Monday.com (MNDY) Earnings Analysis
Thoughts on Monday.com Q1 2022 quarterly results.
Results Summary:
Revenue: $108M (beat) +84% YoY
Non-GAAP EPS: ($0.96) (beat)
Non-GAAP Operating Loss: ($43.8M)
Gross Margins: 89%
Customers over $50k Annual Recurring Revenue (ARR): 960 +187% YoY
Net dollar-based retention rate: 125% (135% for customers with more than 10 users)
Negative free cash flow: ($16.2M)
Monday.com continues to see success in acquiring enterprise clients, as the company now features 50% of the Fortune 500 (compared to 38% one year ago). This number grew to 960, a 187% year-over-year increase from Q1 2021. Perhaps the more impressive metric is a 150% net dollar-based retention rate for customers with over $50k in ARR. Bringing these numbers into context, Monday.com is not only quickly acquiring large customers, but a 150% NDBRR suggests that these customers are spending significantly more money than the year prior.
Q1 also saw the release of several new products: Monday Projects, Monday Dev, Monday Marketer and Monday Sales CRM. These products utilize the WorkOS platform, but are designed to address specific use cases. At the moment, not all accounts have access to products, but the plan is to release these to all customers later this year. I personally like the idea of products designed for specific use cases, as long as Monday.com continues to prioritize the customizability of the WorkOS platform, which is why I initially invested in this company. From the looks of it, WorkOS products are purpose-built, but also provide a ton of customization options. The introduction of WorkOS products are a real-time demonstration of optionality and I am excited to see how customers take to these new solutions.
In other news, the company raised full-year revenue guidance from $470 to $480-$492, which would represent growth of 60% year-over-year. They have also increased their operating loss projections from ($140) to ($139-$135) for FY 2022. Management also mentioned that they strategically front-loaded sales and marketing expenses, and expect those numbers to decrease over the next few quarters.
Overall, I thought the results were good. I was particularly impressed by the extremely high net dollar-based retention rate for enterprise customers (150%). This tells me that the company is prioritizing large customers and has had a lot of success in acquiring and expanding these customers’ platform usage. It was also a positive sign that management raised revenue and operating loss guidance for FY 2022. Lastly, I was excited by the new product releases. It’s important for a SaaS company like Monday.com to continually evolve and offer new solutions to their customers, as this is quite a competitive space. I’ll be watching the adoption rate of these new products in the coming quarters.
Turning to my position, I am not in any hurry to add a ton of shares right now. This is roughly a 4% position, which I am happy with. While the results were positive, this is still an unprofitable company, and I want to see management demonstrate the ability to turn this extreme top line growth into profitability.