Asana beats expectations for Q2, raises outloook

Investment Analysis Clubs Saul’s Investing Discussions
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The full press release is available here:
https://investors.asana.com/news/news-details/2021/Asana-Ann…

The headline numbers:

  • Second quarter revenue growth accelerated to 72% year over year
  • Revenues from customers spending $5,000 or more on an annualized basis grew 97% year over year
  • Customers spending $50,000 or more on an annualized basis increased to 598, up 111% year over year
  • Raised fiscal year 2022 revenue outlook

An excellent ER. Accelerating to over 70% YoY growth is strong and puts them squarely ahead of Monday by about 25% in most metrics. But the market for products from both Asana and Monday is super strong given the impressive growth they both are showing.

Just for fun if you compare numbers between Asana and Monday, Asana is currently 25% larger in nearly every area. And Monday does not appear to be ready to outgrow Asana in 2021, at least their full-year guidance doesn’t project it.

(In millions except for the customer count)

Q2 Revenue
Asana: $89.50
Monday: $70.60
Difference: $18.90 (26.77%)

Q2 Customers spending $50,000 or more
Asana: 598
Monday: 470
Difference: 128 (27.23%)

Q3 Guidance
Asana: $93.50
Monday: $74.50
Difference: $19.00 (25.50%)

Full-Year Guidance
Asana: $358
Monday: $281
Difference: 77 (27.40%)

Now, this is where it gets interesting. Monday has more customers, but less revenue. So if you divide total Q2 revenue by the total number of customers, Asana is charging 52% more per customer. (Keep in mind this is just an exercise to understand the difference between the two companies it’s not an accurate measure of LTV you would need to understand contract terms, etc.)

Monday: $546.88
Asana: $831.78
Difference: $284.90 (52.10%) (I was hoping for 25%…LOL)

Now that we have all the data I stand by my claim that Asana is still more and mid-market to enterprise-level solutions and Monday is more of an SMB solution. But there is overlap between and Monday has done a great job at adding $50K+ customers. Asana, however, is still in the lead.

Two horse races like this are fun to observe and profit from. I will add to Asana and may start a position in Monday.

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The other thing thats interesting in the Asana vs Monday smackdown is how little Monday spend on R&D.

Monday Q2 21 = $16.1m ($55.9m TTM)
Asana Q2 22 = $48.5m ($161m TTM)

The other thing to note is Asanas GAAP Operating Margin is pretty horrific (-149% vs -39%). They do have double the G&A ($27 vs $11 in last quarter) which probably reflects Asanas more expensive environment (US vs Israel), but the biggest difference is the R&D spend.

So, either Asana have some cool stuff in the pipeline and will consign Monday to lower requirement customers, or… they’re overspending?

What do you think is the future value of an R&D dollar?

cheers
Greg

The other (slightly weird) thing I’ve noticed about Asana is they have about $500m in outstanding lease commitments, which include AWS deals and office space. That AWS commitment doesn’t seem to have lowered their cost of revenue significantly versus Monday ($9.9m vs $9.1m).

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Golf, I think you have found the winner with Asan. Why would you invest in the second best?

Greg I think you are looking at this all wrong. Asan has GM of 89 percent and Mndy has GM of 87 percent. Obviously Asan is spending more to accelerate their growth and nab as much market share as possible, that is why their OM are so low.

Thanks Golf for showing me Asan very impressive growth and GM.

Andy

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Asana is charging 52% more per customer.

Now that we have all the data I stand by my claim that Asana is still more and mid-market to enterprise-level solutions and Monday is more of an SMB solution

I’d not conclude that Asana wins in the upmarket just based on this data. If you take a look at the pricing (in the US), Asana’s Business Plan charges $24.99 / user / month, while Monday’s Pro plan charges $16 / seat / month. So Asana charges 56% more prices on its advanced plan than that of Monday. In addition, Monday has 48% revenue coming from the US, while Asana has way more US revenue (I did not find the recent data but, at IPO, Asana had 80% revenue coming from the US). The different geographical distribution of their customers could also potentially affect the cost per user as I think the price for different markets should be different.

Last but not least, large companies like Uber and Adobe are Monday’s customers.

IMO, Asana and Monday can both succeed because the market is currently just a greenfield which has plenty of rooms for two companies. However, I believe Monday could grow faster than Asana, because its solution is more flexible and scalable. While Asana provides a great tool to taskify and manage projects, Monday gives its customers the flexibility to build their own tool to fit needs of a specific vertical. That being said, Monday has a much more expensive valuation multiple than Asana, so I don’t really know which company will bring more returns in the short term.

Regards,
Luffy

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We know what full-year guidance is and all the Asana numbers are 25% more than Monday. Will Monday start to close the gap? That’s what I am going to look for and that could change my Asana is the market leader thesis.

Asana added more languages, now at 15. So international adoption will pick up for them. Monday was ahead with product localization and had support for 15 languages already.

The pricing difference and that Uber and Adobe use Monday are interesting points. Thanks.

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The headline numbers:
- Second quarter revenue growth accelerated to 72% year over year
- Revenues from customers spending $5,000 or more on an annualized basis grew 97% year over year
- Customers spending $50,000 or more on an annualized basis increased to 598, up 111% year over year
- Raised fiscal year 2022 revenue outlook

An excellent ER. Accelerating to over 70% YoY growth is strong and puts them squarely ahead of Monday by about 25% in most metrics. But the market for products from both Asana and Monday is super strong given the impressive growth they both are showing.

Golf - Asana is still ahead on the quantum side of the metrics by a couple of quarters but on the growth side as well as the bottom line operating leverage - it doesn’t compare.

Monday’s growth and margin comparison was:
Second quarter revenue growth at 94% (vs 72%)
The number of paid enterprise customers with more than $50,000 in annual recurring revenue was 470, up 226% from 144, in the second quarter of 2020, (vs 111% for Monday)
Next quarter guidance is for total revenue of $74 to $75 million, representing year-over-year growth of 74% to 76%, (as opposed to 58-60% for Asana)
Non GAAP Operating Margin was -14% for Monday vs -43% for Asana.

Ant

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Now, this is where it gets interesting. Monday has more customers, but less revenue. So if you divide total Q2 revenue by the total number of customers, Asana is charging 52% more per customer.

Is this per paying customers or not?

Monday and Asana have had very different policies on limits to their freemium model. I think one allowed 3 free users and the other up to 10 and this has now just changed again within the last few weeks.

Ant

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Hi Ant,

You’re correct that the percentage gains are bigger for Monday but it’s off a smaller base. That is why I compared full-year guidance for both and Asana is still projected to be 25% larger. If Monday can keep that pace they would be bigger than Asana soon, but that’s not what they are providing as guidance. But it may change.

Yes, you’re correct that there are all kinds of contract and policy differences between Monday and Asan. I compared what both use as the total number of paying customers.

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Looks like they both had great quarters, but are both guiding for very low sequential growth in Q3. Looking back at Asana’s previous quarters, these numbers seem extremely low.

 
ASAN
2019            Q2 +18.2%  Q3 +15.1%  Q4 +14.2%
2020 Q1  +9.7%  Q2  +9.0%  Q3 +13.3%  Q4 +16.1%
2021 Q1 +12.1%  Q2 +16.7%  Q3  _**+4.5%**_

This would be by far their worst sequential quarter. Similarly, MNDY has guided very low as well

Any thoughts on this for either or both?

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However, I believe Monday could grow faster than Asana, because its solution is more flexible and scalable. While Asana provides a great tool to taskify and manage projects, Monday gives its customers the flexibility to build their own tool to fit needs of a specific vertical.

Does anyone understand the differences in the tech enough to know if this is true?

That was my impression as well after digging in a little. Monday is more no-code/low-code modules that can be customized from scratch while Asana trended toward more of a turnkey solution for predetermined projects.

Please take that interpretation with about a pound of salt. It’s just a first impression after looking at the two companies.

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During last earning report, Monday’s stock popped 20%!
For Asana current report, the market is not excited. I say it’s within expectation and its stock probably won’t do much tomorrow. That tells us a lot.

I think focusing on absolute revenue amount as a base for investment choice is a fallacy. It’s no different than saying $1000 per share stock is more expensive than a $100 per share stock. It’s also no different than saying: buying a trillion dollar Cap Company is better than buying a 1B dollar cap company. It’s looking at the wrong number.

Currently, Asana makes more revenue than Monday but it doesn’t matter for investment return. For investment return, it’s not the amount of revenue that matters. It’s the rate of increase of revenue. Everything being equal, revenue % growth rate is directly proportional to the stock return.

The number comparisons already being posted here couple times. Monday was growing faster, is growing faster and will be likely growing faster.

Over the past 8 quarters, looking at the quarter revenue change over 8 quarters, Monday grew revenue at a rate of 86% per year vs Asana 63% per year.

Last quarter: Monday 19.66% sequential QoQ growth vs Asana 16.6%.
The number of paid enterprise customers with more than $50,000 in annual recurring revenue increased 226% over last year for Monday vs ASANA 111%.

The business momentum tends to continue for businesses. It suggests that Monday will surpass Asana in revenue in the next 1 to 2 years but this is not important for investment return standpoint.

The market is already giving Monday a larger market cap than Asana despite Asana’s current revenue is higher. The reason is Monday is growing revenue faster than Asana.

GolfCaddy4PLynch mentioned Asana’s guidance is better than Monday. I doubted so I took a look at the earning release. Again, you are looking at absolute revenue amount and proceeded to ignore the % growth guidance.

Percentage is what matters most. You are trying to prove who’s making more revenue not who’s a better investment. Then concluded Asana is better investment because it’s currently making more revenue than Monday. The market disagreed by giving Monday a higher market cap.

Monday guided year-over-year growth of 74% to 75%.
Asana guided year over year growth of 57% to 58%.
Monday guidance is 17% per year higher than Asana! 17% difference is a lot for investment return!
It makes a huge difference compounded in the long term.

It looks like both are doing great but Monday.com is growing moderately faster.

One thing I noticed is that for both of them, the historical QoQ sequential growth rate varied a few % point each quarter. For Monday, it’s from 14% to 26% range. For Asana, it’s from as low as 9% to 18%.

So if there’s a quarter where the growth rate has slowed but within historical range, I won’t worry about it too much right away and wait a few quarters to confirm. Their QoQ growth rates are not as consistent as many SaaS here.

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Stocknovice,

Your note triggered me to post a reply based on use of Monday.com

monday.com
I use this product daily in my current role as a client facing project manager and it’s a great tool for communication between organizations and internally. I know that our marketing team also use it extensively. I think we have the enterprise account and have about 100 seats (estimate), so not one of over $50k accounts.

It’s a great tool for project management and helps collaborate and collaboration is an area where it differs from Asana or Smartsheet (eg. Imagine a slack discussion on a particular milestone/task). Because of this tool, I have been able to not email my clients - which is a huge timesaver.

It has robust features to present the same information in multiple views (Kanban, gantt etc). So as a PM, I can leverage the same information for leadership vs technical teams. From a licensing perspective- we need to have a license for each internal team member but our clients are guests and don’t need licenses.

Monday.com positions itself as a tool for teams beyond the technology teams and do believe they are able to deliver on this by having a non PM manage their efforts/initiatives. Beyond our marketing team, there are other teams who use this tool as well.

They have a robust set of integrations with gmail, slack, Salesforce and the list goes on and on.

They also talk about the no-code/low code - they call it automations(eg: if a task is it done before a due date - notify the assignee that task is due. I can create that in about 2 minutes.). Yes, it’s robust but also lacks desires what I would expect in an enterprise software (eg: cannot create exceptions for the above example).

Asana
I have not used it since 2016 but believe the overall platform to the same as then (with additional features). Based on my experience then, it was much more geared towards technology teams.

Overall: project management software is a very crowded field: Asana, Monday.com, smartsheets, trello(owned by Atlassian $TEAM), wrike etc. I didn’t mention the project management software from large enterprises (legacy non cloud solutions) Microsoft, Adobe, SAP, Oracle, etc.

Links: both companies are highly rates but typically Asana has more # of reviews. Also it’s interesting that both of these companies have articles on their respective sites about the other product

https://monday.com/blog/reviews/trello-or-asana-how-to-choos…

https://asana.com/compare/asana-vs-monday-com
Asana article also shows ratings bu Capterra, G2 and other 3rd party providers

IMHO - Companies cannot and should not cut corners with Cybersecurity (CRWD, ZS, etc) and they typically will keep any software that helps increases their revenue (ZI, UPST) but I think these PM solutions are not critical for the business and will be more impacted by macro economic trends (all companies will be impacted but I believe these companies will be impacted more). Do I think Monday.com will do well - I think in the short term (next 2 years) because they can continue to expand to new customers.

This board is amazing and excellent in identifying when to get out of a stock. I am still noodling on how stocknovice bear, Saul, Rico (I am sure I am missing some) and other pros operate. So, I have not made a decision if I will invest in Monday.com.

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Buried a little deeper was the impressive growth of deferred revenue. Growing faster than revenue, up 86%.

So we have revenue acceleration QOQ of 16% and perhaps a continuation of this with the faster growing deferred revenue.

Still lots to work out between Asana and Monday!

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Buried a little deeper was the impressive growth of deferred revenue. Growing faster than revenue, up 86%.

So we have revenue acceleration QOQ of 16% and perhaps a continuation of this with the faster growing deferred revenue.

Still lots to work out between Asana and Monday!

Interesting. I’m assuming that this is Asana’s deferred revenue. I couldn’t find this number in my review of the ASANA press release or conference call transcript. Where did you find it? And is there a comparable number provided by Monday.com?

In comparing the two, Monday.com’s revenue growth is superior but from a smaller base. And Asana did see accelerating revenue growth this last quarter. Asana does have an advantage in overall NRR at 118% comparing to 111% for Monday.com. Even more impressively, Asana’s NRR was 145% for larger customers with greater than $50,000 annualized spending.

Monday.com does seem to garner slightly better product ratings from apparently independent reviewers. But each seems to have different strengths. As noted previously, Asana’s R&D spending is triple (!!) that of Monday.com’s. The disparity in R&D spending may be a significant red flag for Monday.com longer term. Asana does have experienced proven management that understands the importance of innovation. And I don’t think they are content with any possible product weaknesses relative to competitors. Asana also has an edge in Glassdoor (4.8 compared to 4.6 for Monday.com) and workplace ratings (rated in the top two for a couple years compared to #78 for Monday.com in one ranking) which also is important for longer term success.

I currently own Asana (with a cost basis in the 20’s) but not Workday. While I like Monday.com’s edge in revenue growth and apparent edge in product reviews, I’m not confident this will be sustained given the above factors. Right now, it is still trading at a sizable premium to Asana on an EV/S basis. I’m hopeful that there is enough room for both to grow well longer term since they both seem to be at the top in this sector. Last year, Asana estimated their TAM would grow to $32 billion by 2023. I suspect this TAM will continue to grow longer term. While their products might not be as vital as cybersecurity, they are critical to optimizing work efficiency and not a luxury.

The market seems to be receiving the Asana report very positively at this time.

I’m planning on holding Asana longer term, especially since I own it in a taxable account. But I will keep Monday.com on my watch list.

Dave

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The disparity in R&D spending may be a significant red flag for Monday.com longer term.

I think one of the reasons to explain the lower R&D cost by MNDY might be that their R&D forces are mainly based in Tel Aviv (Israel) which shall have significantly lower cost than Bay Area where ASAN is based. Zoom also had a similar advantage in the early days as a significant portion of their R&D is based in China.

So having lower R&D cost does not necessarily mean MNDY not investing heavily, on the other hand, it is their edge and that’s why they are showing much better operating leverage YoY.

See what their CFO said in Q2 CC:
there is a huge opportunity; it is a greenfield market. Therefore, we would like to ensure we don’t pass this opportunity and continue to invest.

We believe we can deliver high growth for the foreseeable future as we are addressing a large and growing market, and we believe we are well-positioned to be one of the long-term winners in this space.

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Hi Dave (remmdawg),

Asana does have an advantage in overall NRR at 118% comparing to 111% for Monday.com. Even more impressively, Asana’s NRR was 145% for larger customers with greater than $50,000 annualized spending.

My apologies if I’m being nitpicky but Asana and Monday appear to calculate NRR differently (for specific cohorts).

Monday.com
We calculate Net Dollar Retention Rate as of a period end by starting with the ARR from customers as of the 12 months prior to such period end (“Prior Period ARR”). We then calculate the ARR from these customers as of the current period end (“Current Period ARR”). The calculation of Current Period ARR includes any upsells, contraction and attrition. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the net dollar expansion rate. For the trailing 12-month calculation, we take a weighted average of this calculation of our quarterly Net Dollar Retention Rate for the four quarters ending with the most recent quarter.

Asana
Asana calculates its dollar-based net retention rate by comparing its revenues from the same set of customers in a given quarter, relative to the comparable prior-year period. To calculate Asana’s dollar-based net retention rate for a given quarter, Asana starts with the revenues in that quarter from customers that generated revenues in the same quarter of the prior year. Asana then divides that amount by the revenues attributable to that same group of customers in the prior-year quarter. Current period revenues include any upsells and are net of contraction or attrition over the trailing 12 months, but exclude revenues from new customers in the current period.

As wsm007 explained in his quite superb deep dive of Asana earlier this year, (He compares Crowdstrike and Asana with respect to NRR calculation. Having compared Crowdstrike with Monday, I believe their NRR calculation methodologies are the same):
“Notice how Crowdstrike starts by defining their cohort of customers as customers who were there a year ago and Asana starts by defining their cohort as the current Q’s customers who generated revenue a year ago. Both will yield the same overall NRR, but not if applied to a specific cohort by my interpretation.”. He goes on to say, “It seems to me that Asana uses the second method, which should inflate NRR if you are adding a lot of new customers in the >$5k bucket.”.

I think the interpretation makes sense and he also explains with an example. Here’s a link to the post if you’d like to take a closer look:
https://discussion.fool.com/asana-asan-deepdive-34721363.aspx?so…

The point is that I don’t think we can compare the NRR values of Asana and Monday for specific cohorts.

Best,
Zeecko
P.S.: This is my first post here. Have been lurking here for a couple of months now. Big thanks to Saul, Bear, stocknovice, GauchoRico, wsm007, jonwayne, BroadwayDan and many more for sharing your learnings with everyone. Really appreciate it.

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Zecko, I think you make a really important point that is more broadly applicable than just ASAN and MNDY. I tackled the same topic a few years ago but I think it is a worthy reminder for all of us (including me) that NRR (DBNER) etc is a Non-Gaap measure. Companies are free to define it however they choose.

Here is my post from a few years ago,

https://discussion.fool.com/ins-and-outs-of-revenue-retention-ra…

The specific companies don’t matter as much as the broader point. Forgive me for quoting myself.

Revenue Retention rate
You guys may have noticed that various Saas companies will report some form of a revenue retention rate. Generally the formula is, “(Starting MRR + expansion – downsell – churn)/Starting MRR” This isn’t a GAAP standard so companies are free to define and calculate whatever works best for their company. I do think it is important to understand what they are calculating and how what the company chooses to report can either misinform or inform us as investors. A while back cloudera was reporting their Net expansion rate (NER) was 136% but somehow they only grew their revenue about 20%. It turned out that they were cherry picking only their largest best customers to calculate their NER. As an opposite example paycom (PYC) reports “revenue retention rate” of around 90%, which seems bad until you read their quarterly report, “Dollar-based retention excluding the benefit of upsells, based on GAAP subscription revenue” So basically they have excluded upsells which every other company I know includes.

Some key takeaways:
The various rates that companies are reporting aren’t very comparable between companies.
Yes you can paint with some broad strokes but a AYX 130% DRR is not the same as an OKTA 121% or a PYC 90%. AYX’s 130% isn’t necessarily better than OKTA’s 121% or PYC’s 90%.

A company’s Revenue retention rate or whatever they call it can be used to track a company’s performance for how “sticky “ their product is. In general companies can boost this number by price raises, adding new products that they then sell to existing customers, and decreasing loss or downsells of customers (i.e. moving from netflix’s 11.99 plan to their 8.99 plan).

Sometimes companies will start messing with how they calculate the number so that they can report a prettier number to investors. I.E. cloudera cherry picking only their best customers.

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