What happened
Shares of Asana (ASAN +0.08%) were taking a dive today. The project management software company posted better-than-expected results in its second-quarter earnings report, but investors still balked at the numbers. Asana is posting a wide loss at a time when the market has placed a premium on profitability.
As of 1:43 p.m. ET, the stock was down 13.6% on the news.
NYSE: ASAN
Key Data Points
So what
Revenue in the quarter rose 20% to $162.5 million, which was ahead of the consensus at $157.9 million.
The number of customers with annual spending above $5,000 increased 15% to 20,782, while customers with annual spending above $100,000 increased 20% to 553.
Its dollar-based net retention rate was 105%, indicating that existing customers increased their spending by just 5%. That's likely a reflection of its losing some customers. Its retention rate was 125% for customers spending more than $100 million annually.
On the bottom line, Asana saw some margin improvement but remained significantly unprofitable on a generally accepted accounting principles (GAAP) basis with a net loss of $71.4 million. After adjustments, mostly for share-based compensation, the company lost $8.4 million, or $0.04 per share, which was better than estimates of a loss of $0.11 per share.
Free cash flow was $14.6 million, up from a loss of $42.3 million in the quarter a year ago.
CEO Dustin Moskovitz said: "Asana's Q2 results beat expectations on the top and bottom line. Revenue growth was better than our guidance, operating margin improved 37 percentage points, and we posted positive free cash flow."
Now what
The company also gave better-than-expected guidance for the third quarter and full year. Third-quarter revenue is expected to be between $163.5 million and $164.5 million, up 16%, slightly ahead of estimates, but the company expects a wider loss on the bottom line than in the second quarter, forecasting an adjusted loss per share of $0.10 to $0.11.
That likely helped sparked today's sell-off as investors have shown little patience for unprofitable software stocks in the last couple of years.
Expect Asana stock to remain challenged until it can turn a profit or its revenue growth accelerates.
