Asana (NASDAQ: ASAN), the pure-play work management software company, showed growth across the board in Q4, beating earnings and revenue estimates, even upping its guidance. Alas, unprofitable companies just can't please investors in this market. Let's break down the results though because this decrease for Asana appears to be a fairly severe overreaction. 

Asana's Q4 earnings and full-year results

Asana added 200 new features to its platform this year and it announced a brand new feature in February, Asana Flow. This new product has already seen strong adoption having been tested by over 200,000 users in the last three weeks. Next on the product innovation list will be Asana's Employee Impact Suite, which aims to "leverage the power of people". This will arrive in Q2.

In relation to total revenue, Asana reported 64% growth on a year-on-year (YoY) basis to $112 million, and total revenue for fiscal 2022 was $378 million, a 67% YoY increase. Total clients topped 119,000 benefitted by 5,000 adds in Q4, and the company continues to increase net-dollar-based retention rates (NBRR) among its base -- this means that customers are not only staying with Asana, but spending more.

Let's illustrate:

• Customers spending more than $5,000 annually now make up 69% of revenue compared with 62% a year ago
• Revenue from the $5,000+ segment grew 82% YoY
• The portion of customers spending above $50,000 per year more than doubled to 894
• 340 of those customers now spend more than $100,000 annually
• A number of seven-figure deals have been closed, with at least one eight-figure deal struck in 2021

What's more, is the retention for its core category spending above $50,000. This NDBRR for this division stands at 145%. And then on top of that, margins remained sky-high coming in at 90%.

So why did the stock tank?

For one, the valuation of Asana shares really ran away with itself as stay-at-home boomed. Even today, the stock is richly valued around a price-to-sales ratio of 27. It's not profitable yet, and it will likely be several years before it is. Secondly -- you know what's coming -- guidance.

While Asana upped its guidance beyond analyst estimates, it also expects a much wider loss for the coming year. To pinpoint why, it's actually nothing to do with something that's fundamentally wrong with the company, Asana is just maintaining its hyper-growth strategy investing heavier into both research and development, and more so, sales and marketing which is roughly 70% of revenues.

As stated by management: 

"In Fiscal 2023, this will include: Making our biggest investment increase ever in pipeline build to support lead generation, sales development reps, account based marketing and customer engagement programs. We will be focusing on our sales infrastructure, solution selling, customer success and everything that supports customer expansions, all major levers for adoption and expansion. Our global Enterprise go-to-market sales organization, especially quota carrying sales headcount, will grow faster than overall headcount."

Is Asana a good investment?

This is a great business growing substantially. Large deals were made in banking, media, retail, healthcare, and telecom in 2021 according to management, including Warner and Viacom. On its earnings call, it mentioned new customer adds which included the largest automotive manufacturer in the world -- presumably Toyota -- as well as a world-leading streaming service. That one's anyone's guess.

But this maneuver chasing bigger clients shows a lot of promise. Several customers have already upgraded their plans to Enterprise which will boost long-term revenue growth. Despite work-from-home being in the rearview mirror for many, as Asana said: work management "was a rising category even before remote work hits." I'd agree with this and another point made by CEO Dustin Moskovitz. The "vast majority of teams out there are still on the status quo of spreadsheets and e-mail." There's a big opportunity still for Asana, and I for one, believe their future is promising.