Asana (ASAN)

A new Bert Hochfeld article brought this stock to my attention.

https://seekingalpha.com/article/4378169-asana-leader-in-wor…

Here’s what else got my attention:
–They’re a leader in their niche (workflow management).

–Gross margins of 82% in 2019 and 86% in 2020.

– 86% revenue growth from 2019 to 2020.

–Facebook co-founder Dustin Moskovitz is the CEO.

–A $5B market cap leaves lots of room to grow.

–An impressive list of customers.

https://asana.com/customers

Do they have something that makes them unique? Maybe others can help with this because I have no idea.

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I don’t think they’re a leader in their space. TEAM is the leader. They do have a small base to grow from though.

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If you have access to MF Live, Asana was discussed in Small Cap Roundtable segment on 10/5/20. 5:33 is approximate time mark for Asana discussion.

https://www.fool.com/premium/live/video/4056/coverage/2020/1…

Chris

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Huge fan of the company, Facebook founders, been using the product since practically the beginning and dropped it into several companies. I rate product evangelism right up with Shopify back in the day. Investor, buy and hold long term for me. What I know of the numbers makes me a buyer anywhere below $28 I think. Bought at around $26 and it felt like theft.

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Hi Sqc01,

Do you use Asana? If so can you relate you’re experience? And if you have experience do you have experience with Atlassian or other competitors?

Thanks
Gordon

Will that strong growth continue?

From an MF article…

“Yet as Asana is scaling, management anticipates year-over-year full-year revenue growth to decelerate to 47% to 49%, down from 86% last year.”

https://www.fool.com/investing/2020/10/06/is-now-a-good-time…

Is that a big drop given they just went public and are still early stage?

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My former team (a few years ago) used Asana, and it’s a great tool to collaborate. It’s a productivity tool, and to use the tool, it requires some cultural change. Today probably the most adapted tools in the industry is Jira by Atlassian.com

Personally, I think Asana is way better than Jira. My team love Asana, but I was in a start-up where we can have free choices. While I saw “Google” show up in the customer lists, I bet it’s just some team in Google. Some teams will use Asana to boost their productivities. (It’s not that expensive) But the problem is company-wide adoption, which is often driven by IT, is tough.

Behavior change is difficult when you are getting used to something. I remembered that some teams insist on using Trello and other teams insist on using Monday (a tool).

I want to see their DBNER and their average revenue per customer before invest more. The productivity tool has some moat. It’s hard to change engineering practice (like Jira). While I believe Asana is better than Jira in many scenarios, it is just impossible to give up on Jira because every history is on Jira. Asana requires everyone to change the way they work, so it’s going to be a hard sell.

I’m interested in stack overflow if they go IPO in the future. I’ll pass on Asana unless it shows a better number than DDOG or OKTA. Asana is not a market leader – it tries to take over Jira, and it’s not going to be an easy fight. Especially that many companies that use Jira also use Confluence. Atlassian has an advantage here (combined sale).

TL;DR Unless you believe Atlassian’s revenue is dropping or they are losing customers, I won’t bet on Asana. The space is very crowded, and they try to fight a way out a red ocean.

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“Yet as Asana is scaling, management anticipates year-over-year full-year revenue growth to decelerate to 47% to 49%, down from 86% last year.”

This guidance is based on revenues of $53.5- 54.5 million, which I interpreted as sand bagging.
Most recent 2nd Quarter revenue finished at $52 million or +57%. With the dollar based retention rates quoted below, their next quarter will show an increase sequentially, not remain flat.

Saul has pointed this out before with respect to guidance. Asana’s management would not guide to $54 million unless they were going to soundly beat that number. Especially for their first public conference call. My bet is they finish with at least $61 million in revenue for a 60% YOY growth rate.

Second Quarter Fiscal 2021 Business Highlights. https://investors.asana.com/news/news-details/2020/Asana-Ann…

Ended the quarter with over 82,000 paying customers.
The number of customers spending $5,000 or more with us on an annualized basis grew to 7,933, an increase of 65% year over year.
The number of customers spending $50,000 or more with us on an annualized basis grew to 283, an increase of 160% year over year.

Overall dollar-based net retention rate was over 115%.
Dollar-based net retention rate for customers with $5,000 or more in annualized spend was over 125%.
Dollar-based net retention rate for customers with $50,000 or more in annualized spend was over 140%.

To your point Pikatrain, once they land into a large organization, Asana seems to grab and expand rapidly.

Tomasz Tunguz of Redpoint Venture Capital did a nice analysis prior to the direct listing.
https://tomtunguz.com/asana-s-1/
He compared Asana’s S-1 numbers with pre IPO Smartsheet. In a number of categories Asana looks superior.

At the time of IPO, Asana and Smartsheet had the same number of customers, about 75,000.

Asana records a contract size advantage of about 44%, with an ACV of $2165.
Each seat costs $118 per year or $9.83 per month on average.

At time of IPO, Asana generates more revenue, $162M in revenue to Smartsheet’s $111M.

Asana is also growing faster, 86% annual revenue growth vs. SmartSheet’s 66%.
The cost of higher growth appears in the Net Income Margin delta. Asana generates about 2x the loss of SmartSheet as a percentage of revenue.

However, Asana’s cash flow margin from operations is 13 percentage points better, meaning customer pre-payment terms from customers and cash collections may be superior.

Asana holds a 6 percentage point lead in gross margin, likely a benefit borne of modern software architecture and the cost advantages it brings.

The 2nd Quarter webinar gave a positive insight to their leadership and was helpful.
https://event.on24.com/eventRegistration/console/EventConsol…

Asana recently announced a number of new initiatives that should grow business.
~Launched Asana Goals which allows teams to connect company goals with OKRs and the work to support them in one place.
(OKRs= objectives and key results. I had to google it.)
~Announced Asana for Microsoft Teams integration which enables conversations in Teams to be linked directly to Asana projects.

While there’s much to like about the company, I haven’t invested yet.

The direct listing seems, at least to me, to leave the door open for insiders to sell shares immediately, which may depress the stock price in the short term. (Flipside- maybe this is a buying opportunity?).

Once Asana is in play within large organizations usage does expand rapidly. During the economic downturn, I’m questioning if the software is a “nice to have” product vs a “need to have” product.

I think the pandemic has been a headwind to their growth vs other companies who have enjoyed tailwinds. My focus this year shifted to go “all in” with the beneficiaries of this environment.

As example, in September I sold out from OKTA. Okta is an impressive company with solid 45% growth rates. Until recently I would have held the stock, because no doubt Okta is a great company and long term winner. Right now I’ve chosen to deploy my money in the highest growers like PTON, CRWD, FSLY, DDOG and my 45% position Zoom.

Depending on the next month or so, I may buy Asana. $25 stocks are attractive to me because they’re easier to buy 1,000 shares.
This may be silly, but I like the idea of having 1,000 shares of a stock.
Yes, I know this isn’t logical.

My goal is to get to the level of you big money investors buying blocks of 2,000 and 5,000 then 10,000 shares. :slight_smile:

Thanks
JT

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Philiproth

Thanks for this. Asana was one of the stocks I wanted to get to doing a write up on alongside NCino and Palantir.

The key highlights that stand out for me are:

  1. Their gross margin is top draw
  2. They have >50% growth rates that in pre-Covid days were much higher and I believe could rebound after Covid (similar to Smartsheets which is at a notch lower in terms of growth rates but affected by Covid in a similar vein)
  3. Asana is an enterprise play - and more so than Smartsheets, Monday.com or many of the collaboration platforms it competes with
  4. Asana has a superior functionality profile than direct competitors e.g. Jira (highlighted by Bert)

A couple of points I am watching carefully from Asana:

  1. The extended losses in recent quarters
  2. Rebound in growth rates post Covid

In the meantime I have taken a 1% holding (swapping out my Smartsheets holding in favour of Asana).

Cheers
Ant

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