Apologies, guess I don’t know how to bold text…
And customers over $50k was 793, 29.4% QoQ from 613.
Second rate SaaS companies that aren’t pulling a profit are being re-rated and the market is doing it almost overnight if you don’t have a home run ER. $95.5m with $101m guidance is not enough.
I am disappointed I only trimmed half of my medium (now small) sized position over $200 last week. As I saw a good chance of this happening. 15% QoQ the guidance implies would be YoY growth in the 70%s, and who knows where the deceleration stops.
Bnh
5 Likes
15% QoQ the guidance implies would be YoY growth in the 70%s
Sorry I meant to say 15% implies ~75% growth rate for a non seasonal business. YoY growth in the next Q will probably should mid to high 80%s.
The guidance will be the causes for the dropping stock price. Projected worsen bottom line and decreasing growth rate are concerned. I will wait for the mgm team replying the reason in ER call.
JJ
2 Likes
Reviewing 3 docs provided and I listened to the Call
Q4 2021 Earnings Release
Q4 2021 Investor Presentation
Q4 2021 Prepared Remarks
https://ir.monday.com/events/event-details/mondaycom-q4-and-…
In Q3 they told us they would make max 88M revenue, guiding for 6% QoQ growth, after having delivered 83M for 95% YoY, a beat of 10.7% from previous guidance of 75M
So, they delivered 95.5M, a beat of 8.5%, for 15.1% QoQ growth, 91% YoY growth.
They made 12.5M more in Q4 than in Q3.
Adjusted Gross Profit was 86M, a 90% margin, a great number to me, in line with previous Q.
Adjusted Income from Operations was -9.9M. They told us they would have a loss of -22M, so this was an improvement over the guided outlook from last Q.
Free Cash Flow was 10.1M, a huge improvement
They added 38160 paying customers in Q4 for a total of 152048, 34% more than last Q count of 113888
They added 180 customers paying 50K+ ARR for a total of 793, 29% more than last Q count of 613, a 200% more than in Q4 of previous year.
Think about that: They had 264 50K+ customers in Q4 last year, and this Q4 they have 529 more of those customers
The NRR for customers with 10+ users was 135%, an improvement from last Q 130%. Those customers contribute 72% of revenue.
The outlook next Q guiding for max 102M revenue, expecting 6.8% QoQ which is higher than last Q expectation; And YoY 73% growth. If they beat by over 8% as in this Q they would grow 16% QoQ and 88% YoY.
They also told us they would have losses of -45M next Q in Income from Operations, which is much higher than this Q loss of -9.9. They have to pay 8M for the SuperBowl ad, and they are expanding offices around the world, Their headcount increased to 1050, 11% growth QoQ. Some may not like this number, that it’s too high of a price to pay for growth. I think I completely understand that they will need to spend that money to get more enterprise customers.
Overall I am pleased with the numbers and I understand the coming loss next Q. I am holding my MNDY shares, a position of 13% just yesterday which became 12% this morning due to the price volatility action of Mr Market.
I really don’t understand why the price is low, I may be missing something obvious. MNDY is growing at 90% with 90% gross margins, a phenomenal business to me. Even if it slows to 70% at 90% margins over the next 4 Quarters I would keep my shares, I see growth durability and my MNDY thesis is unchanged from previous Q.
Yes, there is fierce competition, Asana, Notion, Airtable, Clickup, Smartsheets, MSFT, Trello, Jira, Linear, Wrike, Basecamp, and a few dozen others…
I may be completely wrong and I am happy if someone could show me I am wrong. I am keeping my shares. Good luck to all.
Baconski
43 Likes
This has been mentioned here before, but I don’t think 90% gross margins matter much in an industry that requires massive and constant spending on R&D and S&M in order to stay relevant. Gross profit margins won’t shrink - why would they? But what does it matter if you literally can’t take your foot off the gas without dying? Monday is sticky with 130% NRR, but like you said, the competition is STIFF. And many competitors offer migration software which will take your Monday data and shove it into Asana or whatever. Is Monday winning? Maybe? Will they continue to win? How can we know before it is too late?
From a metric perspective, this company no longer holds a candle to say Datadog which grew 84% in Q4 (vs Monday 91%) and isn’t spending nearly as much as a % of revenue to grow/innovate as Monday.
I keep asking myself how the market would have reacted to this report in Q4 2020 instead of Q4 2021. My guess is 25% up instead of down. The market is telling us something. Told us something similar with the Amplitude debacle. I’m still trying to figure out what it’s telling us about Upstart. Whatever the case is, there’s lessons to be learned here, and I hope I don’t make some of these same mistakes next time we experience an inflationary, rate-hiking cycle. Although I suppose that lesson would be SELL EVERYTHING as soon as we get a whiff of it!
Good luck to all.
7 Likes
I really don’t understand why the price is low, I may be missing something obvious.
Here’s my quick thoughts on it - I think the market realized in a blink this is not an 18% QoQ grower but rather a 15% QoQ grower. Here is the breakdown of their sequential growth as far back as I have the numbers:
**Q1**
2019 - N/A
2020 - 20.0%
2021 - 17.6%
*2022 - 15.2% (assuming another 9% beat over the mid-point)*
**Q2**
2019 - 30.8%
2020 - 14.2% (Covid impacted quarter)
2021 - 19.7%
**Q3**
2019 - 23.8%
2020 - 16.8%
2021 - 17.6%
**Q4**
2019 - 26.4%
2020 - 17.7%
**2021 - 15.1%**
As we can see, Monday never grew slower than 16.8% sequentially until this quarter excluding the one heavily impacted Covid quarter. I believe this caught the market off guard. I know it certainly surprised me. I was expecting revenue of ~$98m which would have resulted in 18% sequential growth, right on par with where they had been between 17-20% the last five quarters.
As a result of the slowing growth, the market is now likely questioning Monday’s growth durability. I sure am. Based off their guidance, I would expect growth to land somewhere around 75% next year. This certainly is not bad, I just think it is a bit lower than the market expected. Does that warrant a 25% haircut of the share price? I don’t think so.
Monday is now trading at a valuation of only $6B, giving them a TTM P/S of only ~20. This seems very reasonable/undervalued for a company still growing 70%+. I think this sell off is a bit overdone but would certainly say this report missed expectations, and now shares are being re-rated.
14 Likes
Everyone talks about the fierce competition but Mann said during the conference call that 70% of their new business comes from companies who don’t have a collaborative/ consolidating workflow OS. That’s why you run a Super Bowl ad so when you go for new biz with companies that aren’t using ANY similar platform, you’re the name they’ve heard of.
6 Likes
I’m not sure why the forecast is being looked at as slowing growth.
Q1 forecast is $102 at the high-end. FY22 is $475. If we break that down and apply the typical 9% beat we get the following:
F/cast QoQ Beat
1Q22 $102 6.8% 9.0% $110.6
2Q22 $113 10.3% 9.0% $131.9
3Q22 $124 10.3% 9.0% $157.4
4Q22 $137 10.3% 9.0% $187.8
FY $475 91% $587.7
2 Likes
/* Reposting with correct formatting and additional notes */
I’m not sure why the forecast is being looked at as slowing growth.
Q1 forecast is $102 at the high-end. FY22 is $475. If we break that down and apply the typical 9% beat we get the following:
F/cast QoQ Beat
1Q22 $102 6.8% 9.0% $110.6
2Q22 $113 10.3% 9.0% $131.9
3Q22 $124 10.3% 9.0% $157.4
4Q22 $137 10.3% 9.0% $187.8
FY $475 91% $587.7
So we’re looking at probable 91% YoY growth if the 9% beats continue. Granted, we have only 2 quarters of beats (11.3%, 9%) on which to base that assumption.
More importantly, as RafesUserName said in his post here (https://discussion.fool.com/gt-quotstrictly-speaking-it-is-a-nor…) for a company in this early stage of growth we should be looking at expansion as the leading indicator. Here we were not disappointed with a continuance of 30% QoQ growth in customers > $50K.
Long MNDY @ 12.31% including today’s drop
6 Likes
This has been mentioned here before, but I don’t think 90% gross margins matter much in an industry that requires massive and constant spending on R&D and S&M in order to stay relevant.
Actually, the truth is completely opposite. If a company and/or business model (SaaS) requires constant spending on R&D and S&M then is absolutely imperative that that company and/or business model has extremely high gross margins. Without supremely high gross margins there is no capital available for the required amount of R&D and S&M.
Monday is sticky with 130% NRR, but like you said, the competition is STIFF. And many competitors offer migration software which will take your Monday data and shove it into Asana or whatever.
This is incongruent. 130% NRR shows that the enterprise customers are not migrating and stuffing the data into Asana or whatever. 130% NRR shows that the enterprise customers are sticking with Monday and expanding with Monday.
I strongly suggest that all board participants, posters and non-posters, read the Knowledge Base and other related links on the right side of this page. Study, study, study and learn about the fundamentals of SaaS.
One other note on Sales & Marketing expenses. All revenue producing companies require investment in S&M in order to grow. Without strong sales and marketing companies die.
Lee
Lee
30 Likes
MNDY’s drop and this thread reminded of this analogy that came out of an 21’ UPST ER.
https://discussion.fool.com/my-favorite-stock-market-quote-may-b…
The relationship between the economy and the stock market is like a man walking his dog to a park. When they walk together, the dog runs around randomly. Sometimes the dog runs in front of the man, sometimes behind the man. When they got to the park, the man had walked a mile, but the dog ran four miles.
Can I predict where the dog will go tomorrow, or even next month? No, I can’t. But I see that the man is doing well. Therefore, as an investor, I choose to ignore the noise and continue putting my money on the man, not the dog.
6 Likes
Monday is sticky with 130% NRR, but like you said, the competition is STIFF
FYI: We moved off Monday last quarter to Coda. It really wasn’t much of an issue for our company and most people are happier with Coda.
BTW: Our company has 350 employees - Monday was used by a few teams.
tecmo
…
8 Likes
You missed my point regarding the 90% gross margins. Of course it is imperative that the company has high gross margins when you are spending >100% of revenue on R&D and S&M. What I’m saying is that the 90% gross margins become a lot less impressive of a metric when you consider that the R&D/S&M are for all intents and purposes proving to be COGS. Maybe that won’t be the case and revenue will outgrow these costs, but it’s definitely not happening in 2022 with losses forecast to grow significantly.
Which brings me to the next point about NRR. Yes, as of now it’s proving to be sticky. Is it because it’s hard to switch? As the competition makes it easier and easier to switch via software, will it remain durable? What will happen to NRR if they take the foot off the S&M gas?
My growth portfolio holds 8.5% MNDY. Not sure it deserves that much.
2 Likes
One more thing I forgot to add.
I don’t have these same concerns with NET/DDOG/SNOW/ZS/CRWD - we’ve heard plenty from our panel of tech experts that these companies offer mission critical services and that these technologies are the best of the best.
Unless I’ve missed it, nobody here talks about MNDY this way. We judge Monday primarily based on their revenue growth rate being higher than the other public competition right now. A poster mentioned a few minutes ago that their company moved off Monday and it was no hassle. And the employees tend to like the other software better. It’s just an anecdote, but it encompasses my concerns.
And I guess my last point would be that clearly the numbers alone don’t mean squat right now otherwise MNDY wouldn’t be down 70% from its all-time highs and 40+% in just the past couple days. Maybe it’s just market gyrations, but we’re not seeing this from some of the other SaaS names. It’s a fool’s errand but it’d be good to figure out why certain companies react one way vs another.
1 Like
I wondered where to put my 2c so I guess I will latch on to this thread.
Since the Fed moves impact every SaaS equally, the questions still remain those of 1/ company performance and 2/ other opportunities of interest to me.
Relative to DDOG, ZS, SNOW, or my LTBH SHOP and MELI, MNDY lacks dominance.
Relative to UPST, CRWD and S, MNDY lacks the barrier to entry.
Relative to SHOP and MELI, which are two of my four TMF style LTBH holdings, MNDY still has an exorbitant valuation which is fine only so long as the trajectory of growth looks fine.
When growth slopes down or conversely when valuation becomes just plain cheap by traditional metrics, it matters again.
I like the MNDY software, but I was in MNDy because of their numbers and without a dominant position, I don’t see a reason for any benefit of the doubt.
I formulate my own thesis/context when I buy and then I act upon that: no moving targets unless it turns out that I have previously overlooked something and thus have to reconsider my expectations.
8 Likes
I just don’t get what changed with Monday’s “dominance” in relation to competition or the marketplace or their products from last month to yesterday to today.
Answer is nothing. If anything, they announced new products on call today to provide a “suite” type solution to their clients.
Point is, if it is obvious Monday isn’t sticky or mission critical now, and that matters now, then it should have been obvious yesterday and last month, etc…
Seems like narratives are being crafted based on whether stock pops or drops.
Dreamer
50 Likes
“Seems like narratives are being crafted based on whether stock pops or drops.”
This is exactly right. We’ve seen a consistent pattern of this any time a high conviction stock on the board sells off. As soon as Upstart sold off it got rebranded by the forum as a “lumpy, non-SAAS business” that doesn’t belong in a portfolio with a DDOG or SNOW. Then AMPL got destroyed and was basically written off as a “not much to see here” stock. At the same time, I recall several people mentioning Monday as a higher quality SAAS business to concentrate more dollars in while they exited their Upstart and other lower conviction positions. Now Monday is getting hammered and people are writing it off as a mere commodity product that has no moat and is about to experience a massive slowdown. And people are criticizing Monday’s operating losses while saying nothing about in vogue names like SentinelOne. Forum has been anything but a bastion of rationality throughout this drawdown, imo.
54 Likes
“Seems like narratives are being crafted based on whether stock pops or drops.”
Of course they are. That’s only natural. And expected. And, fundamentally, beneficial.
Firstly, it’s natural just because it’s a lot of money. Seeing a meltdown in something like UPST or AMPL hits our portfolios hard. I posted before earnings that I thought this board collectively probably has multiple millions invested in Monday.com. It would be weird if we all were happy (or even passive) when we all lost a crapton of money (on paper) today. There is, of course, emotion involved.
It’s also natural because the market can teach us things. Any time the stock price drops when we think it should react positively, the healthy reaction is to explore further. Sometimes the market is irrational. But sometimes someone else has noticed something that we have missed. When we think earnings were strong, and the stock drops, we must investigate to see if we are missing some important piece of data.
It’s also natural because of the nonsense of earnings and sandbagging. There’s a natural confusion of “Yes, they hit the numbers. But did they hit the real numbers? And I know they are forecasting low numbers. But are those a warning? Or sandbagging?” I find this especially true for SaaS companies where even revenue really isn’t a good metric. If Monday signed a massive new customer on the last day of a quarter they’ll only recognize a tiny amount of revenue. I’d argue the net retention is a much more important number than raw revenue.
And someday we will want to sell these stocks. We’re only in it for the hypergrowth phase. It’s only natural to be curious (and alarmed) about WTF the market is doing.
The bottom line for me is that I really have to thank dawsdaws. Daws helps us objectify the results we expect. Now I can look at his numbers objectively before the earnings. Since I don’t have the market confusing the issue I can decide for myself about whether his numbers align with my own expectations. And then, after earnings, I can compare the actual numbers with his. And weigh all of the pros and cons.
So that when to stock nosedives, and I ask myself that natural questions of “do they know something I don’t?”, the answer is much easier and faster to determine. For, me, I had a small position in AMPL. And when I saw the numbers I said “yes, clearly there is something fundamentally wrong here”. And for Monday.com (where I have a larger position), when I saw the numbers I said “I see that the market probably wanted a touch more revenue. But I’m very happy with all of the customer and net retention numbers and the revenue numbers are within reasonable tolerances”. So I stuck to my guns with MNDY.
But I’m not going to pretend that I too didn’t have moments of self-doubt from the price movement.
–CH
29 Likes
I wanted to talk about MNDY earnings and asking if I may be missing something obvious.
From some responses I see OFF TOPIC stuff. Please don’t do that. Focus on the company
It’s earnings that count, all else just noise that does not help. Thank you.
I will reiterate: I am pleased with the numbers. I did not find anything obviously wrong, and the question I should be asking now is this:
If I didn’t own this company and who cares about the price movements, will I buy this today for the future given the growth track it’s presenting to me. And the answer is YES, this a 80 to 90% grower with 90% margins with proven capacity to deliver Free Cash Flow, 25 to 30% growing 50K+ enterprise customers with only 793 customers and I am confident they can add 1000 more customers. And I realize this is going to take investment in SALES to keep bringing in 200 to 250 to 300 customers per quarter. The next 793 customers is going to take some focus and money. Let’s go, I am a buyer.
Indulge me with additional scribblings from Earnings Call that I found useful:
70% of companies using monday.com are NON-TECH, they reiterated that again as they did last Q. (so this is not Agile, Scrum, Tasks, Issues world of tech that I am used to so I need to expand my way of looking at what does it mean to have a BOARD, WORK ITEM, WORKDOC if I were in a Pharmaceutical company for example)
They see 130 business use-cases, widespread usage in Horizontals and Verticals. I like how they see those two dimensions of expansion, attack vector for more customers.
They see themselves as a collaboration software for ANY business out there. (TAM is every business)
They see 1.3 billion information workers out there and they want to enable them to work better.
FYI, their SuperBowl Ad ad started off with “Let’s Do Great Things. Wonderful Things. Let’s Work in New Ways. With Our Own Tools. Our Own Rules” Nailed it. (I didn’t care for flying people but the first 15 seconds was good stuff and I would just make that a 15 second ad)
The guidance is ‘responsible guidance’ for 2022, We as investors cheer them on to beat it and we most of the time know they will beat it but please listen to their guidance, next Q calling for 6.8% revenue growth (on the max side), more than in previous Q guidance of 6% so they tell us they are confident, we can then play with anticipation of 8 to 10% beat. (not an issue for me)
They said “we are well ahead of where we anticipated” and “let’s drive hypergrowth”. The fact that they were FCF positive in the last 2 Qs gives them confidence that now is the time to spend the money. There is a massive opportunity ahead to grow and “we are investing a lot of money to do that”. Grab more land as fast as possible (remember last Q they said for every $1 they get $3 back)
There was a question about: ‘what incumbents are you replacing?’ and the surprising answer was - 70% are deals with NO COMPETITION.
Kudos to @FallingWallenda for bringing that up in post 83345
Two Strategies: 1) displacing basic tools (email, sheets, powerpoints) with monday.com, and 2) integrate and connect, using monday.com as one place that connects all tools, break silos (so it’s not displacing but connecting, integrating).
And they are delighted and sometimes blown away by the sophisticated, complex workflows customers end up building in monday.com (this is refreshing to hear how delighted they are to support their customers in their journey to success).
SuperBowl Ad question, effectiveness? did it drive website traffic? signups?:
“WE ARE DATA NERDS, we measure everything”, it was stated on the call couple of times. (2 points for Ravenclaw nerds then). Big spike following the ad but it’s mainly brand recognition. Overall coverage for the ad was amazing.
It’s hard to measure the Brand Effectiveness that well (which makes sense to me and I am happy they mentioned that).
A great chat was when the question was asked about NRR for 10+ users went from 119 to 136. What improved that?
Answer: Less Churn, more expansion, product improvements, relentless innovation and population growth of 10+ accounts increased. Bravo
Workdocs: lots of progress, out of beta, one of the fastest building blocks, 60K existing account use it, 800K workdocs created. (I am too lazy to see the numbers for workdocs for last Q but do compare). Very meaningful part of platform: Roy kept saying phenomenal few times.
New Products: Forms and Canvas. Experimenting with pricing as stand alone products, part of WorkOS Platform. Roy mentioned: a massive go to market for us. completely stand alone products, forms and canvas. different types of customers to join the ecosystem. new approach for us.
I see they are positioning WorkOS as a platform with stand alone products monday.com, forms, canvass, Marketplace Apps (they added payment capability there for developers to get paid). Growing ecosystem of products and each product in turn going potentially after new lands. There are people who may use Canvas Whiteboard but not yet monday.com product (clever), I feel anything to promote the brand to new lands. Innovation is one of the key drivers (again bravo for this way of thinking)
Large deal activity? seven figure deals? Yes, several deals over $1M (nice)
Free accounts significant growth but it does not hurt sales funnels, they see customers from free into paying accelerating.
KPMG involvement: assisting with digital transformation, they see no-low-code as opportunity to solve problems.
And finally Sales and Marketing spent and perhaps the reason they give us a next Q Operating Income outlook to be -45M (and probably lower FCF)
“We are frontloading expenses in Q1 to drive the growth”, increase partner channel, generate leads, aggressively hiring sales people.
Worth repeating “We are front-loading expenses in Q1 to drive the growth”
Thank you, no more OFF TOPIC posts please
Baconski
53 Likes