Q4 2024 Asana Inc Earnings Call

What makes me feel good about our success with enterprises is not only in the number of large customers and the growth, but also the health of these enterprise accounts.

And most of our largest customers sona and highly utilized the tea leaves are helping us grow and expand in the accounts have the ability to keep growing even more.

This is true even in the organizations were heightened focus on budgets has temporarily slowed account expansion.

I'm also excited about the progress we've made with AI and the opportunity in front of us.

Final intelligent strengthens our core value proposition it helps our customers drive more clarity accountability and impact up down and across their organizations.

As you know we run our business on a sauna and we're constantly testing our latest innovations.

As part of this we've been quickly adopting our latest AI features and the insights are remarkable.

The state of the art is advancing quickly and we believe <unk> and AI generally will only get better from here I'm excited for the future and we're seeing real value now.

Like many of our customers, we've just wrapped up our objectives and key results process for the year leveraging this on intelligence, our AI solution to quickly report status across levels of the organization.

These processes always feel like a heavy lift.

And frankly, a bit of a burden even though they are important because everyone's eager to move on to the new year's priorities.

But using smart status cuts this process in half or more with higher quality results and will only get better over time.

Similarly, we just went through our company wide 360 degree performance reviews, another famously onerous process.

I personally used our smart answers product within each of the one on one project I maintain with our executives summarizing in minutes all the important topics and accomplishments we've discussed in the past year.

At my direction, even highlighted all the specific times that gave recognition or feedback. So I could easily include them in our reviews.

That's not a special performance review feature rebuilt to be clear I simply ask the product to help me use our general smart answers feature.

Nothing specific categories and questions to consider.

Even as an end user I was empowered and have the flexibility train a custom workflow in minutes that saved me hours of work across my whole team.

Executives and managers loved the visibility into their teams work and the insights they can derive with AI.

This has proven to be not only a significant productivity boost but it's also yielding higher quality outcomes.

This wouldn't be possible, if we were running our business with email chop spreadsheets and slides.

That's why it's one is different.

The Warcraft, plus AI or more than the sum of the parts.

The Warcraft acts as a map of an organization's plan of record and preferred processes. We have a unique opportunity to solve collaborative work problems because we have the most relevant context and data to create useful and accurate generative outputs.

We believe we're the only work management platform that has this combination.

High powered by a clear structured map how work actually gets done across organizations.

This empowers our customers to ensure people and I worked together to accomplish objectives and achieve results.

We're still early in our AI journey as a company, but we're seeing some exciting trends beginning to play out since we first launched Santa intelligence last fall.

AI is coming up in virtually every conversation, we're having with our enterprise customers as they look to us for help implementing AI in their workflows.

Customers are excited about AI, now and they're actively making purchase decisions based on our AI vision.

Pressures coming from the top down and leaders want to better understand how they can drive business value with AI at scale and do so safely and securely.

And we are even turning skeptics into believers as we're able to demo how AI is not just a chat tool, but how can solve critical business problems when embedded directly in a sauna workflows.

Just the other week at her work innovation Center.

We hosted an executive from one of our largest customers.

She said she was hesitant to adopt AI.

Our team position the value of AI to deliver faster and more effective project status updates a key part of the job for many of our customers that typically takes considerable time and effort to do well.

With us on intelligence. This status can be written generally deep linking relevant work for Maisano. So we know where every five came from and highlighting progress made against company goals. The.

The tone and style can even be personalized.

We showed this in our customer meeting and immediately turn the skeptic into a believer and they are now rolling out this functionality to their whole organization.

This is just one powerful early example of how differentiated our solution is.

The time savings were amazing, but will really impressed the customer was the quality of the output and the fact that it's going straight to the source references.

This is the power of the Warcraft plus AI at work.

Demand for our AI features as one of the leading drivers of growth in our new product tiers, especially in advanced enterprise and enterprise plus.

Although it's still early we've had over 20000 customers adopt the new tiers with AI.

What's next.

We started rolling out our next wave of innovation, starting with smart digests, which provide quick summaries of what happened since you last visited a project.

It can catch you up if you're out on vacation or simply focused elsewhere.

Next is power and gold standardization workflows status updates and business insights at every level of the Warcraft with AI.

I believe in the foreseeable future Simon will give you real time insights on qualitative information about the status of work across all levels of the aircraft in the same way that our dashboards do for numerical data delivering a huge part of our original vision.

On the partnership front, we have strategic partnerships with Entropic opening I in AWS, which allow us to build world class solutions with leading OEM providers.

We're able to get early access to foundation models to help test and prototype against our enterprise AI solutions as you just heard from in tropics announcement of Quad three.

And this benefit is a two way street as these LLM providers tuned their models to our use cases over time.

As one of their customers They trust us to set the bar for what great looks like I'm referencing our work together to help conceptualize their models.

And in return this helps power, our most ambitious and complete vision for collaborative work management.

And as a sign of customers they each enjoying the fruits of our combined efforts to power their own work and dream even bigger.

These partnerships form a virtuous cycle and we expect the benefits to compound over time.

We're also partnering more and more <unk> and it leaders through our work innovation lab, which is regularly featured in Forbes The Wall Street Journal and Harvard business review among others.

Ceos are being asked by their Ceos and boards to drive AI strategy and rollout operationalized business objectives and help accelerate go to market.

They feel the urgency to get value from AI now, but must do so in a safe and trusted way.

CIO, they're not just chief information officers and their chief in children's officers.

This is an important expansion in the operating role of the CIO and the Sona is uniquely positioned to help.

We're investing in making sure <unk> can connect all their worked at them to build the right Foundation for AI.

Soon be launching new innovations like a workflow console deeper integrations with Microsoft 365, and ways to intelligently draft and standardized goals across the entire organization.

We're hoping to see I O us deploy trusted AI across every department with the right safeguards and transparent controls with features like sandbox is multi orbit deployment and AI powered customer onboarding designed to support companies at scale.

And see I always want to see wins with AI by delivering immediate impact and ROI now and they can do this with the <unk> platform.

Features including our new executive summaries capabilities it's.

Smart answers across all warcraft objects from tasks to projects to portfolios to goals and smart status updates at the portfolio and gold level.

They are providing real value time savings and better outcomes for <unk> and our stakeholders across the business.

Again, I want to really emphasize that the phone has ability to connect work all the way up to higher level objectives gives us the ability to provide unique and powerful real time insights at every level.

One way of looking at our roadmap. This year is we're going to be investing leveraging and amplifying that powerful source of differentiation.

The pace of change is only going to accelerate this new AI age and we believe we're extremely well positioned to capture this opportunity. Thanks to our investment in the Warcraft that our model and are incredibly scalable architecture, that's proven to support 200000 plus seat deployments within a single organization.

Because of this investment are positioned today, and our product vision that Gartner recognized <unk> as a leader in the Gartner Magic quadrant for collaborative work management, and they positioned us furthest and completeness of vision.

You'll hear all about our latest AI innovations in all the investments, we're making to help CIO thrive coming out of our next stop on the work innovation Summit tour on March 19th in Sydney, Australia, and then later in San Francisco in June.

They tuned for more announcements.

Before closing I wanted to highlight the recognitions our team has been awarded during fiscal 2024.

For another consecutive year, San was recognized by Fortune and Great places to work across several categories.

Best places to work in the technology industry.

Places to work for Millennials Best places to work in the Bay area.

Inc. Magazine also awarded US on a best workplaces for the sixth year in a row.

And fast company awarded a sign of best workplaces for innovators in the enterprise category.

Finally, I'm very aware of the dynamic market conditions that continue to impact our near term business. Our strategic initiatives are aligned with navigating these headwinds to ensure sustained growth and a path to profitability.

At the same time I'm more excited than ever about the potential of a sauna our vision for collaborative work management and the value. We can provide for our customers in this new era of work.

Everything we're focused on today is in service of driving enterprise growth and customer success.

<unk> pipeline retention and C level customer engagement.

Now I'll turn it over to Anne.

Thanks, Justin as Duston mentioned during the quarter, we continued to feel the impact at the macroeconomic headwinds increased budget scrutiny and reductions in head count among our customers, especially in the technology vertical which has been a jackpot ground. However across the business. There are some early signs that hunt at modest stabilization.

As you've seen them in your head count reductions have continued but they are smaller this year in aggregate versus last year, and we should be lapping the bulk of that was written off in the first half of the year.

As we move up market and further at that proof of chain to senior level decision makers. The deal cycles continued to be elongated, but the conversations for Aflac network management increasingly more strategic especially in the largest enterprises.

Sequential growth in new business appears to be stabilizing, especially for industries outside of technology and our sales force productivity continues to improve.

We still have to lap the original headwinds impacting larger existing customers in the first half, but I'm energized and optimistic about the full year and beyond are.

Our new product plans are driving <unk> and AI as a primary focus for the largest customers. It's still very early but we can definitely see that AI demand with accretive to growth even in the first quarter that it was available in our new tier.

We are hiring new quota carrying salespeople rapidly in every region and will be increasing capacity throughout the year and.

And all of our revenue leadership roles ourselves and new general manager of the Americas, a global head of channel and leaders across operations and field enablement we.

We are starting the year in a better position than 12 months ago.

In addition, we continue to drive thought leadership and the collaborative work management space.

And our second annual state of the I T liter apart the key proprietary research publication from our work innovation lab, we surveyed more than 1200, it professionals from across the U S and U K to understand what's top of mind in their roles, especially as their organizations are adopting AI.

This year, we saw three key trends in the data first approach to streamline and consolidate tech stacks.

Challenges and concerns related to data accuracy, and robustness and third the role of the I T later being called on to lead their company's AI strategy.

The research findings echoes, what we see within our own customer base executives are planning long term and they're looking for strategic partners. We.

We believe this is helping us win on vendor consolidation discussions and Jive multiyear commitments frac.

And I want to Echo both what we're seeing in our research and add to Dustin earlier remarks about the excitement we're seeing around AI with our customers.

I recently returned from a trip to Japan, where I was visiting several enterprise customers alongside our Chief revenue officer at Mcdonald.

One of the customers that you spent time with with Fujitsu, a global technology and business solutions leader.

We learned that <unk> held in Astana AI ideas on with our employees as they seek innovative ways to use us on intelligence to transform the way they work.

He has chaired our recent idea that came from the idea to help them better manage their large global organization.

Like all large multinationals the company dedicate considerable time to resource planning for global projects.

Managed this process and it's on it today, but with our AI features they've ideate new ways to optimize their global resource planning to make it both more efficient and more effective.

The team is foreseeing infinite possibilities to use the sana intelligence like the idea of helping identify the right teams and individuals for each specific assignment assigning the work and then handling language translation to assist both in the handoff and to provide status updates on work progress.

It's a powerful example of what Exxon intelligence can do and just the beginning of what's possible as we continue to invest in helping companies work smarter with AI.

And examples like this powered by AI will help fuel our success with the largest organizations in the world.

Enterprise customers representing organizations with over 2000 employees continue to be our fastest growing customer cohort and we are seeing new business broadly across several diverse industries, including health care financial services transportation and manufacturing among others.

So just to the global technology and business solutions leader I referenced earlier significantly expanded their use of our enterprise solution. This quarter as they continue their organization digital transformation initiative.

They just they have found that teams using us on US then 30% last time on admin work, so they're deploying our platform to more business units and departments to drive employee productivity and impact.

Additionally, they will now be managing goals and Kpis for the organization in Osaka.

Okay.

We continue to see growth within the health care sector. This quarter for a range of use cases from Onboarding, new physicians to fund raising to digitizing their business operations. Some notable wins include the emergency services Division of one of the largest single payer health care systems in the world.

Global Health care company focused on pharmaceutical distribution health care services and medical supplies and equipment.

And a significant humanitarian medical aid organization that deploy thousands of doctors and has cheated over 100 million patients around the world.

In the fiscal year, we started to establish beachheads in the financial services sector with some of the largest global companies.

These include a major exchange and the U K.

A global provider of financial data and you'd see likely rely on every day at work and one of the world's Premier investment banking firm.

And we continue to land significant deals across logistics and transportation for.

For example, a multinational transportation and business services leader selected a sonnet to streamline and manage all of their work to enable the organization sales team from changing to content to help drive additional revenue for their business.

And we also had an expansion with one of our large logistics customers.

We also had a large land deal with PK, a British multinational publishing company and a division of Penguin Random House, who were using us on out across their organization.

As a longtime customer of decay I'm thrilled to have the opportunity to support their mission to inspire educate and entertain readers of all ages.

Despite the headwinds we see in the market, we continue to expand with some of the leaders in tech and our winning on consolidation decisions.

Indeed, the number one job site in the world extended their use of our platform this quarter.

They've been a customer of ours for a few years and core business functions across their organization from project management to customer facing divisions to internal operations I'll use us on a.

They love and rely on us on out to track progress on their goal execute their initiatives faster and pivot quickly when necessary.

Thanks to the strong business value they have experience with <unk>. They will be transitioning employees and then there I T PMO and operations teams from other tools to also manage their work and the Sarnia platform.

In summary, even with the current market conditions, we continue to see more multiyear deals winning on vendor consolidation decisions and are continuing to diversify our enterprise success across more industries.

We have continued to win these strategic expansion, particularly at some of the most recognized companies in the world and that is because the largest secular tailwind around digitization continue.

Looking to Q1 and the rest of the year, we continue to focus on executing on top down go to market strategies that help us win business from new and existing customers with a focus on more and new enterprise sales plays.

Enhanced account coverage across the entire customer journey from strategic account management to professional services plus AI for building workflows and strategy to scale customer success.

And international growth opportunities and our global regions, where we are thrilled to now have new enterprise sales leaders and of course, increasing sales capacity throughout the year.

We are excited to bring the work innovation summit to more parts of the world in the coming year combined with the launch of AI features across every tier we are seeing continued growth in the pipeline and are excited to turn that into incremental revenue.

And with that I'll hand, it over to Tim.

Thank you Anne.

While I'm pleased with our high level results some of the underlying drivers are still developing.

As I mentioned, we continue to see headwinds from a macro standpoint, which continue to impact our dollar based net retention rates.

We also have more work to do as we develop our enterprise go to market myself and continued transitioning of market.

By the same token I am proud of the efforts. The team has put in to manage costs and improve efficiency. We made substantial progress on improving our operating margins and free cash flow in fiscal 2024.

Now onto our Q4 results.

Q4 revenues came in at $171 1 million up 14% year over year.

We have 21646 core customers or customer spending 5000 or more on an annualized basis.

Revenue from core customers grew 16% year over year.

This cohort represented 75% of our revenues in Q4 up from 73% in the year ago quarter.

We have 607 customers spending 100000 or more on an annualized basis and this customer cohort grew at 20% year over year.

As a reminder, we define these customers cohort based on annualized GAAP revenues in a given quarter.

Our dollar based net retention rates were lower mainly driven by sheet adjustments.

Our overall dollar based net retention rate was over 100%.

Our dollar based net retention rate for our core customer was 105%.

And among customer spending $100000 or more a dollar based net retention rate was 115%.

As a reminder, a dollar based net retention rate, there's a trailing four quarter average calculation.

Thus a lagging indicator.

We continue to see stable logo churn rates overall and low churn in our largest accounts.

If I look at our largest customers those with 100000 and above the non tech and our appears to be stabilizing.

However companies continue to remain mindful of the near term economic challenges.

I'll speak specifically to our outlook regarding this in a moment.

As I turned 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.

Gross margins came in at 91%.

Research and development was $54 million or 32% of revenue.

Sales and marketing was $88 million or 51% of revenue an improvement from 62% a year ago.

G&A was $27 7 million or 16% of revenue.

Operating loss was $15 6 million and our operating loss margin was 9%.

Presenting a 16 percentage point 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 $10 1 million and our net loss per share was four cents.

Looking at the highlights from the full fiscal year.

Fiscal year revenue grew 19% year over year to $652 5 million.

We added over 2200 core customers during the year.

We also added over 100 customers spending.

Hundred thousand or more on an annualized basis during the year.

Revenue from customer spending 100000 or more on an annualized basis grew over 29% year over year.

This cohort represented 27% of our revenues for the full year.

Moving onto the balance sheet and cash flow.

Cash and marketable securities at the end of Q4 were approximately $519 5 million.

Our remaining performance obligations or ARPA was $349 million.

Up 17% from the year ago quarter we.

We expect 84% of our appeal will be recognized over the next 12 months.

The current portion of <unk> grew 17% from the year ago quarter.

Our total ending Q4 deferred revenue was $271 2 million up 16% year over year.

Q4, free cash flow was negative $17 million or negative 10% on a margin basis in.

An improvement from negative 18% from the year ago quarter free.

Free cash flow for the full fiscal year was negative $30 4 million.

$130 million improvement year over year.

Moving to guidance for Q1 fiscal 2025, we expect revenues of $168 million to $169 million.

Representing growth of 10% to 11% year over year.

We expect non-GAAP loss from operations of 23 million to $21 million, representing an operating margin of negative 13% at the midpoint of guidance.

And we expect net loss per share of nine cents to eight assuming basic and diluted weighted average shares outstanding of approximately $226 million.

For the full fiscal year 2025, we expect revenue to be in the range of $716 million to $722 million, representing a growth rate of 10% to 11% year over year.

We expect non-GAAP loss from operations of 61 million to 55 million.

Representing an operating margin of negative 8% at the midpoint of guidance.

We expect to be free cash flow positive by the end of this calendar year.

And we expect net loss per share of 22 to 19.

Assuming basic and diluted weighted average shares outstanding of approximately $230 million.

Our guidance assumes there is no change in the current macroeconomic environment.

We continue to believe dollar based net retention rates should bottom around Q1, and hover at plus or minus 100% through Q2.

When a number of large deals from the previous year renewal.

In addition, we anticipate the recent leadership changes we have made in our sales organization will take time to fully manifest.

We're committed to maintaining a disciplined and balanced approach to optimizing costs and improving efficiency and profitability.

We will continue to invest in the future growth opportunities like AI, which we expect will drive long term value.

Our goal this year is to Reaccelerate, our revenue growth rate, while remaining committed to delivering a durable positive free cash flow by the end of calendar 2024.

As we move towards positive free cash flow. We are encouraged by the progress we've made to date and I'm optimistic about our future and our position within the enterprise segment.

Over the next 12 months to 24 months, we anticipate incremental growth will be driven by expansion from our core customers, which will be a tailwind to our NR.

Our focus on moving up market, so focusing on moving more of our customers to the 100000 and spend levels.

And our new product tiers powered by solid intelligence, which will help with more lands improve adoption and encourage new expansion.

And with that I'll turn it back to Dustin for more closing remarks.

I want to close by fluctuating that in fiscal 2024, we made a commitment that we would become free cash flow positive by the end of the coming year and we focused the entire organization on improving our operating efficiency.

In spite of challenges along the way we need more progress in one year and we expected by a wide margin.

This year, we intend to follow through on our commitment to become free cash flow positive by the end of the year, but we're going to do it while also achieving our other key goal this year re accelerating our revenue growth rate.

We've achieved this twice before in our history as a company and we intend to do it once again.

I'm incredibly energized by our roadmap and by the enormous opportunity that lies ahead.

With that operator, we'd love to start with the questions.

Thank you as a reminder to ask a question you will need to press star one one on your telephone to remove yourself from the question queue. You May Press Star one one again, we ask that you. Please limit yourself to one question and one follow up please standby, while we compile the Q&A roster.

Our first question comes from the line of Michael Funk Bank of America. Please go ahead Michael.

Yes. Thank you for taking the question and happy to be alive with with coverage on <unk>.

One for Ian and Dustin if I heard you know curious you know what what is driving the traction up sharing and new tiers.

Hi, Michael I'm, so glad you're joining the call and excited that you are covering us and the things that we're seeing that are driving up touring really our interest from customers, especially our largest customers in our AI investments and it's still early but we're definitely seeing that AI demand was accretive to growth even in the first quarter that all.

Our new tiers where available.

I'm excited about is in all of my customer conversations in every region executives are really seeing that AI combined with Yosano work grass can drive significant value in their organizations and they appreciate the approach that we're taking it's both our guiding principles and then the fact that <unk> available and every page here.

And so what I hear most often is as customers are really looking at their AI strategy, it's about being able to partner with a trusted organization that they are already working with and so I'm really pleased that were considered one of those trusted partners. We expect to see more of that throughout the year as we are investing in AI throw out our roadmap.

And just to go one level deeper this is duston. So when we present. The AI features are the thing customers are really responding to is how they really power the way that the worker App connects work from cash all the way up to a higher level of company objectives. So you take something like our AR smart summaries are smart status.

And because you're applying them to our portfolios and goals that are connected to the underlying work you get much more powerful results and so that that's really resonating and amplifying the power of the functionality, we already had in our higher level tiers before that was really sort of focused.

At the top of the sort of work organizational charts are not just really reinforces what Anne said already that you know AI plus to work off is really more than the sum of the parts.

No that was great. Thank you, Josh and thank you and one more if I could please I think Andy you mentioned in the call that all the essential roles now for sales or sale.

So Europe, you recently hired North America, I'm curious for more color, though on the XP.

<unk> or time to ramp the new sales organization and what measurable if youre looking out throughout the year.

Yes, thanks for asking that we are really excited to have all of our global revenue roll spelled including having great enterprise sales leaders in Germany U K I, Japan.

So it's been great to have them on board many of them were with us at our sales kickoff that just happened. So the things that we continue to measure and monitor them definitely ramp time productivity.

The pipeline Bell's converging all ear classic metrics and I think more than anything it's just having great leaders in place that are working really well together and that's one of the reasons, we will be investing and adding capacity in every region and likely in a linear fashion throughout the year. So those are the things that work and then continuing to watch and monitor.

But really excited about the global team in place.

Great. Thank you all for time.

Pardon me. Our next question comes from the line of cracked wall Ravens of citizens JMP. Your question. Please Pat.

Oh, great. Thank you congratulations.

So I'm lapping the large renewals can you guys comment on on the other side you feel youre seeing that make you more optimistic about the business.

Hi, Pat it's and some of the things that we're seeing that make us optimistic or in particular, the non tech category. So customers in those categories not only are we seeing stabilization, but we're starting to see improvement and kind of early signs of growth there. So.

In particular non tech <unk> grew in the high teens and.

And so as that continues and as we diversify into more of these vertical I think those are other reasons that we are seeing optimism and then we expect that tech will follow that so as we mentioned we're going to work through some of these larger renewals that are mostly concentrated in tech and that's going to happen in the first half of the year, but that's also why.

We're excited to see a reacceleration in the second half of the year.

And I'll just add on a little bit more I think that covered it pretty well. This is dustin here, but wanted to sort of a simple way of looking at it as parts of our business are growing faster than the overall revenue rate and so if we get all the parts of the business to do that then the overall revenue rate re accelerates.

And to Ann's point, even where the business is growing less than the overall revenue rate.

Having really high quality conversations we talk to these customers are interested in deploying further they're trying to work with us on.

Just budget predictability and aligning price to value, but they want to go further and so we're still expecting we're not expecting this to be a new normal for Tac, we think that that recovers and re accelerates as well.

Thank you. Our next question comes from the line of Josh Baer of Morgan Stanley. Please go ahead Josh.

Great. Thank you.

A lot of it.

<unk>.

Points look forward to for next year I did have a question on core customer count. The sequential net adds was positive 300 that was a little bit.

Although it was lower than we've seen this year and as far back as we have data just wondering if you could talk a little bit about the drivers of this.

Comment on gross adds versus churn in over five K cohort.

Yeah, Hey, Josh This is Tim Great question, I think you know for.

For us a lot of our focus is moving more and more of our customers from the five K up to the 50, K and then to the 100 K.

And getting moving more of our customer enterprise customers into a higher spend category.

You know I would say when we looked at kind of the types of customers that may have fell out of the five K some of them actually didn't churn. They just dropped some of their spend primarily due to see the adjustments and then we did have some other customers come in.

As well, but I would say, it's really about our focus on moving a lot of our customers.

Upmarket and into the enterprise enterprise plus tiers.

Okay. That's helpful. So you're seeing some customers may have dropped from over five K to below five.

Is that my follow up.

Got it actually looks like the under five K was a little bit stronger.

As far as sequential adds tough to tell with the rounding of the overall customers, but that looks stronger I was just wondering if there was any change in reinvesting back down market.

But it sounds like it was more just a function of some some downsizing.

Just some movements with it within within the customer base around dollar spend okay got it.

Thank you.

I might just add there's a little bit more speculation, but we did have our work innovation summit at the end of October and we you know we did some PR and brand pushes after that it's possible that contributed but it wasn't like a sort of explicit strategy shifts so much as it's easier to sort of convert those smaller deals very quickly after an event like that.

Yeah.

Thank you. Our next question comes from the line of George <unk> of Oppenheimer. Your line is open matures.

Thank you for taking my question.

And maybe you can build on your vendor consolidation.

Holiday season games can you give us some perspective on.

What areas of spending you are consolidating and how that rollout goes typically.

Yeah happy to George So from a customer perspective, it's really the cross functional use cases enabled by the work Ralph and now AI that are driving the consolidation and then also our multiyear investments are made.

A good example that brings it to life is a global cyber security company consolidated eight disparate applications onto a sauna and they've quickly deployed additional use cases now that they're all on one platform and so we're seeing some fast healthy expansion as it becomes faster and easier for them to manage.

All of these cross functional collaboration initiatives at scale across thousands of employees.

So.

Where we're seeing more of this desire, especially as we're working with CIO, who are driving kind of top down consolidation and really wanting to make sure their unified on one single platform and then you add on top of it the interest in and the investment in AI and we're seeing that kind of cut really come together.

This doesn't again I, just always like to add that the really the strategy of the Warcraft was sort of designed to be positioned well for these consolidation conversations and enterprise because it enables teams to work really well together cross functionally so often we get into a consolidation head to head and we hear that a certain competitor a strong in one department maybe another.

Other department and its on US is really the favorite across arm and especially when they're working on strategic projects Cross functionally. So I just want to get the product strategy and they're in there as well and finally, just congratulations on the win last night.

Okay.

<unk>.

Tim maybe can you provide some context on the linearity month to month trends coming out of the fourth quarter into the first quarter.

Yeah that was a great Oscar joke duston.

So just in terms of I think the thing that like when I when I step back and look at the last few quarters. The thing that's really encouraging is.

<unk> bookings stability.

Especially for new bookings.

That has been stable and when we look at where the business is growing our non tech business is growing into the high teens.

We do have some renewals coming up particularly in the tech sector that will be renewing in the first half and I think once we kind of lap those renewals will feel like where it will be in a really good shape to reaccelerate the business, but the first half of this year is really around stabilization.

And I think there is just really encouraging signs both from a pipeline perspective stabilizing bookings perspective stabilizing.

And when we kind of look under the cover of the kind of the.

Even though the <unk>.

The net seat retention rates have stabilized as well so theres just a lot of positive and good signs we're not out of the woods, yet, but I do think where we can see light at the end of the tunnel and that were probably one or two quarters away.

Thank you.

Our next question comes from the line of pendulum Bora of J P. Morgan Your question. Please pendulum.

Great Hey, Thank you for taking the questions.

It seems like you already have about 20000 customers.

If I heard that correctly and the new pricing and packaging maybe talk about how those conversations have progressed, especially as you kind of layer on the user limits.

Some of those customers.

The way to understand the kind of the contribution from the <unk> hearing in Q4 and maybe Tim.

How does that or should that benefit MBR for the year.

Hi, it's Andrew I'll start with the customer conversations and then turn it over to Tim as we said, it's it was our first full quarter with the new packages and tiers that we launched.

And those 20000 customers that have up tiered and adopted the new packages a lot of that was driven by AI and their desire to access the AI features and functionality that are only available and then your tears.

And so that just makes the sale conversations that our field is having much more strategic and customers are excited to be able to access and really deploy AI immediately with Athena I think we'll we're continuing to invest even more so not only in AI features of a big part of it but also in the new tiers.

We're excited to see more of that throughout this year and then I know you had a question for Ken in there as well.

Okay pendulum, yeah, I, absolutely think with.

With the new tiers.

And as customers renew their annual contract with us.

Create a new opportunity for us to have these thoughtful conversations around.

AI around.

The limits within the existing plant within the existing the legacy.

Legacy Skus.

I do think like Arana, our the way, we've been thinking about our and our and kind of the guidance that we provided in terms of the acceleration of <unk>.

Assumes that our <unk> are recalibrating and Reaccelerate and starts moving back up in the back half of this year.

Thank you. Our next question comes from the line of Taylor Mcginnis of UBS. Your question. Please Taylor.

Yeah, Hi, thanks, so much for taking my question. So the first one is if I just.

For less days Q1it looks like the implied quarter over quarter growth guide is roughly in line with the guidance for <unk> are roughly in line in <unk> to what we saw in in <unk>. So does that mean that the headwind for renewal <unk> is similar to what you saw in <unk> and we could be reaching the bottom in terms of these tougher comp.

Or is there any is there anything to keep in mind for QQ and by that I mean, if <unk> tec heavier renewal quarter that could provide some more.

<unk> pressure to the quarter, DB NR growth or you're expecting to see more stability at depressed levels throughout the first half of this year. Thanks.

Taylor Bingo it was it was <unk>.

Literally the question I had written to myself that somebody should ask.

Based on the number of days if you normalize for the number of days you will actually see that we're.

It does impact the revenue guide so that's one two.

We're coming up on I would say the the renewals that are coming up the larger renewals that are coming up are really tech related and you can kind of understand from my guidance is that I wanted I want to make sure that worse lapping those renewals, so really stabilized and kind of the first half of this year.

And then re accelerating in having easier comps on a year over year basis.

But I think for the most part most of our customers would have readjusted their seat counts.

By the end of Q1 or early Q2, so that's kind of the reason we gave the commentary around it and are hovering at around 100, plus or minus through Q2.

Question Awesome.

Perfect Super helpful. And then just as a follow up to that so when we think about like the trajectory.

<unk> you talked about expecting sequential acceleration maybe in the back half the second half of this year and in terms of revenue growth. So is that just your comfort in that is that largely just being driven by some normalization in churn rate or may be not downtown or is there any.

Gross are green shoots outside of that I know you talked about some of this up hearing maybe with some of the pricing and packaging. There is an opportunity to drive that further in the second half anything else to call out.

Yeah, I think it's really three pieces right I think it's one with the launch of.

Assam intelligence into Warcraft, we just think we can one differentiate the product a lot better than some of the other players out there too we are adding sales capacity and we add sales capacity kind of going into Q4. So I expect many of these reps to be fully ramped by the back half and then three kind of your comment around our and our just normalizing and lapping.

Any of the more difficult renewals that we've had so it's really kind of a three pronged.

I would say three pong.

Well in terms of how we think about reacceleration.

This doesn't it isn't important topics I just wanted to add one other angle on that which is just.

Thank you sort of said that's the way you framed the question too, but we're we're sort of seeing the deceleration slow it feels like we're approaching the nadir when we look at sector by sector.

Sector basis.

And in terms of Green shoots I think that's like partly about the external environment as well.

Just saw great State of Union, President said, where we're headed for a soft landing maybe even it's a little better than that.

But inflation seems to be getting under control and a lot of other things look good and then when you look at the tech sector specifically.

You know we're in the middle of what I think is still is a rising tide of AI growth.

And a lot of the relevant players are core customers of ours and even when we've seen major tech companies retrench like Apple canceling the Kerr project, they're redirecting those resources degenerative AI.

And so that that has its own kind of green shoots that I think we're well positioned to take advantage of.

Thank you. Our next question comes from the line of Steve Enders of Citi. Your line is open Steve.

Okay, great. Thanks for taking the questions here.

Okay.

What are they getting a little bit more about that.

Incremental growth probably coming more from the expansion versus first.

Net new and I guess as we kind of Peel back the net retention.

For this year.

Beyond that how are you thinking about.

What makes the best coming from up here.

Brian.

Some of the higher prices are kind of the new use cases coming on and to capture more of the consolidation opportunities within within accounts.

Hey, Steve It's Andy I'll start with that and so we're investing both you you asked about expansion, we definitely again see as we're driving more strategic top down adoption.

Partnership with <unk>, an executive that that adoption happen faster in the organization, especially as we're also investing in our wholesale services and customer success. We are also focused on net new logo lands in every region and that's part of the investment.

And with our sales leadership team globally. So.

And in that case, where you know earlier there was a question about kind of smaller deals what we're still focused on is seating.

Teams within larger enterprise organizations. So we'll continue to invest in that motion and then now with our global sales team being able to work with the right ceded accounts to drive expansion and then with the new pricing and packaging I think the whole goal there is to make that upmarket motion in the upturn a lot smoother and a.

Lot more predictable. So it's all of those combined that are driving growth in every region in every market.

Okay.

That's helpful. And then maybe just on the investments youre, making or for fiscal 'twenty by I guess wanted to get a better sense for.

How should we be thinking about maybe the pace of the.

I think the context.

The Q2 <unk>.

EBIT margin be it maybe just a little bit smaller than what we've seen.

And the rest of the business.

24 or so.

How should we be thinking about what that means.

Going forward in terms of the guidance assumptions and maybe how the.

Maybe similar or different.

This past quarter.

Hey, Steve It's Tim So I would say the way to think about the investments, they're probably more linear we did I would say for Q4 increase our sales capacity capacity hired new leadership and on the sales side.

It will take the team a little bit of time to ramp, but I would expect us to continue to make progress on the operating margin as we move towards this year.

Now we made huge progress year over year I want to say like 29 percentage points I don't expect us to make that amount of progress. This year, but you should expect us to kind of.

Modest modest improvement there, but then from an operating perspective margin perspective make incremental progress quarter on quarter.

Thank you. Our next question comes from the line of Rishi Galeria of RBC capital markets. Please go ahead.

Wonderful. Thanks, so much for taking my questions guys.

Wanted to start off on the cash flow positive Guy Tim Great to hear you reiterate that target for clarification, when you say being free cash flow positive by the end of the year are you, saying that youre going to be free cash flow positive for FY 'twenty five for the whole year or is that just a Q4 number and maybe more importantly than that how should we be thinking about.

Cash flow from there is your goal to kind of continue investing aggressively in operate kind of at a cash flow breakeven to slightly positive level or should we kind of as a priority on being continued free cash flow margin expansion from there and then I've got a quick follow up.

Let me try to answer it this.

This way I would say certainly we will be positive free cash flow exiting the year.

And depending on our growth rate, how if we see that our sales capacity sales productivity.

Is a meeting of the ROI hurdles that we set in place then there would definitely be a conversation about some increased investments relative to the guide, but the the guidance right now I would say is hey, let's let's make sure we exit the year free cash flow positive, but also give us room to operate with some flexibility.

Got it okay. Thanks.

Helpful and then.

When you're making the comment that AI demand was accretive to growth already.

Great to hear that can you maybe just under.

And how are you measuring and quantifying that.

And internally to give a statement and maybe the larger question that translates to is how should we be thinking about your strategy around monetizing AI and some of the increased productivity that you're offering your customers. Thanks.

Yeah, I'll start with that the the way that we're measuring it in the first quarter is just looking at the upturn compared to.

Year over a year and then just the the movement from our legacy tears onto an upper tier and the new packages versus renewing on the same equivalent tier and so that's really how we're measuring the accretive is looking at what customers are buying as they grow.

And expand with us and that the net the total spend is increasing as they move up here. So.

And again, it's early in the first quarter of having the new plans.

But we saw more of that in terms of that motion of choosing.

More advanced package because of the AI functionality.

And this is Dustin I'm going to give you a little bit more of a philosophical answer.

So first of all I think there are a lot of possibilities in front of US there are a number of different kinds of add ons. We've discussed nothing currently on our roadmap.

But I think there are some that could be a charged in tranche pricing or per user or is like one off reports even.

An example, so I talked through in the script my experience using our AI smart answers to help me with our AR performance reviews internally, but a bigger version of that processes that accompany engagement survey.

And I could imagine every time you run an engagement survey you also get this like $10000 AI summary of sentiment your workspace and then we use that to sort of automatically give you Paul shacks across the year, because we can calibrate the scores anyway. That's just a random idea, but something I can imagine charging and it just like a totally different way from our current pricing.

So that's the first part that's the stuff I think you wanted to hear the philosophical thing is I think that the market has gone off in a really weird direction by considering AI as a feature and charging people for copilot add ons I think far more of the potential of AI is when it's integrated street into workflows and straight into features and so we intend to be an AI first collaborative work management.

System and that means that AI is inextricable from our most important features especially portfolios goals and managing workflows and.

And so we much more C.

The potential of AI in our packaging as a really ex match ex mentally increasing that value and thus our pricing power.

And again I think we're uniquely positioned with by having the Warcraft because AI plus the work Ralph is really more than the sum of the parts. So we think that we can.

Have a special advantage there.

And being able to just create pricing power across our normal packages and then later there may be more sophisticated packaging that allows us to better differentiate price to value, but I think thats.

Strictly an optimization and in the high order bit is really just the power of AI to amplify our core value proposition.

Thank you our next question.

Comes from the line of Rob Oliver of Baird. Please go ahead Rob.

Great. Thanks. Good afternoon. Thanks for squeezing me in I had to Dustin first for you I appreciate your commentary on the macro and on some of the.

Improvements or modest improvements, we're starting to see in the macro makes a lot of sense I'd be curious to hear that.

Those are helpful to you guys. There is also a lot of things you guys have done internally and you're just coming off a sales kick off right now.

<unk> been in the seat now multiple quarters, and you've really revamped team globally as they had also alluded too so I'd love to hear your perspective emerging from sales kickoff clearly a much more.

More optimistic tone here from you guys on the call would love to hear kind of what caught your attention to what most excited you coming out of sales kickoff.

Yeah. That's a great question, a great summary of our strength right now I think that.

It's a little hard to say, but we've been talking about his executive team. It's like it's partially a vibe thing it's partially a contrast from last year.

But things feel very difference are we feel better positioned we feel like we're getting traction in all the execution areas, where it matters, we're seeing a great green shoots in certain regions and certain sectors.

And and were seeing the approach of the navy or even when we're not already seen the bottom and so that's just giving us yeah, a different sort of stance on the future.

And I'll just reiterate that the timing of that is there's a little more in question, but the we have two goals. This year one is to follow through on our promise of free cash flow positive by the end of the year and then the second is to Reaccelerate growth.

And that is not something I would've said last year.

But really excited to have as a goal this year.

Got it helpful. Thank you and then and for you just to probe a little bit there, but a lot of questions on the comments around stabilization I just wanted to ask around.

You guys called out a lot of different verticals, where you're having success, which is clearly great to see and it sounds like you'll be leaning on some of those verticals here as you emerge from this trough periods.

When you look at the verticals that you called out are there any in particular, where you're seeing particular strength I know you mentioned health care financial services Industrial and then I know you were clear early in the call that sales cycles. We're still long has there been any change in sales cycles in some of those industries that are newer for you guys, where perhaps they had not.

Invested or perhaps where there's a reason to consolidate onto soma. Thank you.

Yeah. Thanks for the questions. We we are continuing to focus on health care financial services manufacturing.

Logistics and transportation something I'll pause to say is.

Given the caliber of the customers that we have that the more we focus in each of those verticals and really are working with top tier customers. I think that is also just driving greater success as we reach out to additional customers in those verticals and so that's a huge reason where I'm focused.

So much on our leadership position and we think that that not only paying off right now, but will in the future as well and so that those are the vertical that will continue to invest in them and you know when we're we're excited to continue to do that also you know we have amazing customers and attack.

We mentioned indeed, as one of them and we're continuing to partner with them as they.

Kind of Retrenched and are looking at growth in the future. So we're excited about those possibilities.

As well with their you know continuing to be loyal customers.

Thank you. Our next question comes from the line of Alex Zukin of Wolfe Research. Please go ahead Alex.

Hey, guys. This is Ethan Roth on for Alex Zukin, I, just wanted to ask around the sales capacity and you guys made a comment youre going to be increasing quota capacity throughout the year I guess what are the signals that you saw throughout the quarter.

A few months of the year that gave you the confidence.

Continue increasing Uh huh.

Great.

Yeah, our confidence in our ability to continue to add capacity really comes from we've been seeing a consistent ability to build pipeline. We've been seeing productivity improve we're very focused on making sure. We can absorb capacity in a predictable manner and so having new law.

<unk> in place, who are really focused on that end and measuring those metrics and managing to that is giving us the confidence on being able to add capacity predictably.

Got you and then just quickly.

There is a great chart from yesterday, just kind of decomposing. The dollar based net retention between users RP retention I'm just curious.

We think about the comments around stabilization in many sequential reacceleration in the back half how much of that is between some of the new go to market motion how much of that is.

Factored in our two uplift motion the skew of just kind of curious how would you stack rank.

Stabilizing macro.

AI benefit and.

Better go to market execution.

<unk>.

Yeah.

This is Dustin I honestly I think the way I think about it is the timing is more macro and the scale is execution.

Is that fair.

Yes.

Thank you guys.

Thank you.

I would now like to turn the conference back to Katherine <unk> for closing remarks.

Thank you just thank you again, everyone for participating in the call today, we always appreciate your taking the time, we look forward to seeing you on the road will be in New York. This week and hopefully we'll see some of you out there. Thank you so much bye bye.

This concludes today's conference call. Thank you for participating you may now disconnect.

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Yes.

Thank you for standing by and welcome to <unk> fourth quarter and fiscal year 2024 earnings Conference 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 this session you will need to press star one one on your telephone to remove yourself from the queue. You May Press Star one one again I would now like to hand, the call over to Catherine <unk> 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 of <unk> fourth quarter and fiscal year 2024.

With me on today's call are Duston, Moskovitz Hassan as co founder and CEO, Andrew Monday, Our Chief operating officer, and head of business and Tim <unk>, 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 on 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.

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 <unk> 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.

In Q4, we beat the top and bottom line guidance as we continued on our path to move upmarket and win the largest enterprises.

Today I'll first go through the business highlights from the quarter and year.

And then I'll talk about our excitement and increased focus on our new AI offering upon intelligence. The early traction, we're seeing and how the Warcraft plus AI is differentiated.

And finally I'll share what we're hearing from Cio's leaders and how we're focusing on their pain points.

In Q4 revenues grew 14% year over year in fiscal year revenue grew 19% year over year.

Q4, non-GAAP operating loss margin came in at 9% improving 16 percentage points versus Q4 last year.

And for the fiscal year 2024, our non-GAAP operating loss margin improved 29 percentage points versus the previous year.

This is a huge achievement and credit goes to each and every person on the <unk> team for their focus on expense management and effective investments.

We will continue to be focused on growth and profitability.

And on a free cash flow basis, we expect to achieve free cash flow positive by the end of this year Tim.

Tim will talk in more detail about this shortly.

In the quarter, we continued to land and expand with some of the largest companies across major industries, including manufacturing health care, and pharmaceuticals, transportation and logistics and financial services among many others.

And as you know the fiscal year highlighted customer wins, including three major automotive manufacturers.

Four of the largest telecommunications and Internet service providers five of the largest media conglomerates in six major financial services firms.

And these are just some of our largest names from each of the last four quarters across our entire customer base, 73% of the fortune 500 for smaller customers.

We've also had great success in partnering with customers to grow at a massive scale.

We have several smaller customers, who have over 10000 paying seats with our largest appointment at over 200000 seats.

We have more than 150000 paying customers as demand for our work management solution continues to increase.

The number of customers with over $100000 annualized spend grew 20% year over year.

As these customers continue to grow with US honor our dollar net retention rate continues at a strong pace at 115%.

Revenue from this cohort grew 29% for the fiscal year faster than the overall growth and represented 27% of our total revenue.

What makes me feel good about our success with enterprises is not only in the number of large customers and the growth, but also the health of these enterprise accounts.

Most of our largest customers sona is highly utilized.

Leads are helping us grow and expand in the accounts have the ability to keep growing even more.

This is true even in the organizations were heightened focus on budgets has temporarily slowed account expansion.

I'm also excited about the progress we've made with AI and the opportunity in front of us.

<unk> intelligent strengthens our core value proposition helps our customers drive more clarity accountability and impact up down and across their organizations.

As you know we run our business on a sauna and we're constantly testing our latest innovations.

As part of this we've been quickly adopting our latest AI features and the insights are remarkable.

The state of the art is advancing quickly and we believe <unk> and AI generally will only get better from here I'm excited for the future and we're seeing real value now.

Like many of our customers, we've just wrapped up our objectives and key results process for the year leveraging this on intelligence, our AI solution to quickly report status across levels of the organization.

These processes always feel like a heavy lift.

Frankly, a bit of a burden even though they are important because everyone's ear can move on to the new year's priorities.

But using smart status cuts this process in half or more with higher quality results and will only get better over time.

Similarly, we just went through our company wide 360 degree performance reviews, another famously onerous process.

I personally use our smart answers product within each of the one on one projects I maintain with our executives summarizing in minutes all the important topics and accomplishments we've discussed in the past year.

At my direction it even highlighted all the specific times I gave recognition or feedback so I could easily include them in the reviews.

That's not a special performance review feature rebuilt to be clear I simply ask the product to help me use our general smart answers feature.

Nothing specific categories and questions to consider.

Even as an end user I was empowered and have the flexibility trader custom workflow in minutes that saved me hours of work across my whole team.

Executives and managers loved the visibility in <unk> work and the insights that you can drive with AI.

This has proven to be not only a significant productivity boost but it's also yielding higher quality outcomes.

This wouldn't be possible, if we are running our business with email chop spreadsheets and slides.

And that's why I phone is different.

Warcraft, plus AI or more than the sum of the parts.

Since the Warcraft acts as a math of an organization's plan of record and preferred processes. We have a unique opportunity to solve collaborative work problems because we have the most relevant context and data to create useful and accurate generative outputs.

We believe we're the only work management platform that has this combination AI powered by a clear structured map how work actually gets done across organizations.

Powers, our customers to ensure people in AI work together to accomplish objectives and achieve results.

We're still early in our AI journey as a company, but we're seeing some exciting trends beginning to play out since we first launched Sona intelligence last fall.

AI is coming up in virtually every conversation, we're having with our enterprise customers as they look to us for help implementing AI in their workflows.

Customers are excited about AI now and are actively making purchase decisions based on our AI vision.

Pressures coming from the top down and leaders want to better understand how they can drive business value with AI at scale and do so safely and securely.

And we're even turning skeptics into believers as we're able to demo how AI is not just a chat tool, but how can solve critical business problems when embedded directly in a sauna workflows.

Just the other week at her work innovation Center.

We hosted an executive from one of our largest customers she.

She said she was hesitant to adopt AI.

Our team position the value of AI to deliver faster and more effective project status updates a key part of the job for many of our customers that typically takes considerable time and effort to do well.

With us on intelligence. This status can be written generally deep linking relevant work for Maisano Nowhere every fact came from and highlighting progress made against company goals.

The tone and style can even be personalized.

We showed this in our customer meeting and immediately turn the skeptic into a believer and are now rolling out this functionality to their whole organization.

This is just one powerful early example of how differentiated our solution is.

The time savings were amazing, but will really impress the customer was the quality of the output and the fact that it's going straight to the source references.

This is the power of the Warcraft plus AI at work.

Demand for our AI features as one of the leading drivers of growth in our new product tiers, especially in advanced enterprise and enterprise plus.

Although it's still early we've had over 20000 customers adopt the new tiers with AI.

What's next.

We started rolling out our next wave of innovation, starting with smart digests, which provide quick summaries of what happened since you last visited a project.

It can catch you up if you are out on vacation simply focused elsewhere.

Next is power and golf standardization workflows status updates and business insights at every level of the worker App with AI.

I believe in the foreseeable future Simon will give you real time insights on qualitative information about the status of work across all levels of the Warcraft in the same way that our dashboards do for numerical data delivering a huge part of our original vision.

On the partnership front, we have strategic partnerships with Entropic opening I in AWS, which allow us to build world class solutions with leading O&M providers.

We're able to get early access to foundation models to help test and prototype against our enterprise AI solutions as you just heard from and <unk> announcement of Quad three <unk>.

And this benefit is a two way street as these LLM providers tuner models to our use cases over time.

As one of their customers They trust us to set the bar for what great looks like I'm referencing our work together to help conceptualize their models.

And in return this helps power, our most ambitious and complete vision for collaborative work management.

And as a sign of customers they each enjoying the fruits of our combined efforts to power their own work and dream even bigger.

These partnerships form a virtuous cycle and we expect the benefits to compound over time.

We're also partnering more and more with <unk> and it leaders through our work innovation lab, which is regularly featured in Forbes The Wall Street Journal and Harvard business review among others.

Ceos are being asked by their Ceos and boards to drive AI strategy and rollout operationalized business objectives and help accelerate go to market.

They feel the urgency to get value from AI now, but must do so in a safe and trusted way.

CIO, they're not just chief information officers chief in children's officers.

This is an important expansion in the operating role of the CIO and the Sona is uniquely positioned to help them.

We're investing in making sure Cio's can connect all their worked at them to build the right Foundation for AI.

Soon be launching new innovations like a workflow console deeper integrations with Microsoft 365 ways to intelligently draft and standardized goals across the entire organization.

We're hoping cio's deploy trusted AI across every department with the right safeguards and transparent controls with features like sandbox is multi organ appointments and AI powered customer onboarding designed to support companies at scale.

And see I always want to see wins with AI by delivering immediate impact and ROI now and they can do this with the <unk> platform.

Features including our new executive summaries capabilities smart.

Smart answers across all warcraft objects from tasks to projects to portfolios to goals and smart status updates at the portfolio and gold level.

They are providing real value time savings and better outcomes for <unk> and our stakeholders across the business.

Again, I want to really emphasize that the phone has ability to connect work all the way up to higher level objectives gives us the ability to provide unique and powerful real time insights at every level.

One way of looking at our roadmap. This year is we're going to be investing leveraging and amplifying that powerful source of differentiation.

The pace of change is only going to accelerate this new AI age. We believe we're extremely well positioned to capture this opportunity. Thanks to our investment in the Warcraft that model and are incredibly scalable architecture, that's proven to support 200000 plus seat deployments within a single organization.

Because of this investment our position today and our product vision that Gartner recognized <unk> as a leader in the Gartner Magic quadrant for collaborative work management.

And they positioned us furthest and completeness of vision.

You'll hear all about our latest AI innovations in all of the investments, we're making to help CIO thrive coming out of our next stop on the work innovation Summit tour on March 19th in Sydney, Australia, and then later in San Francisco in June.

They tuned for more announcements.

Before closing I wanted to highlight the recognition our team has been awarded during fiscal 2024.

For another consecutive year, San was recognized by Fortune and Great places to work across several categories.

Best places to work in the technology industry.

Best Places to work for Millennials Best places to work in the Bay area.

Inc. Magazine also ordered a sauna best workplaces for the sixth year in a row.

To Osama's fourth quarter and fiscal year 2024 earnings conference 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 queue. You May Press Star one one again I would now like to hand, the call over to Catherine <unk> 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 on its fourth quarter and fiscal year 2024.

With me on today's call, our Destin Moskovitz Hassan as co founder and CEO.

And then Monday, our Chief operating officer, and head of business and Tim <unk>, 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 on 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.

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 Diasonic 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.

In Q4, we beat the top and bottom line guidance as we continued on our path to move upmarket and win the largest enterprises.

Today I'll first go through the business highlights from the quarter and year.

And then I will talk about our excitement and increased focus on our new AI offering upon intelligence. The early traction, we're seeing and how the work graph plus AI is differentiated.

And finally I'll share what we're hearing from Cio's are T leaders and how we're focusing on their pain points.

In Q4 revenues grew 14% year over year in fiscal year revenue grew 19% year over year.

Q4, non-GAAP operating loss margin came in at 9% improving 16 percentage points versus Q4 last year.

And for the fiscal year 2024, our non-GAAP operating loss margin improved 29 percentage points versus the previous year.

There is a huge achievement and credit goes to each and every person on the team for their focus on expense management and effective investments.

We'll continue to be focused on growth and profitability.

And on a free cash flow basis, we expect to achieve free cash flow positive by the end of this year.

Tim will talk in more detail about this shortly.

In the quarter, we continued to land and expand with some of the largest companies across major industries, including manufacturing health care, and pharmaceuticals, transportation and logistics and financial services among many others.

And as you know the fiscal year highlighted customer wins, including three major automotive manufacturers.

Four of the largest telecommunications and Internet service providers five of the largest media conglomerates in six major financial services firms.

And these are just some of our largest names from each of the last four quarters across our entire customer base, 73% of the fortune 500, or so on our customers.

We've also had great success in partnering with customers to grow at a massive scale.

We have several smaller customers, who have over 10000 paying seats with our largest appointment at over 200000 seats.

We have more than 150000 paying customers as demand for our work management solution continues to increase.

The number of customers with over $100000 annualized spend grew 20% year over year.

As these customers continue to grow with US honor their dollar net retention rate continues at a strong pace at 115%.

Revenue from this cohort grew 29% for the fiscal year faster than the overall growth and represented 27% of our total revenue.

What makes me feel good about our success with enterprises is not only in the number of large customers and the growth, but also the health of these enterprise accounts.

What makes me feel good about our success with enterprises is not only in the number of large customers and the growth, but also the health of these enterprise accounts.

And most of our largest customers sona is highly utilized.

Leads are helping us grow and expand in the accounts have the ability to keep growing even more.

This is true even in the organizations were heightened focus on budgets has temporarily slowed account expansion.

I'm also excited about the progress we've made with AI and the opportunity in front of us.

Unintelligent strengthens our core value proposition helps our customers drive more clarity accountability and impact up down and across their organizations.

As you know we run our business on a sauna and we're constantly testing our latest innovations.

As part of this we've been quickly adopting our latest AI features and the insights are remarkable.

The state of the art is advancing quickly and we believe <unk> and AI generally will only get better from here I'm excited for the future and we're seeing real value now.

Like many of our customers, we've just wrapped up our objectives and key results process for the year leveraging this on intelligence, our AI solution to quickly report status across levels of the organization.

These processes always feel like a heavy lift.

And frankly, a bit of a burden even though they are important because everyone's eager to move on to the new year's priorities.

But using smart status cuts this process and have a more with higher quality results and will only get better over time.

Similarly, we just went through our company wide 360 degree performance reviews, another famously onerous process.

I personally used our smart answers product within each of the one on one project I maintain with our executives summarizing in minutes all of the important topics and accomplishments we've discussed in the past year.

At my direction, even highlighted all the specific times that gave recognition or feedback. So I could easily include them in the reviews.

That's not a special performance review feature rebuilt to be clear I simply ask the product to help me use our general smart answers feature suggesting specific categories and questions to consider.

Even as an end user I was empowered and have the flexibility train our custom workflow in minutes that saved me hours of work across my whole team.

Executives and managers loved the visibility into their teams work and the insights that you can derive with AI.

This has proven to be not only a significant productivity boost but it's also yielding higher quality outcomes.

This wouldn't be possible, if we were running our business with email chop spreadsheets and slides.

And that's why it's one is different.

Warcraft, plus AI or more than the sum of the parts.

Since the Warcraft acts as a map of an organization's plan of record and preferred processes. We have a unique opportunity to solve collaborative work problems because we have the most relevant context and data to create useful and accurate generative outputs.

We believe we're the only work management platform that has this combination AI powered by a clear structured map how work actually gets done across organizations.

Hours, our customers to ensure people and I worked together to accomplish objectives and achieve results.

We're still early in our AI journey as a company, but we're seeing some exciting trends beginning to play out since we first launched Santa intelligence last fall.

AI is coming up in virtually every conversation, we're having with our enterprise customers as they look to us for help implementing AI in their workflows.

Customers are excited about AI now and are actively making purchase decisions based on our AI vision.

Pressures coming from the top down and leaders want to better understand how they can drive business value with AI at scale and do so safely and securely.

And we're even turning skeptics into believers as we're able to demo how AI is not just a chat tool, but how can solve critical business problems when embedded directly in a sauna workflows.

Just the other week at her work innovation Center.

We hosted an executive from one of our largest customers.

She said she was hesitant to adopt AI.

Our team position the value of AI to deliver faster and more effective project status updates a key part of the job for many of our customers that typically takes considerable time and effort to do well.

With us on intelligence. This status can be written generally deep linking relevant work from Hassan them. So we know where every five came from and highlighting progress made against company goals.

The tone and style can even be personalized.

We showed this in our customer meeting and immediately turn the skeptic into a believer and they are now rolling out this functionality to their whole organization.

This is just one powerful early example of how differentiated our solution is.

The time savings were amazing, but will really impressed the customer was the quality of the output and the fact that it's going straight to the source references.

This is the power of the Warcraft plus AI at work.

Demand for our AI features as one of the leading drivers of growth in our new product tiers, especially in advanced enterprise and enterprise plus.

Although it's still early we've had over 20000 customers adopt the new tiers with AI.

What's next.

We started rolling out our next wave of innovation, starting with smart digests, which provide quick summaries of what happened since you last visited a project.

It can catch you up if you're out on vacation or simply focused elsewhere.

Next is power and gold standardization workflows status updates and business insights at every level of the Warcraft with AI.

I believe in the foreseeable future Simon will give you real time insights on qualitative information about the status of work across all levels of the Warcraft in the same way that our dashboards do for numerical data delivering a huge part of our original vision.

On the partnership front, we have strategic partnerships with Entropic opening I in AWS, which allow us to build world class solutions with leading OEM providers.

We're able to get early access to foundation models to help test and prototype against our enterprise AI solutions as you just heard from in tropics announcement of Quad three.

And this benefit is a two way street as these LLM providers tuned their models to our use cases over time.

As one of their customers They trust us to set the bar for what great looks like I'm referencing our work together to help conceptualize their models and in return. This helps power our most ambitious and complete vision for collaborative work management.

And as a sign of customers they each enjoying the fruits of our combined efforts to power their own work and dream even bigger.

These partnerships form a virtuous cycle and we expect the benefits to compound over time.

We're also partnering more and more <unk> and it leaders through our work innovation lab, which is regularly featured in Forbes The Wall Street Journal and Harvard business review among others.

<unk> those are being asked by their Ceos and boards to drive AI strategy and rollout operationalized business objectives and help accelerate go to market.

They feel the urgency to get value from AI now, but must do so in a safe and trusted way.

CIO, they're not just chief information officers chief in children's officers.

This is an important expansion in the operating role of the CIO and the Sona is uniquely positioned to help.

We're investing in making sure <unk> can connect all their worked at them to build the right Foundation for AI.

Soon be launching new innovations like a workflow console deeper integrations with Microsoft 365, and ways to intelligently draft and standardize goals across the entire organization.

We're hoping cio's deploy trusted AI across every department with the right safeguards and transparent controls with features like sandbox is multi orbit deployment and AI powered customer onboarding designed to support companies at scale.

And see I always want to see wins with AI by delivering immediate impact and ROI now and they can do this with the <unk> platform.

Features including our new executive summaries capabilities.

Smart answers across all warcraft objects from tasks to projects to portfolios to goals and smart status updates at the portfolio and gold level.

They are providing real value time savings and better outcomes for <unk> and our stakeholders across the business.

Again, I want to really emphasize that the phone has ability to connect work all the way up to higher level objectives gives us the ability to provide unique and powerful real time insights at every level.

One way of looking at our roadmap. This year is we're going to be investing leveraging and amplifying that powerful source of differentiation.

The pace of change is only going to accelerate this new AI age. We believe we're extremely well positioned to capture this opportunity. Thanks to our investment in the Warcraft that our model and are incredibly scalable architecture, that's proven to support 200000 plus seat deployments within a single organization.

Because of this investment are positioned today, and our product vision that Gartner recognized <unk> as a leader in the Gartner Magic quadrant for collaborative work management, and they positioned us furthest and completeness of vision.

You'll hear all about our latest AI innovations in all the investments, we're making to help CIO thrive coming out of our next stop on the work innovation Summit tour on March 19th in Sydney, Australia, and then later in San Francisco in June.

Stay tuned for more announcements.

Before closing I wanted to highlight the recognitions our team has been awarded during fiscal 2024.

For another consecutive year <unk> was recognized by Fortune and Great places to work across several categories.

Best places to work in the technology industry.

Places to work for Millennials Best places to work in the Bay area.

Inc. Magazine also awarded US on a best workplaces for the sixth year in a row.

And fast company awarded a sign of best workplaces for innovators in the enterprise category.

Finally, I'm very aware of the dynamic market conditions that continue to impact our near term business. Our strategic initiatives are aligned with navigating these headwinds to ensure sustained growth and a path to profitability.

At the same time I'm more excited than ever about the potential of a sauna our vision for collaborative work management and the value. We can provide for our customers in this new era of work.

Everything we're focused on today is in service of driving enterprise growth and customer success.

Building pipeline retention and C level customer engagement.

Now I'll turn it over to Anne.

Thanks, Justin as Duston mentioned during the quarter, we continued to feel the impact of the macroeconomic headwinds increased budget scrutiny and reductions in head count among our customers, especially in the technology vertical which has been a jackpot ground. However across the business. There are some early signs that hint at modest stabilization.

As you've seen them in your head count reductions have continued but they are smaller this year in aggregate versus last year, and we should be lapping the bulk of those renewals in the first half of the year.

As we move up market and further at that proof of chain to senior level decision makers. The deal cycles continued to be elongated, but the conversations for Aflac network management and increasingly more strategic especially in the largest enterprises.

Sequential growth in new business appears to be stabilizing, especially for industries outside of technology and our sales force productivity continues to improve.

We still have to lap the original headwinds impacting larger existing customers in the first half, but I'm energized and optimistic about the full year and beyond.

Our new product plans are driving up hearing and AI is a primary focus for the largest customers. It's still very early but we can definitely see that AI demand with accretive to growth even in the first quarter that it was available in our new tier.

We are hiring new quota carrying salespeople rapidly in every region and will be increasing capacity throughout the year.

And all of our revenue leadership roles are held and new general manager of the Americas, a global head of channel and leaders across operations and field enablement.

We are starting the year in a better position than 12 months ago.

In addition, we continue to drive thought leadership and the collaborative work management space.

And our second annual state of the I T liter apart the key proprietary research publication from our work innovation lab, we surveyed more than 1200, it professionals from across the U S and U K to understand what's top of mind in their roles, especially as their organizations are adopting AI.

This year, we saw three key trends in the data first approach to streamline and consolidate tech stacks.

Challenges and concerns related to data accuracy, and robustness and third the role of the elite are being called on to lead their company's AI strategy.

The research findings echoes, what we see within our own customer base.

<unk> are planning long term and Theyre looking for strategic partners.

We believe this is helping us win on vendor consolidation discussions and Jive multiyear commitment right.

And I want to Echo both what we're seeing in our research and add to Dustin earlier remarks about the excitement we're seeing around AI with our customers.

I recently returned from a trip to Japan, where I was visiting several enterprise customers alongside our Chief revenue officer at Mcdonald.

One of the customers that you spent time with with Fujitsu, a global technology and business solutions leader.

We learned that <unk> held in Astana AI ideas on with our employees as they seek innovative ways to use us on intelligence to transform the way they work.

He has chaired our recent idea that came from the idea on to help them better manage their large global organization.

Like all large multinationals the company dedicate considerable time to resource planning for global projects.

Managed this process and it's on it today, but with our AI features they've ideate new ways to optimize their global resource planning to make it both more efficient and more effective.

The team is foreseeing infinite possibilities to use the sana intelligence like the idea of helping identify the right teams and individuals for each specific assignment assigning the work and then handling language translation to assist both in the handoff and to provide status updates on work progress.

It's a powerful example of what axon intelligence can do and just the beginning of what's possible as we continue to invest in helping companies get smarter with AI.

And examples like that powered by AI will help fuel our success with the largest organizations in the world.

Enterprise customers representing organizations with over 2000 employees continue to be our fastest growing customer cohort.

And we are seeing new business broadly across several diverse industries, including health care financial services transportation and manufacturing among others.

If it did to the global technology and business solutions leader I referenced earlier significantly expanded their use of our enterprise solution. This quarter as they continue their organization digital transformation initiative.

Did you say has found that teams using us on US then 30% last time on admin work, so they're deploying our platform to more business units and departments to drive employee productivity and impact.

Additionally, they will now be managing goals and Kpis for the organization in Osaka.

Yeah.

We continue to see growth within the health care sector. This quarter for a range of use cases from Onboarding, new physicians to fund raising to digitizing their business operations. Some notable wins include the emergency services Division of one of the largest single payer health care systems in the world.

Global Health care company focused on pharmaceutical distribution health care services and medical supplies and equipment.

And a significant humanitarian medical aid organization that deploy thousands of doctors and has cheated over 100 million patients around the world.

In the fiscal year, we started to establish beachheads in the financial services sector with some of the largest global companies. These.

These include a major exchange and the U K.

A global provider of financial data and you'd see likely rely on every day at work and one of the world's Premier investment banking firm.

And we continue to land significant deals across logistics and transportation.

For example, a multinational chance rotation in business services leader selected a sonnet to streamline and manage all of their work to enable the organization sales team from changing to content to help drive additional revenue for their business.

And we also had an expansion with one of our large logistics customers.

We also had a large land deal with Teekay, a British multinational publishing company and a division of Penguin Random House, who were using us on out across their organization.

As a longtime customer of decay I'm thrilled to have the opportunity to support their mission to inspire educate and entertain readers of all ages.

Despite the headwinds we see in the market, we continue to expand with some of the leaders in tech and our winning on consolidation decision.

Indeed, the number one job site in the world extended their use of our platform this quarter.

<unk> been a customer of ours for a few years and core business functions across their organization from project management to customer facing divisions to internal operations I'll use us on out there.

They love and rely on <unk> to track progress on their goal execute their initiatives faster and pivot quickly when necessary.

Thanks to the strong business value of their experience with <unk>. They will be transitioning employees and then there I T PMO and operations teams from other tools to also manage their work and the Sarnia platform.

In summary, even with the current market conditions, we continue to see more multiyear deals winning on vendor consolidation decisions and are continuing to diversify our enterprise success across more industries.

We have continued to win these strategic expansion, particularly at some of the most recognized companies in the world and that is because the largest secular tailwind around digitization continue.

Looking to Q1 and the rest of the year, we continue to focus on executing on top down go to market strategies that help us win business from new and existing customers with a focus on more and new enterprise sales plays.

Enhanced account coverage across the entire customer journey from strategic account management to professional services plus AI for building workflows and strategy to scale customer success.

And international growth opportunities and our global regions, where we are thrilled to now have new enterprise sales later.

And of course, increasing sales capacity throughout the year.

We are excited to bring the work innovation summit to more parts of the world in the coming year combined with the launch of AI features across every tier we are seeing continued growth in the pipeline and are excited to turn that into incremental revenue.

And with that I'll hand, it over to Tim.

Thank you Anne.

While I'm pleased with our high level results some of the underlying drivers are still developing.

As Ann mentioned, we continue to see headwinds from a macro standpoint, which continue to impact our dollar based net retention rates.

We also have more work to do as we develop our enterprise go to market muscle and continued transitioning of market.

By the same token I am proud of the efforts. The team has put in to manage costs and improve efficiency. We made substantial progress on improving our operating margins and free cash flow in fiscal 2024.

Now onto our Q4 results.

Q4 revenues came in at $171 1 million up 14% year over year.

We have 21646 core customers or customer spending 5000 or more on an annualized basis.

Revenue from core customers grew 16% year over year.

This cohort represented 75% of our revenues in Q4 up from 73% in the year ago quarter.

We have 607 customer spending 100000 or more on an annualized basis and this customer cohort grew at 20% year over year.

As a reminder, we define these customers cohort based on annualized GAAP revenues in a given quarter.

Our dollar based net retention rates were lower mainly driven by sheet adjustments.

Our overall dollar based net retention rate was over 100%.

Our dollar based net retention rate for our core customer was 105%.

And among customer spending $100000 or more a dollar based net retention rate was 115%.

As a reminder, a dollar based net retention rate was a trailing four quarter average calculation.

Thus a lagging indicator.

We continue to see stable logo churn rates overall and low churn in our largest accounts.

If I look at our largest customers those with 100000 and above the non tech and our appears to be stabilizing.

However companies continue to remain mindful of the near term economic challenges.

I'll speak specifically to our outlook regarding this 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.

Gross margins came in at 91%.

Research and development was $54 million or 32% of revenue.

Sales and marketing was 88 million or 51% of revenue an improvement from 62% a year ago.

G&A was $27 7 million or 16% of revenue.

Operating loss was $15 6 million and our operating loss margin was 9%.

Representing a 16 percentage point 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 $10 1 million and our net loss per share was four cents.

Looking at highlights from the full fiscal year.

Fiscal year revenue grew 19% year over year to $652 5 million.

We added over 2200 core customers during the year.

We also added over 100 customers spending over 100000 or more on an annualized basis during the year.

Revenue from customer spending 100000 or more on an annualized basis grew over 29% year over year.

This cohort represented 27% of our revenues for the full year.

Moving onto the balance sheet and cash flow.

Cash and marketable securities at the end of Q4 were approximately $595 million.

Our remaining performance obligations or <unk> was $349 million.

Up 17% from the year ago quarter.

We expect 84% of our appeal will be recognized over the next 12 months.

The current portion of <unk> grew 17% from the year ago quarter.

Our total ending Q4 deferred revenue was $271 2 million up 16% year over year.

Q4 free cash flow was negative $17 million or negative 10% on a margin basis, an improvement from negative 18% from the year ago quarter.

Free cash flow for the full fiscal year was negative $30 4 million.

Almost $130 million improvement year over year.

Moving to guidance for Q1 fiscal 2025, we expect revenues of 168 million to $169 million.

Representing growth of 10% to 11% year over year.

We expect non-GAAP loss from operations of 23 million to $21 million, representing an operating margin of negative 13% at the midpoint of guidance.

And we expect net loss per share of nine cents to eight cents, assuming basic and diluted weighted average shares outstanding of approximately $226 million.

For the full fiscal year 2025, we expect revenue to be in the range of $716 million to $722 million, representing a growth rate of 10% to 11% year over year.

We expect non-GAAP loss from operations of 61 million to $55 million representing.

Representing an operating margin of negative 8% at the midpoint of guidance.

We expect to be free cash flow positive by the end of this calendar year.

And we expect net loss per share of <unk> 22 cents to 19.

Assuming basic and diluted weighted average shares outstanding of approximately $230 million.

Our guidance assumes there is no change in the current macroeconomic environment.

We continue to believe dollar base net retention rates should bottom around Q1, and hover at plus or minus 100% through Q2.

When a number of large deals from the previous year renewal.

In addition, we anticipate the recent leadership changes we have made in our sales organization will take time to fully manifest.

We're committed to maintaining a disciplined and balanced approach to optimizing costs and improving efficiency and profitability.

We will continue to invest in the future growth opportunities like AI, which we expect will drive long term value.

Our goal this year is to Reaccelerate, our revenue growth rate, while remaining committed to delivering durable positive free cash flow by the end of calendar 2024.

As we move towards positive free cash flow. We are encouraged by the progress we've made to date and I'm optimistic about our future and our position within the enterprise segment.

Over the next 12 months to 24 months, we anticipate incremental growth will be driven by expansion from our core customers, which will be a tailwind to our NR our focus on moving up market. So focusing on moving more of our customers to the 100000 and spend levels.

And our new product tiers powered by solid intelligence, which will help with more lands improve adoption and encourage new expansion.

And with that I'll turn it back to Dustin for more closing remarks.

I want to close by fluctuating that in fiscal 2024, we made a commitment that we would become free cash flow positive by the end of the coming year and we focused the entire organization on improving our operating efficiency.

Spite of challenges along the way we need more progress in one year and we expected by a wide margin.

This year, we intend to follow through on our commitment to become free cash flow positive by the end of the year, but we're going to do it while also achieving our other key goal this year re accelerating our revenue growth rate.

We've achieved this twice before in our history as a company and we intend to do it once again.

I'm incredibly energized by our roadmap and by the enormous opportunity that lies ahead.

With that operator, we'd love to start with the questions.

Thank you as a reminder to ask a question you will need to press star one one on your telephone to remove yourself from the question queue. You May Press Star one one again, we ask that you. Please limit yourself to one question and one follow up please standby, while we compile the Q&A roster.

Our first question comes from the line of Michael Funk Bank of America. Please go ahead Michael.

Yes. Thank you for taking the question and happy to be alive with coverage on a sort of.

One for Ian and Dustin if I heard you know curious you know what what is driving the traction up sharing new tiers.

Hi, Michael I'm, so glad you're joining the call and excited that you are covering us and the things that we're seeing that are driving up to and really our interest from customers, especially our largest customers in our AI investments and it's still early but we're definitely seeing that AI demand was accretive to growth even in the first quarter that are.

New tiers where available.

I'm excited about is in all of my customer conversations in every region executives are really seeing that AI combined with Yosano work graph can drive significant value in their organizations and they appreciate the approach that we're taking it's both our guiding principles and then the fact that as available and every page here.

And so what I hear most often is as customers are really looking at their AI strategy, it's about being able to partner with a trusted organisation that they are already working with and so I'm really pleased that were considered one of those trusted partners. We expect to see more of that throughout the year as we're investing in AI throughout our roadmap.

And just to go one level deeper this is duston. So when we present. The AI features are the thing customers are really responding to is how they really power the way that the worker App connects work from cash all the way up to a higher level of company objectives do you take something like our AR smart summaries are smart status.

And because you're applying them to our portfolios and goals that are connected to the underlying work you get much more powerful results and so that that's really resonating and amplifying the power of the functionality, we already had in our higher level tiers before that was really sort of focused.

At the top of the sort of work organizational charts are not just really reinforces what Anne said already that you know AI plus to work off is really more than the sum of the parts.

No that was great. Thank you, Josh and thank you and one more if I could please I think Andy you mentioned in the call that all the essential roles now for sales or sale I know you saw Europe, you recently hired new.

North America.

Just some more color, though on your expectations for time to ramp.

New sales organization, and what measurable youre looking out throughout the year.

Yeah. Thanks for asking that we are really excited to have all of our global revenue roll spelled including having great enterprise sales leaders in Germany, U K I, Japan, and I'll ask them. So it's been great to have them on board many of them were with us at our sales kickoff.

That just happened so the things that we continue to measure and monitor them definitely ramp time productivity pipeline Bell's converging all ear classic metrics and I think more than anything it's just having great leaders in place that are working really well together and that's one of the reasons, we will be investing.

<unk> and adding capacity in every region and likely in a linear fashion throughout the year. So those are the things that work and then continuing to watch and monitor them, but really excited about the global team in place.

Great. Thank you all for time.

Pardon me. Our next question comes from the line of Pat Wall Ravens of citizens JMP. Your question. Please Pat.

Okay.

Oh, great. Thank you congratulations.

Despite lapping the large renewals can you guys comment on on the other side you feel youre seeing that make you more optimism about the business.

Hey, Pat it's and some of the things that we're seeing that make us optimistic or in particular, the non tech category. So customers in those categories not only are we seeing stabilization, but we're starting to see improvement and kind of early signs of growth. There. So we're.

In particular non tech <unk> grew in the high teens.

So as that continues and as we diversify into more of these vertical I think those are other reasons that we are seeing optimism and then we expect that tech will follow that so as we mentioned we're going to work through some of these larger renewals that are mostly concentrated in tech and that's going to happen in the first half of the year, but that's also why.

We're excited to see a reacceleration in the second half of the year.

And I'll just add on a little bit more I think that covered it pretty well. This is dustin here, but one just sort of simple way of looking at it as parts of our business are growing faster than the overall revenue rate and so if we get all the parts of the business to do that then the overall revenue rate re accelerates.

And to Ann's point, even where the business is growing less than the overall revenue rate, we were still having really high quality conversations we talk to these customers. They are interested in deploying further they're trying to work with us on <unk>.

Budget predictability and aligning price to value, but they want to go further and so we're still expecting we're not expecting this to be a new normal for Tac, we think that that recovers and reaccelerate.

Thank you. Our next question comes from the line of Josh Baer of Morgan Stanley. Please go ahead Josh.

Great. Thank you.

A lot of encouraging.

Yes.

Look forward to for next year I did have a question on core customer count. The sequential net adds was positive 300 that was a little bit.

So that was lower than we've seen this year and as far back as we have data just wondering if you could talk a little bit about the drivers of this.

Comment on gross adds versus churn in over five K cohort.

Yeah, Hey, Josh This is Tim Great question, I think you know.

For us a lot of our focus is moving more and more of our customers from the five K up to the 50, K and then to the 100 K.

And getting moving more of our customers enterprise customers into a higher spend category.

You know I would say when we look at kind of the types of customers that may have fell out of the five K some of them actually didn't churn. They just dropped some of their spend primarily due to see the adjustment and then we did have some other customers come in as well, but I would say, it's really about our focus on moving a lot of our customers.

Upmarket and into the enterprise enterprise plus tiers.

Okay. That's helpful. So you're seeing some customers may have dropped from over five K to below five.

As my follow up.

Got it actually looks like the under five K was a little bit stronger as far as sequential adds tough to tell with the rounding of the overall customers, but that looks stronger I was just wondering if there was any change in reinvesting back down market.

But it sounds like it was more just a function of some some downsizing.

Yeah, just some movements with it within within the customer base around dollar spend okay got it very helpful. Thank you.

I might just add there's a little bit more speculation, but we did have our work innovation summit at the end of October and we you know we did some PR and brand pushes after that it's possible that contributed but it wasn't like a sort of explicit strategy shifts so much as it's easier to sort of convert those smaller deals very quickly after an event like that.

Yeah.

Thank you. Our next question comes from the line of George <unk> of Oppenheimer. Your line is open that George.

Thank you for taking my question and maybe you can build on your vendor consolidation.

Consolidation gains can you give us some perspective on.

What areas of spending you are consolidating and how that rollout goes typically.

Yes happy to George So from a customer perspective, it's really the cross functional use cases enabled by the work graph and now AI that are driving the consolidation and then also a multiyear investments.

A good example that brings it to life is a global cyber security company consolidated eight disparate applications onto Sona and they've quickly deployed additional use cases now that they're all on one platform and so we're seeing some fast healthy expansion and as it becomes faster and easier for them to manage.

All of these cross functional collaboration initiatives at scale across thousands of employees.

Hmm.

We're seeing more of this desire, especially as we're working with CIO, who are driving kind of top down consolidation and really wanting to make sure their unified on one single platform and then you add on top of it the interest in and the investment in AI and we're seeing that kind of cut really come together.

This doesn't again I, just always like to add that the really the strategy of the Warcraft was.

Designed to be positioned well for these consolidation conversations and enterprise because it enables teams to work really well together cross functionally so often we get into a consolidation head to head and we hear that a certain competitor a strong in one department maybe another in another department and its on US is really the favorite across arm and especially when they're working on strategic projects Cross functionally.

So I just want to get the product strategy and they're in there as well and finally, just congratulations on the win last night.

Okay.

<unk>.

Tim maybe can you provide some context on the linearity month to month trends coming out of the fourth quarter into the first quarter.

Yeah that was a great Oscar joke duston.

So just in terms of I think the thing that like when I when I step back and look at the last few quarters. The thing that's really encouraging is.

Bookings stability.

Especially for new bookings.

That has been stable and when we look at where the business is growing our non tech business is growing into the high teens.

We do have some renewals coming up particularly in the tech sector that will be renewing in the first half and I think once we kind of lap those renewals will feel like we'll be in a really good shape to reaccelerate the business, but the first half of this year is really around stabilization.

And I think there is just really encouraging signs both from a pipeline perspective stabilizing bookings perspective stabilizing.

And when we kind of look under the cover of the kind of the.

Even the net.

And all our costs the net seat retention rates have stabilized as well so theres just a lot of positive and good signs.

We're not out of the woods, yet, but I do think where we can see light at the end of the tunnel and that were probably one or two quarters away.

Thank you.

Our next question comes from the line of pendulum Bora of J P. Morgan Your question. Please pendulum.

Great Hey, Thank you for taking the questions.

It seems like you already have about 20000 customers.

If I heard that correctly and the new pricing and packaging maybe talk about how those conversations have progressed, especially as you kind of layer on the user limits.

And some of those customers and.

And any way to understand the kind of the contribution from the <unk> hearing in Q4, and maybe Tim how how does that or should that benefit MBR for the year.

Hi, it's Andrew I'll start with the customer conversations and then turn it over to Tim.

You said it was our first full quarter with the new packages and tiers that we launched <unk>.

And there was 20000 customers that have up tiered and adopted the new packages a lot of that was driven by AI and their desire to access the AI features and functionality that are only available and then your tears.

And so that just makes the conversations that our field is having much more strategic and customers are excited to be able to access and really deploy AI immediately with Athena I think well, we're continuing to invest even more so not only in AI features of the big part of it but also in the new tiers.

We're excited to see more of that throughout this year and then al I know you had a question for Ken in there as well.

Hey, pendulum, yeah, I, absolutely think with the new tiers.

And as customers renew their annual contract with us.

Create a new opportunity for us to have these thoughtful conversations around.

AI around that.

The limits within the existing within the existing the legacy.

Legacy Skus.

I do think like our in our the way we've been thinking about our and our and kind of the guidance that we provided in terms of the acceleration assumes that our <unk> are recalibrating and Reaccelerate starts moving back up in the back half of this year.

Thank you. Our next question comes from the line of Taylor Mcginnis of UBS. Your question. Please Taylor.

Yeah, hi, thanks, so much I'm sorry for taking my question. So the first one is if I just.

For less days Q1it looks like the implied quarter over quarter growth guide is roughly in line with the guidance for <unk> you are roughly in line in <unk> to what we saw in in <unk>. So does that mean that the headwind for renewal <unk> is similar to what you saw in <unk> and we could be reaching the bottom in terms of these tougher comps.

Or is there any is there anything to keep in mind for QQ and by that I mean, if <unk> tec heavier renewal quarter that could provide.

Modest pressure to the quarter deviantart growth or youre expecting to see more stability at depressed levels throughout the first half of this year. Thanks.

Taylor Bingo.

It was literally the question I had written to myself that somebody should ask.

Based on the number of days if you normalize for the number of days you will actually see that were.

It does impact the revenue guide so that's one two.

We are coming up on I would say the the renewals that are coming up on the larger renewals that are coming up are really tech related and you can kind of understand from my guidance is that I wanted I want to make sure that worse lapping those renewals, so really stabilized and kind of the first half of this year.

And then re accelerating in having easier comps on a year over year basis.

But I think for the most part most of our customers would have readjusted their seat counts.

By the end of Q1 or early Q2, so that's kind of the reason we gave the commentary around it and are hovering at around 100, plus or minus through Q2.

Question Awesome.

Perfect Super helpful. And then just as a follow up to that so when we think about like the trajectory.

<unk> you talked about expecting a sequential acceleration maybe in the second half of this year and in terms of revenue growth. So is that just your comfort in that is that largely just being driven by some normalization in churn rate or maybe not downtown or is there any.

Gross are green shoots outside of that I know you talked about this up tearing maybe with some of the pricing and packaging. There is an opportunity to drive that further in the second half anything else to call out.

Yeah, I think it's really three pieces right I think it's one with the launch of Assam intelligence into Warcraft. We just think we can one differentiate the product a lot better than some of the other players out there too we are adding sales capacity and we add sales capacity kind of going into Q4. So I expect many of these reps to be fully ramped by the back half.

And then three kind of your comment around our MLR, just normalizing and lapping many of the more difficult renewals that we've had so it's really kind of a three pronged.

I would say three pong.

Well in terms of how we think about reacceleration.

This doesn't it isn't important topics I just wanted to add one other angle on that which is just.

He sort of said that's the way you framed the question too, but we're we're sort of seeing the deceleration slow it feels like we're approaching the nadir when we look at sector by sector basis.

And in terms of Green shoots I think that's like partly about the external environment as well.

Just saw great state of the Union, President said, where we're headed for a soft landing and maybe even into a little better than that.

But you know inflation seems to be getting under control and a lot of other things look good and then when you look at the tech sector specifically.

I think you know we're in the middle of what I think is still is a rising tide of AI growth.

And a lot of the relevant players are core customers of ours and even when we've seen major tech companies retrench like Apple canceling the Kerr project, they're redirecting those resources degenerative AI and.

So that that has its own kind of green shoots that I think we're well positioned to take advantage of.

Thank you. Our next question comes from the line of Steve Enders of Citi. Your line is open Steve.

Okay, great. Thanks for taking the questions there.

Okay.

<unk> yeah.

And a little bit more about that.

The loan growth, probably coming more from the expansion versus versus net new and I guess as we kind of Peel back the net retention.

But this year it had been.

On that how are you thinking about.

What makes the best coming from up here.

Brian.

Some of the higher prices are kind of the new use cases coming on as we capture more of those consolidation opportunities within within accounts.

Hey, Steve It's Andy I'll start with that and so we're investing both you you asked about expansion, we definitely again see as we're driving more strategic tops down adoption in partnership with <unk>, an executive that that adoption has.

Ben faster in the organization, especially as we're also investing in our wholesale services and customer success. We are also focused on net new logo lands in every region and that's part of the investment with our sales leadership team globally. So.

And in that case, where you know earlier there was a question about kind of smaller deals what we're still focused on is seating.

<unk> within larger enterprise organizations. So we'll continue to invest in that motion and then now with our global sales team being able to work with the right seed it accounts to drive expansion and then with the new pricing and packaging I think the whole goal there is to make that upmarket motion in the upturn a lot smoother and a lot more.

More predictable so it's all of those combined that are driving growth in every region in every market.

Okay.

Helpful. And then maybe just on kind of the investments youre, making in four for fiscal <unk>, I guess I want to get a better sense for.

How should we be thinking about maybe the pace of the new context.

Context.

The Q2 <unk>.

<unk> EBIT margin be it maybe a little bit smaller than what we've seen.

And the rest of the fiscal 'twenty four or so.

So should we be thinking about what that means moving forward in terms of the guidance assumptions and maybe how they are they.

Maybe similar or different.

The first quarter.

Hey, Steve It's Tim So I would say the way to think about the investment there, they're probably more linear we did I would say for Q4 increase our sales capacity capacity hired new leadership and on the sales side.

And I think it will take the team a little bit of time to ramp, but I would expect us to continue to make progress on the operating margin as we move towards this year.

Now we made huge progress year over year I want to say like 29 percentage points I don't expect us to make that amount of progress. This year, but you should expect us to kind of.

Make a modest modest improvement there, but then from an operating perspective margin perspective.

Make incremental progress quarter on quarter.

Thank you. Our next question comes from the line of Richie Deloria of RBC capital markets. Please go ahead.

Wonderful. Thanks, so much for taking my questions guys.

I wanted to start off on the cash flow positive Guy Tim Great to hear you reiterate that target for clarification, when you say being free cash flow positive by the end of the year are you, saying that youre going to be free cash flow positive for FY 'twenty five for the whole year or is that just a Q4 number and maybe more importantly than that how should we be thinking about.

Cash flow from there is your goal to kind of continue investing aggressively in operate kind of at a cash flow breakeven to slightly positive level or should we kind of as a priority on continued free cash flow margin expansion from there and then I've got a quick follow up.

Let me try to answer it this.

This way I would say certainly we will be positive free cash flow exiting the year.

And depending on our growth rate if.

If we see that our sales capacity sales productivity is meeting the ROI hurdles that we set in place then there would definitely be a conversation about some increased investments relative to the guide, but the the guidance right now I would say is hey, let's let's make sure we exit the year free cash flow positive, but also give us room to operate with some flexibility.

Yeah.

Got it okay. That's.

That's helpful.

And then.

When you're making the comment that AI demand was accretive to growth already are really great to hear that can you maybe help us.

Understand how are you measuring and quantifying that.

I internally to get that statement and maybe the larger question that translates to is how should we be thinking about your strategy around monetizing.

And some of the increased productivity that you're offering your customers. Thanks.

Yeah, <unk> I'll start with that the the way that we're measuring it in the first quarter is just looking at the op tyrion compared to kind of year over a year and then just the the movement from our legacy tariffs on to an upper tier and then you.

Packages versus renewing on the same equivalent here and so that's really how we're measuring the accretive is looking at what customers are buying as they grow and expand with us and that the net the total spend is increasing as they move up here, so and again.

It's early in the first quarter of having the new plans.

But we saw more of that in terms of that motion of of choosing.

More advanced package because of the AI functionality.

And this is Dustin I'm going to give you a little bit more of a philosophical answer.

So first of all I think there are a lot of possibilities in front of US there are a number of different kinds of add ons, we discuss nothing currently on our road map.

But I think there are there are some that could be a charged in tranche pricing or per user or is like one off reports even.

An example, I talked through in the script my experience using our AI smart answers to help me with our AR performance reviews internally, but a bigger version of that processes to accompany engagement survey.

And I could imagine every time you run an engagement survey you also get the slide $10000 AI summary of sentiment your workspace and then we use that to sort of automatically give you Paul shacks across the year, because we can calibrate the scores anyway. That's just a random idea, but something I can imagine charging and it just like a totally different way from our current pricing.

So that's the first part that's the stuff I think you wanted to hear the philosophical thing is I think that the market has gone off in a really weird direction by considering AI as a feature and charging people for copilot add ons I think far more of the potential of AI is when it's integrated street into workflows and straight into features and so we intend to be an AI first collaborative work management.

System and that means that AI is inextricable from our most important features especially portfolios goals and managing workflows and.

And so we much more see the.

The potential of AI in our packaging as.

Really excellent excellent increasing that value and thus our pricing power.

And again I think we're uniquely positioned with by having the Warcraft because AI plus the work Ralph is really more than the sum of the parts. So we think that we can.

Have a special advantage there.

And being able to just create pricing power across our normal packages and then later.

There may be more sophisticated packaging that allows us to better differentiate price to value, but I think that's strictly.

Strictly an optimization and in the high order bit is really just the power of AI to amplify our core value proposition.

Thank you our next question.

Comes from the line of Rob Oliver of Baird. Please go ahead Rob.

Great. Thanks. Good afternoon. Thanks for squeezing me in I had to Dustin first for you I appreciate your commentary on the macro and on some of the.

Improvements or modest improvements, we're starting to see in the macro makes a lot of sense I'd be curious to hear that and.

And those are helpful to you guys. There is also a lot of things you guys have done internally and you're just coming off a sales kick off right now and you know Ed depended a seat now multiple quarters and you've really revamped team globally is an also alluded too so I'd love to hear your perspective emerging from sales kickoff clearly a much.

More optimistic tone here from you guys on the call would love to hear kind of what caught your attention to what most excited you coming out of sales kickoff.

Yeah. That's a great question, a great summary of our strengths right now I think that.

It's a little hard to say that we've been talking about his executive team at play it's partially a vibe thing. It's partially a contrast from last year, but things feel very difference are we feel better positioned we feel like we're getting traction in all the execution areas, where it matters, where seeing the green shoots in certain regions and certain sectors.

And <unk> and we're seeing the approach of the navy or even when we're not already seen the bottom.

And so that's just giving us yeah, a different sort of stance on the future.

And I'll just reiterate.

The timing of that is a little more in question, but the we have two goals. This year one is to follow through on our promise of free cash flow positive by the end of the year and then the second is to Reaccelerate growth and that is not something I would have said last year.

But really excited to have as a goal this year.

Got it helpful. Thank you and then and for you just to probe a little bit there, but a lot of questions on the comments around stabilization I just wanted to ask around.

You guys called out a lot of different verticals, where you're having success, which is clearly great to see and it sounds like you'll be leaning on some of those verticals here as you emerge from this trough periods when.

When you look at the verticals that you called out are there any in particular, where you're seeing particular strength I know you mentioned health care financial services Industrial and then I know you were clear early in the call that sales cycles. We're still long has there been any change in sales cycles in some of those.

Industries that are newer for you guys, where perhaps they had not invested or perhaps where there's a reason to consolidate onto soma. Thank you.

Yeah. Thanks for the question. We we are continuing to focus on health care financial services manufacturing.

Logistics and transportation something I'll pause to just say is.

Given the caliber of the customers that we have that the more we focus in each of those protocols and really are working with top tier customers. I think that is also just driving greater success as we reach out to additional customers in those verticals and so that's a huge reason where I'm focused.

So much on our leadership position and we think that that not only paying off right now, but will in the future as well and so that those are the verticals that will continue to invest in them and you know when we're we're excited to continue to do that also you know we have amazing customers and attack.

We mentioned indeed, as one of them and we're continuing to partner with them as they.

Kind of Retrenched and are looking at growth in the future. So we're excited about those possibilities.

As well, where they're continuing to be loyal customers.

Thank you. Our next question comes from the line of Alex Zukin of Wolfe Research. Please go ahead Alex.

Hey, guys. This is Ethan Roth on for Alex Zukin, I, just wanted to ask around the sales capacity and you guys made a comment youre going to be increasing quota capacity throughout the year and just what are the signals that you saw throughout the quarter.

A few months of the year that gave you the confidence.

Continue increasing Uh huh.

Okay.

Yeah, our confidence in our ability to continue to add capacity really comes from we've been seeing a consistent ability to build pipeline, we've been seeing productivity improve them. We're very focused on making sure. We can absorb capacity in a predictable manner and so having new.

Leaders in place, who are really focused on that end and measuring those metrics and managing to that is giving us the confidence on being able to add capacity predictably.

Got you and then just quickly.

There is a great chart from yesterday, just kind of decomposing. The dollar based net retention between users RP retention I'm just curious as we think about the comments on stabilization and then sequential reacceleration in the back half.

Much of that is between some of the new go to market motion how much of that is.

Factored in our two uplift motion the skew of just kind of curious how would you chalk.

Okay by the macro.

Hey, I benefit and better.

Better go to market execution and market.

This is Dustin I honestly I think the way I think about it is the timing is more macro and the scale is execution.

Is that fair.

Yes.

Okay. Thank you guys.

Thank you.

I would now like to turn the conference back to Katherine <unk> for closing remarks about them yes.

Yes. Thank you just thank you again, everyone for participating in the call today, we always appreciate your taking the time, we look forward to seeing you on the road will be in New York. This week and hopefully we'll see some of you out there. Thank you so much bye bye.

This concludes today's conference call. Thank you for participating you may now disconnect.