Barclays TMT Conference. I'm Evan Cosbin, Software Research Analyst here at Barclays. Very happy to have Sonalee Parekh with us today, CFO at Asana. Sonalee is a former Barclays employee, so I have to mention, welcome back. I just saw some former colleagues in the hall there. Welcome back. Welcome back. It's great to have you here. I guess for anyone in the room that maybe missed your Q3 earnings, can you help us understand some of the key takeaways from the call, yeah? Yeah, absolutely. So firstly, thank you. I'm delighted to be here, and nice to reconnect with you again. So, key takeaways from our Q3 earnings. It was a really solid quarter. You know, we were really proud of what we accomplished. So we delivered revenue growth above the top end of consensus and our guide. We grew 9% year over year. Also, very importantly, we delivered record operating margins, so 8% operating margin. And also raised our guide on revenues, which I forgot to add to that. Not only did we beat, we actually raised, rolled and raised. And then, thirdly, net retention stabilized, and that's very, very significant for us. And, in my prepared remarks, I talked about net retention being at or near the bottom, which is something a new comment I had made this quarter. And then finally, free cash flow, we delivered another strong quarter of $13 million of free cash flow. So really, across the board, it was a very, very solid set of numbers. And then just on new products, our AI Studio product again showed sequential growth in bookings, which we're really excited about. And hopefully you'll ask me a little bit more about AI Studio and our AI products. I'd be remiss not to. I guess just staying on some of that, we can unpack a lot of that there. But, like, what gives you the confidence that NRR is near or at the bottom? And maybe what's some of the key drivers to improve that? And then maybe what are some of the risks that could actually see that degradation? Just, like, any sort of comment on how you're seeing the trajectory there. Sure. No, it's a great question and one that, you know, I think about a lot. And what I said in a couple of the one-on-ones I had earlier is when we make comments in the earnings script, like, they're very, you know, scripted, and we think a lot about the language we use. So to say we are at or near the bottom was a change versus what I said, going into Q3. So, you know, as we now look ahead to Q4, I am more confident today than I was when we were going into Q3 despite the fact that Q4 is typically a larger renewals quarter in terms of volume, dollar volume. But the actual number of large renewals is less for Q4. So the real drivers, it was a couple of areas. So one, GRR improved across the board in all cohorts. Secondly, net retention improved across all cohorts, and it was the second quarter in a row. The last quarter, you know, we saw net retention tick up in a quarter. And, you know, while we were encouraged, we said, you know, too soon to call a trend. Now we've seen two quarters of in-quarter net retention improve. So, you know, that was the reason that I gave the change in language. Thirdly, we saw better expansion and, you know, new products played a role there. So as we enter these renewal conversations, we now have, you know, a new arrow in our quiver in terms of offering customers l Service Plans, AI Studio. And then as we look ahead, this wasn't the case in Q3, but as we look ahead, AI teammates as well. So I think those new products are helping with the renewal conversations. And then finally, in our self-serve business, which is still a very large portion of our overall base, and does tend to be the churniest part of our business, we actually saw the best retention that we've seen in a year in 12 months. So I think taking all of that together, it just made me feel more confident as we looked ahead, and, you know, excited to keep delivering and executing. Yeah, absolutely. No, I think just, like, when we think about some of that renewal base in the fourth quarter, maybe what drives some of the confidence in that NRR being stable? And then maybe as we think about the last two years, like, that trajectory, like, what is driving, like, that stability? Or are we seeing, like, the end of that right-sizing from that customer base? And then maybe how to think about, like, next year? Yeah, it's a really very, very intuitive question or insightful question because one of the things that we've talked about in this earnings but also in the last several quarters is just you know our exposure to tech which actually has been declining. So today tech represents about 25% of our ARR base. But you know if you look one or two years ago it was closer to a third of our base. So we have that working its way through the base. And some of the large renewals that I called out as we looked into Q3 were in the tech technology vertical. And I called those out actually for the entire second half but many of those were in Q3 which we've now gone through and then we have several in Q4 although they're lower in dollar amount. But what I would say and what we're finding with the tech exposure is, one, it's smaller today than it was, but two, the customers, the tech customers that we have who are renewing, as they renew for the second time, they're not coming back for a second downgrade or a second bite at that downgrade apple. So basically, we're lapping these larger renewals, and we're lapping the downgrades from those renewals. So as they work their way through the base, they become, you know, a lesser and lesser, proportion of the overall. So that's helping, and then the other thing is in Q3, we saw better expansion, and I think, you know, part of becoming a multi-product story is really as we enter those renewal conversations, making sure that our sellers don't just have incremental seats or higher SKUs to sell, but actually have new products. And one of the things that's most exciting about our foundational service Plans is that customers that buy those, what we find is within six months, their utilization goes up by about 20%. So actually, you know, you end up with healthier customers, and hopefully as those customers renew down the road, you know, they'll be less likely to churn. So healthier and stickier customers. And the other thing I would say is that you end up with customers, or customers who buy more than one product from us are much less likely to churn. And that's sort of the thesis. And again, that's what gives us confidence that we are either at or near the bottom of net retention. Super, super interesting because a company, somewhere in the SaaS space, Braze, last night printed, and they had the first and second quarter in a row of in-quarter net retention improving from they're getting through the belly of the beast from, like, zero bar renewals beginning to improve. So it's interesting to see that. So it's a very similar. Very similar dynamic. Yeah. Okay. I'll have to read that. Yeah, definitely. I guess just understanding some of the different challenges that are going through the market, I think, SEO has been a difficult change for not just Asana, for a variety of different SMB SaaS companies. I guess just understanding some of the remedies that you're pushing through the market, is there any sort of context you could provide on what your net new business is being driven by SEO? If there's any sort of context you can provide, and then some of the remedies that maybe that Asana is working through to improve that motion? Yeah, absolutely. So this is not a new phenomenon for us. It's something we've called out now for a couple of quarters. And we did call it out again in Q3, and we expect it to continue to be a tailwind for Q4, however fully reflected in the way I guided for Q4 and the full year. So, I guess it was, you know, several quarters ago, we started to see an impact in terms of, like, top of funnel, which for us, you know, translation, is kind of visits to our website and trial starts of Asana. And what we found was that although the number of visitors to our website was declining, the traffic that was coming to the website was higher intent traffic, so more likely to convert. So while we saw a decline in the visits and the trial starts, we saw better conversion rates, but when you take, you know, the lower numbers visiting the site multiplied by the higher conversion rate, it's still a downdraft. It's still a negative, and what we've seen in the last several months and what I called out at earnings and what we're continuing to see is a month-over-month improvement in those visits to our website because of some of the initiatives we put in place, and at a certain point, I haven't been specific in terms of like when this will occur, but at a certain point, we will hit the crossover point where the decline in visits is more than offset by the better conversion. And ultimately, like, our belief is that we emerge stronger from this because you actually end up with healthier customers that actually always should have been Asana customers as opposed to, I think, in the past, perhaps with SEO and with some of our SEO investments and marketing spend, of which SEO was a large portion of our overall marketing spend. Like, programmatic as a percentage of overall marketing was about 75%, and SEO was the largest portion of that programmatic spend. But, you know, when we hit that crossover point, ultimately that will end up being a, we believe, a tailwind because you end up with stickier customers and customers that are likely to, you know, stay with us and have a higher propensity to expand with us and have a higher propensity to buy more products from us. So that is kind of the holy grail. And what we're doing is we've used the opportunity to, one, you know, reallocate some of our marketing spend to channels where we believe LLM search is more prolific and prominent. Some of the channels that are net beneficiaries are things like Reddit, YouTube, Quora, and the other thing we're doing is in product, we're trying to make, you know, Dan, our CEO, calls it like the time to that aha moment within the product. We're trying to make that, you know, time to get there much quicker, so we have this new prompt to project that's on our website today, and we think that, you know, that is already driving the kind of behavior that we're hoping to see from customers, and then finally, the content within our website and the content in our marketing has changed. So, you know, the things that resonate with LLM search are more things like short-form video and demos and webinars and FAQs and ROI calculators, and those, again, have proven to be really efficient in terms of getting the right type of customer in those trial starts that then ultimately convert. And I think, you know, in the past, we were perhaps, and I remember when I joined Asana, and I think you're going to ask me about margins a little bit later. But I remember one of the things that really hit me when I joined Asana, when I was doing extensive benchmarking of our OpEx, our marketing spend looked fairly off benchmark, like too high. And I do believe, like, this is an opportunity for us to right-size some of that marketing spend. And again, like, it doesn't mean that it's going to go straight to the bottom line. We could reinvest in other marketing channels, which is one of the things we're doing today. But there should be some benefit to the margins as well from, like, this reallocation of marketing spend into more efficient channels. Definitely. So I mean, I think it's an evolving story for, again, not just Asana. Like, this is a clear market dynamic that I think a lot of people are trying to work through. It doesn't seem like there's a perfect answer, but as you mentioned, there's a variety of different channels I think you can work through. Yeah. And I think, like, the point of us, about us emerging stronger, I do firmly believe that because the customers, and particularly, you know, in that base, that those tend to be our churniest customers. Yep. So it's actually great that we're really inspecting that today and finding, you know. Definitely. Remedies. I guess, I mean, one of the more exciting parts of the Asana story is some of the AI adoption, some of the great growth that you're seeing there. Can you just describe some of the early feedback you've seen from some of the, particularly from the enterprise customers regarding teammates, and then maybe just trying to understand maybe the ARPU outlook that we could see from that adoption. Yeah. I love the analysts always ask about, like, how much are the numbers going up? So we haven't broken it out yet. But, you know, you asked about AI Studio and its adoption and then teammates. And, to be clear, it is still early days, but, you know, a couple of the numbers that we put out on around AI Studio was in our first quarter of going GA, and it went GA mid-quarter. We did $1 million of ARR. The following quarter, we said we more than doubled that. And then this last quarter, Q3, we've said that we saw strong or healthy sequential growth, or strong and healthy sequential growth quarter over quarter. So AI Studio is really doing very well and resonating with customers. What we found with AI Studio in its, you know, initial launch was that it was really being adopted by customers that were fairly sophisticated Asana users, customers that were using Asana already. We call them our builders, but like they were building workflows and already used Asana, using like rule-based, you know, actions, and what we've now done is rolled out AI Studio to a much larger proportion of the base, and I think this is what's really exciting because now AI Studio is available to our self-serve base, so I think it really proliferates among the base, and some of the use cases, like some of the most powerful use cases, think like, you know, very repeatable tasks, things like anything involving customer intake, anything involving like marketing campaigns, anything involving like multi-step processes with lots of handoffs, you know, lots of procurement use cases. One of our best examples is like a CEO that is actually using it for, you know, RFPs to go through RFPs and his procurement process, but with teammates, I think what's so exciting is, to me, teammates, it democratizes AI Studio because AI Studio, I think, is for people, the initial launch, again, for those more sophisticated users who are building workflows. Teammates actually, you can use a teammate to build a workflow for you, so I think it has even broader and wider adoption, even broader, like TAM in terms of use cases and the kind of customers and departments that are likely to use teammates, so we actually think that this is an even bigger opportunity than AI Studio. In terms of where we are on teammates, we haven't gone GA yet. We will next quarter, but we are in beta and we have 30 reference customers and the feedback has been overwhelmingly positive. So we're really excited about that. And we internally, you know, like, of course, we have to dog food. We're using teammates a lot within the organization. In some of the use cases, there are, you know, SDRs and BDRs using teammates. We have teammates doing enterprise technology code reviews, like you name it, ticketing. We're actually using it for all ticketing within Asana today. And we moved off of another point solution in order to offer our internal teams ticketing just using AI teammates. So it sounds like there's clear ROI from these products already, and early traction with teammates. I guess just trying to understand, like some of the go-to-market with, like, AI Studio and then teammates, is that a token-based or like credit-based? Yeah. For the customers? How has that early reception been? Is that the right monetization opportunity? Have you thinking about it differently? Anything to describe there? Yeah, so we are still thinking about it. Like we've gone to market today as, so AI Studio and actually teammates, it's a platform fee, quarterly platform fee, and it's use it or lose it. We've been very deliberately generous with the credits. I know tokens credits. Sometimes people use those interchangeably, because what we really wanted to do was drive as much adoption as possible. Yep. Because we actually do think that there will be high willingness to pay, and there is high willingness to pay so long as you're driving ROI and the outcomes that customers are, you know, hoping to gain. What we've found is that, customers really at this stage prefer knowing what their bill is going to be. So they want that visibility and spend. Whereas if you move to full consumption or straight consumption right away, they don't necessarily know the value they're going to get, and they also don't know what their bill is going to be. So we felt like this was definitely the right way to hit the market. I think, you know, as we look ahead, and I think part of Dustin's original vision was that, you know, the world was likely to evolve from seat-based to more consumption-based models. And AI Studio and teammates is really a way of future-proofing Asana and, you know, our role in the CWM market so that in the future we can grow with our customers as their engagement with us grows. We no longer have to grow based on seats. We can grow based on the amount, like even a small group of power users are using Asana to drive outcomes. And I think, like, we feel very, very good that as we look ahead, you know, if the seat-based model does. And again, you know, our thesis is that there will be some movement in the seat-based model that we have this solution where we can grow and grow incrementally over and above what our ARR base is today. Definitely. I think the conversation with AI and the ROI that it's driving is super interesting when it ties back to like a power user. Like if you and I are both leveraging Asana and I use it 24 hours a day and you use it two hours a day for a seat-based model, you were the same price. But then with AI and then introduction of seat-based models, it's a whole new lever. Exactly. And that's exactly what Dustin had in mind when we first, you know, or when he conceived of this. And, you know, the other point I would make is that AI Studio and teammates have been many, many years in the making. So, you know, our R&D spend isn't going to suddenly like skyrocket or there won't be any step change in our R&D spend because again, these models or these products have been, you know, on our roadmap for many years. And the beauty of AI Studio and teammates is that it sits on top of our Work Graph, which is our core architecture. And therefore, Studio and teammates are context-aware. And I think that's another key source of differentiation. And again, when you talk about pricing power and willingness to pay, it's about the value you're delivering for customers. And we believe we can deliver outsized value because we are the system of work that these teammates, agents, and workflows pull the data from. Yeah. No, definitely. I guess shifting a little bit to some of the competitive dynamics like throughout the space. Smartsheet was recently taken out to go private, and Monday.com has this new multi-product story that it's pushing through the market. I guess where does Asana stand out? What drives the differentiation? What drives those wins in the RFPs? Yeah. So I think a couple of things. Like one, I would say is the flexibility and scalability of our platform. And again, like when I talk about our R&D spend and you know the work graph, like these are things that Dustin was thinking about many years ago that like actually we're really benefiting from today. So you may have heard me talk about our very large. We won a $100 million three-year TCV deal with one of the major hyperscalers two quarters ago. It's a three-year deal. And you know, we are considered a foundation software with them. And we haven't been specific about the number of seats, but like it's about 250,000 plus. We are the only CWM platform that could scale to that level. Not to mention, you can imagine the scrutiny over the controls and certifications and governance and, you know, security, everything, that a sophisticated buyer like that would need. You know, we were able to pass that test. I think like that scalability and flexibility and governance and security is puts us into a category of our own in terms of being able to serve large enterprise. And I don't think, other CWM platforms are anywhere close to that. Secondly, you know, when we talk about teammates and agents, you know, I believe our, horizontal platform makes us truly differentiated versus some of these other solutions are very narrow in terms of the types of markets and work that they can serve, either specific to CRM, specific to ITSM, specific to DevSecOps, whereas we can go across organizations and like within organizations. I think we believe, and I see it, and I think everyone in this room would see that work is cross-functional. Yep. So it's very hard to be a CWM platform that's siloed. And I think some of the other competitors you mentioned are much more siloed than we are. And we think that horizontal platform that we designed and the work graph being so horizontal is a key differentiator for us. Yeah. No, that makes sense. Like I guess just understanding, some of the guidance for 4Q, how to think about 2027, and then I think reflecting on your time at Asana and packaging a large number of questions into one. But I guess just like would love to hear your perspective on your last year and a half, since you came to Asana. What are some of the things that you think Asana has done well? What do you think some of the things that maybe you could have improved on? And then maybe how to think about 2027 growth and profitability. Obviously, I'm not looking for a pre-announcement, but anything. I'm going to guide. The fiscal year 27 guide is, yeah, no, great questions. Of course, like, you know, without being specific, like you've heard myself and the rest of the team say that like our ambition, absolutely, as we look ahead without putting any timeframe on it, is to re-accelerate growth and to continue driving margin improvement. These are two things I believe we can do. In terms of the drivers of that re-acceleration, I think net retention, you know, it was your second question. I think it was the right question. We need to get net retention on a path to 100 and above. I think, you know, stabilization to slight improvement is a really good start. Stabilization of that trend was key to being able to, you know, believe in improving it. I think our PLG business, so our product-led growth business, what we're learning in terms of the SEO and top-of-funnel dynamics, will allow us to emerge stronger, and I think actually, what is today a headwind ultimately becomes a tailwind. I think there's more we can do with channel. Like today, channel is a tiny part of our overall ARR, you know, single digit. If you look at some of those competitors you talked about, it's like 40, 50, 60%. So I think that's a huge untapped distribution channel, and I think with our new products, like they're tiny today, but if you look at a couple of million of ARR, a percentage of an $800 million-plus ARR base, it doesn't sound like a lot. But if you think about how much those products will contribute to future bookings, it becomes meaningful. So that gets me excited. When I reflect, I see we have 10 seconds left, but when I reflect, you know, what have we done really well? The new product introduction, keeping our edge and lead in AI, and I think the other thing is like driving 12 percentage points of margin improvement, which has allowed us to also free up, like become more efficient and free up dollars to be able to invest in our AI platform. Yeah. You're two companies in a row. You're just driving incredible operational efficiency. So thank you so much for helping, for having us, and great to be here. Thank you. Thanks so much. Yeah. Thank you.