Asana’s unprofitability (NYSE: ASAN) is hardly a problem


Faced with the headwind of teleworking and increasingly important online work management, Asana(NYSE: ASAN) fared very well in 2021, almost tripling before the latest earnings caused a parabolic rally.

Following these events, we will take a look at the numbers and examine the current cash consumption of this exciting but unprofitable business.

Check out our latest review for Asana

Earnings Results

  • Non-GAAP EPS: -0.23 US $ (beaten by 0.03 US $)
  • GAAP EPS: -0.40 US $ (online) Revenue: 89.6 million US dollars (vs. 7.24 million US dollars)
  • Revenue for fiscal year 2022: $ 357M – $ 359M (+ 57-58% y / y) vs consensus US $ 338.88M

The outlook for the company is improving, with data showing that customers who spend US $ 50,000 per year are up 111%. The following graph shows the strong positive growth of paying customers.

Growth of Asana’s paying customer base; Source: Presentation to investors

CEO Dustin Moskovitz said the company was helping the company through one of the most significant transformations in workplace history. He named some of the latest partnerships, in particular deep integration with Zoom Video Communications (NASDAQ: ZM).

During this time, Asana became one of the first companies to listing on the Long Term Exchange (LTSE). This exchange was founded 2 years ago to list companies that focus on long term value creation and executive compensation responsibility.

Describe the consumption of money

For this article, we’ll define cash consumption as the amount of cash the business spends each year to finance its growth (also known as negative free cash flow). Let’s start with a review of the company’s cash flow versus its cash consumption.

Does Asana have a long cash flow trail?

A company’s cash flow trail is the time it would take to deplete its cash reserves at its current rate of cash consumption. Asana has such low debt that we’re going to put it aside and focus on the $ 374 million in cash it had in July 2021.

In the past twelve months, cash consumption amounted to US $ 144 million. This means he had a cash flow trail of around 2.6 years as of July 2021. Notably, analysts predict that Asana will break even (in free cash flow) in about 3 years.

Although he doesn’t have a lot of room to maneuver, he shouldn’t need more money, since the money consumption should be continuously reduced.

You can see how her cash balance has changed over time in the image below.

NYSE: Historical Debt vs. Equity of ASAN September 21, 2021

How is Asana growing?

Asana has given a strong boost to investments over the past year, increasing cash consumption by 66%. While this certainly gives us food for thought, we are very reassured by the strong annual revenue growth of 62%.

Considering the above factors, the business doesn’t fare badly when it assesses how it has changed over time. If the past is always worth studying, it is the future that matters most. You might want to take a look at how the business is expected to grow over the next few years.

How easily can Asana collect money?

While Asana seems to be in a decent position, we think it’s still worth considering how easily it could raise more money, should it prove desirable. The issuance of new shares or indebtedness are the most common ways for a listed company to raise more money for its activity.

One of the main advantages of publicly traded companies is that they can sell stocks to investors to raise funds and finance their growth. By looking at a company’s cash consumption relative to its market capitalization, we understand how diluted shareholders would be if the company needed to raise enough cash to cover another year’s cash consumption.

Since it has a market cap of $ 22 billion, Asana’s $ 144 million in cash consumption is equivalent to about 0.7% of its market value. So he could almost certainly borrow a little to finance another year’s growth, or he could easily raise cash by issuing a few shares.

How risky is Asana’s cash burn situation?

It might already be obvious to you that we’re relatively comfortable with how Asana burns its money. In particular, we believe that the growth in its revenues is proof that the company has good control over its expenses.

After reviewing the various measures mentioned in this report, we are quite confident that the company will meet its needs in the medium term.

It is important for readers to be aware of the risks that can affect business operations, and we have selected 2 warning signs for Asana that investors need to know when investing in stocks.

Sure, you might find a fantastic investment looking elsewhere. So take a look at this free list of interesting companies, and this list of growth stocks (according to analysts’ forecasts)

Simply Wall St analyst Stjepan Kalinic and Simply Wall St do not have any position in any of the companies mentioned. This article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material.

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