we have really high confidence. So it's not like we're just sort of throwing money at billboards and Super Bowl ads, we're able to invest in really smart ways.
And have confidence that we're going to get that money back.
I appreciate the color. Thank you.
Thank you Brent. The next question comes from Andrew de Gasperi with firm Berg. Please proceed.
Thanks.
The first one on the partnerships, particularly I know when you launched the channel partner program internationally.
This was.
Expanding geographically, but I'm wondering if we were to fast forward a few years from now do you see the partner channel, becoming a much more meaningful contributor to sales like we see in some of your largest software.
Here's.
Yeah no. Thanks for that question I think right now and we definitely see this as both early and promising it really is helping us reach customers and more geographies. We had mentioned our partner Matthew concept in Taiwan, and how they were able to help us with PC home.
And growing that account faster in EMEA, we're seeing that same thing we were able to bring on great partners and they are investing in the business through dedicated resources and programs I think we so those are all promising and while we're still early we do think medium to longer term. This is an important place for us to spin.
Resources, and and bring on additional strategic partners, especially to help in the enterprise.
Yes, I would say, it's very promising and we're excited to see how we can better reach and serve customers together, but we also note that at the medium to long term investment for us.
Thanks, that's helpful and then as a follow up on the <unk>.
Figure deal that you signed last year I mean, I was just wondering if the pipeline that youre seeing for this year is there potential to do more of that type.
Over the next over the next few quarters.
Yes.
We're certainly very excited about that customer and the rate of growth.
The more that we're working with these larger customers that are using us for their most strategic cross team initiatives, we actually see faster expansion. So there are a number of the larger seven figure deal customers as well as high growth ones that were certainly partnering very closely with them to be able to deliver more value.
And then realize that value.
Thanks.
Thank you Andrew the next question comes from Pat <unk> with JMP Securities. Please proceed.
Oh, great. Thank you and let me add my congratulations.
So I don't know if its for Tamar Dustin but.
So, yes revenue accelerated year over year, and we can see why that would justify investments, but Tim you know how we are we look at the quarter's.
And if you look at the quarters basically like calculated billings seems like a good place a really clean place to look at it.
The business accelerated for five quarters in a row from the beginning of 'twenty one to Q2 of this year 'twenty two.
And then it seems to have decelerated the last two quarters. So I just love to hear your thoughts and what key points you make to investors on.
On why the acceleration and deceleration.
Yes.
It's a good it's a good question I do think there obviously there is a.
Comp analysis that you can look at because last year Youre also comping against a prior year, where COVID-19 was much more rapid.
But I would also point out that billings isn't.
Necessarily the one metric we run the business and we certainly look at the business.
Across a number of different metrics.
I think GAAP revenue is probably a better a better indicator of how we think about our growth rate.
Now with that said we are as you can see one of the things that we are focused on is building out our go to market around the enterprise motion and that you would expect our Poe as well as our CRP owed to.
As someone metrics that you should be looking to over time, where we're getting more enterprise traction, especially as we go beyond.
As we do more longer term deals.
Yes.
Yes, and but revenue.
Again was sort of a higher at the beginning of half of the year and then decelerating in the second half two alright is there something more fundamental going on Ben Toms.
Yes.
<unk>.
No.
There is also just the timing of large deals can change things. It's part of why we don't focus on as much.
But yes, the comps versus the prior year, and then just like which quarter particular deals happen to fall in.
Okay.
The lumpiness of the billings related to larger deals.
Okay alright, thank you.
Thank you Pat the next question comes from Rishi <unk> with RBC capital markets. Please proceed.
Hi, This is Richard <unk>.
So you mentioned some of the partnerships you.
You guys have with players in tangential areas the collaboration landscape Sachin.
Digital collaboration tools wakeboarding tools.
So as you look forward have you identified other collaboration categories that you think you could expand into long term or just I guess more generally how do you think about.
Broader market opportunity and collaboration software long term.
Yes, it really depends how long term youre thinking but for the foreseeable future. We really think of ourselves as a pure play work management. So when we think about the overall collaboration landscape, we divide it into three big areas. So one is.
Communications, so it's going to be.
Anything from zoom and slack to Voip technologies E Mail.
And then the content categories, which would include.
Documented editors the white boarding tools.
<unk> products like Adobe or Sigma.
And then the third Big category is work management and we really collaboration software is obviously, just really exciting writ large, but even work management itself is just such an enormous market opportunity and.
And still feels just incredibly untapped. So we think about the total addressable market is over 1 billion knowledge workers worldwide.
And still a vast majority of them are using the status quo of email spreadsheets long meetings sticky notes on whiteboards or digital Whiteboards.
And so we're really excited about staying focused on that opportunity and then partnering with the best to be breed products and the other and the other ones.
Yes.
Thank you very helpful.
And.
This might be.
Little bit of a repetitive question, but you talked about the launch of sign up flow last month, then it seemed to be some strong early engagement numbers and metrics. So I guess just in terms of monetization strategy.
The majority of these new features are in some of the.
More premium Skus. So do you expect something like that could drive some freak paid conversion or upgrade.
Skus.
And same question I guess as you look forward to the broader product road map.
Such as the employee impacts what you mentioned earlier.
You want to talk maybe about the pricing aspect yeah. We're excited.
How does that.
Particularly for the flow launch.
To get the most value out of the workflow builder the template library those are in our premium tiers and so I think the early response, we're very excited about both within that new customers, who are joining our webinars as well as we had a large over 6000 person community event of some.
Our most active evangelists, so again as I mentioned, it's early right now, but we're excited about the interest and momentum in customers and new customers trying the product and then our sales teams are actively working with them to understand their needs and ideally get them into the right package to be able to solve there.
Team.
<unk>.
So that's overall, how we're thinking about all the features that we launch which is making them as accessible as possible is going to be part of our strategy and then <unk>.
Or is that have these cross team strategic needs.
Making sure that they understand the value of that are in our business and enterprise tiers and being able to move them up into those tariffs when they are ready.
Then in addition to packaging I would just also point out that we're closer really helpful for helping a customer adopt.
They retain with us on us so a lot of what.
We've built into the templates and what we are hoping the first set of customers with workflow builder.
It is really very quickly implement.
Workflow streams that they were otherwise doing by sort of gluing together a set of features like the automation rules reforms or task templates or custom API script, they were writing to integrate with.
Some of the other apps in their toolkit.
And so this is really giving us a much faster way to deploy cross functional use cases, and workflows into new customers and help them.
Just get started on a really good foot and expand faster.
Got it thank you Ed.
Thank you. The next question comes from Brent Thill with Jefferies. Please proceed.
Good afternoon, Dustin and Tim many investors are asking about the magnitude of your spend and I know Brent question, Brent or thinking of like on this call on the questions.
When you think about how long you are willing to commit to that magnitude of a loss.
Before you start to show some leverage what is the what's the trigger what's going to what's going to ship.
Trip the line, if you will or the court.
Q2.
Pull back a bit.
Significantly over spending relative to your peers.
And so we're getting a lot of questions on that if you could just address that thank you.
Yes, well there are a couple of different ways I look at it again, the very big picture for me as the CEO is just where we are in the category of maturation.
And so we're investing to win and we mean that quite literally.
And so when you think about this this big market opportunity.
A little less focused on what the.
The.
The optics of the operating margin or in the short run and more focused on how confident are we that we're going to get those investments back in the form of long term revenue.
So again, there we look at our efficiency metrics. So we have the 90% gross margins.
Look at the success with enterprise customers.
We look at the sort of concrete channel and market efficiency for our marketing spend and where sales are succeeding.
And so I think the.
The things that will cause us to get leverage or more about hitting diminishing returns there such that those investments no longer look profitable on the on the margin.
And then also slowing our growth trajectory so that it makes less sense to invest ahead, because when youre growing as fast as we are you sort of quickly catch up to the scale of the spend.
And if you don't then you can you can sort of slow down on adding heads and grow into it.
But if youre growing much slower than you can't really sort of make that kind of rationale. So I think that those are the two things that that we would look to and you could look to for when we get leverage but we do.
Maybe not in every quarter and every year, but over multiyear periods, we do trend towards more leverage.
Thanks, guys. So just for Tim you'd look at the biggest areas of spend this year is there an easy way to bucket.
This is all going is it across the board is at 70% of their sales and marketing what how would you put broader categories around that.
Yes, I would say.
A big part of it is around our sales and marketing and I would say, it's a combination of demand Gen pipeline building.
Sales capacity.
Building up on the enterprise motion and the necessary support so many of the customer facing teams to support that part of the business. So it's a lot of.
Focus around reaching our enterprise customers, helping them adopt and helping them expand.
Great. Thanks.
Thank you Brent.
The next question comes from Robert Simmons with D. A Davidson. Please proceed.
Hey, Thanks for taking the question I was wondering how much are you factoring in higher expenses from a return to relative normalcy post or semi post COVID-19 .
Yes, I mean, we are we haven't returned to the office yet some of US are actually doing this call in person together.
But we have included made some assumptions of.
Return to office around the back half of the year So additional travel.
Additional spend related to being in the office together and being able to reach our customers meet with them help them be successful. So I would say back half of the year.
I wanted to do on that a little bit returned to office as a concrete definition internally that we do have several hundred people in.
In the San Francisco office, and dozens of people in from the other offices, but 10 means.
More like 90% to 100% of the workforce coming back in.
So part of those expenses now exists now and part of them.
It may accelerate in the back half.
Got it.
And then.
Sorry finish I was just I was just also going to say I mean.
Not quite so binary though because we are we're paying rent on offices anyway, that's probably the largest sort of office expense. So it's not like it's totally flips, but yes travel and expenses.
Some of the cost of actually operating the building change.
Got it alright, and then.
And where do you think you're the most underpenetrated out in the market is at a particular region. Other industries as a specific parts of the enterprise like legal or sales or what are your thoughts there.
Theres a few different ways. They could go at that I mean, the first thing that comes to mind is just very highly regulated industries, where we may not.
Have the compliance requirements, yet or they may just be the least.
Sure.
Last mover to adopt new technologies.
That's where we're at least penetrated you'd have a lot of presence in a wide variety of industries wide variety of regions and customer scale.
Great. Thank you very much.
Thank you Robert that concludes the Q&A session I would like to pass the conference back to Katherine <unk> for additional remarks.
Thanks, so much. Thank you very much everyone for joining us today looking forward to seeing you on the road this quarter and always appreciate your time. Thank you.
That concludes the <unk> fourth quarter and fiscal year 2022 earnings call. Thank you for your participation you may now disconnect your lines.