The success of the two direct listings today on the New York Stock Exchange grabbed the attention of the stock market watchers. While the work management platform Asana (NYSE: ASAN) ended the day by soaring 37%, defense tech firm Palantir Technologies (NYSE: PLTR) stock surged 31% today. ASAN stock had further advanced about 4% in the extended trading hours.
Direct listing
Asana opened at $27 when it started to trade in the afternoon, above its reference price of $21 per share. With a trading volume of 40.5 million shares, ASAN stock closed at $28.80, implying a valuation of about $4.5 billion based on its 74 million shares of Class A common stock outstanding and 80.6 million shares of Class B common stock outstanding.
Overview
Asana was incorporated in December 2008 and is headquartered in San Francisco, California. The company helps companies orchestrate work, ranging from daily tasks to cross-functional strategic initiatives. Customers use Asana to manage their product launches, marketing campaigns and organization-wide goal setting.
A majority of the paying customers initially adopt the Asana platform through self-service and free trials. This drives further adoption of the company’s services and expansion opportunities for the customers.
Asana generates revenues from the sale of subscriptions to its customers. The company offers three levels of paid subscriptions to serve the varying needs of paying customers: Premium, Business, and Enterprise.
Financials
For the fiscal year ended January 31, 2020, Asana’s revenue jumped 86% to $142.6 million and non-GAAP net loss widened to $68.2 million from $42.4 million in the previous fiscal year. As of July 31, 2020, Asana had over 1.3 million paid users and over 82,000 paying customers.
For the second quarter of 2021, revenue surged 57% to $52 million and non-GAAP net loss expanded to $26.3 million from $13.7 million in the second quarter of 2020. The number of customers spending $5,000 or more on an annualized basis was up 65% year-over-year at the end of Q2.
Outlook
For the third quarter of fiscal year 2021, Asana anticipates revenue to be between $53.5 million and $54.5 million, representing 40% to 43% year-over-year growth. Non-GAAP net loss per share is expected to be $0.38 to $0.36.
For the fiscal year 2021, revenue is anticipated to be $210 million to $213 million, representing 47% to 49% growth. Non-GAAP net loss per share is expected in the range of $1.33 to $1.30. For fiscal 2022, the company expects revenue to grow in the 30% plus range.
Also read: Palantir Technologies’ (PLTR) direct listing
Tailwinds
According to a June 2019 IDC report, the markets for collaborative applications and project and portfolio management, are expected to grow from $23 billion in 2020 to $32 billion in 2023. Industry analysts estimate there are 1.25 billion global information workers. The company believes that this market is underpenetrated and it has a massive opportunity to serve this underpenetrated market.
After the global pandemic, many organizations had adopted to the work from home culture. This has created an opportunity for workplace collaboration platforms like Asana.
Headwinds
Asana had incurred net losses in each fiscal year since its inception. In its S-1 filing, the company stated that “We do not expect to be profitable in the near future”. The company expects to continue the losses in the future as it needs to make substantial future investments and expenditures to grow its business.
COVID-19 has affected the spending of the companies. This is expected to affect Asana’s plans to convert the customers who are using free and trial versions into the paying customers.
Asana also faces heavy competition from work management solutions providers like Smartsheet (NYSE: SMAR) and Atlassian (NASDAQ: TEAM) as well as tech giants Microsoft (NASDAQ: MSFT) and Alphabet (NASDAQ: GOOGL) who offer productivity suites to their customers.
Also read: Snowflake (SNOW) creates a record as the most successful software IPO ever