Here are my notes from the earnings call from this morning.
Monday Q2 FY 23
Analyst Q/A and additional Remarks From Co-CEOs/CFO
08/14/2023
Eran Zinman, Co-CEO
Roy Mann, Co-CEO
Eliran Glazer, CFO
Remarks:
Revenue grew 42%
Monday DB 1.0 is now available to all customers, enabling customers to experience large and more complex boards loading 5X faster
Launched AI assistant and launched several AI capabilities.
Recent innovation efforts:
Monday Sales CRM is now available to roughly half of customers
Monday Dev transitioned out of beta and initial demand has been strong
Since the launch of their product suite in 2022, we’ve seen 1,656 accounts initially begin with work mgt product and later extend their portfolio with an additional product.
Monday workflows add on now available to 20% of customers and will be available to all customers by the end of 2023.
Dec 6, 2023: New York City Elevate Conference will feature a segment exclusively for MNDY shareholders.
Revenue up 42% y/y
Net dollar retention slipped to 110%. Guidance assumes full year NDR slightly under 110%.
2nd qtr gross margin was 90% and in medium to long term, expect GM to be in the high 80’s percent
G&A was 8% of revenue as compared to 12% last year.
Continue to expect to report FCF positive moving forward
Free Cash Flow 3rd year being FCF positive
Updated outlook for FY 2023:
For 3rd quarter of FY 2023, revenue growth of 32 to 34% growth y/y
For full year of 2023, expect revenue to be 37 and 38% y/y
Non-GAAP Op margin of 2% to 3%
Analyst Q/A:
Q Congrats on a super quarter w/ growth and FCF expansion. Dev and DB products -what’s unique about them, describe and when will we see NDR bottom and begin to stabilize?
A Monday DB is part of their infrastructure change. Finished deployment of version 1.0 ahead of schedule, that will allow size of boards, automation, integrations and will allow enterprise customers to scale their use cases and will improve NDR. Monday Dev allows developers and product managers focus on agile springs and manage R&D operations. Just launched beta and see good numbers and momentum.
Differentiators for all of their products is the fact that MNDY is a platform that allows customers to build whatever they need.
With MNDY out customers can customize the tool better to reflect whatever they require to get the outcome they desire.
NDR -expect moderate pressure on this. Going into July, they see signs of stabilization. They expect NDR to stabilize by the end of the year.
Q Congrats on great quarter. Platform itself, namely the marketplace. MNDY has launched/exposed their API, which could accelerate 3rd party development. Do you think marketplace starts emerging as a material growth driver in 2024?
A Hard to say, because CRM, the dev, the work management, which is their main growth driver. Put a lot of emphasis and investment on the marketplace. Marketplace is a longer-term play.
Q What are you seeing in the macro? What are you seeing at the top of the funnel?
A Demand development hasn’t changed a lot. Some pressure w/ customer expansion. The pressure on NDR but do see some stabilization/getting flat going into July. Top of funnel remains healthy. Now that they have CRM and dev is out of beta will help.
Q MNDY DB-Any quantitative metrics re: driving of seat count?
A MNDY DB is about 5X faster. Definitely customers can use larger boards. Don’t yet see revenue impact, yet in terms of customer feedback, the results are super positive. Hard to quantify because it’s early and just available to 20% of users.
Q Macro
A More encouraging across all segments.
Q Cross-sell, what’s typical customer journey look like? Is it net new users or customers adding use cases?
A Over 1,600 accounts that were using work mgt. have bought CRM. They’ve found CRM users were already using work mgt product. Really encouraging to see other departments within customers who are using it. Have not yet put a lot of effort into marketing and sales of CRM.
Q Really strong FCF in first half of the year. Should we be thinking anything would change/seasonality?
A Q3 and FY 23 as a whole, probably low 20%’s, disciplined spending and improving efficiency, upcoming election cycle, they’ve increased FCF expectations.
Q Congrats on a great quarter. Have you thought how far up market and what’s the ideal enterprise customer look like? Have you put a limit on it?
A I think it’s a journey going up market. Every time they roll out new features and capabilities, they see strong demand for even deeper and stronger ones, which opens the door to more use cases. Do not see themselves limiting the customer sizes. Medium size customers can easily become enterprise accounts the next year if a department within a customer company is the land and they expand into the larger enterprise.
Q How do you think about CRM and Dev becoming a landing point and then cross selling into the work management platform?
A Great point. We’re making the new products as go to market tools. This expands their go to market having multiples of CRM, Dev and Work Mgt. Lots of optionality and big opportunity to land however the customer needs/wants.
Q AI launched this quarter. What has been the initial response. How will you monetize AI going forward?
A Have taken a sever layer approach to AI so customer can use it however they need. 1,600 people signed up for their hack-a-thon. Really committed to AI and will add more going forward.
Q Now that you’re finished launching 1.0, what can we expect from 2.0.
A MNDY DB 1.1 will focus on large dashboards and then in 2024 they’ll do a major release of DB 2.0. Now that most of their customers are using DB 1.0, they’ve got a captive audience who will be using it.
Q Magnitude of the beat was great. Actually raised the guidance more than the beat. Please comment.
A Beat the revenue by $7M and the combination of the new product, the momentum, the efficient spend gives them confidence to do this.
Q CRM price uplift, what do you see going forward?
A New users are using the product. In addition, the CRM has higher pricing per seat, and it’s below the market average, so there’s room to raise prices. This should expand the average ACV.
Q Competition, tool consolidation?
A 70% of their deals have no competition. See new competitors in Dev tools. Not significant competitors in their deals.
Q When customers are using salesforce, what are you seeing?
A Definitely see Salesforce as an integration rather than to displace them. Do see in small/mid-market that they compete with their more simple CRM. Customers look up to see MNDY CRM as a means of customizing.
Q Product re-packaging. How do you see it?
A Great point. One of the options they have now is the ability to package this into a product suite and actually as a business solution. Definitely looking into this.
Q MNDY Dev has 800 customers. Could ramp up be similar to CRM or should we expect a different path?
A Still early. Hard to tell if faster or slower than CRM. Momentum is very strong and customer feedback has been excellent. Our customers are seeing other operations teams within their customers using MNDY Dev. They’re seeing it as an ecosystem.
Q Performance marketing. Changes going forward?
A Marketing environment has been largely stable. Some uptick, but nothing material.
Q With the release of MNDY DB, will this result in different use cases? Consolidation trends about CRM cases, have you seen shifts in your top of funnel?
A This has a lot of potential to go up market to serve larger and larger customers. Haven’t noticed changes on customer behavior. Churn has been very stable.
Q Faster cross sell. Are you expanding with the help of sales reps?
A We see both customers expanding no touch and we’ve had our sales teams landing larger deals. Going forward, they’ll keep increasing their opportunities to cross sell and sell.
Q Details of NDR?
A During the last 1 ½ years, there was a decline, and now starting to see pick-up compared to last year. Seeing positive signs but not yet seeing a trend.
Q Trends in the marketplace where you’re seeing more interest in and how that may inform your future product plans?
A Additional capabilities on top of the MNDY platform. Definitely opens up additional opportunities, maybe acquisitions, but nothing specific he can report on.
sjo