Asana, Inc. Q4 FY2023 Earnings Call

Good afternoon, and thank you for joining today's Asana Fourth Quarter and Fiscal Year 2023 Earnings Call. I am Danial, the moderator for this call. It is now my pleasure to hand the conference over to our host, Catherine Buan, Head of Investor Relations. Catherine, please go ahead.

Good afternoon, and thank you for joining us on today's conference call to discuss the financial results for Asana's fourth quarter and fiscal year 2023. 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. 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. Reconciliations 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 web page at investors.asana.com. And with that, I'd like to turn the call over to Dustin.

Thank you, Catherine, and thank you all for joining us on the call today. Despite a challenging year, we've ended fiscal 2023 with strong growth, driven by our continued success serving enterprise customers and meaningful progress towards profitability. Q4 revenues grew 34% year-over-year and fiscal year revenue grew 45% year-over-year. This growth was fueled by some of the largest companies in the world who are Asana customers, representing industries such as media, automotive, professional services, manufacturing, healthcare, transportation, logistics, telecommunications, and financial services. During the fiscal year, we closed deals with three of the world's largest automotive manufacturers, four of the largest telecommunications and internet service providers, several large professional services companies, five of the largest media conglomerates, a top five shipping and logistics company, and six financial services firms. Overall, eight of the top ten tech companies are Asana customers and 80% of the Fortune 100 use Asana. In a moment, Anne will share more of our specific Q4 wins. When you segment our customer base by those with more than 2,000 employees for a more precise look at our enterprise penetration, we have well over 1,500 enterprise customers. Our seat penetration in most of these accounts is significant but still in the single-digit percentages on average. So there's a large opportunity for future growth. Some of the most strategic companies in the world are partnering with Asana to define what work management at scale looks like. We have several Asana customers who have over 10,000 paying seats. We now have more than 139,000 paying customers as demand for our work management solution continues to increase. Customers with over $100,000 annualized spend grew 49% year-over-year. As these customers continue to grow with Asana, their dollar net retention rate continues at a very strong pace at over 135%. Revenue from this cohort grew 80% for the fiscal year and represents about one-fourth of our total revenue. Despite more budget scrutiny in enterprises, our win rates remain strong. We're winning more consolidation deals and are seeing an increase in large multiyear commitments as customers grow their investment in Asana. In Q4, the momentum in our non-GAAP operating margins turned the corner, and we expect to continue positive momentum over the next several quarters. We expect to drive significant improvement in non-GAAP operating margin in this coming year as we focus on operational efficiency and growth, which Tim will talk about more. Looking towards fiscal 2024, we're focusing even more on our go-to-market strategies. We'll be scaling our winning playbook across the entire sales organization, increasing the operational excellence and discipline, and ensuring we have proven enterprise talent to lead. While we expect the current challenging macroeconomic environment to continue for the near term, we're encouraged by the way the longer-term trends are playing out. The need for digital transformation isn't going anywhere. Customers are making multiyear commitments with Asana as they look to disrupt the status quo and achieve measurable ROI and time to value for their investments. When companies want to consolidate their spend on work management, we're winning. We're fortunate to serve and learn from some of the most innovative organizations in the world. Working with companies across major sports leagues, financial services, media, multinational consumer goods, and manufacturing has also given us unique insights into potential growth opportunities in the areas where we need to evolve in the coming years. I'm excited that Asana has reached the stage where these investments can be leveraged to create value across many more large enterprise customers. Core to serving these customers is the way our product has evolved as well. We believe Asana has the most scalable architecture and data model and can support the most users, the largest volume of work, and incredibly complex workflows. The Asana platform is quickly becoming the work management solution of choice for large organizations looking to transform the way they work. There are four areas where we've seen recent traction in the enterprise: goals, cross-functional collaboration, compliance, and integrations. Asana Goals was already the number one goal product according to the G2 Enterprise Objectives and Key Results Software market. The vast majority of our $100,000 or more customers use goals, and over 90% of those that do connect them to work. Companies are moving goal management from standalone OKR vendors into Asana, and CIOs are recognizing our product as a consolidation opportunity. Our customers continue to realize value from Asana's cross-functional capabilities which allow people from multiple teams to work together seamlessly. Cross-functional collaboration is not just an activity businesses do; it is everything they do. Asana is a critical platform that allows companies to work in a way that things get done. Virtually all of our customers use us on a cross-functional basis. The majority of the work within each customer in Asana is cross-functional collaboration in contrast to other applications that track single projects for single teams. This number is even higher for customers spending more than $100,000. We see an even higher proportion of this cross-functional collaboration in features we've built as we've moved upmarket, including goals and portfolios. For compliance, our newly launched HIPAA offering is enabling customers to bring more of their patient care management workflows into Asana. We have dozens of customers using our HIPAA solution just four months after its release, and we continue to see opportunities to open up in healthcare and healthcare insurance-related deals. We're also seeing traction as more and more companies build integrations with Asana. Integrations help customers make better use of existing investments and improve productivity and quality of work across their applications. These include HubSpot, Rules Integration with Gmail, PagerDuty, and Twilio. Salesforce for Goals is our first out-of-the-box integration for Asana Goals, and it was just rolled out to customers this quarter. We're already seeing over a 50% increase in Salesforce integration from our top 100 customers. When work happens in Salesforce, the progress of linked goals in Asana is automatically updated, making it easier to monitor impact and make informed decisions. On March 28, we will be hosting our first event of the year, Asana Forward. This virtual program will feature cutting-edge research and real-life insights for Asana customers, Amazon Web Services, Zoom, T-Mobile, Live Nation, and Morningstar. Attendees will hear why these companies choose work management software and how they're doing change management, supporting new revenue streams, and using IT to drive process excellence. Those attending will also learn firsthand about collaborative intelligence, the next phase of Asana's proprietary technology to work graph. Just as Asana led the way in defining the work management category, we're taking the next step to shape the future of work. Before I close, I want to mention some of the industry recognition Asana has recently been given. In Okta's most recent Business at Work Report for 2022, Asana is the fastest-growing app in our category among the top 50 most popular apps on the Okta platform. Also, Asana was named a leader in The Forrester Wave: Collaborative Work Management Tools Q4 2022 Report. The report specifically differentiated Asana for how our Work Graph data model connects information, people, and objectives that drive work through the organization, and how our goal management structure helps organizations connect disparate teams with a common focus. Asana was also recognized as one of the top 100 in Glassdoor's Best Places to Work award for the fourth time. By Newsweek in cooperation with Plant-A Insights Group, Asana was awarded one of America's greatest Workplaces for Diversity 2023. I also want to highlight the release today of our fourth annual Anatomy of Work Global Index, an in-depth analysis into how work has evolved during this time of rapid volatility. Conducted by GlobalWebIndex on behalf of Asana, the 2023 Anatomy of Work Global Index surveyed the behaviors and attitudes of more than 9,000 knowledge workers across the United States, the UK, Australia, France, Germany, and Japan to understand the impact of cross-functional collaboration, including what's working and what's not. The report highlights that successful cross-functional collaboration helps organizations tackle challenges more effectively, leading to increased revenue growth and adaptability for business, and how clear goals contribute to business success by boosting collaboration, innovation, and employee engagement. This report is another example of how Asana continues to serve as a thought partner to our customers on the future of work. There are three things I want to reiterate before handing it over to Anne. First, we're building a long-term sustainable business focused on both growth and profitability. In Q4, we improved our non-GAAP operating margin by over 14 percentage points year-over-year. As you can see from our guidance, we're expecting to improve our non-GAAP operating margin by 19 percentage points for the full fiscal year in 2024. This would be a 50% improvement versus fiscal year '23 through a combination of efficient investment and growth. Second, we're planning for pricing and packaging opportunities in the future to better match price to value for our enterprise customers. This is another area where larger deployments help us understand where we can evolve and add more value. We also expect this work to generate better leads for seat expansion and new opportunities in the future to upsell using add-ons. And third, as I mentioned before, we're launching collaborative intelligence, the next phase of Asana's proprietary technology, the Work Graph. Our virtual event will be on March 28, featuring Amazon Web Services, Zoom, T-Mobile, Live Nation, and Morningstar. In fiscal 2024, we're aligning our actions to optimize for serving enterprise as well, which will be our key driver of growth. New use cases within existing customers and use cases that drive new lands. We've already been making progress in this direction and are now well positioned to become the category leader with consistently high reviews from users and analysts and the largest existing deployments in enterprise. The future of work is every organization working from a shared system of clarity and accountability built on the Asana Work Graph. Our strategy is focused on bringing that future to life. Now I'll turn it over to Anne.

Thanks, Dustin. The macro headwinds continue to impact our expansions and create longer sales cycles in Q4, and will continue to impact us going into fiscal year 2024. Top of funnel demand remained stable in the fourth quarter. Our free-to-pay conversion rate was also stable and helped feed our total customer number. We added 4,000 customers in Q4, consistent with the previous quarter. The softness in Q4 was somewhat offset by overachievement in our enterprise and strategic accounts. Our largest customers really tell the story of the kind of value and ROI Asana delivers and how much potential opportunity there is in the market. We have invested heavily in our enterprise products over the years, and we will further build our organizational go-to-market muscle in fiscal year '24 for the growth opportunity ahead. We expect to see those investments fully materialize by the end of this year. Beyond the macro headwinds, I also believe that this is an important time for us to be building for longer-term success. There are areas where I know we can do even better. We've identified additional opportunities for execution improvement, especially ramping sales reps and increasing productivity across the field and sales operations. We also recently reorganized territories and teams and rolled out new messaging in order to better position us for the next few years. And there's still more work to be done to execute consistently and broadly in all regions around the world. When I look back, we had some significant highlights and momentum that will carry our business forward. Looking at our largest customers, they continue to grow with us for multiple years. There are a number of strategic use cases that drive these long-term investments. Digital transformation projects are our largest. One of the world's largest consumer and industrial electronics manufacturers and IT service providers has been undergoing a company-wide digital transformation. Asana is being used by thousands of users across their transformation office, designers, marketing, business planning, and business systems project team to gain more visibility and clarity into their cross-functional working processes so they can execute and make business decisions faster. Another strong use case for Asana is global client and campaign management. One of the world's largest global consulting firms signed a global MSA, which cements Asana as a worldwide work management provider of choice for every office. Also, Asana Goals has proven to be a significant differentiator in the market, so setting and tracking goals across teams in the organization is a very compelling use case. In fact, a revolutionary carbon transformation company is using Asana Goals to help achieve their mission to eliminate global emissions and build a fossil-free future. As Dustin shared, the vast majority of our cohort of customers with $100,000 or more in annualized spend use Asana Goals and connect them to work. Many of these long-term investments are multiyear agreements, which we have started to see more of. Another theme this quarter was vendor consolidation. As organizations look to simplify and streamline their vendors, Asana is winning vendor consolidation decisions. One of the largest marketing and advertising agencies in the world had a significant expansion with Asana in Q4. They signed a multiyear contract for our enterprise solution, expanding to 13,000 seats across 13 agencies. The agencies around the world use Asana as part of a strategic initiative to more effectively manage their clients' media and marketing campaigns to help grow their businesses and gain market share. Coupa, the platform transforming the way businesses manage their spend, signed a multiyear agreement for our enterprise solution in Q4. Across Coupa, customer-facing teams, marketing, IT, business operations, finance, and engineering rely on Asana to manage large strategic projects tied to company goals, as well as their daily work. Eric Tan, CIO at Coupa, said, we consolidated on Asana, recognizing the importance of building a common platform for our employees and customer communities to work together to drive meaningful results. One of the world's most recognized brands in the short-term vacation rental platforms chose our enterprise solution via a strategic multiyear agreement as their foundational collaboration platform in their consolidated tech stack. This will enable the organization to create a consistent method for managing workflows across the business and have a system of record for all work in the organization. This consolidation onto Asana will help them drive efficiencies now that the company is remote-first. Plus, it will improve accountability and alignment across the company, so employees can focus their energy and effort on innovation and delivering the best experience for their customers. We are seeing expansions broadly across several diverse industries as we continue to expand beyond our leadership in the tech industry. We're seeing continued growth within the financial services industry. For example, one of the world's largest European exchanges significantly expanded their use of Asana in Q4 to thousands of seats. Asana is now heavily used within their product, data, engineering, analytics, and machine learning teams to manage their roadmap and project execution. We were the only work management platform that met their stringent security and compliance requirements. For those of you that love pizza, we saw a great expansion with Pizza Express, the British multinational pizza restaurant and food retail chain with 360 locations across the UK and 100 overseas in Europe in Q4. They began using Asana in Q2 within their innovation team and will now be implementing Asana across all of their operations, including frontline employees, to drive growth in the business. In summary, we are seeing more multiyear deals, winning more vendor consolidation decisions, and continuing to diversify our enterprise success across more and more industries. All this said, we can do more. Looking forward, we have a number of big initiatives in fiscal year 2024. First, our strategic accounts initiative. The goal of this initiative is to ensure that we are focused on our most leveraged account opportunities. We've already reviewed our top accounts by region to identify where our investments would be highly leveraged. With this initiative, we can focus even further on our account management, customer success, and R&D resources, where we will likely see growth opportunities and high ROI. These accounts represent some of the largest names in technology, telecom, professional services, retail, manufacturing, consumer goods, media, and financial services. We've already seen some proof of success. Our enterprise customers, which we define as organizations with over 2,000 employees, was our fastest-growing customer segment. Second, my goal is to increase average productivity per sales rep by 20% by the end of the second half of fiscal year 2024. We'll continue to improve our sales enablement capabilities and lead generation initiatives targeted at enterprise accounts. We'll also be elevating our sales playbook to focus primarily on high ROI workflows, quick time-to-value use cases, digital transformation, goals and reporting, and ensuring that customers understand and experience that Asana is a must-have. Third, we will further build our enterprise leadership bench strength. In EMEA, Sanj Bhayro has recently joined as our new General Manager of EMEA. We also brought on board Shannon Sullivan Duffy as our new Chief Marketing Officer, and Neeracha Taychakhoonavudh has joined us as our new Head of Global Customer Experience. Together, these new leaders have over 70 years of combined experience in enterprise sales and marketing management and scaling fast-growing businesses from companies such as Salesforce and Oracle. We're also actively recruiting for a new Chief Revenue Officer, who will help lead and accelerate our move further upmarket. With that, I'll hand it over to Tim.

Thank you, Anne. Q4 revenues came in at $150.2 million, up 34% year-over-year. Revenue from the U.S. grew 40% year-over-year, accounting for 61% of our total revenue. International grew 26% year-over-year, accounting for 39% of our revenue. Currency impacted our international growth rate by roughly 300 basis points, and the overall growth rate by about 100 basis points. International growth would have been 29% year-over-year, and total revenue growth would have been 35% year-over-year without the impact of currency. Revenue from customers spending $5,000 or more on an annualized basis grew 42% year-over-year. This cohort represented 73% of our revenues in Q4, up from 69% in the year-ago quarter. We have 19,432 customers spending $5,000 or more on an annualized basis, up 26% year-over-year. Our largest customers remain our fastest-growing cohort. We have 506 customers spending $100,000 or more on an annualized basis, and the customer cohort is growing at 49% year-over-year. As a reminder, we define these customer cohorts based on annualized GAAP revenues in a given quarter. Our dollar-based net retention rates were lower but remained healthy across every cohort. Our dollar-based net retention rate was over 115%. Among customers spending $5,000 or more, our dollar-based net retention rate was over 120%, and among customers spending $100,000 or more, our dollar-based net retention rate was over 135%. As a reminder, our dollar-based net retention rate is a trailing four-quarter average calculation. We continue to see stable gross churn rates overall and across the cohorts and low churn in our large accounts, demonstrating the value we deliver for our enterprise customers. However, we expect our overall dollar-based net retention rates to trend lower as companies remain mindful of the near-term economic challenges. As I turn to expense items and profitability, I would like to point out that I will be discussing non-GAAP results in the balance of my remarks. Keep in mind, non-GAAP results exclude stock-based compensation and the one-time restructuring costs that we incurred in Q4. Gross margins came in at 90.5%. Research and development was $51.6 million, or 34% of revenue. Sales and marketing was $93.2 million, or 62% of revenue. G&A was $28.6 million, or 19% of revenue, an improvement from 28% a year ago. Operating loss was $37.4 million, and the operating loss margin was 25%, representing a 14 percentage point improvement versus a year ago. The improvement in our operating margin demonstrates our ability to drive more efficient growth and manage our operating expenses with increased discipline. Net loss was $33.2 million, and our net loss per share was $0.15. Looking at the highlights from the full fiscal year, fiscal year revenue grew 45% year-over-year to $547.2 million. We added almost 4,000 customers spending $5,000 or more on an annualized basis during the year, and we also added 166 customers spending $100,000 or more on an annualized basis during the year. Revenues from customers spending $100,000 or more on an annualized basis grew over 80% year-over-year. This cohort represented 25% of our revenues for the full fiscal year. Moving on to the balance sheet and cash flow, cash and marketable securities at the end of Q4 were approximately $529.3 million. Our remaining performance obligations, or RPO, was $299.2 million, up 37% from the year-ago quarter. 84% of our RPO will be recognized over the next 12 months. That current portion of RPO grew 36% from the year-ago quarter. Total deferred revenue at the end of Q4 was $233.6 million, up 34% year-over-year. Our free cash flow is defined as net cash from operating activities less cash used in property and equipment and capitalized software costs, excluding the nonrecurring items such as costs related to restructuring. In Q4, free cash flow was negative $26.5 million or negative 18% on a margin basis, an improvement from the negative 37% from the year-ago quarter. We ended the fiscal year with 1,782 employees. Moving to guidance for Q1 fiscal 2024, we expect revenues of $150 million to $151 million, representing growth rates of 24% to 25% year-over-year. We expect non-GAAP loss from operations of $40 million to $38 million, and we expect net loss per share of $0.19 to $0.18, assuming basic and diluted weighted average shares outstanding of approximately 215 million. For the full fiscal year 2024, we expect revenue to be in the range of $638 million to $648 million, representing a growth rate of 17% to 18% year-over-year. We expect non-GAAP loss from operations of $130 million to $120 million. Operating margins of 19% at the midpoint of guidance, a 50% improvement from the fiscal year '23. We expect net loss per share of $0.59 to $0.55, assuming basic and diluted weighted average shares outstanding of approximately 219 million. Our guidance assumes the macro environment continues to create headwinds, especially in the first half of fiscal 2024. I'm also factoring in some assumptions that our new leaders will need some time to execute on our strategies. From an expense management standpoint, we implemented a number of initiatives to improve our operating margins, which you saw begin to manifest as early as Q4. First, we reduced our global headcount as part of a restructuring designed to better prioritize our resources on moving upmarket and improve operating efficiency for the long run. This reduction resulted in nonrecurring restructuring charges of $9.3 million in Q4, which will be excluded from our non-GAAP results and free cash flow per our definition. Second, we are continuing to evaluate every investment, ensuring that we prioritize the highest ROI investments with shorter payback periods and aligning with our focus on moving upmarket. Third, we are continuing to evaluate our spending with every vendor, consolidating where there may be overlap and renegotiating our contracts to better match the value we are realizing with these providers. We expect these expense-related initiatives will drive measurable improvements in our operating margins in fiscal year '24 and beyond. Our guidance implies that operating expenses grow in the low single digits or essentially stay flat to the previous year. Despite the uncertainty with the macro environment, we have increased confidence in our ability to be free cash flow positive before the end of calendar 2024 while balancing growth and profitability. With that, I'll hand it back to Dustin for some final remarks.

Thanks, Tim. One thing I want to add to my formal comments is that I'm planning to enter into a 10b5-1 trading plan on March 9, 2023, to purchase up to 30 million shares of our Class A common stock, subject to the required cooling-off period. I'm doing this because I personally believe Asana shares are undervalued, given the scale of the opportunity I see in front of us. The work management market is an enormous underpenetrated market that I believe we're well positioned to lead, especially in enterprise. Working alongside some of the most strategic leaders in their respective industries gives us unique insights into their complex enterprise needs and various business models. This helps inform our product strategy and positions us well to understand the future of work and help solve our customers' most critical challenges over the long term.

Thank you, Dustin. And before I open it up to Q&A, I want to note that Mr. Moskovitz's statements regarding his trading plan to purchase shares of our Class A common stock may be considered forward-looking statements that are subject to risks and uncertainties, including that his trading plan may be modified or suspended or terminated by him at any time, and there can be no assurance that the price and volume parameters of this trading plan will result in purchases of shares of our Class A common stock in line with its expectations in such forward-looking statements. And with that, operator, we can open it up for Q&A.

The first question comes from Brent Thill of Jefferies.

This is Anic Bamon on for Brent Thill. So, Dustin, in the face of decelerating top line, which is undoubtedly macro-led, what continues to give you faith that you will ultimately win the enterprise? And what is left to do to solidify that position?

Yes. Thanks for the question. There are a lot of things that I think are really positive signs for us. I think the thing that I feel most excited about is just the strength of the really impressive customers that we have and how healthy those accounts are. So even though we've seen headwinds in the form of longer sales cycles that we talked about this quarter and last quarter, we know that there is still really high utilization even when the deals are stalled. We know those customers aren't going to competitors. We have a lot of signs from them that they intend to expand with us over time. So we feel really great about the places where we've landed already, especially in the Fortune 100 and other enterprises. We think there's just a ton of room to expand there. We know that when we do see consolidation conversations, and customers looking to take the next step and commit to a partner, we're really well positioned. We often win those, thanks to the strength of the Work Graph and the way it facilitates cross-functional use cases. The fact that it's loved across many functions instead of specializing into one, and the credibility we have, not just from having the existing deployments but also from the high ratings we get from analysts that focus on the enterprise segment.

The next question comes from Jackson Ader of SVB.

Great. The first one, Anne, I think it was you that mentioned some opportunities on pricing and packaging specifically in the enterprise. I'm sure these are still in the works, but any kind of specifics you can give us, like ideas that are kind of bouncing around? And also, why just focus on the enterprise?

Jackson, thanks so much for your question. Yes, the updates we're exploring are really focused on aligning value for our customers, and they're deeply informed by both existing enterprise customers as well as prospects we're speaking with and market analysis. Our priorities, as you might imagine, we are exploring a whole number of options. I think Dustin mentioned add-ons. But having said that, we're thinking about aligning our enterprise customer needs to be met, and we’re delivering for them and they are realizing value as they scale and grow with us. That's why we're focusing on that particular segment. Our current pricing and packaging plans have evolved over the years, specifically for the existing base. With the growth in enterprise, that's why we're laser-focused on pricing and packaging for those customers.

Okay, great. I have a quick follow-up about the multiyear deals with Fortune 100 companies. Do the contracts include minimum seat ramps that increase over the years? Are they based on adoption, or are the companies purchasing a large pool of seats that might not be utilized immediately? I'm curious about how these multiyear deals are structured.

Yes. Hey, Jackson. This is Tim. I would say the common theme we see across these multiyear consolidation plays is that customers want to consolidate on a scalable enterprise platform. In many cases, we are being deployed, and they're reducing their spending with some of the other work management players. Additionally, given the macro context, most companies are being very mindful of how many seats they purchase, so they are buying according to their usage. These are all very healthy accounts. As companies grow, we often see them requesting tranches for purchasing the next set of seats, which gives them some flexibility and price certainty.

The next question comes from the line of Alex Zukin of Wolfe Research.

I have a couple of questions. First, regarding generative AI, which seems to be a common topic among investors. Dustin, in our discussions about Asana's long-term vision, you've mentioned that ideally, when someone comes to work, they could use your platform to ask what tasks they should focus on for the day, and it could theoretically provide those recommendations. How should we think about leveraging generative AI to enhance the Asana platform, and what are your thoughts on monetizing this feature? Is this something that all work management vendors will need to adopt? I'd appreciate your insights on that before I move on to some financial questions.

Yes. Great question. Obviously, it's a really exciting time in AI. We've been following it really closely. I'd also like to point out that we're really close to the OpenAI team in particular. We share a Board member in Adam D'Angelo. The CEO, Sam Altman, actually led our Series C a few years back. So we've been able to talk to them about the best ways to leverage GPT and Asana and how they think about the future. To your question about leveraging the unique value of the Work Graph, just to step back, there's a larger arc story in AI for us that involves multiple kinds of technology, not just the ChatGPT-style language models. We’ve been working with machine learning for a while now. We actually have some data-driven experiences in the product today, and we're continuing to build on that direction. We are also prototyping things internally with the language models and have a lot of exciting ideas there. In terms of the generative stuff, I think the exact use case you gave could possibly use language models for that. I think the other machine learning approaches may be better suited, and we'll try both. I think there are many possibilities with generative models, like summarizing long threads for you, writing status updates, trying to aggregate all the information in a project, and pulling out the highlights, summarizing meeting transcripts. We've already seen a lot of that from other SaaS products already. We’re students of the space, so we'll incorporate the best ideas. I do think the Work Graph structure gives us an advantage when it comes to using the data to draw insights and help direct users to the most important work. So I think the Work Graph ends up being a strong enabler, but definitely expect to see AI used across a variety of products.

That's awesome. I'll put in the joke about no more TPS reports...

The next question comes from Andrew DeGasperi of Berenberg.

Just maybe back to the sales reorganization or I guess the changes you're making in the sales motion, can you maybe let us know what led you to do this kind of drastic shift? What did you learn, I guess, over the last year or two since you've ticked off on the enterprise side? And then generally, how is this reflected in the next few quarters in terms of the growth? I know you're baking in some conservatism in the guidance? I am just wondering how should we think about this proceeding as we move through the year?

Hi, Andrew. It's Anne. Thanks so much for that question. We're really focused on building and scaling our enterprise selling infrastructure. So we rapidly added to the sales team last fiscal year. Now we're ensuring that all the operational systems and enablement support is scaled to meet that investment. Our enterprise sales reps' time needs to be focused on landing and expanding with the right customers and delivering fast, measurable business value. We're committed to executing consistently and broadly across all world regions.

Hey, Andrew. Just adding on to Anne, I think Dustin mentioned this in the script. We do have 15,000 enterprise customers. When we look at the data, customers that are spending more than $100,000 with us, their net expansion rate this last quarter was 135%. The majority of that growth and expansion is through seat expansion and getting more deployment across the company. That provides us with confidence in the strategy we’re moving forward with. We're still seeing a lot of macro uncertainty, and we want to be thoughtful about our guidance. The Fed is likely to raise rates. Geopolitical issues are present. Therefore, we're cautious about the first half and baking in some time for our leadership changes to ramp up and for their strategies to take hold.

That's helpful. And just on the math question that Alex didn't get to ask. I mean, just in terms of the OpEx rising low single digits, what should we think about? Should it be R&D really growing a little faster overall, and you're just taking a cut to sales and marketing? How should we think about the moving parts on that?

Yes. I think R&D as a percent of revenue will be relatively flat. I wouldn't say sales and marketing is a cut. It's more a reallocation of where those resources were in prior years, with a focus on moving upmarket. You'll continue to see leverage in sales and marketing, and more leverage in G&A. Expect R&D to remain relatively flat year over year.

The next question comes from Rob Oliver of Baird.

So a question, Dustin, for you or for Anne. It sounds as if the consolidation play is a nice change for you guys relative to last quarter. Can you talk a little bit more about those vendor consolidation wins? Are they seat expansions that come at the expense of other vendors as people rationalize vendors? Are these C-level decisions influenced by the strength you guys have with users?

Hi, Rob. Thanks so much for your question. Yes, we're seeing consolidation wins for Asana especially as CIOs are looking to drive consistency across organizations and reduce the total number of applications they support. A couple of factors are in our favor. We have a proven ability to scale to over 150,000 seats and growing, and the power of our Work Graph architecture, which allows organizations to consolidate multiple divisions or functions. It's driven by strong usage and the love for the product that exists in the organization. Our Goals product enables executives to connect the company's top priorities to all the work that’s necessary. About 90% of our $100,000 plus customers are using Goals and connecting them to work. We're seeing that being especially valuable and impactful in this environment.

Yes, that's a fair statement, Rob. The quarter was a bit weaker on the SMB side, but it was pretty solid for our larger accounts.

The next question comes from the line of Steve Enders of Citi.

I guess I want to dig in a little bit about some of the comments on the go-to-market side, talking about trying to drive 20% better sales rep productivity through the year. What are the biggest levers you can pull to achieve that? Also, how is this reflected in the guidance and outlook?

There are a couple of factors contributing to sales productivity. First, about one-fourth of our sales team is still ramping. Second, the reduction in force we implemented in November impacted productivity as managers and teams adjusted to those changes. Our focus now is investing in several areas, certainly the infrastructure, the tools, and training needed to deliver repeatable and predictable lands and expands, especially with our larger accounts. This focus includes enablement and partnership with our enterprise technology team, plus investments in DevOps. We're excited about the early traction we're seeing but recognize we have a lot of work to do.

In terms of the guidance, I would characterize it as we're committed to delivering free cash flow before the end of calendar '24. We've made vast improvements in terms of the operating margin guide. We’re focused on under-promising and over-delivering.

The next question comes from Shebly Seyrafi of FBN Securities.

Can you talk about the linearity during the quarter? I noticed that receivables grew 39% sequentially, much more than the 6% revenue growth. How was January versus December? And how has February been compared to January?

December is typically an odd month to compare primarily because of the holidays. We had a solid finish to the fiscal year, and we're encouraged by what we're seeing in the conversations we’re having with customers in February.

Okay. And also, your seat growth was according to my model, like 33%. Am I in the right ballpark? That was much more than your customer growth? Importantly, in my model at least, your price per seat was flat year-to-year. I'm wondering whether you're modeling flat, up, or down in '24 for price per seat?

Yes. I think your model is not too far off in terms of seat. We’ve talked on the call that the focus is seat deployment and getting as many seats as possible within these large enterprises, and over time, we view price as just another lever for growth, moving those up as we deliver more value.

And with that, we will conclude our question-and-answer session of today's call. I would now like to hand the call back over to the management team for closing remarks.

Thanks so much. Just a final thank you to everybody joining the call today. I know it's a busy season. We look forward to seeing you out on the road this quarter, and thanks again.

And with that, we will conclude today's call. Thank you for participating, and you may now disconnect your lines.