Q4 2025 Asana Inc Earnings Call
Speaker Change: Thank you for standing by and welcome to Asana's fourth quarter and fiscal year 2025 earnings conference call. At this time, all participants aren't a listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. On your phone, you will need to press star 11 on your phone.
Speaker Change: To remove yourself from the question, you may press star 11 again.
Speaker Change: I would now like to hand the call over to Evelyn, Head of Investor Relations, please go ahead.
Eva Leung: Good afternoon and thank you for joining us on today's conference call to discuss the financial results for respondents both quarter and fiscal year 2025.
Dustin Moskovitz: With me on today's call at Dustin Moskovitz, Asana's co-founder and CEO , Anne Raimondi, our Chief Operating Officer, and Head of Business, and Sonalee Parekh, our Chief Financial Officer.
Dustin Moskovitz: Today's call will include four looking statements, including statements regarding the expected release and benefits of our product offerings including AI Studio and our expectation for revenue to be generated by AI Studio, our expectation for our financial outlook, strategic plans, our market position and growth opportunities.
Dustin Moskovitz: Forward-looking statements involve risks, uncertainties, and assumptions that make cost our actual results to be materially different from those expressed in or implied by the forward-looking
Dustin Moskovitz: Please refer to our filings with the SEC, including a most recent annual report on form 10K and quarter report on form 10Q, for additional information on risks, uncertainties and assumptions that may cause actual results to differ materially from those steps forth in such statements.
Speaker Change: A reconciliation between GAAP and non-GAAP financial measures and a discussion of the limitations of using non-GAAP measures versus their closest GAAP equivalents are available in our earnings release, which is posted on our Investor Relations website at Investor thought assign on dot com and with that I'd like to turn the call over to <unk>.
Dustin Moskovitz: Duston.
Speaker Change: You all for joining us on the call today, we delivered solid Q4 results while building the foundation for profitable growth and continued innovation.
Speaker Change: In Q4 total revenues were up over 10% year over year exceeding the top end of our guidance when adjusted for the impact of currency by using prior year FX rates.
Speaker Change: This reflects continued stabilization in our growth rate.
Speaker Change: non-GAAP operating margins improved more than 800 basis points year over year from an operating loss margin of 9% to an operating loss margin of 1%.
We expect to reach non-GAAP profitability in Q1, this year, which Tony will discuss in more detail.
Speaker Change: And we hit a significant milestone in our company's history as we reached positive free cash flow for the full year fiscal year 'twenty five I'm, particularly proud of the team for managing towards this achievement, while simultaneously investing in growth and establishing <unk> as a multi product company.
Speaker Change: Once again, our non tech verticals grew faster than overall growth for the quarter and were up 15% year over year, a slight acceleration when adjusted for currency.
Speaker Change: Some of our fastest growing verticals this quarter included manufacturing and energy consumer retail and media.
Speaker Change: We continue to make progress in our enterprise customer acquisition are $100000 in over customers grew 20% year over year and accelerated from last quarter.
Speaker Change: Overall in our core customer and RR were stable and we saw an uptick in in quarter and IRR for these cohorts.
Speaker Change: During the quarter, we continued to execute on our enterprise strategy made significant progress in improving profitability and entered a new era as we established ourselves as a multi product company with AI studio.
Speaker Change: This quarter marks a pivotal moment for us as we chart, our course towards becoming the definitive platform for human AI coordination.
Speaker Change: It starts with AI studio.
Speaker Change: Even before general availability the momentum is exceeding our expectations.
Speaker Change: Hundreds of our largest customers are now actively running smart workflows powered by AI studio.
Speaker Change: While we anticipated strong enterprise interest we've been struck by the breadth of demand across all segments.
Speaker Change: <unk> response from mid market and small business customers prompted us to accelerate our self serve offering which we intend to launch around mid year.
Speaker Change: To date thousands of customers have enabled AI studio with particularly strong adoption in the EMEA region, which is notable given the increased scrutiny and higher bar for AI deployment in that region.
Speaker Change: We're seeing significant customer demand across industries from manufacturing and financial services to health care and technology.
Speaker Change: What's particularly exciting is how quickly customers are realizing concrete volume.
Speaker Change: For example, one global media company has reduced manual work in their creative request process by 60%, while decreasing overall request processing times by 69%.
Speaker Change: This customer in a matter of a few months as device purchased additional credits that in total exceed its initial platform credit allotment by 150%.
Speaker Change: We're standing up a dedicated sales team the AI studio specialists to capitalize on this opportunity.
Speaker Change: With millions of pipeline in general availability launching later in Q1, plus thousands of smart workflows already running across our customer base, we're more confident than ever in AI studios transformative potential.
Speaker Change: Stepping back my vision for <unk> is to be defining platform for human AI coordination.
Speaker Change: This isn't just about adding AI features it's about fundamentally transforming how organizations coordinate and execute work at scale, enabling more and higher level work to become self driving overtime.
Speaker Change: And what's important to understand is AI studio goes beyond basic AI summarization and chat it orchestrates real work.
Speaker Change: Our approach mirrors, how organizations themselves adopt AI, starting with specific well defined processes and expanding to more dynamic collaboration as trust grows.
Speaker Change: What sets us apart is our unique foundation the Warcraft.
Speaker Change: Unlike standalone AI chat bots are simple task automation, we provide a structured intuitive framework that both humans and AI and can navigate a altogether.
Speaker Change: This enables us to deliver AI capabilities, exactly where teams work with the essential context security controls that enterprises demand.
Speaker Change: And our power extends beyond their proverbial walls.
Speaker Change: Our strategy is to be the central coordination layer for humans and AI across all teams and tools.
Speaker Change: When work happens in the Sana originates in other systems, we intelligently coordinate the right actions getting approvals requesting supplies and generating creative assets, all while maintaining complete accountability.
Speaker Change: Ai's studio is not only strengthening our core value proposition and the workflows customers rely on us on a for everyday it's also unlocking entirely new use cases.
Speaker Change: One of our customers a leading Swiss healthcare company is now using AI studio to revolutionize SAP process testing by using AI to math complex workflows and dependencies automatically.
Speaker Change: This system eliminates manual review of 50, plus page documents creates task based on SAP P codes and signs roles dynamically.
Speaker Change: This saves 13 multiple working days of manual analysis.
Speaker Change: And the same company as also transform technician report handling.
Speaker Change: They previously lost an estimated $1 million annually to manual data entry errors, while processing a high volume of daily PDF reports.
Speaker Change: Now AI studio automatically converts these reports infrastructure dishonour to us.
Speaker Change: Cutting processing time from months to hours.
Speaker Change: All communication flows through the task level, eliminating email chains and improving accuracy.
Speaker Change: Our own security team has transformed their mission critical workflows with AI studio.
Speaker Change: We use AI studio to transform alert and vulnerability management with AI teammates Triaging alerts into three categories malicious threats requiring investigation.
Speaker Change: <unk> threats, requiring no action and false positives to ignore.
Speaker Change: Every AI action remains and spectacle with clear approval workflows, enabling humans to guide and refine the AI work.
AI will increasingly be apart and how the world accomplishes work and the limiting factor is not going to be AI capability, but the ability for humans to coordinate guide and collaborate with AI.
Speaker Change: Hassan is positioned to be the first and best fully unlock this potential.
We see <unk> evolving along two possible paths gradual evolution or rapid emergence of agi.
Speaker Change: <unk> is well positioned for either scenario.
Speaker Change: As AI continues to advance organizations need a trusted coordination layer that bridges employees AI systems and enterprise tools we.
Speaker Change: We provide the critical structure security and serve ability that makes AI workflows governable at scale.
Speaker Change: Protecting goals task departments in ways that meet enterprise compliance requirements.
Speaker Change: And we've been laying the groundwork for many years importantly, the core fundamentals, we built into the Warcraft project structure sharing models permission systems and collaboration frameworks are likely to become requirements for any platform seeking to coordinate AI and human work at scale.
Speaker Change: We see other platforms, including the leading AI labs themselves are realizing they need at least some of the structure to make AI useful contacts industrial beginning to add basic versions of these capabilities like simple project sharing in AI chat interfaces and lightweight tests.
Speaker Change: And what were previously simple message in response chat interfaces.
Speaker Change: We've spent years refining these essential building blocks and real world enterprise context, putting mature automation system around them and integrating with other services.
Speaker Change: This gives us a significant head start instead of having to build and test. These foundational elements from scratch, we can focus on extending our proven structures to support new AI capabilities that we can leverage from the leading AI providers.
Speaker Change: So I'm surprised that that many of the leading AI labs are themselves long term <unk> customers.
Speaker Change: In fiscal 'twenty, six we'll build more autonomous agents it capabilities into AI studio, enabling an adaptive approach to complex work managements that customers can delegate as much or as little of a process to an agent as desired.
Speaker Change: These agents will be designed to intelligently manage both structured and open ended work by decomposing complex campaigns into step by step workflows.
Speaker Change: <unk> assigning tasks across teams, including to other AI agents.
Monitoring progress with real time adjustments.
Speaker Change: Again, if I and bottlenecks before they impact deadlines and seamlessly coordinating work across various teams tools, all while maintaining human oversight and approval where needed.
Speaker Change: This blend of flexibility and predictability will help teams work more efficiently, while maintaining appropriate controls and oversight.
Speaker Change: Moreover, our system is built so humans remaining loop.
Speaker Change: For example, if the AI suggest rewriting a sensitive contract Hassan I can require approval using our built in approval workflows before changes go lives.
Speaker Change: This model fosters predictability and confidence that AI will act within well-defined guardrails without requiring you to follow every step as it happens.
Speaker Change: What's also distinctive Amazon is our competitive advantage doesn't depend on owning massive amounts of data.
Speaker Change: Instead, we ask solid orchestrating work across multiple AI agents in human teams managing complex axis controls and governance frameworks and connecting cross system workflows with enterprise grade reliability.
Speaker Change: The core fundamentals, we built into the Warcraft project and processed structures sharing models permission systems and collaboration frameworks give us a big head start and position us to lead the coordination of AI and human work at scale.
Speaker Change: Our differentiation stems from three key advantages are.
Speaker Change: Warcraft clear boundaries and permissions that gives teams transparency and control.
Speaker Change: Sophisticated human AI collaboration within spectral actions and improve our workflows and enterprise ready security with well engineered access controls comprehensive audit trails and industry, leading compliance frameworks.
Speaker Change: As I've mentioned in previous calls, we're evolving our pricing model to align with the value we deliver through AI studio and other advanced capabilities, enabling organizations to scale AI adoption effectively while maintaining clarity and control.
Speaker Change: This is a new monetization avenue for us not relying on seats, a small number of users can be large consumers and represent a significant revenue opportunity.
Speaker Change: We've structured it in two tiers basic and pro.
Speaker Change: <unk> runs on a credit system think.
Speaker Change: Bank of credits is the fuel for AI workflows.
Speaker Change: All paying customers have AI studio basic and the monthly credit allowance scales with the levels.
Speaker Change: When teams are ready to scale their usage they can move to our approach here.
Speaker Change: The pro tier, which comes with a much larger quarterly credit allowance must purchase extra credits if needed and the auction for implementation services to help teams redesign their workflows.
Speaker Change: We built the structure to support organizations at every stage of their AI adoption journey.
Speaker Change: Before I hand, it off to and I wanted to take a moment to discuss the leadership transition process, we announced earlier today.
Speaker Change: To best position this honor to redefine the future of work through AI and capitalize on a generational opportunity, we announced that I plan to transition from day to day operations in the CEO role to board chair.
Speaker Change: This will allow me to focus on our AI product vision and strategy, ensuring a sona maintains its category leadership amid the evolving AI landscape that is reshaping our industry.
Speaker Change: I'm looking forward to this more focused contribution where I believe I can add the greatest value to us on a going forward, while stepping away from the day to day operational demands that a CEO must prioritize.
In addition, I plan to focus more on my philanthropic work through my Foundation good ventures.
Speaker Change: As I reflect on my journey with us on us since co founding at nearly 17 years ago I'm filled with immense gratitude.
Speaker Change: Creating and leading US Ana has been more than just building a company. It's been a profound privilege to build something that helps teams do their most meaningful work.
Speaker Change: What began as a small internal tool at Facebook has evolved into a global platform empowering millions of users and nearly 200 countries.
Speaker Change: We've weathered market shifts navigated pandemic taken the company public and build something that truly matters.
Speaker Change: All while maintaining the values that make us unique.
Speaker Change: The board has engaged in a thorough process with a leading executive search firm to identify the right successor to oversee Hassan his next phase of growth.
Speaker Change: I will provide my full assistance to the board and the search and transition and support my successor, when the time comes.
Speaker Change: And I will remain CEO until a successor begins enrolling.
Speaker Change: I plan to maintain my shareholding in the company given my confidence in <unk> ability to leverage AI to continue transforming how work gets done and create significant long term value.
Speaker Change: As you'll hear more from an and suddenly.
Speaker Change: We're getting better than ever and allocating our resources effectively to drive productivity boost cash flow and strengthen our financial profile.
Speaker Change: Youre seeing that clearly in the margin expansion, we delivered in fiscal year 'twenty five and will continue to deliver in fiscal year 'twenty six.
Speaker Change: I'm confident that an experienced leader well matched to the company's scale and potential we will build on this on a strong track record of innovation, including the recent launch of AI studio.
Speaker Change: Sure in a new era of growth and profitability.
Speaker Change: And with that let me turn it over to Ann to discuss our go to market.
Speaker Change: Initiatives.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: On behalf of all of <unk> I wanted to extend my heartfelt appreciation for your unwavering commitment.
Speaker Change: And thank you for your pivotal contributions and scaling our business.
Speaker Change: You have redefined how we work and collaborate and set the stage for the company to lead in the new era of human AI collaboration.
Speaker Change: When a new CEO is named I'm excited to work alongside you in your role as chair to define our AI strategy and vision and further our commitment to empowering global collaboration and driving long term profitable growth.
Speaker Change: The strategic investments, we've made and continue to make to strengthen our enterprise footprint I delivering meaningful impact.
Speaker Change: We continue to see strong expansion and renewals from our large enterprise customers, including Epson Morningstar Alliance Global Food company based in Europe.
Speaker Change: Leading customer relationship management platform company and a cyber security company in the U S to name just a few.
Speaker Change: We set a new record for multiyear deals this quarter, a testament to our enterprise customers confidence in Astana, and our long term strategic productivity and collaboration benefits we deliver.
Speaker Change: Through our integration with Amazon Q business, which was announced by Amazon at their reinvent conference. This past December Hassan is now an even more powerful solution for enterprises looking to transform the way they work.
Speaker Change: This integration offers enterprises smarter workflows improve productivity and deeper insights that drive efficiency at scale.
Speaker Change: Our investment in vertically focused go to market teams and driving adoption of vertical specific product use cases is resulting in strong growth in our non tech verticals, which grew similarly to last quarter in the mid teens accounting for over 70% of our business.
Speaker Change: We are seeing particular strength in health care manufacturing retail and consumer goods and media and entertainment and.
Speaker Change: A few customer examples in our strategic verticals I want to highlight <unk>, we added a new biotech customer in Japan, who selected us on are primarily for our AI studio capabilities.
Speaker Change: They will be using our platform to manage their drug stability testing, replacing their previously manual excel based process.
Speaker Change: Judy can help them automatically setup complex drug safety testing projects with dynamic requirements and extensive task structures.
Speaker Change: It eliminates manual tasks creation and provides more flexibility and standard project templates, while reducing workload for the employees.
Speaker Change: We continue to see growth within the manufacturing sector, especially with a studio where we have built a large and growing pipeline for.
Speaker Change: For example, one of the world's leading overhead crane and hoist manufacturer based in Germany relies on us on it and is leveraging a studio to digitize their work processes to increase transparency and efficiency. So they can adapt to meet market requirements.
Speaker Change: Hassan is used across the company, including production and facility management.
Speaker Change: While tech continues to drag on our overall growth on a constant currency basis, we saw another quarter of stabilization of <unk> in this vertical.
Speaker Change: In the quarter, we added zoom info, a leading go to market intelligence platform as a new customer as they will leverage <unk> to be the platform of choice for their marketing campaign launches and with our PMO team.
Speaker Change: International markets remain a key strength of our business driven by growing global demand for our platform.
Speaker Change: As organizations worldwide recognized the value of a sauna and streamlining collaboration and driving productivity. Our international revenue grew 14% year over year, reflecting an acceleration in growth from the previous quarter.
Speaker Change: Despite our successes in moving up market with non tech verticals and internationally, we have more work to do to accelerate growth in particular, continuing to offset the macro driven impact on expansion with new business better allocating our go to market resources to drive increased productivity and expanding our presence with the channel.
Speaker Change: First new business, we have strategically shifted our focus to accelerate new business acquisition. This has led to strong growth in new business bookings in fiscal year 'twenty five and it will continue to be a key focus in fiscal year 'twenty six.
Speaker Change: New business has helped to offset the impact of headwinds to expansion, partly due to broader macro economic softness, particularly in the technology vertical where we expect macro driven softness to persist.
Speaker Change: While gross retention has been stable our net retention rate has been most impacted by pressure on expansion.
Speaker Change: To accelerate the pace of new business acquisition and increase our retention and ability to expand with new customers over time, we are refining our pricing and packaging strategies to better align price to customer value along the customer journey and within each market.
Speaker Change: This is a key lever to ensure customers remain engaged and that any friction around cost versus value is minimized.
Speaker Change: For our self service customers, we believe better aligning price to value will drive growth in the pipeline improve conversion enhance retention and drive the adoption of a studio.
Speaker Change: Price test in select geographic markets have shown a positive trade off between price and steep volume.
Speaker Change: We plan to rollout self service pricing changes in select geographic markets later this year.
Speaker Change: For enterprise and sales lead customers aligning price to value for new business in fiscal year 'twenty five has been a key strength with the growth from new business offsetting the headwinds we have faced from that retention.
Speaker Change: As a result of proper price to value alignment. We expect these customers to both scale up the size of their initial deployment and become more likely to expand seats and progressively adopt our higher value functionality over time. We believe this creates a natural growth pathway that benefits both customers and Astana.
Speaker Change: In addition, we are delivering increased value to customers with AI studio and other add ons later this year, such as resource management, which add incremental revenue streams to offset expansion pressure from upselling seats and packages.
Speaker Change: Add ons given the value they deliver to customers also lead to higher retention customers and our consumption revenue stream from a subset of a studio customers.
Speaker Change: Our entire go to market organization has now enabled on ask studio and it will be generally available to all customers in Q1.
Speaker Change: Despite being an early access as Duston mentioned, we already have multimillion dollar pipeline paying customers and thousands of smart workflows running across our customer base.
Speaker Change: We've also implemented a more systematic approach to new customer onboarding, ensuring customers adopt our higher value use cases early in their journey and realize value early on.
Speaker Change: We saw adoption of more advanced features like portfolios goals reporting and resource management increased by over 50% in the past year.
Speaker Change: In addition, we are delivering personalized pre configured use cases tailored to industries roles and organizational needs.
Speaker Change: We believe this can lead to increased adoption of workflows in a sauna, which drives more value and opens up a studio opportunities in our base.
Speaker Change: The introduction of view only licenses expose a greater portion of our customers employees tests on his capabilities, which we believe will lead to increased adoption and future upgrades to paid licenses.
Speaker Change: We have seen some early evidence of this with 25% of view only users converting to paid licenses since we launched the only in 2023.
Speaker Change: Second resource allocation and sales and marketing productivity, we reallocated resources to optimize capacity alignment across segments geographic territories and marketing channels. This includes both reallocating resources and making investments in channel AI studio specialists and vertically focused team to drive increased.
Speaker Change: Activity expand our reach and scale our studio motion.
Speaker Change: We anticipate productivity metrics to show improvement throughout the year because of better territory design and allocation of resources and investments into higher growth motions.
Speaker Change: Third increasing our channel presence, we recognize that we're underpenetrated with the channel, which is a significant portion of the market and a key growth driver, where we have experienced significantly higher net retention rates.
Speaker Change: We've already implemented a new channel strategy and though its still early we've had significant wins through partners and have experienced very strong growth in partner sourced deals in fiscal year 'twenty five.
Speaker Change: We have expanded our partner community, adding several large system integrators, including Datacom in Australia, a major systems integrator in Japan, and a teaming agreement with a global systems integrator based in the United States.
Speaker Change: To accelerate our presence with the channel further we are revamping our partner program, which will include new tooling and a partner Academy and directory, which are set to launch in Q1.
Speaker Change: This program will better incentivize the partners through a performance based sharing framework.
Speaker Change: In addition, we have transitioned selected geographic regions from direct sales to channel that distribution to better expand our reach in these markets in a more cost effective manner.
Speaker Change: Our strategic priorities and growth initiatives are centered around the customer.
Speaker Change: We believe these initiatives will ultimately lead to increased seat growth improved customer retention and long term growth acceleration.
Speaker Change: I am excited to share the progress we are making executing against these priorities throughout fiscal year 'twenty six.
Ali: Now I'll turn it over to Ali.
Ali: Thanks, Ed.
Ali: And I also want to share my sincere thanks for everything you've done to make us onto the great company. It is today.
Ali: I look forward to partnering closely with you in your new role as we establish a sona is the leading platform for human AI coordination and Usher in a new era of growth and profitability.
Ali: Now onto the quarterly results.
Ali: Q4 revenues came in at $188 3 million up 10% year over year.
Ali: If we adjusted for currency impact by using prior year FX rates revenues would have been $189 1 million up 10, 5% year over year.
Ali: We have 24062 core customers or customer spending $5000 or more on an annualized basis.
Ali: Revenues from core customers grew 11% year over year.
Ali: This cohort represented 75% of our revenues in Q4, consistent with the year ago quarter.
Ali: We have 726 customers spending $100000 or more on an annualized basis and this customer cohort grew at 20% year over year, an acceleration for two consecutive quarters.
Ali: As a reminder, we define these customer cohorts based on annualized GAAP revenues in a given quarter.
Ali: Our overall dollar based net retention rate was 96%.
Ali: Our dollar based net retention rate for our core customers was 97%.
Ali: And among customers spending $100000 or more our dollar based net retention rate was 96%.
Ali: As a reminder, our dollar based net retention rate is a trailing four quarter average calculation and thus a lagging indicator.
Ali: However, it's important to highlight the in quarter trend as we go through this transition.
Once again, our in quarter dollar based net retention rates were stable in Q4 overall and core customer dollar based net retention continued to improve and was slightly better than Q3.
Ali: Now moving to profitability, where I will be discussing non-GAAP results.
Ali: Gross margins came in at 90%.
Ali: Research and development with $54 7 million or 29% of revenue.
Ali: Sales and marketing was $85 million or 45% of revenue.
Ali: G&A was $31 1 million or 17% of revenue.
Ali: Operating loss was $1 7 million and our operating loss margin was 1%, which improved over 800 basis points versus last year and over 200 basis points better than our guidance.
Ali: Net loss was 438000 and our net loss per share was zero cents.
Ali: Our profitability improvement was and will continue to be driven by five main leavers.
Ali: One we are seeing the benefits of operating leverage as we scale given our recurring revenue base and 90% gross margin.
Two we are prioritizing more efficient labor spend and taking further steps to improve the productivity of our workforce.
Ali: We made the extremely difficult decision last month to reduce our full time workforce by approximately 5% to ensure our cost base is aligned with our strategic priorities and we enhance our ability to reallocate spend to areas that drive higher productivity and position us for long term revenue growth acceleration.
Ali: This action impacted R&D sales and marketing and G&A and.
Ali: And thus, we expect to deliver meaningful cost improvement in all three areas in fiscal year 'twenty six.
Ali: Three we are rationalizing and reallocating program spend such as marketing and lead generation activities to ensure they meet our our ROI hurdle rates as well as being judicious around all discretionary spend.
Ali: Four we are consolidating vendors to simplify our procurement process and deploying AI studio throughout our organization to drive increased productivity.
Ali: One example, being our security team leveraging AI studio for alert and vulnerability management, which has reduced our reliance on an external vendor in this area.
Ali: Five we have and will continue to shift a portion of new hiring and back filling to lower cost locations like Warsaw, and Reykjavik to drive closer towards industry benchmarks for onshore offshore mix of head count.
Ali: The net result of these initiatives is an expected over 1000 basis point expansion in our non-GAAP operating margin in fiscal year 'twenty six versus fiscal year 'twenty five.
Ali: Continuing the momentum on the 800 plus basis point margin improvement, we already made this past quarter.
Looking at highlights from the full fiscal year.
Ali: Fiscal year revenue grew 11% year over year to $723 9 million.
Ali: We added over 2400 core customers during the year.
Ali: Revenue from our core customers grew over 12% year over year.
Ali: This cohort represented 72% of our revenues for the full year.
Ali: And we also added nearly 120 customers spending $100000 or more on an annualized basis during the year.
Ali: Moving onto balance sheet and cash flow.
Ali: Cash and marketable securities at the end of Q4 were approximately $466 9 million.
Ali: Our remaining performance obligations or RP O with $430 8 million up 23% from the year ago quarter.
Ali: This is a re acceleration from last quarter, driven by multiyear deals and conversion of monthly and annual contracts to multiyear at renewal.
Ali: 81% of <unk> will be recognized over the next 12 months.
Ali: That current portion of our P. O also accelerated and grew 19% from the year ago quarter.
Ali: Our total ending Q4 deferred revenue was $302 8 million up 12% year over year.
Ali: We achieved a significant milestone this quarter and generating positive free cash flow above the target. We set in Q4 of last year and ending the fiscal year with positive free cash flow for the full year.
Ali: Q4 free cash flow was $12 3 million or 7% on a margin basis.
Ali: Free cash flow for the full fiscal year was $2 6 million, a $34 million improvement year over year.
Ali: Related to the head count actions, we took in February to reduce our workforce by approximately 5% we.
Ali: We incurred a $4 5 million restructuring charge in Q4 and expect to incur an additional $2 5 million in Q1.
Ali: We expect to make the full 7 million cash payment associated with this charge in Q1.
Ali: Moving to guidance.
Ali: Underlying our guidance are the following assumptions.
Ali: While we believe there is increasing risk of a macroeconomic slowdown in our guidance, we've assumed no material change to the current macroeconomic climate or spending environment.
Ali: This includes SMB enterprise and the technology sector, the latter of which has been a headwind to our overall growth.
Two as Anne outlined we are optimizing our go to market by reallocating a portion of resources, where we had overcapacity in certain territories motion and marketing channels to higher growth and ROI emotions and channels.
Ali: This includes both reallocation and additional investment that has been freed up through our efficiency initiatives.
Ali: While the full impact of these investments will take several quarters to materialize, we expect to see incremental revenue benefits beginning in the second half of fiscal year 'twenty six with more meaningful acceleration of revenue and and are are in fiscal year 'twenty seven.
Ali: As a result, we anticipate our a R. Our growth will outpace our revenue growth in fiscal year 'twenty six.
Ali: <unk> studio has the potential to drive material contribution to our growth. However, it is still early with the product only going into G. Later this quarter.
Ali: Until adoption and usage patterns become clearer and we cannot project the impact of AI studio with greater Fidelity, we're factoring in a modest contribution from AI studio in fiscal year 'twenty six.
Ali: For the full impact of cost efficiency and productivity initiatives will be realized fully by Q4 'twenty six.
Ali: Given this ramp we expect to see sequential improvement in our operating margin over the course of this year with an exit Q4 fiscal year 'twenty six operating margin that is in excess of our full year guidance.
Ali: Okay.
Ali: Given the strengthening of the dollar in Q4, particularly versus the euro and yen, which represent our largest exposure we have experienced a reduction to annual recurring revenue attributable to exchange rate fluctuations and thus impact our guidance for Q1 and full year fiscal year 'twenty six four.
Ali: Q1 fiscal 'twenty six.
Ali: We expect.
Ali: Revenues of $184 5 million to $186 $5 million, representing 7% to 8% growth year over year.
Ali: Adjusting for currency impact using prior year FX rates.
Ali: The leap year impact on Q1 revenue.
Ali: Growth rates would have been 9% to 10%.
Ali: We expect non-GAAP operating profit of 2 million to 3 million, representing an operating margin of 1% to 2%.
Ali: And we expect non-GAAP net income per share of <unk>.
Ali: Assuming a diluted weighted average shares outstanding of approximately $245 million.
Ali: For the full fiscal year 2026, we expect revenues to be in a range of $782 million to $790 million, representing a growth rate of 8% to 9% year over year.
Ali: Adjusting for currency impact using prior year FX rates.
Ali: On full year revenue our growth rate would have been 9% to 10%.
Ali: We expect non-GAAP operating margin of at least 5%.
Ali: non-GAAP net income per share of 19 to 20.
Ali: Assuming a diluted weighted average shares outstanding of approximately $247 million.
Dustin Moskovitz: As I shared last quarter, Duston, and and I are focused on executing on our long term plan that enables us to accelerate growth while materially expanding profitability.
Dustin Moskovitz: We have transformed ourselves into a multi product company and believe the investments we are making position us for long term growth acceleration and strengthen our position as the CW am leader and the age of AI.
Speaker Change: And with that operator, we are ready for questions.
Speaker Change: As a reminder to ask a question you will need to press star one on your telephone to remove yourself from the queue. You May press star one again.
Speaker Change: You will be limited to one question and one follow up to allow everyone the opportunity to participate.
Speaker Change: Please standby, while we compile the Q&A roster.
Our first question.
Speaker Change: It comes from pendulum Bora of J P. Morgan.
Speaker Change: Your question please pendulum.
Speaker Change: Oh, great. Thanks, so much for taking the question. So now two questions for you.
Speaker Change: Maybe unpack the assumptions in the guidance a little bit what are you assuming from an Austin MLR standpoint is that.
Speaker Change: Are you assuming that going above 100% and then it seems like AI.
Speaker Change: You are seeing some modest contribution there any way to quantify that and then lastly on efficiency.
Speaker Change: You're already it seems like talking about a thousand basis point improvement to plus 5% that's impressive.
Speaker Change: But as we embark on this journey how do you define success. If we if we kind of look forward a couple of years, where the core does that 5% go where do you think are kind of the low hanging fruit on kind of the opex lines and where they settle over the next couple of years. Thank you very much.
Speaker Change: Sure sure.
Speaker Change: Thanks for the question I'm going to start and then I may hand over to Dustin just on the AI studio part and then.
Speaker Change: Cover your a question around the margin guide as well so firstly on putting the guide into context first and foremost what I would say is that if you look at the Q1 guide there is a full two percentage points of impact that's factored in from both the leap year from last year that obviously didn't occur this year.
Speaker Change: As well as FX, so ex that our guidance would have been two percentage points higher on topline.
Speaker Change: And that's because on a currency basis about 25% of our <unk> is non dollar denominated.
Speaker Change: And then if you also look at Q1 last year. So Q1 'twenty five although typically Q1 is a seasonally weak quarter for us. If you look at Q1 'twenty five it was actually a very strong growth quarter in terms of revenue growth, but a less good quarter in terms of bookings. So it's also an extremely difficult comp.
Speaker Change: So what I would say there is as I think about Q1, I'm thinking about acceleration in terms of a or our growth. So our growth is expected to outpace.
Dustin Moskovitz: Our revenue growth in Q1 and that actually should hold true for the full year as well now obviously, we don't guide on the air but I think it's important just in terms of understanding that <unk> is the leading indicator and that we do expect to outpace our overall revenue growth for the year I was just going to hand over to duston on the.
Dustin Moskovitz: Studio impact in that guide.
Dustin Moskovitz: Great.
Dustin Moskovitz: This would would come up because last on last quarter's call I was very enthusiastic about AI studio and I still am but I mentioned I really think of it as a very high beta opportunity. So it could be a solid base hit for the company or it could be a grand Slam and I want to explain why it's been hard to narrow the range of expectations and loss.
Dustin Moskovitz: Why we haven't given you a more exciting guide or more data to build a proper model.
Dustin Moskovitz: When we've been forecasting internally, we repeatedly come to two specific variables that the models are incredibly sensitive to.
Dustin Moskovitz: But theyre actually tiny percent with very large air margins. So they create big swings in the outcome.
Dustin Moskovitz: So the first is how many of our customers are going to adopt studio at all.
Dustin Moskovitz: And generally how many of our users are potential workflow builders. So we started by approaching our power users. The people, who we think make great early adopters, that's going really well I think we can forecast that now.
Dustin Moskovitz: But there's a much larger potential population of non power users and the difference between converting one or three or 5% of that population is just a massive swing in the model and it's really going to depend on things like how effective our marketing is and how easy how easy we make it to customize out of box workflows. So I think we're going to learn a lot more about that when we launch our self serve around mid year and as we.
Dustin Moskovitz: Improve the builder experience out of box workflow experience.
Dustin Moskovitz: Second Big one and I think this will be universal to all consumption AI models.
Dustin Moskovitz: Internally and externally I've seen people try and estimate the average level of consumption to understand how we will build a consumption business and I feel very clear, that's just not going to be the correct way to model. It instead theres going to be a stratification with a small portion of customers consuming the vast majority of credits like an 80, 20 rule or probably a power law distribution and <unk>.
Dustin Moskovitz: I've seen plenty enough to be fully confident we're going to have some of those as we refer to them whales individual customers paying six figures, maybe even seven figures for consumption by the end of the year, but I haven't seen enough to know whether theres going to be five of those or 50 or even 5000. So again massive swing on the model. Finally, the channel is just getting ramped up on AI studio and we've already.
Dustin Moskovitz: Our partner network nearly eight acts since the end of Q1 and partners are I think that's the end of Q4, but partner is going to be key to driving AI studio and really think there's a lot of potential there and in fact, we've already had one of our initial customers. The builder inside that customer was so excited about AI studio.
Dustin Moskovitz: He is deciding to maybe spin out and actually start a consultancy dedicated on us on AI studio workflows. So that's how big the opportunity is there. So all that's to say we are guiding very modestly on AI steel specifically until we can get better resolution on those variables, but feel really good about the proof points. We're seeing a lot of compounding usage over time are the cohorts in general are compounding their usage over time.
Dustin Moskovitz: But the individual customers really are as well so we're seeing exactly like I hope for.
Dustin Moskovitz: You create one of these workflows and then they automatically run its not like engaging a chat bot, where you've got a change of behavior and come back to it over and over so.
Dustin Moskovitz: So for example in the last call I mentioned, our biggest customer had scaled from 2000 to 20000 workflows in one quarter that same customers executed almost 300000 workflows. Since then so you can really see the potential for this to go exponential.
Dustin Moskovitz: Yeah.
Speaker Change: Thanks, and now just to address your question on margins and just how high can they go.
Speaker Change: So you're absolutely right. We're really pleased with what we managed to grow margins in Q4, and you obviously saw how I guided on Q1 in terms of operating margin, which is 1% to 2% versus the full year guide of 5%. So it's really implying a continued sequential increase in operating.
Speaker Change: <unk>, which we feel really confident about.
Speaker Change: And you can imagine that at Q4, where we're likely to exit again looking at that one to two to five it will be significantly higher than 5%. So that's what we go into fiscal year 'twenty seven at and then if you factor in the operating leverage.
Speaker Change: When you consider where our close to 90% gross margin business that continues as well as continued discipline that we will be.
Speaker Change: Be employing around our hiring as well as discretionary spend some of the things that we called out in this past quarter you should see a continued evolution in that margin in terms of where we can go on a three to five year view them I would say, there's still a lot more to go for I'm not actually going to guide on this call.
Speaker Change: But I would say the trajectory that youre seeing that 1100 or over a 1000 basis point improvement this year, but we do feel very confident that we'll be able to continue at a similar rate.
Speaker Change: And I just want to add just in case, there's a follow up we've got a long queue. So we're going to keep things to one question and one follow up or three questions and no follow ups. So we'll go to the next caller.
Speaker Change: Our next question.
Comes from Michael Funk of Bank of America. Your question. Please Michael Yes.
Speaker Change: Thank you for the question and first off congratulations everything you've achieved.
Speaker Change: Good luck with your next chapter.
Speaker Change: We worked on traffic activities so far.
Speaker Change: First you've mentioned during the call a few times aligning price to value and refining pricing and packaging.
Speaker Change: Better understand what the quantification of that means so I mean, it sounds as though lowering pricing too.
Speaker Change: Make the product more attractive customers stickier.
Speaker Change: Then also just wanted to know as part of her question.
Speaker Change: That would impact the guidance for fiscal year 2006, the alignment of pricing.
Speaker Change: Yeah, great. So first I just want to point out in particularly in a SaaS product pricing and packaging isn't just about picking one particular point on a spectrum for at the price, it's really about having the right menu of options to align price to value.
Speaker Change: And that alignment that whether or not your line is specific to both regional and macro dynamics.
Speaker Change: So what I've observed in the Macrocycle is just more cautious buying behavior and customers, becoming more budget conscious and that means the growth opportunity involved in getting those details right has dramatically increased so previously inelastic patterns are now more elastic and so it matters a lot more exactly where you are on the spectrum for each of your product offerings.
Speaker Change: And relatedly customers want a lot more agency and choosing how their budget is leveraged so we have a spread of packages and we're introducing new products are you know starting with AI studio. So we really have a massive opportunity to accelerate growth by dialing in those variables better.
Speaker Change: And we have a lot of testing on this as well. So our intention is to go forward with this with everything being accretive. So if things are working I expect the guidance to go up and if things aren't working I expect not to change things and Additionally, asada was built in a way that gives you increasing returns to scale when you deploy it further in the company. So we get second.
Speaker Change: Benefits are to improving alignment as well.
Speaker Change: Great.
Speaker Change: Thank you for that and then quickly check my understanding.
Speaker Change: All of this strategy.
Speaker Change: Got it.
Speaker Change: Previous commentary last quarter commentary.
Speaker Change: If I'm wrong. Please correct me.
Speaker Change: Greater focus on.
Speaker Change: And IRR, so current customers and less on net new.
Speaker Change: Tonight, you said that you know new business focus shifted focus to new business acquisition.
Speaker Change: Is that a shift in the strategy and then if it is what led to that shift in the strategy away from prioritizing.
Speaker Change: Existing and more towards that and bill.
Speaker Change: I don't know that it's a shift in the strategy so much as a reflection of what's going on in the math. So part of it is what we've been saying about the split between tech and non tech and non tech is a drag on overall growth and it's a drag on <unk> as well the flip side of that is that a non tech looks looks better.
Speaker Change: And because of our ours under 100% as well new business looks better to it's better than our overall growth rate. So we're seeing some strength there and we want to double down on places, where it's really working so that includes our verticals and then also our channel business. It's something we're really excited to scale and so it's really about seeing a lot of opportunity there.
Speaker Change: Not to say there isn't opportunity in the N R R, but I think the place.
Speaker Change: But that's really going to inflect. It is as we roll out AI studio, which again, we're well underway, but it will take a couple of quarters for it to scale in terms of expansion revenue.
Speaker Change: So we're already starting to see it would be really useful in renewals as well. So it can protect us from downside and just gives the sales team a few more options and how they structured deals. So I do expect to make progress on both I just think to enter our progress will be a little more back loaded in the in our our strength is what we're seeing right now.
Speaker Change: Thank you. Our next question comes from Rob Oliver of Baird. Please go ahead Rob.
Rob Oliver: Great. Thank you. Good afternoon. My question is for an and.
Rob Oliver: I know one of your priorities is channel and I was hoping you could provide a little bit more color. I know this has been a priority for you guys now for a little while so I wanted to understand when Youre looking at FY 'twenty six what what is new in terms of the strategy and what's going to constitute success. At this point next year is it going to be.
Rob Oliver: Number of new partners, new regions, I know dust and called out the importance of partners to AI studio, so a little bit more color on that would be great and then I just had a quick follow up for <unk>.
Hey, Rob. Thanks, so much for that question, Yeah with channel I think Theres a few things we definitely recognize we're underpenetrated with channel. It's currently only a single digit percentage of revenue and we know it has the potential to be much larger as duston mentioned, we're also really excited about channel because it's an important driver of.
Rob Oliver: <unk> studio and we're really rapidly expanding the number of partners that are enabled on a studio. So that's one thing that we're doing much more of them. In addition to our studio partners continue to help us extend reach both geographically as well as in our target vertical markets and then customers that are working.
Rob Oliver: With partners are seeing significantly higher net retention rates. So all of that has influenced us to reallocate more resources to channel them something we've already implemented.
Rob Oliver: At the end of last year, and we're continuing to do as a new channel strategy. So more enablement, we brought our partners to our global sales kick off recently and that was great just to have much more sort of aligned strategies and working really closely with them and so as we bring on more large systems integrators.
Rob Oliver: <unk> you know around the World I think we're excited about that opportunity, but overall I would just say much more of it is you know seeing the progress you asked about you know in a year from now what would good look like I think it's that we're partnering with our channel partners to grow their businesses and grow with our customers I think the other is much more.
Rob Oliver: Channel source revenue, so where we're monitoring all of that really carefully.
Rob Oliver: Helpful. Thanks for all that color and then suddenly for you just.
Rob Oliver: I know you said in your prepared remarks that the guidance for the top line assumes no material change to the current macro for SMB or enterprise.
Speaker Change: That comment comes out a day, where the market is forecasting a material change.
Just wanted to get a sense for what sort of base slide you're factoring in there.
Speaker Change: That got any more color on that to help us understand what that means it would be great. Thank you.
Speaker Change: Sure absolutely. So yes, I did make that comment and obviously, we are watching things unfold in the market are daily and as you all are what.
Speaker Change: What I would say there is you know we're guiding based on what we've seen over the last couple of quarters and you've heard us call out macro impact and you know we've talked about some challenges we've seen an upsell them, you know and and and our our and although we're really pleased with the stabilization we've seen an overall net retention and.
Speaker Change: Core net retention, we've still seen challenges in the tech vertical so you know.
Speaker Change: We feel that the way we've guided is really.
Speaker Change: Incorporating a soft macro and the soft macro that that we've been seeing over the last couple of quarters, but no significant degradation to that.
Speaker Change: Yeah.
Speaker Change: Thank you. Our next question comes from Brent Bracelet, a Piper Sandler your question. Please Brent.
Good afternoon, Dustin 17 year journey here impressive can you just walk us through maybe the timeline of the succession plan is this something youre your goal and aspiration is to implement over the next six months 12 months is this all external external and internal any color there and then and could.
Speaker Change: You also weigh in on demand front as well had some questions just around the tariff wars lot of uncertainty out there a recessionary fears what are you seeing top of funnel on the on the enterprise side any color there.
Speaker Change: Just as we go into another period of uncertainty will be super helpful. Thank you.
Speaker Change: Yeah I'll jump in first on the timeline. So you know this is really the beginning so you know we announced that we did hire a search firm and so you know we're kicking off the search, but there's no specific timeline or deadline for completion on I'm here for the duration I feel pretty confident you'll still have me on the next earnings call.
Speaker Change: In case, you have some more questions for me, but we're really focused on ensuring we have the highest quality leadership for our salt is next up so will be as patient as we need to but.
Speaker Change: But we've retained a leading executive search firm to find the next CEO and the reaction has been that this is a great opportunity. They expect us to find somebody great and hopefully oh, not too long a time line.
Speaker Change: But we'll have to see how it goes and you know like I said I'm I'm here for the for the duration and I really think of the fiscal year 'twenty. Six plan is my plan and you know my personal goal is to be able to build the fiscal year 'twenty seven plan together with the next person, but there's still plenty of time left remaining to make that happen.
Speaker Change: That's helpful color and then ends.
Speaker Change: Anything any color on what youre seeing out there.
Speaker Change: The yet another year of uncertainty yeah. No I appreciate that question, Brad I think you know in Q4, we largely saw sort of similar sentiment as Q3 mm Tac is definitely continuing to adjust spend and decision timelines continued to be elongated.
Speaker Change: You know, we have not seen customer sentiment degrade thus far but we also appreciate there's just a lot of uncertainty right now and things can and will likely change quickly. So we're paying close attention to that and all of our customer conversations I do think our focus over the last year on diver.
Speaker Change: Suffocation.
Speaker Change: And investments in additional verticals like retail manufacturing and financial services has helped us with kind of steady and consistent growth, especially outside the U S. But again you know we know things can change rapidly. So so much of that is just being close to our customers and really understanding where their priorities.
Speaker Change: Probably the bright spot is that that last quarter. The AI studio pipeline generation is really strong it shifts the conversations that we're having to hire executive levels and thus far we've certainly seen that prioritization of AI in our investments has continued.
Speaker Change: <unk>.
Speaker Change: Yes.
Thank you our next question.
Speaker Change: Comes from Steve Enders of Citi. Please go ahead Steve.
Steve Enders: Okay, great. Thanks for taking the questions I guess just to start.
Speaker Change: Dustin.
Speaker Change: The firm's out looking for a new CEO I guess what are the <unk>.
Speaker Change: Things that youre looking to prioritize or what are the.
Speaker Change: The characteristics of a news here that you're looking to bring into it to take those companies the next level.
Speaker Change: Yeah, Great question.
Speaker Change: So first of all really looking for someone who is passionate about this on our mission and aligned with our values and culture. So if they don't appreciate the parts of a sauna that make us who we are and got us to here they won't be successful.
Speaker Change: And table Stakes, we're definitely looking for somebody with relevant experience building and leading high performance teams in a SaaS environment at the scale that we're looking to get to in the coming years.
Speaker Change: But on top of that Oh, I'm personally looking for a strategic first principles thinker. He is going to be able to be agile and anticipate the important shifts during the transformative years to come for the tech industry.
Speaker Change: Okay, that's great too great to hear and then just for a quick follow up I.
Speaker Change: I guess I'm trying to understand I guess, maybe some of the disconnect between I guess, what looks like strong billings are strong IPO in the quarter and that come in and kind of more in the mid teens range or low to mid teens range in the guide for for next year. So can you kind of help us think through.
Speaker Change: What's being accounted for as there been kind of incremental churn or.
Speaker Change: Just help us think whats actually been accounted for between the strength of it looks like in the quarter versus the outlook.
Speaker Change: Yeah sure so I'll take that one.
Speaker Change: If you think about our business today, and and you know obviously, our P. O N E. R. P O.
Speaker Change: That does not include the part of our business that is on monthly billings and that's actually quite significant its about a third of our business.
Speaker Change: So you're absolutely right our P O N E. R. P O, which are typically leading indicators and grew very very healthily in Q4 and.
Speaker Change: You have to take into account. The fact that one third of our business is not included in that.
Speaker Change: And the other thing I would just say on an net retention I I think it's important to really look at the tech and non tech portions of our business now we have fairly successfully diversified away from tech. So about 70% of our business today is non tech and by the way it growing mid teens for the.
Speaker Change: Second quarter in a row, but if you look at the tech vertical I'm. The MLR in the tech space is actually worse than the overall net retention rate so that ends up being a drag to our outlook and our growth as well.
Alex Zukin: Thank you. Our next question comes from Alex Zukin.
Speaker Change: Wolf Research. Please go ahead Alex.
Speaker Change: Hi, This is <unk> on for Alex Thanks for taking my question understanding and ours, a lagging metric, but the worsening in over 100 K customer in or are coming in below Coronado was I think a first I'm just trying to understand what drove that given the improvement last quarter on quarter on there or is that dollar churn out renewal specifically, maybe in the tech space or is there some.
Speaker Change: We're sitting in gross retention and just a brief all thanks.
Speaker Change: Yeah. So.
Speaker Change: At the risk of sounding repetitive, yes. It was in the tech vertical where we saw them a bit of weakness in an hour or so if you look at the you know what.
Speaker Change: In Q3, we had called out several large tours that we had seen in the first half of the year. We saw them more are not to the same magnitude, but we saw several one off a churn events as well and our tech vertical these were more downgrades. So we've retained the logo, but it was actually several.
Speaker Change: Tech customers that that downgraded this quarter and that impacted them.
Speaker Change: Ah the net retention in those larger customers because they happen to be large customers, but again I'd point to the fact that you know we still very much see stabilization in our net retention overall, so and that's for several quarters now in a row. So overall net retention was stable.
Speaker Change: In quarter, and that retention and as well as for the core customers, where we saw stable overall and in quarter.
Speaker Change: Got it that's helpful. And then just on the follow up with the larger amount of those over undertake customer adds in the quarter is that more of a testament to new business being stronger versus expansion that could maybe support larger customer and are in fiscal 'twenty. Six is that expected to maybe continue to be a headwind in fiscal 'twenty six or do you think that can recover in fiscal 2000 and section I guess one.
Speaker Change: Can you maybe see that offset some of the.
Speaker Change: Dollar churn that you're seeing from political.
Speaker Change: And yeah. The addition of almost 120 over 100 K accounts is reflective of the strength in new business and that was up 20% year over year and some of the investments we've been making in faster and better onboarding.
I'm sure our customers are implementing the most valuable use cases and getting clear value and then as duston mentioned earlier I think the opportunities certainly with our studio and add ons I think those we believe will all help with NR are going forward.
Thank you our next question.
Speaker Change: Come from Brent Thill of Jefferies. Please go ahead Brent.
Speaker Change: Thanks, just on the sales changes I was hoping if you can elaborate is that is that a big change in our go to market or is this a 5% to 10% fine tune how do you characterize the changes that you're making in our go to market.
Speaker Change: Yeah, it's and I'll, let him answer that Brian. Thanks for that question. It is more of a fine tune I think it's really a reflection of reallocating and reinvestment into higher growth areas. So we've mentioned channel. We also are investing are shifting resources to higher performing marketing programs.
Speaker Change: Our vertical teams post sales and customer success, and then building out a dedicated AI studio team. We also feel like the better design that we've had now in territories and focusing resources in the most productive areas is going to continue to drive productivity increases and improve our overall sales.
Speaker Change: Fish and see them. So just looking at where we have good positive signal and making sure we're shifting resources there.
Speaker Change: Okay, and then I think just maybe trying to reconcile low 20%.
Speaker Change: Now you're guiding to high single digit growth I believe and correct me, if I'm wrong, but I'm just trying to understand the bridge why.
Speaker Change: There'd be such a disconnect in then.
Speaker Change: You know looking at sub 10% growth y.
Speaker Change: In a market that seems like it's growing double digit what what's happening.
Speaker Change: Yeah, so on the RP O specifically that really.
What I tried to make clear earlier is that only covers about two thirds of our business and the other thing I would say is that Q1 disproportionately drives our overall guide and not took a two percentage point hit due to currency leap year.
Speaker Change: And actually if you look at our quarterly or sequential quarterly growth improves.
Speaker Change: Some of our investments start to kick in particularly in the back half, where you see a nice or contribution from things like AI studio, which we've said is modest in the overall guide, but is still very heavily back end loaded.
Speaker Change: And then the other thing I would point to is and I believe you know I'm more focused on this metric as a or our growth and our E. R. Our growth will outpace our revenue growth every single quarter in fiscal year 'twenty six and you know as we exit fiscal year 'twenty six will set us up for a reacceleration in revenue growth for.
Speaker Change: 27, I just want to add one more thing to that but I think factors into the to the growth rate of CRP O, which is we've been talking a lot about multiyear deal strength this quarter than last and that that's kind of a new motion for us.
Speaker Change: So you know maybe in.
Speaker Change: <unk> business, where we had been doing that for five or 10 years, I think <unk> would be a better leading indicator and if we didn't have the monthly is it would be a better leading indicator for growth, but because it's new for us that meant we were able to sort of grow quickly off of a smaller base and I think it'll it'll sort of trend back down towards the growth rate over time.
Speaker Change: Okay.
Eve along: Thank you I would now like to turn the conference back to Eve along for closing remarks Madam.
Eve along: Thank you everyone for joining us on today's conference call them do you have any question. Please feel free to give me a call or email us at IR at Astana dotcom. Thank you so much.
Eve along: This concludes today's conference call. Thank you for participating you may now disconnect.
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Speaker Change: Thank you for standing by and welcome to <unk> fourth quarter and fiscal year 2025 earnings Conference call. At this time, all participants are in a listen only mode.
Speaker Change: After the speaker 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 on your telephone.
Speaker Change: To remove yourself from the question you May press Star one again.
Speaker Change: I would now like to hand, the call over to Ebola.
Ebola: Head of Investor Relations. Please go ahead.
Speaker Change: Good afternoon, and thank you for joining us on today's conference call to discuss the financial results for <unk> fourth quarter and fiscal year 2025 with me on today's call are duskin, Moskovitz astonished co founder and CEO and Remondi, our chief operating officer, and head of business and suddenly.
Ebola: <unk>, our chief Financial Officer.
Ebola: Today's call will include forward looking statements, including statements regarding the expected release and benefits of our product offerings, including AI studio and our expectation for revenue to be generated by AI studio our expectation for our financial outlook should teach plans our market position and growth opportunities.
Ebola: Forward looking statements involve risks uncertainties and assumptions that may cause our actual results to be materially different from those expressed or implied by the forward looking statements. Please refer to our filings with the SEC, including our most recent annual report on Form 10-K, and quarterly report on Form 10-Q.
Ebola: For additional information on risks uncertainties and assumptions that may cause actual results to differ materially from those set forth in such statements.
Ebola: 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.
Ebola: Reconciliation between GAAP and non-GAAP financial measures and a discussion of the limitations of using non-GAAP measures versus the closest GAAP equivalents are available in our earnings release, which is posted on our Investor Relations website at Investor <unk> Dot com and with that I'd like to turn the call over to.
Ebola: Justin.
Justin: Thank you all for joining us on the call today, we delivered solid Q4 results while building the foundation for profitable growth and continued innovation.
Justin: In Q4 total revenues were up over 10% year over year exceeding the top end of our guidance when adjusted for the impact of currency by using prior year FX rates.
Justin: This reflects continued stabilization in our growth rate.
Justin: non-GAAP operating margins improved more than 800 basis points year over year from an operating loss margin of 9% to an operating loss margin of 1%.
We expect to reach non-GAAP profitability in Q1, this year, which Tony will discuss in more detail.
Justin: When we hit a significant milestone in our company's history as we reached positive free cash flow for the full year fiscal year 'twenty five I'm, particularly proud of the team for managing towards this achievement, while simultaneously investing in growth and establishing <unk> as a multi product company.
Justin: Once again, our non tech verticals grew faster than overall growth for the quarter and were up 15% year over year, a slight acceleration when adjusted for currency.
Justin: Some of our fastest growing verticals this quarter included manufacturing and energy consumer retail and media.
Justin: We continue to make progress in our enterprise customer acquisition are $100000 in over customers grew 20% year over year and accelerated from last quarter.
Justin: Overall in our core customer and RR were stable and we saw an uptick in in quarter and IRR for these cohorts.
Justin: During the quarter, we continued to execute on our enterprise strategy made significant progress in improving profitability and entered a new era as we established ourselves as a multi product company with AI studio.
Justin: This quarter marks a pivotal moment for US honor as we chart, our course towards becoming the definitive platform for human AI coordination.
Justin: It starts with AI studio.
Even before general availability the momentum is exceeding our expectations.
Justin: Hundreds of our largest customers are now actively running smart workflows powered by AI studio.
Justin: While we anticipated strong enterprise interest we've been struck by the breadth of demand across all segments. The.