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Asana is the Sanskrit word for the sitting meditation pose. Over the centuries the meaning of the word evolved to imply various yoga poses. Asana (ASAN), the project management software company founded by Facebook’s Co-founder Dustin Moskovitz, also evolved by expanding its product offering much like Datadog (DDOG) did by entering adjacent markets.
When I first came across the company in 2021 on account of Mr. Moskovitz’s insider purchases, Asana was growing revenue more than 60% year-over-year and was trading at 31 times sales. The stock is now trading at less than four times sales and revenue growth last quarter was 10% with a net customer retention rate of just 98%.
Investors were patient with companies as long as revenue growth provided a path to eventual GAAP profitability and as long as the company was free cash flow positive. That paradigm shifted in 2022 and as discussed in our May 2022 article Capitulation or Forced Selling, Uber’s new CEO Dara Khosrowshahi got the message loud and clear that growth at all costs was no longer going to work.
Last week Asana appointed Sonalee Parekh as its new CFO following the departure of long-serving CFO Tim Wan. Hopefully Ms. Parekh, with her investment banking background, helps Asana rise from its sitting pose.
Asana (ASAN): $11.92
Market Cap: $2.77B
Enterprise Value: $2.52B
Key Insights:
Company Profile
Asana is a global work management platform that streamlines task coordination, project management, and progress tracking, offering real-time insights across various workflows. Founded in 2008 as Smiley Abstractions, Inc., it rebranded to Asana, Inc. in 2009 and is based in San Francisco. Asana went public via a direct listing on September 30, 2020.
Asana appoints a new CFO
On September 3, 2024, Asana announced as part of its latest earnings call the appointment of Sonalee Parekh as its new Chief Financial Officer, effective September 11, 2024. According to the press release, Ms. Parekh, who brings over 25 years of experience in the technology and banking sectors, previously served as CFO at RingCentral (RNG).
During her tenure at RingCentral, revenue growth rate moderated but GAAP losses shrunk and free cash flow increased significantly from $158.6 million to over $402 million during the trailing twelve months. RingCentral’s stock, on the other hand, lost more than half its value during her time there.
Before RingCentral, Ms. Parekh was Divisional CFO at Hewlett Packard Enterprise, where she played a crucial role in the company’s transition to an as-a-service business model and managed key acquisitions. Her extensive experience also includes senior roles at Goldman Sachs, Jefferies, and Barclays Capital.
Ms. Parekh succeeds Tim Wan, who has been with Asana since 2017 and was instrumental in driving significant growth, increasing revenue to over $689 million and expanding the team from under 300 to nearly 2,000 employees. Mr. Wan will continue to support Asana in an advisory capacity during the transition.
But why her? Sonalee Parekh’s appointment isn’t just a routine executive shuffle—it hints at a bigger play. With a resume boasting senior roles at Goldman Sachs, Jefferies, and Barclays Capital, along with hands-on experience managing acquisitions at RingCentral, Ms. Parekh brings a skill set tailored for M&A. Her arrival could mean that Asana is gearing up to increase acquisitions or explore strategic options, including a sale of the company.
Smartsheet (SMAR) is a pre-deal situation we are tracking after the company hired Qatalyst Partners in July after receiving interest from private equity firms.
Ms. Parekh will receive an annual base salary of $750k and a $15 million equity grant in restricted stock units (RSUs). The RSUs will vest according to the company’s 2020 Equity Incentive Plan, with 35% vesting on the first anniversary of the vesting commencement date (VCD). An additional 30% will vest quarterly between the first and second anniversaries of the VCD, 20% will vest quarterly between the second and third anniversaries, and the remaining 15% will vest quarterly between the third and fourth anniversaries
Asana’s CEO Dustin Moskovitz clarified that CFO Tim Wan’s departure was part of a long-planned transition, not a reaction to current events. Mr. Wan confirmed that his departure, after nearly eight years with Asana, was driven by his need to take time off and reflect on his future.
Dustin Moskovitz’s Unusual Insider Purchases
We previously highlighted Mr. Moskovitz’s consistent activity in purchasing shares, including his participation in a secondary offering in September 2022 when I wrote:
About a year ago, Mr. Moskovitz was actively purchasing shares of Asana at prices sometimes approaching $100 per share. Despite the nearly 34% gain in the stock during the last five days after the company released earnings that beat expectations, the stock is still down 75% over the last year as the company continues to post losses and growth decelerates.
Unlike certain SaaS companies that post net losses but are cash flow positive, Asana is posting negative cash flows having burnt through $164 million in cash during the trailing twelve months. At this rate, the company would have been out of cash in a year. This cash from the private placement allows the company to extend its runway as it continues to prioritize revenue growth over bottom line profitability.
I wrote the following about the company in June 2021 after a series of insider purchases by Mr. Moskovitz.
Dustin Moskovitz is one of the co-founders of Facebook, making him the youngest self-made billionaire in history in 2011. He co-founded the productivity software company, Asana, in 2008 and the company went public through a direct listing on September 30, 2020. The “reference price” for the direct listing was $21 and it closed its first day of trading at $28.80. It has more than doubled from that first day close to $62.73.
While it is unusual for insiders of a newly public company to buy shares as we highlighted with the Bumble purchases, it is even more unusual to see an insider buy shares multiple times though a defined trading plan (a 10b5-1 plan) as we have seen with Mr. Moskovitz since June 2021. The stock is already up more than $20 a share since he started buying shares. Asana’s market cap is a little over $10 billion and Mr. Moskovitz’s net worth is estimated to be over $21 billion.
There are many productivity software companies out there including Monday.com, Smartsheet (SMAR) and Atlassian (TEAM). I was an early adopter of Smartsheet (before Office 365 made Excel online a viable competitor), have held Atlassian shares for several years and nearly two decades ago wrote most of the code for an online project management module in an enterprise software application that is still in use. The barriers to entry appear low from the outside but the highly competitive nature of this industry makes it difficult for new entrants to gain enough traction to unseat incumbents unless the product is sufficiently unique or there is a lot of capital backing the company.
This Twitter thread by the CEO of a company that was an Asana competitor provides a fascinating inside look into just how competitive this little area of the software industry can be. The thread is long but the screenshot below is the money shot as it relates to Asana and Mr. Moskovitz.
Given the nature of this little niche and Asana’s valuation (31 times estimated 2021 sales), I would prefer to watch how the Asana story unfolds from the sidelines despite Mr. Moskovitz’s enthusiasm for the stock.
Asana’s valuation has come down to earth since I wrote that article last year and the stock now trades at 9.55 forward sales instead of the 31 times sales it was trading at last year. I still can’t muster enough enthusiasm for the stock as there are several other high growth technology companies that have dropped to valuations that make them look attractive at current levels including our portfolio companies Twilio (TWLO) and Coursera (COUR). I’ll continue to monitor Asana to see if the company can become a true platform company and if the market offers it at more attractive levels.
The stock continued to trend lower since that September 2022 secondary offering and finally appears to have bottomed below $12 this year.
In the latest earnings report, Mr. Moskovitz announced plans to purchase up to 13.5 million shares, citing his belief that Asana’s shares are undervalued.
Buybacks
On June 20, 2024, Asana announced that it plans to repurchase up to $150 million of its Class A common stock through June 30, 2025, representing nearly 6% of the company’s market cap at announcement. In Q2, Asana repurchased $19.7 million worth of its shares under this program, at an average price of $13.64 per share.
In response to an analyst’s concern that frequent stock buybacks might suggest operational issues, Dustin Moskovitz clarified that their buyback plans are scheduled in advance and not driven by short-term market changes. He views the market as stabilizing and believes the new buyback plan, unlike last year’s, is a strategic decision rather than a response to operational or financial concerns.
Over the last three years the company’s shares outstanding have increased by nearly 35% on account of a combination of stock-based compensation and the $350 million private placement in 2022 through the sale of 19.27 million shares to Dustin Moskovitz. Stock-based compensation over the last four quarters was $213.47 million.
Financials
Asana’s stock has declined by 33.65% over the past year. The company’s market capitalization stands at $2.77 billion, while its enterprise value is $2.52 billion. Additionally, Asana holds $246.43 million in net cash.
Asana reported a GAAP operating loss of $76.8 million, representing 43% of revenues, compared to a GAAP operating loss of $73.4 million, or 45% of revenues, in the previous quarter. Its non-GAAP operating loss was $15.7 million, or 9% of revenues, up from $10.4 million, or 6% of revenues, in the second quarter of fiscal 2024.
In the earnings call, former CFO Tim Wan reported that Q2 revenues reached $179.2 million, marking a 10% year-over-year increase. The company now has 22,948 core customers, those spending $5,000 or more annually, with their revenue growing 11% year-over-year and representing 75% of Q2 revenues, up from 74% a year ago.
The number of high-spending customers ($100,000+ annually) rose by 17% to 649 a possible sign of momentum in high-value customers. Dollar-based net retention rate was 98% overall, 99% for core customers, and 103% for high-spending customers. Tim Wan noted that while these retention rates are trailing indicators, current trends suggest a stabilization point for the dollar-based net retention rate in Q2.
The median dollar-based net retention rate for successful SaaS companies is expected to be 110%.
Balance Sheet and Cash Flow Summary
Asana’s balance sheet showed strong liquidity with $521.6 million in cash and marketable securities. Deferred revenue was $289.2 million, up 11% year-over-year. Free cash flow for the quarter was positive at $12.8 million, representing a 7% FCF margin.
Peer Comparison
The closest competitor for Asana is Monday.com (MNDY), which has been absolutely trouncing Asana with its growth. The market has rewarded with a market cap that is nearly five times that of Asana and the stock is trading at 15 times trailing sales.
Monday.com has delivered impressive results, reporting $160.4 million in revenue for Q2 2024—a 42% jump from the previous year. Additionally, Monday.com reported EBITDA of $17.3 million and free cash flow of $15.6 million, highlighting its ability to generate free cash flow while maintaining a high growth rate.
Despite these difficulties, Asana is focusing on expanding its AI capabilities and scaling its product offerings.
Financial Outlook
Compared to previous quarter guidance, Asana slightly narrowed its revenue forecast to $719.0-$721.0 million from $719.0-$724.0 million and improved its non-GAAP operating loss estimate to $58.0-$55.0 million from $59.0-$55.0 million. The non-GAAP net loss per share remains at $0.20-$0.19. The earlier guidance also included a positive free cash flow expectation, which is not mentioned in the updated forecast.
Earnings call Highlights (Transcript)
Conclusion
Sudden departures of C-suite executives and especially the CFO are often a red flag in our book. While Asana claims that Mr. Wan’s transition was planned for a long time, it was announced on August 28th that he was departing on September 10th.
In the past, I have not been very enthusiastic about Asana despite Mr. Moskovitz’s purchases but as I look at the company again, I think the new CFO can start to move the needle after a couple of quarters of potential weakness.
The vast chasm in valuation between Asana and Monday.com implies if Ms. Parekh can repeat what she did at RingCentral, then the market will start rewarding Asana and we will likely see multiple expansions. I plan to continue watching Asana from the sidelines but am more cautiously optimistic about the company than I was before this C-suite appointment.
CEO
CFO
Chief Legal Officer
Others
Appointments
1. Microsoft Corporation (MSFT): $430.81
On September 12, 2024, Microsoft appoints GE’s finance chief Carolina Dybeck Happe as the new Executive Vice President and Chief Operations Officer.
| MarketCap: $3.21T | Avg. Daily Volume (30 days): 19,813,966 | Revenue (TTM): $245.12B |
| Net Income Margin (TTM): 35.96% | ROE (TTM): 37.13% | Net Debt: $22.32B |
| P/E: 36.88 | Forward P/E: 32.47 | EV/EBIDTA (TTM): 24.94 |
| P/S (TTM): 13.13 | P/B (TTM): 11.93 | 52 Week Range: $309.45 – $468.35 |
2. Norfolk Southern (NSC): $249.29
On September 11, 2024, Norfolk Southern Corporation announced that the Norfolk Southern appointed Mark R. George, the company’s Chief Financial Officer, as President and Chief Executive Officer, effective immediately.
| MarketCap: $55.86B | Avg. Daily Volume (30 days): 1,207,517 | Revenue (TTM): $12.09B |
| Net Income Margin (TTM): 14.84% | ROE (TTM): 14.01% | Net Debt: $17.47B |
| P/E: 31.15 | Forward P/E: 18.28 | EV/EBIDTA (TTM): 13.15 |
| P/S (TTM): 4.67 | P/B (TTM): 4.34 | 52 Week Range: $183.09 – $263.66 |
3. Chipotle Mexican Grill (CMG): $56.93
On August 28, 2024, Chipotle Mexican Grill announced that Adam Rymer was appointed as Chief Financial Officer, effective October 1, 2024.
| MarketCap: $78.96B | Avg. Daily Volume (30 days): 19,116,601 | Revenue (TTM): $10.66B |
| Net Income Margin (TTM): 13.23% | ROE (TTM): 43.54% | Net Debt: $2.79B |
| P/E: 57.54 | Forward P/E: 42.55 | EV/EBIDTA (TTM): 38.17 |
| P/S (TTM): 7.38 | P/B (TTM): 21.00 | 52 Week Range: $35.37 – $69.26 |
4. RB Global (RBA): $83.90
On August 28, 2024, RB Global announced the appointment of Steve Lewis as Chief Operations Officer effective September 3, 2024.
| MarketCap: $15.56B | Avg. Daily Volume (30 days): 1,315,616 | Revenue (TTM): $4.22B |
| Net Income Margin (TTM): 8.67% | ROE (TTM): 6.61% | Net Debt: $3.92B |
| P/E: 47.36 | Forward P/E: 22.52 | EV/EBIDTA (TTM): 16.67 |
| P/S (TTM): 3.66 | P/B (TTM): 3.00 | 52 Week Range: $58.85 – $87.45 |
5. Veeva Systems (VEEV): $215.48
On September 11, 2024, the board of directors of Veeva Systems appointed Brian Van Wagener as Chief Financial Officer of Veeva, effective September 16, 2024.
| MarketCap: $35.14B | Avg. Daily Volume (30 days): 912,198 | Revenue (TTM): $2.57B |
| Net Income Margin (TTM): 23.91% | ROE (TTM): 13.18% | Net Cash: $4.83B |
| P/E: 57.28 | Forward P/E: 35.46 | EV/EBIDTA (TTM): 48.35 |
| P/S (TTM): 13.75 | P/B (TTM): 6.73 | 52 Week Range: $162.72 – $236.90 |
Departures
1. Progressive Corp (PGR): $257.66
On August 28, 2024, Mariann Wojtkun Marshall, Chief Accounting Officer of The Progressive Corporation notified the company of her decision to retire from the position in mid-2025.
| MarketCap: $150.11B | Avg. Daily Volume (30 days): 2,431,869 | Revenue (TTM): $67.80B |
| Net Income Margin (TTM): 10.18% | ROE (TTM): 34.45% | Net Debt: $6.08B |
| P/E: 22.00 | Forward P/E: 20.53 | EV/EBIDTA (TTM): 16.89 |
| P/S (TTM): 2.23 | P/B (TTM): 6.47 | 52 Week Range: $137.59 – $260.46 |
2. Chipotle Mexican Grill (CMG): $56.93
| MarketCap: $78.96B | Avg. Daily Volume (30 days): 19,116,601 | Revenue (TTM): $10.66B |
| Net Income Margin (TTM): 13.23% | ROE (TTM): 43.54% | Net Debt: $2.79B |
| P/E: 57.54 | Forward P/E: 42.55 | EV/EBIDTA (TTM): 38.17 |
| P/S (TTM): 7.38 | P/B (TTM): 21.00 | 52 Week Range: $35.37 – $69.26 |
3. Honeywell International (HON): $201.64
On September 5, 2024, Honeywell International Inc. announced that CFO Greg Lewis, transitions to the role of President of Senior Vice President of Honeywell Accelerator and as a Senior Advisor to Chairman and CEO Vimal Kapur.
| MarketCap: $132.97B | Avg. Daily Volume (30 days): 2,716,922 | Revenue (TTM): $37.33B |
| Net Income Margin (TTM): 15.49% | ROE (TTM): 32.74% | Net Debt: $19.22B |
| P/E: 23.30 | Forward P/E: 18.12 | EV/EBIDTA (TTM): 16.88 |
| P/S (TTM): 3.56 | P/B (TTM): 7.73 | 52 Week Range: $174.88 – $220.79 |
4. Apple (AAPL): $220.69
On August 26, 2024, Apple announced that Chief Financial Officer Luca Maestri will transition from his role on January 1, 2025.
| MarketCap: $3.29T | Avg. Daily Volume (30 days): 55,900,977 | Revenue (TTM): $385.60B |
| Net Income Margin (TTM): 26.44% | ROE (TTM): 160.58% | Net Cash: $51.74B |
| P/E: 33.01 | Forward P/E: 29.07 | EV/EBIDTA (TTM): 24.57 |
| P/S (TTM): 8.88 | P/B (TTM): 50.30 | 52 Week Range: $164.08 – $237.23 |
5. Citigroup (C): $59.90
| MarketCap: $111.40B | Avg. Daily Volume (30 days): 13,522,946 | Revenue (TTM): $69.75B |
| Net Income Margin (TTM): 11.89% | ROE (TTM): 4.04% | Net Debt: N/A |
| P/E: 16.43 | Forward P/E: 8.26 | EV/EBIDTA (TTM): N/A |
| P/S (TTM): 1.48 | P/B (TTM): 0.60 | 52 Week Range: $38.17 – $67.81 |
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