Q2 2024 Asana Inc Earnings Call
[music].
Thank you for standing by and welcome to US on our second quarter fiscal year 'twenty 'twenty four earnings call. At this time all participants are in a listen only mode. After the speaker presentation, there will be a quirk.
<unk> and answer session.
To ask a question during the session you will need to press star one one on your telephone to remove yourself from the question queue. You May press Star one again.
I would now like to hand, the call over to Katherine born head of Investor Relations. Please go ahead.
Good afternoon, and thank you for joining us on today's conference call to discuss the financial results for the second quarter of fiscal year 2024.
With me on today's call are Duston, Moskovitz, Sonic co founder and CEO and Remondi, our Chief operating officer, and head of business and Tim Wan, Our Chief Financial Officer.
Today's call will include forward looking statements, including statements regarding our expectations for free cash flow, our financial outlook strategic plans market position and growth opportunities.
Forward looking statements involve risks uncertainties and assumptions that may cause our actual results to be materially different from those expressed or implied by the forward looking statements.
Please refer to our filings with the SEC, including our most recent annual report Form 10-K, and quarterly report on Form 10-Q for additional information on risks uncertainties and assumptions that may cause actual results to differ materially from those set forth in such statements.
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.
Reconciliation between GAAP, and non-GAAP financial measures and a discussion of the limitations of using non-GAAP measures versus their closest GAAP equivalents are available in our earnings release, which is posted on our investor relations webpage at investors Dot Asama Dot com.
And with that I'd like to turn the call over to Dustin.
Thank you Catherine and thank you all for joining us on the call today.
We reported Q2 results between top and bottom line expectations.
Q2 revenues grew 20% year over year as we continue to close large deals in the enterprise segment.
non-GAAP operating margins improved 40 percentage points year over year, while we obtained positive free cash flow in the quarter at $14 $6 million.
Our growth continues to be fueled by some of the largest and most strategic companies in the world choosing this honor.
In Q2, we closed an expanded deals across industries, such as manufacturing professional services health care logistics media and financial services.
Our most strategic customers are modernizing the way they work and they are turning to sign up for work management at scale.
And as we look toward the next generation of work management and implement AI even further.
Relationships will be increasingly valuable.
Even with continued macro headwinds and heightened budget scrutiny in the enterprise sentiment seems to be stabilizing.
Customers are looking for ways to consolidate their vendors getting more ROI out of everything they're doing and they are turning to us on them.
Sonic and help to achieve their goals and objectives more efficiently and faster than ever before.
In fact, we've seen an increase in multiyear commitments, both year over year and sequentially in the quarter.
In Q2, we made great progress on improving our non-GAAP operating margins, we expect significant improvement in non-GAAP operating margin year over year for the full year as we focus on operational efficiency and growth, which Tim will talk about more.
In the first half of the year, we've been working through the macro headwinds and we continue to focus on our enterprise playbook, improving sales execution and building substantial enterprise leadership, most recently announcing the arrival of our new CRO at Mcdonalds.
I'd be remiss to start with anything but artificial intelligence gives me opportunity it presents for <unk> and our customers. So let me jump right in.
In short I'm extremely excited I've.
I've been deeply involved and passionate about AI for a very long time.
China has the good fortune of sharing our backyard with many of the leaders in AI, including companies like in Tropic and opening on.
And I personally have been embedded in that community and working with these companies since their founding days as an early supporter of both opening <unk> and Entropic.
AI really entered the zeitgeist and captured People's Imaginations in November of last year with the launch of chat GPT.
But it is a novelty for some is worn out so as their enthusiasm my.
My view is that people aren't thinking big enough and they're underestimating how quickly the foundation models themselves will improve.
I believe chat bots or just demos there not really the end game.
Preopening show with AI is going to manifest when it gets deeply integrated into other software, making it possible for end users to get great results without themselves, becoming prompt engineers and.
And for developers to radically accelerate their productivity.
There's also a lot of skepticism around AI that I understand and acknowledge.
Many folks have rightly called out the hallucination or black box problems folks just don't trust that AI is providing accurate or useful guidance all of the time.
They want to be able to trust that theyre getting good recommendations, which means they need to understand the thinking process and assumptions that underlie them.
And countering the now infamous hallucinations roads trust, especially when you can't trace how the AI came up with that in the first place.
We've been Architected Hassan as work wrapped out a model for over a decade, and we believe it will become increasingly valuable in this AI powered future. Thanks to what it allows us to achieve with Hassan intelligence.
The work off ensures that you are a single source of truth for work data structured in a way that it's scalable and maps to how work actually gets done inside organizations.
With the Warcraft datas connected across the whole enterprise work functions teams and people.
And this data connection is powerful because it captures the sum and the parts.
Hey, I can use the underlying pieces of the work to more accurately draw conclusions at multiple levels of altitude.
And with the final Warcraft, we believe we're best positioned and work management category to solve the Blackhawks problem because we can show its work on packets assumptions from tax and analysis of the work across all teams at all levels of granularity.
Here's a tangible example.
Let's say the company is preparing for global product launch and multiple teams across R&D marketing product marketing and sales are involved.
Each have their own projects and work streams that support the overall launch effort and each beds in one portfolio of work in front of them.
So on intelligence will be able to analyze all elements of the work supporting the product launch and flight key risks and bottleneck season granular information from supporting tasks.
Before these hidden blockers would've been a blind spot for the organization and we've taken many conversations to uncover.
But now with the work Ralph and AI. This can be surfaced immediately and it's an intelligence will help show its work by pointing how it came to that conclusion based on the worked out and the work relationships at its disposal.
So I will highlight where and how this unseen, but critical dependency will impact launch timelines visually.
The Warcraft makes how work gets done in your organization highly legible to the AI, but it's also going to make the underlying assumptions to its conclusions logical to your organization and the people within it.
This is critical for key enterprise requirements like permissions access control and accountability.
The Santa intelligence powered by the Warcraft will serve as a shared map that helps align human intention with guidance as they work together to achieve our customer's goals.
We believe it is the only work management platform built for enterprise scale with proven capabilities of scaling to 200000 seats and company wide deployments and our enterprise customers agree.
Is this an adoption grows across the enterprise and the value we provide increases.
And the cross functional nature of the Warcraft out a model is even more important with AI because information silos isolate context that could otherwise be used.
Even if you use AI to find the context and another silo you have to infer how theyre connected.
Whereas the relationship as explicit and Warcraft out a model.
It gives us yet another way of giving customers increasing returns to scale and nurse on adoption.
And some sinus capitalize on an enterprise's warcraft to deliver more useful accurate and insightful user experience at every level, especially the executive level.
AI is the ultimate accelerant of one of US on this core value propositions, which is to help companies thrive by connecting companywide goals to the strategic initiatives departments teams and work needed to achieve them.
We see ourselves as creating entirely new software interfaces between teams of humans and working together and the powerful AI models that make getting their work done easier is.
This is the core of our innovation focus right now.
We've already announced a slew of new AI features that are currently in beta that help individuals and teams improve their productivity like writing assistant instant summaries and work organizer.
Other features in beta include health checks that drive greater clarity and accountability and asks on anything that maximizes impact.
Further down the product roadmap. We're also planning features such as goal based resource management and AI assistant Smart workflows, and we're just getting started.
Youll see us unveiled an exciting new lineup of innovation in our work innovation summit on October three in New York City.
This will be our most exciting customer event of the year with visionary keynotes luminary speakers industry leaders across operations and marketing as well as a special investor session to talk more about our product plans go to market initiatives and financial outlook.
Well also be hosting customers that our work innovation center, where we will share their work and emission score.
Cutting edge benchmark developed by industry, leading experts.
The score is powered by the work Ralph and I are designed to SaaS organizations potential for innovation, both now and in the future.
The organization score highlights, our customers' innovation potential, allowing them to clearly identify strengths and overcome obstacles.
This unique offering and our market and its only offered by us on them.
It's extremely popular, especially with our largest and most strategic customers. So we're excited to include even more customers in the program.
We look forward to seeing you in New York City on October three.
In closing in spite of significant headwinds we've made measurable progress in the first half of the fiscal year we.
We continue to see traction with some of the largest companies in the world and look forward to partnering with these companies as we look toward the future product roadmap.
Now I'll turn it over to Anne.
Thanks, Dustin starting in Q2, it's really about continued enterprise growth and building our enterprise leadership bench, we have talked about our strategy for moving up market and we are working and executing on this plan.
That said I know the macro situation is still top of mind. So let me address that upfront.
All the sentiment in our customer base has remained the same versus last quarter.
It Hasnt yet improved it also has not gotten worse.
<unk> continued to be scrutinized seats are being optimized and decisions for expansion are being pushed out.
But as customers continued to optimize budget. We are also getting positive competitive signals, where customers are consolidating removing incumbents and choosing us on it.
I also wanted to talk about net retention rate trends.
As the de facto choice for some of the largest tech companies in the world.
Honda has likely seen disproportionate exposure to any pullback in that vertical which is about 30% of our business.
Accordingly, much of this has been less seat expansion as opposed to anything else and that remains a factor this quarter for.
For example, in some cases, even when a customer with choosing to expand into new use cases and departments. This is often offset by removing seats that were downsized as part of our budget pullback.
Conversely, as we approach the anniversary at the beginning of this trend we expect to benefit from any rebound in future quarters.
Top of funnel demand was stable versus last quarter and our pipeline continues to build.
The U S grew 22% year over year, while international grew 18%.
If I split off EMEA separately, EMEA had a particularly solid quarter reporting the fastest growth across our major regions.
Our new leadership and regional model in EMEA are in place and we're getting increased traction we closed several of our largest net new deals in EMEA as a result of our improved execution.
Growth in our business and enterprise tiers led overall growth at 32% year over year and represents 73% of our revenue.
We believe this is a good proxy for our traction within larger customers.
On our goals portfolios and reporting are key differentiators for us.
Adoption has continued to be strong and these investments are leading to consolidation wins.
Our top down use case and value selling is resonating and it's allowing us to land large deals.
Our enterprise customers representing organizations with over 2000 employees continue to be our fastest growing customer segment and this segment is further diversifying.
Proximately, 80% of the net new $100000 plus customers in Q2 were in non tech sectors.
Executives are planning long term about how to invest and work management capabilities and this is driving multiyear commitments for us.
And there's not a single enterprise customer that isn't asking us about AI and automation and Osaka.
We believe our AI roadmap will help to further drive adoption and expansion within customers.
We are seeing new lands and expansions broadly across several diverse industries.
First we set a new record with our largest land deal and a sign of history. One of the largest multinational cyber security companies chose us on a in a multimillion dollar consolidation win.
During the RFP process. They evaluated multiple work management apps that they were using across the company based on several factors. The company will be methodically ripping out legacy apps and replacing them with us on it across the organization over three phases.
This is a very significant win on many fronts in particular, how successfully we can execute on a top down value based south motion.
Also I'm very excited about another net new customer one of the largest professional services companies in the world based in the U K with over 12000 employees worldwide.
Their CMO with looking for a centralized global platform to ensure a consistent brand experience across markets and channels. It's a multiyear deployment that represents a great deal of potential.
In addition, a large healthcare manufacturing company headquartered in Switzerland with over 9000 employees is expanding with us on it and replacing a legacy incumbent.
The company has grown significantly through acquisitions and will make <unk> available to employees globally. This is another multiyear strategic deal.
We signed several deals this quarter with manufacturing companies one of the larger deals with with Fujitsu one of the largest companies in the world.
We're also seeing continued success in the financial services industry, we had a six figure early renewal and expansion with a large financial services firm in the consumer credit space. After they saw significant value from Hassan at in their marketing and strategic planning functions in just six months.
They are bringing more teams onto our enterprise platform to manage everything from okay ours to project plans. So they can make informed decisions about their strategic initiatives to improve goal attainment.
We also had an expansion with a subsidiary of a major U S insurance company for a two year prepaid contract. The company uses <unk> to manage developing new products to enter new industries.
Security and governance are very important to them.
On the enterprise capabilities were among the reasons we won.
You may or may not know, but I thought it was very very popular in the sports business. We closed deals this quarter with one of the English Premier League's most highly decorated football club as well as with the New York Islanders and the <unk> and.
And importantly, we continue to win in the healthcare and biotech vertical as well with $2 six figure deals in the U S.
As you know, we announced HIPAA compliance about a year ago and have been gaining momentum in this vertical supported by our compliance and security offerings.
As you can see we've already helped dozens of our largest customers with their digital transformation initiatives. We believe digital transformation is an enormous secular trend, but the intelligence transformation with AI has the potential to be an even larger opportunity for Astana and we're preparing to be the leading platform for change and this new revolution.
Of technology.
In summary, we're seeing more multiyear deals up both sequentially and year over year.
Winning on vendor consolidation decisions and are continuing to diversify our enterprise success across more and more industries.
But we have more work to do.
Looking to the second half in the beginning of next year, we continue to focus on improving expansion rates through customer success programs and initiatives.
<unk>, our partnerships with our strategic accounts rolling out new packaging, which we will talk more about on October 3rd and enterprise leadership.
We are thrilled to welcome Ed Mcdonald as our new Chief revenue Officer. He has most recently from Salesforce and spent 10 years. They are scaling the marketing cloud and multiple vertical businesses from $100 million two of $3 $5 billion business today.
He also has experience from aliquot Mcgraw financial and Thomson Reuters. He has a remarkable track record and deep experience, leading and scaling some of the most well known enterprise software businesses.
With Ed Shannon Duffy, our CMO, Roger <unk>, our chief customer officer, and the rest of our go to market team. We are focused on elevating our sales motion for the next phase of growth.
We're improving our sales enablement capabilities and lead generation initiatives targeted at enterprise accounts.
We're creating a repeatable playbook to scale enterprise accounts to become over $100000 customers and beyond.
We're improving on our customer success strategy to scale of Lee serve more customers.
Importantly, we can focus on better serving our most strategic customers. These long term partnerships play a critical role in our product roadmap and our vision to strategically serve large scale customers, which we believe will help us further drive growth.
And with that I'll hand, it over to Tim.
Thank you and while I am pleased with our high level results. Some of the underlying drivers were not as strong as we had hoped.
We continue to see headwinds from a macro standpoint and in our technology segment.
And you see that especially in our net dollar retention rate metrics.
We also have more work to do as we develop our enterprise go to market muscle and continued transitioning upmarket.
Meanwhile, the performance at the low end of the market is dragging down overall growth.
On the other hand, I am really proud of the efforts the team put in to manage costs and improve efficiency.
We have made substantial progress on improving our operating margin and delivered our first positive free cash flow quarter since going public.
Onto our Q2 results.
Q2 revenues came in at $162 5 million up 20% year over year.
Revenue from customer spending 5000 or more on an annualized basis grew 24% year over year.
This cohort represented 74% of our revenues in Q2 up from 72% in the year ago quarter.
We have 20782 customer spending 5000 or more on an annualized basis.
We have 553 customer spending 100000 or more on an annualized basis.
This customer cohort grew at 20% year over year.
As a reminder, we define these customer cohorts based on annualized GAAP revenues in a given quarter.
Our dollar based net retention rates were lower driven by lower expansion in downgrades.
Our overall dollar based net retention rate was over 100% and 5%.
Among customer spending 5000 or more our dollar based net retention rate was over 110%.
And among customer spending 100000 or more our dollar based net retention rate was over 125%.
As a reminder, our dollar based net retention rate, there's a trailing four quarter average calculation and thus a lagging indicator.
We continue to see stable logo churn rates overall and low churn in our largest accounts demonstrating the value we deliver for our enterprise customers.
Companies remain mindful of the near term economic challenges and we therefore expect our overall dollar based net retention rates to trend lower particularly in the lower end of the market.
Ill speak specifically to the outlook in a moment.
As I turn to expense items and profitability I would like to point out that I'll be discussing non-GAAP results and the balance of my remarks.
Keep in mind non-GAAP results exclude stock based compensation and noncash expenses related to impairment.
Gross margins came in at 93%.
Research and development was $52 3 million or 32% of revenue an improvement from 37% a year ago.
Sales and marketing were $79 6 million or 49% of.
Revenue an improvement from 70% a year ago.
G&A was $25 1 million or 15% of revenue an improvement from 29% a year ago.
Operating loss was $10 4 million and our operating loss margin was 6%.
Representing a 40% point margin improvement versus a year ago.
The improvement in our operating margin demonstrates our ability to take a balanced approach to growth and profitability.
Net loss was $8 4 million and our net loss per share was <unk> <unk>.
Moving onto the balance sheet and cash flow.
Cash and marketable securities at the end of Q2 were approximately $537 5 million.
Our remaining performance obligations or <unk> was $333 4 million up 27% from the year ago quarter.
86% of our appeal will be recognized over the next 12 months.
The current portion of RP O grew 26% from the year ago quarter.
Our ending Q2 deferred revenue was $261 1 million up 24% year over year.
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 costs related to restructuring Q.
Q2 free cash flow was positive $14 6 million or 9% on a margin basis, an improvement from negative 31% from the year ago quarter.
Moving to guidance for Q3 fiscal 2024, we expect revenues of $163 5 million.
$264 5 million Rep.
Representing growth of 16% year over year.
We expect non-GAAP loss from operations of 25 million to $23 million, representing an operating margin of negative 15% at the midpoint of guidance.
A measurable improvement from the same year ago period.
And we expect net loss per share of <unk> 11 to <unk> <unk>, assuming basic and diluted weighted average shares outstanding of approximately $221 million.
For the full fiscal year 2024, we expect revenue to be in the range of $642 million to $648 million, representing a growth rate of 17% to 18% year over year.
We expect non-GAAP loss from operations of $93 million to 85 million, representing an operating margin of negative 14% at the midpoint of guidance down from negative 38% in fiscal 2023.
And we expect net loss per share of <unk> 42 to 39 <unk>.
Assuming basic and diluted weighted average shares outstanding of approximately $219 million.
Our guidance assumes that there is no change in the current macroeconomic environment and that headwinds persist through the end of this year.
We expect continued compression in our dollar based net retention rate but.
But we expect it will remain above 100%.
We also have changes in leadership for our sales organization that may take time to manifest.
We are committed to maintaining a disciplined and balanced approach to optimizing costs and improving efficiency and profitability. We will continue to invest in future growth opportunities like AI, which we expect will drive long term value.
While this quarters free cash flow may not repeat next quarter, we remain committed to delivering sustained positive free cash flow by the end of calendar 2024 and thereafter.
As we work towards reaching sustained free cash flow. We are encouraged by the progress we've made and I'm optimistic about our future.
Over the next 18 months to 24 months, we anticipate incremental growth will be driven by first economic recovery in the most impacted verticals such as the tech sector paired with improved execution on our go to market initiatives under our new leadership team.
New capabilities driven by advances in AI and third our new packaging strategy, which we will talk more about on October 3rd.
We look forward to seeing you all in New York on October 3rd where we will dive deeper into these topics during the investor session in.
And with that I'll turn it back to the operator for questions.
Thank you as a reminder to ask a question you will need to press star one one on your telephone again Thats Star one on your telephone SaaS question to remove yourself from the queue. Please press star one again.
We ask that you please limit yourself to one question and one follow up and then return to the queue. Please standby, while we compile the Q&A roster.
Our first question.
Comes from the line of Andrew.
Doug, Yes, Barry Bahrenburg.
Thanks for taking my question, maybe first on the largest land deal.
One this quarter can you maybe elaborate what.
In terms of the discussions with that customer what kind of stood out in terms of a sauna and what they found important.
Generally do you think this can replicate itself out.
Going forward.
Hi, Andrew it's Ann Thanks, So much for your question, yes, happy to share a little bit more insight on that deal.
Really the customer was looking for an opportunity to grow with one partner over multiple years are they cared a lot about.
Where do you think tech sprawl. They wanted to replace at least seven existing applications that they had seen used across many of their departments. In particular this company had acquired a lot of other companies and so being able to consolidate all in one platform is really important and theyre looking to incur.
This collaboration and standardization and really ultimately deliver products faster.
And so we're really excited to work with them and all the different departments are a part of the RFP process ultimately our view on where AI is going how we can scale our security and the fact that we had already successfully deployed up to 200000 employees in our largest account really helped to secure that so we're looking forward to doing more.
More of those especially where cio's are driving their decision making process across the organization.
Thanks, and then maybe on EMEA can you read Lei.
A little bit what wasn't working there at least.
Is working better right now I mean, what changes did you implement besides obviously, the new leadership, there and could you replicate that changed it to other regions as well.
Yes. So we are really excited about the new leadership in EMEA I think a few things certainly with the leadership. There is also a focus.
On larger deals and really ensuring that we've got repeatability and discipline around the large deal pipeline and large deal close rates.
And then we've aligned both our corporate and enterprise teams by region under the New leadership. So that was a change that was made we had previously sort of centralized leadership around for our corporate segment, but now it's aligned by our largest markets. So we're excited to see that momentum and it certainly contributed to the two large law.
Land that I mentioned before one with a professional services organization with 12000 employees and one with a health care manufacturing firm with 9000 employees. So excited to see more of that and we do believe that is something that is replicable. We're seeing some great signs in Japan, which is another strategic market, where we've got a gray.
New leader on board as well.
Thank you. Our next question comes from the line of Steve Enders of Citi.
Okay, great. Thanks for thanks for taking my questions here.
I guess, if you want to ask on the consolidation.
Activity that you saw in a really good win there I guess.
I guess, how much of an increase have you seen.
There's consolidation opportunities that maybe some of the choppy macro.
You were that you would be calling out and I guess as we think about.
Further a large deal activity, how should we think about what the pipeline looks like.
Where there's opportunities going into the second half of the year.
Yes. Thank you so much Steve what we are seeing in this environment as there is more scrutiny both by CIO and CFO is on budget spend that the interest in opportunities to consolidate is increasing and we've seen that across the last several quarters.
Particular, as they evaluate where they have different investments already and where they can improve them going forward and in particular for us the ability to bring that all onto one platform and benefit from increased collaboration on the platform that is what's driving the consolidation consideration.
And then I do think the focus on security and scale is really important.
As CIO is in particular are looking to consolidate so we are also seeing that for some legacy applications that existing customer accounts there is active.
Evaluation of how those might be replaced by us on us so definitely in our pipeline, we're seeing more opportunities that are focused specifically on consolidation.
Okay.
That's helpful.
And then maybe just on the outlook and I guess, what you are seeing in the macro.
Hi.
Hey, guys.
What changed versus maybe what you were seeing last quarter or is it just things got a little bit worse.
And then.
Then maybe originally expecting when you when you gave the guide 90 days ago or just how should we think about what's incrementally changed in the.
And the outlook here.
Yes, I would say a couple of things I think we continue.
We continue to see one.
Headwinds and I think a lot of that headwinds does reside within our tech segment and we have to work through.
As you know many many of these tech companies had layoffs and we do need to work through their renewals over the next.
Six six to nine months, so I would say that's one too.
We have we also have sales leadership changes right now and I want to just provide ample time and some air cover for the team to make the necessary changes to reaccelerate and build their team out so I would say, it's really those two things.
If I could just add on to that maybe I think part of the way we think about it just in terms of how we were thinking 90 days ago I think.
We knew there would be headwinds, particularly in the tech orgs and it hasnt improved yet, but we don't we're not saying it's gotten worse, we just see the sort of continuation of that that budget scrutiny.
Okay.
Thank you.
Our next question.
Comes from the line of George <unk> of Oppenheimer.
Thank you for taking my question maybe Dustin.
Let's start off with AI and gave us some perspective on that and maybe digging deeper into that.
The AI topic, how do you feel.
So on that can best differentiate with AI and then when you look at rolling out the product how should we think about the ability to monetize it.
Yeah sure happy to happy to talk about that and.
Of course, I also want to remind everyone about the event that we're hosting in October where we'll go pretty deep on both of those topics.
So first of all so how are we differentiate so I think the thing that's really unique about us is our warcraft outer model. So we've always had an AI AI in mind as we architected that that model over the past decade.
And we think it only becomes even more valuable in this AI powered future. So the work or if it's really ensuring that you are a single source of truth for worked out and it's structured in a way that's scalable maps. How work is actually organized inside our customers and so with the aircraft that is collected across the entire enterprise.
Work functions teams and people without having to duplicate pieces of information and having that data connection is really powerful because it captures the sum and the parts. So hey, I can use the underlying pieces of the work to accurately draw conclusions at multiple levels of altitude.
And so part of what that gives US is I think we're best positioned in the work management category to solve this kind of black box problem that you sometimes hear about with AI.
We can really show the work and unpack the assumptions from tax and analysis of the work across teams at all levels of granularity.
And we've seen that reflected with our customers to when we show them. The Aif features in the beta they say hey, this is really bringing the work off to life for me.
Really helping make it clear why all these connections are valuable. So we think that'll be a you know.
Our virtuous cycle there in terms of our ability to differentiate in the markets both with our core value proposition.
And sort of data model differentiation and to make the AI functionality itself better so warcraft mix.
How work gets done in the organization logical for AI, but it also makes the AI more logical to your organization and so customers really love. This idea of like the human and the <unk> are working together, so theres always a human in the loop.
In terms of monetization.
No not a lot of specifics to give but we are going to talk more about our packaging chase packaging.
Packaging changes when we do the Investor event in October and a lot of that is about you really accelerating the enterprise onramp, but we've also been very thoughtful about how we organize AI within those packages and.
I've said before that I don't think AI is really one thing it's not just a single line item in those packages, there's some AI and each of them and.
And as the functionality gets more complex and as what were the sort of computerized work, we're doing under the hood.
It gets more expensive and complex those those types of features show up in the higher enterprise packages I know, we've also had questions in the past to about an add on are theirs.
I don't think the sort of initial launch is going to involve that but it is something that we're thinking about may show up in the future certainly paying attention to how a lot of the other enterprise products are starting to monetize and we want to learn from from what works and doesn't there. So in the short run I think the main thing Youll see is that it is helping up to your customers through three of the pack.
<unk> is the main monetization advantage.
As well as highlighting the differentiation of assault on the first place that we went more deals.
Alright, and maybe just quickly following up on that the way.
When you think about investing and hiring with AI.
Product innovation and ongoing enterprise investment how should we think about the near to moderate term plants.
Yes, I mean I think one.
You know we've made we've made really substantial progress on our operating margin, but what's taken a very balanced approach in terms of how we're investing and how we how we're investing and how we're trying to get to profitability.
So I think I think.
At a macro level, we're going to continue to invest in AI, that's one two and to the degree that we see.
Improvements in productivity and efficiency across our sales and marketing organizations will be able we will feel more confident putting more investments in that area.
Thank you.
Our next question.
Comes from the line of Jackson to Adder of Moffett Nathanson.
Alright, Thanks, guys. Thanks for taking my question.
Duston, you mentioned earlier in the call some of the.
Other AI winners that are kind of your neighbors in the bay area and I think.
Some of the early winners at least from Investor standpoint seem to be some of the largest technology in some of the largest software companies out there that are kind of publicly investable.
I'm curious how you see astana fitting into the AI landscape among some of these.
Tech Giants I guess for lack of a better term.
Alright. Thanks, So I think there's a couple different ways to think about that so so earlier oh.
He was really talking about the foundation model builders, primarily so at open AI, and then brought back and our relationships with them as well where customers, so where we're adding value on top of their underlying infrastructure. They're doing we're very grateful they've made a huge capex investments that we used to leverage just in terms of marginal API.
Yes.
And so we're really building on their platform.
And I guess I'm not totally sure who you mean by the other large public companies I mean, certainly Nvidia is very very different kind of company.
And then you know it's very different I think a lot of the public stocks that are taken after the cloud compute providers.
So again, we're we're kind of customers and their stock.
But I think that Asada, we'll be part of a sort of second generation of value creation that that's really figuring out how to integrate those services into our existing workflows, where I think they can be a lot more powerful. So what people are familiar with right. Now is basically these opened into chat applications, where you can kind of.
Ask anything you want and that's very powerful and very flexible.
But most people in the world It really want to.
Can you kind of shown what works best and particularly in something like work management, we're finding that the kinds of requests we are making to the API or are highly structured highly temper ties were also educating the user about.
What kind of questions work best often they sort of start with very generic what should I know about this project or something very open ended.
Much better to get specific and so the more we're able to provide people with some temporal ties the options and some are.
Multi step workflows that help lead them to the most powerful value.
I think people will actually be able to get value from those underlying platforms. So I think of us as a sort of value creation on top of those underlying foundations.
Okay.
Great. That's helpful. And then the follow up is needed for I guess timber and whoever wants to take it.
The low end.
The low end weakness do you think it's.
More to do with the fact that since.
Assam is moving resources upmarket that kind of competition is filling the void left behind or is there something also happening in budgets or something on the macro side and the low end, if not holding up as well maybe some enterprise budgets.
No great Great question, I think one I would say I think the way you characterize that we did redeploy a lot of our investments away from the lower end of the market.
And focus those those investments towards towards the upper end.
As you know is one of the reasons, we're kind of like are less than five K customer revenue from that customer cohort is growing slower than customers with more than five K. So I would say that's one too obviously I think the.
Collaborative work management category is still very much greenfield and Theres, just a lot of runway.
So it's not necessarily when a winner take all across all of these segments. So to the degree that we move up market and other players end up staying in the lower end of the market I think that's a very likely outcome in the long term.
Thank you.
Our next question.
Comes from the line of Alex Zukin of Wolfe Research.
Thank you guys for taking the question maybe.
Maybe just the first one Doug for you all up yet.
It's kind of a similar question on the AI front, but I guess, if we step back for a second and we think about.
Where and how you think.
More specifically customers are going to actually pay for the AI functionality that you're introducing for the way that you are positioned and how investors and it's on are going to benefit.
From the investments and the experience that you have is it more.
And also in the context of like availability of Gpus when youre launching.
The product functionality when you expect folks to actually be able to see the ROI from it just conceptually what what are people willing to pay for not willing to pay for at least the conversations.
Not very conversations youre, having and when would you expect your ability to actually deliver this product to market.
In a way that.
Enables.
The ultimate monetization opportunity and also the impact on retention.
Slightly down.
Yes. Thanks for the question I think it's a little difficult to answer because I don't I don't really think of it as binary in that way. So it's not a feature we're launching and delivering but sort of unfolding of our road map.
And in a lot of ways, it's already begun because we already have customers in the private beta will be launching into a much more open beta alongside our events in October with some of the functionality.
But we also have teams working on what's next.
And you know more customers into the beta features beyond that.
And we're also talking.
Talking about our roadmap with customers when we're briefing Nam and it's part of the purchase decisions. They are making when they think about what partner, they're going to want it for the long run you know a lot of it has to do with who can differentiate on that AI vision.
And I think it's helping us now and it will continue to help US more you know I think the October event is is a particularly big moment for us to tell the story, especially in a visual way, it's hard to get across on these earnings calls.
And so I think it will we'll just like continue to build.
Then just in terms of like a packaging a moment I think it will present itself most in terms of customers.
Upped hearing to get the more advanced AI functionality.
There may even be a benefits from free to premium and we've kind of debated that internally, but havent really modeled anything.
And so it'll it'll happen in pieces and get better and better rather than being a single moment, where there's an inflection in the revenue.
Okay.
Sorry are you asking about customer feedback as well. So I just wanted to add a couple of things in terms of what we're hearing from customers in.
In the conversations with Cio's at our largest customers, whether that's a global live events company or the leading vacation rental platform in the world, but they're telling US is first and foremost they're excited to have a strategic partner to help them build out their AI strategy because right now it does feel overwhelming the number of choices out there and so things.
They care about our data specifically, where it comes from how it's used they care very much about security and they care a lot about transparency and how AI is deployed and so for work management in particular, it's very straightforward for them to see how AI will accelerate what they're already trying to do whether that's in projects or portfolios.
We're connecting that work to golf.
So more than anything our conversations really are starting to be how we can help them really figure out their AI strategy, and then be able to deploy it in <unk>. So we're really excited about the early feedback and the desire for customers to help us shape the roadmap and how engaged they are so just wanted to share a little bit more of that color.
<unk>.
That's super helpful and then maybe Tim.
Really open ended question for you on the numbers.
If we look at some of the commentary that suggests that multi year deals with strong enterprise traction continues to be really positive.
So I'm trying to square that with the forward looking metrics like if we look at billings.
In the low teens.
Growth.
This quarter <unk> bookings kind of similarly in that low.
Low teens kind of dimension. So is there anything that kind of onetime in nature.
Typically that we should be paying attention to because.
Your guidance for Q4 kind of implies you're exiting the year just over double digit growth. The street has you.
Doing something a lot better than that for next year. So given the commentary you made around the six to nine months of kind of still having that renewal headwind within these large tech companies like Wynn Wednesday, we've seen added the Perm happened is that a Q1 phenomenon in Q2, how do we think about that.
I think no. It's a great question, Alex I think one.
Just for clarity I just want to say.
While we're encouraged by the multi the number of multiyear deals. They do they are still a minority a small percentage of our total billings.
So that's one two I would say certainly I think we.
We continue to see you know kind of the same environment that we operating in in the first half of the year and that the environment not getting materially better or worse right now.
So to the degree that you know with our net expansion rate I do think it's going to take another two to potentially three quarters for all the renewals to work themselves out so that we have an easier comp after that.
And then I also you know obviously, we have new sales leadership coming on and we want to just make sure that that theres adequate.
Room for for the for the leaders to kind of make the necessary changes as we as we go upmarket.
Okay.
Thank you.
Our next question.
It comes from the line of Josh Baer of Morgan Stanley .
Great. Thank you for the question I wanted to ask one on the net retention rates.
Tim just kind of thinking to some of your comments on.
Some areas not as strong as they hoped and sort of taking another two to three quarters to get easier comps just wondering like what gives you confidence that that retention rate can remain above 100% just kind of looking at some of the the trend lines and deceleration that we've been seeing.
Yes, so I would say Josh.
Josh the thing we looked at obviously is a combination of.
Both the downgrades and the expansion and that's where most of the compression has really come from it our net expansion rates on that companies arent expanding as fast as they had during you know prior years and that companies that were planning to grow ultimately ended up doing layoffs and having to readjust your renewals with us.
So I do think like those things need to work themselves out and that over time.
One encouraging sign I would say is that when we look at logo churn, especially on our large customers in our core and across the base essentially those have remained unchanged. So the companies that are using us are staying with us while they are downgrade are expanding less right now I do expect them to over time as the economy gets better to hire.
Deploy more seats and as we add more functionality into our different packages have them kind of move up into these kind of more more advance packages that we'll be offering later this year.
Okay got it and then kind of related since.
Backwards looking I was hoping you could give a little bit of color on the linearity through the quarter, but then also.
You know into August as well.
On what youre seeing as far as demand trends.
Yeah, I mean I think.
In terms of just kind of like how the quarter shook.
Shook out this last quarter I Wouldnt I would say no different than what we saw in Q1 and Q4 of last Q4 of last year that it's.
It's generally the first couple or first couple of months, a little bit slower and then kind.
Kind of deals being somewhat in the most of the larger deals being somewhat in the last month of the quarter.
August traditionally for US there is some seasonality primarily because.
EMEA is a slower month they are generally on vacation, but you know I think when we look at the pipeline and when we look at how we entered the quarter I think we feel we feel pretty good about how the quarter shaped shaping up right now.
Thank you.
Our next question.
It comes from the line of Robert Simmons of D. A Davidson.
Hey, Thanks for taking the question.
Wondering if you can give a little more color on the net retention number.
First was it closer to one five or two 110, and then how did it trend over the quarter and so far in <unk>.
Sure.
I think what we think.
What we.
Disclosed this I was over 105 so.
Last quarter, we I think I believe we said it was over 110. So you can you can imagine kind of the the data point on the trend lines of that why we would change why we would drop the disclosure from 110 to 105.
Okay, and then I guess two things I mean have you seen any change so far in <unk> and then also could you give some color on what you've seen on that number kind of inside and outside of Texas.
I think it's certainly stronger outside of Tech and I would say you know similar to the commentary that we made about the different.
You know the I would say the headwinds, particularly we've seen headwinds in obviously tech and non tech, but I would say, it's more definitely more pronounced in the in the Tech segment.
Thank you.
Our next question.
It comes from the line of Patrick Wall Ravens of JMP Securities.
Oh, great. Thank you.
I know, it's kind of off message, but.
I was intrigued when you when you commented that.
The AI functionality that might help with the.
Free to premium conversion so.
You guys really haven't talked about that for a while what remind us how many free users are there and what is the what is the size of that opportunity.
I don't have the free user base number off hand, but I I don't want to.
Over.
Here I I think opportunity small I, just think it's a bit of a wildcard of like maybe it'll show up we paid attention to some other vendors that have more of like a pro sumer market and seen that you know some of their customers are empirically willing to upgrade even for sort of single player.
So most of our free user base is you know individuals' personal use cases prosumer use cases inside.
And so I think some of them might be more enticed by this than some of the other functionality that was more oriented around teams I just think there's a little more of that is valuable to specific individual end users, even if theyre not collaborating or if they're just collaborating a little bit. So that that's the only reason I mentioned that but I do think it's it's small it could be nothing.
You know I don't I don't want that to end up in analysts' models to be honest.
Okay.
You know a lot of us pay for CECI P. T. So it is kind of interesting.
And then one for you Tim just how should we think about the shape of free cash flow margins in the second half when you said not to expect.
Necessarily another 15 million, but how do we think about that yeah, I think you should.
You should you should expect our free cash flow to be negative in the for both Q3 and Q4.
But we'll make improvements on a year over year basis and that the margin will will improve from kind of Q1. I think Q2 was a you know was it was a quarter, where we essentially had a large invoice in Q1 with one with one of our largest customers. We collected that cash in Q2, that's certainly helped us our free.
Cash flow.
But we wont, we wont see that for another year, but it will improve on a year over year basis.
Thank you.
Our next question comes from the line of <unk>.
Final question comes from the line of Brent Thill of Jefferies.
Duston and impressive higher with Ed Mcdonald coming in as CFO from Salesforce I mean, maybe if you could talk through.
Your your top aspirations.
Out of the gate for him in.
If you could speak to also any time, we see.
<unk> come in there tends to be a little weight turbulence that's felt.
How impactful do you think that wake turbulence will be in the changes that you would like him to make.
I'm, sorry that word was wait turbulence.
Yeah.
Okay. Okay. Okay.
Okay, Great Alright forget.
Getting there.
The airplane chatter chatter on yeah yeah.
Yeah, well you know it is a really a seasoned executive and he has built a number of teams over his career and has seen where we're going so he's come in and really demonstrated.
The ability to make decisions quickly and inspite of the team.
And just like it get the lay of the land really quickly I was actually really impressed even before he started he he went really deep on the company did a ton of research.
And it really got to know us. So he was able to sort of onboard and hit the ground running and has just been you know a sprinting ever since he got here and has already made a lot of progress. So I feel really good about it right now where we're still only I think this week.
And and so you know, they're still going to be a learning curve, but it's been really impressive so far and so you know I'm optimistic about minimal minimal wait turbulence.
Thanks.
Thank you I would now like to turn the conference back to Katherine Braun for closing remarks Madam.
Thank you again for joining us today, and making the time to to hear our earnings results. We look forward to seeing you in New York on October 3rd.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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Thank you for standing by and welcome to US on our second quarter fiscal year 2024 earnings call. At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one one on your telephone to remove yourself from the question queue. You May press Star one again.
I would now like to hand, the call over to Katherine Bock head of Investor Relations. Please go ahead.
Good afternoon, and thank you for joining us on today's conference call to discuss the financial results for the second quarter of fiscal year 2024.
With me on today's call are Dustin Moskovitz soon as co founder and CEO and Remondi, our Chief operating officer, and head of business and Tim Wan, Our Chief Financial Officer.
Today's call will include forward looking statements, including statements regarding our expectations for free cash flow, our financial outlook strategic plans market position and growth opportunities.
Forward looking statements involve risks uncertainties and assumptions that may cause our actual results to be materially different from those expressed or implied by the forward looking statements.
Please refer to our filings with the SEC, including our most recent annual report Form 10-K, and quarterly report on Form 10-Q for additional information on risks uncertainties and assumptions that may cause actual results to differ materially from those set forth in such statements.
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.
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 are available in our earnings release, which is posted on our investor relations webpage at investors Dot Asama Dot com.
And with that I'd like to turn the call over to Dustin.
Thank you Catherine and thank you all for joining us on the call today.
We reported Q2 results between top and bottom line expectations.
Q2 revenues grew 20% year over year as we continue to close large deals in the enterprise segment.
non-GAAP operating margins improved 40 percentage points year over year, while we attained positive free cash flow in the quarter at $14 $6 million.
Our growth continues to be fueled by some of the largest and most strategic companies in the world choosing us on them.
In Q2, we closed an expanded deals across industries, such as manufacturing professional services healthcare logistics media and financial services.
Our most strategic customers are modernizing the way they work and they are turning to Hassan I for work management at scale.
And as we look toward the next generation of work management and implement AI even further.
Relationships will be increasingly valuable.
Even with continued macro headwinds and heightened budget scrutiny in the enterprise sentiment seems to be stabilizing.
Customers are looking for ways to consolidate their vendors getting more ROI out of everything they're doing and they're turning to us on them.
Hassan I can help to achieve their goals and objectives more efficiently and faster than ever before.
In fact, we've seen an increase in multiyear commitments, both year over year and sequentially in the quarter.
In Q2, we made great progress on improving our non-GAAP operating margins, we expect significant improvement in non-GAAP operating margin year over year for the full year as we focus on operational efficiency and growth, which Tim will talk about more.
In the first half of the year, we've been working through the macro headwinds and we continue to focus on our enterprise playbook, improving sales execution and building substantial enterprise leadership, most recently announcing the arrival of our new CRO at Mcdonalds.
I'd be remiss to start with anything but artificial intelligence given the opportunity it presents for Sona and our customers. So let me jump right in.
In short I'm extremely excited I've.
I've been deeply involved and passionate about AI for a very long time.
<unk> has the good fortune of sharing a backyard with many of the leaders in AI, including companies like in Tropic and opening up.
And I personally have been embedded in that community and working with these companies since their founding days as an early supporter of both opening <unk> and Entropic.
AI really entered the zeitgeist and captured People's Imaginations in November of last year with the launch of chat GPT.
But it is a novelty for some is worn out so as their enthusiasm my view is that people aren't thinking big enough and they're underestimating how quickly the foundation model themselves will improve.
I believe chat bots or just demos there not really the end game.
And the real potential of AI is going to manifest when it gets deeply integrated into other software, making it possible for end users to get great results without themselves, becoming prompt engineers and for developers to radically accelerate their productivity.
There's also a lot of skepticism around AI that I understand and acknowledge.
Many folks have rightly called out the hallucination or black box problems folks just don't trust that AI is providing accurate or useful guidance all of the time.
They want to be able to trust that theyre getting good recommendations, which means they need to understand the thinking process and assumptions that underlie them.
And countering the now infamous hallucinations roads trust, especially when you can't trace how they came up with that in the first place.
We've been Architected Hassan as work wrapped out a model for over a decade, and we believe it will become increasingly valuable in this AI powered future. Thanks to what it allows us to achieve with this on intelligence.
The work off ensures that you are a single source of truth for worked at are structured in a way that it's scalable and maps to how work actually gets done inside organizations.
With the Warcraft datas connected across the whole enterprise work functions and teams and people.
And this data connection is powerful because it captures the sum and parts.
Hey, I can use the underlying pieces of the work to more accurately draw conclusions at multiple levels of altitude.
And with the final work graph, we believe we're best positioned in the work management category to solve the Blackhawks problem because we can show its work on packets assumptions from tax and analysis to work across all teams at all levels of granularity.
Here's a tangible example.
The company is preparing for global product launch and multiple teams across R&D marketing product marketing and sales are involved.
Each have their own projects and work streams that support the overall launch effort and each lives in one portfolio of work in front of them.
The southern intelligence will be able to analyze all elements of the work supporting the product launch and fly key risks and bottleneck season granular information from supporting tasks.
Before these hidden blockers would've been a blind spot for the organization and we've taken many conversations to uncover.
But now with the work Ralph and AI. This can be surfaced immediately and it's an intelligence will help show its work by pointing how it came to that conclusion based on the worked out and the work relationships at its disposal.
Sandoval highlight where and how this unseen, but critical dependency will impact launch timelines visually.
The Warcraft makes how work gets done in your organization highly legible to the AI, but it's also going to make the <unk> underlying assumptions to its conclusions logical to your organization and the people within it.
This is critical for key enterprise requirements like permissions access control and accountability.
The southern intelligence powered by the Warcraft will serve as a shared map that helps align human intention with guidance as they work together to achieve our customer's goals.
We believe it is the only work management platform built for enterprise scale with proven capabilities of scaling to 200000 seats and company wide deployments and our enterprise customers agree.
Is this an adoption grows across the enterprise and the value we provide increases.
The cross functional nature of the Warcraft out a model is even more important with AI because information silos isolate context that could otherwise be used.
Even if you use AI to find the context and another silo you have to infer how theyre connected.
Whereas the relationship as explicit and Warcraft out among them.
That gives us yet another way of giving customers increasing returns to scale and Arizona adoption.
And some subtle capitalize on an enterprise's warcraft to deliver more useful accurate and insightful user experience at every level, especially the executive level.
AI is the ultimate accelerant of one of <unk> core value proposition, which is to help companies thrive by connecting companywide goals to the strategic initiatives departments teams and work needed to achieve them.
We see ourselves as creating entirely new software interfaces between teams of humans and working together and the powerful AI models that make getting their work done easier is.
This is the core of our innovation focus right now.
We've already announced a slew of new AI features that are currently in beta on that help individuals and teams improve their productivity like writing assistant instant summaries and work organizer.
Other features and data include health checks that drive greater clarity and accountability and asks on it anything that maximizes impact.
Further down the product roadmap. We're also planning features such as goal based resource management and AI assisted smart workflows and we're just getting started.
You'll see us unveil an exciting new lineup of innovation in our work innovation Summit on October three in New York City.
This will be our most exciting customer event of the year with a visionary keynotes luminary speakers industry leaders across operations and marketing as well as a special investor session to talk more about our product plans go to market initiatives and financial outlook.
Well also be hosting customers that our work innovation center, where we will share their work and emission score.
Cutting edge benchmark developed by industry, leading experts.
The scores powered by the work Ralph and AI designed to SaaS organizations potential for innovation, both now and in the future.
The organization score highlights our customers' innovation potential, allowing them to clearly identify strengths overcome obstacles.
This unique offering and our market and its only offered by us on them.
Extremely popular, especially with our largest and most strategic customers. So we're excited to include even more customers in the program.
We look forward to seeing you in New York City on October 3rd.
In closing in spite of significant headwinds we've made measurable progress in the first half of the fiscal year.
We continue to see traction with some of the largest companies in the world and look forward to partnering with these companies as we look toward the future product roadmap.
Now I'll turn it over to Anne.
Thanks, Justin the story in Q2, it's really about continued enterprise growth and building our enterprise leadership bench.
Talked about our strategy for moving up market and we are working and executing on this plan.
That said I know the macro situation is still top of mind. So let me address that upfront.
Overall, the sentiment in our customer base has remained the same versus last quarter.
Well it hasnt yet improved it also has not gotten worse.
I just continue to be scrutinized seats are being optimized and decisions for expansion are being pushed out but.
But as customers continued to optimize budget. We are also getting positive competitive signals, where customers are consolidating removing incumbents and choosing Hassan and I.
I also want to talk about net retention rate Ken has.
As the de facto choice for some of the largest tech companies in the World <unk> has likely seen disproportionate exposure to any pullback in that vertical which is about 30% of our business.
Importantly, much of this has been less seat expansion as opposed to anything else and that remains a factor this quarter.
For example, in some cases, even when a customer with choosing to expand into new use cases and departments. This is often offset by removing seats that were downsized as part of our budget pullback.
Conversely, as we approach the anniversary at the beginning of this trend we expect to benefit from any rebound in future quarters.
Top of funnel demand was stable versus last quarter and our pipeline continues to build.
The U S grew 22% year over year, while international grew 18%.
If I split off in EMEA separately, EMEA had a particularly solid quarter reporting the fastest growth across our major regions.
Our new leadership and regional model in EMEA are in place and we're getting increased Jackson, we closed several of our largest net new deals in EMEA as a result of our improved execution.
Growth in our business and enterprise tiers led overall growth at 32% year over year and represents 73% of our revenue.
We believe this is a good proxy for our Jackson within larger customers.
That's on a Gulf portfolios and reporting are key differentiators for us.
Adoption has continued to be strong and these investments are leading to consolidation wins.
Our top down use case and value selling is resonating and it's allowing us to land large deals.
Our enterprise customers representing organizations with over 2000 employees continue to be our fastest growing customer segment and this segment is further diversifying.
Proximately, 80% of the net new $100000 plus customers in Q2 were in non tech sectors.
Executives are planning long term about how to invest and work management capabilities and this is driving multiyear commitments for us.
And there's not a single enterprise customer that isn't asking us about AI and automation in Osaka we.
We believe our AI roadmap will help to further drive adoption and expansion within customers.
We're seeing new lands and expansions broadly across several diverse industries.
First we set a new record with our largest land deal in our history, one of the largest multinational cyber security companies chose us on a in a multimillion dollar consolidation win.
During the RFP process. They evaluated multiple work management apps that they were using across the company based on several factors the company will be methodically ripping out legacy apps and replacing them with us on it.