Monday MNDY Q4 2023 Earnings

Investment Analysis Clubs Saul’s Investing Discussions
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Monday has released Q4 and Full Year (FY2023) earnings and there are a lot of things to be excited about.

There are 3 documents investors want to take a look at that are linked from the main Quarterly Results landing page

https://ir.monday.com/financials-and-filings/quarterly-results/default.aspx

  • Press Release (brief highlights)
  • Shareholder letter (28 pages)
  • Earnings Presentation (28 slides)

Last Q3, 3 months ago, they told us they would make up to $198M in revenue guiding for 4.7% QoQ growth - They delivered $202.6M in revenue, a beat of 2.3%, and growing 7.1% QoQ and 35% YoY. Bravo, bravo.

For the Full Year 2023 the revenue came to $729.8M, a 41% YoY rev growth

Adjusted Gross Margin 90%, holy moly and as usual

Stock Based Compensation cost was $22.3M, 11% of rev, lower than last Q. This is very healthy.

Adjusted Operating Income (after operating expenses) was $21.2M, a 10% Margin

Net Cash From Operations $58.5M

Free Cash Flow $55.4M, a 27% of rev, bravo.

CUSTOMERS GROWTH Oh My! This is so cool

Customers paying $100K+ a year increased 58% YoY to top 833 (this is a new metric introduced at Investor’s Day)

Customers paying $50K+ a year increased by 218 this Quarter for a total of 2295

CRM Product Customers increased 21% this Quarter, for a total of 13318

DEV Product Customers increased 39% this Quarter, for a total of 1448, this is just getting started (watch out JIRA)

Headcount increased by 110 net new employees for a total of 1854 employees worldwide

Now onto listening to the Earnings Call.

Cheers !

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Yeah, looked pretty good to me as well. But, Mr. Market is of a different mind, Monday’s stock is down about 12% in pre-market open trading.

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Mr. Market (and I) were excited to see an acceleration of net-new ARR. This is the 6th consecutive quarter of growing ARR by $13M. Monday seems to be stuck in that range.

Since they had beaten their estimates by 3.4% the last two quarters, implying a similar beat would have led to a growth of net-new ARR to ~$15M. Instead, Monday beat by 2.3% which is their lowest as a public company.

A difference $2M may seem extremely trivial, but it seems that the only way Monday will be able to grow its net-new ARR will be through pricing (they indicated this is coming on their Investor Day).

Operating expenses growing at 33% YoY was quite significant too, particularly in S&M. I’ll have to listen to the call, but it’ll be interesting to see the results of this spend over the coming quarters. It had essentially been flat over the past three quarters.

It was encouraging to see continued traction in enterprise customers, and a reduction in SBC is a welcomed surprise.

All in all, looks like a “business as usual” quarter when the market was expecting more.

-RMTZP

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I sold my 3% position pre-market as the report is fine, but I had baked in higher expectations. We started as a consumer of MNDY with 4 licenses last year and now are using it extensively and at 10 licenses. We are reasonably happy with the tools but a little concerned with their apparent tendency to raise pricing.

It’s still reasonably priced for it’s growth and cash flows which are increasing, but I just feel like it will be available to me lower here shortly. It trades at somewhat of a discount due to being Israel based.

We will see later today if Datadog shows a big increase in consumption to match it’s 3 month big move. We had promising AI driven news from the Hyperscalars and we have seen some other great signs from a few reports, but other more ho-hum results so far with no visible signs of re-acceleration.
I’d put this in the ho-hum category and I think it could give back some gains in the short term.

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Earnings Call Transcript from fool.com

Monday Code Launch: Pretty cool
“monday code provides a secure, serverless environment within the workplace platform where developers can host and run apps with monday’s security and compliance standards built in.”

Price Increases:
“we recently introduced an updated pricing model ahead of schedule. As part of the rollout, we notified our customers that we’ll be updating these prices across our product suite”
“We expect that this price adjustment will contribute an estimate of $15 million to $20 million of revenue in fiscal year '24”

Questions:

It seems most questions were about (1) customer growth, (2) cross selling and (3) price increases. I would encourage you to read the transcript to get a better idea of the themes.

Some snippets

Customers Growth vs Weaker guidance:
“customers with 10-plus users… that’s growing about 20%, net expansion rate, 110%. So, just that base logic alone should give you a pretty decent level of growth. And then when I dig underneath the numbers, as everybody did, the 50,000-plus ARR customers, it’s growing faster, 56%. And the 100,000 is growing even faster. So, help us understand how you constructed the guidance in light of the skew in the metrics that suggests that the underlying business is healthier than the guidance might seemed to suggest.”

Question was good. Answer from Eliran is caution “We’re focused on providing always prudent, achievable, and responsible guidance based on the latest data that we have”

Note: looks like customer growth is healthy and analysts heard that

Questions on price increases. This is Monday first attempt at price increases in the history of the business.

Paraphrase: At investor day you said price increase will add 10M in revenue in FY24, now you say 15 to 20M, what changed?
Answer: Yep, initially we thought rolling out price increase in June but we finished our A/B testing sooner than that and we decided to make it I would say three or four months earlier than we initially thought.
Note: looks like price increases will start on Feb 16th

Question: What drove momentun in growth of DEV product customers?
Answer: Improvements dude… in product and gotomarket

Thanks.
Good luck to all the Longs.
Baconski
Cheers !

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The guidance is, undoubtedly, driving the stock down. BUT even after the 10.7% haircut I see (2:51 ET), MNDY is still up 10.3% for the last month. I’ll give MNDY time to see how the price increases go, and, they sure over delivered this quarter. Maybe they’ll handily beat their own guidance and analyst estimates next quarter too.

Best,
bulwnkl

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The earnings call had many questions around growth and sales. This indicates to me that those are subjects for concern among the analysts on the call. At one point it is mentioned:

Eliran Glazer

… some headwinds in the macroeconomy environment and we assume this will continue also in Q1 and Q2.

I also expect that there is general concern over the fact that their headquarters is located in Israel. The company is adamant that Monday is an international company and the current conflict has not effected business, but I suspect investors are a bit concerned and were hoping for more reassurance than the numbers in this quarter provided.

Derrick Wood
…
And can you just comment on kind of what you’re seeing in the Middle East given the war?

Eliran Glazer
…
With regard to the Middle East war, we didn’t see any impact on our numbers. We are a global company. So nothing that, you know, we’re calling out until now. Since it’s actually began - begun, we actually didn’t see anything and, hopefully, we’re going to continue to see no impact on our business.

Regardless, the actual price drop was trivial compared to the rise in price since November 2023. This tells me that while expectations had gotten a bit ahead of reality, there was likely nothing viewed as “wrong” with this quarter.

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Hi MFChips,
As this is their first and only price increase ever, since they started the business, it’s hard to accuse them of having “an apparent tendency to raise pricing.”
Saul

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