Earnings Call Transcript - ASAN Q4 2022

Operator, Operator

Good evening, and thank you for joining today's Asana Fourth Quarter and Fiscal Year 2022 Earnings Call. My name is Selena, and I will be your moderator. I would now like to hand over the conference to our host, Catherine Buan, Head of Investor Relations at Asana. Please proceed.

Catherine Buan, Head of Investor Relations

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 2022. With me on today's call are Dustin Moskovitz, Asana's Co-Founder and CEO; Tim Wan, our Chief Financial Officer; and Anne Raimondi, our Chief Operating Officer and Head of Business. Today's call will include forward-looking statements, including statements regarding our financial outlook, 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 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 their closest GAAP equivalents are available in our earnings release, which is posted on our Investor Relations webpage at investors.asana.com. And with that, I'd like to turn the call over to Dustin.

Dustin Moskovitz, CEO

Thank you, Catherine. I'm excited to talk about our business results, but I wish I didn't have to do it against the backdrop of the humanitarian crisis in Ukraine. Our thoughts are with all those who are personally impacted by the situation in the region. We had a strong Q4, which capped off a great fiscal year. I continue to be really proud of our team, our mission-driven culture and what we've achieved together. As you can see from our results, our product-led strategy and execution drove accelerated revenue growth to 67% year-over-year versus 59% last fiscal year. We saw continued strength in the enterprise with 340 customers spending $100,000 or more on an annualized basis. Those with the biggest investments also significantly increased their footprint, with the dollar-based net retention of this cohort much higher than the $50,000 or more cohort in Q4. For example, our largest customer is now spending well into 8 figures with more than 50,000 paying seats and growing. Their continued investment speaks to the power of the Asana Work Graph, our proprietary technology that enables cross-functional teams to work together at a global scale. Customer adoption is at record levels with well over 2 million paid users. We partner closely with our customers to help them succeed at their missions and co-create our product roadmap through channels like Asana's Voice of the Customer program. Speaking of products, we launched more than 200 features last year, at a rate of more than 4 features every week. We also have a large and rapidly growing Asana Together Community, now representing more than 3,800 Asana ambassadors around the world. Our talent and culture is what makes these results possible. I'm proud to share that Asana has grown to over 1,600 employees and earned a record of 16 total workplace awards in 2021, with 3 awards ranking us at #1. These included Fortune's Best Workplaces in the Bay Area, Intech and for Millennials. We're entering the New Year with incredible momentum, and as companies look to drive their most critical initiatives, they are increasingly turning to us. While others are building suites of collaboration products for small teams, our strategy is different. We're a pure-play work management company, committed to leading the category and building the most comprehensive platform capable of serving organizations of all sizes around the world. Teams are organized functionally, but most work gets done cross-functionally. That's also where the greatest opportunity is for reducing friction and increasing impact. Asana is a great platform across team work, thanks to our ability to serve as a system of record across different projects. This is one of our big differentiators and the key to supporting large complex organizations. The larger the team and more cross-functional the use cases, the faster Asana can expand. These trends give us the confidence to invest aggressively, particularly in the Enterprise. We're initiating top line guidance for Q1 representing 50% growth year-over-year. We're also initiating fiscal 2023 revenue guidance at 40% growth year-over-year at the midpoint of the guidance range. As we enter fiscal year 2023, we have a strong product cycle ahead. We'll continue to focus heavily on our Enterprise Work Graph, improving on and expanding the functionality required by the largest and most complex organizations. We're already off to a fast start to the year, launching products out of the gate. On February 15, we introduced Asana Flow, a suite of new features, purpose-built to enable workflow automation across an entire organization. It used to be that only IT or system administrators could build workflows. We democratize that power with Workflow Builder, a point-and-click tool that makes it easy for every knowledge worker to create automated workflows. Importantly, you can also add everyday apps like Slack, Adobe Creative Cloud, Salesforce and Zoom, right into your workflows, plus 2 new additions to Asana partners that were Miro and Jotform. This means Asana can serve as the connective tissue across existing best-of-breed collaboration tools. Our customer base is already fanatical about this launch. We had a combined 12,000 people registered for a recent Learn-a-thon and live Asana Flow demo. And in only 3 weeks, 200,000 users have tried Workflow Builder with 42,000 rules created. Our redesigned Template Library is where you can save, share and reuse your most successful workflows. It also features industry-approved templates made in collaboration with leading organizations around the globe. This year, we'll build on this launch with part of our roadmap dedicated to adding more partners and more capabilities. Our next big product moment is Asana's Employee Impact Suite in Q2, which will give leaders a blueprint for how to better leverage the power of their people. We'll be announcing several product enhancements to help employees operate with parity of purpose, do their most impactful work and feel valued for their contributions. These enhancements will help them find flow, limit distractions and keep them in sync with their team members. Our investments in creating high-level clarity also mean building on the adoption and capabilities of features like Reporting and Goals and the ability to better track the time spent on the work done in support of these goals. We're seeing incredible early adoption of our Goals products by existing customers like Benevity and Xero. These companies care deeply about employee engagement, and as a result, have chosen to go wall-to-wall with Asana as their work platform of choice. You'll see even more enhancements to Goals and functionality to better support larger enterprise companies over time. The price of this altogether is an emphasis on helping large organizations get clarity around their work graph and simplify workflows, something Asana is uniquely capable of doing. In addition to the functionality that helps both teams organize, we're investing in all of the other things important to large enterprises, too, like making Asana accessible for all employees, improving our compliance capabilities, adding integrations for data loss prevention and discovery and scalability. We'll also be increasing the depth and breadth of the core Asana platform by expanding our IT partner ecosystem. I want to wrap up by saying that this virtually untapped market opportunity for work management and our differentiated ability to deliver value gives us increased confidence in investing further in the enterprise. We're still in early innings, and we're investing well. And now, I'll turn it over to Anne.

Anne Raimondi, COO and Head of Business

Thanks, Dustin. I want to join you in congratulating our teams for accelerating growth during a period of dramatic change in the world and in our markets. We achieved some amazing milestones this past year. Asana is now available in 13 major languages, meaning our product is now accessible to the majority of the world's population in their native language. We've opened new offices in Paris, Singapore and Chicago to better reach and serve our customers, growing our customer-facing teams around the world. Our significant top-of-funnel investment paid off with new records in both web traffic and sign-ups. We hosted thousands of attendees from all over the globe at our Focus and Flow and Scale events, generating significant pipeline while increasing our ability to reach larger customers and build relationships with executives. The tremendous traction we made in some of our most strategic investments has proven that we not only have the right product, we also have the right focus and strategy. The number of customers spending $50,000 or more was up 125% in Q4. And as Dustin mentioned, the number of customers spending $100,000 or more was 340 in Q4. We've been closing seven-figure deals, and we are still early. We've accomplished so much and are still just getting started. In fiscal year '23, we'll see our largest top-of-funnel investment ever with a focus on solving our customers' most strategic cross-functional needs as we grow and scale the value we deliver to them. Let's talk about some of the customer wins in Q4. We've won big deals across all industries, including banking, media, retail, healthcare, and telecom. This quarter, one of the largest banks in Canada consolidated on Asana to increase their operating agility, to improve cross-functional work across wealth management, marketing, and sales, and to eliminate the time-consuming back and forth of e-mails, messages, and spreadsheets to coordinate work in their venture division. One of the largest global media and marketing conglomerates signed a multiyear contract for Asana's Enterprise Solution and added 1,000 seats. Their agencies around the world use Asana to manage their clients' media and marketing campaigns, grow their businesses, and gain market share. Many of our expansions are also accelerating. One of our largest this quarter was with Morningstar, a global investment research company. They first began using Asana's Enterprise Solution to streamline global marketing campaigns and manage strategy and global accounts. After realizing quick efficiency gains in just 2 quarters, they more than tripled their seats to bring other departments throughout the business into Asana. It was the ability to scale, eliminate silos, and orchestrate work across different lines of business that won this account. Next, I'm sure many of you have binge-watched a show or two over these past 2 years. I definitely did. This quarter, one of the world's leading streaming services upgraded from our business to Enterprise Solution. Their studio and production divisions rely on Asana to help with real-time team support so they can hit their production deadlines and ambitious subscriber goals. With this upgrade, their corporate teams will now also be able to utilize Asana to manage their work. T-Mobile, the industry leader in 5G, is known for their unwavering obsession with offering the best possible service experience. To do this, teams need to be on the same page, which is why they chose to expand their use of Asana's enterprise solution last quarter. Now their emerging products and digital teams can collaborate cross-functionally in one platform to develop strategies and business plans for consumer markets, co-create digital products for emerging markets, and deliver digital technology programs for business and government. Another inspiring impact customer who upgraded to Asana's Enterprise Solution this quarter was Bombas, the basic apparel company with a mission to help those experiencing homelessness. My family has a few favorite Bombas styles, including their Pride collection and Princess collection. At Bombas, they donate a product for every one sold and have donated more than 60 million items to more than 3,500 community organizations and shelters to date. A number of Bombas' teams use Asana to manage internal projects and communicate requests, progress and updates within the platform. This allows for easy cross-functional collaboration and connection. We also saw success with channel partners in some of our fastest-growing international geography. PC Home is now the leading integrated e-commerce service group in Taiwan, providing e-commerce, fintech, and web portal services. They chose Asana's business solution this quarter to manage product development. They were initially looking for a tool for their IT and engineering teams to manage their fast-paced product development cycle. But with the help of our local partner, Master Concept, they decided to also bring in their marketing, customer service, and operations teams into Asana as well so everyone would have a system of record for the development process to help launch products faster. Not only are we adding big customers, but we are also helping customers serve their own customers faster. This quarter, we’re launching a strategic partnership with one of our existing customers, a major global medical device company, to bring a new, HIPAA-compliant workflow solution to the healthcare industry. Instead of relying on manual processes and disconnected systems across their vast network, they are using Asana to power a workflow that connects processes and teams to real-time updates to improve operational efficiency and customer care. With Asana, they seek to serve more customers, support them in growing their business, and create consistent experiences for those receiving treatment. By solving this pain point for their global network of organizations, we have the opportunity to reach hundreds of thousands of offices worldwide over the life of this partnership. This partnership is just the beginning and one example of how the Asana platform can support coordination at scale across many industries and organization types from franchises to supply chains and much more. We’re also excited to announce that to further support Asana’s enterprise advancements, a broader HIPAA offering will soon expand to other customers in the healthcare industry later this year. As Dustin said, the major fiscal 2022 wins we had with customers like Warner Music, Viacom CBS, and the largest automotive manufacturer in the world give us increased confidence to invest further in the enterprise. In Fiscal 2023, this will include: making our biggest investment increase ever in pipeline build to support lead generation, sales development reps, account-based marketing and customer engagement programs. We will be focusing on our sales infrastructure, solution selling, customer success, and everything that supports customer expansions, all major levers for adoption and expansion. Our global Enterprise go-to-market sales organization, especially quota-carrying sales headcount, will grow faster than overall headcount. And we will be expanding our ecosystem of technology partners, channel partners, and co-selling networks. Another example of a successful partnership has been Vimeo. In fact, just yesterday Asana and Vimeo were named a Top 3 Joint Venture among Fast Company's annual list of the World's Most Innovative Companies. In conclusion, we are investing to win, especially in the enterprise. We are growing adoption and expansion with our product-led strategy and we are going to market focused on customer success and adoption.

Tim Wan, CFO

Thank you, Anne. Q4 revenue growth represented continued momentum in the business. Revenues were $111.9 million, up 64% year over year. This puts us at an annualized quarterly run rate of $448 million. Revenue from customers spending $5,000 or more annually grew 82% year-over-year. This cohort represented 69% of our revenues in Q4, up from 62% in the year-ago quarter. We now have over 119,000 paying customers at the end of Q4, up 5,000 in the quarter. This represents a 28% year-over-year increase. We have 15,437 customers spending $5,000 or more on an annualized basis, up 52% year over year. And growth in larger customers is even stronger. We now have 894 customers spending $50,000 or more on an annualized basis, up 125% year-over-year. And, as Dustin and Anne mentioned, we have 340 customers spending $100,000 or more on an annualized basis as of Q4. As a reminder, we define these customer cohorts based on annualized GAAP revenues in a given quarter. Our dollar-based net retention rates remained strong across every cohort. Overall dollar-based net-retention rate was over 120%. Among customers spending $5,000 or more, our dollar-based net retention rate was over 130%. And among customers spending $50,000 or more, our dollar-based net-retention rate was over 145%. As a reminder, our dollar-based net-retention rate is a trailing 4-quarter average calculation. Before turning 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. Gross margins came in at 90.0%, improved from 88.2% in the year-ago quarter. Research and Development was $37.7 million, or 34% of revenue. We continue to invest heavily to fuel innovation on our proprietary technology, the Work Graph. Sales and Marketing was $75.6 million, or 68% of revenue, reflecting the investment in growth for both our self-serve and sales-led motions. For example, our customer-facing teams grew faster than overall company headcount growth in Q4. G&A was $31.3 million, or 28% of revenue. Operating loss was $43.9 million, and operating loss margin was 39%. Net loss was $46.9 million, and our net loss per share was $0.25. Now on to the full fiscal year highlights. Fiscal year revenue growth accelerated to 67% year-over-year to $378.4 million. About 42% of our revenue came from outside the United States. Both U.S. and international revenue growth for the year was 67% year-over-year. We added over 26,000 net new paying customers during the year. We also added over 5,000 customers spending $5,000 or more on an annualized basis during the year, and we added almost 500 customers spending $50,000 or more on an annualized basis during the year. Importantly, our unit economics remained strong throughout the year. Our net expansion rate across all segments increased. Sales and marketing payback was less than 15 months at the end of fiscal year '22. Please refer to our SEC filings for the calculation. With strong gross margins and compelling unit economics, we feel confident in our ability to continue to invest further in durable long-term growth. Moving on to the balance sheet and cash flow. Cash and marketable securities including long-term investments at the end of Q4 were approximately $315 million. Our remaining performance obligations, or RPO, was $218.1 million, up 78% from one year ago. 85% of RPO will be recognized over the next twelve months, which grew 70% from the year-ago quarter. Our free cash flow is defined as net cash used for operating activities, less cash used in property and equipment and capitalized software costs, excluding non-recurring items such as the build-out of our San Francisco office. In Q4 free cash flow was negative $41.2 million, reflecting our investment in growth and rapid onboarding of new headcount during the quarter. We also ended the fiscal year with over 1,600 employees. We are very proud of our business momentum, especially our success with very large scale deployments at great referenceable accounts and the velocity of innovation this year. Now moving on to our fiscal year 2023 outlook. For Q1 fiscal year 2023, we expect revenues of $114.5 million to $115.5 million, representing growth rates of 49% to 51% year-over-year. We expect non-GAAP loss from operations of $68 million to $66 million, and we expect net loss per share of $0.36 to $0.35, assuming basic and diluted weighted average shares outstanding of approximately 189 million. For the full fiscal year 2023, we expect revenues to be $527 million to $531 million representing a growth rate of 39% to 40% for the full year. In terms of the shape of the quarterly progression, we expect to see more traditional enterprise sales seasonality with our sales capacity ramping towards the second half of the year as our mix continues to evolve towards a sales-led motion. Given the large untapped opportunity ahead and along with the success we've seen in fiscal year '22, with the Work Graph scaling to 25,000 and 50,000 seats and beyond, we are increasing our investments to expand the functionality required by large and complex enterprises and further investments in our go-to-market motion in the form of increasing our sales capacity and customer-facing teams to support adoption and expansion within many of our larger enterprise customers. We expect full year non-GAAP operating loss margins to be in the mid-40 percentage range for fiscal year 2023. We believe the investments we are making in fiscal year '23 reflect our ambition to be the category leader and our drive towards durable long-term growth. And with that, I'll turn it back to the operator for questions.

Operator, Operator

Thank you. The first question comes from Alex Zukin with Wolfe Research.

Alex Zukin, Analyst

Congratulations on the quarter. It’s clear that the results are strong and your guidance is impressive. The main question I expect to hear tomorrow revolves around the incremental operating margins and the investment strategy for next year. Could you elaborate, Dustin and Tim, on the key areas where you plan to invest and focus? How do you foresee the return on those investments? Will it involve more enterprise acquisitions and faster expansions, given that you are currently excelling at attracting enterprise customers? What are the areas that still need attention this year in order to meet those goals? How should investors approach this?

Dustin Moskovitz, CEO

That's an excellent question. You've framed it well. The overall category is evolving rapidly, but we believe it's still in the early stages. Most teams are still using spreadsheets and email, so we're eager to keep investing in our unique vision and reach more of the market. There are two primary areas where we are focusing our largest investments. I'll start with R&D and then let Anne discuss our go-to-market strategy. In R&D, we're anticipating a strong product cycle and will heavily focus on enhancing our Enterprise Work Graph, which caters to the needs of large and complex organizations. While we've had success with these clients, there are still many needs across different organizations that we can address to add value and aid their success. We began the year with the launch of Asana Flow, which I've previously mentioned as one of my key focuses. There's still more to accomplish. A significant part of our roadmap for fiscal year '23 is aimed at enhancing the Workflow Builder, expanding the Template Library, and increasing our partner integrations. In Q2, we're set to unveil our Employee Impact Suite, which will help team members gain clarity of purpose, focus, and feel valued for their contributions. Throughout the year, we'll also be investing in features that provide high-level clarity, which distinguishes Asana from other work management solutions. This includes enhancing our reporting, goals, and portfolios features, as well as improving time tracking related to those goals. Beyond functionalities for team organization, we're also prioritizing enterprise needs, such as making Asana accessible to all employees, enhancing compliance capabilities, integrating for data loss prevention, and ensuring scalability for large deployments with thousands of users. Lastly, we'll be expanding our IT partner ecosystem to deepen and broaden the core Asana platform. Overall, our goal is to help large organizations achieve clarity around their Work Graph and streamline their workflows.

Anne Raimondi, COO and Head of Business

Yes. And then on the go-to-market side, we're excited to put more resources towards areas where we're already seeing strong performance and that enable us to reach and serve our customers faster. So starting with our top of funnel, we're continuing to see strong performance in all regions. We're also making big investments in pipeline building, including scaling our global sales development teams and increasing account-based marketing and customer engagement programs. From a hiring standpoint, our quota-carrying sales headcount will grow faster than overall headcount. And there, what we see is when our team is able to partner early with our larger customers, we're able to serve more of their employees and make a faster impact on their most strategic cross-team initiative. We're also investing a lot in customer success in post-sales programs because in our larger customers, we're seeing a step-function change in adoption and expansion. And this is because we're not only helping their teams adopt the Asana platform, we're also helping the organization codify and implement their best practices for cross-team work. So this is the work many of our biggest customers are asking us to help them with, given our 10-plus years of experience partnering with some of the world's most innovative teams. So just this week, one of our Fortune 10 customers was seeking our advice on best practices for updating how their organization sets and manages goals across their enterprise. And we're just seeing that demand in a lot of our larger customers. And so we're excited to invest in places where we're already seeing results.

Alex Zukin, Analyst

Got it. Perfect. And then maybe just as a follow-up, with a good proportion of the revenue coming from international or outside of the U.S., any thoughts or incorporation into the guidance around headwinds, if there are any out of Europe, Western or Eastern? And just in general, how do we think about the conservatism in the guide with respect to that?

Tim Wan, CFO

Hey, Alex, this is Tim. It's probably too early to fully assess the impact of the Ukraine crisis and its broader implications. Revenues from customers based in Ukraine and Russia are not a significant part of our business. However, it is challenging to predict the short- and long-term implications from our current position. Like many of you and other companies, we are closely monitoring the situation. The falling euro, rising gas prices, inflation, and supply chain issues are certainly concerning and may affect how companies and customers approach investments. While we are keeping an eye on it, this situation has not been included in our guidance at this time, and we will continue to monitor it closely.

Catherine Buan, Head of Investor Relations

Hi, this is Catherine. I am going to read a question from Rob Oliver at Baird. Strong billings this quarter. You guys rolled out a ton of enterprise specific functionality at your Scale event in late '21. I wanted to ask if those announcements drove larger deployments in the quarter and how they have impacted the enterprise expansion pipeline?

Anne Raimondi, COO and Head of Business

Yes. Great. I’ll go ahead and answer that. So we’re seeing more customers choosing enterprise, including some of our largest customers who upgraded in Q4, including one of the largest global sports apparel manufacturers, a Fortune 10 company and a global streaming service provider. So the revenue combined from our business and enterprise tiers represents more than 60% of our revenue in fiscal year '22. And the revenue from those two tiers grew over 100% year-over-year in fiscal year '22. So strong demand for our business and enterprise tiers.

Operator, Operator

The next question comes from Steve Enders with KeyBanc.

Steven Enders, Analyst

I think you mentioned in the prepared remarks that you saw record web traffic and new sign-ups coming onto the platform. I guess, wondering how are you seeing paid conversion at this point? And how should we kind of think about the new customers potentially coming in going forward here?

Anne Raimondi, COO and Head of Business

Yes. We approach our top of funnel investments by focusing on payback, the quality of customers, and their lifetime value. Many of our enterprise customers enter through our strong product-led growth strategy, after which our sales teams engage with them to drive expansion. Our investments are based on these positive outcomes.

Steven Enders, Analyst

That's helpful. Regarding Reporting and Goals, you mentioned positive adoption. How are these factors encouraging customers to move to higher price tiers at this stage?

Dustin Moskovitz, CEO

Well, generally, I think the larger the customer, the more value they're going to get out of trying to achieve clarity at what we call the top of the pyramid of clarity. So thinking about larger portfolios of work or strategic initiatives, and Goals is literally about modeling your highest level objectives and mapping them to the work and Reporting is about getting that high-level clarity that's most useful to the senior team leads or executives. And so a lot of that functionality is just literally part of our business tier SKU. And so it will be part of an upgrade conversation. But I think sort of more qualitatively, it's part of what is exciting in any sort of sales cycle conversation when we're demoing the product and helping explain to potential customers how Asana is differentiated from competition.

Anne Raimondi, COO and Head of Business

One thing I want to add is that those features are also helping us engage with our upper mid-market customers. One of the fastest-growing community platforms has 1,000 seats and is expected to double in size this year or more. Every employee receives an instance of Asana, integrating it into their work processes. This is leading not only to upgrades in terms of the tiers but also to broader adoption across the entire company.

Steven Enders, Analyst

Just a quick follow-up on that last comment you had about a wall adoption. I guess, how prevalent is that becoming at this point? And how should we kind of think about the increasing mix of those conversations versus maybe a year ago?

Anne Raimondi, COO and Head of Business

Yes. We are seeing that much more prevalent, especially in our upper mid-market customers, which really we see as these high-growth companies are the future enterprise customers. And so with the functionality that we just talked about and the investments in workflow and the investments in security and scalability, we are seeing many more conversations about wall-to-wall and companies a way that all their employees do work together.

Dustin Moskovitz, CEO

And this is Dustin. One thing I want to emphasize is that even among larger enterprise customers, we frequently observe a division or business unit utilizing Asana comprehensively. This often involves a subsidiary with its own brand within a larger conglomerate, possibly acquired recently. While we see this most prominently in mid-market companies, enterprise customers also often exhibit similar patterns. I'd like to connect this to the earlier question regarding web traffic, as it can be misleading to view that solely as a pathway to new logos or customers. In reality, it frequently leads to new opportunities within a large enterprise, which is an important aspect of how we evaluate the return on investment from those efforts.

Operator, Operator

The next question comes from Mark Murphy with JPMorgan.

Mark Murphy, Analyst

Tim, you commented that you expect more traditional enterprise sales seasonality toward the second half of the year. And I was wondering, when you say more, do you mean more than other companies? Or do you mean more than you saw last year? I'm just trying to understand if you mean it's going to be a little more back-end loaded in terms of bookings patterns this year.

Tim Wan, CFO

Yes. What I meant, Mark, was that we expect to see more than what we historically observed at Asana, mainly due to the additional sales capacity. By the end of Q4, we had made significant investments in new capacity during the first half, as well as in the infrastructure to support those salespeople. So, you can compare this to our investment in the sales-led strategy last year and how it is shifting moving forward.

Mark Murphy, Analyst

Okay. Understood. And Dustin, how is the usage and the actual engagement of the Asana product trending when you see employees begin to return to the office? For instance, I don't know what the typical usage looks like, but say, if someone is using the app for 20 minutes per day when they're remote, are you able to track how does that change at all when they return to the office?

Dustin Moskovitz, CEO

I haven't explicitly looked at session time, but I've seen some of the just frequency metrics like how often people log in and those look totally unchanged. I'm not sure how acutely you'd be able to see something like that though since people are returning office on different timelines around the world. But even aside from that, I wouldn't expect to see a change because work management was something that was a rising category even before remote work hits. And we really see Asana as an essential platform to use, whether you're working in a distributed way or from an office. And even when you're working from an office, you're often also working in a distributed way because a lot of our customers work across many offices. Even before the pandemic, Asana had, I think, 13 locations all over the world. And so even though in each of those locations, we're working in an office, we're still having to collaborate in a distributed way. And even within one building, you're working across floors or working across one large floor plate. It's still very useful to have a shared source of truth and a database like Asana.

Operator, Operator

The next question comes from George Iwanyc with Oppenheimer.

George Iwanyc, Analyst

Dustin, maybe you could provide some more color on Flow and Workflow Builder. With the customers that have already launched, I know it's early, but have you noticed anything different in the way that they're using Asana?

Dustin Moskovitz, CEO

Yes, it's still a bit early for that. Hopefully at the next earnings call, we can share some great stories. In my prepared remarks, I mentioned that over 200,000 individual users have tried the Workflow Builder and have created around 60,000 rules with it. That's a really promising beginning. We've observed significant enthusiasm from customers eager to learn more. Many people have signed up for our webinars and have been reaching out to their customer success and sales representatives. There’s clearly a lot of excitement surrounding it. The upcoming months will focus on helping users maximize its value. Internally, I can tell you we have begun adopting it seriously and have used it to streamline our most complex workflows that require multiple groups within the company to share context, particularly during product launches where many different stakeholders are involved. We want to ensure that we maintain high-quality processes that always execute correctly and keep everyone in the loop at the appropriate times.

George Iwanyc, Analyst

All right. And then maybe in the context of the new capabilities that you're adding and the wall-to-wall expansion. Can you give us a bit of an update on the competitive environment? Or are you seeing any displacements going on? Or are you seeing any price changing?

Anne Raimondi, COO and Head of Business

Yes, I'll take that one. We're not really seeing a material change in competition, but rather an overall increase in awareness of and interest in work management, so I think what we're seeing also is like our dedicated focus on innovating specifically in work management, the caliber of our customers and our ability to deliver and measure value quickly is what's kind of contributing to us being able to attract new customers, win those customers and then expand with the ones that we have.

Operator, Operator

The next question comes from Brent Bracelin with Piper Sandler.

Brent Bracelin, Analyst

My question here is really around just an evolvement of the trends here on work management, which historically has been a departmental land, encouraging to see more wall to wall. You guys are talking about more cross-functional being a driver here. Is the industry shifting here where you're seeing a bit of a tipping point towards wanting more of a cross-functional tool than we historically have seen? Or are those expansions happening faster? Any color around some of the wall-to-wall activity you're seeing? And is the land profile changing here?

Dustin Moskovitz, CEO

I believe it has always been common for Asana to initiate and expand projects across different functions. Since our company's inception, we've noted that we typically start with a marketing team, which then collaborates closely with product, sales, and legal on various workflows. This trend has grown as we've developed more features to meet those specific needs and established our unique position in facilitating cross-team collaboration. Additionally, there's increasing recognition of work management solutions. As we pursue larger deals, the discussions are rising to higher levels within organizations, engaging more CIOs and C-level executives who inherently approach deployment with a cross-functional perspective. I see this as a long-term trend that is gaining momentum.

Brent Bracelin, Analyst

Great. So it sounds like the lands are similar, the expands seem to be accelerating. Helpful color there. Tim, my last question for you is just really around the aggressive investment plans for this year. It looks like OpEx growth will outpace revenue growth based on the guide. As you think just about the philosophy of operating leverage, is there a pull-forward of investment this year with the intent to drive maybe more leverage next year? Just trying to think through at what point would you start to willing to show a little bit more leverage in the business model?

Tim Wan, CFO

That's a great question. You're right, Brent, and you would anticipate seeing more leverage in the coming year. One thing worth mentioning is that we accelerated our growth and actually grew faster this year compared to last year. In looking at our unit economics and gross margins, which are above 90%, along with strong net expansion rates on larger deployments like $50,000 or $100,000, we feel confident in our ability to continue investing in both our product and our sales and marketing to engage many of those customers. The model we shared about a year and a half ago during our direct listing, detailing our growth phase and longer-term strategy, remains unchanged. As long as we continue to grow at a strong rate, that is the key focus for us, and that perspective has not shifted.

Dustin Moskovitz, CEO

And 2 additional points I want to make there. So in addition to revenue overall accelerating, when we look at our largest customers, so revenue from customers spending more than $5,000 annually, that actually grew 90% in fiscal year '22. So that's growing even faster than revenue overall. And a lot of the headcount that we're adding conceptually really needs to keep pace with that part of the growth because a different motion to support those larger customers. And then additionally, on the sort of marketing side, we have really great analytics on the specific channels and markets that we're investing into, to acquire new customers or acquire additional seats and existing customers. And that gives us a lot of confidence that we can further invest into those and expect to get the return, not necessarily immediately, but on looking out over the longer payback period, we have really high confidence. So it's not like we're just sort of throwing money at billboards and Super Bowl ads. We're able to invest in really smart ways and have confidence that we're going to get that money back.

Operator, Operator

The next question comes from Andrew DeGasperi with Berenberg.

Andrew DeGasperi, Analyst

I have a question about the partnerships. When you launched the channel partner program internationally, the primary goal was to expand geographically. Looking ahead a few years, do you anticipate that the partner channel will become a more significant contributor to sales, similar to what we observe with some of your larger software competitors?

Anne Raimondi, COO and Head of Business

Yes, thank you for the question. We see this as both early and promising. It is really helping us connect with customers in more locations. We previously mentioned our partner, Master Concept in Taiwan, who has been instrumental in assisting us with PC Home and accelerating that account. We are observing similar trends in EMEA, where we are onboarding excellent partners who are investing in the Asana business with dedicated resources and programs. These developments are encouraging, and while we are still in the early stages, we believe that medium to long term, this area is crucial for us to allocate resources and establish additional strategic partners, particularly to support enterprise growth. Overall, we are optimistic about our ability to better reach and serve customers collaboratively, understanding that it requires a medium to long-term investment on our part.

Andrew DeGasperi, Analyst

That's helpful. And then as a follow-up on the 8-figure deal that you signed last year, I mean, I was just wondering if the pipeline that you're seeing for this year, is there a potential to do more of that type over the next few quarters?

Anne Raimondi, COO and Head of Business

Yes, we're certainly very excited about that customer and the rate of growth. The more that we're working with these larger customers that are using us for their most strategic cross-team initiatives, we actually see faster expansion. So there are a number of the larger 7-figure deal customers as well as high-growth ones that we're certainly partnering very closely with to be able to deliver more value and then realize that value.

Operator, Operator

The next question comes from Pat Walravens with JMP Securities.

Patrick Walravens, Analyst

Thank you, and congratulations. I’m not sure if this is for Tim or Dustin, but revenue has indeed accelerated year-over-year, which supports further investments. However, Tim, as you know, we focus on quarterly performance. If we examine the quarters, calculated billings provides a clear view. The business accelerated for five consecutive quarters from early 2021 to Q2 of this year, but it appears to have slowed in the last two quarters. I would like to hear your thoughts on this and the key points you share with investors regarding the acceleration and subsequent deceleration.

Tim Wan, CFO

Yes, that's a good question. There is certainly a comparison to be made since last year we were dealing with a situation where COVID was much more impactful. However, it's important to note that billings isn't the sole metric we use to gauge our business. We analyze our performance across various metrics, and I believe GAAP revenue is a more accurate reflection of our growth rate. That being said, one of our main objectives is to enhance our go-to-market strategy in the enterprise sector. Over time, you should focus on RPO and CRPO, as these will indicate our increasing traction in the enterprise space, particularly as we pursue longer-term agreements.

Dustin Moskovitz, CEO

Yes.

Operator, Operator

The next question comes from Rishi Jaluria with RBC Capital Markets.

Rishi Jaluria, Analyst

This is Richard on for Rishi. So you mentioned some of the partnerships you guys have with players in tangential areas of the collaboration landscape such as digital collaboration tools, whiteboarding tools. So as you look forward, have you identified other collaboration categories that you think you could expand into long term? Or just, I guess, more generally, how do you think about the broader market opportunity in collaboration software long term?

Dustin Moskovitz, CEO

Yes, it really depends on your long-term perspective. For the foreseeable future, we see ourselves as focused on work management. When we look at the collaboration landscape, we categorize it into three main areas. The first is communications, which includes tools like Zoom, Slack, and email technologies. The second category involves content, encompassing document editors, whiteboarding tools, and specialized products like Adobe or Figma. The third major area is work management. Collaboration software is indeed exciting and significant, but work management presents a vast market opportunity that feels largely untapped. We estimate the total addressable market includes over 1 billion knowledge workers globally, with a significant number still relying on traditional tools like email, spreadsheets, lengthy meetings, and sticky notes. We're very enthusiastic about focusing on this opportunity and collaborating with top-tier products in the field.

Rishi Jaluria, Analyst

Very helpful. And this might be a little bit of a repetitive question, but you talked about the launch of Asana Flow last month and it seemed to be some strong early engagement numbers and metrics. So I guess just in terms of monetization strategy, I note the majority of these new features are in some of the more premium SKUs. So do you expect something like that to drive some free to paid conversion or upgrade SKUs? And same question, I guess, as you look forward to the broader product roadmap such as the Employee Impact Suite you mentioned earlier?

Dustin Moskovitz, CEO

You want to talk maybe about the pricing aspect?

Anne Raimondi, COO and Head of Business

Yes. We're excited that, in particular, for the Flow launch, to get the most value out of the Workflow Builder, the Template Library, those are in our premium tiers. And so I think the early response, we're very excited about both within like new customers who were joining our webinars as well as we had a large over 6,000-person community event of some of our most active evangelists. So again, as just mentioned, it's early right now, but we're excited about the interest and momentum in customers and new customers trying the product and then our sales teams are actively working with them to understand their needs and ideally get them into the right package to be able to solve their cross team needs. So that's overall how we're thinking about all the features that we launched, which is making them as accessible as possible is going to be part of our strategy. And then for those customers that have these cross-team strategic needs, making sure that they understand the value that are in our business and enterprise tiers and being able to move them up into those tiers when they're ready.

Dustin Moskovitz, CEO

And then in addition to packaging, I would just also point out that workflows are really helpful for helping a customer adopt and stay retained with Asana. So a lot of what we've built into the templates and what we are helping the first set of customers to with Workflow Builder is really very quickly implement workflow streams that they were otherwise doing by sort of gluing together a set of features like the automation rules or forms or task templates or custom API scripts they were writing to integrate with some of the other apps in their toolkit. And so this is really giving us a much faster way to deploy cross-functional use cases and workflows into new customers and help them just get started on a really good foot and expand faster.

Operator, Operator

Next question comes from Brent Thill with Jefferies.

Brent Thill, Analyst

Dustin and Tim, many investors are asking about the magnitude of your spend. And I know Brent's question, the Brents are thinking alike on this call on the questions, it's just when you think about how long you're willing to commit to that magnitude of a loss before you start to show some leverage? What's the trigger? What's going to trip the line, if you will, or the core to pull back a bit? You're significantly overspending relative to your peers. And so we're getting a lot of questions on that if you can address that.

Dustin Moskovitz, CEO

Yes. Well, there are a couple of different ways to look at it. Again, the very big picture for me as the CEO is just where we are in the category maturation. And so we're investing to win, and we mean that quite literally. And so when you think about this big market opportunity, I'm a little less focused on what the optics of the operating margin are in the short run and more focused on how confident are we that we're going to get those investments back in the form of long-term revenue. And so again, there, we look at our efficiency metrics. So we have the 90% gross margins. We look at the success with enterprise customers. We look at the sort of concrete channel and market efficiency for our marketing spend and where sales are succeeding. And so I think the things that will cause us to get leverage are more about hitting diminishing returns there, such that those investments no longer look profitable on the margin and then also slowing our growth trajectory so that it makes less sense to invest ahead because when you're growing as fast as we are, you sort of quickly catch up to the scale of the spend. And if you don't, then you can sort of slow down on adding heads and grow into it. But if you're growing much slower, then you can't really sort of make that kind of rationale. So I think that those are the 2 things that we would look to and you could look to for when we get leverage. But we do, maybe not in every quarter and every year. But over multiyear periods, we do trend towards more leverage.

Tim Wan, CFO

That's a great question. I agree with you, Brent, that we should expect to see more leverage in the upcoming year. One important point we may not have mentioned is that we accelerated growth this year, outpacing last year's performance. When we examine our unit economics and gross margins, which are over 90%, we find that our payback and the unit economics of larger deployments, such as those of $50,000 or $100,000, are performing well. This gives us confidence to keep investing in both product development and sales and marketing to engage and support our customers. The growth model we shared about 1.5 years ago during our direct listing still stands, and our approach to defining growth phases remains the same. As long as we maintain healthy growth rates, we remain in our desired sweet spot, which has not changed.

Dustin Moskovitz, CEO

Operator, Operator

The next question comes from Robert Simmons with D.A. Davidson.

Robert Simmons, Analyst

I was wondering how much are you factoring in higher expenses from a return to relative normalcy post or semi post-COVID?

Tim Wan, CFO

Yes, we haven't returned to the office yet. Some of us are actually doing this call in person together, but we have made some assumptions about returning to the office in the second half of the year. This includes additional travel and spending related to being together in the office and reaching our customers, meeting with them, and helping them succeed. So I would say in the second half of the year.

Dustin Moskovitz, CEO

I want to nuance that a little bit, return to office has a concrete definition internally. You have several hundred people in the San Francisco office and then dozens of people in some of the other offices, but 10 means more like 90% or 100% of the workforce coming back. And so part of those expenses exist now and part of them may accelerate in the back half.

Robert Simmons, Analyst

Got it. And sorry, please continue.

Dustin Moskovitz, CEO

I also want to mention that it's not entirely straightforward because we are still paying rent for our offices, which is likely our biggest office-related expense. So it's not as if everything changes completely, but there are adjustments to travel, expenses, and some operational costs for the building.

Robert Simmons, Analyst

Got it. All right. And then where do you think you're the most underpenetrated out in the market? Is it a particular region? Are there industries? Is it specific parts of the enterprise, like legal or sales? Or what are your thoughts there?

Dustin Moskovitz, CEO

There are several factors to consider. The first that comes to mind is highly regulated industries where we may not have met compliance requirements yet, or where adoption of new technologies is slower, making them our least penetrated areas. However, we maintain a significant presence across various industries, regions, and customer scales.

Operator, Operator

That concludes the Q&A session. I would like to pass the conference back to Catherine Buan for additional remarks.

Catherine Buan, Head of Investor Relations

Thank you very much, everyone, for joining us today. I look forward to seeing you on the road this quarter and always appreciate your time. Thank you.

Operator, Operator

That concludes the Asana Fourth Quarter and Fiscal Year 2022 Earnings Call. Thank you for your participation. You may now disconnect your lines.