Earnings Call Transcript - ASAN Q3 2022

Operator, Operator

Ladies and gentlemen, thank you for being here. My name is Brent, and I will be your conference operator today. I would like to welcome everyone to the Asana Third Quarter and Fiscal Year 2022 Earnings Call. Currently, all lines are muted to minimize background noise. After the speaker's remarks, we will have a question-and-answer session. Now, I’d like to turn the call over to Catherine Buan, Head of Investor Relations. Please proceed.

Catherine Buan, Head of Investor Relations

Good afternoon. Thank you for joining us on today’s conference call to discuss the financial results for Asana’s third quarter 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 reports on Form 10-Q for additional information on risks, uncertainties, and assumptions that may cause our 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 equivalent 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, Co-Founder and CEO

Thank you, Catherine. We’re very pleased to be reporting another quarter of strong topline growth, large customer wins, and record-breaking adoption. As you can see from our results, the momentum at Asana continued into Q3, we’re now at an annualized quarterly revenue run rate of over $400 million. Quarterly revenue surpassed $100 million for the first time and grew 70% year-over-year, driven by new heights in paid customers to over 114,000. Our larger customers grew even faster, with 96% year-over-year revenue growth from customers spending $5,000 or more, and considerable momentum in enterprises with a number of customers spending $50,000 or more accelerating for the third consecutive quarter. Our dollar-based net retention rates increased across all cohorts, illustrating the larger expansion across the customer base. And finally, we’re seeing continued record adoption of paying users, topping 2 million this quarter, a new milestone. Put simply, as our enterprise momentum continues, we’re landing bigger and expanding faster. We’ve seen our investments in product lead growth and the enterprise succeed in the past, and we continue to see that they’re paying off now. The Asana Work Graph is uniquely architected to give organizations cross-functional capabilities that deliver measurable business value, and according to IDC, an estimated 225% ROI in the first year. Today’s reality is that we’re more distributed than ever and are frequently collaborating both cross-functionally and with people we’ve never met in person. This complexity compounds the larger and more dispersed a company is. Yet most enterprises will organize workers based on their location and function. The Enterprise Work Graph solves this problem by coordinating the right people around the right work at a global scale. It’s why Asana is so powerful for large companies and why we’re seeing such amazing growth. Rather than micromanaging, leaders are free to macro-manage their teams, by aligning them around key objectives and the work needed to achieve them no matter where they are in the world. In the third quarter, we continued to invest in enterprise-grade infrastructure that supports our customers’ needs. At our launch event, Scale, we hosted thousands of attendees from all over the globe and generated significant pipeline. We showcased how two incredible companies, Okta and Jira, are better orchestrating work and achieving their growth goals with Asana. We also announced a new suite of enterprise-specific functionality in three key areas. First, we released greater security and scalability features for IT, such as Enterprise Key Management or EKM, SCIM functionality, which automates setup and syncs profile updates with Okta and Microsoft Azure AD, and better admin capabilities to deploy Asana with Audit Log API and Admin Announcements. Second, we’ve made cross-functional and cross-team coordination even easier with Workflow Builder. Now it’s possible for anyone to build comprehensive and repeatable processes that connect teams regardless of location or function and move work forward. And third, we’ve improved alignment and visibility for executives, including a new Goals API for linking our natively built Goals products to data and insights for mission-critical tools, and the ability to report on data trends and workflows over time in universal reporting. Universal reporting is more and more viable on customer deployments scale, and we share large customers often faster in the overall customer rates. Our company values guide how we develop our products, how we serve our customers and their missions, and how we show up and work together. During the third quarter, we were honored to be recognized for our investments in product innovation and customer experience across several platforms. Asana was named a leader in IDC MarketScape: Worldwide Collaboration and Community Applications 2021 vendor assessment, recognized in Fast Company’s first annual list of Brands That Matter, and we were also included on Inc. Magazine’s inaugural list of Best-Led Companies in 2021. These recognitions are outcomes of our culture and diligent pursuit of our mission. Before I pass it on to Anne, I want to highlight the addition of Amit Singh to Asana’s Board of Directors. Amit, who serves as the Chief Business Officer for Palo Alto Networks, has impressive go-to-market leadership experience, including founding and building Google’s Cloud business and leading business and operations for Google’s AR and VR efforts. Prior to Google, Amit spent 20 years at Oracle in various product, engineering, sales, and strategy roles. He will be a tremendous resource for Asana as we continue expanding our enterprise footprint. And now, I’ll hand it off to Anne.

Anne Raimondi, Chief Operating Officer

Thank you, Dustin. I’m thrilled to be here and excited to experience my first end of quarter leading Asana’s business team. For those of you who have not yet had the pleasure of meeting, I’ll briefly introduce myself. During my career, I’ve had the good fortune of scaling organizations including eBay, SurveyMonkey, and Zendesk. As a former Asana customer, I deeply understand our customers' pain points and the value we can deliver for them. And as a former member of our Board of Directors, I spent over two years working with the Asana leadership team as the company was growing, scaling, and creating the strategy that we now have in place. Much of my first 90 days as COO has been spent meeting with our customers. I’ve been struck first by how much people love Asana, how passionate users are about the product, and how strong our brand is in terms of customer satisfaction and employee engagement. It’s gratifying to see how we are enabling enterprises across auto manufacturing, global consumer packaged goods, high tech, and the non-profit sector to work more effortlessly across growing teams. Leading companies such as Amazon, Japan Airlines, Roche, and thousands of others are partnering with us to empower their teams. I also find it remarkable hearing CEOs, COOs, and CIOs at these companies tell us about their cross-functional pain points and the huge challenge they’re experiencing keeping their teams connected during this time. These themes translated into some really amazing large company deals in Q3. In North America, we’re excited to welcome Warner Music Group as a new customer. They are one of the three largest multinational recording companies in the world. They chose Asana’s Enterprise Solution in Q3 to organize, manage, and track the end-to-end process of how they identify, evaluate, and bring new artists into its various labels faster and more effectively. I think we all have a favorite artist or two under one of their many labels. Mine are the Red Hot Chili Peppers and Bebe Rexha. This was a net new customer and a significant win for our team. In Japan, we signed a strategic deal with one of the largest automotive manufacturing companies in the world. They expanded their use of Asana’s Enterprise Solution this quarter as they focus on improving operating efficiency so teams can spend more time developing innovations for their vehicles. These new teams will be managing software development for their mobile app, product development, things like digital keys and new hire onboarding for thousands of employees on the platform. This reinforces the credibility we are getting across traditional industries. We also closed yet another big global brand in North America. One of the largest chocolate manufacturers in the world chose Asana’s Enterprise Solution. They were struggling with significant time and resource management challenges and painful project handoffs across departments that were slowing down campaigns. They knew they needed a better way to manage their work in order to hit deadlines and more quickly produce the iconic marketing campaigns the brand is known for, and they chose Asana. Not only are we landing bigger, but we are also expanding faster. Benevity is a corporate purpose platform that helps companies like Nike, Coca Cola, Google, Apple, and many of the Fortune 1000 empower their people to be agents for social change through giving, volunteering, and grant making. It is one of Western Canada’s largest startups and another great impact company that went wall-to-wall on Asana as a net new customer this quarter. Now all departments of Benevity will use Asana to manage their work from OKRs to revenue operations, roadmaps, and everything in between, so they can execute quickly and effectively to hit their aggressive growth goals. We did another strategic multiyear deal with an important impact organization called Team Rubicon that unites the skills and experiences of military veterans with first responders to rapidly deploy emergency response teams. They chose to go wall-to-wall with Asana’s Enterprise Solution. They deploy thousands of volunteers around the world. In Asana, they get critical information to their large volunteer base in the field and will be able to increase their operational agility and help people prepare, respond, and recover from disasters and crises faster. In fact, we have great momentum as an important brand that supports impact organizations everywhere, including Allbirds, The Citizenry, and Chapters of the United Way, and many others. We have believed from the beginning that it’s critical to have a mission that guides our work and core values. This mission underlies Asana’s foundational commitment to support impact organizations to empower their teams to pursue world-changing work more effectively. Whether it’s with large impact organizations, the most modern fast-growing innovators, or increasingly traditional industries, we’re simply landing bigger and expanding faster. As a result, my top priorities over the next several quarters are these. First, gelling our global enterprise go-to-market sales organization, where we are quickly ramping to capture the enormous enterprise opportunity. In fact, it’s worth mentioning that with tremendous momentum in the enterprise over the last few quarters, we’ve been closing seven and eight-figure deals, and we’re still early. Second, helping our largest customers succeed and grow adoption. Our strong net expansion rates are evidence of our ability to win and expand in large enterprises where work is by nature cross-functional. Third, continuing our international momentum by meeting customers where they are, with local anchor support and cultural localization, as well as leveraging partners to expand our reach. And I will continue to spend considerable time further nurturing our strategic customers and our partner relationships. We expect to further expand our partner ecosystem over the coming quarters. As you can see, we’re investing to win and grow with our product-led strategy and go-to-market focus on customer success. With that, I will hand it over to Tim to go through our financial results.

Tim Wan, Chief Financial Officer

Thank you, Anne. Q3 revenue growth represented continued momentum in the business. Revenues were $100.3 million, up 70% year-over-year. Revenue from customers spending $5,000 or more annually grew 96% year-over-year. This segment represented 68% of our revenues in Q3, up from 59% in the year-ago quarter. We now have over 114,000 paying customers at the end of Q3, up 7,000 in the quarter. This represents a 28% year-over-year increase. We have 14,143 customers spending $5,000 or more on an annualized basis, up 58% year-over-year, and growth in our larger customers is even stronger. We now have 739 customers spending $50,000 or more on an annualized basis, up 132% year-over-year, our third consecutive quarter of accelerating year-over-year increase. As a reminder, we define customer spending $5,000 or more and $50,000 or more based on annualized GAAP revenues in a given quarter. Dollar-based net retention rates increased across every cohort. Our overall dollar-based net retention rate increased to over 120%. Among customers spending $5,000 or more, our dollar-based net retention rate increased to 130%, and among customers spending $50,000 or more, our dollar-based net retention rate was well over 145%. As a reminder, our dollar-based net retention rate is a trailing four-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 90.7%, improved from 87.7% in the year-ago quarter. Research and development was $39.1 million or 39% of revenue; we continue to invest heavily to fuel innovation. Sales and marketing was $65.8 million or 66% of revenue, reflecting the investments in growth in both our self-serve and direct sales motions. G&A was $27.3 million or 27% of revenue. Operating loss was $41.3 million and operating loss margin was 41%. Net loss was $42.5 million and our net loss per share was $0.23. Moving on to the balance sheet and cash flow. Cash and marketable securities, including long-term investments at the end of Q3, were approximately $353.6 million. Our RPO is $190 million, up 87% from the prior 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 non-recurring items such as the build-out of our San Francisco office. In Q3, free cash flow was negative $29.5 million, reflecting our investment in growth and rapid onboarding of new headcount during the quarter. Now moving on to our Q4 and fiscal year 2022 outlook. For Q4 fiscal 2022, we expect revenues of $104.5 million to $105.5 million, representing growth rates of 53% to 54% year-over-year. We expect non-GAAP loss from operations of $53 million to $51 million. And we expect a net loss per share of $0.28 to $0.27, assuming basic and diluted weighted average shares outstanding of approximately 187 million. Looking out to the full fiscal year 2022, we are raising our previous outlook and now expect revenue to be in the range of $371 million to $372 million, representing a growth rate of 63% to 64% year-over-year. We expect non-GAAP loss from operations of $166 million to $164 million. And we expect a net loss per share of $0.96 to $0.95, assuming basic and diluted weighted average shares outstanding of approximately 176 million. With an addressable market of over 1.2 billion knowledge workers, the industry has tremendous growth ahead, and our success with some of the most valuable companies in the world demonstrates our early leadership position. As you can see from our outlook, we’re investing to grow rapidly and win through industry-leading innovation and operational execution. And with that, I’ll turn it back to the Operator for questions.

Catherine Buan, Head of Investor Relations

Great. Thanks. This is Catherine. I'm going to jump in. We have a couple of analysts who are on airplanes that are kind enough to still put out some questions, so I'm going to read them aloud. For the first question, we have a question from Rob Oliver of Baird, who emailed it in from the plane. The question is this: Large deal deployments, you've mentioned a few 50K and 25K seat deployments in the past. You also highlighted a very large deal that contributed to billings last quarter. Are those size deployments still outliers, or are you starting to see deals approach that size? Can you give us a sense of how large enterprise deployments are trending and if you are seeing those grow, considering the recent enhancements you rolled out such as security features at the Scale event?

Anne Raimondi, Chief Operating Officer

Catherine, I’m happy to take that. So we are seeing strong growth in both landing larger and expanding faster as we shared our 50K customers accelerated for the third quarter in a row. I feel like we’re really seeing it because Work Management is a business imperative now. Definitely, our enterprise enhancements are resulting in customers choosing to partner with us to help them solve their most strategic mission-critical cross-functional initiatives. For example, Warner, which I mentioned, it’s one of their most important initiatives across the company to identify and onboard new artists.

Catherine Buan, Head of Investor Relations

Great. I’m going to keep the next question to, the next question will be from Steve Enders and following that will be Ittai Kidron from Oppenheimer. So next question from Steve Enders, please.

Steve Enders, Analyst

About the Scale event, you guys recently had a lot of exciting announcements on enterprise automation, security, etc. What’s been the early customer feedback on that and traction? And I have a follow-up.

Anne Raimondi, Chief Operating Officer

The early customer feedback has been incredibly positive. Many of the features we announced were based on customer input. We’re excited to deliver features that our customers want and to see it help net retention as more customers expand with us because they can scale out. If there are additional product questions, I will have Dustin also chime in.

Dustin Moskovitz, Co-Founder and CEO

Yeah. I think you said you had a follow-up.

Steve Enders, Analyst

Yeah. So follow up maybe for Tim on billings. A little bit of slowdown, I think, the previous question mentioned, maybe large deal impacts in the last quarter, anything to note for this quarter’s billings and what is the pipeline look like? Thank you.

Tim Wan, Chief Financial Officer

Yeah. I would say there’s nothing to note. I do want to remind the investors on the call that about a third of our customer base are still on monthly. So billings isn’t really a perfect guide or a perfect barometer for our growth rate. So, but really nothing to note from a Q4 standpoint.

Steve Enders, Analyst

Okay. Thanks and congrats on the $100 million. Have a great next quarter.

Catherine Buan, Head of Investor Relations

Thank you. The next question is going to be from Ittai Kidron from Oppenheimer and after that will be Stan Zlotsky from Morgan Stanley. Ittai, please.

Ittai Kidron, Analyst

Thanks. Great quarter, Tim. I wanted to explore the numbers a bit more and get some insight into the net dollar expansion and what has contributed to the improvement. Can you provide a qualitative breakdown of what’s driving that? How much of it is related to increased seats versus a shift in pricing plans towards the business side from premium?

Tim Wan, Chief Financial Officer

I appreciate the question, Ittai. I can say that our net expansion rates across all segments have improved, especially in the 5K and above category, increasing from 125 to 130. The revenue in that segment grew 96% year-over-year. This growth can be attributed to both an increase in seat numbers and customers transitioning from business to enterprise. We recently announced that we ended the quarter with over 2 million seats, and we are very proud of how we are expanding our business through acquiring new customers and increasing seat deployments.

Ittai Kidron, Analyst

Okay. Very good. And maybe a follow-up for Anne. Great to hear you’re a Red Hot Chili Pepper fan. So that’s great to hear. So maybe on that, what are some of the dark necessities you’ll have to employ over there internally in order to drive the company scale-wise to $2 billion, $3 billion, $4 billion in revenue over the next few years?

Anne Raimondi, Chief Operating Officer

I like the reference. So really my priorities as I dived, the last 90 days I have been meeting with executives at some of the largest organizations in the world and the cross-functional pain points are so clear and particularly acute as organizations are thinking about the future of work. Based on these interactions with customers, really my priorities are to continue to grow our customer-facing teams around the world, and in particular, continue to invest in supporting faster adoption and expansion. As we shared as we’re landing bigger, the deployments are bigger, and they’re really focused on ensuring that we’re delivering value as fast as possible. So, I’m really excited to invest in our post-sales teams in particular.

Ittai Kidron, Analyst

Got it. Maybe I can just push on this a little bit, if you’re landing bigger, can you also talk on whether you’re also landing in multiple spots within the organization when you land bigger or is it still landing within one group, perhaps more people within one group? So how much of this is landing in multiple places versus just landing big within a single group?

Anne Raimondi, Chief Operating Officer

Yeah. That’s a great question. We are seeing that we’re landing in multiple teams at the same time. We mentioned a couple of great customer examples, including Benevity, where we landed wall-to-wall. So we’re being adopted not only by every department, but in particular, to really tackle those cross-department initiatives. So that’s where we’re really excited to see is that at the C-level, we’re being chosen for those really strategic cross-departmental initiatives that everybody in the company has to have clarity around.

Ittai Kidron, Analyst

Very good. All right. Good luck. Thank you.

Anne Raimondi, Chief Operating Officer

Thank you.

Catherine Buan, Head of Investor Relations

Thanks, Ittai. The next question is from Stan Zlotsky from Morgan Stanley and just up next after that will be Andrew DeGasperi from Berenberg. But the mic is open for you, Stan.

Keith Weiss, Analyst

Excellent. No. This is actually Keith Weiss sitting in for Stan Zlotsky this evening. Very nice quarter, guys, and a pleasure to meet you. It’s great how you could really know your audience, just throw out Red Hot Chili Peppers and now we’re all like Dustin who, we got Anne to talk. So a way to win over the crowd there. That was pretty impressive. I want to ask a question about engagement. You guys have had outstanding couple quarters here, new customer adoption really ramping up, hitting that like 7000 quarter mark and hitting that pretty consistently. And you mentioned customer support, like when you look at the customer base and as you sort of built it out so quickly have the engagement metrics kept pace, meaning the daily active users, monthly active users, the solution has that been kind of keeping pace with the rapid expansion of the customer count? Then I have a follow-up for Tim.

Dustin Moskovitz, Co-Founder and CEO

Thank you for the question, Keith. I think it depends on the metric. However, the aspects you mentioned seem quite strong. In our last earnings call, we discussed achieving record metrics across the funnel regarding conversion, adoption, and retention, which are connected to those engagement metrics. The accounts appear very healthy, particularly among our larger customers. We are acquiring larger accounts and expanding more quickly. However, expansion is contingent on engagement, which is evident. Therefore, you should view this as a direct indicator of how well employees within those organizations are engaging.

Keith Weiss, Analyst

Got it. That’s super helpful. And then for, Tim, when we look at the profitability curve, and it’s not that you sort of didn’t tell us this was going to be happening, you’re going through the investment cycle, but the operating losses are expanding into the back half of the year, you expected bigger operating loss in Q4. As we think about FY 2023 and the forward year, are we still thinking about kind of Q4 being the peak in terms of operating losses and then we’ll be sort of more on the trajectory towards improving profitability into FY 2023? And are we still kind of aligned to the schedule towards approaching breakeven that we had talked about around the IPO?

Tim Wan, Chief Financial Officer

Yeah. What I would say is, we’ll provide a more updated view kind of on both the growth rate and profitability on next earnings call. But we fundamentally believe that this is a huge market opportunity and that we’ll continue to invest into the opportunity. But on a full year basis, Keith, I think if you kind of look at the numbers on a free cash flow margin, we did improve on a full year basis year-over-year, and there was some timing just related to quarterly fluctuations even within cash flows.

Keith Weiss, Analyst

Got it. Thank you.

Catherine Buan, Head of Investor Relations

Great. Our next question is going to come from Andrew DeGasperi from Berenberg and behind that will be Brent Bracelin from Piper Sandler. So Andrew, the mic is yours.

Andrew DeGasperi, Analyst

Thanks, Catherine. Maybe one question that you probably get a lot on competition. I am just wondering if you’ve seen any changes last quarter relative to what you’ve seen in the past. And in particular, I know Microsoft introduces a new product, they’re making changes to teams and just wondering if that at all has an impact on what you see in the market right now?

Anne Raimondi, Chief Operating Officer

Yeah. Hey. Thanks for that question. We’re not really seeing a material change in the competitive environment overall. But there’s definitely increased awareness and faster adoption of Work Management across companies of all sizes. And so because of that acceleration and the need to manage distributed work, the topic of Work Management is moving higher up the strategic chain in companies. So we’re really excited that we’re talking to CIOs and C-level executives about how Asana can help them solve their most strategic and complex cross-functional needs. So I’d say what’s really changing is greater awareness of the pain points and then greater desire to partner with someone who can scale really rapidly with them.

Dustin Moskovitz, Co-Founder and CEO

And just to address the sort of direct part of your question too. We do see that Microsoft has a few different ways of thinking about Work Management. So they have Microsoft Planner, and Microsoft Project, Lists, and Flow. The thing that we compete with most often is actually Microsoft Excel, because it’s part of the status quo of emails, documents, and meetings. So the vast majority of teams are still not using any form of Work Management Solution in this space. And then, yeah, so you mentioned they introduced a new product loop. I think that is a little more about document-centric collaboration. So that’s always been something that we’ve sort of competed with a little bit less. We’re all about the coordination part of collaboration. So really helping teams get clarity about the plan and who’s doing what by when and coordinating strategic imperatives.

Andrew DeGasperi, Analyst

Thank you.

Catherine Buan, Head of Investor Relations

Great. Our next question is going to be from Brent Bracelin at Piper Sandler and following that will be Brent Thill from Jefferies. But for now, Brent Bracelin, you have the mic.

Brent Bracelin, Analyst

Thank you and good afternoon. I have a question for Dustin and Anne, and a follow-up for Tim. I noticed that you reached 2 million paid subscribers, which is impressive. It seems it took about 11 years to gain the first million, but you've added the next million in just the last three years, reflecting the expansion momentum. However, when I look at the seat basis, it averages about 18 paid users per customer, up from 16. Is this simply due to us being in the early stages? Is there potential to further accelerate growth? I would appreciate your insights on the overall opportunity and the potential for expanding further beyond the current average of 18 paid users per customer.

Dustin Moskovitz, Co-Founder and CEO

Yeah. I think that’s a great question. I think let’s think of that primarily as a function of the fact that that we have a hybrid business. So it’s composed of everything from very small businesses, including one and two-person companies to the largest enterprises in the world, literally Fortune 5 companies. And so when you think about 114,000 customers, the vast majority of them are going to be the SMBs or the very small SMBs. And so that just sort of drags down the average. But we are seeing a lot of the growth happen in those larger customers, and so a lot of the revenue growth is going to come from there, but you may still see a lot of the sort of raw logos and the customer accounts coming from the SMBs. So I wouldn’t necessarily expect the average count to change all that much, even though we can clearly see that the revenue is coming more up-market.

Brent Bracelin, Analyst

It makes complete sense. Tim, I’d like to follow up on the strong growth in the 50K customer group, which has seen an increase this quarter. However, it seems that there is a slowdown in the smaller customer segment. Were there any unusual issues this quarter regarding churn or monthly subscribers that might explain this decrease? The smaller segment is still growing well, but it has slowed compared to last quarter. Could you provide any insights or comments on what transpired in the smaller customer group this quarter that led to this slowdown?

Tim Wan, Chief Financial Officer

There isn't anything specific to highlight. A significant portion of our investments has focused on targeting higher market segments, both in the 5K and 50K ranges. Currently, the 5K and above customer base accounts for approximately 68% of our revenue and is experiencing a 96% growth rate. While we do see some fluctuations among smaller teams, they are still growing at a very strong rate.

Brent Bracelin, Analyst

Got it. Helpful color there. Thank you.

Tim Wan, Chief Financial Officer

Yeah.

Catherine Buan, Head of Investor Relations

Great. Thanks, Brent. And the next question is from the other Brent, Brent Thill from Jefferies and after that will be Mark Murphy from JPMorgan. Brent Thill?

Brent Thill, Analyst

Thanks, Catherine. Tim, I'm curious about what might be happening below the surface. There are several surface-level metrics showing a slowdown in revenue, RPO, and billings, and I understand the tough comparisons you're facing. However, I think many are wondering if you've noticed anything else behind the scenes apart from these difficult comparisons. Can you provide any insights, even though I know you mentioned not focusing on billings?

Tim Wan, Chief Financial Officer

Yeah.

Brent Thill, Analyst

…curious if there’s anything else that we should point out?

Tim Wan, Chief Financial Officer

Yeah. I mean, I don’t think like if I step back, and obviously, how we kind of tend to look at the health of the business, obviously, one is revenue growth. The other is the way we want to grow our business, right? And we want to grow our business through adding more new logos and having those logos continue to adopt and expand, and I think you see that with our seats. And then over time, the marginal cost or the marginal cost to have them increase or grow becomes less, because based on our net expansion rate, for both our 5K and our 50K, you see that they’ve improved to pre-pandemic levels now, 130% on the 5K and above, and then over 145K on the 50K and above. But your question is really about the billings and RPO, and I think we’ve said because a third of our base is still on monthly that billings isn’t the best indicator for how we grow our business over time. And I’ll just add that part of your question is, is that a harbinger of doom or something like that, and so I’ll just reiterate, we’re really excited about the enterprise momentum and we raised guidance for next quarter by $12 million for the year.

Brent Thill, Analyst

Great.

Tim Wan, Chief Financial Officer

…for the year.

Anne Raimondi, Chief Operating Officer

Great. Thank you. And the next question comes from Mark Murphy at JPMorgan.

Mark Murphy, Analyst

Yes. Thank you very much. Dustin, I am interested in what your view is your highest priority R&D innovation vectors heading into next fiscal year? For instance, is there anything bubbling up that is very highly requested in terms of features from customers or premium features you’re building in that could kind of drive ongoing uplift?

Dustin Moskovitz, Co-Founder and CEO

Yeah. It’s a great question. So I’ll just reiterate, we had the Scale event about a month ago and that was a combination of announcing some new things and also previewing what is in our future. And so there are three big categories. The first was more security and scalability features for IT. We announced Enterprise Key Management, SCIM functionality, integrations with Okta and Microsoft Azure AD, admin capabilities. Honestly, there’s just a lot more of that coming. There are plenty more requests in that vein of things. Additionally, we announced we’re making cross-functional and cross-team coordination easier with the Workflow Store and the Workflow Builder. So those are not yet released. That’s something I’ve talked about across a few earnings calls as we’ve been working towards throughout the entire year, so really excited about that launch at the end of the fiscal year. And even there, there’s a lot we’ve been building, and there’ll be a lot more to do after that to really go deeper with the most important workflows to our customers. So a lot of how we think about the roadmap is what integrations they need to make those intended workflows work really well and just what we’re hearing from customers as they adopt, helping them get the next important functionality on the margin. And then, finally, we also talked about improved alignment and visibility for executives. We talked about our new Goals API, bringing data in from other sources to help you report on goals in real time, improvements in universal reporting. There’s a lot more we’re doing in those areas to improve goals and reporting and portfolios and give those really great high-level views for executives. And then, additionally, another huge pillar for us is just helping make customers really successful throughout their lifecycle. So helping them adopt really quickly, adopt into those workflows and adopt into the product in general. And all of that together levels up to contributing to helping us again land bigger and expand faster with those larger enterprises. That’s really the big theme for our roadmap next year.

Mark Murphy, Analyst

Thank you, that's very helpful. As a follow-up, Tim, do any of your ultra-large deployments currently account for more than 1% of revenue? You secured some significant contracts over the summer, and do you see that potential growing in the next couple of years, or does the rapid growth of the rest of the business make it unlikely?

Tim Wan, Chief Financial Officer

Yeah. I would say no, not at 1%, but we are getting very close to, we do have probably a large deployment that will get close to 1%.

Catherine Buan, Head of Investor Relations

Great. Thank you. And that’s our last question for today. Thanks very much for joining our call today. I know it’s a really busy earnings week, and we appreciate your time and dedication to following Asana as usual. Look forward to seeing you guys either virtually or on the road sometime soon and thank you again.

Operator, Operator

Ladies and gentlemen, this concludes today’s conference call. You may now...