Asana Inc.

09/03/2025 | Press release | Distributed by Public on 09/03/2025 14:14

Quarterly Report for Quarter Ending July 31, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K filed with the SEC on March 18, 2025. As described in the section titled "Special Note Regarding Forward-Looking Statements," the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove correct, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled "Risk Factors" included under Part II, Item 1A below.
Overview
Asana is a leading work management platform for human + AI coordination. Customers use Asana to connect their work to company goals and orchestrate mission critical workflows like product launches, employee onboarding, resource planning, tracking company-wide strategic initiatives and more. Our secure and scalable platform with AI-powered features adds structure to unstructured work, creating clarity, accountability, and impact for everyone within an organization-executives, department heads, team leads, and individuals. In Asana, everyone understands exactly who is doing what, by when, how and why.
We offer two complementary products within the Asana platform to meet the needs of diverse organizations:
•our core work management product, available in a tiered, seat-based model; and
•Asana AI Studio, a no-code builder that lets teams build and embed AI into workflows, which operates on a consumption basis.
We employ a hybrid go-to-market approach, combining a product-led model, direct sales, and channel partners.
Key Business Metrics
We believe that our growth and financial performance are dependent upon many factors, including the key factors described below.
Paying Customers
We are focused on continuing to grow the number of customers that use our platform, and specifically on growing the number of customers spending over $5,000 on an annualized basis ("Core customers"), and those spending over $100,000 on an annualized basis. Our operating results and growth opportunity depend, in part, on our ability to attract new customers and expand within those same organizations. We believe we have significant greenfield opportunities among addressable customers worldwide, and we will continue to invest in our research and development and our sales and marketing organizations to address this opportunity.
We define a customer as a distinct account, which could include a team, company, educational or government institution, organization, or distinct business unit of a company, that is on a paid subscription plan, a free version, or a free trial of one of our paid subscription plans. A single organization may have multiple customers. We define a paying customer as a customer on a paid subscription plan.
We define customers spending over $5,000 and $100,000 as those organizations on a paid subscription plan that had $5,000 or more or $100,000 or more in annualized GAAP revenues in a given quarter, respectively, inclusive of discounts. As customers realize the productivity benefits we provide, our platform often becomes critical to managing their work and achieving their objectives, which drives further adoption and expansion opportunities, and results in higher annualized contract values. We believe that our ability to increase the number of these customers is an important indicator of the components of our business, including: the continued acquisition of new customers,
retaining and expanding our user base within existing customers, our continued investment in product development and functionality required by larger organizations, and the strategic expansion of our direct sales force.
As of July 31, 2025, we had 25,006 Core customers contributing approximately 76% and 75% of revenues for the three and six months then ended, respectively. As of July 31, 2024, we had 22,948 Core customers who contributed approximately 75% and 75% of revenues for the three and six months then ended, respectively.
As of July 31, 2025 and 2024, we had 770 and 649 customers spending over $100,000, on an annualized basis, respectively.
During the fiscal quarter ended July 31, 2025, we entered into the largest subscription agreement in our history with a global technology leader. This agreement is for $100.0 million over a three-year term, billed annually.
Dollar-based Net Retention Rate
We expect to derive a portion of our revenue growth from expansion within our existing customer base, where we have an opportunity to expand adoption of Asana across teams, departments, and organizations. We believe that our dollar-based net retention rate demonstrates our opportunity to further expand within our existing customer base, particularly those that generate higher levels of annual revenues.
Our reported dollar-based net retention rate equals the simple arithmetic average of our quarterly dollar-based net retention rate for the four quarters ending with the most recent fiscal quarter. We calculate our dollar-based net retention rate by comparing our revenues from the same set of customers in a given quarter, relative to the comparable prior-year period. To calculate our dollar-based net retention rate for a given quarter, we start with the revenues in that quarter from customers that generated revenues in the same quarter of the prior year. We then divide 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. We expect our dollar-based net retention rate to fluctuate due to a number of factors, including the expected growth of our revenue base, the level of penetration within our customer base, our ability to retain our customers, and the macroeconomic environment. For example, macroeconomic conditions have affected customers' renewal decisions, which has impacted our dollar-based net retention rate in recent periods.
As of July 31, 2025 and 2024, our dollar-based net retention rate was 96% and 98%, respectively.
As of July 31, 2025 and 2024, our dollar-based net retention rate for our Core customers was 96% and 99%, respectively. Our dollar-based net retention rate for customers spending over $100,000 on an annualized basis for the same periods was 95% and 103%, respectively.
Current Economic Conditions
Global macroeconomic events including inflation, fluctuating interest rates, bank failures, supply chain disruptions, fluctuations in currency exchange rates, tariffs and changes in trade agreements, and geopolitical unrest have led to economic uncertainty. These macroeconomic conditions have and are likely to continue to have adverse effects on the rate of global IT spending, including the buying patterns of our customers and prospective customers, and the length of our sales cycles.
Components of Results of Operations
Revenues
We primarily generate revenues from subscription fees earned from customers accessing our cloud-based platform. Subscription revenues are driven primarily by the number of paying customers, the number of paying users within the customer base, and the level of subscription plan. We recognize revenues ratably over the related contractual term beginning on the date that the platform is made available to a customer.
We also generate revenues from our consumption-based AI product and professional services, which are not material to the consolidated financial statements.
Cost of Revenues
Cost of revenues consists primarily of the cost of providing our platform to free users and paying customers and is comprised of third-party hosting fees, personnel-related expenses for our operations and support personnel including allocated overhead costs for facilities and shared IT-related expenses, third-party implementation services partner fees, credit card processing fees, infrastructure and application performance monitoring costs, and amortization of our capitalized internal-use software costs.
As we acquire new customers and existing customers increase their use of our cloud-based platform, we expect that our cost of revenues will continue to increase.
Gross Profit and Gross Margin
Gross profit, or revenues less cost of revenues, and gross margin, or gross profit as a percentage of revenues, has been and will continue to be affected by various factors, including the timing of our acquisition of new customers, renewals of and follow-on sales to existing customers, costs associated with operating our cloud-based platform, and the extent to which we expand our operations and customer support organizations. We expect our gross profit to increase in dollar amount and our gross margin to remain relatively consistent over the long term.
Operating Expenses
Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Personnel-related expenses are the most significant component of operating expenses and consist of salaries, employer payroll taxes, benefits, stock-based compensation expense, and, in the case of sales and marketing expenses, sales commissions. Operating expenses also include an allocation of overhead costs for facilities and shared IT-related expenses, including depreciation expense.
Research and Development
Research and development expenses consist primarily of personnel-related expenses. These expenses also include product design costs, software subscriptions and computer equipment used in research and development activities, and allocated overhead costs. A substantial portion of our research and development efforts are focused on enhancing our software architecture and adding new features and functionality to our platform. We anticipate continuing to invest in innovation and technology development, including the integration of AI in our products, and as a result, we expect research and development expenses to continue to increase in dollar amount, but to decrease as a percentage of revenues over time.
Sales and Marketing
Sales and marketing expenses consist primarily of personnel-related expenses and expenses for performance marketing, brand marketing, pipeline generation, and sponsorship activities. These expenses also include allocated overhead costs, travel-related expenses, and professional fees. Sales commissions earned by our sales force that are considered incremental and recoverable costs of obtaining a subscription with a customer are deferred and amortized on a straight-line basis over the expected period of benefit of three years.
We continue to make strategic investments in our sales and marketing organization, and we expect sales and marketing expenses to remain our largest operating expense in dollar amount. We expect our sales and marketing expenses to continue to increase in dollar amount but to decrease as a percentage of revenues over time, although the percentage may fluctuate from period to period depending on the extent and timing of our initiatives.
General and Administrative
General and administrative expenses consist primarily of personnel-related expenses for our finance, human resources, information technology, and legal organizations. These expenses also include non-personnel costs, such as outside legal, accounting, and other professional fees, software subscriptions and expensed computer equipment, certain tax, license, and insurance-related expenses, and allocated overhead costs.
We have recognized and will continue to recognize certain expenses as part of being a publicly traded company, consisting of professional fees and other expenses. As a public company, we incur additional costs associated with
accounting, compliance, insurance, and investor relations. We expect our general and administrative expenses to continue to increase in dollar amount for the foreseeable future but to generally decrease as a percentage of our revenues, although the percentage may fluctuate from period to period depending on the timing and amount of our general and administrative expenses.
Interest Income and Other Income (Expense), Net and Interest Expense
Interest income and other income (expense), net consists of income earned on our marketable securities and investments, in addition to foreign currency transaction gains and losses.
Interest expense consists of interest expense from our credit facilities.
Provision for Income Taxes
Provision for income taxes consists primarily of income taxes in certain foreign jurisdictions in which we conduct business. To date, we have not recorded a material provision for income taxes for any of the periods presented other than for foreign income tax. We have recorded deferred tax assets for which we provide a full valuation allowance, which primarily include net operating loss carryforwards and research and development tax credit carryforwards. We expect to maintain this full valuation allowance for the foreseeable future as it is more likely than not the deferred tax assets will not be realized based on our history of losses.
Results of Operations
The following tables set forth our results of operations for the periods presented and as a percentage of our revenues for those periods. The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods.
Three Months Ended July 31, Six Months Ended July 31,
2025 2024 2025 2024
(in thousands)
Revenues $ 196,936 $ 179,212 $ 384,203 $ 351,660
Cost of revenues(1)
20,221 19,987 39,448 37,791
Gross profit 176,715 159,225 344,755 313,869
Operating expenses:
Research and development(1)
79,376 91,151 154,503 173,942
Sales and marketing(1)
106,677 108,649 206,518 212,981
General and administrative(1)
40,118 36,222 77,094 69,912
Total operating expenses 226,171 236,022 438,115 456,835
Loss from operations (49,456) (76,797) (93,360) (142,966)
Interest income and other income (expense), net 3,307 6,760 9,137 11,120
Interest expense (797) (955) (1,588) (1,897)
Loss before provision for income taxes (46,946) (70,992) (85,811) (133,743)
Provision for income taxes 1,414 1,197 2,567 2,168
Net loss $ (48,360) $ (72,189) $ (88,378) $ (135,911)
__________________
(1)Amounts include stock-based compensation expense as follows:
Three Months Ended July 31, Six Months Ended July 31,
2025 2024 2025 2024
(in thousands)
Cost of revenues $ 497 $ 393 $ 841 $ 676
Research and development 30,977 34,045 55,341 60,785
Sales and marketing 18,100 17,249 32,923 32,497
General and administrative 12,580 8,420 21,216 14,789
Total stock-based compensation expense $ 62,154 $ 60,107 $ 110,321 $ 108,747
The following table sets forth the components of our statements of operations data, for each of the periods presented, as a percentage of revenues.
Three Months Ended July 31, Six Months Ended July 31,
2025 2024 2025 2024
(percent of revenues)
Revenues 100 % 100 % 100 % 100 %
Cost of revenues 10 11 10 11
Gross margin 90 89 90 89
Operating expenses:
Research and development 40 51 40 49
Sales and marketing 54 61 54 61
General and administrative 20 20 20 20
Total operating expenses 115 132 114 130
Loss from operations (25) (43) (24) (41)
Interest income and other income (expense), net 2 4 2 3
Interest expense * * * *
Loss before provision for income taxes (24) (40) (22) (38)
Provision for income taxes * * * *
Net loss (25) % (40) % (23) % (39) %
_______________
* Less than 1%.
Note: Certain figures may not sum due to rounding.
Comparison of Three Months Ended July 31, 2025 to Three Months Ended July 31, 2024
Revenues
Three Months Ended July 31,
2025 2024 $ Change % Change
(dollars in thousands)
Revenues $ 196,936 $ 179,212 $ 17,724 10 %
Revenues increased $17.7 million, or 10%, during the three months ended July 31, 2025 compared to the three months ended July 31, 2024. The increase in revenues was primarily due to the addition of new paying customers and a continued shift in our sales mix toward our higher priced subscription plans, such as Enterprise and Enterprise+ plans.
Cost of Revenues and Gross Margin
Three Months Ended July 31,
2025 2024 $ Change % Change
(dollars in thousands)
Cost of revenues $ 20,221 $ 19,987 $ 234 1 %
Gross margin 90 % 89 %
Cost of revenues increased $0.2 million, or 1%, during the three months ended July 31, 2025 compared to the three months ended July 31, 2024. The increase was primarily due to an increase of $0.6 million in amortization of capitalized software development costs and an increase of $0.4 million in professional services, partially offset by a decrease of $0.6 million in third-party hosting costs and a decrease of $0.2 million in credit card processing fees.
Our gross margin increased during the three months ended July 31, 2025 compared to the three months ended July 31, 2024 primarily due to increased revenue from new paying customers and the shift toward higher priced subscription plans, offset by the costs of revenue detailed above.
Operating Expenses
Three Months Ended July 31,
2025 2024 $ Change % Change
(dollars in thousands)
Research and development $ 79,376 $ 91,151 $ (11,775) (13) %
Sales and marketing 106,677 108,649 (1,972) (2) %
General and administrative 40,118 36,222 3,896 11 %
Total operating expenses $ 226,171 $ 236,022 $ (9,851) (4) %
Research and Development
Research and development expenses decreased $11.8 million, or 13%, during the three months ended July 31, 2025 compared to the three months ended July 31, 2024. The decreasewas primarily due to a decrease of $9.1 million in personnel-relatedcosts, an increase of $3.0 million in capitalized internal-use software, and a decrease of $0.4 million in cloud computing and related costs, partially offset by an increase of $0.6 million in allocated overhead costs and an increase of $0.3 million in subscription and software related expenses.
Sales and Marketing
Sales and marketing expenses decreased $2.0 million, or 2%, during the three months ended July 31, 2025 compared to the three months ended July 31, 2024. The decreasewas primarily due to a decrease of $1.2 million in personnel-related costs, a decrease of $0.6 million in fees to marketing vendors, a decrease of $0.4 million in travel and entertainment costs, and a decrease of $0.2 million in professional fees, partially offset by an increase of $0.5 million in allocated overhead costs.
General and Administrative
General and administrative expenses increased $3.9 million, or 11%,during the three months ended July 31, 2025compared to the three months ended July 31, 2024. The increase was primarily due to an increase of $3.5 million in personnel-related costs driven by an increase in stock-based compensation expense, an increase of $0.6 million in professional fees, and an increase of $0.5 million in allocated overhead costs, partially offset by a decrease of $0.4 million in subscription and software related expenses, a decrease of $0.2 million in insurance expenses, and a decrease of $0.1 million in cloud computing and related costs.
Interest Income, Interest Expense, and Other Income (Expense), Net
Three Months Ended July 31,
2025 2024 $ Change % Change
(dollars in thousands)
Interest income and other income (expense), net $ 3,307 $ 6,760 $ (3,453) (51) %
Interest expense (797) (955) 158 17 %
Interest income and other income (expense), net decreased by $3.5 million, or 51%, during the three months ended July 31, 2025compared to the three months ended July 31, 2024, primarily due to a decrease of $2.2 million for the impact of foreign currency transaction gains and losses and a decrease of $1.3 million in interest income on marketable securities. Interest expense decreased by $0.2 million, or 17%, during the three months ended July 31, 2025compared to the three months ended July 31, 2024, primarily due to a decrease in interest rates.
Comparison of Six Months Ended July 31, 2025 to Six Months Ended July 31, 2024
Revenues
Six Months Ended July 31,
2025 2024 $ Change % Change
(dollars in thousands)
Revenues $ 384,203 $ 351,660 $ 32,543 9 %
Revenues increased $32.5 million, or 9%, during the six months ended July 31, 2025 compared to the six months ended July 31, 2024. The increase in revenues was primarily due to the addition of new paying customers and a continued shift in our sales mix toward our higher priced subscription plans, such as Enterprise and Enterprise+ plans.
Cost of Revenues and Gross Margin
Six Months Ended July 31,
2025 2024 $ Change % Change
(dollars in thousands)
Cost of revenues $ 39,448 $ 37,791 $ 1,657 4 %
Gross margin 90 % 89 %
Cost of revenues increased $1.7 million, or 4%, during the six months ended July 31, 2025 compared to the six months ended July 31, 2024. The increase was primarily due to an increase of $1.2 million in amortization of capitalized software development costs, an increase of $1.0 million in professional services, and an increase of $0.6 million in personnel-related costs, partially offset by a decrease of $0.5 million in third-party hosting costs, a decrease of $0.4 million in credit card processing fees, and a decrease of $0.2 million in subscription and software related expenses.
Our gross margin increased during the six months ended July 31, 2025 compared to the six months ended July 31, 2024 primarily due to increased revenue from new paying customers and the shift toward higher priced subscription plans, offset by the costs of revenue detailed above.
Operating Expenses
Six Months Ended July 31,
2025 2024 $ Change % Change
(dollars in thousands)
Research and development $ 154,503 $ 173,942 $ (19,439) (11) %
Sales and marketing 206,518 212,981 (6,463) (3) %
General and administrative 77,094 69,912 7,182 10 %
Total operating expenses $ 438,115 $ 456,835 $ (18,720) (4) %
Research and Development
Research and development expenses decreased $19.4 million, or 11%, during the six months ended July 31, 2025 compared to the six months ended July 31, 2024. The decreasewas primarily due to a decrease of $13.9 million in personnel-related costs, an increase of $4.3 million in capitalized internal-use software, and a decrease of $1.2 million in allocated overhead costs.
Sales and Marketing
Sales and marketing expenses decreased $6.5 million, or 3%, during the six months ended July 31, 2025 compared to the six months ended July 31, 2024. The decreasewas primarily due to a decrease of $3.3 million in fees to marketing vendors, a decrease of $1.4 million in personnel-related costs, a decrease of $1.2 million in professional fees, and a decrease of $0.6 million in travel and entertainment costs.
General and Administrative
General and administrative expenses increased $7.2 million, or 10%,during the six months ended July 31, 2025compared to the six months ended July 31, 2024. The increasewas primarily due to an increase of $5.4 million in personnel-related costs driven by an increase in stock-based compensation expense, an increase of $0.9 million in tax contingencies, and an increase of $0.8 million in provision for credit losses.
Interest Income, Interest Expense, and Other Income (Expense), Net
Six Months Ended July 31,
2025 2024 $ Change % Change
(dollars in thousands)
Interest income and other income (expense), net $ 9,137 $ 11,120 $ (1,983) (18) %
Interest expense (1,588) (1,897) 309 16 %
Interest income and other income (expense), net decreased by $2.0 million, or 18%, during the six months ended July 31, 2025compared to the six months ended July 31, 2024,primarily due to a decrease of $2.4 million in interest income on marketable securities, partially offset by an increase of $0.5 million for the impact of foreign currency transaction gains and losses. Interest expense decreased by $0.3 million, or 16%, during the six months ended July 31, 2025compared to the six months ended July 31, 2024, primarily due to a decrease in interest rates.
Non-GAAP Financial Measures
The following tables present certain non-GAAP financial measures for each period presented below. In addition to our results determined in accordance with GAAP, we believe these non-GAAP financial measures are useful in evaluating our operating performance. See below for a description of the non-GAAP financial measures and their limitations as an analytical tool.
Three Months Ended July 31, Six Months Ended July 31,
2025 2024 2025 2024
(in thousands)
Non-GAAP income (loss) from operations $ 14,007 $ (15,658) $ 22,144 $ (31,428)
Non-GAAP net income (loss) $ 15,103 $ (11,050) $ 27,126 $ (24,373)
Free cash flow $ 35,382 $ 12,760 $ 39,377 $ 8,485
Adjusted free cash flow $ 35,439 $ 12,760 $ 45,321 $ 8,485
Non-GAAP Income (Loss) From Operations and Non-GAAP Net Income (Loss)
We define non-GAAP income (loss) from operations as loss from operations plus stock-based compensation expense and the related employer payroll tax associated with RSUs, impairment of long-lived assets, and restructuring costs. The amount of employer payroll tax-related items on employee stock transactions is dependent on our stock price and other factors that are beyond our control and that do not correlate to the operation of the business. The restructuring costs are related to the reduction of our global workforce, which resulted in expenses related to severance, benefits, and other related items. When evaluating the performance of our business and making operating plans, we do not consider these items (for example, when considering the impact of equity award grants, we place a greater emphasis on overall stockholder dilution rather than the accounting charges associated with such grants). We believe the costs associated with restructuring are distinguishable from ongoing operating costs and are not reflective of underlying trends in our business. We believe it is useful to exclude these expenses in order to better understand the long-term performance of our core business, to facilitate comparison of our results to those of peer companies, and to facilitate comparison over multiple periods.
We define non-GAAP net income (loss) as net loss plus stock-based compensation expense and the related employer payroll tax associated with RSUs, impairment of long-lived assets, and restructuring costs.
We use non-GAAP income (loss) from operations and non-GAAP net income (loss) in conjunction with traditional GAAP measures to evaluate our financial performance. We believe that non-GAAP income (loss) from operations and non-GAAP net income (loss) provide our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations.
Free Cash Flow and Adjusted Free Cash Flow
We define free cash flow as net cash from operating activities less cash used for purchases of property and equipment and capitalized internal-use software costs. We define adjusted free cash flow as free cash flow plus restructuring costs paid. We believe that free cash flow and adjusted free cash flow are useful indicators of liquidity that provide information to management and investors, even if negative, about the amount of cash used in our operations other than that used for investments in property and equipment and capitalized internal-use software costs, adjusted for expenditures which are distinguishable from our ongoing operations.
Limitations and Reconciliations of Non-GAAP Financial Measures
Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as substitutes for financial information presented under GAAP. There are a number of limitations related to the use of non-GAAP financial measures versus comparable financial measures determined under GAAP. For example, other companies in our industry may calculate these non-GAAP financial measures differently or may use other measures to evaluate their performance. In addition, free cash flow does not reflect our future contractual commitments and the total increase or decrease of our cash balance for a given period. All of these limitations could reduce the usefulness of these non-GAAP financial measures as analytical tools. Investors are encouraged to review the related GAAP financial measures and the reconciliations of these non-GAAP financial measures to their most
directly comparable GAAP financial measures and to not rely on any single financial measure to evaluate our business.
The following tables reconcile the most directly comparable GAAP financial measure to each of these non-GAAP financial measures.
Non-GAAP Income (Loss) From Operations
Three Months Ended July 31, Six Months Ended July 31,
2025 2024 2025 2024
(in thousands)
Loss from operations $ (49,456) $ (76,797) $ (93,360) $ (142,966)
Add:
Stock-based compensation and related employer payroll tax associated with RSUs 63,463 61,139 113,287 111,538
Restructuring costs - - 2,217 -
Non-GAAP income (loss) from operations $ 14,007 $ (15,658) $ 22,144 $ (31,428)
Non-GAAP Net Income (Loss)
Three Months Ended July 31, Six Months Ended July 31,
2025 2024 2025 2024
(in thousands)
Net loss $ (48,360) $ (72,189) $ (88,378) $ (135,911)
Add:
Stock-based compensation and related employer payroll tax associated with RSUs 63,463 61,139 113,287 111,538
Restructuring costs - - 2,217 -
Non-GAAP net income (loss) $ 15,103 $ (11,050) $ 27,126 $ (24,373)
Free Cash Flow and Adjusted Free Cash Flow
Three Months Ended July 31, Six Months Ended July 31,
2025 2024 2025 2024
(in thousands)
Net cash (used in) provided by investing activities $ (18,918) $ 56 $ (14,742) $ (21,305)
Net cash used in financing activities $ (30,556) $ (19,228) $ (36,079) $ (9,281)
Net cash provided by operating activities $ 39,835 $ 15,858 $ 46,599 $ 13,960
Less:
Purchases of property and equipment (1,297) (1,690) (1,935) (2,692)
Capitalized internal-use software costs (3,156) (1,408) (5,287) (2,783)
Free cash flow $ 35,382 $ 12,760 $ 39,377 $ 8,485
Add:
Restructuring costs paid 57 - 5,944 -
Adjusted free cash flow $ 35,439 $ 12,760 $ 45,321 $ 8,485
Liquidity and Capital Resources
Since inception, we have financed operations primarily through the net proceeds we have received from the sales of our preferred stock and common stock,the issuance of senior mandatory convertible promissory notes in January and June 2020 to a trust affiliated with our co-founder, Chair, and former CEO, Dustin Moskovitz, cash generated from the sale of subscriptions to our platform, and financing activities including the private placement transaction with Mr. Moskovitz. We have generated losses from our operations as reflected in our accumulated deficit of $1,960.3 million as of July 31, 2025 and positive cash flows from operating activities for the six months ended July 31, 2025 and 2024.
As of July 31, 2025, our principal sources of liquidity were cash, cash equivalents, and marketable securities of $475.2 million.
In November 2022, we entered into a four-year credit agreement with SVB, which provided for a senior secured credit facilities in the aggregate principal amount of up to $150.0 million, consisting of a term loan facility in the aggregate principal amount of $50.0 million and a revolving loan facility in an aggregate principal amount of up to $100.0 million, including a $30.0 million letter of credit sub-facility (as amended on April 13, 2023, June 18, 2024, November 18, 2024, and May 29, 2025, the "November 2022 Senior Secured Credit Facility"). The November 2022 Senior Secured Credit Facility refinanced our prior credit agreement with SVB (the "April 2020 Senior Secured Term Loan") and terminates on November 7, 2026.
Borrowings under the November 2022 Senior Secured Credit Facility may be designated as ABR Loans or SOFR Loans, subject to certain terms and conditions under the agreement. Interest will accrue on any outstanding balance at a floating rate tied to the adjusted term SOFR, the prime rate or the federal funds effective rate. Interest is payable monthly in arrears. Pursuant to the terms of the revolving credit facility, we are required to pay an annual commitment fee that accrues at a rate of 0.15% per annum on the unused portion of the borrowing commitments under the revolving credit facility. Refer to Note 6. Debtfor further details.
As of July 31, 2025, under the November 2022 Senior Secured Credit Facility there was $50.0 milliondrawn and $41.9 millionwas outstanding under the term loan, no amounts outstanding under the revolving credit facility and an aggregate $21.7 millionin letters of credit issued under the credit sub-facility. Our total available borrowing capacity under the revolving credit facility was $78.3 million as of July 31, 2025.
On March 27, 2023, First Citizens BancShares, Inc. ("First Citizens") announced that it had entered into an agreement to purchase assets and liabilities of SVB, inclusive of our November 2022 Senior Secured Credit Facility. We continue to have the ability to make additional borrowings under the November 2022 Senior Secured Credit Facility which is now held by SVB as a division of First Citizens.
In June 2024, our board of directors authorized a stock repurchase program of up to $150.0 million of our outstanding Class A common stock (the "Repurchase Program"). Repurchases are made on the open market, including via pre-set trading plans, in accordance with applicable securities laws. The Repurchase Program is funded using our working capital and was initially authorized through June 2025. The Repurchase Program does not obligate us to acquire any particular amount of Class A common stock, and the Repurchase Program may be suspended or discontinued at any time at our discretion. During the three and six months ended July 31, 2025, we repurchased 2.0 millionand 3.0 millionshares of our outstanding Class A common stock for an aggregate purchase price of $27.8 million and $43.4 million, respectively. During the three and six months ended July 31, 2024, we repurchased 1.4 million shares of our outstanding Class A common stock for an aggregate purchase price of $19.7 million. All shares of Class A common stock repurchased were retired. The Repurchase Program was later amended on May 30, 2025 to remove the original expiration date and authorize the repurchase of an additional $100.0 million of Class A common stock. As of July 31, 2025, $128.2 millionremained available for future stock repurchases under the Repurchase Program. The Repurchase Program, as amended, has no specified expiration date and will continue until the funds committed to the Repurchase Program are exhausted or such authorization is revoked by our board of directors. SeeNote 10. Stockholders' Equityto our unaudited condensed consolidated financial statements included in Part I, Item 1of this Quarterly Report on Form 10-Q for more information regarding stock repurchases.
A substantial source of our cash provided by operating activities is our customer billings for subscription to our platform. Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is included on our condensed consolidated balance sheets as a liability and is recorded as revenues over the term of the subscription
agreement. As of July 31, 2025, we had $313.6 million of deferred revenue, of which $312.5 million was recorded as a current liability. This deferred revenue will be recognized as revenues when all of the revenue recognition criteria are met.
We assess our liquidity primarily through our cash on hand as well as the projected timing of billings under contract with our paying customers and related collection cycles. We believe our current cash, cash equivalents, marketable securities, and amounts available under our November 2022 Senior Secured Credit Facility will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months. Our future capital requirements will depend on many factors, including our revenue growth rate, subscription renewal activity, billing frequency, our dollar-based-net-retention rate, the timing and extent of spending to support our research and development efforts, particularly for the introduction of new and enhanced products and features, including the integration of AI in our products, the performance of sales and marketing activities, costs associated with international expansion, additional capital expenditures to invest in existing and new office spaces, as well as increased general and administrative expenses to support being a publicly traded company. We may, in the future, enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. We may seek to raise additional funds at any time through equity, equity-linked arrangements, and debt. If we are unable to raise additional capital when desired and at reasonable rates, our business, results of operations, and financial condition would be adversely affected. Additionally, cash from operations could also be affected by various risks and uncertainties in connection with the impact of an economic downturn or recession, significant market volatility in the global economy, timing and ability to collect payments from our customers and other risks detailed in Part II-Other Information, Item 1A. Risk Factors.
Cash Flows
The following table shows a summary of our cash flows for the periods presented:
Six Months Ended July 31,
2025 2024
(in thousands)
Net cash provided by operating activities $ 46,599 $ 13,960
Net cash used in investing activities (14,742) (21,305)
Net cash used in financing activities (36,079) (9,281)
Operating Activities
Our largest source of operating cash is cash collection from sales of subscriptions to our paying customers. Our primary uses of cash from operating activities are for personnel-related expenses, marketing expenses, and third-party hosting-related and software expenses. In prior years, we generated negative cash flows from operating activities and supplemented working capital requirements through net proceeds from the sale of equity and equity-linked securities.
Net cash provided by operating activities of $46.6 million for the six months ended July 31, 2025 reflects our net loss of $88.4 million, adjusted by non-cash items such as stock-based compensation expense of $110.3 million, amortization of deferred contract acquisition costs of $13.8 million, depreciation and amortization of $10.1 million, non-cash lease expense of $9.1 million, and provision for expected credit losses of $1.2 million, partially offset by net accretion of discount on marketable securities of $1.3 million, and net cash outflows of $8.3 million from changes in our operating assets and liabilities. The net cash outflows from changes in operating assets and liabilities primarily consisted of a $20.2 million increase in prepaid expenses and other current assets related to an increase in deferred contract acquisition costs, a $12.2 million decrease in accrued expenses and other liabilities primarily from accrued advertising expenses and accrued payroll liability, and a $11.1 million decrease in operating lease liabilities. These amounts were partially offset by a $17.8 million decrease in accounts receivable, a $10.8 million increase in deferred revenue resulting from increased billings for subscriptions, a $6.3 million increase in accounts payable, and a $0.3 million decrease in other assets.
Net cash provided by operating activitiesof $14.0 million for the six months ended July 31, 2024reflects our net lossof $135.9 million, adjusted by non-cash items such as stock-based compensation expenseof $108.7 million, amortization of deferred contract acquisition costsof $12.5 million, non-cash lease expense of $8.9 million,
depreciation and amortizationof $8.3 million, provision for expected credit losses of $0.4 million, partially offset by net accretion of discount on marketable securities of $3.6 million, and net cash inflowsof $14.6 million from changes in our operating assets and liabilities. The net cash inflowsfrom changes in operating assets and liabilities primarily consisted of a $22.9 million decreasein accounts receivable,a $18.0 million increase in deferred revenue resulting from increased billings for subscriptions, and a $6.4 million increase in accounts payable. These amounts were partially offset by a $13.6 million increase in prepaid expenses and other current assets related to an increase in deferred contract acquisition costs, a $9.6 million decreasein operating lease liabilities, a $6.4 million decreasein accrued expenses and other liabilities primarily from accrued advertising expenses and accrued payroll liability, and a $3.1 million increase in other assets.
Investing Activities
Net cash used in investing activities of $14.7 million for the six months ended July 31, 2025 consisted of $104.1 million in purchases of marketable securities, $5.3 million in capitalized internal-use software costs, and $1.9 million in purchases of property and equipment. This was partially offset by $96.6 million in maturities of marketable securities.
Net cash used in investing activitiesof $21.3 million for the six months ended July 31, 2024consisted of $107.1 million in purchases of marketable securities, $2.8 million in capitalized internal-use software costs, and $2.7 million in purchases of property and equipment. This was partially offset by $91.3 million in maturities of marketable securities.
Financing Activities
Net cash used in financing activitiesof $36.1 million for the six months ended July 31, 2025consisted of $43.4 million in repurchases of Class A common stock and $2.5 million in repayment of term loan. This was partially offset by $7.7 million in proceeds from our employee stock purchase plan and $2.1 million in proceeds from the exercise of stock options.
Net cash used in financing activitiesof $9.3 million for the six months ended July 31, 2024consisted of $19.0 million in repurchases of Class A common stockand $1.3 million in repayment of term loan. This was partially offset by $8.9 million in proceeds from our employee stock purchase plan and $2.1 million in proceeds from the exercise of stock options.
Contractual Obligations and Commitments
During the six months ended July 31, 2025, there were no material changes in our contractual obligations and other commitments as disclosed in our Annual Report on Form 10-K filed with the SEC on March 18, 2025.
For further information on our commitments and contingencies, refer to Note 7. Commitments and Contingenciesin the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q.
In November 2022, we entered into the November 2022 Senior Secured Credit Facility with SVB, as discussed in Liquidity and Capital Resourcesabove.
Indemnification Agreements
In the ordinary course of business, we enter into agreements of varying scope and terms pursuant to which we agree to indemnify customers, vendors, lessors, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, services to be provided by us, or from intellectual property infringement claims made by third parties. Additionally, in connection with the listing of our Class A common stock on the NYSE, we have entered into indemnification agreements with our directors and certain officers and employees that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers, or employees. No demands have been made upon us to provide indemnification under such agreements, and there are no claims that we are aware of that could have a material effect on our financial position, results of operations, or cash flows.
Critical Accounting Estimates
Our unaudited condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
Except as noted below, there have been no changes to our critical accounting policies and estimates during the six months ended July 31, 2025 as compared to those disclosed in our Management's Discussion and Analysis of Financial Condition and Results of Operations set forth in our Annual Report on Form 10-K filed with the SEC on March 18, 2025.
Stock-Based Compensation Expense
Accounting for stock-based compensation expense related to equity awards requires the use of significant estimates and assumptions, most notably for Performance-Based Awards. Refer toNote 10. Stockholders' Equityfor further discussion of the estimates and assumptions which impact the reported amount and recognition of stock-based compensation expense for Performance-Based Awards, which can contain both market conditions and performance conditions.
Recent Accounting Pronouncements
See Note 2. Basis of Presentation and Summary of Significant Accounting Policiesto our condensed consolidated financial statements included in Part I, Item 1of this Quarterly Report on Form 10-Q for more information regarding recent accounting pronouncements.
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