Asana, Inc. Class A Common Stock 2027 Q2 Earnings Call

Please go ahead. Good afternoon, and thank you for joining us on today's conference call to discuss the financial results for Asana's second quarter fiscal year 2027.

With me on today's call are Dan Rogers, our Chief Executive Officer, and Aziz Megji, our Chief Financial Officer. Today's call will include forward-looking statements, including statements regarding the expected release and benefits of our product offerings and our expectations for revenue to be generated by those offerings, our retention and expansion opportunities, our expectations for our financial outlook, including our fiscal year 2027 full-year guidance, strategic plans, our market position and growth opportunities, and our capital allocation strategy, including our stock repurchase program, among other items. Forward-looking statements including risks, uncertainties, and assumptions 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 annual report on Form 10-K and our most recent quarterly report on Form 10-Q for additional information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements. In addition, during today's call, we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. Reconciliation between GAAP and non-GAAP financial measures and a discussion of the limitations of using non-GAAP measures versus the closest GAAP equivalents are available in our earnings release, which is posted on our investor relations website at investors.asana.com. With that, I'd like to turn the call over to Dan.

We delivered a solid second quarter, exceeding our expectations on both revenue and profitability. We've continued improvement in the underlying health of the business. There's three things I want to point out this quarter. First, the business continued to get healthier. Growth is accelerating, retention is improving again, and we saw broad-based strength across industries and geographies. Second, while still early, our AI products are creating a new growth and expansion vector beyond our traditional seat-based model. Customers adopting AI Studio and AI Teammates are engaging more deeply, retaining better, and expanding faster than the broader customer base. We believe this gives us an early validation of our opportunity to build meaningful consumption and outcome-orientated revenue stream. Third, we're acting on the learnings by bringing AI Teammates, AI Studio, and Asana Dash together as a core part of the Asana experience through our Agentic Work Management product.

We want our customers to experience these capabilities early and naturally as part of how they work every day, rather than as separate AI products that they have to discover and purchase. We are going to be bringing that same orchestrated execution across humans, agents, and systems with Asana Client Management, Asana Service Management, and our Command products. Let us have a look at this quarter. Improving health of our core business validates our strategy. It gives us confidence in the investments we are making to drive future growth. Revenue was $216.4 million, up 10% year-over-year, and above the high end of our guidance. Reported net retention improved in every cohort we report. Overall NRR improved to 97% from 96%. In quarter, net retention improved for the fifth consecutive quarter.

Core customers NRR improved to 98%, and our largest customers, that is those spending over $100,000 or more, improved to 98% from 96%. That improvement is being driven by broader multi-product adoption within the largest customers, creating additional paths for expansion. The technology sector delivered a second consecutive quarter of year-over-year growth. While growth remains modest, we are encouraged by the continued acceleration in this vertical. That growth included another expansion with a leading AI lab this quarter, adding seats, in addition to the expansion with AI Teammates that we mentioned last quarter. As well as a global streaming service that both expanded seats and added AI Studio. Outside of tech, the story has been consistent for more than a year. Non-tech continues to grow faster than the company's overall growth.

In fact, we added new customers across a range of industries this quarter, including one of the largest telecommunications operators in the U.S., a large insurance operator in the U.S., a Big Four professional services firm, one of the world's leading law firms, and an iconic American luxury jewelry brand. We also saw encouraging acceleration in the U.S., where revenue grew 10% year-over-year in Q2, returning to double-digit growth for the first time in over two years. This growth acceleration is attributed to improvement in both bookings and retention at our tech customers, which are concentrated in the U.S., strong adoption of our AI products, and acceleration in new logo acquisition. Internationally, Darktrace and a leading U.K.-based financial services company were notable new logo wins for our EMEA team. Delivery Hero expanded its relationship with Asana, including our AI products. Looking now at our AI product momentum.

Momentum across our AI products continued to build this quarter. While still early, we are seeing encouraging validation of the opportunity to build meaningful consumption and outcome-orientated growth and expansion revenue streams alongside our traditional seat-based model. AI Studio and AI Teammates, in fact, drove about 25% of our net new ARR, up from 17% last quarter. This is above our 15% full-year target, which we set in March. We find that customers that are adopting our AI products engage more deeply, retain better, and expand faster than the broader customer base. This shows up most clearly in our largest accounts. More than 25% of our 100K plus customers have now purchased AI Studio or AI Teammates. This has been a key contributor to the NRR expansion we are seeing in our market.

Also seeing clear evidence that AI products can mitigate seat-based pressure while creating new expansion opportunities tied to usage and outcomes. This quarter, we signed our largest AI expansion deal in Asana's history, a three-year multi-million dollar agreement with a Fortune 500 media company spanning AI Studio and AI Teammates, with our AI products representing almost half of the total contract value. Most particularly important is the role our AI products played in the expansion. The customer is operating with a smaller workforce, which historically would have resulted in a seat contraction. Instead, the investment in our Studio and AI Teammates more than offset the smaller footprint, resulting in a modest overall expansion, with also the additional upside potential if consumption grows over time. They are already seeing measurable value. In fact, in one creative marketing workflow, AI Teammates have already reduced the content operations cycle time by 30%.

This is an important example of how our AI products are creating new growth vectors beyond seats, allowing us to expand with customers based increasingly on the work and outcomes delivered through Asana rather than changes in headcount. We are seeing customers move beyond individual use cases to make Asana a core part of their broader agentic enterprise strategy, coordinating humans and AI across the workflows that run their businesses. Asana is becoming the operating system for human agent teams for them. Let me share a couple of examples of what that looks like in practice. Indeed is a great example of how enterprises are using our AI products together to remove manual coordination at global scale. The world's number one job site deployed AI Studio to automate project discovery and the technical scoping for its analytics teams.

It also runs the dynamic intake and triage across their 70-person in-house creative agency, which operates in more than 60 countries and 28 languages. Annually, that work reclaims more than 1,400 hours of senior-level time. It has cut lead time for raw requests to active project by 60%. It has reduced manual ticket management by more than 40% for the creative team, and delivers roughly $300,000 in savings and unlocked capacity. Indeed is also piloting AI Teammates as an autonomous brand auditor, matching localized content to global brand guidelines across dozens of languages. Washmen, a UAE-based textile care business, is an early example of AI Teammates running an operation end to end. They are using AI Teammates to agentify their customer support and returns process.

When a garment comes in, one teammate researches its retail value, a second reviews the care plan for risk, a third checks it against every past claim, and a fourth handles compensation and drafts the customer message. A person steps in only when a teammate escalates. The result is 90% faster claim resolution, taking it from three days down to six hours. These kind of results reinforce our belief that our AI products create the greatest value when they are deeply embedded in business-critical workflows, with a shared context that enables people and agents to coordinate and execute together towards outcomes. This principle is the heart of what we are bringing to market in mid-September with Agentic Work Management. Let us take a look at Agentic Work Management.

Let me explain what we mean here, because this is real meaningful evolution of our product, not simply a label on traditional work management. Individuals have experienced significant productivity gains from AI, but most organizations haven't yet translated that into the productivity gains at the enterprise level. AI often sits outside the workflows that run the business, requiring people to find the right agent, provide the right context, and bring the output back into the work. With AWM, we close that gap by putting people and agents and systems on the same plan. Historically, customers use Asana to coordinate work between people, to provide visibility into those tasks. With AWM, they can orchestrate execution across people and agents with the same context, the same goals, and the same governance. AWM brings three things into every paid package tier.