MONDAY 2023 Q3 Results

[Baconski]

monday.com has released 2023 Q3 Earnings Results (ER)

All docs needed to know what was in earnings is found at IR site
https://ir.monday.com/financials-and-filings/quarterly-results/default.aspx

I do recommend going over the 26 pages of Shareholder Letter https://s29.q4cdn.com/881027206/files/doc_financials/2023/q3/3Q23-_-Shareholder-Letter.pdf

A story I tell myself about this company, and happy to share with you, have a listen.

Let’s start with the guidance they told us at Q2 ER on August 14th, 3 months ago.

They told us they would deliver revenue of up-to 183M for Q3, expecting 4.2% QoQ growth and 34% YoY.

They told us the Full Year 2023 revenue would be up-to 717M, they increased the guidance by 11M from 706M in Q1

The market reacted positively on that day, awarding MNDY a price of about $170. With fully diluted shares (due to share-based compensation) of 51.2M the Market Cap was at 8.7 Billion, no debt and almost 1B in Cash.

For the last 3 months the MNDY price went as High as $179 and as Low as $122, volatile beast, as low as -28% below the reaction ER price, I assume mainly due to the war that started on Oct 7th.

And here we are today:

• They delivered 189.2M in revenue, beating their own guidance by 3.4%, delivering QoQ growth of 7.7% and YoY 38%.

• Adjusted Gross Profit of 89%, steady, just like in previous Qs.

• Shared-Based compensation was 26.6M, or 14% of revenue, similar to previous Qs. (SBC has been between 14% to 19% of revenue over the last 4 Quarters.)

• Thus adjusted Operating Income was 24.1M or 13% operating margin, yay!, better than last Q.

• Adjusted Net Cash from Operations (which includes deferred revenue) was 66.6M or 35% of revenue, yay again!

• Capex was a light 1.7M, a tiny 0.3%

• Finally the adjusted Free Cash Flow 64.9M, a 35% of revenue, yay and yay again! (I am not here to start a fight about SBC)

So far I like the numbers.

Now let’s talk about Customers

The most important were those who spend $50K+ annually.

• They added 185 customers in that group, ending at 2077, and ARR from those customers is at 31%, DBNER ticked down to 115%, a lagging indicator but something to watch.

I was hoping for a larger add, they did add 209 customers in previous Q.

The headcount went up by 98 people to 1744.

The also told us about CRM and DEV products customers

There are now 11025 customers using CRM, 32% up from previous Q, added 2702

There are now 1024 DEV product customers, 31% up from previous Q, added 243

Finally MNDY increased their cash position to over $1.05 Billion, yay!

And finally finally the guidance for next Q and Full Year.

In Q4 they expect to deliver up-to 198M in revenue, expecting 4.7% QoQ growth, and 32% YoY
That would end the Full Year 2023 at 40% delivering $725M in revenue. (they did up the FY guidance by 8M)

With today’s price reaction of $154 and slight 0.6% share dilution we now have a Market Cap of $7.9 Billion.

I do expect the price to go up, MNDY is 26% of our portfolio.

Cheers! Baconski.

[wpr101]

Really nice summary there. Just building on what you have, some things that stood out to me from this fantastic quarter,

They had given guidance of 4-6M in operating income and it came in at 24M so they beat their estimate on that metric by roughly 5x! In the previous year Q3 it was -2M.

Operating margin guidance was for 2-3% and they came in at 13% so another impressive beat. The prior Q3 last year was -2%.

GAAP income per share was 0.15 vs -0.51 a year ago.

Adj income per share was 0.68 vs 0.06 a year ago.

Net cash from operating activities was 67M vs 20M a year ago.

FCF was 65M vs 14M a year ago.

Highlights of the call,

• 7% of workforce was called up for reserve duty, but small % of customers are Israeli, and no servers in Israel so the business impact is minimal
• Seeing remarkable cross sell opportunities, 2,534 work management accounts adopted one of the new products in the Q
• Successfully upgraded to mondayDB 1.0, lots of great feedback on speedups and capabilities
• Gross margin 89%
• Very healthy top of funnel demand, with new customers joining
• Momentum with new customers across all products is stable and strong
• Performance marketing going well, have insights if spend is working, will spend to acquire customers
• Landing bigger, multi-product strategy that customers find to be a core part of business operation, growing sales team with experts in enterprise accounts, driving upmarket motion
• Large enterprise customers interested in buying Monday and doing a much wider deployment
• Level of engagement from internal metrics strong, like active paying people and active seats
• Marketplace doing well, callouts of partnerships with Appfire and Adaptive
• Smaller and indie developers in the marketplace have “large momentum”
• Very encouraged with the development and type of applications that are being built
• Seeing AI as a differentiator

Overall I’m really impressed with the numbers Monday is putting up, they beat so many of their metrics by a wide margin, large customers are adopting and the number of products is growing fast. At an 8B market cap and 1B+ in cash, I see this as a very attractive company to invest in.

[Baconski]

And here we are, a month later after Q3 Earnings Results.

The price has been as high as $185, a 19% appreciation from the initial ER Reaction price of $155.

We also learned something new at MONDAY INVESTORS DAY 2023 on December 6h.

The webcast (VIDEO) and PDF presentation found here on IR site

https://ir.monday.com/news-and-events/events/event-details/2023/mondaycom-2023-Investor-Day-2023-pO7wgTV-gs/default.aspx

The PDF is a 132 pages, the webcast is over 2 hours. I reviewed the PDF, I listened to parts of the presentation and I plan to rewatch and reread.

Sidenote: Yes, It takes time to do research, I encourage you to invest in yourself and do the work, listen to CEO’s and CFO and their demeanor, their excitement showing in how they move and talk, is it genuine? are they faking it? is it only a show ? or something real?

I encourage you to watch the video and review the PDF. There are some new exciting announcements there.

co-CEOs Presentation
Roy and Eran
Video presentation begins at 4 minute mark, about 30 min long. Totally worth watching
PDF Slides 4 to 32 (and few more about the future of MNDY)

Key Points:

Monday is a Platform with Multi-Products Strategy
The platform is the product And the product is the platform
New upcoming PRODUCT: monday service (next year)
Landed larges customer with 25 thousand seats (who would it be?)

Slide 9 numbers for FY23 Estimates

• $835 Million ARR (sharing this metric for the first time)
• 2 Million Monthly Active Paying People (new Metric for me)
• 1800+ employees, so they expect to add about 56 employees in Q4, looks healthy to me.
• 54% of customers in North America

New Product: Monday Service

… and TAM increase

METRIC: 50K+ Customers
They hint at ending FY23 with over 2200 of those customers. in Q3 the count was 2077

Sidenote: so they will have added at least 123 customers in Q4. I was hoping for at least 2300 final count, we’ll find out in Q4

Sidenote: these 2 guys are such geeks, I love how Roy is just basically telling you all the nice things about monday like a kid telling you about Lego blocks, Roy is great, he reminds of an extreme introvert that I tend to be,

CFO Presentation
Few things we learned from the CFO Eliran Glazer
Video presentation is about 20 minutes from 1 hour 24 minute mark to 1 hour 45 min mark.
PDF Slides from page 111 to 126

About 225 thousand customers total

40 thousand new customer between 2022 and 2023

80% of our contracts are annual (better cash flow)

We expect to surpass $1 Billion in ARR in FY24 (Eliran was vary happy to deliver this line)

We expect to generate about $1 Billion in Free Cash flow from 2023 to 2026

METRIC: HEADCOUNT
Eliran mentioned that they will have about 1800 employees at the end of FY23 (we’ll find out at Q4 ER sometimes in February 2024). That means that in FY23 they would have added over 250 emplyees, a 16% YoY growth.

And they expect about 2400 headcount in FY24 so it looks like next year they plan to grow headcount over 30% expecting to add 600 employees. (65% of employees in Israel, they plan to increase 60% outside of Israel)

I expect most will go to Go To Market sales teams to grow large customers, we’ll see.

Financial Model Expectations Slide 123
I like that they expect SBC to be around the same as last few Q, nice nice nice. (not like SNOWFLAKE which worris me a bit at 44% as comparison)

UPDATE.
They have also hinted at Monday Dev product about 1300 paying customers, that means they would have added almost 280 customers in Q4, a 27% growth.

Disclosure: We have 24% of MNDY in our portfolio

Cheers ! Baconski

[Baconski]

I rewatched the Investor Day and reviewed the PDF and I HAVE MISSED completely the metric for 100K+ ARR customers.

This was disclosed by Yoni Osherov, Chief Revenue Officer (video mark about 1h 16m)

Looks like they will have grown 100K+ customers over 50% for 2023F

Slide 102

sidenote: They did not disclose the 1M+ ARR customers yet but they did mention there are some

And because the GoToMarket strategy Top Down approach the ARR from expansion is getting faster, it’s cheaper to grow a customer than to acquire a new one.

Monday plans to double Annual Contract Value (ACV) by 2026 through expansion opportunities, cross-sell and upsell, and pricing.

Yoni’s presentation is worth watching, I missed it the first time around. It’s good to revisit.

UPDATE on MNDY action in the last 30 days.

The price has been as high as $200, there was a crazy sell off on Jan 4th down to $170.

I trimmed some shares at $190, our position was getting too big, up to 26%.
At this time we have 19% of our family portfolio in MONDAY.
Looks like next ER for Q4 and Full Year will be on Monday before market opens on 2/12

Cheers !
Baconski