Q2 2025 Asana Inc Earnings Call
Yeah.
Good day, and thank you for standing by welcome.
Speaker Change: Welcome to the second quarter fiscal year 2025 earnings call.
Speaker Change: At this time all participants are in a listen only mode.
Speaker Change: After the speaker's presentation, there will be a question and answer session.
Speaker Change: To ask a question during the session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised.
Speaker Change: To withdraw your question. Please press star one again.
Speaker Change: Please be advised that today's conference is being recorded.
Kathryn one: I would now like to hand, the conference over to Kathryn one head of Investor Relations. Please go ahead.
Kathryn one: Good afternoon, and thank you for joining us today on today's conference call to discuss the financial results for us on our second quarter of fiscal year 2025 with me on today's call are doesn't moskovitz song as co founder and CEO and Remondi, our Chief operating officer, and head of business and Tim <unk>, Our Chief Financial Officer.
Speaker Change: Today's call will include forward looking statements, including statements regarding our expectations for free cash flow, our financial outlook strategic plans, our 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.
Speaker Change: 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.
Speaker Change: 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 got a sauna dot com.
Duston: And with that I'd like to turn the call over to duston.
Duston: Thank you Catherine and thank you all for joining us on the call today.
Duston: The second quarter, if on a continued to execute on our transition to the enterprise and make strides on our phone or AI.
Duston: I'll go through a few highlights from the quarter and then jump into some of the key trends that are shaping our industry and informing our strategy to be the enterprise leader in the category.
Duston: In Q2, our revenues grew 10% year over year ahead of our guidance and consistent with our expectation that Q2 would be a baseline for stabilization going forward.
Duston: We saw great leading indicators for growth in pockets of our business, including key wins in manufacturing energy transportation and government, where Jan will talk about.
Duston: Excluding the technology vertical our Q2 revenue growth rate would have been in the mid teens.
Jan: We also reported free cash flow positive of $12 $8 million or 7% on a free cash flow margin basis from Q2, reflecting our continued focus on operational discipline.
Speaker Change: The number of customers spending over $100000 or more grew 17% year over year.
Unknown Executive: Good day, and thank you for standing by.
Speaker Change: We had a record number of multi year deals as we continue to build partnerships with industry leaders and the most innovative companies in the world We're redefining how they work.
Catherine Buan: Welcome to the Asana Second Quarter fiscal year 2025 earnings call. At this time, all participants aren't a listen-only mode. After the speaker's presentation, there will be a question and answer session.
Speaker Change: In fact, two of the most well known AI lab companies had significant expansions in Q2 as they adopt us on internally and partner with us on the technology front as well.
Catherine Buan: To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again.
Speaker Change: We are clearly on the right path and are confident that our business will reaccelerate. However, the macro headwinds persist.
Speaker Change: Also the technology vertical remains a drag on our overall growth.
Unknown Executive: Please be advised that today's conference is being recorded.
Speaker Change: At the same time, we see encouraging signs in some of our top verticals, such as retail and consumer goods and media and entertainment. We have more work to do and this quarter marks a stabilization point from which we're well poised to inflect in the coming quarters.
Catherine Buan: I would now like to hand the conference over to Catherine Buan, Head of Investor Relations. Please go ahead.
Dustin Moskovitz: Good afternoon, and thank you for joining us today's conference call to discuss the financial results for Asana Second Quarter fiscal year 2025.
Today, we're at a pivotal moment, where AI, particularly generative AI has enormous potential to revolutionize work management and reshape the software industry.
Dustin Moskovitz: With me on today's call are Dustin Moskovitz, Asana's co-founder and CEO, Anne Raimondi, our chief operating officer and head of business, and Tim Wan, our chief financial officer. Today's call will include forward-looking statements, including statements regarding our expectations for free cash flow, our financial outlook, strategic plans, our 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.
Speaker Change: This era of AI transformation is poised to be a significant as if not more than the digital transformation trend that preceded it.
At <unk>, we're laser focused on unlocking the potential of AI for our customers and.
Speaker Change: And our work innovation summit in San Francisco. This June we previewed for the first time Sona AI workflows, a groundbreaking advancement that leverages AI to manager work, helping our customers tackle complex workflows and elevate teamwork with AI.
Dustin Moskovitz: Please refer to our filings with the SEC, including our most recent annual report on form 10K, and quarterly report on form 10Q, for additional information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements. In addition, during today's call, we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to, and not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. Reconciliation between GAAP and non-GAAP financial measures, and a discussion of 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.asana.com.
Speaker Change: These AI workflows, which had been in beta since June will be part of our upcoming paid offering Sona AI studio launching in October.
Speaker Change: Ai's studio platform will allow customers to build deploy and enhance workflows with AI teammates taking on some of the work.
Speaker Change: And AI studio a program manager or any designated team member can dictate where an AI teammate can start doing useful work without anyone else, having to learn something new adopted new application or change their behavior.
Speaker Change: Importantly employees don't need to go elsewhere to access this AI capability embedded right, where they work every day.
Speaker Change: This provides a practical powerful solution for organizations trying to adopt AI internally.
Speaker Change: It also means you have existing integrations to all your important tools across CRM finance HR productivity suites and more.
Dustin Moskovitz: 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 the second quarter, Asana continued to execute on our transitions to the enterprise and makes strides on Asana AI. I'll go through a few of our highlights from the quarter, and then jump into some of the key trends that are shaping our industry and informing our strategy to be the enterprise leader in the category.
Speaker Change: This supports our long term strategy to be the hub that moves work forward across your systems using AI.
Speaker Change: Of course, automated workflows and workflow builders have been around for years, but now customers have the ability to design. These workflows and Astana with AI teammates to assist with any step in the workflow.
Speaker Change: Customers will be able to subscribe to AI studio builder and begin creating and deploying AI workflows.
Dustin Moskovitz: In Q2, our revenues grew 10% year by year, ahead of our guidance and consistent with our expectations that Q2 would be a baseline for stabilization going forward. We saw great leading indicators for growth in pockets for our business, including key wins in manufacturing, energy, transportation, and government, which Anne will talk about. Excluding the technology vertical, our Q2 revenue growth rate would have been in the mid teens. We also reported free cash flow positive of $12.8 million or 7% on a free cash flow margin basis in Q2, reflecting our continued focus on operational discipline.
Speaker Change: This model will allow customers to unlock AI actions on a consumption basis, allowing enterprises to buy exactly what they need to fit their organization at that moment in time.
Speaker Change: It's been exciting to see the early momentum and our AI studio Beta program since we rolled it out in June.
Speaker Change: The beta program has already attracted industry leaders across various sectors, including media technology financial services manufacturing health care professional services and consumer goods.
Speaker Change: There's a healthy amount of skepticism around AI and the value. It is currently providing in the enterprise.
Dustin Moskovitz: The number of customers spending over $100,000 or more grew 17% year by year. We had a record number of multi-year deals as we continued to build partnerships with industry leaders and the most innovative companies in the world who are redefining how they work. In fact, two of the most well-known AI lab companies had significant expansions in Q2, as they adopt the SANA internally and partner with us on the technology front as well.
Speaker Change: Viewers, we're still early in the adoption cycle, especially in businesses and customers are just beginning to successfully leverage the potential and understand how to apply it effectively to more parts of their business.
Speaker Change: AI is powerful, but it demands new skills and behaviors from users.
Speaker Change: These capabilities are currently being offered and chat apps and co pilots, leaving it up to every individual to determine how to extract value.
Dustin Moskovitz: We are clearly on the right path and are confident that our business will re-excelerate. However, the macro headwinds persist. Also, the technology vertical remains a drag on our overall growth. At the same time, we see encouraging signs in some of our top verticals such as retail and consumer goods and median entertainment. We have more work to do in this quarter marks stabilization point from which we're well poised to inflect in the coming quarters.
Likewise autonomous agents are not ready to take over roles in an organization, there too unpredictable and unreliable.
Speaker Change: Effective AI adoption needs integrating AI directly into everyday work and workflows, where AI can drive meaningful and measurable impact at scale.
Speaker Change: Complementing human efforts rather than replacing them.
Let me detail a few specific early use cases from actual customer implementations to make this real for all of you.
Dustin Moskovitz: Today we're at a pivotal moment where AI, particularly generative AI, has enormous potential to revolutionize work management and reshape the software industry. This era of AI transformation is poised to be as significant as if not more than the digital transformation trend that proceeded it. At Asana, we laser focused on unlocking potential with AI for our customers. At our work innovation summit in San Francisco this June, we previewed for the first time Asana AI workflows, a groundbreaking advancement that leverages AI to manage your work, helping our customers tackle complex workflows and elevate teamwork with AI.
Speaker Change: Regardless of industry or size every company has work and workflows that touch multiple departments and teams such as strategic planning customer service store openings procurement and due diligence.
Speaker Change: Coordinating work cross functionally is notoriously difficult because it extends across teams tools and geographies.
Speaker Change: Where can take is oftentimes the bridge across a lot of these teams tools and processes and now it's on the AI teammates can not only improve the process holistically. It can manage and do a lot of the work.
Speaker Change: Each of the four phases of cross functional work gets easier including.
Dustin Moskovitz: These AI workflows, which have been in data since June, will be part of our upcoming paid offering Asana AI Studio launching an October The AI Studio platform will allow customers to build deploy and enhance workflows with AI teammates taking on some of the work. In AI Studio, a program manager or any designated team member can dictate where an AI teammate can start doing useful work without anyone else having to learn something new, adopt a new application or change their behavior.
Speaker Change: Intake this is where AI teammates are able to refine tasks extract out of triage requests prioritize work communicate with Requesters and route tasks.
Speaker Change: Next stages planning, where AI teammates are able to summarize requests conduct research, including via integrations with other tools and recommend next steps.
Speaker Change: Execution.
Speaker Change: Teammates are able to draft content to translations incorporate feedback and can answer questions using various data sources.
Dustin Moskovitz: Importantly, employees don't need to go elsewhere to access this AI capability embedded right where they work every day. This provides a practical, powerful solution for organizations trying to adopt AI internally. It also means you have existing integrations to all your important tools across CRM, finance, HR, productivity, sweets, and more. The supports are long-term strategy to be the hub that moves work forward across your systems using AI. Of course, automated workflows and workflow builders have been around for years, but now customers have the ability to design these workflows in Asana with AI teammates to assist with any step in the workflow.
Speaker Change: And finally reporting reflection.
Speaker Change: This is where AI teammates are able to update metadata for reporting and suggest retrospective topics driving continuous improvement.
Speaker Change: One of our customers are global cyber security leader has tested how our AI teammates can contribute to their global marketing organization and significantly improve their processes for and taking email requests to execution.
Speaker Change: Before us on AI teammates they face challenges with missing information and submissions time consuming prioritization meetings and delays in global market launches.
Dustin Moskovitz: Customers will be able to subscribe to AI Studio Builder and begin creating and deploying AI workflows. This model will allow customers to unlock AI actions on a consumption basis allowing enterprises to buy exactly what they need to fit their organization at that moment in time. It's been exciting to see the early momentum in our AI Studio Beta program since we rolled it out in June. The Beta program is already attracted industry leaders across various sectors, including media, technology, financial services, manufacturing, healthcare, professional services, and consumer goods.
Speaker Change: Our teammates have shown how we can address these pain points comprehensively.
Speaker Change: So the first step is to request intake and I can now evaluate requests at the point of submission auto naming them for clarity and proactively finding missing information.
Speaker Change: Requests are summarized in natural language, making their relative importance clear at a glance.
Speaker Change: Second step prioritization, we've shown how we can streamline their alignment meetings with better first stab prioritization producing the time spent on these sessions.
Speaker Change: Third step execution.
Dustin Moskovitz: There's a healthy amount of skepticism around AI and the value it's currently providing in enterprise. My view is we're still early in the adoption cycle, especially in businesses, and customers are just beginning to successfully leverage the potential and understand how to apply it effectively to more parts of their business. AI is powerful, but it demands new skills and behaviors from users. Most of these capabilities are currently being offered in chat apps and co-pilots, leaving it up to every individual to determine how to extract value.
Speaker Change: Perhaps most impressively this customer has expressed how this can eliminate translation delays that are previously caused more than two week gaps between English and other market launches.
Speaker Change: Now all launches can happen simultaneously, ensuring no market feels to you prioritized and the marketing organization can deliver a more consistent improved customer experience globally.
Speaker Change: It's worth noting that this AI powered solution replaces the need for dedicated industry specific translation software where services that companies might traditionally used for such tasks and we expect to offer this for much less than what those traditional translation services cost, providing significant value and cost savings to customers.
Dustin Moskovitz: Likewise, autonomous agents are not ready to take over real roles in an organization. They're too unpredictable. Effective AI adoption means integrating AI directly into everyday work and workflows, where AI can drive meaningful and measurable impacted scale, complementing human efforts rather than replacing them. Let me detail a few specific early use cases from actual customer implementations to make this real for all of you. Regardless of industry or size, every company has work and workflows that touch multiple departments and teams, such as strategic planning, customer service, store openings, procurement, and due diligence.
Speaker Change: Last reporting and the reporting reflection phase AI can update meta data, which you know has got some fields to inform work reporting and suggest topics for retrospective. This helps teams capture learnings and insights more effectively leading to continuous improvements in their processes.
Speaker Change: Let me share another customer example.
Speaker Change: A global leader in outdoor advertising has been testing Sona AI teammates for their creative request intake process across regions.
Dustin Moskovitz: Coordinating work cross-functionally is notoriously difficult because it extends across teams, tools, and geographies. Work intake is oftentimes the bridge across a lot of these teams, tools, and processes. And now, Asana AI teammates can not only improve the process holistically, they can manage and do a lot of the work. Each of the four phases of cross-functional work gets easier, including intake. This is where AI teammates are able to refine tasks, extract data, triage requests, prioritize work, communicate with requesters, and route tasks.
The team is very encouraged by the potential here.
Speaker Change: In the words of the VP of marketing operations and allows them to prioritize the bigger things they want to do to show more business impact and affect the bottom line.
Speaker Change: Importantly, this customer views AI as an enabler for human creativity, and strategic thinking not as a replacement for human work.
Speaker Change: This encapsulates our vision for AI teammates tools that enhance human capabilities drive efficiency and ultimately contribute to our customer's bottom line.
Speaker Change: These stories exemplify how our AI capabilities built on the foundation of our unique and proprietary Warcraft out a model can drive efficiency improved collaboration and ultimately contribute to better business outcomes for our customers.
Dustin Moskovitz: Next stage is planning, where AI teammates are able to summarize requests, conduct research, including via integrations with other tools, and recommend next steps. Execution, where AI teammates are able to draft content, do translations, incorporate feedback, and answer questions using various data sources. And finally reporting reflection. This is where AI teammates are able to update metadata for reporting and suggest retrospective topics driving continuous improvement. One of our customers, a global fiber security leader, has tested how our AI teammates can contribute to their global marketing organization, and significantly improve their processes for intaking email requests to execution.
The Testament to the power of AI teammates working alongside human teams to enhance productivity and strategic impact.
Speaker Change: These are just a few early examples with AI teammates in action.
Speaker Change: We hope to be able to report next year there'll be hundreds or even thousands of such workflows at a meaningful number of our customers.
Speaker Change: Now, let me talk about how we're capturing the consolidation opportunity we.
Speaker Change: We remain in a budget focused environment and customers are looking for consolidation opportunities.
Speaker Change: Our proven ability to scale the structural advantages of the Warcraft, especially as it relates to AI and our focus on our central functions across the enterprise it makes us, particularly well suited to capitalize on this opportunity.
Dustin Moskovitz: Before Asana AI teammates, they face challenges with missing information and submissions, time-consuming prioritization meetings, and delays in global market launches. Our AI teammates have shown how we can address these pain points comprehensively. So the first step is request intake. AI can now evaluate requests at the point of submission, auto naming them for clarity, and proactively flagging missing information. Requests are summarized in natural language, making the relative importance clear to glance. Second step, prioritization.
Speaker Change: We believe we're the only collaborative work management platform, that's proven at scale for large enterprises, and we have several customers with over 10000 seats and one customer with 200000 seats actively deployed.
Speaker Change: In practice, there's no organization too big for us on them and we've proven that the value and differentiation of our Santa Cruz with scale, thanks to our unique and differentiated data model.
Dustin Moskovitz: We've shown how we can streamline their alignment meetings with better first-ab prioritization, producing the time spent on these sessions. Third step, execution. Perhaps most impressively, this customer has expressed how this can eliminate translation delays that have previously caused more than two week gaps between English and other market launches. Now launches can happen simultaneously, ensuring no market feels deprioritized, and the marketing organization can deliver more consistent, improved customer experience globally. It's worth noting that the AI-powered solution replaces the need for dedicated, industry-specific translation software, where services that companies might traditionally use for such tasks.
Speaker Change: To support this effort and help our customers realize more value even faster we are expanding the baseline offering of our enterprise tiers.
Speaker Change: In addition to premium AI features writing more high value functionality like request tracking and where can take resource management enhanced executive reporting and visualizations of how goals and work are inextricably linked in a sauna.
Speaker Change: We're also rolling out unlimited the only licenses to see where can this honor with and in product path to request to paid license to comment or artwork.
We think this has the potential to meaningfully contribute to paid seat growth within our accounts.
Speaker Change: Finally, we announced our official commitment to pursue fed ramp certification, which will unlock new market opportunities and government agencies and other regulated industries.
Dustin Moskovitz: And we expect to offer this for much less than what those traditional translation services cost, providing significant value and cost savings to customers. Class reporting. In the reporting reflection phase, AI can update metadata, which you know is custom fields, to inform work reporting and suggest topics for retrospectives. This helps teams capture learnings and insights more effectively, leading to continuous improvements in their processes. Let me share another customer example. A global leader in outdoor advertising has been testing Asana AI teammates for their creative request intake process across regions.
These initiatives are designed to help enterprises quickly achieve the critical mass needed to fully leverage the AI enhanced work graph and consolidate their work management needs on a single powerful platform.
Speaker Change: Finally, let me explain how we believe AI will help us drive revenue and adoption in three key ways.
Speaker Change: <unk> already enhances the value we deliver in our core work management functionality, such as smart goals and smart status features.
Speaker Change: This is what customers get most of our packages today, depending on their tears.
Speaker Change: Second AI is enabling us to introduce new add ons and we have specific ones we're developing now.
Dustin Moskovitz: The team is very encouraged by the potential here. In the words of the VP of marketing operations, it allows them to prioritize the bigger things they want to do to show more business impact and affect the bottom line. Importantly, this customer views AI as an enabler for human creativity and strategic thinking, not as replacement for human work. Bruck. This encapsulates our vision for AI teammates, tools that enhance human capabilities, drive efficiency, and ultimately contribute to our customers bottom one.
Speaker Change: Resource planning will be a license based on for example.
And third we continue to believe in the potential of usage based AI revenue.
Speaker Change: In the early stages here, but we're learning more on this front everyday from our customers and our AI studio Beta program, which we're expecting to formally launch soon.
Speaker Change: In closing, we're clearly making progress with our enterprise strategy, but the shape of your acceleration curve will be very modest in the next few quarters and more pronounced later.
Dustin Moskovitz: These stories exemplify how our AI capabilities build on the foundation of our unique and proprietary work raft data model, can drive efficiency, improve collaboration, and ultimately contribute to better business outcomes for our customers. The testament to the power of AI teammates working alongside human teams, to enhance productivity and strategic impact. These are just a few early examples of AI teammates in action. We hope to be able to report next year that we have hundreds or even thousands of such workflows at a meaningful number of our customers.
Speaker Change: We're confident it'll happen because we've already seen it in some segments of the business and we're beginning to see stabilization and others.
Speaker Change: We remain committed to a sustained positive free cash flow by the end of Q4.
Speaker Change: We're winning strategic customers across important industries, causing more multiyear deals and investing in AI to meet enterprise demands.
Speaker Change: We're excited to share more of our innovation and customer success stories at the work innovation Summit in New York City on October 22nd and again in London on November 13th we hope to see you there.
Speaker Change: Before I hand, it over to Ann I'd like to also say a few words about the announcements we made today in conjunction with our earnings release.
Dustin Moskovitz: Now let me talk about how we're capturing the consolidation opportunity. We remain in a budget-focused environment, and customers are looking for consolidation opportunities. Our proven ability to scale, the structural advantages of the work raft, especially as it relates to AI, and our focus on essential functions across the enterprise makes us particularly well-suited to capitalize on this opportunity. We believe we're the only collaborative work management platform that's proven at scale for large enterprises, and we have several customers with over 10,000 seats, and one customer with 200,000 seats actively deployed.
Speaker Change: As you've probably read we announced his departure and the arrival of a new CFO.
Ann: Change is always bittersweet, but it's part of being in a high growth environment.
Ann: As many of you already appreciate Tim has been a great leader partner and friend for all of US have to sign up for almost eight years now I'll be handing over the baton.
Speaker Change: He's been an integral part of the Santa journey, joining us on in 2017 building financial infrastructure to help us scale and navigating us through our entry into the public markets and improving operating margins dramatically, while we continued to invest in growth.
Dustin Moskovitz: In practice, there's no organization too big for Asana, and we've proven that the value and differentiation of Asana crews with scale thanks to our unique and differentiated data model. To support this effort and help our customers realize more value even faster, we're expanding the baseline offering of our enterprise tiers. In addition to premium AI features, we're adding more high-value functionality like recrust tracking and work intake, resource management, enhanced executive reporting, and visualizations of how goals and work are an extricably linked Asana.
Speaker Change: I will miss working with him. He has been a strong partner to me and the leadership team, but he will remain on as an adviser to help in the transition.
Speaker Change: Tim we're very grateful for your many contributions.
Speaker Change: At the same time I'm excited to announce our new Chief Financial Officer <unk> <unk>.
Speaker Change: Suddenly is a seasoned finance executive with over 25 Years' experience in high growth technology.
Speaker Change: Most recently she was CFO of ring central.
Dustin Moskovitz: We're also rolling out unlimited view only licenses to see work in Asana, with an in-product path to request a paid license to comment or ad work. We think this has the potential to meaningfully contribute to paid seat growth within our accounts. Finally, we announced our official commitment to pursue Fed Ram certification, which will unlock new market opportunities and government agencies and other regulated industries. These initiatives are designed to help enterprises quickly achieve the critical mass needed to fully leverage the AI enhanced work raft and consolidate their work management needs on a single, powerful platform.
Suddenly: Suddenly brings deep operational and financial experience and leading companies at scale.
Suddenly: I look forward to partnering with her and our next stage of growth.
Suddenly: That I'll hand, it over to Anne.
Speaker Change: Thanks, Justin and I'll, just echo <unk> sentiment on both fronts and Tim. Thank you for everything you will certainly be missed but definitely not forgotten.
Speaker Change: As Dustin mentioned early access Tarzana AI studio Beta program is getting great response from our customers.
Speaker Change: We talk to our top 100 customers virtually every customer wanted to be part of our beta program.
Dustin Moskovitz: Finally, let me explain how we believe AI will help us drive revenue and adoption in three key ways. First, it already enhances the value we deliver in our core work management functionality, such as smart goals and smart status features. This is what customers get in most of our packages today, depending on their tiers. Second, AI is enabling us to introduce new add-ons, and we have specific ones we're developing now. Resource planning will be a license based add-on, for example.
Speaker Change: Customers are interested in a sign of a studio for everything from translating global communications across over 100 countries in minutes.
Speaker Change: <unk> and prioritizing complex of aircraft and even making other existing applications more effective by adding a workflow layer on top of our customer database.
Speaker Change: Importantly customers are most excited with what AI can do inside their assigned a workflow.
Dustin Moskovitz: In third, we continue to believe in the potential of usage based AI revenue. We're in the early stages here, but we're learning more on this front every day from our customers and our AI Studio Beta program, which we're expecting to formally launch soon. We're clearly making progress with our enterprise strategy, but the shape of the acceleration curve will be very modest in the next few quarters and more pronounced later. We're confident it will happen because we've already seen it in some segments of business, and we're beginning to see stabilization in others.
Speaker Change: Customers are saying the quality efficiency and personalization that we can deliver at scale is groundbreaking.
Speaker Change: As we're seeing in our beta program or a studio offering is opening up new kinds of conversations across our customer base and helping us access new incremental budget dollars.
Speaker Change: Through our AI studio a beta program, we've seen a help us gain more executive mindshare and create significant inroads with executive leadership in AI strategy groups. Our AI capabilities are not just operational tools that strategic assets.
Dustin Moskovitz: We remain committed to a sustained positive free cashflow by the end of Q4. We're winning strategic customers across important industries, closing more multi-year deals, and investing in AI to meet enterprise demands. We're excited to share more of our innovation and customer success stories at the work innovation summit in New York City on October 22nd and again in London on November 13th. We hope to see you there.
Speaker Change: This level of access is allowing us to enhance the traditional workflows our customers rely on us on a far such as break intake product launches and strategic planning, while also giving us the opportunity to support new workflows.
Speaker Change: Our ease of use and flexibility of our AI offering.
Dustin Moskovitz: Before I hand it over to Anne, I'd like to also say a few words about the announcements we made today in conjunction with our earnings release.
Speaker Change: We're finding that customers don't want to introduce another siloed tool for their AD workflows. They want at embedded where their employees are already managing their work and that's N <unk>. This.
Dustin Moskovitz: As you've probably read, we announced him as departure and the arrival of a new CFO. Change is always better sweet, but it's part of being in a high growth environment. As many of you already appreciate, Tim has been a great leader, partner and friend for all of us at Asana for almost eight years and now we'll be handing over the baton. He's been an integral part of the Asana journey, joining Asana in 2017, building financial infrastructure to help us scale and navigating us through our entry into the public markets and improving operating margins dramatically while we continue to invest in growth. I'm this working with Tim who's been a strong partner to me and the Asana leadership team, but he'll remain on as an advisor to help in the transition. Tim, we're very grateful for your many contributions.
Speaker Change: This engagement at the highest levels of organizations and direct collaboration with AI counsel positions us on it as a key partner in shaping our customers' AI strategies and sets us up well for expanded partnerships and growth opportunities.
Speaker Change: Turning to Q2, as we expected going into the quarter ongoing budget scrutiny and longer sales cycles continued to impact our business consistent with last quarter.
Speaker Change: As a result, we saw a number of deals pushed out but they remained in our pipeline.
Speaker Change: Secondly, the headwinds in the technology vertical continue to weigh down our overall revenue growth.
Dustin Moskovitz: At the same time, I'm excited to announce our new chief financial officer, Sonali Perak. Sonali is a seasoned finance executive over 25 years experience in high growth technology. Most recently, she was CFO of Ring Central. Sonali brings deep operational and financial experience and leading companies at scale. I look forward to partnering with her in our next stage of growth.
Speaker Change: Despite the continued headwinds we closed some very strategic deals across industries, such as automotive manufacturing government energy among many others.
Speaker Change: By geography International led revenue growth at 12, 3% reported and 12, 8% year over year, when we exclude the currency impact.
Speaker Change: The international team continues to execute well with particular success in key verticals, such as energy and manufacturing.
Anne Raimondi: And with that, I'll hand it over to Ann. Thanks, Dustin. And I'll just echo Dustin's sentiment on both fronts.
Anne Raimondi: And Tim, thank you for everything you will certainly be missed, but definitely not forgotten. As Dustin mentioned, early access to our Asana AI Studio beta program is getting great response from our customers. When we talk to our top 100 customers, virtually every customer wanted to be part of our beta program. Customers are interested in the Asana AI Studio for everything from translating global communications across over 100 countries in minutes to managing and prioritizing complex work requests and even making other existing applications more effective by adding a workflow layer on top of a customer database.
In the U S. We continued in Q2 to be pressured by early successes in the technology sector. Overall U S growth was 9% year over year heavily impacted by the technology sector exposure.
Fortunately, we now have put our largest seat adjustments behind us as of last quarter and we believe that the in quarter dollar based net retention rate is at a stabilizing point.
Speaker Change: As Dustin mentioned on our previous call in order to get to Reacceleration you need to first go through stabilization and that's where we believe we are today.
Dustin: We are well poised for slight reacceleration in the near term and more substantial acceleration in the out quarters.
Anne Raimondi: Importantly, customers are most excited with what AI can do inside their Asana workflow. Customers are saying the quality, efficiency, and personalization that we can deliver at scale is groundbreaking. As we're seeing in our beta program, our AI Studio offering is opening up new kinds of conversations across our customer base and helping us access new incremental budget dollars. Through our AI Studio beta program, we've seen AI help us gain more executive mind chair and create significant inroads with executive leadership and AI strategy groups.
Speaker Change: Now turning to customer dynamics in Q2.
Enterprise customers continue to expand and multiyear deals jumped significantly in this quarter pointing to the types of longer term partnerships, we're forming with large and strategic enterprises.
Speaker Change: The first sector I'll mentioned, you may be very familiar with while the overall technology sector has been cycling through various buying dynamics. There are specific cohorts such as AI where growth is very healthy. For example, we are the de facto standard across two of the most well known AI lab.
Speaker Change: <unk> significantly expanded their use of us on them. So.
Anne Raimondi: Our AI capabilities are not just operational tools, but strategic assets. This level of access is allowing us to enhance the traditional workflows our customers rely on asana for, such as work intake, product launches, and strategic planning, while also giving us the opportunity to support new workflows due to the power, ease of use, and flexibility of our AI offering. We're finding that customers don't want to introduce another silo tool for their AI workflows.
Speaker Change: So more departments can manage their strategic programs and work in a central platform.
Speaker Change: They also both upgraded to our enterprise plus solution to access enhanced security capabilities and get the most value from our platform. Both companies have seen rapid organic adoption of us on it in departments like marketing sales growth engineering finance and more thanks to improved cross department collaboration which is enabling them to release.
<unk> faster and work more effectively.
Anne Raimondi: They want AI embedded where their employees are already managing their work, and that's in Asana. This engagement at the highest levels of organizations and direct collaboration with AI Councils positions Asana as a key partner in shaping our customers' AI strategies and sets us up well for expanded partnerships and growth opportunities.
Speaker Change: The energy vertical is another place where the need for innovation and efficiency is fueling demand for Astana.
Speaker Change: For example, one of the largest energy companies in Iceland selected us honest enterprise plus solution after a competitive evaluation.
Speaker Change: They will use us to manage their long term strategic investments projects like the construction of energy plants, low temperature and high temperature geothermal hydropower fiber networks and more.
Anne Raimondi: Turning to Q2, as we expected going into the quarter, ongoing budget scrutiny and longer sales cycles continue to impact our business consistent with last quarter. As a result, we saw a number of deals pushed out but they remained in our pipeline. Secondly, the headwinds in the technology vertical continue to weigh down our overall revenue growth. Despite the continued headwinds, we closed some very strategic deals across industries such as automotive, manufacturing, government, energy among many others.
Speaker Change: Also the British renewable energy group specializing in sustainable energy and pairing millions of homes in eight countries renewed their use of <unk> to manage work across their entire company this quarter.
Speaker Change: S on it as the hub for all business activities and teams manage everything from hardware development to business strategy planning to vendor management. So they can innovate and execute quickly to deliver continued value to their customers.
Anne Raimondi: By geography, international lead revenue growth at 12.3% reported and 12.8% year-over-year when we exclude the currency impact. The international team continues to execute well with particular success in key verticals such as energy and manufacturing. In the U.S., we continued in Q2 to be pressured by early successes in the technology sector. Overall, U.S, growth was 9% year-over-year heavily impacted by the technology sector exposure. Fortunately, we now have put our largest seed adjustments behind us as of last quarter and we believe that the in-quarter dollar-based net retention rate is at a stabilizing point.
Speaker Change: In transportation, we closed a deal with <unk> a leader in fleet management software, who upgraded to our enterprise population this quarter to gain access to our latest features including us on AI. They.
Speaker Change: They use us on it to manage their core work across the entire company. So they can make data driven decisions and execute on their calls.
Speaker Change: And we had several deals across the manufacturing sector through one of our partners. We landed a subsidiary of a prominent Korean automotive manufacturer this quarter after winning a competitive RFP.
Speaker Change: They're replacing their legacy project management system with <unk> enterprise plus.
Speaker Change: Additionally, a Japan based global innovator in manufacturing electronics expanded their use of us on it this quarter because of our ease of use and ability to enable seamless collaboration across departments and ability to integrate it into their current tech stack like Microsoft 365.
Anne Raimondi: As Dustin mentioned on a previous call, in order to get to re-exceleration, you need to first go through stabilization and that's where we believe we are today. We are well-poised for slight re-exceleration in the near term and more substantial acceleration in the out-quarters. Now, turning to customer dynamics in Q2, our enterprise customers continue to expand and multi-year deals jump significantly this quarter, pointing to the types of longer-term partnerships we are forming with large and strategic enterprises.
Speaker Change: Now more departments like engineering chain management will manage their work and assign that to drive innovation faster.
Speaker Change: Within the public sector, a major department within the U S government needed a new collaborative work management tool to bring together nine separate unit just flattish their first project management organization to manage operations and complex projects for the office in charge of planning policy and resources and they selected us on it.
Anne Raimondi: The first sector I'll mention, you may be very familiar with. While the overall technology sector has been cycling through various buying dynamics, there are specific cohorts such as AI where growth is very healthy. For example, we are the de-factors standard across two of the most well-known AI labs, both significantly expanded their use of Asana, so more departments can manage their strategic programs and work in a central platform. They also both upgraded to our enterprise plus solution to access enhanced security capabilities and get the most value from our platform.
Speaker Change: They will use us on out to attract executive team strategy budget and finance management complex project in process management and work intake from satellite government offices.
Speaker Change: With us on a they have visibility across all current projects. So they can report to leadership on progress and the support they are providing their satellite offices.
Speaker Change: This great public sector customer win Punctuates, the importance of our government strategy as seen by our recent announcement to pursue fed ramp certification.
Anne Raimondi: Both companies have seen rapid organic adoption of Asana into departments like marketing, sales, growth, engineering, finance, and more. Thanks to improved cross-department collaboration, which is enabling them to release products faster and work more effectively. The energy vertical is another place where the need for innovation and efficiency is fueling demand for Asana. For example, one of the largest energy companies in Iceland selected Asana's enterprise plus solution after a competitive evaluation. They will use Asana to manage their long-term strategic investments projects like the construction of energy plants, low temperature and high temperature geothermal, hydro power, fiber networks, and more.
Speaker Change: These are just a few stories to illustrate how well Astana can execute we are driving initiatives to replicate these playbooks and scale the methodologies to repeatable consistent processes.
Speaker Change: We're focused on several key initiatives that will help us develop and transform our business first investing in a more consistent post sales experience to drive expansion.
Speaker Change: Improving velocity by further streamlining sales processes.
Third building on the excitement around AD products to improve account engagement and adoption and finally, focusing on strategic industry vertical to further diversify our business.
Anne Raimondi: Also, the British Renewable Energy Group specializing in sustainable energy and pairing millions of homes in eight countries renewed their use of Asana to manage work across their entire company this quarter. Asana is a hub for all business activities and teams manage everything from hardware development to business strategy planning to vendor management so they can innovate and execute quickly to deliver continued value to their customers. We have a deal with Fleetio, a leader in fleet management software who upgraded to our enterprise plus solution discordor to gain access to our latest features including Asana AI.
In summary, our strategies are designed to drive seat expansion deepen our customer relationships and ultimately grow a R.
Speaker Change: And with AI, joining the team, we can deliver even greater value to our customers.
Speaker Change: We're excited about the path ahead and confident in our ability to execute on these initiatives.
Speaker Change: And with that I'll hand, it over to Tim.
Tim: Thank you Ann Q2 revenues came in at $179 2 million up 10% year over year.
Tim: We have 22948 core customers or customer spending 5000 or more on an annualized basis.
Anne Raimondi: They use Asana to manage their core work across the entire company so they can make data driven decisions and execute on their goals. And we have several deals across the manufacturing sector. Through one of our partners, we landed a subsidiary of a prominent Korean automotive manufacturer this quarter after winning a competitive RFP. They are replacing their legacy project management system with Asana's enterprise plus. Additionally, a Japan-based global innovator in manufacturing electronics expanded their use of Asana discordor because of our ease of use ability to enable seamless collaboration across department and ability to integrate Asana into their current tech stack like Microsoft 365. Now, more departments like Engineering Chain Management will manage their work in Asana to drive innovation faster.
Tim: Revenue from core customers grew 11% year over year.
Tim: This cohort represented 75% of our revenues in Q2 up from 74% in the year ago quarter.
Tim: We have 649 customers spending 100000 or more on an annualized basis.
Tim: And this customer cohort grew at 17% year over year.
Tim: As a reminder, we define these customer cohorts based on annualized GAAP revenues in a given quarter.
Tim: Our overall dollar based net retention rate was 98%.
Tim: Our dollar based net retention rate for our core customers was 99%.
And among customer spending 100000 or more our dollar based net retention rate was 103%.
Tim: As a reminder, our dollar based net retention rate is a trailing four quarter average calculation and thus a lagging indicator.
Anne Raimondi: Within the public sector, a major department within the U.S, government needed a new collaborative work management tool to bring together nine separate units to establish their first project management organization to manage operations and complex projects for the office in charge of planning, policy and resources and they selected Asana. They will use Asana to track the executive team strategy, budget and finance management, complex project and process management and work intake from satellite government offices.
Tim: However, it's important to highlight the quarter trends as we go through this transition.
Anne Raimondi: With Asana, they have visibility across all current projects so they can report to leadership on progress and the support they're providing their satellite offices. This great public sector customer when punctuates the importance of our government strategy as seen by our recent announcement to pursue bed ramp certification.
Tim: We believe that the in quarter dollar based net retention rate is at a stabilization point in Q2.
Tim: As I turn to expense items and profitability I would like to point out that I will be discussing non-GAAP results and the balance of my remarks.
Tim: Gross margins came in at 89%.
Tim: Research and development was $56 5 million or 32% of revenue.
Tim: Sales and marketing was $91 1 million or 51% of revenue.
Tim: G&A was $27 7 million or 15% of revenue.
Tim: During the quarter, we also realized a onetime property tax credit related to our corporate headquarter, which lowered our operating expenses by $3 1 million.
Tim: This was an allocation impacting each opex line item.
Anne Raimondi: These are just a few stories to illustrate how well Asana can execute. We are driving initiatives to replicate these playbooks and scale the methodologies to repeatable consistent processes. We're focused on several key initiatives that will help us develop and transform our business. First, investing in a more consistent post sales experience to drive expansion. Second, improving velocity by further streamlining sales processes. Third, building on excitement around AI products to improve account engagement and adoption.
Tim: Operating loss was $15 7 million and our operating loss margin was 9%.
Tim: Net loss was $11 1 million and our net loss per share was five cents.
Anne Raimondi: And finally, focusing on strategic industry verticals to further diversify our business. In summary, our strategies are designed to drive seed expansion, deepen our customer relationships and ultimately grow AR. And with AI joining the team, we can deliver even greater value to our customers. We're excited about the path ahead and confident in our ability to execute on these initiatives.
Speaker Change: Moving onto the balance sheet and cash flow cash and marketable securities at the end of Q2 were approximately $521 6 million.
Speaker Change: Our remaining performance obligation or our appeal was $394 5 million up 18% from the year ago quarter.
Speaker Change: This is a reacceleration from last quarter driven by multiyear deals.
Speaker Change: 83% of our appeal will be recognized over the next 12 months that current portion of <unk> grew 14% from the year ago quarter.
Speaker Change: Our total ending Q2 deferred revenue was $289 2 million.
Speaker Change: Up 11% year over year.
Speaker Change: Q2 free cash flow was $12 8 million or 7% on a margin basis.
Anne Raimondi: And with that, I'll hand it over to you.
Speaker Change: However, remember that Q3 free cash flow will be seasonally lower but we expect to see durable positive free cash flow by the end of Q4.
Tim Wan: Thank you, Anne. Q2 revenues came in at 179.2 million up 10% year-over-year. We have 22,948 core customers or customers spending 5,000 or more on an annualized basis. Revenue from core customers grew 11% year-over-year. This cohort represented 75% of our revenues in Q2 up from 74% in the year-go quarter. We have 649 customers spending 100,000 or more on an annualized basis in this customer cohort grew at 17% year-over-year. As a reminder, we defined these customer cohorts based on annualized gap revenues in a given quarter.
Speaker Change: As you know, we announced the $150 million stock repurchase program in June in Q2, we repurchased $19 7 million of our shares at an average price of $13 64 per share.
Speaker Change: We remain committed to investing in our growth and managing dilution, while returning excess capital to shareholders via share repurchases.
Speaker Change: Moving to guidance for Q3 fiscal 2025, we expect revenues of $180 million to $181 million.
Speaker Change: Representing growth of 8% to 9% year over year.
Speaker Change: We expect non-GAAP loss from operations of $19 million to $18 million, representing an operating margin of negative 10% at the midpoint of guidance.
Tim Wan: Our overall dollar-based net retention rate was 98%, our dollar-based net retention rate for our core customers was 99%, and among customers spending 100,000 or more, our dollar-based net retention rate was 103%. As a reminder, our dollar-based net retention rate is a trailing 4-quarter average calculation and thus a lagging indicator. However, it's important to highlight the in-quarter trends as we go through this transition. We believe that the in-quarter dollar-based net retention rate is at a stabilization point in Q2.
And we expect net loss per share of seven assuming basic and diluted weighted average shares outstanding of approximately $227 million.
Speaker Change: For the full fiscal year 2025, we expect revenues to be in the range of $7 $19 million to $721 million, representing a growth rate of 10% year over year.
Speaker Change: We expect non-GAAP loss from operations of 58 million to 55 million, representing an operating margin of negative 8% at the midpoint of guidance.
Tim Wan: As I turn to expense items and profitability, I would like to point out that I will be discussing non-gap results in the balance of my remarks. Gross margins came in at 89%. Research and development was 56.5 million or 32% of revenue. Sales and marketing was 91.1 million or 51% of revenue. GNA was 27.7 million or 15% of revenue. During the quarter, we also realized the one-time property tax credit related to our corporate headquarters, which lowered our operating expenses by 3.1 million. This was an allocation impacting each off-bex line item. Operating loss was 15.7 million and our operating loss margin was 9%. Net loss was 11.1 million and our net loss per share was 5 cents.
Speaker Change: And we expect net loss per share of 20 to 19, assuming basic and diluted weighted average shares outstanding of approximately $227 million.
Speaker Change: As you can see from our guidance and commentary we continue to see the software macro environment consistent with last quarter and.
And we expect these headwinds to continue.
Speaker Change: The technology vertical continues to drag our overall growth dramatically.
Speaker Change: However, we see pockets of reacceleration across some of our key verticals as noted in some of the significant wins and mentioned in the last two quarters.
Speaker Change: Also we believe that our in quarter net dollar retention rate in gross retention rates have stabilized.
Speaker Change: And we're poised for moderate revenue reacceleration in the coming quarters.
Speaker Change: Therefore, we are tightening the fiscal year guidance range to be more conservative in the back half, but overall underlying trends continue to be stabilizing.
Tim Wan: Moving on to the balance sheet and cash flow. Cash and marketable securities at the end of Q2 were approximately 521.6 million. Our remaining performance obligation or RPO was 394.5 million, up 18% from the year ago quarter. This is a re-exceleration from last quarter, driven by multi-year deals. 83% of our RPO will be recognized over the next 12 months. That current portion of RPO grew 14% from the year ago quarter. Our total ending Q2 defer revenue was 289.2 million, up 11% year over year.
Speaker Change: In addition, we have made a great deal of progress on operating margins and improving our free cash flow through a disciplined approach to balancing growth and profitability.
Speaker Change: I'll add just a few words of thanks before we go to Q&A. Thank.
Speaker Change: Thank you Dustin and thank you and and also a big Thank you Thorn employees.
It's been an incredibly fulfilling time alessandra the.
Speaker Change: Company has grown so much in the nearly eight years I've been here and I feel fortunate to have had the opportunity to lead our CFO.
Speaker Change: I also want to thank the investment community and especially those of you who have been our shareholders over the last several years.
Tim Wan: Q2 free cash flow was 12.8 million or 7% on a margin basis. However, remember that Q3 free cash flow will be seasonally lower, but we expect to see durable positive free cash flow by the end of Q4.
Speaker Change: I continue to be incredibly bullish about the status of potential. So this hasnt been an easy decision to make.
Speaker Change: There's never been a greater need amongst enterprises for solution like a sauna and I believe the company is poised for even greater things in the years ahead.
Tim Wan: As you know, we announced the $150 million stock we purchased program in June. In Q2, we repurchased 19.7 million of our shares at an average price of $13.64 per share. We remain committed to investing in our growth and managing delusion while returning excess capital to shareholders via Sherbrook.
Speaker Change: Before I turn it over to the operator for Q&A, Let me hand, it over to duston for some closing comments.
Duston: Thanks, Tim.
Duston: One thing I want to add to my formal comments that I'm planning to enter into a <unk> one trading plan as early as September 5th to purchase up to $13 5 million shares of our class a common stock.
Tim Wan: Andrew Purchases.
Duston: The plan is subject to the required cooling off period.
Tim Wan: Moving to guidance for Q3 FISCO 2025, we expect revenues of $180,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000. [inaudible]000,000,000,000,000,000,000,000,000,000,000[inaudible] There can be no assurance that the price and volume parameters of his trading plan will result in purchases of our shares of our Class A common stock in line with his expectations in such forward-looking statements.
Speaker Change: I'm entering into this new plan because I continue to personally believe Osama shares are undervalued, given the size and relatively low penetration of the work management market and I Trust in the path. We've chartered ahead to be the leader in the category, while delivering value to our investors.
Speaker Change: Thank you duston before I open it up to Q&A I wanted to note that Mr. Moskovitz. This plan is separate from the company's ongoing share repurchase program and his statements regarding who's trading plan to purchase shares of our class a common stock maybe considered forward looking statements that are subject to risks and uncertainties, including that is trading plan may be modified suspended or terminated by hand.
Speaker Change: Anytime.
Speaker Change: There can be no assurance that the price and volume parameters are as trading plan will result in purchases of our shares of our class a common stock in line with his expectations in such forward looking statements.
Speaker Change: And with that operator, we are ready for questions.
Speaker Change: As a reminder, if you'd like to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Speaker Change: Our first question will come from the line of Tyler Mcguinness with UBS.
Tyler Mcguinness: Hi, Thanks, so much for taking my questions. Just the first one so you talked about seeing stabilization and expansion rates in the quarter and being through the worst of the renewal optimizations, but it also sounds like upside might have been a little bit lighter due to some deal delays. So can you just offer what gives you confidence in the acceleration.
Speaker Change: And implied in <unk> based on what you're seeing at the start of <unk> is that just a function of retention rates, improving and starting to maybe see an inflection in revenue growth amongst technology companies or do you need to see an acceleration in other verticals or an improvement in that net up south. Thank you so much.
Speaker Change: Hey, Tyler this is Tim.
Yeah I wanted to just say the what we had talked about even in a kind of a previous earnings call is really kind of.
Tim: Getting past the these bigger renewals that we knew about that would that would likely be downgrades and I feel like we are past that now and that will be a tailwind and essentially kind of a stabilization point that we needed to to reaccelerate the business.
Tim: Some of the deals and I would say you know that we had hoped to close in Q2 have moved into Q3, they haven't fallen out of the pipeline and we expect the team and the business is to essentially close those deals in Q3. So I think where we were encouraged by the pipeline, but a lot of it is really just the bottoming out of our gross renewal rate.
Justin: Great. Thank you and then maybe Justin one for you would just be you talked a lot about innovation around a song on NII and what you guys are doing there as well as it relates to some tinkering around pricing and packaging. So can you just maybe talk about windows.
Speaker Change: Changes could be a bigger driver of growth on the line and some of the customer feedback that you've heard that that's driving that decision. Thank you.
Justin: Oh, Yeah, So I think you're referring to in the last earnings call I was talking about the possibility of consumption based revenue around what we call. It in that call. Our custom workflows. This time, where we're introducing a new term AI studio, which is the same idea, but this is really a new package that customers will.
Justin: Be able to purchase starting in Q4 that will give them the ability to build those custom workflows I think we were still seeing incredibly great engagement from the customers in the pilot and they all want to proceed and I have huge hopes for how far that goes I'm, hoping to be here next year talking about the pilot customers.
Justin: Now doing hundreds or even thousands of workflows in a sauna, but it's still pretty early to be able to quantify it what I do know is as sales will have something that is all in Q4 and I expect some amount of revenue from that but not material revenue and then the hope is that building pretty quickly into the early quarters of next year.
Unknown Executive: And with that operator, we are ready for questions. As a reminder, if you'd like to ask a question, please press star-1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star-1-1 again.
Justin: We see some of those early customers start to get into enough volume that they're they're also triggering the incremental consumption revenue. So I think I will start by buying a package.
Taylor McGinnis: Our first question will come from the line of Taylor McGinnis with UBS. Hi, thanks so much for taking my question.
Speaker Change: Probably including some professional services.
Tim Wan: Just the first one. So you talked about seeing stabilization and expansion rates in the quarter and being through the worst of the renewal optimizations, but it also sounds like upside might have been a little bit lighter due to some field delays. So can you just offer what gives you confidence in the acceleration implied in 4Q based on what you're seeing at the start of 3Q? Is that just a function of retention rates improving and starting to maybe see an inflection and revenue growth amongst technology companies or do you need to see an acceleration and other verticals or an improvement in that net upsells? Thank you so much.
Speaker Change: And that that will began by you know in Q4, and then next year I'm, hoping it becomes a material revenue.
Speaker Change: And we'll just know more and more as we go along with the pilot customers and you can see what they look like later in the funnel not all give us the ability to quantify it better for guidance.
Speaker Change: Our next question will come from the line of Josh Baer with Morgan Stanley.
Josh Baer: Thanks, and Tim it's been great working with you good luck in the next chapter.
Josh Baer: Wanted to ask about the deals that were pushed any sense for why they were pushed how big they were or how many and what gives you confidence that they'll close next quarter.
Tim Wan: Hey Taylor, this is Tim. Yeah, I wanted to just say what we had talked about even in our kind of previous earnings call is really kind of getting past these bigger renewals that we knew about that would likely be downgrades. And I feel like we are past that now and that will be a tailwind and essentially kind of the stabilization point that we needed to to re-accelerate the business.
Speaker Change: Hi, Josh and thanks, so much for your question. So what we saw in the selling environment was especially for larger deals and larger organizations is the decision making cycle has been elongated but things are relatively stable compared to last quarter in terms of sentiment while a number.
Tim Wan: Some of the deals and I would say, you know, that we had hoped to close in Q2 have moved into Q3. They haven't fallen out of the pipeline. We expect a team and the businesses to essentially close those deals in Q3. So I think we're encouraged kind of by the pipeline, but a lot of it is really just the bottoming out of our gross renewal rate.
Speaker Change: <unk> of these deals did push out of the quarter, we actually saw a good percentage of them closed in August and the rest are remaining in pipeline. So a lot of our focus as a team really is on big deal conversion rates in this environment and so that's what were swarming around the teams that are working on the largest deals, but the ones that got pushed into the quarter and the ones.
Unknown Executive: Great, thank you.
Dustin Moskovitz: And then maybe Justin one one for you would just be you talked a lot about innovation around a sauna and an AI and what you guys are doing there as well as it relates to some tinkering around pricing and packaging. So can you just maybe talk about when those changes could be a bigger driver of growth on the line and some of the customer feedback that you've heard that that's driving the decisions.
Speaker Change: Our that we're working through in this quarter. So that's where our focus really is is making sure. Those large deals have the right resources to get them across the finish line.
Speaker Change: Got it thanks, and maybe for Tim or Duston, just wondering if there.
Speaker Change: Theres any more context as far as the CFO transition any more color you could provide as far as the timing and the change. Thank you.
Dustin Moskovitz: Thank you. Yeah, so I think you're referring to in the last earnings call I was talking about the possibility of consumption based revenue around what we called in that call custom workflows. This time we're introducing a new term AI studio, which is the same idea, but this is really a new package that customers will be able to purchase starting in Q4 that will give them the ability to build those custom workflows.
Dustin: This is dustin.
Duston: Speak up too, but you know I think it's easy to look at something like this and think it's an and reactions like what's happening right now, but the reality is this is a much longer our conversation that Tim and I have been having and just trying to figure out the right time for him to make a transition because he wanted to take some some time off and.
Dustin Moskovitz: I think we're still seeing incredibly great engagement from the customers in the pilot and they all want to proceed. And I have huge hopes for how far that goes. I'm hoping to be here next year talking about the pilot customers now doing hundreds or even thousands of workflows in a sauna, but it's still pretty early to be able to quantify it. What I do know is sales will have something to sell in Q4 and I expect some amount of revenue from that but not material revenue.
Dustin: I also think about.
Dustin: Maybe one one last a big career move before retirement.
Dustin: And so we're talking about this for a while don't have loved how the timing ended up but I think it's pretty much a coincidence and that's just ended up being.
Dustin: How it worked out after after talking about it for a while really sad to see him go but also as I said.
Speaker Change: It's bittersweet because we're also getting the opportunity to work with a really talented new CFO and so on a and I know from experience that you lose something important when somebody with Tim's experience walks out the door, but it's also just a chance to kind of shake things up and see things with new eyes.
Dustin Moskovitz: And then the hope is that's building pretty quickly into the early quarters of next year when we see some of those early customers start to get into enough volume that they're also triggering the incremental consumption revenue. So I think it will start by buying a package, probably including some professional services. And that will begin by in Q4 and then next year I'm hoping it becomes material revenue. And we'll just know more and more as we go along with the pilot customers and we can see what they look like later in the funnel now give us the ability to quantify it better for guidance.
Speaker Change: Yeah, Hey, Josh This is Tom Yes, there was.
Speaker Change: Mike Just mentioned this was a very long conversation and I had wanted to you know I've been here for almost eight years and it was really an opportunity to take some time off reset refresh my mind and think about what's next.
Speaker Change: I loved this company I love the people that I work with everyday I loved the problems that we solve them.
Joshua Baer: Our next question will come from the line of Joshua Baer with Morgan Stanley. Thanks, and Tim, it's been great working with you. Good luck in the next chapter. I wanted to ask about the deals that were pushed, any sense for why they were pushed, how big they were, how many, and what gives you confidence that they'll close next quarter.
Speaker Change: Honestly it was a incredibly difficult decision.
George <unk>: Our next question comes from the line of George <unk> with Oppenheimer.
George <unk>: Thank you for taking my question and Tim I also wish you the best with what they had.
George <unk>: And maybe just starting with the technology vertical can you give us a little bit of color. There have you reached a point of stability with most of your customers there and maybe put that in perspective of what you're seeing from a logo churn standpoint as well.
Anne Raimondi: Hi, Josh, it's Anne. Thanks so much for your question. So what we saw in the selling environment was especially for larger deals in larger organizations is the decision making cycle has been elongated, but things are relatively stable compared to last quarter in terms of sentiment. While a number of these deals did push out of the quarter, we actually saw a good percentage of them closed in August and the rest are remaining in pipeline.
Speaker Change: Yeah, Thanks, George happy to dive in a little bit more on Tac well Tech was a drag on growth for us this quarter I do want to just pause and reiterate that tech continues to be super important to us for a number of reasons and it's where we partner with some of the most innovative companies in the world to build our products we eat.
Anne Raimondi: So a lot of our focus as a team really is on big deal conversion rates in this environment. And so that's what we're swarming around the teams that are working on the largest deals, both the ones that got pushed into the quarter and the ones that are that we're working through in this quarter. So that's where our focus really is is making sure those large deals have the right resources to get them across the finish line. Got it. Thanks, Anne.
Speaker Change: Mentioned earlier, we're the platform of choice for the two largest L. L. M companies and we expanded with them this quarter as well as we continue to work really closely with them as we build out our AI solutions and so our ability to partner with technology companies, who are innovators and early adopters really helps us to continue to differentiate our product and <unk>.
Dustin Moskovitz: And maybe for Tim or Dustin, just wondering if there's any more contacts as far as the CFO transition, any more color you could provide as far as the timing and the change. Thank you.
Speaker Change: Shape, where the category is growing.
Speaker Change: And so we feel that's also quite important to our growth in the developing verticals such as manufacturing energy retail and consumer transportation and health care are non tech sector actually had good mid teens growth this quarter and some of that partnership with technology organizations is important.
Dustin Moskovitz: This is Dustin. Tim should speak up too, but I think it's easy to look at something like this and think it's in reactions like what's happening right now, but the reality is this is a much longer arc conversation. That Tim and I have been having and just trying to figure out the right time for him to make a transition because he wanted to take some time off. And then also think about maybe one last big career move before retirement.
Speaker Change: These non tech customers, because theyre, leading organizations really care about implementing the best solution. That's available that they can securely and innovative really scale with them. So where you know we will we saw stability I think we mentioned in terms of our where retention and renewals are I think we will.
Dustin Moskovitz: And so we've been talking about this for a while. Don't love how the timing ended up, but I think it's pretty much a coincidence. And it's just ended up being how it worked out after talking about it for a while.
Speaker Change: You to partner with technology companies, but the diversification outside of Tech is one of our main focus areas and where we're pleased to see some early signs and positive indicators in those sectors.
Tim Wan: Really sad to see him go. But also, as I said, it's better sweet because we're also getting the opportunity to work with a really talented new CFO and Sona. And I know from experience you lose something important when somebody with Tim's experience walks out the door, but it's also just a chance to kind of shake things up and see things with new eyes.
Speaker Change: Okay, and just following up on that with respect to logo churn and then maybe give.
Speaker Change: Give us a sense of where you are with the sales initiatives across the four points that you were highlighting.
Speaker Change: Yeah, the focus areas that we mentioned investing in more consistent post sales, including services. We're seeing that services are incredibly important for larger deals in particular migration into planing and so those services either provided by us or our growing partner eco.
Tim Wan: Yeah, hey Josh, this is Tim. Yeah, there was, like Dustin mentioned, this was a very long conversation and I had wanted to, you know, I've been here for almost eight years and it was really an opportunity to take some time off. We said, refresh my mind and think about what's next.
Speaker Change: System.
Speaker Change: Mentioned, improving velocity, that's really important, especially with the bigger deals. So further streamlining our sales processes and systems.
Tim Wan: I love this company. I love the people I work with every day. I love the problems that we solve.
Tim Wan: And honestly, it was an incredibly difficult decision.
Speaker Change: In particular, we're also excited about the energy and interest in AI products, especially from our largest customer. So it gives us an opportunity actually to have a different conversation and particular with AD Council's our people within the CIO organization that are leading AI initiatives.
George Iwanyc: Our next question comes from a line of George Iwanec with Oppenheimer. Thank you for taking my question and Tim, I also wish you the best with what they had. And maybe just starting with the technology vertical, can you give us a little bit of color there? Have you reached a point of stability with most of your customers there? And maybe put that in perspective of what you're seeing from a logo churn standpoint as well. Yeah, thanks, George. Happy to dive in a little bit more on tech.
Speaker Change: Kind of opens up new avenues for us so while it's early and we're piloting the positive feedback from our largest and most important customers has been great and we're excited to bring that to more of our customers. When we go G E.
Speaker Change: And then just reiterate my earlier point, focusing on strategic industry verticals to really diversify our business. So we're working hard on all those fronts and continue to be excited that the most important for US is that our global revenue leadership team is in place and working really well together.
Anne Raimondi: Waltech was a drag on growth for us this quarter. I do want to just pause and reiterate that tech continues to be super important to us for a number of reasons. It's where we partner with some of the most innovative companies in the world to build our products. We mentioned earlier where the platform's choice for the two largest LLM companies and we expanded with them this quarter, as well as we continue to work really closely with them as we build out our AI solutions.
Anne Raimondi: So our ability to partner with technology companies who are innovators and early adopters really helps us to continue to differentiate our product and really shape where the category is going. And so we feel that's also quite important to our growth in the developing verticals, such as manufacturing, energy, retail, and consumer transportation and healthcare are non tech sector, actually had good, you know, mid teens, growth is quarter. And some of that partnership with technology organizations is important to these non tech customers because the leading organizations really care about implementing the best solution that's available that they can securely and innovatively scale with.
Speaker Change: Our next question will come from the line of Alex Zukin with Wolfe Research.
Speaker Change: Hey, guys. This is rich Magnus on for Alex can you talk more about how the competitive landscape has evolved over the last 12 months and separately can you give us some more color on how to think about billings trends over the next few quarters. Thanks.
Dustin: Yeah. This is dustin.
Speaker Change: You're not going to be surprised to hear this we haven't seen a whole lot of change in the competitive landscape.
Dustin: In recent months.
Speaker Change: I think we're seeing we think we're in a lot of the consolidation deals and we're seeing customers.
Speaker Change: As it takes to make a decision either way and so I think that's a sort of definition only what are what our competitors are saying as well here on those deals.
Speaker Change: And do you want to take the second half of that so.
Speaker Change: The question was just like what is giving us confidence about billings in the next two quarters is that fair.
Anne Raimondi: So we will we saw stability. I think we mentioned in terms of our where retention and renewals are. I think we'll continue to partner with technology companies, but the diversification outside of tech is one of our main focus areas. And we're pleased to see some early signs and positive indicators in those sectors. Okay, just following up on that with respect to logo turn and then maybe give us a sense of where you are with the sales initiatives across the four points that you're highlighting.
Speaker Change: Yeah for sure.
Speaker Change: Yeah, I think what's giving us confidence is just a continued improvement on it across our revenue operations and execution I think some of the things that we're also seeing early signs of we've been investing a lot and enablement and ramping new Ram.
Speaker Change: That's been a big initiative I mentioned earlier, just investment in streamlining our processes.
Speaker Change: That's both operational processes, but also systems.
Speaker Change: Just making sure you know frankly that more of our reps time is spent strategically with customers and prospects.
Anne Raimondi: Yeah, the focus areas that we mentioned investing in more consistent post sales, including services we are seeing that services are incredibly important for larger deals in particular migration and deployment. And so those services either provided by us or our growing partner ecosystem. I mentioned improving velocity. That's really important, especially with the bigger deals. So further streamlining our sales processes and systems. In particular, we're also excited about the energy and interest in AI products, especially from our largest customers.
Speaker Change: And then just consistency around being able to close the largest deal. So I think as that work continues and we're seeing that in across all of our regions. Maybe I'll also digging a little bit deeper you know this quarter and some of the areas and regions that we saw you know good consistent growth we're actually up.
Speaker Change: Outside of the U S. So by geography EMEA and.
Speaker Change: In Japan led our revenue growth and grew about 12% year over year and so those teams continue to execute really well, especially on larger deals. Those leadership teams have been in place about longer than our Americas team. So those are great leading indicators that in North America, where we have them.
Anne Raimondi: So it gives us an opportunity, actually, to have a different conversation in particular with AI councils or people within a CIO organization that are leading AI initiatives. And kind of opens up new avenues for us. So while it's early and we're piloting the positive feedback from our largest and most important customers who've been great. And we're excited to bring that to more of our customers when we go GA. And then just reiterate my earlier point focusing on strategic industry verticals to really diversify our business. So we're working hard on all those fronts and continue to be excited that the most important for us is that our global revenue leadership team is in place and working really well together.
Speaker Change: Where our general managers has been in place for two quarters and has been really working with the team there will be able to start to see that in the coming quarters.
Speaker Change: Thanks, guys.
Speaker Change: Our next question will come from the line of Michael Funk with Bank of America.
Yeah, Hi, Thank you for the questions. This evening and Sam. Thank you again for all of that for all the help.
Speaker Change: With the company.
Speaker Change: So a couple of you mentioned a couple of times that some deal stalled in the pipeline.
Alex Zuchen: Our next question will come from the line of Alex Zuchen with Wolf Research.
Speaker Change: During the quarter can you be more specific about where in the pipeline they stalled.
Speaker Change: Presumably your metrics on deal closure rate certain tiers.
Dustin Moskovitz: Hey guys, this is Rich Magnus on Braillex. Can you talk more about how the competitive landscape has evolved over the last 12 months? And separately, can you give us some more color on how to think about building strands over the next two quarters? Thanks.
Speaker Change: Closer to the end of the pipeline the deal versus the beginning so any additional color or commentary there would be appreciated.
Speaker Change: Sure happy to add some more commentary.
Speaker Change: Our focus has been on moving up market and working with larger enterprise customers. We are seeing more backend loading in the quarter on the larger deals I think that's sort of just a natural evolution of our focus up market and so what we saw in those deals was that they sort of slipped from the end of Q2.
Tim Wan: Yeah, this is Dustin. Not going to be surprised to hear this. We haven't seen a whole lot of change in the competitive landscape in recent months. I think we're seeing, we think we're in a lot of the consolidation deals and we're seeing customers hesitate to make a decision either way. And so I think that's sort of definitionally what our competitors are seeing as well, who are in those deals. And do you want to take the second half of that?
Speaker Change: I mentioned into Q3, but again, we're seeing signals that we were able to close those in Q3. So a lot of that is just the pattern that we're seeing as we work with larger deals and larger enterprise customers and part of that is strengthening our muscle to be able to close those in quarter on and that's the focus for us.
Tim Wan: So the question was just like, what is giving us confidence about buildings in the next two quarters? Is that fair? Yeah, for sure. Yeah, I think what's giving us confidence is just the continued improvement on across our revenue operations and execution. I think some of the things that we're also seeing early signs that we've been investing a lot in enablement and ramping new reps. That's been a big initiative. I mentioned earlier, just investment in streamlining our processes.
Tim Wan: And that's both operational processes, but also systems, just making sure, frankly, that more of our reps time is spent strategically with customers and prospects. And then just consistency around being able to close the larger deals. So I think as that work continues and we're seeing that in across all of our regions, maybe I'll also dig in a little bit deeper, you know, this quarter, some of the areas and regions that we saw, you know, good, consistent growth were actually outside of the US.
Speaker Change: Okay, and then I think if I go to the Investor focus and stock reaction aftermarket is primarily the <unk> guide.
Speaker Change: The greater waiting on <unk>, you know I think presume.
Speaker Change: <unk> sequential dollar step up if you wanted to larger.
Speaker Change: And the last couple of years so.
Speaker Change: What concrete breakdown of the factors can you give us to give us confidence in that for Q <unk>.
Revenue step up whether that is.
Speaker Change: Our forecast for let's see churn Lara.
Speaker Change: Large deal go lives that you have towards the end of pipeline anything to help people get more confidence in the.
Speaker Change: In the backend loading for the year would be appreciated.
Speaker Change: Yeah, Hey, Michael This is Tim I think I think there's really two points one as I mentioned, we know the we know what the renewal base looks like and many of the larger renewals and downgrades that we had to lap have already happened and we feel really confident around the based on the rates that we're going into the quarter with wishes with respect to Reno. So we view that.
Tim Wan: So by geography, Amia and Japan led our revenue growth and grew about 12% year-over-year. And so those teams continue to execute really well, especially on larger deals. Those leadership teams have been in place a bit longer than our America's team. So those are grid leading indicators that North America, where our general manager has been in place for two quarters. And has been really working with the team there will be able to sort of see that in the coming quarters.
Speaker Change: A headwind so that's one two you know a good majority of the deals that didn't move from Q2 and Q3 have already closed.
Unknown Executive: Thanks, guys.
Speaker Change: The pipeline continues to be healthy and I feel like we have really good visibility in terms of.
Speaker Change: The dials on the levers.
Speaker Change: You know converting those deal. So it's really a combination of just like hey, lapping some of the more difficult renewables, which we have and to kind of what we're going into the quarter with.
Speaker Change: So if we close those deals in Q3.
Speaker Change: Generally the GAAP revenue Youll see will impact Q4 so.
Michael Funk: Our next question will come from the line of Michael funk with Bank of America. Yeah, hi. Thank you for the questions this evening. And Sam, thank you again for all the help with the company.
Speaker Change: Our next question will come from the line of Brent Thill with Jefferies.
Tim: Tim Congrats on Iran.
Tim Wan: So a couple of if I could and you mentioned a couple of times that some deal stalled in the pipeline during the quarter, can you be more specific about where in the pipeline they stalled? You know, presumably you have metrics on deal closure rate, certainty as you're closer to the end of the pipeline, the deal versus the beginning. So any additional color or commentary there will be appreciated. Sure, happy to add some more commentary.
Speaker Change: And looking forward to the next chapter.
Speaker Change: Dustin.
Speaker Change: You're not alone in terms of what's happening in the software industry and it feels like.
Speaker Change: Many are taking down guide are seeing things pushed out I guess from your perspective, what do you think is going on if you. If you had to take a look at a 40000 foot level isn't <unk>.
Speaker Change: Consuming what where customers have as in AI.
Speaker Change: AI stall is there is there a blend of things that youre seeing what do you. What do you think is actually causing this stall out across the industry.
Tim Wan: As our focus has been on moving up market and working with larger enterprise customers, we are seeing more back and loading in the quarter on the larger deals. I think that's sort of just a natural evolution of our focus up market. And so what we saw in those deals was that they sort of flipped from the end of Q2, as I mentioned, into Q3. But again, we're seeing signals that we're able to close those in Q3.
Yeah, there are a few big trends.
Speaker Change: Obviously, I think that especially.
Speaker Change: Especially what we're seeing in tech is still kind of the unwinding of the over hiring and overspending that we saw at the beginning of the pandemic and you know it's the same thing we're doing with our own internal it projects as we are just being <unk>.
Speaker Change: Incredibly judicious about starting your vendor relationships, we're trying to consolidate vendors.
Tim Wan: So a lot of that is just a pattern that we're seeing as we work with larger deals and larger enterprise customers. And part of that is strengthening our muscle to be able to close those in Q4 and that's the focus for us.
Speaker Change: We're actively provisioning seats and.
Speaker Change: And all of that is just about budget control.
Speaker Change: And Additionally, I think our I T and procurement is taking the opportunity to try and.
Tim Wan: Okay, and then I think investor focus and stock reaction after market is primarily the 3Q guys and the greater waiting on 4Q now I think presume or the I'm implied for 4Q sequential dollar step up. We do one of the larger moves in the last couple of years. So you know what concrete breakdown of the factor is can you give us to give us confidence in that 4Q revenue step up. Whether that is, you know, your forecast for less seat churn large deal go lines that you have towards the end of pipeline, anything to help people get more confidence in the back in loading for the year of you appreciate it.
Speaker Change: Holiday and choose the vendors that theyre going to bet on for the long run, but at the same time, they're trying to do that with any constrained.
Speaker Change: You know, both dollar and sort of energy environment internally and it takes a little bit of change management to do that consolidation and to push it through and to make those big decisions that they're going to live with for a while and so they just have like a little bit less capacity to do that and then that all couples with.
Speaker Change: What I think is massive uncertainty in the economic environment and then also just with how AI is going to play.
Speaker Change: Play out so we've been talking a lot about this idea of lately that.
Speaker Change: The coming wave of AI transformation is even bigger than what people have been calling digital transformation for the past 10 years and I think that some enterprises are trying to figure out.
Tim Wan: Yeah, hey Michael, this is him. I think I think there's really two points. One, as I mentioned, we know the we know what the renewal base looks like and many of the larger renewals and downgrades that we have to lap have already happened. And we feel really confident around the base of the rates that we're going into the quarter with with respect to renewal. So we view that less of a headwind.
Speaker Change: Whether and where it may actually leapfrog their digital transformation and it would actually be kind of a waste of time to invest in a technology that is just going to be sort of obsolete it by something else and one or two years.
Speaker Change: So that that's a pretty difficult environment to make decisions, where again, we are often faced with those same sorts of decisions ourselves internally.
Tim Wan: So that's one to, you know, a good majority of the deals that didn't move from Q2 and Q3 have already closed. The pipeline continues to be healthy and I feel like we have really good visibility in terms of the dials and the levers, you know, converting those deals. So it's really a combination of just like, hey, lapping some of the more difficult renewals, which we have and to kind of what we're going into the quarter with. So if we close those deals in Q3, generally the gap revenue you'll see will impact Q4.
Hassan: And end up doing proofs of concept some things and then pulling back and trying another vendor trying to solve things and Hassan and I are not in a sauna and so I'm I'm very sympathetic and strategically what we're trying to do is meet the customers in the moment and provide a solution that can be part of their digital transformation continuity.
And the answer to AI transformation for them by embedding AI studio by delivering AI studio and giving them the opportunity to embed AI directly in the workflows, where they already live.
Speaker Change: Great a quick one for Timur and.
Timur: About a year ago, Ed joined and took over on the sales side can you walk through.
Tim Wan: Our next question will come from the line of Brent Bill with Jeffries. Tim, congrats on eight year run in looking forward to the next chapter. Dustin, you're not alone in terms of what's happening in the software industry. It feels like many are taking down guide or seeing things pushed out. I guess from your perspective, what do you think is going on if you had to take a look at a 40,000 foot level?
Speaker Change #101: The change is kind of how far year in implementing some of those changes that he's made or maybe they're fine tunes I don't know how you would characterize.
Speaker Change #101: Yes.
Strategic actions, but if you can just give us a sense of kind of where you're at for that journey.
Speaker Change #101: Having a board since last August.
Speaker Change #102: Yeah, I'm happy to cover that so yeah, Ed just across kind of the one year, Mark with us and I would say the most important things that he's been doing we now have a global revenue leadership team in place general managers in all of our most important.
Tim Wan: Is it consuming what customers have? Is it AI stall? Is there a blend of things that you're seeing? What do you think is actually causing this stall out across the industry? Yeah, there are a few big trends. You know, obviously I think that, especially what we're seeing in tech is still kind of the unwinding of the over hiring and overspending that we saw at the beginning of the pandemic. And you know, it's the same thing we're doing with our own internal IT budgets.
Speaker Change #102: Regions as well as new enterprise sales leaders and our top markets. So that's been also really important and also brought onboard a new head of global channel Who's now been with us almost two quarters.
Tim Wan: We're just being incredibly judicious about starting new vendor relationships. We're trying to consolidate vendors. We're actively deprovisioning seats. And all of that is just about budget control. And additionally, I think, you know, IT and procurement is taking the opportunity to try and consolidate and choose the vendors that they're going to bet on for the long run. But at the same time, they're trying to do that within a constrained, you know, both dollar and sort of energy environment internally.
Speaker Change #102: <unk> has been also working really diligently with our post sales teams, which is really important both services.
Speaker Change #102: Customer success and renewals teams are across every region and so I'd say the most important things has just been ensuring that we have the right team around the world and in all of our top markets I think some other focus areas have been really diving in on verticals are most important.
Speaker Change #102: Verticals outside of technology, and so that's also where we're seeing good progress and I would also say just a really tight partnership with our global marketing team. So some other things where we're seeing good signal that is helping us build the right kind of pipeline and the right relationships with the director plus decision makers and C level decision makers is.
Tim Wan: And it takes a little bit of change management to do that consolidation and to push it through. And to make those big decisions that they're going to live with for a while. And so they just have like a little bit less capacity to do that. And then that all couples with what I think is massive uncertainty in the economic environment. And then also just with how AI is going to play out.
Speaker Change #102: All our investments in our work innovation summits that pacing has been really strong. This year, we brought that event. So all of our markets. We have our two most important events coming up in October and November and just the I think the customer engagement and the volume of responses.
Tim Wan: So we've been talking a lot about this idea lately that, you know, the coming wave of AI transformation is even bigger than what people have been calling digital transformation for the past 10 years. And I think that, you know, some enterprises are trying to figure out whether and where it may actually leapfrog their digital transformation. And it would actually be, you know, kind of a waste of time to invest in a technology that's just going to be, you know, sort of obsoleteed by something else in one or two years.
Speaker Change #102: And the ability to really have our global team kind of meet our customers where they are it doesn't set but also meet with prospects and decision makers, who are looking at their medium to long term investment. So I think those are all and a result of the investment that had been putting in place over the last year and we're excited to.
Tim Wan: So that's a pretty difficult environment to make decisions. But, you know, again, we are often faced with those same sorts of decisions ourselves internally. And, you know, end up doing proofs of concepts and things and then pulling back and trying another vendor, trying to solve things in the sauna or not in the sauna. And so I'm very sympathetic.
Speaker Change #102: See more to come.
Speaker Change #102: Our next question comes from the line of Jackson Ader with Keybanc capital markets.
Dustin Moskovitz: And strategically what we're trying to do is meet the customers in the moment and provide a solution that can be part of their digital transformation continuity and the answer to AI transformation for them by delivering AI studio and giving them the opportunity to embed AI directly in the workflows where they already live. And so that's what we're trying to do.
Jackson Ader: Alright, thanks for taking my questions guys.
Jackson Ader: And our dust and the first question for you guys on the on the impact of the tech sector.
Speaker Change #104: Much of the.
Speaker Change #105: Modest slope in the Reacceleration curve is kind of due to that sector subdued spending now and then how much do you think that the steepening of that curve could be juice by tech.
Dustin Moskovitz: Great, quick one for Timmer and about a year ago Ed joined and took over on the sail side. Can you walk through the changes kind of how far you're in implementing some of those changes that he's made or maybe they're fine tunes and I don't know how you characterize his strategic actions, but if you can just give us the sense of kind of where you're at for that journey, having, having an onboard since last August.
Speaker Change #106: Coming back in the future as being one of them I assume an early adopter or frequent a doctor or some of your AI innovation.
Speaker Change #107: I'm not quite sure quite how to answer that but I think.
Speaker Change #108: We've been clear that the tech is a drag on overall growth and so we're seeing.
Dustin Moskovitz: Yeah, I'm happy to cover that. So yeah, Ed just crossed kind of a one year mark with us and I would say the most important things that he's been doing, we now have a global revenue leadership team in place, general managers in all of our most important regions, as well as new enterprise sales leaders in our top markets. So that's been also really important. Ed also brought on board a new head of global channel who's now been with us almost two quarters has been also working really diligently with our post sales teams, which is really important both services, customer success, renewals teams across every region.
Speaker Change #109: Some segments that are growing faster than our overall growth rate right now and what it looked like theyre starting to Reaccelerate.
Speaker Change #109: Until it's tech stopped being a drag we would at least go up to those to those overall.
Speaker Change #109: The growth rates of the better segments and if it reaccelerate it yeah that would be fantastic, we're certainly not.
Speaker Change #109: Modeling it that way and it's really hard to know the timing.
Speaker Change #109: But.
Speaker Change #109: Our transformation really takes off and Sona is seen as the solution of choice for that than that that is definitely an excellent outcome for us.
Speaker Change #110: Right. Okay, alright, Thank you and then just in a.
Speaker Change #111: Couple of quick follow ups on the.
Speaker Change #112: <unk> 501.
Speaker Change #113: I've asked this before but I think it's just relative relevant again.
Yeah.
Dustin Moskovitz: And so I'd say that most important things has just been ensuring that we have the right team around the world and in all of our top markets, it being some other focus areas have been really diving in on verticals are most important verticals outside of technology. And so that's also where we're seeing good progress. And I would also say just a really tight partnership with our global marketing team, so some of the things where we're seeing grid signal that's helping us build the right kind of pipeline and the right relationships with director plus decision makers and sea level decision makers is all our investments in our work innovation summit.
Speaker Change #114: Do you do you worry at all about the you're stepping in again and again at some point.
Speaker Change #114: Counterproductive message too.
Speaker Change #114: Employees or the company around the operational and financial discipline and then.
Second is there anything that we should take away from the relative size of this plan that starts a couple of days from now versus the 30 million shares from last year.
Speaker Change #114:
Speaker Change #115: The operational discipline thing would make more sense to me if I was funding the operations of the company.
Dustin Moskovitz: And it's that pacing has been really strong this year, we brought that event to all of our markets, we have our two most important events coming up in October and November and just the, I think the customer engagement and the volume of responses and the ability to really have our global team kind of meet our customers where they are. All in a result of the investment that has been putting in place over the last year, and we're excited to see more to come.
Speaker Change #115: But I think it's pretty independent our commitment to discipline on free cash flow and building up margins I don't think it's changed much by by me being a buyer in the market.
Speaker Change #115: In terms of the timing.
Speaker Change #116: I just wanted to point out you know people often.
Speaker Change #116: Sort of read into when I.
Speaker Change #116: Put the plans in market or even the days they are buying and what's going on in the market are going on in the business.
Speaker Change #116: But I actually have to plan like way in advance.
Speaker Change #116: And so you.
Speaker Change #116: The company buying plans very different are in fact during the open window. It can kind of be aggressive on a day to day basis, but for me I've got a cooling off period, and then it sort of set it and forget it on what the plan is and historically I've found it difficult two.
Dustin Moskovitz: Our next question comes from a line of Jackson Aider with key bank capital markets. All right, thanks to our questions guys. Ann or Dustin, the first question for you guys on the impact of the tech sector, how much of the modest slope in the re acceleration curve is kind of due to that sector, some dude spending now. And then how much do you think that the steepening of that curve could be juiced by tech coming back in the future as being one of the.
Speaker Change #116: To sort of predict what the market was going to do to the stock.
Speaker Change #116: Especially during all the uncertainty with inflation.
Speaker Change #116: And with everything that was happening.
Speaker Change #116: In the years before that.
Speaker Change #116: And the reason I'm entering the market now is I think this is different I think this is a point of stabilization a low point about a.
Speaker Change #116: A point of stabilization for the economy and for the tech sector and Relatedly for this on a business and even though I think there'll be some continued uncertainties.
Dustin Moskovitz: I assume an early adopter or frequent adopter of some of your a i evations. Not quite sure quite how to answer that, but you know, I think we've been clear that the tech is a drag on overall growth. And so we're seeing some segments that are growing faster than our overall growth rate right now and look like they're starting to accelerate. And so if tech stopped being a drag, you know, we would at least go up to those overall, you know, to the growth rates of the better segments.
Speaker Change #116: I just feel more confident that this is this is the time in the market. When I can do this very slow process to sort of declare my intentions way in advance and not end up getting sort of too rocked by exogenous factors.
Speaker Change #116: But it's not it's not something I plan to do again and again.
Speaker Change #116: The sizing.
Speaker Change #116: The number of shares is really a function of the price schedule and I mean more made a decision around the amount of money.
Dustin Moskovitz: And if it re accelerated, yeah, that would be fantastic. We're certainly not modeling it that way and it's really hard to know the timing. But you know, if a our transformation really takes off and sauna is seen as the solution of choice for that, then that is definitely an excellent outcome for us.
Speaker Change #116: And.
Speaker Change #116: I'll just say also the.
Speaker Change #116: I found it interesting to put in put in plans announced the sort of up to number and then how people sort of anchor around that I'll just emphasize that there is a price schedule.
Unknown Executive: All right. Okay. All right. Thank you.
Dustin Moskovitz: And then Dustin, a couple of quick follow-ups on the 10B51. And I know I've asked this before, but I think it's just relevant. Again, you know, do you worry at all about like the your stepping in again and again at some point, then you know counterproductive message to, you know, employees or, you know, the company around operational and financial discipline. And then, you know, second, is there anything that we should take away from the relative size of this plan that starts, you know, it's a couple of days from now, versus the 30 million shares from last year.
Speaker Change #116: And I think what happened with the last plan had as much to do with what sort of prevailing market conditions is what my original intentions were.
Speaker Change #116: So pretty hard to give you a lot more detail than that without sort of revealing enough information to be front run.
Speaker Change #116: But that's kind of where I'm at I'm intrigued I guess by this operational discipline thing, but that that isn't really a primary lens I've had for thinking about it.
Speaker Change #117: Our last question will come from the line of Patrick Wall Ravens with citizens JMP.
Speaker Change #118: Oh, great. Thank you.
Speaker Change #119: So bigger picture here, how do you see this whole world of AI agents, playing out I mean, you guys have have yours and you have nine.
Dustin Moskovitz: The operational discipline thing would make more sense to me if I was funding the operations of the company. But I think it's pretty independent, you know, our commitment to discipline on free cash flow and building up margins. I don't think it's changed much by me being a buyer in the market. In terms of the timing, you know, I just wanted to point out, you know, people often sort of read into, you know, when I put the plans in market, or even the days they're buying and what's going on in the market are going on in the business.
Speaker Change #120: Nine different features I think that are generally available from one of your slides Bret Taylor just launched Sierra.
Speaker Change #120: Any off just announced agent force and he said that was going to be you know the highlight a dream for so what should investors expect in terms of how these things are going to be differentiated and how do you see it playing out.
Speaker Change #121: Yeah, I think agent is an interesting time, because it means a lot of different things to different people.
Speaker Change #121: One of the things that I've seen a lot of people try and deliver and try and buy.
Dustin Moskovitz: But I actually have to plan like way in advance. And so, you know, the company buying plan is very different. In fact, during the open window, it can kind of be aggressive on a day-to-day basis. But for me, you know, I've got the cooling off period, and then it's sort of set it and forget it on what the plan is. And historically, I found it difficult to sort of predict what the market was going to do to the stock, especially during all the uncertainty with inflation.
Speaker Change #121: Is really you know almost the equivalent of like a humanoid physical robot just something that could theoretically be a drop in replacement to an actual person you have in the org.
Speaker Change #121: Had that cycle with a bamboo HR wanting to onboard them and have them be part of the HRS system.
Speaker Change #122: And that I think we're you know as with him and I know I'd robots I think we're still a few years away from at least and in the meantime, our point of view is you want to focus a eye on more specific.
Speaker Change #122: Jobs to be done so it's a little more analogous to the robots that Amazon uses and its factory warehouses that are especially designed for that purpose and have a more well defined objectives.
Dustin Moskovitz: And, you know, with everything that was happening, you know, in the years before that. And the reason I'm entering the market now is I think this is different. I think this is a point of stabilization, a low point, a point of stabilization for the economy and for the tech sector, and relatedly for the Asana business. And, you know, even though I think there will be some continued uncertainties, I just feel more confident that this is the time in the market when I can do this very slow process to sort of declare my intentions way in advance and not end up getting, you know, sort of too rocked by exogenous factors.
Speaker Change #122: Objectives and sort of rules of engagement.
Speaker Change #122: And I think that is how a sona agents are going to show up youre going to be able to give them a.
Speaker Change #122: Specific workflow to to go off of specific instructions for each step of that workflow, a predefined process and knowledge bases that sort of give.
Speaker Change #122: Give it the rules for the road and I think that will make customers a lot more successful because they'll be able to deploy it.
Dustin Moskovitz: But it's not something I plan to do again and again. The sizing, the number of shares is really a function of the price schedule. And, you know, I mean, more made a decision around the amount of money. And, you know, I'll just say also the, I found it interesting to put in, put in plans, announce a sort of up to number and then have people sort of anchor around that, you know, just emphasize that there is a price schedule.
In exactly the places where it's possible to be productive without worrying about things kind of going off the rails or let's say a customer chat agents that offers refund you didn't intend.
Just being able to put these into a much more sort of predefined workflows I think is how custom.
Customers are going to find the slope of productivity in terms of the specific competitors you mentioned.
Speaker Change #123: I think that agents will do sort of context relevant things and so it'll matter a little more what the product is they're being introduced into and I think Sierra I don't know a whole ton about it but I think they are coming at it more from the Swiss Army knife approach and I think that it's going to be difficult to get that deployed in the short run.
Dustin Moskovitz: And I think what happened with the last plan had as much to do with sort of the family market conditions is what my original intentions were. So, pretty hard to give you a lot more detail than that without sort of revealing enough information to be frontrun, but that's kind of where I'm at. I'm intrigued, I guess, by this operational discipline thing, but that isn't really a primary lens I've had for thinking about it.
Speaker Change #123: Awesome, Thank you and Tim if I could ask you a follow up so.
Speaker Change #123: Okay.
Tim: I mean, it's been great working with you.
I'm looking forward to getting to do it again.
Speaker Change #124: But why do you think is the number one metric that investors should be looking at for a sada.
Patrick Walravens: Our last question will come from the line of Patrick Walravens with Citizens' JMP. Oh, great, thank you.
Speaker Change #125: Once you you know after you're gone and so over the next year or two what's the number one thing we should be focused on to see that this businesses.
Dustin Moskovitz: So, um, bigger picture here Dustin, how do you see this whole, um, world of AI agents playing out? I mean, you guys have, have yours and you have, you know, nine different features I think that are generally available from one of your slides. Brett Taylor just launched Sierra. Any opt just announced agent force and said that was going to be, you know, the highlight of Dream Force. So what should investors expect in terms of how these things are going to be differentiated and how do you see it playing out?
Speaker Change #124: His turnaround.
Speaker Change #126: Yeah, I think the most important thing is seats I think that's one of the Northstar metric that we run the business on the more seats, we can deploy the more value we can deliver across an organization and as we add more skus and some of these AI functionality I think will be.
Speaker Change #126: Really differentiate the product and demonstrate a lot more value, where we will have more pricing power over time.
Catherine bond: That concludes today's question and answer session I'd like to turn the call back to Catherine bond for closing remarks. Thank.
Dustin Moskovitz: Yeah, you know, I think, uh, agent is an interesting term because it means a lot of different things to different people. Um, one of the things that I've seen a lot of people try and deliver and try and buy, uh, is really, you know, almost the equivalent of like a humanoid physical robot, just something that could theoretically be a drop in replacement to an actual person you have in the org. We even had that cycle with a bamboo HR wanting to onboard them and have them be part of the HR system.
Catherine bond: Thank you so much for joining us today, and we look forward to seeing you on the road this quarter will be at the Piper Sandler Conference. The Wolfcamp, France, The Deutsche Bank Bus tour. The Keybank bus tour and those are just a few off the top of my head most of all please join US on October 22nd in New York at our own work innovation Summit and we look forward to seeing you there. Thank you again.
Speaker Change #128: This concludes today's conference call. Thank you for participating you may now disconnect.
Dustin Moskovitz: Um, and that I think we're, you know, as with humanoid robot, I think we're still a few years away from at least. Um, and in the meantime, our point of view is you want to focus AI on more specific jobs to be done. So it's a little more analogous to the robots that Amazon uses in a factory warehouses that are specially designed for that purpose. Uh, and have, uh, more to well-defined objectives and sort of rules of engagement.
Speaker Change #128: Okay.
Speaker Change #128: [music].
Yeah.
Speaker Change #128: Yeah.
Speaker Change #128: [music].
Speaker Change #128: Okay.
Okay.
Speaker Change #128: [music].
Dustin Moskovitz: Um, and I think that is how, uh, Asana agents are going to show up. You're going to be able to give them, um, you know, a specific workflow to, to go off of specific instructions for each step of that workflow, a predefined process. Um, and, uh, knowledge basis that, you know, sort of, uh, you know, yeah, give it, give it the rules for the road. And I think that will make customers a lot more successful because they'll be able to deploy it.
Dustin Moskovitz: Uh, in exactly the places where it's possible to be productive without worrying about things kind of going off the rails or, you know, say a customer chat agent that offers a refund you didn't intend. Um, just being able to put these into much more sort of predefined workflows, I think is how customers are going to find the slope of productivity. Uh, in terms of the specific competitors, you mentioned, um, you know, I think that agents will do sort of context relevant things and so it'll matter a little more, um, what the product is they're being introduced into.
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Speaker Change #128: [music].
Speaker Change #128: Yes.
Speaker Change #128: Okay.
Dustin Moskovitz: Um, and I think Sierra, I don't know a whole ton about it, but I think they're coming at it more from the sort of Swiss Army knife approach. Um, and I think that's it's going to be difficult to get that deployed in the short run.
Speaker Change #128: [music].
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
No.
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Yes.
Speaker Change #128: Okay.
Yes.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Speaker Change #128: Okay.
Speaker Change #128: [music].
Speaker Change #128: Yes.
Speaker Change #128: Yes.
Speaker Change #128: [music].
Speaker Change #128: Okay.
Speaker Change #128: Yeah.
Speaker Change #128: Okay.
Speaker Change #128: [music].
Speaker Change #128: Yeah.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: [music].
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Speaker Change #128: Okay.
Speaker Change #128: Hum.
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Speaker Change #128: Okay.
Speaker Change #128: [music].
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: [music].
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Speaker Change #128: [music].
Speaker Change #128: Yes.
Speaker Change #128: Yes.
Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Okay.
Speaker Change #128: [music].
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Okay.
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Speaker Change #128: Okay.
Speaker Change #128: [music].
Speaker Change #128: Yes.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Speaker Change #128: Yes.
Speaker Change #128: Yes.
Speaker Change #128: [music].
Speaker Change #128: Sure.
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Speaker Change #128: Sure.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Sure.
Sure.
Speaker Change #128: Yes.
Okay.
Speaker Change #128: Thank you.
Speaker Change #128: Yes.
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Speaker Change #128: Yes.
Speaker Change #128: Okay.
Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: [music].
Speaker Change #128: Yes.
Speaker Change #128: Yes.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: [music].
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Speaker Change #128: [music].
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Sure.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Speaker Change #128: [music].
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Speaker Change #128: Yes.
Speaker Change #128: Yeah.
Sure.
Speaker Change #128: Yes.
Speaker Change #128: [music].
Speaker Change #128: Thank you.
Speaker Change #128: Thanks.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Sure.
Speaker Change #128: Okay.
Speaker Change #128: Thanks.
Speaker Change #128: Okay.
Speaker Change #128: Okay.
Speaker Change #128: Yes.
Speaker Change #128: Good day, and thank you for standing by welcome.
Speaker Change #129: Welcome to the <unk> second quarter fiscal year 2025 earnings call.
Speaker Change #130: At this time all participants are in a listen only mode.
Speaker Change #130: After the speaker's presentation, there will be a question and answer session.
Speaker Change #130: To ask a question during the session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised.
Speaker Change #130: To withdraw your question. Please press star one again.
Speaker Change #130: Please be advised that today's conference is being recorded.
Catherine <unk>: I would now like to hand, the conference over to Catherine <unk> head of Investor Relations. Please go ahead.
Catherine: Good afternoon, and thank you for joining us today on today's conference call to discuss the financial results for us on our second quarter fiscal year 2025 with me on today's call are Duston Moskovitz, Assam as co founder and CEO and Remondi, our Chief operating officer, and head of business and Tim <unk>, Our Chief Financial Officer.
Speaker Change #133: Today's call will include forward looking statements, including statements regarding our expectations for free cash flow, our financial outlook strategic plans, our 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.
Speaker Change #133: 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.
Speaker Change #133: 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.
Speaker Change #133: 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.
Speaker Change #133: And with that I'd like to turn the call over to Dustin.
Dustin: Thank you Catherine and thank you all for joining us on the call today.
Dustin: In the second quarter, if on a continued to execute on our transition to the enterprise and make strides on Osama AI.
Dustin: I'll go through a few highlights from the quarter and then jump into some of the key trends that are shaping our industry and informing our strategy to be the enterprise leader in the category.
Dustin: In Q2, our revenues grew 10% year over year ahead of our guidance and consistent with our expectation that Q2 would be a baseline for stabilization going forward.
Dustin: We saw great leading indicators for growth in pockets of our business, including key wins in manufacturing energy transportation and government, which Andy will talk about.
Andy: Excluding the technology vertical our Q2 revenue growth rate would have been in the mid teens.
Andy: We also reported free cash flow positive of $12 $8 million or 7% on a free cash flow margin basis in Q2, reflecting our continued focus on operational discipline.
Andy: The number of customers spending over $100000 or more grew 17% year over year.
Dustin Moskovitz: Awesome. Thank you.
Andy: We had a record number of multiyear deals as we continue to build partnerships with industry leaders and the most innovative companies in the world We're redefining how they work.
Tim Wan: And Tim, if I could ask you a follow up, so, um, and I mean, you know, it's been great working with you looking forward to getting to do it again. But what do you think is the number one metric that investors should be looking at for a sauna, you know, watching, you know, after you're gone. So over the next year or two, what's the number one thing we should be focused on to see that this businesses is turning around.
Andy: In fact, two of the most well known AI lab companies had significant expansions in Q2 as they adopt us on internally and partner with us on the technology front as well.
Andy: We are clearly on the right path and are confident that our business will reaccelerate. However, the macro headwinds persist.
Andy: Also the technology vertical remains a drag on our overall growth.
Andy: At the same time, we see encouraging signs in some of our top verticals, such as retail and consumer goods and media and entertainment. We have more work to do and this quarter marks a stabilization point from which we're well poised to inflect in the coming quarters.
Tim Wan: Yeah, I think the most important thing is seats. I think that's one of the North Star metric that we run the business on the more seats we can deploy, the more value we can deliver across an organization. And as we add more skews in some of these AI functionality, I think we'll be able to really differentiate the product and demonstrate a lot more value where we'll have more pricing power over.
Andy: Today, we're at a pivotal moment, where AI, particularly generative AI has enormous potential to revolutionize work management and reshape the software industry.
Catherine Buan: That concludes today's question and answer session. I'd like to turn the call back to Catherine Buon for closing remarks. Thank you so much for joining us today. And we look forward to seeing you on the road. This quarter will be at the Piper Sandler Conference, the Wolf Conference, the Deutsche Bank bus tour, the Key Bank bus tour. And those are just a few off the top of my head. Most of all, please join us on October 22nd in New York at our own work innovation summit. And we look forward to seeing you there.
Andy: This era of AI transformation is poised to be a significant as if not more than the digital transformation trend that preceded it.
Catherine Buan: Thank you again.
At <unk>, we're laser focused on unlocking the potential of AI for our customers and.
Andy: And our work innovation summit in San Francisco. This June we previewed for the first time, Osama AI workflows, a groundbreaking advancement that leverages AI to manage your work, helping our customers tackle complex workflows and elevate teamwork with AI.
Andy: These AI workflows, which had been in beta since June will be part of our upcoming paid offering Sona AI studio launching in October.
Andy: AI studio platform will allow customers to build deploy and enhance workflows with AI teammates taking on some of the work.
Andy: And AI studio a program manager or any designated team member can dictate where an AI teammate can start doing useful work without anyone else, having to learn something new adopted new application or change their behavior.
Andy: Importantly employees don't need to go elsewhere to access this AI capability embedded right, where they work every day.
Andy: This provides a practical powerful solution for organizations trying to adopt AI internally.
Andy: It also means you have existing integrations to all your important tools across CRM finance HR productivity suites and more.
Unknown Executive: This concludes today's conference call. Thank you for participating.
Andy: This supports our long term strategy to be the hub that moves work forward across your systems using AI.
Unknown Executive: You may now disconnect. Thank you. . Good day, and thank you for standing by.
Andy: Of course, automated workflows and workflow builders have been around for years, but now customers have the ability to design. These workflows into sonar with AI teammates to assist with any step in the workflow.
Catherine Buan: Welcome to the Asana Second Quarter, fiscal year 2025 earnings call. At this time, all participants aren't a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded.
Customers will be able to subscribe to AI studio builder and begin creating and deploying AI workflows.
Catherine Buan: I would now like to hand the conference over to Catherine Buan, Head of Investor Relations. Please go ahead. Good afternoon, and thank you for joining us today's conference call to discuss the financial results for Asana Second Quarter, fiscal year 2025. With me on today's call are Dustin Moskovitz, Asana's co-founder and CEO, Anne Raimondi, our Chief Operating Officer and Head of Business, and Tim Buan, our Chief Financial Officer. Today's call will include forward-looking statements, including statements regarding our expectations for free cash low, our financial outlook, strategic plans, our market position, and growth opportunities.
Catherine Buan: 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 10K, and quarterly report on form 10Q, 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-gap financial measures.
Andy: This model will allow customers to unlock AI actions on a consumption basis, allowing enterprises to buy exactly what they need to fit their organization at that moment in time.
Catherine Buan: These non-gap financial measures are in addition to, and not a substitute for or superior to, measures of financial performance prepared in accordance with GAP. Reconciliation between GAP and non-gap financial measures and a discussion of limitations of using non-gap measures, versus their closest GAP equivalents, are available in our earnings release, which is posted on our investor relations webpage at investors.assana.com.
Andy: It's been exciting to see the early momentum and our AI studio Beta program since we rolled it out in June.
Dustin Moskovitz: 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 the second quarter, Asana continued to execute on our transition to the enterprise and makes strides on Asana AI. I'll go through a few highlights from the first quarter, and then jump into some of the key trends that are shaping our industry and informing our strategy to be the enterprise leader in the category.
Andy: The beta program has already attracted industry leaders across various sectors, including media technology financial services manufacturing health care professional services and consumer goods.
Dustin Moskovitz: In Q2, our revenues grew 10% year by year. In the head of our guidance and consistent with our expectations that Q2 would be a baseline for stabilization going forward. We saw great leading indicators for growth in pockets for our business, including key wins in manufacturing, energy, transportation, and government, which I will talk about. Excluding the technology vertical, our Q2 revenue growth rate would have been in the mid-teens. We also reported free cash flow positive of $12.8 million or 7% on a free cash flow margin basis in Q2, reflecting our continued focus on operational discipline.
Speaker Change #135: There's a healthy amount of skepticism around AI and the value. It is currently providing an enterprise <unk>.
Dustin Moskovitz: The number of customers spending over $100,000 or more grew 17% year-rear. We had a record number of multi-year deals as we continue to build partnerships with industry leaders and the most innovative companies in the world who are redefining how they work. In fact, two of the most well-known AI lab companies had significant expansions in Q2, as they adopt the SANA internally and partner with us on the technology front as well. We are clearly on the right path and are confident that our business will re-excelerate.
Speaker Change #135: My view is we're still early in the adoption cycle, especially in businesses and customers are just beginning to successfully leverage the potential and understand how to apply it effectively to more parts of their business.
Speaker Change #135: AI is powerful, but it demands new skills and behaviors from users.
Speaker Change #135: Most of these capabilities are currently being offered and chat apps and co pilots, leaving it up to every individual to determine how to extract value.
Speaker Change #135: Likewise autonomous agents are not ready to takeover real roles in an organization, there too unpredictable and unreliable.
Dustin Moskovitz: However, the macro headwinds persist. West. Also, the technology vertical remains a drag on our overall growth. At the same time, we see encouraging signs in some of our top verticals, such as retail and consumer goods and median entertainment. We have more work to do, and this quarter marks stabilization point, from which we're well poised to inflect in the coming quarters. Today, we're at a pivotal moment where AI, particularly generative AI, has enormous potential to revolutionize work management and reshape the software industry.
Speaker Change #135: Effective AI adoption needs integrating AI directly into everyday work and workflows, where AI can drive meaningful and measurable impact at scale complementing human efforts rather than replacing them.
Speaker Change #136: Let me detail a few specific early use cases from actual customer implementations to make this real for all of you.
Speaker Change #136: Regardless of industry or size every company has work and workflows that touch multiple departments and teams such as strategic planning customer service store openings procurement and due diligence.
Dustin Moskovitz: This era of AI transformation is poised to be as significant as, if not more than, the digital transformation trend that preceded it. At Asana, we're laser-focused on unlocking the potential with AI for our customers. At our work innovation summit in San Francisco this June, we've previewed for the first time Asana AI workflows, a groundbreaking advancement that leverages AI to manage your work, helping our customers tackle complex workflows and elevate teamwork with AI.
Coordinating work cross functionally is notoriously difficult because it extends across teams tools and geographies.
Speaker Change #137: Where can take is oftentimes the bridge across a lot of these teams tools and processes and now it's on the AI teammates can not only improve the process holistically. It can manage and do a lot of the work.
Dustin Moskovitz: These AI workflows, which have been in data lessons June, will be part of our upcoming paid offering, Asana AI Studio, launching in October. The AI Studio platform will allow customers to build, deploy and enhance workflows with AI teammates taking on some of the work. In AI Studio, a program manager or any designated team member can dictate where an AI teammate can start doing useful work without anyone else having to learn something new, adopt a new application, or change their behavior.
Speaker Change #137: Each of the four phases of cross functional work gets easier including.
Speaker Change #137: Intake this is where AI teammates are able to refine tasks extract data triage request prioritize work communicate with Requesters and route tasks.
Speaker Change #137: Next stages planning, where AI teammates are able to summarize requests conduct research, including via integrations with other tools and recommend next steps.
Speaker Change #137: Execution.
Speaker Change #137: It means we're able to draft content to translations incorporate feedback and can answer questions using various data sources.
Dustin Moskovitz: Importantly, employees don't need to go elsewhere to access this AI capability. It's embedded right where they work every day. This provides a practical, powerful solution for organizations trying to adopt AI internally. It also means you have existing integrations to all your important tools across CRM, finance, HR, productivity suites and more. This supports our long-term strategy to be the hub that moves work forward across your systems using AI. Of course, automated workflows and workflow builders have been around for years, but now customers have the ability to design these workflows in Asana, with AI teammates to assist with any step in the workflow.
Speaker Change #137: And finally reporting reflection.
Speaker Change #137: This is where AI teammates are able to update metadata for reporting and suggest retrospective topics driving continuous improvement.
Speaker Change #137: One of our customers are global cyber security leader has tested how our AI teammates can contribute to their global marketing organization and significantly improve their processes for and taking email requests to execution.
Speaker Change #137: Before us on AI teammates they face challenges with missing information and submissions time consuming prioritization meetings and delays in global market launches.
Dustin Moskovitz: Customers will be able to subscribe to AI Studio Builder and begin creating and deploying AI workflows. This model will allow customers to unlock AI actions on a consumption basis, allowing enterprises to buy exactly what they need to fit their organization at that moment in time. It's been exciting to see the early momentum in our AI Studio beta program since we rolled it out in June. The beta program is already attracted industry leaders across various sectors including media, technology, financial services, manufacturing, healthcare, professional services and consumer goods.
Speaker Change #137: Our teammates have shown how we can address these pinpoints comprehensively.
Speaker Change #137: So the first step is requesting take AI can now evaluate requests at the point of submission auto naming them for clarity and proactively finding missing information.
Speaker Change #137: Requests are summarized in natural language, making their relative importance clear at a glance.
Speaker Change #137: Second step prioritization we've.
Speaker Change #137: We've shown how we can streamline their alignment meetings with better first stab prioritization, reducing the time spent on these sessions.
Speaker Change #137: Third step execution, perhaps most.
Dustin Moskovitz: There's a healthy amount of skepticism around AI, and the value it's currently providing in the enterprise. My view is we're still early in the adoption cycle, especially in businesses, and customers are just beginning to successfully leverage the potential and understand how to apply it effectively to more parts of their business. AI is powerful, but it demands new skills and behaviors from users. Most of these capabilities are currently being offered in chat apps and co-pilots, leaving it up to every individual to determine how to extract value.
Speaker Change #138: Impressively. This customer has expressed how this can eliminate translation delays that are previously caused more than two week gaps between English and other market launches now.
Speaker Change #138: Now I'll launches can happen simultaneously, ensuring no market feels to be prioritized and the marketing organization can deliver a more consistent improved customer experience globally.
It's worth noting that this AI powered solution replaces the need for dedicated industry specific translation software where services that companies might traditionally used for such tasks and we expect to offer this for much less than what those traditional translation services cost, providing significant value and cost savings to customers.
Dustin Moskovitz: Likewise, autonomous agents are not ready to take over real roles in an organization. They're too unpredictable and unreliable. Effective AI adoption means integrating AI directly into everyday work and workflows, where AI can drive meaningful and measurable impact at scale, complementing human efforts rather than replacing them. Let me detail a few specific early use cases from actual customer implementations to make this real for all of you. Regardless of industry or size, every company has work and workflows that touch multiple departments and teams, such as strategic planning, customer service, store openings, procurement and due diligence.
Last reporting and the reporting reflection phase AI can update meta data, which you know has got some fields to inform work reporting and suggest topics for retrospective. This helps teams capture learnings and insights more effectively leading to continuous improvements in their processes.
Speaker Change #138: Let me share another customer example.
Speaker Change #138: A global leader in outdoor advertising has been testing Sona AI teammates for their creative request intake process across regions.
Dustin Moskovitz: Coordinating work cross-functionally is notoriously difficult because it extends across teams, tools, and geographies. Work intake is oftentimes the bridge across a lot of these teams, tools, and processes. And now it's found that AI teammates can not only improve the process holistically, they can manage and do a lot of the work. Each of the four phases of cross-functional work gets easier, including intake. This is where AI teammates are able to refine tasks, extract data, triage requests, prioritize work, communicate with requesters, and route tasks.
Speaker Change #139: The team is very encouraged by the potential here.
Speaker Change #140: In the words of the VP of marketing operations and allows them to prioritize the bigger things they want to do to show more business impact and affect the bottom line.
Speaker Change #141: Importantly, this customer views AI as an enabler for human creativity and strategic thinking.
Speaker Change #142: Not as a replacement for human work.
Speaker Change #143: This encapsulates our vision for AI teammates tools that enhance human capabilities drive efficiency and ultimately contribute to our customer's bottom line.
Speaker Change #143: These stories exemplify how our AI capabilities built on the foundation of our unique and proprietary Warcraft out a model can drive efficiency improved collaboration and ultimately contribute to better business outcomes for our customers.
Dustin Moskovitz: Next stage is planning, where AI teammates are able to summarize requests, conduct research, including the integrations with other tools, and recommend next steps. Execution, where AI teammates are able to draft content, do translations, incorporate feedback, and answer questions using various data sources. And finally reporting reflection. This is where AI teammates are able to update metadata for reporting and suggest retrospective topics, driving continuous improvement. One of our customers, a global fiber security leader, has tested how our AI teammates can contribute to their global marketing organization, and significantly improve their processes for intaking email requests to execution.
Speaker Change #143: The Testament to the power of AI teammates working alongside human teams to enhance productivity and strategic impact.
Speaker Change #143: These are just a few early examples with AI teammates in action.
Speaker Change #143: We hope to be able to report next year there'll be hundreds or even thousands of such workflows at a meaningful number of our customers.
Speaker Change #144: Now, let me talk about how we're capturing the consolidation opportunity we remain in a budget focused environment and customers are looking for consolidation opportunities.
Speaker Change #144: Our proven ability to scale the structural advantages of the Warcraft, especially as it relates to AI and our focus on our central functions across the enterprise makes us, particularly well suited to capitalize on this opportunity.
Dustin Moskovitz: Before us on AI teammates, they face challenges with missing information and submissions, time-consuming prioritization meetings, and delays in global market launches. Our AI teammates have shown how we can address these pain points comprehensively. So the first step is request intake. AI can now evaluate requests at the point of submission, auto naming them for clarity, and proactively flagging missing information. Requests are summarized in natural language, making the relative importance clear to glance.
Speaker Change #144: We believe we're the only collaborative work management platform, that's proven at scale for large enterprises, and we have several customers with over 10000 seats and one customer with 200000 seats actively deployed.
In practice, there's no organization too big for us on them and we've proven that the value and differentiation of our Santa Cruz with scale, thanks to our unique and differentiated data model.
Dustin Moskovitz: Second step, prioritization. We've shown how we can streamline their alignment meetings with better first-ab prioritization, producing the time spent on these sessions. Third step, execution. Perhaps most impressively, this customer has expressed how this can eliminate translation delays that are previously caused more than two week gaps between English and other market launches. Now all launches can happen simultaneously, ensuring no market feels deprioritized, and the marketing organization can deliver more consistent, improved customer experience globally.
Speaker Change #144: To support this effort and help our customers realize more value even faster we are expanding the baseline offering of our enterprise tiers and.
Speaker Change #144: In addition to premium AI features writing more high value functionality like request tracking and where can take resource management enhanced executive reporting and visualizations of how goals and work are inextricably linked in a sauna.
Speaker Change #144: We're also rolling out unlimited the only licenses to see where can this honor with and in product path to request a paid license to comment or add work.
Dustin Moskovitz: It's worth noting that the AI-powered solution replaces the need for dedicated, industry-specific translation software, where services that companies might traditionally use for such tasks. And we expect to offer this for much less than what those traditional translation services cost, providing significant value and cost savings to customers. Last reporting. In the reporting reflection phase, AI can update metadata, which you know is custom fields, to inform work reporting and suggest topics for retrospectives.
Speaker Change #144: We think this has the potential to meaningfully contribute to paid seat growth within our accounts.
Speaker Change #144: Finally, we announced our official commitment to pursue fed ramp certification, which will unlock new market opportunities and government agencies and other regulated industries.
Speaker Change #144: These initiatives are designed to help enterprises quickly achieve the critical mass needed to fully leverage the AI enhanced work graph and consolidate their work management needs on a single powerful platform.
Speaker Change #144: Finally, let me explain how we believe AI will help us drive revenue and adoption in three key ways.
Dustin Moskovitz: This helps teams capture learnings and insights more effectively, leading to continuous improvements in their processes. Let me share another customer example. A global leader in outdoor advertising has been testing a sauna AI teammates for their creative request intake process across regions. The team is very encouraged by the potential here. In the words of the VP of marketing operations, it allows them to prioritize the bigger things they want to do to show more business impact and affect the bottom line.
Speaker Change #144: First it already enhances the value we deliver in our core work management functionality, such as smart goals and smart status features.
Speaker Change #145: This is what customers get most of our packages today, depending on their tears.
Speaker Change #145: Second AI is enabling us to introduce new add ons and we have specific ones we're developing now.
Speaker Change #145: Resource planning will be a license based on for example.
Speaker Change #145: And third we continue to believe in the potential of usage based AI revenue.
Dustin Moskovitz: Importantly, this customer views AI as an enabler for human creativity and strategic thinking, not as replacement for human work. Mark. This encapsulates our vision for AI teammates, tools that enhance human capabilities, drive efficiency, and ultimately contribute to our customers bottom line. These stories exemplify how our AI capabilities built on the foundation of our unique and proprietary work raft data model, can drive efficiency, improve collaboration, and ultimately contribute to better business outcomes for our customers.
Speaker Change #145: In the early stages here, but we're learning more on this front everyday from our customers and our AI studio Beta program, which we're expecting to formally launch soon.
Speaker Change #145: In closing, we're clearly making progress with our enterprise strategy, but the shape of the acceleration curve will be very modest in the next few quarters and more pronounced later.
Speaker Change #145: We're confident it will happen because we've already seen it in some segments of the business and we're beginning to see stabilization and others.
Speaker Change #145: We remain committed to a sustained positive free cash flow by the end of Q4.
Speaker Change #145: We're winning strategic customers across important industries, causing more multiyear deals and investing in AI to meet enterprise demands.
Dustin Moskovitz: The testament to the power of AI teammates working alongside human teams, to enhance productivity and strategic impact. These are just a few early examples for the AI teammates in action. We hope to be able to report next year that we have hundreds or even thousands of such workflows at a meaningful number of our customers.
Speaker Change #145: We're excited.
Speaker Change #145: To share more of our innovation and customer success stories at the work innovation Summit in New York City on October 22nd and again in London on November 13th we hope to see you there.
Speaker Change #145: Before I hand, it over to Ann I'd like to also say a few words about the announcements we made today in conjunction with our earnings release.
Dustin Moskovitz: Now let me talk about how we're capturing the consolidation opportunity. We remain in a budget-focused environment, and customers are looking for consolidation opportunities. Our proven ability to scale, the structural advantages of the work raft, especially as it relates to AI, and our focus on essential functions across the enterprise makes us particularly well suited to capitalize on this opportunity. We believe we're the only collaborative work management platform that's proven at scale for large enterprises, and we have several customers with over 10,000 seats, and one customer with 200,000 seats actively deployed.
Speaker Change #146: As you've probably read we announced his departure and the arrival of a new CFO.
Ann: Change is always bittersweet, but it's part of being in a high growth environment.
Ann: As many of you already appreciate Tim it's been a great leader partner and friend for all of US with us for almost eight years now I'll be handing over the baton.
Speaker Change #147: He's been an integral part of the Santa journey, joining us on in 2017 building financial infrastructure to help us scale and navigating us through our entry into the public markets and improving operating margins dramatically, while we continue to invest in growth.
Dustin Moskovitz: In practice, there's no organization too big for Asana, and we've proven that the value and differentiation of Asana crews with scale thanks to our unique and differentiated data model. To support this effort and help our customers realize more value even faster, we're expanding the baseline offering of our enterprise tiers. In addition to premium AI features, we're adding more high-value functionality like request tracking and work intake, resource management, enhanced executive reporting, and visualizations of how goals and work are an extricably linked Asana.
Speaker Change #148: I will miss working with him. He has been a strong partner to me and the leadership team, but he will remain on as an adviser to help in the transition.
Speaker Change #149: Tim we're very grateful for your many contributions.
Speaker Change #150: At the same time I'm excited to announce our new Chief financial officer suddenly and per acre.
Sundeep Reddy: Certainly is a seasoned finance executive with over 25 Years' experience in high growth technology most.
Sunderly Peracre: Most recently she was CFO of ring central.
Dustin Moskovitz: We're also rolling out unlimited view-only licenses to see work in Asana, with an in-product path to request a paid license to comment or ad work. We think this has the potential to meaningfully contribute to paid seat growth within our accounts. Finally, we announced our official commitment to pursue FedRAM certification, which will unlock new market opportunities and governance agencies and other regulated industries. These initiatives are designed to help enterprises quickly achieve the critical mass needed to fully leverage the AI enhanced work raft and consolidate their work management needs on a single, powerful platform.
Sunderly Peracre: Suddenly brings deep operational and financial experience and leading companies at scale.
Sunderly Peracre: I look forward to partnering with her and our next stage of growth.
Sunderly Peracre: I'll hand, it over to Anne.
Anne: Thanks, Dustin and I will just echo Dustin sentiment on both fronts and Tim. Thank you for everything you will certainly be missed but definitely not forgotten.
Anne: As Dustin mentioned early access to our axon AI studio Beta program is getting great response from our customers.
Speaker Change #154: We talk to our top 100 customers virtually every customer wanted to be part of our beta program.
Dustin Moskovitz: Finally, let me explain how we believe AI will help us drive revenue and adoption in three key ways. First, it already enhances the value we deliver in our core work management functionality, such as smart goals and smart status features. This is what customers get in most of our packages today, depending on their tiers. Second, AI is enabling us to introduce new add-ons, and we have specific ones we're developing now. Resource planning will be a license-based add-on, for example.
Speaker Change #155: Customers are interested in axon AI studio for everything from translating global communications across over 100 countries in minutes to managing and prioritizing complex of our progress and even making other existing applications more effective by adding a workflow layer on top of our customer database.
Speaker Change #155: Importantly customers are most excited with what AI can do inside their workflow.
Dustin Moskovitz: And third, we continue to believe in the potential of usage-based AI revenue. We're in the early stages here, but we're learning more on this front every day from our customers and our AI Studio Beta program, which we're expecting to formally launch soon. In closing, we're clearly making progress with our enterprise strategy, but the shape of the acceleration curve will be very modest in the next few quarters and more pronounced later. We're confident it will happen because we've already seen it in some segments of the business, and we're beginning to see stabilization in others. We remain committed to a sustained positive free cash flow by the end of Q4. We're winning strategic customers across important industries, closing more multi-year deals, and investing in AI to meet enterprise demands.
Speaker Change #155: Customers are saying the quality efficiency and personalization that we can deliver at scale is groundbreaking advair.
Speaker Change #155: As we're seeing in our beta program or a studio offering is opening up new kinds of conversations across our customer base and helping us access new incremental budget dollars.
Speaker Change #155: Through our AI studio Beta program, we've seen AI help us gain more executive mindshare and create significant inroads with executive leadership in AI strategy groups.
Speaker Change #155: Our AI capabilities are not just operational tools that strategic assets.
Speaker Change #155: This level of access is allowing us to enhance the traditional workflows our customers rely on us on fr such as work intake product launches and strategic planning, while also giving us the opportunity to support new workflows.
Dustin Moskovitz: We're excited to share more of our innovation and customer success stories at the work innovation summit in New York City on October 22nd and again in London on November 13th. We hope to see you there.
Speaker Change #155: Our ease of use and flexibility of our AI offering.
Dustin Moskovitz: Before I hand it over to Anne, I'd like to also say a few words about the announcements we made today in conjunction with our earnings release. As you've probably read, we announced him as departure in the arrival of a new CFO. Change is always better sweet, but it's part of being in a high growth environment. As many of you already appreciate, Tim has been a great leader, partner and friend for all of us at Asana for almost eight years, and now we'll be handing over the baton.
We're finding that customers don't want to introduce another siloed tool for their AD workflows. They want at embedded where their employees are already managing their work and that then lassana. This.
Speaker Change #155: This engagement at the highest levels of organizations and direct collaborations with AI counsel positions us on it as a key partner in shaping our customers' AI strategies and set us up well for expanded partnerships and growth opportunities.
Dustin Moskovitz: He's been an integral part of the Asana journey, joining Asana in 2017, building financial infrastructure to help us scale and navigating us through our entry into the public markets and improving operating margins dramatically while we continue to invest in growth. I'm this working with Tim, who's been a strong partner to me and the Asana leadership team, but he'll remain on as an advisor to help in the transition. Tim, we're very grateful for your many contributions.
Speaker Change #156: Turning to Q2, as we expected going into the quarter ongoing budget scrutiny and longer sales cycles continued to impact our business consistent with last quarter.
Speaker Change #156: As a result, we saw a number of deals pushed out but they remained in our pipeline.
Speaker Change #156: Secondly, the headwinds in the technology vertical continue to weigh down our overall revenue growth.
Dustin Moskovitz: At the same time, I'm excited to announce our new chief financial officer, Sonali Perak. Sonali is a seasoned finance executive with over 25 years experience in high growth technology. Most recently, she was CFO of Ring Central. Sonali brings deep operational and financial experience and leading companies at scale.
Speaker Change #156: Despite the continued headwinds we closed some very strategic deals across industries, such as automotive manufacturing government energy among many others.
Speaker Change #156: By geography International led revenue growth at 12, 3% reported and 12, 8% year over year, when we exclude the currency impact.
Anne Raimondi: I look forward to partnering with her in our next stage of growth, and with that, I'll hand it over to Ann. Thanks, Dustin, and I'll just echo Dustin's sentiment on both fronts, and Tim, thank you for everything you will certainly be missed, but definitely not forgotten. As Dustin mentioned, early access to our Asana AI Studio beta program is getting great response from our customers. When we talk to our top 100 customers, virtually every customer wanted to be part of our beta program.
Speaker Change #156: The international team continues to execute well with particular success in key verticals, such as energy and manufacturing.
Speaker Change #156: In the U S. We continued in Q2 to be pressured by early successes in the technology sector. Overall U S growth was 9% year over year heavily impacted by the technology sector exposure.
Anne Raimondi: Customers are interested in the Asana AI Studio for everything from translating global communications across over 100 countries in minutes to managing and prioritizing complex work requests and even making other existing applications more effective by adding a workflow layer on top of a customer database. Importantly, customers are most excited with what AI can do inside their Asana workflow. Customers are saying the quality, efficiency, and personalization that we can deliver at scale is groundbreaking.
Speaker Change #156: Fortunately, we now have put our largest seat adjustments behind us as of last quarter and we believe that the in quarter dollar based net retention rate is at a stabilizing point.
Speaker Change #156: As Dustin mentioned on our previous call in order to get to Reacceleration you need to first go through stabilization and Thats, where we believe we are today.
Dustin: We are well poised for slight reacceleration in the near term and more substantial acceleration in the out quarters.
Speaker Change #157: Now turning to customer dynamics in Q2.
Speaker Change #157: Enterprise customers continue to expand and multiyear deals jumped significantly this quarter pointing to the types of longer term partnerships, we're forming with large and strategic enterprises.
Anne Raimondi: As we're seeing in our beta program, our AI Studio offering is opening up new kinds of conversations across our customer base and helping us access new incremental budget dollars. Through our AI Studio beta program, we've seen AI help us gain more executive mind chair and create significant inroads with executive leadership and AI strategy groups. Our AI capabilities are not just operational tools but strategic assets. This level of access is allowing us to enhance the traditional workflows our customers rely on asana for, such as work intake, product launches, and strategic planning, while also giving us the opportunity to support new workflows due to the power, ease of use, and flexibility of our AI offering.
Speaker Change #157: The first sector I'll mentioned, you may be very familiar with while the overall technology sector has been cycling through various buying dynamics. There are specific cohorts such as AI where growth is very healthy. For example, we are the de facto standard across two of the most well known AI lab.
Speaker Change #157: <unk> significantly expanded their use of <unk>.
Speaker Change #157: So more departments can manage their strategic programs and work in a central platform.
Speaker Change #157: They also both upgraded to our enterprise plus solution to access enhanced security capabilities and get the most value from our platform. Both companies have seen rapid organic adoption of <unk> in departments like marketing sales growth engineering finance and more thanks to improved cross department collaboration which is enabling them to release.
Anne Raimondi: Refining that customers don't want to introduce another silo tool for their AI workflows, they want AI embedded where their employees are already managing their work, and that's in Asana. This engagement at the highest levels of organizations and direct collaboration with AI Councils positions Asana as a key partner in shaping our customers' AI strategies and sets us up well for expanded partnerships and growth opportunities. Turning to Q2, as we expected going into the quarter, ongoing budget scrutiny and longer sales cycles continue to impact our business consistent with last quarter.
Speaker Change #157: <unk> faster and work more effectively.
Speaker Change #157: The energy vertical is another place where the need for innovation and efficiency is fueling demand for Astana.
Speaker Change #157: For example, one of the largest energy companies in Iceland selected us honest enterprise plus solution after a competitive evaluation.
Speaker Change #157: They will use us to manage their long term strategic investments projects like the construction of energy plants, low temperature and high temperature geothermal hydropower fiber networks and more.
Speaker Change #158: Also the British renewable energy group specializing in sustainable energy and pairing millions of homes in eight countries renewed their use of <unk> to manage work across their entire company this quarter.
Anne Raimondi: As a result, we saw a number of deals pushed out but they remained in our pipeline. Secondly, the headwinds in the technology vertical continue to weigh down our overall revenue growth. Despite the continued headwinds, we close some very strategic deals across industries such as automotive, manufacturing, government, energy among many others. By geography, international lead revenue growth at 12.3% reported and 12.8% year-over-year when we exclude the currency impact. The international team continues to execute well with particular success in key verticals such as energy and manufacturing.
Speaker Change #159: <unk> is the hub for all business activities and teams manage everything from hardware development to business strategy planning to vendor management. So they can innovate and execute quickly to deliver continued value to their customers.
Speaker Change #160: In <unk>, we closed the deal with <unk>, a leader in fleet management software, who upgraded to our enterprise Pos solution this quarter to gain access to our latest features including us on AI.
Speaker Change #160: They use us on it to manage their core work across the entire company. So they can make data driven decisions and execute on their calls.
Anne Raimondi: In the US, we continued in Q2 to be pressured by early successes in the technology sector. Overall, US growth was 9% year-over-year, heavily impacted by the technology sector exposure. Fortunately, we now have put our largest seed adjustments behind us as of last quarter and we believe that the in-quarter dollar-based net retention rate is at a stabilizing point. As Dustin mentioned on a previous call, in order to get to re-exceleration, you need to first go through stabilization and that's where we believe we are today.
Speaker Change #160: And we had several deals across the manufacturing sector through one of our partners. We landed a subsidiary of a prominent Korean automotive manufacturer this quarter after winning a competitive RFP.
Speaker Change #160: They're replacing their legacy project management system with <unk> enterprise plus.
Speaker Change #160: Additionally, a Japan based global innovator in manufacturing electronics expanded their use of us on this quarter because of our ease of use and ability to enable seamless collaboration across departments and ability to integrate <unk> into their current tech stack like Microsoft 365.
Anne Raimondi: We are well poised for slight re-exceleration in the near term and more substantial acceleration in the out-quarters. Now, turning to customer dynamics in Q2, our enterprise customers continue to expand and multi-year deals jump significantly this quarter, pointing to the types of longer-term partnerships we are forming with large and strategic enterprises. The first sector I'll mention, you may be very familiar with. While the overall technology sector has been cycling through various buying dynamics, there are specific cohorts such as AI where growth is very healthy.
Speaker Change #160: Now more departments like engineering team management will manage their work in Astana to drive innovation faster.
Speaker Change #160: Within the public sector, a major department within the U S government needed a new collaborative work management tool to bring together nine separate unit to establish their first project management organization to manage operations and complex projects for the office in charge of planning policy and resources and they selected us on it.
Speaker Change #161: They will use us on how to track the executive team's strategy budget and finance management complex project in process management and work intake from satellite government offices.
Anne Raimondi: For example, we are the de-facto standard across two of the most well-known AI labs. Both significantly expanded their use of Asana, so more departments can manage their strategic programs and work in a central platform. They also both upgraded to our enterprise plus solution to access enhanced security capabilities and get the most value from our platform. Both companies have seen rapid organic adoption of Asana in departments like marketing, sales, growth, engineering, finance, and more, thanks to improved cross-department collaboration, which is enabling them to release products faster and work more effectively.
Speaker Change #162: With us on a they have visibility across all current projects. So they can report to leadership on progress and the support they are providing their satellite offices.
Speaker Change #163: This great public sector customer win Punctuates, the importance of our government strategy as seen by our recent announcement to pursue fed ramp certification.
Speaker Change #163: These are just a few stories to illustrate how well Astana can execute we are driving initiatives to replicate these playbooks and scale the methodologies to repeatable consistent processes.
Anne Raimondi: The energy vertical is another place where the need for innovation and efficiency is fueling demand for Asana. For example, one of the largest energy companies in Iceland selected Asana's enterprise plus solution after a competitive evaluation. They will use Asana to manage their long-term strategic investments projects like the construction of energy plants, low temperature and high temperature geothermal, hydro power, fiber networks, and more. Also, the British Renewable Energy Group specializing in sustainable energy and pairing millions of homes in eight countries renewed their use of Asana to manage work across their entire company this quarter.
Speaker Change #163: We're focused on several key initiatives that will help us develop and transform our business first investing in a more consistent post sales experience to drive expansion.
Speaker Change #163: Improving velocity by further streamlining sales processes.
Speaker Change #163: Third building on excitement around AD products to improve account engagement and adoption and finally, focusing on strategic industry vertical to further diversify our business.
Speaker Change #163: In summary, our strategies are designed to drive seat expansion deepen our customer relationships and ultimately grow AAR.
Speaker Change #163: And with AI, joining the team, we can deliver even greater value to our customers.
Anne Raimondi: Asana is a hub for all business activities and teams manage everything from hardware development to business strategy planning to vendor management so they can innovate and execute quickly to deliver continued value to their customers. In transportation we close to the deal with Fledio, a leader in fleet management software who upgraded to our enterprise plus solution discord to gain access to our latest features including Asana AI. They use Asana to manage their core work across the entire company so they can make data driven decisions and execute on their goals and we have several deals across the manufacturing sector through one of our partners we landed a subsidiary of a prominent Korean automotive manufacturer this quarter after winning a competitive RFP.
Speaker Change #163: We're excited about the path ahead and confident in our ability to execute on these initiatives.
Speaker Change #163: And with that I'll hand, it over to Tim.
Tim: Thank you Ann Q2 revenues came in at $179 2 million up 10% year over year.
Tim: We have 22948 core customers or customer spending 5000 or more on an annualized basis.
Tim: Revenue from core customers grew 11% year over year.
Tim: This cohort represented 75% of our revenues in Q2 up from 74% in the year ago quarter.
Tim: We have 649 customers spending 100000 or more on an annualized basis and.
Anne Raimondi: They are replacing their legacy project management system with Asana's enterprise plus. Additionally, a Japan-based global innovator in manufacturing electronics expanded their use of Asana this quarter because of our ease of use ability to enable seamless collaboration across department and ability to integrate Asana into their current tech stack like Microsoft 365. Now more departments like Engineering Chain Management will manage their work in Asana to drive innovation faster. Within the public sector a major department within the US government needed a new collaborative work management tool to bring together nine separate units to establish their first project management organization to manage operations and complex projects for the office in charge of planning policy and resources and they selected Asana.
Tim: And this customer cohort grew at 17% year over year.
Tim: As a reminder, we define these customer cohorts based on annualized GAAP revenues in a given quarter.
Tim: Our overall dollar based net retention rate was 98%.
Tim: Our dollar based net retention rate for our core customers was 99%.
Tim: And among customer spending 100000 or more our dollar based net retention rate was 103%.
Tim: As a reminder, our dollar based net retention rate is a trailing four quarter average calculation and thus a lagging indicator.
Anne Raimondi: They will use Asana to track the executive team strategy budget and finance management complex project and process management and work intake from satellite government offices. With Asana, they have visibility across all current projects so they can report to leadership on progress and the support they're providing their satellite offices. This great public sector customer win puncture rates the importance of our government strategy as seen by our recent announcement to pursue bed ramp certification.
Tim: However, it's important to highlight the in quarter trends as we go through this transition.
Tim: We believe that the in quarter dollar based net retention rate is at a stabilization point in Q2.
Tim: As I turn to expense items and profitability I would like to point out that I will be discussing non-GAAP results and the balance of my remarks.
Tim: Gross margins came in at 89%.
Tim: Research and development was $56 5 million or 32% of revenue.
Sales and marketing was $91 1 million or 51% of revenue.
Tim: G&A was $27 7 million or 15% of revenue.
Tim: During the quarter, we also realized a onetime property tax credit related to our corporate headquarter, which lowered our operating expenses by $3 1 million.
Tim: This was an allocation impacting each opex line item.
Anne Raimondi: These are just a few stories to illustrate how well Asana can execute. We are driving initiatives to replicate these playbooks and scale the methodologies to repeatable consistent processes. We're focused on several key initiatives that will help us develop and transform our business. First, investing in a more consistent post sales experience to drive expansion. Second, improving velocity by further streamlining sales processes. Third, building on excitement around AI products to improve account engagement and adoption.
Tim: Operating loss was $15 7 million and our operating loss margin was 9%.
Net loss was $11 1 million and our net loss per share was <unk> <unk>.
Tim: Moving onto the balance sheet and cash flow cash and marketable securities at the end of Q2 were approximately $521 6 million.
Tim: Our remaining performance obligation or <unk> was $394 5 million up 18% from the year ago quarter.
Tim: This is a reacceleration from last quarter driven by multiyear deals.
Anne Raimondi: And finally, focusing on strategic industry verticals to further diversify our business. In summary, our strategies are designed to drive seed expansion, deepen our customer relationships, and ultimately grow AR. And with AI joining the team, we can deliver even greater value to our customers. We're excited about the path ahead and confident in our ability to execute on these initiatives.
Tim: 83% of our appeal will be recognized over the next 12 months that current portion of <unk> grew 14% from the year ago quarter.
Our total ending Q2 deferred revenue was $289 2 million.
Tim: Up 11% year over year.
Tim: Q2 free cash flow was $12 8 million or 7% on a margin basis.
Anne Raimondi: And with that, I'll hand it over to you. Tim. Thank you, Anne. Q2 revenues came in at 179.2 million up 10% year-over-year. We have 22,948 core customers or customers spending 5,000 or more on an annualized basis. Revenue from core customers grew 11% year-over-year. This cohort represented 75% of our revenues in Q2 up from 74% in the year-go quarter. We have 649 customers spending 100,000 or more on an annualized basis in this customer cohort grew at 17% year-over-year.
Tim: However, remember that Q3 free cash flow will be seasonally lower but we expect to see durable positive free cash flow by the end of Q4.
Tim: As you know, we announced the $150 million stock repurchase program in June in Q2, we repurchased $19 7 million of our shares at an average price of $13 64 per share.
Tim: We remain committed to investing in our growth and managing dilution, while returning excess capital to shareholders via share repurchases.
Tim: Moving to guidance for Q3 fiscal 2025, we expect revenues of $180 million to $181 million.
Anne Raimondi: As a reminder, we defined these customer cohorts based on annualized gap revenues in a given quarter. Our overall dollar-based net retention rate was 98%. Our dollar-based net retention rate for our core customers was 99%. And among customers spending 100,000 or more, our dollar-based net retention rate was 103%. As a reminder, our dollar-based net retention rate is a trailing 4-quarter average calculation and thus a lagging indicator. However, it's important to highlight the in-quarter trends as we go through this transition. We believe that the in-quarter dollar-based net retention rate is at a stabilization point in Q2.
Tim: Representing growth of 8% to 9% year over year.
Tim: We expect non-GAAP loss from operations of $19 million to $18 million, representing an operating margin of negative 10% at the midpoint of guidance.
Tim: And we expect net loss per share of seven assuming basic and diluted weighted average shares outstanding of approximately $227 million.
Tim: For the full fiscal year 2025, we expect revenues to be in the range of $7 $19 million to $721 million, representing a growth rate of 10% year over year.
Tim: We expect non-GAAP loss from operations of 58 million to $55 million, representing an operating margin of negative 8% at the midpoint of guidance.
Tim Wan: As I turn to expense items and profitability, I would like to point out that I will be discussing non-gap results in the balance of my remarks. Gross margins came in at 89%. Research and development was 56.5 million or 32% of revenue. Sales and marketing was 91.1 million or 51% of revenue. GNA was 27.7 million or 15% of revenue. During the quarter, we also realized the one-time property tax credit related to our corporate headquarter, which lowered our operating expenses by 3.1 million.
Tim: And we expect net loss per share of <unk> 20 to 19, assuming basic and diluted weighted average shares outstanding of approximately $227 million.
Tim: As you can see from our guidance and commentary we continue to see the software macro environment consistent with last quarter and.
Tim: And we expect these headwinds to continue.
The technology vertical continues to drag our overall growth dramatically.
Tim: However, we see pockets of reacceleration across some of our key verticals as noted in some of the significant wins and mentioned in the last two quarters.
Tim Wan: This was an allocation impacting each off-bex line item. Operating loss was 15.7 million and our operating loss margin was 9%. Net loss was 11.1 million and our net loss per share was 5 cents. Moving on to the balance sheet and cash flow, cash and marketable securities at the end of Q2 were approximately 521.6 million. Our remaining performance obligation or RPO was 394.5 million up to 18% from the euro-go quarter. This is a re-exceleration from last quarter driven by multi-year deals.
Tim: Also we believe that our in quarter net dollar retention rate and gross retention rates have stabilized.
Tim: And we're poised for moderate revenue reacceleration in the coming quarters.
Tim: Therefore, we are tightening the fiscal year guidance range to be more conservative in the back half, but overall underlying trends continue to be stabilizing.
Tim: In addition, we have made a great deal of progress on operating margins and improving our free cash flow through a disciplined approach to balancing growth and profitability.
Speaker Change #164: I'll add just a few words of thanks before we go to Q&A. Thank.
Speaker Change #165: Thank you Dustin and thank you and and also a big Thank you Todd employees.
Tim Wan: 83% of our RPO will be recognized over the next 12 months. That current portion of RPO grew 14% from the euro-go quarter. Our total ending Q2 deferred revenue was 289.2 million, up 11% year-over-year. Q2 free cash flow was 12.8 million or 7% on a margin basis. However, remember that Q3 free cash flow will be seasonally lower, but we expect to see durable positive free cash flow by the end of Q4.
Speaker Change #165: It's been an incredibly fulfilling time alessandra.
Todd: Company has grown so much in the nearly eight years I've been here and I feel fortunate to have had the opportunity to lead our CFO.
Todd: I also want to thank the investment community and especially those of you who have been our shareholders over the last several years.
Todd: I continue to be incredibly bullish about our sinus potential. So this hasnt been an easy decision to make.
Todd: There's never been a greater need amongst enterprises for solution like a sauna and I believe the company is poised for even greater things in the years ahead.
Tim Wan: As you know, we announced the $150 million stock we purchased program in June. In Q2, we purchased 19.7 million of our shares at an average price of $13.64 per share. We remain committed to investing in our growth and managing delusion while returning excess capital to shareholders via sharebreeds. Andrew Purchases.
Todd: Before I turn it over to the operator for Q&A, Let me hand, it over to duston for some closing comments.
Duston: Thanks, Tim.
Duston: One thing I want to add to my formal comments that I'm planning to enter into a <unk> one trading plan as early as September 5th to purchase up to $13 5 million shares of our class a common stock.
Duston: The plan is subject to the required cooling off period.
Tim Wan: Moving to guidance for Q3 Fisco 2025, we expect revenues of $180 million to $181 million, representing growth of 8% to 9% year-over-year. We expect non-gab loss from operations of 19 million to 18 million, representing an operating margin of negative 10% at the midpoint of guidance. And we expect net loss per share of 7 cents, assuming basic and diluted weighted average shares[inaudible] There can be no assurance that the price and volume parameters of his trading plan will result in purchases of our shares of our class A common stock in line with his expectations in such forward-looking statements.
Speaker Change #167: I'm entering into this new plan because I continue to personally believe Osama shares are undervalued, given the size and relatively low penetration of the work management market and I Trust in the path. We've chartered ahead to be the leader in the category, while delivering value to our investors.
Speaker Change #168: Thank you duston before I open it up to Q&A I wanted to note that Mr. Moskovitz. His plan is separate from the company's ongoing share repurchase program and his statements regarding his trading plan to purchase shares of our class a common stock maybe considered forward looking statements that are subject to risks and uncertainties, including that is trading plan may be modified suspended or terminated by hand.
Speaker Change #168: Anytime.
Speaker Change #168: There can be no assurance that the price and volume parameters are as trading plan will result in purchases of our shares of our class a common stock in line with his expectations in such forward looking statements.
And with that operator, we are ready for questions.
Speaker Change #169: As a reminder, if you'd like to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Speaker Change #169: Our first question will come from the line of Tyler Mcguinness with UBS.
Tyler Mcguinness: Hi, Thanks, so much for taking my questions. Just the first one so you talked about seeing stabilization and expansion rates in the quarter and being through the worst of the renewal optimizations, but it also sounds like upside might have been a little bit lighter due to some deal delays. So can you just offer what gives you confidence in the acceleration in <unk>.
Speaker Change #171: Slide into <unk> based on what Youre seeing at the start of <unk> is that just a function of retention rates, improving and starting to maybe see an inflection in revenue growth amongst technology companies or do you need to see an acceleration in other verticals or an improvement in that net upsells. Thank you so much.
Speaker Change #171: Hey, Taylor this is Tim.
Tim: I wanted to just say the what we had talked about even in our previous earnings call is really kind of.
Taylor: Getting past the these bigger renewals that we knew about that would that would likely be downgrades and I feel like we are past that now and that will be a tailwind and essentially kind of the stabilization point that we needed to to reaccelerate the business.
Taylor: Some of the deals and I would say that we had hoped to close in Q2 have moved into Q3, they haven't fallen out of the pipeline and we expect the team and the businesses to essentially close those deals in Q3. So I think we are encouraged by the pipeline, but a lot of it is really just the bottoming out of our gross renewal rate.
Justin: Great. Thank you and then maybe Justin one for you would just be you talked a lot about innovation around a thorn on NII and what you guys are doing there as well as it relates to some tinkering around pricing and packaging. So can you just maybe talk about windows.
Speaker Change #173: It could be a bigger driver of growth on the line and some of the customer feedback that you've heard that that's driving that decision. Thank you.
Justin: Yeah, So I think you're referring to in the last earnings call I was talking about the possibility of consumption based revenue around what we call it in that call custom workflows.
Justin: This time, we're introducing a new term AI studio, which is the same idea, but this is really a new package that customers will be able to purchase starting in Q4 that will give them the ability to build those custom workflows.
Justin: I think we were still seeing incredibly great engagement from the customers in the pilot and they all want to proceed.
Justin: And I have huge hopes for how far that goes I'm, hoping to be here next year talking about the pilot customers now doing hundreds or even thousands of workflows in a sauna, but it's still pretty early to be able to quantify it what I do know is as sales will have something thats. All in Q4, and I expect some amount of revenue from that but not material revenue and then.
Unknown Executive: And with that operator, we are ready for questions. As a reminder, if you'd like to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Our first question will come from the line of Taylor McGinnis with UBS.
Justin: The hope is that building pretty quickly into the early quarters of next year. When we see some of those early customers start to get into enough volume that they're also triggering the incremental consumption revenue. So I think I will start by buying a package.
Taylor McGinnis: Hi, thanks so much for taking my question. Just the first one. So you talked about seeing stabilization and expansion rates in the quarter and being through the worst of the renewal optimizations, but it also sounds like upside might have been a little bit lighter due to some field delays. So can you just offer what gives you confidence in the acceleration implied in 4Q based on what you're seeing at the start of 3Q?
Probably including some professional services.
Justin: And that that will begin by you know in Q4, and then next year I'm, hoping it becomes material revenue and we will just know more and more as we go along with the pilot customers and you can see what they look like later in the funnel not all give us the ability to quantify it better for guidance.
Speaker Change #174: Our next question will come from the line of Josh Baer with Morgan Stanley.
Taylor McGinnis: Is that just a function of retention rates improving and you know starting to maybe see an inflection and revenue growth among technology companies or do you need to see an acceleration and other verticals or an improvement in that net upsells. Thank you so much. Hey Taylor, this is Tim. Yeah, I want to just say what we had talked about even in our kind of pre-fish earnings call is really kind of getting past the these bigger renewals that we knew about that would that would likely be downgrades and I feel like we are past that now and that will be a tailwind and essentially kind of the stabilization point that we needed to to re accelerate the business.
Josh Baer: Thanks, and Tim it's been great working with you good luck in the next chapter.
Speaker Change #175: Wanted to ask about the deals that were pushed any sense for why they were pushed how big they were or how many and what gives you confidence that they will close next quarter.
Speaker Change #176: Hi, Josh and thanks, so much for your question.
Speaker Change #177: So what we saw in the selling environment was especially for larger deals and larger organizations is the decision making cycle has been elongated but things are relatively stable compared to last quarter in terms of sentiment while a number of these deals did push out of the quarter, we actually saw a good.
Taylor McGinnis: Some of the deals and I would say you know that we had hoped to close in Q2 have moved into Q3 they haven't fallen out of the pipeline. We expect a team and the businesses to essentially close those deals in Q3. So I think we're we're encouraged kind of by the pipeline, but a lot of it is really just the bottoming out of our gross renewal rate. Great. Thank you. And then maybe Justin one one for you would just be you talked a lot about innovation around a sauna and AI and what you guys are doing there as well as it relates to some tinkering around pricing and packaging.
Speaker Change #177: Percentage of them closed in August and the rest are remaining in pipeline. So a lot of our focus as a team really is on big deal conversion rates in this environment and so thats what were swarming around the teams that are working on the largest deals, but the ones that got pushed into the quarter and the ones that are that we're working through in this quarter. So that's.
Taylor McGinnis: So can you just maybe talk about when those changes could be a bigger driver of growth on the line and some of the customer feedback that you've heard that that's driving the decisions. Thank you. Yeah, so I think you're referring to in the last earnings call I was talking about the the possibility of consumption based revenue around what we called in that call custom workflows. This time we're introducing a new term AI studio which is the same idea, but this is really a new package that customers will be able to purchase starting in Q4 that will give them the ability to build those custom workflows.
Speaker Change #177: Where our focus really is is making sure those large deals have the right resources to get them across the finish line.
Speaker Change #178: Got it thanks, and maybe for Tim or Duston, just wondering if.
Speaker Change #179: Theres any more context as far as the CFO transition any more color you could provide as far as the timing and the change. Thank you.
Dustin: This is dustin.
Dustin: Tim should speak up too, but you know.
Dustin: I think it's easy to look at something like this and think it's an and reactions like what's happening right now, but the reality is this is a much longer our conversation that Tim and I have been having.
Speaker Change #180: And just trying to figure out the right time for him to make a transition because he wanted to take some some time off and then also think about.
Taylor McGinnis: I think we we're still seeing incredibly great engagement from the customers in the pilot and they all want to proceed and I have huge hopes for how far that goes. I'm hoping to be here next year talking about the pilot customers now doing you know hundreds or even thousands of workflows in a sauna, but it's still pretty early to to be able to quantify it. What I do know is sales will have something to sell in Q4 and I expect some amount of revenue from that, but not material revenue.
Tim: Maybe one last.
Tim: Big career move before retirement.
Tim: And so we're talking about this for a while.
Tim: Don't have loved how the timing ended up but I think it's pretty much a coincidence.
Tim: And that's just ended up being.
Speaker Change #181: How it worked out after after talking about it for a while really sad to see him go but also as I said.
Speaker Change #181: It's bittersweet because we're also getting the opportunity to work with a really talented new CFO and so on.
Taylor McGinnis: And then the hope is that's building pretty quickly into the early quarters of next year when we see some of those early customers start to get into enough volume that they're also triggering the incremental consumption revenue. So I think it will start by buying a package probably including some professional services and that that will begin by you know in Q4 and then next year I'm hoping it becomes material revenue and we'll just know more and more as we go along with the pilot customers and see what they look like later in the funnel. That will give us the ability to quantify it better for guidance.
Speaker Change #182: And I know from experience that you lose something important when somebody with Tim's experience walks out the door, but it is also just a chance to kind of shake things up and see things with new eyes.
Speaker Change #182: Yeah, Hey, Josh This is Tom Yes, there was.
Tim: Dustin mentioned this was a very long conversation and I had wanted to you know I have been here for almost eight years and it was really an opportunity to take some time off reset refresh my mind and think about what's next.
I Love This company I love the people that I work with everyday all of the problems that we solve them.
Anne Raimondi: Our next question will come from the line of Josh Baer with Morgan Stanley. Thanks, and Tim, it's been great working with you. Good luck in the next chapter. I wanted to ask about the deals that were pushed any sense for why they were pushed, how big they were, how many, and what gives you confidence that they'll close next quarter. Hi, Josh, it's Anne. Thanks so much for your question. So what was we saw in the selling environment was especially for larger deals in larger organizations is the decision making cycle has been elongated, but things are relatively stable compared to last quarter in terms of sentiment.
Tim: Honestly it was incredibly difficult decision.
George <unk>: Our next question comes from the line of George <unk> with Oppenheimer.
Anne Raimondi: While a number of these deals did push out of the quarter, we actually saw a good percentage of them close in August and the rest are remaining in pipeline. So a lot of our focus as a team really is on big deal conversion rates in this environment. And so that's what we're swarming around the teams that are working on the largest deals, both the ones that got pushed into the quarter and the ones that are that we're working through in this quarter. So that's where our focus really is is making sure those large deals have the right resources to get them across the finish line. God, thanks.
George <unk>: Thank you for taking my question and Tim I also wish you the best with what they had.
George <unk>: And maybe just starting with the technology vertical can you give us a little bit of color. There have you reached a point of stability with most of your customers there and maybe put that in perspective of what youre, saying.
Speaker Change #183: The churn standpoint as well.
Tim: Yes, Thanks George.
Speaker Change #184: To dive in a little bit more on Tac well Tech was a drag on growth for us this quarter I do want to just pause and reiterate that tech continues to be super important to us for a number of reasons.
Speaker Change #184: Where we partner with some of the most innovative companies in the world to build our products.
Speaker Change #184: We mentioned earlier, we're the platform of choice for the two largest LLM companies and we expanded with them this quarter as well as we continue to work really closely with them as we build out our AI solutions. So our ability to partner with technology companies, who are innovators and early adopters really helps us to continue to differentiate our products.
Dustin Moskovitz: And maybe for Tim or Dustin, just wondering if there's any more context as far as the CFO transition, any more color you could provide as far as the timing and the change. Thank you. This is Dustin. Tim should speak up too, but I think it's easy to look at something like this and think it's in reactions like what's happening right now, but the reality is this is a much longer arc conversation that Tim and I have been having.
And really shape, where the category is growing.
Speaker Change #184: And so we feel that's also quite important to our growth in the developing verticals such as manufacturing energy retail and consumer transportation and health care are non tech sector actually had good mid teens growth this quarter.
Speaker Change #184: And some of that partnership with technology organizations as important to these non tech customers, because they're leading organizations really care about implementing the best solution. That's available that they can securely and innovative really scale with them. So where we will we saw stability I think we mentioned in terms of.
Dustin Moskovitz: And just trying to figure out the right time for him to make a transition because he wanted to take some time off. And then also think about maybe one last big career move before retirement. And so we've been talking about this for a while. Don't love how the timing ended up, but I think it's pretty much a coincidence. And this just ended up being how it worked out after talking about it for a while, really sad to see him go.
Speaker Change #184: Of our where retention and renewals are I think we'll continue to partner with technology companies, but the diversification outside of Tech is one of our main focus areas and where we're pleased to see some early signs and positive indicators in those sectors.
Speaker Change #185: Okay, and just following up on that with respect to logo churn and then maybe.
Dustin Moskovitz: But also, as I said, it's bittersweet because we're also getting the opportunity to work with a really talented new CFO and Sona. And I know from experience, you lose something important when somebody with Tim's experience walks out the door, but it's also just a chance to kind of shake things up and see things with new eyes. Yeah, there was, like Dustin mentioned, this was a very long conversation and I had wanted to, you know, I've been here for almost eight years.
Give us a sense of where you are with the sales initiatives across the four points that you were highlighting.
Speaker Change #186: Yeah, the focus areas that we mentioned investing in more consistent post sales, including services. We're seeing that services are incredibly important for larger deals in particular migration and deployment and so those services either provided by us or our growing partner eco.
Dustin Moskovitz: And it was really an opportunity to take some time off, reset, refresh my mind and think about what's next. I love this company. I love the people I work with every day. I love the problems that we solve. And honestly, it was an incredibly difficult decision.
Speaker Change #186: System.
Mentioned, improving velocity, that's really important, especially with the bigger deals. So further streamlining our sales processes and systems.
Speaker Change #186: In particular, we're also excited about the energy and interest in AI products, especially from our largest customer. So it gives us an opportunity actually to have a different conversation and particular with AD Council's our people within the CIO organization that are leading AI initiatives.
Dustin Moskovitz: Our next question comes from a line of George Iwanec with Oppenheimer. Thank you for taking my question and Tim, I also wish you the best with what they had. And maybe just starting with the technology vertical, can you give us a little bit of color there? Have you reached that point of stability with most of your customers there? And maybe put that in perspective of what you're seeing from a logo churn standpoint as well.
Speaker Change #186: Kind of opens up new avenues for us so while it's early and we're piloting the positive feedback from our largest and most important customers has been great and we're excited to bring that to more of our customers. When we go G E.
And then just reiterate my earlier point, focusing on strategic industry verticals to really diversify our business. So we're working hard on all those fronts and continue to be excited that the most important for US is that our global revenue leadership team is in place and working really well together.
Dustin Moskovitz: Yeah, thanks, George. Happy to dive in a little bit more on tech. While tech was a drag on growth for us this quarter, I do want to just pause and reiterate that tech continues to be super important to us for a number of reasons. It's where we partner with some of the most innovative companies in the world to build our products. We mentioned earlier where the platform was choice for the two largest LLM companies, and we expanded with them this quarter, as well as we continue to work really closely with them as we build out our AI solutions.
Speaker Change #187: Our next question will come from the line of Alex Zukin with Wolfe Research.
Speaker Change #187: Hey, guys. This is rich Magnus on for Alex can you talk more about how the competitive landscape has evolved over the last 12 months and separately can you give us some more color on how to think about billings trends over the next few quarters. Thanks.
Dustin Moskovitz: So our ability to partner with technology companies who are innovators and early adopters really helps us to continue to differentiate our product and really shape where the category is going. And so we feel that's also quite important to our growth in the developing verticals such as manufacturing, energy, retail and consumer, transportation and healthcare are non tech sector actually had good mid-teens growth this quarter. And some of that partnership with technology organizations is important to these non tech customers because the leading organizations really care about implementing the best solution that's available that they can securely and innovatively scale with.
Dustin: Yeah. This is dustin.
Speaker Change #188: I'm not.
I'm not going to be surprised to hear this we haven't seen a whole lot of change in the competitive landscape.
Speaker Change #188: In recent months.
Speaker Change #189: We're seeing we think we're in a lot of the consolidation deals and we're seeing customers.
Speaker Change #189: To make a decision either way.
Speaker Change #189: And so I think thats sort of definition only what are what our competitors are saying as well who are in those deals.
Speaker Change #189: Andy do you want to take the second half of that so.
Andy: The question was just like what is giving us confidence about billings in the next two quarters is that fair.
Dustin Moskovitz: So we will we saw stability. I think we mentioned in terms of our where retention and renewals are. I think we'll continue to partner with technology companies, but the diversification outside of tech is one of our main focus areas and we're pleased to see some early signs and positive indicators in those sectors. Okay, just following up on that with respect to logo turn and then maybe give us a sense of where you are with the sales initiatives across the four points that you're highlighting.
Andy: Yeah for sure.
Andy: Okay.
Andy: Yeah, I think what's giving us confidence is just the continued <unk>.
Speaker Change #190: Men on it across our revenue operations and execution I think some of the things that we're also seeing early signs that we've been investing a lot and.
Speaker Change #190: Enablement and ramping new reps, that's been a big initiative I mentioned earlier, just investment in streamlining our processes and Thats, both operational processes, but also systems, just making sure you know frankly that more of our reps time is spent strategically with customers and prospects.
Dustin Moskovitz: Yeah, the focus areas that we mentioned investing in more consistent post sales, including services we're seeing that services are incredibly important for larger deals. In particular migration and deployment. And so those services either provided by us or are growing partner ecosystem. I mentioned improving velocity. That's really important, especially with the bigger deals. So further streamlining our sales processes and systems. In particular, we're also excited about the energy and interest in AI products, especially from our largest customer.
Speaker Change #190: And then just consistency around being able to close the largest deal. So I think as that work continues and we're seeing that in.
Speaker Change #190: Cross all of our regions, maybe I'll also digging a little bit deeper this quarter.
Speaker Change #190: Some of the areas and regions that we saw good consistent growth where actually outside of the U S. So by geography.
Speaker Change #190: And Japan led our revenue growth and.
Speaker Change #190: We grew about 12% year over year and so those teams continue to execute really well, especially on larger deals.
Dustin Moskovitz: So it gives us an opportunity actually to have a different conversation in particular with AI councils or people within a CIO organization that are leading AI initiative and kind of opens up new avenues for us. So while it's early and we're piloting the positive feedback from our largest and most important customers who've been great and we're excited to bring that to more of our customers when we go GA. And then just reiterate my earlier point focusing on strategic industry verticals to really diversify our business. So we're working hard on all those fronts and continue to be excited that the most important for us is that our global revenue leadership team is in place. And working really well together.
Speaker Change #190: Those leadership teams have been in place a bit longer than our Americas team. So those are great leading indicators that in North America, where we've where our general managers has been in place for two quarters.
Speaker Change #190: And that's been really working with the team there will be able to start to see that in the coming quarters.
Thanks, guys.
Speaker Change #191: Our next question will come from the line of Michael Funk with Bank of America.
Speaker Change #192: Yes, hi, thank you for the questions.
Speaker Change #192: And Tim. Thank you again for all of that for all the help.
Tim: With the company.
Speaker Change #193: So a couple of you mentioned a couple of times that some deal stalled in the pipeline.
George Iwanyc: Our next question will come from the line of Alex Zuchen with Wolf Research. Hey guys, this is Rich Magnus on Braillex. Can you talk more about how the competitive landscape has evolved over the last 12 months? And separately, can you give us some more color on how to think about Billy Strins over the next two quarters? Thanks. Yeah, this is Dustin. Not going to be surprised to hear this. We haven't seen a whole lot of change in the competitive landscape in recent months.
Speaker Change #193: During the quarter.
Speaker Change #194: Be more specific about where in the pipeline they stalled.
Speaker Change #195: Presumably yes metrics on deal closure rates certain tiers.
Speaker Change #196: Closer to the end of the pipeline the deal versus the beginning.
Speaker Change #196: Any additional color or commentary there would be appreciated.
Speaker Change #197: Sure happy to add some more commentary.
Speaker Change #198: Our focus has been on moving up market and working with larger enterprise customers. We are seeing more backend loading in the quarter on the larger deals I think thats sort of just a natural evolution of our focus up market and so what we saw in those deals was that they sort of slipped from the end of Q2.
George Iwanyc: I think we're seeing, we think we're in a lot of the consolidation deals and we're seeing customers hesitate to make a decision either way. And so I think that's sort of definitionally what our competitors are seeing as well who are in those deals. And do you want to take the second half of that? So the question was just like what is giving us confidence about buildings in the next two quarters? Is that fair?
Speaker Change #198: I mentioned into Q3, but again, we're seeing signals that we were able to close those in Q3. So a lot of that is just the pattern that we're seeing as we work with larger deals and larger enterprise customers.
George Iwanyc: Yeah, for sure. Yeah, I think what's giving us confidence is just a continued improvement on it across our revenue operations and execution. I think some of the things that we're also seeing early signs that we've been investing a lot in enablement and ramping new reps. That's been a big initiative. I mentioned earlier, just investment in streamlining our processes. And that's both operational processes, but also systems, just making sure, frankly, that more of our reps time is spent strategically with customers and prospects.
Part of that is strengthening our muscle to be able to close those in quarter on and that's the focus for us.
George Iwanyc: And then just consistency around being able to close the larger deals. So I think as that work continues and we're seeing that in across all of our regions, maybe I'll also dig in a little bit deeper. This quarter, some of the areas and regions that we saw good, consistent growth were actually outside of the US. So by geography, Amia and Japan led our revenue growth and grew about 12% year-over-year. And so those teams continue to execute really well, especially on larger deals.
Speaker Change #199: Okay, and then I think if I go to the Investor focus and stock reaction aftermarket is primarily the <unk> guide.
Speaker Change #199: The greater waiting on <unk>, you know I think presume implied <unk> sequential dollar step up if you're one of the larger.
Speaker Change #199: And the last couple of years so.
Speaker Change #200: What country breakdown in the factor is can you give us to give us confidence in that for Q <unk>.
Revenue step up whether that is.
Speaker Change #200: Our forecast for let's see churn Lara.
Speaker Change #200: Large deal go lives that you have towards the end of pipeline anything to help people get more confidence in the in.
Speaker Change #201: In the backend loading of the year would be appreciated.
Tim: Hey, Michael This is Tim I think I think there's really two points one as I mentioned, we know the we know what the renewal base looks like and many of the larger renewals and downgrades that we had to lap have already happened and we feel really confident around the based on the rates that were going into the quarter with wishes with respect to renewals. So we view that.
Speaker Change #202: A headwind so that's one two.
Speaker Change #202: A good majority of the deals that didn't move from Q2 and Q3 have already closed.
George Iwanyc: Those leadership teams have been in place a bit longer than our America's teams. So those are grid leading indicators that North America where our general manager has been in place for two quarters. And has been really working with the team there will be able to sort of see that in the coming quarters. Thanks, guys.
Speaker Change #202: The pipeline continues to be healthy and I feel like we have really good visibility in terms of.
Speaker Change #202: The dials and levers.
Speaker Change #202: You know converting those deal. So it's really a combination of just like hey, lapping some of the more difficult.
Speaker Change #202: Renewables, which we have and to kind of what we're going into the quarter with.
Speaker Change #202: So if we close those deals in Q3.
Anne Raimondi: Our next question will come to the line of Michael funk with Bank of America. Yeah, hi. Thank you for the questions this evening. And Tim, thank you again for all the help with the company. So a couple of five, if I could, you mentioned a couple of times that some deal stalled in the pipeline during the quarter. Can you be more specific about where in the pipeline they stalled, you know, presumably you have metrics on deal closure rate, certain tiers, closer to the end of the pipeline, the deal versus the beginning.
Speaker Change #202: Generally the GAAP revenue Youll see will impact Q4 so.
Speaker Change #202: Our next question will come from the line of Brent Thill with Jefferies.
Speaker Change #202: Tim Congrats on eight year run.
Speaker Change #203: And looking forward to the next chapter.
Speaker Change #203: Dustin.
Dustin: You are not alone in terms of what's happening in the software industry and it feels like.
Speaker Change #204: Many are taking down guide are seeing things pushed out I guess from your perspective, what do you think is going on if you. If you had to take a look at a 40000 foot level isn't.
Anne Raimondi: So any additional color or commentary there will be appreciated. Sure, happy to add some more commentary. As our focus has been on moving up market and working with larger enterprise customers, we are seeing more back and loading in the quarter on the larger deals. I think that's sort of just a natural evolution of our focus up market. And so what we saw in those deals was that they sort of flipped from the end of Q2 as I mentioned into Q3.
Speaker Change #205: To me, what where customers have is it.
Speaker Change #206: AI stall as there is a blend of things that youre seeing what do you. What do you think is actually causing this stall out across the industry.
Speaker Change #207: Yeah, there are a few big trends.
Speaker Change #207: Obviously I think that.
Speaker Change #208: Especially what we're seeing in tech is still kind of the unwinding of the over hiring and overspending that we saw at the beginning of the pandemic and its the same thing we're doing with our own internal it projects as we're just being incredibly.
Anne Raimondi: But again, we're seeing signals that we're able to close those in Q3. So a lot of that is just a pattern that we're seeing as we work with larger deals and larger enterprise customers. And part of that is strengthening our muscle to be able to close those in quarter and that's the focus for us. Okay, and then I think investor focus and stock reaction after market is primarily the 3Q guys and the greater waiting on 4Q now I think presume or the I'm implied for 4Q sequential dollar step up.
Speaker Change #208: Incredibly judicious about starting new vendor relationships, we're trying to consolidate vendors.
Speaker Change #208: We're actively be provisioning seats.
Speaker Change #208: And all of that is just about budget control.
Speaker Change #208: And Additionally, I think.
Speaker Change #208: I T and procurement is taking the opportunity to try and.
Speaker Change #208: Consolidate and choose the vendors that theyre going to bet on for the long run but at the same time. They are trying to do that within a constrained.
Speaker Change #208: Both dollar and sort of energy environment internally and it takes a little bit of change management to do that consolidation and to push it through.
Anne Raimondi: We do one of the larger moves in the last couple of years. So, you know, what concrete breakdown of the factor is can you give us to give us confidence in that 4Q revenue step up. Whether that is, you know, your forecast for less seat churn, large deal go lines that you have towards the end of pipeline. Anything to help people get more confidence in the back in loading for the year of you appreciate it.
Speaker Change #208: And to make those big decisions that theyre going to live with for a while and they just have like a little bit less capacity to do that and then that all coupled with what I think is massive uncertainty in the economic environment and then also just with how AI is going to play.
Speaker Change #208: Play out so we've been talking a lot about this idea of lately that.
Speaker Change #208: The coming wave of AI transformation is even bigger than what people have been calling digital transformation for the past 10 years and I think that some enterprises are trying to figure out.
Anne Raimondi: Yeah, hey Michael, this is him. I think I think there's really two points. One, as I mentioned, we know the we know what the renewal base looks like and many of the larger renewals and downgrades that we have to lap have already happened. And we feel really confident around the base and the rates that we're going into the quarter with with respect to renewal. So we view that less of a headwind.
Speaker Change #209: Whether and where it may actually leapfrogged or their digital transformation and it would actually be kind of a waste of time to invest in a technology thats just going to be sort of obsolete by something else and one or two years.
Speaker Change #209: So that's a pretty difficult environment to make decisions, where again, we are often faced with those same sorts of decisions ourselves internally.
Anne Raimondi: So that's one to, you know, a good majority of the deals that didn't move from Q2 and Q3 have already closed. The pipeline continues to be healthy and I feel like we have really good visibility in terms of the dials and the levers, you know, converting those deals. So it's really a combination of just like, hey, lapping some of the more difficult renewals which we have and to kind of what we're going into the quarter with. So if we close those deals in Q3, generally the gap revenue you'll see will impact you for.
Hassan: And ended up doing proofs of concepts some things and then pulling back and trying another vendor trying to solve things and Hassan and I are not in a sauna and so I'm I'm very sympathetic and strategically what we're trying to do is meet the customers in the moment and provide a solution that can be part of their digital transformation continuity.
Hassan: And the answer to AI transformation for them by embedding AI studio by delivering AI studio and giving them the opportunity to embed AI directly in the workflows, where they already live.
Hassan: Great a quick one for Timur and.
Tim Wan: So our next question will come from the line of Brent Bill with Jeffries. Tim, congrats on the eight year run in looking forward to the next chapter. Dustin, you're not alone in terms of what's happening in the software industry. It feels like many are taking down guide or seeing things pushed out. So I guess from your perspective, what do you think is going on? If you had to take a look at a 40,000 foot level, is it consuming what customers have?
Timur: About a year ago at joined and took over on the sales side can you walk through.
Speaker Change #210: The change is kind of how far year in implementing some of those changes that he's made or maybe they're fine tunes I don't know how you would characterize.
Speaker Change #210: His.
Speaker Change #211: Strategic actions, but if you can just give us a sense of kind of where you're at for that journey, having having a ball.
Speaker Change #211: Third since last August.
Speaker Change #212: I'm happy to cover that.
Speaker Change #211: Yeah.
Speaker Change #211: Ed just across kind of the one year.
Speaker Change #213: Mark with Us and I would say the most important things that he's been doing we now have a global revenue leadership team in place general managers in all of our most important regions as well as new enterprise sales leaders and our top markets. So that's been <unk>.
Tim Wan: Is it AI stall? Is there blend of things that you're seeing? What do you think is actually causing this stall out across the industry? Yeah, there are a few big trends. You know, obviously I think that, especially what we're seeing in tech is still kind of the unwinding of the over hiring and overspending that we saw at the beginning of the pandemic. And, you know, it's the same thing we're doing with our own internal IT budgets.
Speaker Change #211: Also really important.
Speaker Change #211: And also brought onboard a new head of global channel Who's now been with us almost two quarters.
Tim Wan: We're just being incredibly judicious about starting new vendor relationships. We're trying to consolidate vendors. We're actively deprovisioning seats. And all of that is just about budget control. And additionally, I think, you know, IT and procurement is taking the opportunity to try and consolidate and choose the vendors that they're going to bet on for the long run. But at the same time, they're trying to do that within a constrained, you know, both dollar and sort of energy environment internally.
Speaker Change #211: Has been also working really diligently with our post sales teams, which is really important both services.
Speaker Change #211: Customer success.
Speaker Change #214: Renewals teams across every region and so I'd say the most important things has just been ensuring that we have the right team around the world and in all of our top markets I think some other focus areas have been really diving in on verticals, our most important verticals outside of technology and.
Tim Wan: And it takes a little bit of change management to do that consolidation and to push it through. And to make those big decisions that they're going to live with for a while. And so they just have like a little bit less capacity to do that. And then that all couples with what I think is massive uncertainty in the economic environment. And then also just with how AI is going to play out.
Speaker Change #214: So that's also where we're seeing good progress and I.
Speaker Change #214: I would also say just a really tight partnership with our global marketing team. So some of the things where we're seeing good signal that is helping us build the right kind of pipeline and the right relationships with director plus decision makers and C level decision makers as all our investments in our work innovation summits.
Tim Wan: So we've been talking a lot about this idea lately that, you know, the coming wave of AI transformation is even bigger than what people have been calling digital transformation for the past 10 years. And I think that, you know, some enterprises are trying to figure out whether and where it may actually leapfrog their digital transformation. And it would actually be, you know, kind of a waste of time to invest in a technology that's just going to be, you know, sort of obsolete it by something else in one or two years.
Speaker Change #214: That pacing has been really strong this year, we brought that event. So all of our markets. We have our two most important events coming up in October and November and just the.
Speaker Change #215: I think the customer engagement and the volume of responses and the ability to really have our global team kind of meet our customers where they are as duston said, but also meet with prospects and decision makers, who are looking at their medium to long term investment. So I think those are all and a result of the investment.
Tim Wan: So that's a pretty difficult environment to make decisions. But, you know, again, we are often faced with those same sorts of decisions ourselves internally. And, you know, end up doing proofs of concepts and things and then pulling back and trying another vendor trying to solve things in the sauna or not in the sauna. And so I'm very sympathetic. And strategically what we're trying to do is meet the customers in the moment and provide a solution that can be part of their digital transformation continuity and the answer to AI transformation for them by embedding AI studio by delivering AI studio and giving them the opportunity to embed AI directly in the workflows where they already live. And so that's what we're trying to do.
Speaker Change #215: I've been putting in place over the last year and we're excited to see more to come.
Speaker Change #215: Our next question comes from the line of Jackson Ader with Keybanc capital markets.
Jackson Ader: Alright, thanks for taking my questions guys.
Jackson Ader: And our dust and the first question for you guys on the on the impact of the tech sector, how much of the.
Modest slope in the Reacceleration curve is kind of due to that sector subdued spending now and then how much do you think that the steepening of that curve could be juiced by tech.
Dustin Moskovitz: Great, quick one for Timmer, and about a year ago Ed joined and took over on the sail side. Can you walk through the changes kind of how far you're in implementing some of those changes that he's made or made to their fine tunes? I don't know how you characterize his strategic actions, but if you can just give us the sense of kind of where you're at for that journey, having, having an onboard since last August.
Speaker Change #216: Coming back in the future as being one of the I assume an early adopter or frequent a doctor or some of your AI innovation.
Speaker Change #217: I'm not quite sure quite how to answer that but I think we've been clear that the tech is a drag on overall growth.
Dustin Moskovitz: Yeah, I'm happy to cover that. So yeah, Ed just crossed kind of a one year mark with us, and I would say the most important things that he's been doing. We now have a global revenue leadership team in place, general managers in all of our most important regions as well as new enterprise sales leaders in our top markets. So that's been also really important. Ed also brought on board a new head of global channel who's now been with us almost two quarters has been also working really diligently with our post sales teams, which is really important both services, customer success, renewals teams across every region.
Speaker Change #217: So we're seeing.
Speaker Change #217: Some segments that are growing faster than our overall growth rate right now look like they are starting to accelerate.
Speaker Change #217: Until it's tech stopped being a drag we would at least go up to those to those overall.
Speaker Change #217: Two the growth rates of the better segments and if it reaccelerate it yeah that would be fantastic, but we're certainly not.
Speaker Change #217: Modeling it that way and it's really hard to know the timing.
Speaker Change #217: But.
If they are transformation really takes off and Sona is seen as the solution of choice for that then that is definitely an excellent outcome for us.
Speaker Change #218: Right. Okay, alright, Thank you and then duston.
Duston: Couple of quick follow ups on the.
Speaker Change #219: <unk> 501.
Speaker Change #220: I've asked this before but I think it's just relative relevant again.
Dustin Moskovitz: And so I'd say that most important things has just been ensuring that we have the right team around the world and in all of our top markets. It being some other focus areas have been really diving in on verticals are most important verticals outside of technology, and so that's also where we're seeing good progress. And I would also say just a really tight partnership with our global marketing team. So some of the things where we're seeing grid signal that's helping us build the right kind of pipeline and the right relationships with director plus decision makers and sea level decision makers is all our investments in our work innovation summit.
Speaker Change #219: Yes.
Speaker Change #221: Do you do you worry at all about the you're stepping in again and again at some point.
Speaker Change #221: Counterproductive message too.
Speaker Change #221: Employees are the company around the operational and financial discipline and then.
Speaker Change #222: Second is there anything that we should take away from the relative size of this plan that starts a couple of days from now versus the 30 million shares from last year.
Speaker Change #222:
Speaker Change #223: The operational discipline thing would make more sense to me if I was funding the operations of the company.
Dustin Moskovitz: That's that pacing has been really strong this year. We brought that event to all of our markets. We have our two most important events coming up in October and November and just the I think the customer engagement and the volume of responses and the ability to really have our global team kind of meet our customers where they are. All in a result of the investment that has been putting in place over the last year, and we're excited to see more to come.
Speaker Change #224: But I think it's pretty independent our commitment to discipline on free cash flow and building up margins.
Speaker Change #224: Don't think has changed much by by me being a buyer in the market.
Speaker Change #225: In terms of the timing I just wanted to point out you know people often.
Speaker Change #225: Sort of read into when I.
Speaker Change #225: Put the plans in market or even the days they are buying and what's going on in the market are going on in the business.
Speaker Change #225: But I actually have to plan like way in advance.
Speaker Change #225: So.
Speaker Change #225: Buying plans very different are in fact during the open window. It can kind of be aggressive on a day to day basis, but for me.
Dustin Moskovitz: Our next question comes from a line of Jackson Aider with key bank capital markets. All right, thanks to our questions guys. Ann or Dustin, the first question for you guys on the impact of the tech sector. How much of the modest slope in the re acceleration curve is kind of due to that sector subdued spending now, and then how much do you think that the steepening of that curve could be juiced by tech.
Speaker Change #225: I've got a cooling off period, and then it sort of set it and forget it on what the plan is and historically I've found it difficult two two.
Speaker Change #225: To sort of predict what the market was going to do to the stock.
Speaker Change #225: During all of the uncertainty with inflation.
Speaker Change #225: And with everything that was happening.
Speaker Change #225: Before that.
Speaker Change #225: And the reason I'm entering the market now is I think this is different I think this is a point of stabilization a low point about a.
Dustin Moskovitz: Coming back in the future as being one of the I assume in early adopter or frequent adopter of some of your a i evations. Not quite sure quite how to answer that, but I think we've been clear that the tech is a drag on overall growth. And so we're seeing some segments that are growing faster than our overall growth rate right now and look like they're starting to accelerate. Until if tech stopped being a drag, we would at least go up to the growth rates of the better segments.
Speaker Change #225: A point of stabilization for the economy and for the tech sector and Relatedly for the <unk> business.
Speaker Change #225: And even though I think there'll be some continued uncertainties.
Speaker Change #225: I just feel more confident that this is this is a time in the market. When I can do this very slow process to sort of declare my intentions way in advance and not end up getting sort of too rocked by exogenous factors.
Speaker Change #225: But it's not it's not something I plan to do again and again.
Speaker Change #225: The sizing.
Speaker Change #225: The number of shares is really a function of the price schedule and I mean more made a decision around the amount of money.
Dustin Moskovitz: And if it re accelerated, yeah, that would be fantastic. We're certainly not modeling it that way, and it's really hard to know the timing. But if AR transformation really takes off and sauna is seen as the solution of choice for that, then that is definitely an excellent outcome for us. All right. Thank you. And then Dustin, a couple of quick follow-ups on the 10B51. And I know I've asked this before, but I think it's just relevant again.
Speaker Change #225: And.
Speaker Change #225: I would just say also the.
Speaker Change #225: I found it interesting to put in put in plans announced the sort of up to number and then have people sort of anchor around that I'll just emphasize that there is a price schedule.
Speaker Change #225: And I think what happened with the last plan had as much to do with what sort of prevailing market conditions is what my original intentions were.
Speaker Change #225: So pretty hard to give you a lot more detail than that without sort of revealing enough information to be front Ron.
Dustin Moskovitz: Do you worry at all about like your stepping in again and again at some point sends counterproductive message to employees or the company around operational and financial aid. And then, you know, second, is there anything that we should take away from the relative size of this plan that starts, you know, a couple of days from now versus the 30 million shares from last year. The operational discipline thing would make more sense to me if I was funding the operations of the company.
Speaker Change #225: But that's kind of where I'm at I'm intrigued by this operational discipline thing, but that that isn't really a primary lens I've had for thinking about it.
Speaker Change #226: Our last question will come from the line of Patrick Wall Ravens with citizens JMP.
Speaker Change #227: Oh, great. Thank you.
Speaker Change #228: So bigger picture here, how do you see this whole.
Speaker Change #229: World of AI agents, playing out I mean, you guys have have yours and you have.
Speaker Change #230: Nine different features I think that are generally available from one of your slides Bret Taylor just launched Sierra.
Dustin Moskovitz: But I think it's pretty independent. You know, our commitment to discipline on pre-cash flow and building up margins. I don't think it's changed much by me being a buyer in the market. In terms of the timing, you know, I just wanted to point out, you know, people often sort of read into, you know, when I put the plans in market or even the days they're buying and what's going on in the market or going on in the business.
Speaker Change #231: <unk>, just announced agent force and he said that was going to be you know the highlight a dream for so what should investors expect in terms of how these things are going to be differentiated and how do you see it playing out.
Speaker Change #232: Yeah I think.
Speaker Change #232: <unk> is an interesting time, because it means a lot of different things to different people.
Speaker Change #232: One of the things that I've seen a lot of people try and deliver and try and buy.
Dustin Moskovitz: But I actually have to plan like, way in advance. And so, you know, the company buying plan is very different. In fact, during the open window, it can kind of be aggressive on a day-to-day basis. But for me, you know, I've got the cooling off period and then I sort of set it and forget it on what the plan is. And historically, I've found it difficult to sort of predict what the market was going to do to the stock, especially during all the uncertainty with inflation.
Speaker Change #232: It's really almost the equivalent of like a humanoid physical robot just something that could theoretically be a drop in replacement to an actual person you have in the org.
Speaker Change #234: That cycle with bamboo HR wanting to onboard them and have them be part of HRS system.
Speaker Change #234: And that I think we're as a team and I know I'd robots I think we're still a few years away from at least.
And in the meantime, our point of view is you want to focus AI on more specific.
Dustin Moskovitz: And, you know, with everything that was happening, you know, in the years before that. And the reason I'm entering the market now is I think this is different. I think this is a point of stabilization, a low point, a point of stabilization for the economy and for the tech sector and relatedly for the Asana business. And, you know, even though I think there will be some continued uncertainties, I just feel more confident that this is the time in the market when I can do this very slow process to sort of clear my intentions, way in advance and not end up getting, you know, sort of too rocked by exogenous factors.
Speaker Change #234: Job to be done so it's a little more analogous to the robots at Amazon uses and its factory warehouses that are especially designed for that purpose and have.
Speaker Change #234: More well defined.
Speaker Change #234: Objectives and sort of rules of engagement.
Speaker Change #234: And I think that is how a sona agents are going to show up youre going to be able to give them.
Speaker Change #234: A specific workflow to to go off of specific instructions for each step of that workflow a predefined process.
Speaker Change #234: And knowledge bases that sort of.
Speaker Change #234: Given the rules for the road and I think that will make customers a lot more successful because they'll be able to deploy it.
Dustin Moskovitz: But it's not something I plan to do again and again. The sizing, the number of shares is really a function of the price schedule. And, you know, I mean more made a decision around the amount of money. And, you know, I'll just say also, I found it interesting to put in plans, announce a sort of up to number and then have people sort of anchor around that. You know, I'll just emphasize there is a price schedule.
Speaker Change #234: In exactly the places where it's possible to be productive without worrying about things kind of going off the rails or let's say a customer chat agents that offers refund you didn't intend.
Speaker Change #234: Just being able to put these into a much more sort of predefined workflows I think is how custom.
Speaker Change #235: Customers are going to find the slope of productivity in terms of the specific competitors you mentioned.
Speaker Change #236: I think that agents will do sort of context relevant things in total matter a little more what the product is there being introduced into and I think Sierra I don't know a whole ton about it but I think theyre coming at it more from the Swiss Army knife approach.
Dustin Moskovitz: And I think what happened with the last plan had as much to do with sort of prevailing market conditions is what my original intentions were. So pretty hard to give you a lot more detail than that without sort of revealing enough information to be front run. But that's kind of where I'm at. I'm intrigued, I guess, by this operational discipline thing, but that isn't really a primary lens I've had for thinking about it.
Speaker Change #236: It's going to be difficult to get that deployed in the short run.
Speaker Change #236: Awesome, Thank you and Tim if I could ask you a follow up so.
Speaker Change #236: Okay.
Tim: I mean, it's been great working with you and looking forward to getting to do it again, but why do you think is the number one metric that investors should be looking at for a sada.
Patrick Walravens: Our last question will come from the line of Patrick Walravens with Citizens' JMP. Oh, great. Thank you. So, um, bigger picture here, Dustin, how do you see this whole, um, world of AI agents playing out? I mean, you guys have, have yours and you have, you know, nine different features. I think that are generally available from one of your slides. Brett Taylor just launched Sierra. Any opt just announced agent force and said that was going to be, you know, the highlight of dream force.
Speaker Change #237: Once you you know after your guidance over the next year or two what is the number one thing we should be focused on to see that this business is.
Patrick Walravens: So what should investors expect in terms of how these things are going to be differentiated and how do you see it playing out? Yeah. Um, you know, I think, uh, agent is an interesting term because it means a lot of different things to different people. Um, one of the things that I've seen a lot of people try and deliver and try and buy. Uh, it is really, you know, almost the equivalent of, like, a humanoid physical robot, just something that could theoretically be a drop-in replacement to an actual person you have in York, um, even had that cycle with a bamboo HR wanting to onboard them and have them be part of the HR system.
Tim: As turnaround.
Speaker Change #238: Yes, I think the most important thing is seats I think that's one of the Northstar metric that we run the business on the more seats, we can deploy the more value we can deliver across an organization and as we add more skus and some of these AI functionality I think will be the.
Speaker Change #238: Really differentiate the product and demonstrate a lot more value, where we will have more pricing power over time.
Speaker Change #238: That concludes today's question and answer session I'd like to turn the call back to Catherine <unk> for closing remarks. Thank.
Patrick Walravens: Um, and that I think we're, you know, as with humanoid robot, I think we're still a few years away from at least. Um, and in the meantime, our point of view is you want to focus AI on more specific jobs to be done. And so it's a little more analogous to, um, the robot that Amazon uses in a factory warehouses that are especially designed for that purpose, uh, and have, uh, more well-defined objectives and sort of rules of engagement.
Catherine: Thank you so much for joining us today, and we look forward to seeing you on the road this quarter will be at the Piper Sandler Conference. The Wolfcamp, France, The Deutsche Bank Bus tour. The Keybank bus for and those are just a few off the top of my head. Most of all please join US on October 22nd in New York at our own work innovation Summit and we look forward to seeing you there. Thank you again.
Speaker Change #239: This concludes today's conference call. Thank you for participating you may now disconnect.
Patrick Walravens: Um, and I think that is how, uh, Asana agents are going to show up. You're going to be able to give them, um, you know, a specific workflow to, to go off of specific instructions for each step of that workflow, a predefined process. Um, and, uh, knowledge basis that, you know, sort of, uh, you know, yeah, give it, give it the rules for the road. And I think that will make customers a lot more successful because they'll be able to deploy it.
Patrick Walravens: Uh, in exactly the places where it's possible to be productive without worrying about things kind of going off the rails or, you know, say a customer chat agent that offers a refund you didn't intend. Um, just being able to put these into, uh, much more sort of predefined workflows, I think is how customers are going to find the slope of productivity. Uh, in terms of the specific competitors you mentioned, um, you know, I think that agents will do sort of context relevant things and so it'll matter a little more, um, what the product is they're being introduced into.
Patrick Walravens: Um, and I think Sierra, I don't know a whole ton about it, but I think they're coming at it more from the sort of Swiss Army knife approach. Um, and I think that's it's going to be difficult to get that deployed in the short run. Awesome. Thank you. And Tim, if I can ask you a follow up, so, um, and I mean, he knows been great working with you looking forward to getting to do it again.
Patrick Walravens: But what do you think is the number one metric that investors should be looking at for a sauna, you know, once you, you know, after you're gone, so over the next year or two, what's the number one thing we should be focused on to see that this business is, uh, is turning around. Yeah, I think the most important thing is seats. I think that's one of the North Star metric that we run the business on the more seats we can deploy, the more value we can deliver across an organization.
Patrick Walravens: And as we add more skews and some of these AI functionality, I think we'll be able to really differentiate the product and demonstrate a lot more value where we'll have more pricing power over. That concludes today's question and answer session.
Catherine Buan: I'd like to turn the call back to Catherine Buan for closing remarks. Thank you so much for joining us today and we look forward to seeing you on the road. This quarter will be at the Piper Sandler Conference, the Wolf Conference, the Georgia Bank bus tour, the Key Bank bus tour and those are just a few off the top of my head. Most of all, please join us on October 22nd in New York at our own work innovation summit and we look forward to seeing you there. Thank you again.
Catherine Buan: This concludes today's conference call. Thank you for participating. You may now disconnect.