MONDAY 2023 Q3 Results

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1

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.

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2

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.

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