Monday .Com Ltd (MNDY (NASDAQ:MNDY)) reported its quarterly earnings, surpassing revenue expectations but experiencing a decline in stock price. The company's revenue reached $251 million, exceeding the forecast of $246.17 million. Despite this, the stock fell by 2.06% in post-market trading, reflecting mixed investor sentiment.
Key Takeaways
- Monday.Com's revenue surpassed expectations by $4.83 million.
- Stock price declined by 2.06% after the earnings announcement.
- The company's performance compares favorably to previous quarters, maintaining a trend of exceeding revenue forecasts.
Company Performance
Monday.Com continues to demonstrate robust financial performance, with revenue growth outpacing forecasts. This quarter's results highlight the company's ability to maintain its upward trajectory, leveraging its platform's appeal to a broad range of businesses.
Financial Highlights
- Revenue: $251 million, up from the forecasted $246.17 million
- Stock Price: Closed at $286.95, down from the previous close of $293
- 52-Week Range: $170 to $324.99
Earnings vs. Forecast
The company reported $251 million in revenue, a 2% increase over the anticipated $246.17 million. This marks a continuation of Monday.Com's trend of surpassing revenue expectations, suggesting effective execution of its growth strategies.
Market Reaction
Despite the positive earnings report, Monday.Com's stock declined by 2.06% in aftermarket trading. The stock had previously experienced a significant drop of 19.65% in the pre-market phase, indicating investor concerns that may not have been fully allayed by the earnings beat.
Company Outlook
Monday.Com's leadership remains optimistic about future growth, citing ongoing product enhancements and market expansion efforts. The company aims to capitalize on its strong market position and continue delivering value to its stakeholders.
Executive Commentary
Roy Mann, Co-CEO of Monday.Com, emphasized the company's commitment to innovation and customer satisfaction during the earnings call. "Our focus on enhancing our platform and expanding our customer base has yielded positive results, and we are excited about the opportunities that lie ahead," Mann stated.
Q&A
During the Q&A session, analysts inquired about the company's strategy to sustain revenue growth. Executives highlighted investments in technology and partnerships as key drivers for future performance.
Risks and Challenges
- Market Volatility: Recent stock price fluctuations may affect investor confidence.
- Competitive Pressure: The rapidly evolving tech landscape poses challenges.
- Economic Uncertainty: Global economic conditions could impact business operations.
In conclusion, Monday.Com's latest earnings report underscores its strong market position and growth potential, despite the immediate negative reaction in its stock price. The company's ability to exceed revenue forecasts suggests resilience and adaptability in a competitive industry.
Full transcript - Monday.Com Ltd (MNDY) Q3 2024:
Desiree, Conference Operator: Good day. My name is Desiree and I will be your conference operator today. At this time, I would like to welcome everyone to monday.com's 3rd Quarter Fiscal Year 20 24 Earnings Conference Call. I would like to turn the call over to monday.com's Vice President of Investor Relations, Mr. Byron Stephan.
Please go ahead.
Byron Stephan, Vice President of Investor Relations, monday.com: Hello, everyone, and thank you for joining us on today's conference call to discuss the financial results for monday.com's Q3 fiscal year 2024. Joining me today are Roy Mann and Aaron Zeman, Co CEOs of monday.com and Eleron Glaser, monday.com's CFO. We released our results for the Q3 fiscal 2024 earlier today. You can find our quarterly shareholder letter along with our investor presentation and a replay of today's webcast under the News and Events section of our IR website at ir.monday.com. Certain statements made on the call today will be forward looking statements, which reflect management's best judgment based on currently available information.
These statements involve risks and uncertainties that may cause actual results to differ from our expectations. Please refer to our earnings release for more information on the specific factors that could cause actual results to differ materially from our forward looking statements. Additionally, non GAAP financial measures will be discussed on the call. Reconciliations to the most directly comparable GAAP financial measures are available in the earnings release and the earnings presentation for today's call, which are posted on our Investor Relations website. Now, let me turn the call over to Roy.
Roy Mann, Co-CEO, monday.com: Thank you, Byron, and thank you, everyone, for joining us today. We're fresh off another strong quarter in Q3, highlighted by improving retention trends, strong financial performance and robust product development. This quarter also marked significant milestone for monday.com as we surpassed $1,000,000,000 in annual recurring revenue. Reaching the $1,000,000,000 ARR milestone is not just a number. It's a pivotal moment in our company's journey and we are ready to build on that momentum.
With a total addressable market of over $100,000,000,000 growing 14% annually across 4 markets: work management, CRM, service management and software development, there is a substantial opportunity ahead. To drive our next stage growth, we remain committed to deepening and expanding our product offering and increasing our global presence. As the landscape of work evolves, we are determined to stay ahead of the curve by continuously investing in technology, exploring new markets and fostering a culture of agility. Monday.com is not just keeping pace with the industry, we are shaping its future. Before I turn it over to Eran, I'd like to cover a few changes in our management team.
First, we are pleased to announce the appointment of Adidar as Chief Operating Officer with over 20 years of experience driving sustainable growth in global tech companies. Ajib brings significant expertise to our executive team and has already made a strong impact since joining us a few months ago. On a different note, we would like to share that our Chief Revenue Officer, Yoni Oshov, has informed us that he will depart the CRO role at the end of December. Since joining in 2017 as VP Global Sales and Marketing and becoming the CRO in 2022, Yoni has been instrumental in developing our sales and partner channels. During Yoni's tenure, we have seen remarkable growth with ARR increasing from $10,000,000 to over $1,000,000,000 We are deeply grateful for his contribution and wish him all the best in his future endeavors.
We are conducting a global search for Yoni's successor, and he will continue to serve as an advisor until the CRO is appointed. Let me now turn it over to Eran to walk you through some of our product highlights for the quarter.
Eran, Executive (likely Co-CEO), monday.com: Thank you, Roy. I'm pleased to share highlights from our recent flagship user conference, Elevate, which took place in London, New York City and Sydney. This year's event was our largest ever, with attendance doubling compared to last year. Thank you to all who joined us. For those who could not attend in person, we invite you to participate in Elevate online on December 4.
Our Elevate conference provide us with a platform to showcase our latest product innovations. This year, we featured Monday AI, which include no code AI building blocks that customers can tailor to their specific business needs. We're excited to report initial strong adoption with a remarkable 150% increase in the use of AI blocks since Q2. Looking ahead, MondayAI will be integrated throughout our entire product suite, enhancing functionality across the platform. We also highlighted our 2nd larger product, Monday CRM, and our vision to expand its capabilities behind sales, fostering collaboration across various revenue teams.
Upcoming features will include email marketing functionality, enabling teams to manage their campaigns directly within Monday CRM. Additionally, we're excited to demo our latest product, Monday service at Elevate. Although still in beta, Monday service have shown promising cross sell potential and it's on track for release by the end of 2024. As we expand our product offerings and support our customers' growth, are committed to building a robust platform for scalable work. At Elevate, we announced the next iteration of MongoDB (NASDAQ:MDB) is now live.
MongoDB 2.0 is all about scale and allows boards with up to 100,000 items and leaked items and a dashboard with 500,000 items. Lastly, we are pleased to report that Monday Work Management continues to gain significant traction with enterprise customers. In Q3, our 2nd largest customer increased their seat count from 25,000 to 6,000 as part of their initiative to simplify and consolidate the technology stack. This represents a remarkable 24 fold increase in the receipt count since 2022. With that, I'll now turn it over to Eliron to cover our financial and guidance.
Eliran Glaser, CFO, monday.com: Thank you, Eliron, and thank you to everyone for joining our call. Q3 was another strong quarter for monday.com with solid revenue growth and profitability and improving retention. We are pleased that fiscal year 2024 is on target to be above our base case guidance outlined at our December Investor Day. Having surpassed $1,000,000,000 in IRR, we are now focused on leveraging our momentum to advance into the next stage of growth for the company. Total (EPA:TTEF) revenue in Q3 2024 came in at 251,000,000 dollars up 33% from the year ago quarter.
Overall NDR increased to 111% in Q3 2024. We expect NDR to be stable through the end of the year. As a reminder, our NDR is trailing 4 quarter weighted average calculation. For the reminder of the financial metrics disclosed, unless otherwise noted, I will be referencing a non GAAP financial measures. We have provided a reconciliation of GAAP to non GAAP financials in our earnings release.
3rd quarter gross margin was 90%. In the medium to long term, we continue to expect gross margin to remain in the high 80s range. Research and development expense was $43,000,000 in Q3 2024 or 17% of revenue, compared to 15% in Q3 'twenty three. Sales and marketing expense was $130,300,000 in Q3 'twenty four or 52% of revenue compared to 54% in Q3 'twenty three. General and administrative expense was $21,400,000 in Q3 'twenty four or 9% of revenue compared to 8% in Q3 'twenty three.
Net income was $45,000,000 in Q3 'twenty four, up from $33,000,000 in Q3 'twenty three. Diluted net income per share was $0.85 in Q3 'twenty four based on 52,600,000 fully diluted shares outstanding. Total employee headcount was 2,305, an increase of 195 employees since Q2 2024. We expect to increase headcount by mid-thirty percent in fiscal year 2024 with continued focus on our R and D, product and sales team as we build out our platform and product suite. Moving on to the balance sheet and cash flow, we ended the quarter with $1,340,000,000 in cash and cash equivalents, up from $1,290,000,000 at the end of Q2 2024.
Free cash flow for Q3 2024 was $82,400,000 and free cash flow margin as defined as free cash flow as a percentage of revenue was 33%. It should be noted that free cash flow for the quarter was impacted by a one time net cash incentive of approximately $11,000,000 for our new London office rental agreement. Free cash flow is defined as net cash from operating activities, less cash used for property and equipment and capitalized software costs. Now let's turn to our updated outlook for fiscal year 2024. For the Q4 of fiscal year 2024, we expect our revenue to be in the range of 260,000,000 dollars to $262,000,000 representing growth of 28% to 29% year over year.
We expect a non GAAP operating income of $29,000,000 to $31,000,000 and an operating margin of 11% to 12%. We expect free cash flow of $63,000,000 to $66,000,000 and free cash flow margin of 24% to 25%. For the full year 2024, we expect revenue to be in the range of $964,000,000 to $966,000,000 representing growth of approximately 32% year over year. We expect full year non GAAP operating income of $121,000,000 to $123,000,000 and an operating margin of 12% to 13%. We expect full year free cash flow of $286,000,000 to $289,000,000 and free cash flow margin of approximately 30%.
Let me now turn it over to the operator for your questions.
Desiree, Conference Operator: Thank you. We will now begin the question and answer session. Our first question comes from the line of Kelly Novakalovitch with Goldman Sachs (NYSE:GS). Your line is open.
Kelly Novakalovitch, Analyst, Goldman Sachs: Hey, team. It's Kelly on for cash. Thanks for taking the question and congrats on reaching the $1,000,000,000 run rate mark. Two questions, if I may. As we see your larger cohort supporting an inflection in NRR, but we see a softening of your net new customer adds.
Can you share how Monday's engagement with customers is evolving and whether you're seeing any changes in the broader demand or competitive environment?
Eliron, Executive, monday.com: Yes. Hi, Gary, it's Arun. So first of all, as you mentioned, we see good retention results. Our NRR is improving and also our gross retention is at record level historically. So overall, we see better retention with small and larger customers.
We do see a little bit less customer adds, but that's part of our price increase and part of our strategy that we focus not just on SMBs, but also on large enterprises. So overall, if I take everything, we see demand to be steady, pretty similar to what we saw in previous quarters in terms of retention of customers and also in adding new customers. Hi, Gili, this is Eliran. Maybe I will add one more thing is that with the new product that we introduced, service we see also with CRM and Service CFC cross sales in between our existing customers and new customers that continue to add additional potential momentum to our sales.
Kelly Novakalovitch, Analyst, Goldman Sachs: Perfect. Thanks. And when we think about your growth initiatives that you just mentioned as well as the hiring uptick that we saw in this quarter and what we're expecting in 4Q, how are you thinking about that expansion versus larger new land, especially in the backdrop of the 2nd largest customer that you saw an expansion there?
Eliron, Executive, monday.com: Hey, guys. So this is Ron again. So the fact that we're hiring more salespeople is basically because we see a lot of demand and a lot of opportunity within our own customer base. So it makes sense building towards growth for 2025. So we're pretty confident on that and our plans for 2025 as well.
And again, like as we grow, more revenue is coming from existing customers as they upgrade buying more products and adding more seats. But our acquisition engine and bringing the customers remains a very strong part of the business and we're investing a lot into that and growing that as well. So I would say that both in expanding existing customers and acquiring new customers is according to our original plan and demand in the market looks very stable.
Desiree, Conference Operator: Our next question comes from the line of Tim Jalim Bora with JPMorgan (NYSE:JPM). Your line is open.
Tim Jalim Bora, Analyst, JPMorgan: Great. Thank you for taking the questions. It seems like you're seeing half of paying customers for service come from cross sell. And I think the product is still in beta, right? So do you think service might have a much bigger cross sell opportunity versus CRM and that you might actually realize it faster than CRM?
Roy, Co-CEO, monday.com: Yes. Hi, it's Roy. So we do see a great opportunity to cross sell with service. It is, like you mentioned, still in beta and very early stage. So like it's not something we see as a significant part of our, let's say, revenue next year, but we do see it as a huge growth potential going forward.
Too soon to tell how we can measure up compared to CRM.
Tim Jalim Bora, Analyst, JPMorgan: Okay, understood. I want to ask you on net retention as well just as a follow-up. It seems like you're seeing an uptick, but seems like the uptick is largely in the large customer segments. Maybe talk about how much of that is due to seat unlocks from Monday DB versus cross sell? And maybe broadly, Eliran, has that metric turned the corner as we look into the next several quarters?
Eliron, Executive, monday.com: Yes. Hi, Tanjalim, it's Eliran. So again, we are pleased with our NDR. It increased to 111%. This is ahead of our expectations.
And I think that we expect it to be largely stable in Q4. To your question, if it's going to be a turn point going into next year, so we foresee opportunity for continued improvement in fiscal year 2025. This is the result of the fact that we continue to go up market. Potentially, the impact of the price increase around 100 to 200 basis points. And I would say it's also broad based across all customers with the growth retention also getting to record high.
Tim Jalim Bora, Analyst, JPMorgan: Understood. Thank you very much.
Desiree, Conference Operator: Next (LON:NXT) question comes from the line of Brent Bracelin with Piper Sandler. Your line is open.
Desiree, Conference Operator0: Thank you. Good morning. Wanted to touch base on service again. What are the key kind of product milestones you're looking for that product to hit in order to GA? I know it's been a pretty successful beta, but what are the key last parameters that you'd like to see before that's released?
And then one quick follow-up on guidance.
Eliron, Executive, monday.com: Yes. So hi, Brian, this is Arun. So like everyone mentioned, we're very excited about managed service. It feels like there's a huge opportunity there, especially cross selling that product to existing customers. Because of that and because we see them and also from our larger customers, we just want to make sure that, 1, the product is mature enough, so it can scale within our existing customers, not just the smaller ones, but also the remarket and enterprise customers.
And then there's a bunch of features that we're planning to finalize before the official launch. One of them is the customer portal where people can create tickets and also some AI functionality that we added into the product. We feel that we're pretty close to launching the full release of that product and the feedback from customers is very good. So overall, we're very excited. There seems to be strong demand in terms of go to market and also great reception from customers who already use the product.
Desiree, Conference Operator0: Helpful. And then Elirond, the guidance here have been pretty consistent all year, 28% to 30% forward outlook here for 4 consecutive quarters now. How would you frame just the demand going into kind of year end here?
Eliron, Executive, monday.com: So demand environment hi Brent, it's Elan. As Elan said, demand environment has been very stable. It's broad based. We still see strong momentum coming from SMB and continue to move up market. I would expect it to be getting slightly better going into next year based on what we heard from other companies.
But there are still some signs of choppiness in some segments. So I would say, I don't want to tell you that it's going to be a dramatic change going into next year, but it's going to be a combination of we see a strong momentum on our business, but there is some choppiness in the market.
Desiree, Conference Operator1: Helpful color. Thank you.
Desiree, Conference Operator: Next question comes from the line of Ryan MacWilliams with Barclays (LON:BARC). Your line is open.
Eliron, Executive, monday.com: Hey, guys. Thanks for taking
Desiree, Conference Operator2: the question. Just a follow-up on Brent's question. As we think about our models for next year and building up to our estimates for 2025, Any early insight into the things to think about as we continue on the price increase into next year? Maybe should we look at 4Q as a reasonable starting point? Just any break ins we can use from our models for next year growth?
Thanks.
Eliron, Executive, monday.com: Hi, it's Elidon. So we will give our fiscal year 2020 5 guidance as part of next earnings call, but we remain optimistic that with Monday service, with the price increase that we did, with the gross sale opportunity, with the fact that momentum continues to be good, we're going to see some potential upside also next year. Excellent. And then you guys have
Desiree, Conference Operator2: seen really strong product development with the new product line releases. But any thoughts on M and A here? Like would it make sense to maybe acquire some bolt on AI capabilities? Just want to see if your thought process changed around that
Eliron, Executive, monday.com: at this point too much. Yes. Hi, Ron, this is Arun. So yes, definitely, we have an M and A team. We're constantly monitoring the market and looking for opportunities.
Multiply the right one, we definitely try to afford those opportunities. But given the cash reserves that we have and the opportunity that we have as a company, we're definitely looking into that as well.
Desiree, Conference Operator: Next question comes from the line of Brent Thill with Jefferies. Your line is open.
Desiree, Conference Operator3: Thanks. With Janney leaving, can you just talk through the transition and ultimately in past sales transitions, it takes some time to settle in. What gives you confidence maybe this isn't as big of a turbulence or perhaps it is, but give us a sense of how you're going to manage that?
Eliron, Executive, monday.com: Yes, Brent. So this is Ron. So basically, Yoni will stay in his role until the end of the year and then we will remain the company as an advisor until we find the replacement for a CRO. We're pretty confident that we'll be able to find a new service company in the near future. We're looking for new candidates across the globe and there's a lot of great talent out there.
And we're doing like an orderly transition plan. We got everything covered and we get great management as part of our leadership and leadership in our CR organization. So we're pretty confident that things will remain stable and we have ambitious plans for 2025.
Desiree, Conference Operator3: Great. And then can you just give us a quick update on the CRM traction? What mile markers are you proud of? And whether what's kind of the next chapter as we head into next year that you're excited to cross with CRM? Thanks.
Roy, Co-CEO, monday.com: Yes. Hi, it's Roy. So within CRM, we are always looking to like scale it up a notch in terms of the sizes of business we're approaching part of it is like scaling the infrastructure like we announced to support large data sets and also adding AI to many areas that really facilitate and make sales process much faster and robust. So we're super excited about CRM, remains a very strong growth area for us and keep investing in it.
Eliron, Executive, monday.com: Thanks.
Desiree, Conference Operator: Next question comes from the line of Jackson Ader with KeyBanc Capital Markets. Your line is open.
Desiree, Conference Operator1: Great. Thanks for taking our questions guys. The first one is on the sales rep motion. Can we just kind of go over what that typical motion looks like? Are they trying to sell into like net new high level purchasers?
Is it rounding up kind of disparate teams that might be using Monday across an organization and bringing them all together? And then just curious like how this role might change with the leadership changes in that organization? Thanks.
Eliron, Executive, monday.com: Yes. Hi, Jackson. This is Arun. So very broadly in general, the way our CRO organization is built is that we have different teams that focus on different go to markets, meaning SMB, mid market and enterprise customers. And then within each one of those segments, we have AEs and AEs.
AEs focus on acquiring and converting new businesses to sign up or have interest in using platforms. And AEs, which is the most significant part of our CR organization, our focus on expanding existing customers. What they usually do is either expand the existing use case or find new buyers within the organization to sell them additional use cases or additional product. We're planning to scale that. As part of the CRM transition, I think this also presents an opportunity.
We're also going up market and definitely it's opportunity to expand that motion. We're going to bring more seasoned sales reps and perhaps leadership that have expertise in scaling to the enterprise segment as well. So all in all, this is how the team is built and we're planning to scale that and invest more heavily into larger accounts.
Desiree, Conference Operator1: Okay. All right, great. Understood. And then my second question is actually also on go to market, but it's more in down market, that kind of the funnel on the low end. But has there been any impact from your pricing increases on maybe the has there been a commensurate increase in performance marketing spend to try and land those customers in the funnel given that now you've got an increased lifetime customer value you assume from the higher prices, but I'm curious how that impacts the performance marketing spend?
Thank you.
Roy, Co-CEO, monday.com: Hi, it's Troy. So our performance marketing, like always, is driven by results. And we've done the test before the pricing and after. And obviously, what you see is less fewer number of customers, but higher quality ones that have more potential to scale upward. And this is in line with the strategy we have in the sales team and like the whole company is geared towards like taking our sweet spot, if you like, higher.
Desiree, Conference Operator4: Okay, great. Thank you.
Desiree, Conference Operator: Next question comes from the line of Alex Zukin with Wolfe Research. Your line is open.
Desiree, Conference Operator4: Hey, guys. Maybe just the very large customer expansion. Can you talk a bit about what they adopted? Was there a consolidation motion with respect to that? And maybe just the pipeline for those types of deals as you kind of go into the end of the year and have a quick follow-up?
Eliron, Executive, monday.com: Yes. Hi, Alex. This is Eran. So this specific company has grown a lot since 2023 over 24x increase. Just until recently, they had 25,000 Sich and now we have this additional upgrade.
What basically happened is they got more departments using the product across the team. We now had departments from consulting, infrastructure, finance, operations and also the sales team. So all in all, it's become a very significant tool within the company and also more room to grow. The civic is great. And if you add that to the other large customers that we announced in the previous quarter, we see great traction in terms of not just landing larger accounts, but also expanding them over time.
So we see more and more of those deployments that land within our platform. Perfect.
Desiree, Conference Operator4: And then maybe just with the management changes, what does Adi bring to the table that you didn't have before? Maybe why was that the right time after this addition? And as you think about Yealia's replacement, how important is kind of larger enterprise sales experience in that with respect to that?
Eliron, Executive, monday.com: Yes. So this is Arun. So first of all, we're very excited for you to join. I think it brings experience in 2 ways. 1 is tailing, building large organizations.
He had experience managing very big organization with a lot of people, a lot of departments, the complexity. And I think his expertise and knowledge can really help us scale the organization, not just in terms of management, but also in terms of processes, business processes, strategic process that we have. So definitely, we already see great impact from that. That's definitely very helpful. Also, we have a lot of technology expertise in different domains, but we really understand technology, understand the SaaS business and know how to leverage and increase also sales orgs and it brings a lot of expertise around those areas as well.
So all in all, I think it will bring a lot to the table and will help us scale the company path at this point. Yes. Hi,
Roy, Co-CEO, monday.com: it's Roy. I can add that we Adi is someone we rely on a lot during this transition period and it helps us across the company.
Eliron, Executive, monday.com: There was a second part this is Elirando. The second part on the question, I'll remind you, Elirando, about the CRO, how important it is to have experience in going up market? Yes. So definitely in terms of the new CRO that we're looking for somebody that will help us go through this transition that we're going through as a company. We invested a lot into that and as part of that, Yoni has been busy transitioning the sales team and in this new role, we also look to somebody to continue that momentum.
We already made a lot of progress, great progress on that front. And I'm sure that once we find the right person to join the company, he or she will help us complete this transition.
Desiree, Conference Operator4: Perfect.
Desiree, Conference Operator: Next question comes from the line of Arjun Bhatia with William Blair. Your line is open.
Eliron, Executive, monday.com: Thank you, guys. I want
Desiree, Conference Operator5: to go back to Monday's CRM for a bit. I think you announced some pretty interesting new capabilities at Elevate. It sounds like there's campaign management capabilities that are going to be now built in house. Can you talk a little bit about what your long term ambitions are for Monday CRM? And could we in the future expect this to become a full on kind of sales and marketing suite that lives inside Monday?
And if so, how do you think about kind of the build versus buy versus partner motion for CRM in particular?
Roy, Co-CEO, monday.com: Hi, it's Roy. So CRM is essentially built on Monday WorkOS, which gives it amazing capabilities in terms of flexibilities and the complexity it can manage and also the connectivity to the rest of the organization. So I think this is something that our customers really appreciate and want, the connectivity across the organization being able to do things connectively with other departments. And those additions you mentioned kind of connected to that as well and add more wholeness to the CRM suite that we see ourselves building over time.
Desiree, Conference Operator5: Okay. Understood. Thanks, Ryan. And then if I can just turn to the quarter for a second, certainly 32% growth is very strong. I think when I look at the sequential growth from Q2 to Q3, it looks a little bit lighter than we've seen historically.
So can you just touch a little bit on what happened this quarter, what trends you saw in the business and whether there's any timing elements from the move up market that we should consider as we're just thinking about the financials this quarter and going forward?
Eliron, Executive, monday.com: Sure, Jun. This is Elijan. First of all, we are pleased with Q3 performance. We have still a good of 60 company. We had an exceptional performance in Q2.
It set an high bar for Q3. And if we think about what we presented even in the Investor Day, we are going to be above our expectation in fiscal year 2024. Nevertheless, in Q3, we saw some continued choppiness in the macro, including pure enterprise customer rates. If you look at the total ad, which was impacted in part by slower hiring in sales. As I said, we had a very strong Q2 and outlier and slower than expected growth in Monday there as we've been able to focus on developers.
So I would say all of the above created some light September, but we're seeing already strong momentum in October.
Desiree, Conference Operator5: Okay, got it. That's helpful. Thank you, Anand.
Desiree, Conference Operator: Next question from Michael Berg with Wells Fargo (NYSE:WFC) Securities. Your line is open.
Desiree, Conference Operator2: Hi, thanks for taking my question. Congrats on the quarter. I wanted to turn back to pricing real quick. There hasn't been much of an update in the last couple of quarters on contribution from pricing. Is there any incremental color there from the potential contribution in the quarter or in for the year or in the quarter, whether it be quantitative or directional?
Thank you.
Eliron, Executive, monday.com: Yes. So this is Iran. So just a quick update on pricing, the new pricing, the minimum target to be fully rolled out by July of 2025. So we're still kind of in the middle of the process. So far, it's been rolled out to about 50% of our customers.
We see about 30% impact $30,000,000 sorry, impact for fiscal 2024. And total impact from the price increase will be about $80,000,000 between fiscal 2024 and fiscal year 20 26. So those are kind of the updated figures, but just give us some more colors. We are very going really well with the price increase for certain customers is good. We don't see any kind of negative feedback.
So we continue to roll out the pricing as we plan.
Desiree, Conference Operator2: Helpful. And then a quick follow-up on service. It looks like it's expected to be GA here in Q4. We had heard through the Grapevine that there might have been some delays. Anything to point you there?
Any color versus potentially prior expectations around GA? Obviously, the feedback sounds incredibly strong from the ecosystem as well as from Elevate. So anything to help point us in the right direction there would be helpful. Thanks.
Eliron, Executive, monday.com: Yes. So this is Ron. So there's no delay. Basically, we plan to roll out at the end of the year, and this is largely when we release the full version. Just to remind you, it's already available for customers in beta, the great reception of Zviq and they use the product.
So around the end of the year, beginning of next year, January, we'll announce the product to be GA and then kind of open it up for our entire customer base. But the product is up and running and it's great feedback from customers. So it's pretty much on schedule.
Desiree, Conference Operator6: Thank you.
Roy, Co-CEO, monday.com: We're checking.
Desiree, Conference Operator7: Yes. Our next question comes from the line of Mike Funk with Bank of America (NYSE:BAC). Your line is open.
Eliron, Executive, monday.com: Yes. Thank you for
Desiree, Conference Operator8: the question today, guys. Just a quick one, thinking about the revenue growth trajectory and the factors that go into that, we did see either a flattening or decline in the customer net additions across CRM and net additions across CRM and dev this quarter. You mentioned the price impact, dollars 30,000,000 for $24,000,000 I think you've played uptick from what you had before. And then not expecting a lot of contribution from service next year. So maybe just help me think through those factors and how they're going to impact revenue growth, if I'm missing anything and if maybe we are hitting a point when law of large numbers is catching up to us in terms of maintaining 30% plus?
Eliron, Executive, monday.com: Hi, Jason. It's Elhan. So as we said in prior quarters, as part of the price increase, we said that we expect high single digits as of new customers in compared to prior year. However, the ACV and the land is bigger, and this is something when we already finished the last year with 225,000 customers, obviously, the add in terms of percentage are going to
Roy, Co-CEO, monday.com: be slightly lower of what you have seen in
Eliron, Executive, monday.com: the past. With regards to service, strong momentum. We expect it to continue to next year. This is in line with what we saw with CRM, great adoption between our customers sorry, amongst our customers. So this is something that we think will contribute to next year.
And price increase, as Eran mentioned, we continue to contribute by between 2024 to 2026 around CAD80 1,000,000 So nothing much has changed from what we have seen in the past other than what I mentioned earlier with regards to enterprise and net adds in Q3 as well as some softness in there.
Roy, Co-CEO, monday.com: And also, hi, it's Roy. I can add that like you mentioned like size, so we have a very large amount of existing customers and a large portion of our sales team is focused on increasing adoption within existing customers and also our product more road map is geared towards growth within existing customer
Eliron, Executive, monday.com: and it's not built.
Desiree, Conference Operator8: Okay. And just to confirm that my notes are correct, the $30,000,000 impact for fiscal 2024 from price, and that was an increase from $25,000,000 previously?
Eliron, Executive, monday.com: Yes, dollars 25,000,000 to $30,000,000 correct.
Desiree, Conference Operator8: Great. Okay. Thank you all very much.
Desiree, Conference Operator: Our next question comes from
Desiree, Conference Operator7: the line of Derrick Wood with TD (TSX:TD) Cowen. Your line is open.
Eliron, Executive, monday.com: Thanks
Desiree, Conference Operator9: guys. So you've been pushing up market pretty aggressively in recent quarters. And I'm just wondering if this is having any impact to deal cycle timeframes. I imagine as you start doing more multi thousand seat deals, there's more buyers involved and a longer sales cycle. So just wondering if perhaps there's a little more seasonality coming into the model because of these bigger deals and perhaps a little less activity in Q3 and a little more of a flush of activity in Q4.
Is that the right way to be thinking about it? And any comment of how you're seeing pipelines of large 1,000 seat plus deals heading into Q4?
Eliron, Executive, monday.com: Yes, Derek. It's Eli Van. So as I mentioned earlier, we came on a very strong we came on the back of a very strong Q2. And obviously, Q3, you have July August, which are traditionally months of vacations in Europe and potentially in the U. S.
But I don't want to kind of provide this as a seasonality kind of dramatic changes we have seen. As I said, potentially with the fact that there is some macro headwinds to a certain extent in some areas of the market, the macro is still choppy. Potentially, this is contrary to some of the fact that we saw less enterprise customer adds. And as I mentioned also, the Monday debt was more soft than we anticipated. But again, looking at October, we are seeing still momentum very positive and I don't want to tell you that this was a strong seasonality trend in Q3.
Desiree, Conference Operator9: Got it. And then maybe just to touch on just the competitive landscape. I mean, I guess, as you've pushed into new product areas, more upmarket, It was some stats in the past on like greenfield percentage of deals. Like has that changed much as your market positioning has evolved?
Roy, Co-CEO, monday.com: Hi, it's Roy. So I think as we push towards larger deals, we see more competition on deals. If you look at
Roy Mann, Co-CEO, monday.com: the average, I'm not sure
Roy, Co-CEO, monday.com: if it's changed or not. But definitely within CRM, we are competing against other players. But while
Eliron, Executive, monday.com: a lot of
Roy, Co-CEO, monday.com: new adoption comes from Greenfield still, but they are comparing us to competitors.
Desiree, Conference Operator9: Yes, that makes sense. Okay, thank you.
Desiree, Conference Operator7: Next question comes from the line of D. J. Hynes with Canaccord. Your line is open.
Desiree, Conference Operator6: J. Hynes:] Hey, guys. Thanks for taking the question. Any updates on the partner ecosystem, especially as you go further up market, growth there, contribution of the business, your ability to monetize that activity? Any trends emerging that are worth calling out?
Eliron, Executive, monday.com: Yes. Hi, Vijay. This is Imran. So no major update, but we continue to see great momentum with our partner ecosystem. What we see over time is more and more partners are also delivering services to our customers, not just helping them with the implementation, but also help them customize the platform even more.
We also starting to see more partners that specialize in each one of our specific products, so more partners that focus on CRM or partners that focus on that product. And I'm sure as we launch run this service, we're going to add more partners that have it producing that. But overall, we continue to see great momentum with the partner ecosystem, we remain significant part of our revenue composition and in terms of helping larger customers onboard and use the platform.
Desiree, Conference Operator6: Got it. And then maybe a follow-up on service. Just based on the beta usage you've seen to date, how much of the demand has been for internal ticketing use cases versus customer facing support? And do you see that kind of evolving over time with public availability here on the horizon?
Eliron, Executive, monday.com: Yes. So maybe this is Eran. So maybe important to emphasize, we don't just see IT service. What we've seen currently from the use cases that we have, we see I see IT service, but we see a lot of ticketing around HR, around operations, all the way to finance, marketing teams and customer support, internal customer support ticketing. Currently, we don't plan to position mine as a service as outside facing support platform, but mostly within the company.
But given the current use cases, it's very broad across the company, not just for IT, but across almost any department.
Desiree, Conference Operator6: Okay, okay. Got it. Thank you, guys. Appreciate the color.
Desiree, Conference Operator7: Next question comes from the line of Steve Anders with Citi. Your line is open.
Byron Stephan, Vice President of Investor Relations, monday.com0: Okay, great. Thanks for taking the questions here.
Roy, Co-CEO, monday.com: I guess, I just want
Byron Stephan, Vice President of Investor Relations, monday.com0: to ask on some of the choppiness that you're seeing and some of the impact that you saw this quarter. I guess, maybe how is that being accounted for in the Q4 outlook? Is there maybe some incremental conservatism that's being baked in our accounted for here? Just can you help us think about maybe some of the moving pieces that you're kind of incorporating in the outlook?
Eliron, Executive, monday.com: Yes, Steve. Hi, it's Elijan. So I think I spoke about this earlier, but I will repeat. I mean, we continue to see steady demand across our business segment and it's consistent growth rate. As we said, gross retention is at record levels, but there is some cautious spend environment, which may be for our customers.
And in Q3, we saw some continued choppiness in the macro. So again, we saw enterprise, although it's the fastest growing segment that we have, we saw fewer enterprise customers in Q3. As I said, it was impacted in part by slower hiring in sales and on the back of very strong Q2. So I don't want to tell you that we bake conservatism. As we always said, when we provide guidance, we try to do it in a prudent way based on all the information that we know in the quarter.
And we account for all the things that we know today. In addition, the company is growing and becoming more mature and we wanted to make sure that we are providing the most accurate guidance possible while maintaining strong conviction in meeting our estimate.
Byron Stephan, Vice President of Investor Relations, monday.com0: Okay, perfect. That's helpful context there. And then I guess just following up on that, I think you said the sales hires is maybe a little bit slower. I guess, I just want to clarify that comment. And I guess, secondly, just how are you kind of thinking about future sales time growth and maybe how that should kind of layer into the hiring plans going into next year?
Eliron, Executive, monday.com: Just Stephen, the last part of the question about hiring, you broke up in the
Tim Jalim Bora, Analyst, JPMorgan: Yes.
Byron Stephan, Vice President of Investor Relations, monday.com0: Just how you're thinking about future sales headcount adds and I guess the pace of that as we head into 2025?
Eliron, Executive, monday.com: Case of hiring. So Steve, this is Erwan. I will take it. So sales as we said, sales hiring was lower than what we anticipated in Q3, but we expect it to rebound in Q4. And we plan to ramp up hiring for sales quota carriers in Q4 and in fiscal year 'twenty five.
The areas of investment will continue to be product, R and D and go to market. Worth mentioning that as we look at the evolution of the business with all the changes that we're doing in the CRO, so obviously, as I mentioned earlier, we're going to hire people in the segment of account management, enterprise to continue to deepen within existing customer base and but momentum will continue to be strong across hiring.
Byron Stephan, Vice President of Investor Relations, monday.com0: Okay, perfect. Thanks for taking the questions.
Desiree, Conference Operator7: Next question comes from the line of Scott Berg with Needham. Your line is open.
Byron Stephan, Vice President of Investor Relations, monday.com1: Hi, everyone. Thanks for taking my questions. First one I wanted to jump on was your R and D spend took kind of an abnormal increase quarter over quarter, especially relative to historical seasonality between Q2 and Q3. Can you help us maybe unpack and understand what's driving the big R and D increases or specific product or something else in the strategy? Or is it just general hiring for R and D?
Eliron, Executive, monday.com: Hi, Scott. It's Elijan. So over the last few quarters, we continue to say that an area of investment for us is going to be R and D and product. Having in mind everything that we are doing, innovation is in the core of everything we do in Monday, introducing new product, investing in existing product, Monday DB, AI capabilities, feature and functionalities, all of these things require talent and this is something that we continue to do proactively. So we had strong overall iron strength in Q3 and particularly for product and R and D and as well as operation.
So all of that is contributing to the fact that R and D is becoming more significant quarter over quarter.
Byron Stephan, Vice President of Investor Relations, monday.com1: Helpful, El Aron. And then as you think about your sales and marketing hiring, you've talked a couple of times how that was a little bit behind in the Q3. Do you catch up on the hiring there in the Q4? Or is this going to be an item that persists into maybe early 2025?
Eliron, Executive, monday.com: Yes. So we expect it to rebound in Q4. Again, with all the changes that we are doing, obviously, we are looking at all the plans. And also going into fiscal year 2025, we would like to make sure that we will ramp up hiring for sales quota carriers.
Byron Stephan, Vice President of Investor Relations, monday.com1: Great. Thanks for taking my questions.
Desiree, Conference Operator7: Next question comes from the line of Taylor MacKenzie with UBS. Your line is open.
Byron Stephan, Vice President of Investor Relations, monday.com2: Yes. Hi. Thanks so much for answering my questions today. The first one would just be in thinking about the $5,000,000 raise from price to the full year rev guide. Can you maybe provide a little bit more color on how much of the upside came from outperformance on price in 3Q versus what you are expecting for 4Q?
And just the reason why I ask is you mentioned some of like the macro choppiness. Just curious if some of like the sales hiring or that macro choppiness was a bottleneck to 3Q and if there's any areas on that choppiness that you called in particular? Thanks.
Eliron, Executive, monday.com: Yes. So hi, Tullow, it's Eli Van. If you recall, when we did the price increase, it actually was launched at the end of February, early this year. And we said at the time that we don't know what would be the impact, what would be because this is the first time we do it, what would be the churn of the customers in accordance with the price increase. Overall, it became better than what we anticipated.
For most customers, it has been largely a nonevent. Gross retention has been improved. So I would say that the €5,000,000 extra is the fact that the profile of the customers and the momentum is better than what we anticipated. So this was a good surprise for us.
Byron Stephan, Vice President of Investor Relations, monday.com2: Perfect. And then just as we think about the one point uptick in NRR, could you maybe like unpack that a little bit more? So was that largely due to price? Or are you seeing cross seller seat expansions actually drive some of that upside? Is this more work management stable?
And then I know you're talking about expecting NRR to be stable and the outlook for 4Q. I think you made a comment earlier about seeing some good momentum in October. So is that just really prudence or anything to keep in mind there from a seasonal perspective? Thanks.
Eliron, Executive, monday.com: Yes. So I think it's all of the above, meaning pricing we've contributed around 100 to 200 basis points to the reported NDR in Q3. We expect pricing that we continue to positively contribute approximately 200 basis points for the reported NDR in fiscal year 2024 as a whole. We said that it's going to be stable in Q4 around 111%. There is potentially some upside in next year.
Too early to say, but so far we're seeing good momentum going also into October.
Desiree, Conference Operator7: And our last question comes from the line of Itay Kidron with Oppenheimer. Your line is open.
Desiree, Conference Operator4: Thanks. I made it. Couple of questions for me. First on dev, it's been somewhat underwhelming since you've announced it. Can you talk about from either a feature or go to market standpoint, what needs to change in the product for you to get a better and more consistent contribution here?
Eliron, Executive, monday.com: Yes. Hi, Tay, it's Ron. So, first of all, we have with the progress with the Mondydev, it might not grow as fast as CRM, but the growth, we're very pleased with it. With MondayDebt, we're very focused on software developers. So it might be just a part that takes a little bit longer to scale compared to CRM, which is kind of more of a broad use case.
But we kind of now in the we finalized the kind of refocusing of our go to market. We added specific features that more tailored towards developers. It might be more slowdown in the net adds in the short term, but in the long term, we're pretty confident in the product. We see great feedback about using the product, great use cases and retention of the customers to do that. So overall, we're happy with the progress and we continue to invest into that product.
Desiree, Conference Operator4: That's great. And then for you, Roy, in your prepared remarks or I think it was around, I'm sorry. You talked about that AI blocks up quite significantly quarter over quarter. Can you talk about evolution here? How do we think about AI blocks?
First of all, how would this change, let's say, a year from now? And what do you expect it to do to customer pattern in the context of expansion and moving up price tiers? How do you see this impacting that?
Eliron, Executive, monday.com: Yes. So, yes, the adoption we're very pleased with adoption. Like I had mentioned, in terms of total AI actions, it grew from more than 2 50% compared to Q2. And the AI blocks grew 150% from Q2. So overall, we see more and more customers adopt those blocks.
People incorporate them into their automation. They create a lot of processes within the product that involve AI within that. And over time, we are planning to roll out the monetization tied with AI, where we're going to generate clear and efficient value for our customers. So definitely, we're very happy to see the progress with AI features, the adoption of AI features. And over time, we're going to add the ability to monetize that as well.
Desiree, Conference Operator4: And Ron, is that a 25 time frame for monetization on AI?
Eliron, Executive, monday.com: Yes. We don't have a specific date, but it might be in 2025, but we can commit to that. Okay.
Roy, Co-CEO, monday.com: All right. We're not modeling for that in the plan for 2025.
Desiree, Conference Operator4: Very good. Appreciate it. Thank you.
Desiree, Conference Operator7: Ladies and gentlemen, that concludes the question and answer session. Thank you all for joining. You may now disconnect.
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