Q3 2023 Monday.Com Ltd Earnings Call

Thank you for standing by and welcome to the Monday Dotcom third quarter of fiscal year 2023 earnings conference call.

I would now like to welcome Byron Steven head of Investor Relations to begin the call.

Byron over to you.

Hello, everyone and thank you for joining us on today's conference call to discuss the financial results for Monday Dot Coms third quarter fiscal year 2023.

Joining me today are Roy Man, and Aaron's and then co Ceos of Monday, Dotcom, and aileron Glaser Monday Dotcom CFO.

Yeah.

We released our results for the third quarter earlier today.

You can find our quarterly shareholder letter.

With our Investor presentation, and a replay of today's webcast under the news and events section of our IR website at IR, Todd Monday Dot com.

Certain statements made on the call today will be forward looking statements, which reflect management's best judgment based on the currently available information.

These statements involve risks and uncertainties that may cause actual results to differ from our expectations.

Please refer to our earnings release for more information on the specific factors that could cause actual results to differ materially from our forward looking statements.

Additionally, non-GAAP financial measures will be discussed on the call.

Reconciliations to our most directly comparable GAAP financial measures are available in the earnings release and the earnings presentation for todays call, which are posted on our Investor Relations website now let me turn the call over to Roy.

Thank you Byron and thank you everyone for joining us today.

As we reflect on our most recent quarter. It is with heavy hearts that we acknowledge the recent tragic events that have unfolded in Israel. Our thoughts are with all those affected by recent violent terrorists attacks.

At this time the impact on the current situation of her global operation is minimal and we remain.

I'm confident in our ability to meet all our business and financial targets in terms of revenue Israel accounts for a low single digit percentage of our total they are well.

While only approximately 7% of our global workforce have been called up for reserve duty, our global employees have gone above and beyond to seamlessly fill any gaps to help ensure our business continues to run smoothly.

Furthermore, all of our data server are distributed globally across North America, Europe, and Australia, ensuring our operations will continue seamlessly we are monitoring the situation closely and will make necessary adjustments to our plans as needed.

Now, let me turn to our results. This quarter. We are pleased to share that we have achieved another quarter of strong growth impressive margin improvement and amazing cash generation in Q3, we continued to demonstrate our ability to scale with efficiency posting record non-GAAP operating margin of 13%.

And a record free cash flow margin of 34% I'll now turn it over to Iran to walk you through some of our product highlights this quarter. Thank you Leroy.

We remain focused on our multi product strategy and ensuring that our products can successfully naval cross functional collaboration for our customers. Our new products continue to show a remarkable cross sell opportunity with 2534 initial work management accounts adopting one of our new product.

We are dedicated to providing exceptional solutions that meet the evolving needs of our customers and we believe that our new products will play a pivotal role in achieving this.

Our target is to open access to our new Monday sales CRM and Monday that products to all customers by the end of Q1 of next year.

In Q2, we successfully completed money DB one plano.

With the completion of that phase all Monday customers had been transitioned to a new cutting edge infrastructure and initial feedback has been amazing.

Users are noticing a meaningful boost in performance and capabilities of the work life platform.

Our next phase many of you'd be 1.1, dashboards is now alive and already showing significant improvements in load times and performance of our largest and most complex dashboards.

We are also beginning to see great initial results from our new Monday AI capabilities.

Specifically, the AI for Formula builder, and the AI solution builder.

For mobile Theres already saving users' diamond accurate and to date has helped over 5000 users build advanced format capabilities.

We're excited that you've got opportunities. We see ahead as we seek to generate meaningful value for our customers through the power of AI.

The AI solution builder is also receiving very positive feedback from customers.

We're utilizing it to easily set up fully operational personalized boards.

As always we are very proud of the money dotcom team achievement in this quarter.

And we remain highly confident in our opportunities ahead.

As a reminder, we will.

I'll be hosting our first Investor day, as a company and that New York City Elevate conference on December six we look forward to seeing many of you in person and sharing our vision strategy and protocol, Beth and 19th to gain deeper insights into our operations and future plans.

With that I'll now turn over to early Ron to cover our financial and guidance. Thank you Ron and thank you to everyone for joining our call today I'll review, our third quarter fiscal 2023 results in detail and provide updated guidance. We reported strong results in Q3 with record quarterly free cash flow and non-GAAP operating income.

For the third consecutive quarter, our results in the quarter demonstrate our consistent execution as well as the healthy customer demand, we see for the Monday Dotcom work operating system platform and our products total revenue came in at $189 2 million in Q3 up 38% from the year ago quarter, our overall.

Net dollar retention rates remained steady in Q3, reflecting our continued resilience through a more challenging macroeconomic environment, what our full year 2023 guidance still assumes N. They ought to be slightly below 110%. We're encouraged by the signs of stabilization that we witnessed during the most recent quarter as a reminder.

Our net dollar retention rate is trailing four quarter weighted average calculation for the reminder of the financial metrics disclosed unless otherwise noted I will be referencing non-GAAP financial measures. We've provided a reconciliation of GAAP to non-GAAP financials in our earnings release.

Third quarter gross margin was 89% in the medium to long term, we continue to expect gross margin to be in the I 80 range.

Research and development expense was 28.1 million or 15% of revenue compared to 19% in Q3 2022 in.

In the medium to long term, we anticipate R&D expense as a percentage of revenue to be in the eye teens as we build out our product suite and scale our work operating system platform, both horizontally and vertically.

Selling and marketing expense was 101.5 million or 54% of revenue compared to 60% in Q3 2022.

G&A expense was $15 2 million or 8% of revenue compared to 11% in Q3 2022.

Net income was 33 million up from 2.6 million in Q3, 2022 diluted net income per share was 64 cents.

On 51.5 million fully diluted shares outstanding.

Total employee headcount was 1744, an increase of 98 employees since Q2 'twenty three we expect to continue hiring over the next year with the focus on our R&D product and sales team as we build out our platform and product suite.

Moving onto the balance sheet and cash flow, we ended the quarter with $1.050 billion in cash and cash equivalents at the end of Q3 23 up from 918 9 million at the end of Q2 23 free cash flow for Q3, 23 was $64 9 million and free cash flow margin.

As defined as free cash flow as a percentage of revenue was 34% free cash flow is defined as net cash from operating activities less cash used for property and equipment and capitalized software costs.

Now, let's turn to our updated outlook for fiscal year 2023 for the fourth quarter of fiscal year 2023, we expect our revenue to be in the range of 196 million to 198 million representing growth of 31% to 32% year over year, we expect non-GAAP operating income of 7 million to 9 million.

And then operating margin of 4% to 5% for.

For the full year 2023 we now expect revenue to be in the range of 723 million to 725 million representing growth of 39% to 40% year over year, we expect full year non-GAAP operating income of 47 million to 49 million and an operating margin of approximately 7%.

I'll now turn it over to the operator for your questions operator.

At this time I'd like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

We ask that you limit yourself to one question and one follow up question. Please.

We'll pause for just a moment to compile any questions.

Again, if you'd like to ask a question. Please press star one on your telephone keypad now.

Our first question comes from the line of Kash Rangan with Goldman Sachs. Please go ahead.

Hi, Thank you very much and I'm happy to hear that your employees are safe at Vishay.

Your first continues to be very safe.

Mark It's Greg.

With respect to the business first of all congratulations on the quarter and curious to hear.

Here, you have funds or its kind of thoughts on the stabilization you saw and that expansion rate in deepwater.

So as you take a step back with the broadening out of the platform and the capabilities.

And different buying centers and the personas that you can go after such as CRM and who knows what it's turned the future.

What's the go to market approach of the company changing.

You're a good entrepreneurs who've been through multiple businesses before you can understand the nuances of how go to market might have to evolve given the broadening of the product just curious Jay sharing thoughts on those two things. Thank you so much.

Hi, Kash. This is Ellie Ron I will answer your first question and then I will referred to it on to address your second question. So with regards to the stabilization of the <unk>. As a reminder, we are looking at and the other is the weighted average of the last four quarters. So what we saw when you were looking at the trailing 12 months basically that is flattening we saw it.

Climbing the past.

That was a part of also the macroeconomic headwinds and the fact that expansion was lower than we anticipated or what we saw in the past, but over the last few months, we sold it on a month by month basis, basically settling and this is encouraging us to believe that there is going to be potentially a stabilization to the long term.

And this is also driven by the fact that we see a very healthy top of funnel and demand and additional new customers that they joining the platform.

Yes.

This is a noncash.

So regarding the new products are productive assistant and how it helps in terms of our go to market. So definitely having multiple persona is the multiple verticals really helps in two ways really one is our ability to both performance marketing across multiple verticals just make our acquisition much more efficient in this.

<unk> all the way too.

Events in exhibitions and we have different.

Basically personas that can buy the software, but one and that it can.

Now us to be more aggressive because our LTV for its customers is much greater.

We're not just competing one vertical but a customer might start with CRM and then expand into wealth management or vice versa. So the total LTV of each customer is much greater which allowed us to be but that should be more aggressive going forward in how we acquire customers. So it definitely to open up our ability to acquire customers and extend them all the time.

Wonderful many thanks and congratulations again.

Our next question comes from the line of pendulum Bora with J P. Morgan. Please go ahead.

Alright, thanks, and congrats on the quarter from me as well.

Yes.

On the top of the final comment that you just made maybe help us understand that momentum going into Q4, so far and if the conversion rates of the top of the funnel. So far in Q4 that you have seen has been consistent or not.

As Q3.

Yeah. So in terms of customer acquisition at the top of funnel activity. We see is still very strong demand very stable, it's across all customer size as well as F&B and Morris enterprise customers.

We continue to grow our enterprise segment grew 57% year over year.

And the last quarter.

And like we mentioned like the only impact that we've seen right now is less fleet expansion from existing customers, but apart from that our customer acquisition the momentum that we see with new customers across all products.

Very stable and strong.

Understood. Thank you for that and if I can ask one.

Ill subset the hybrid with more success.

Yes, Bob.

Sean.

A few questions on that.

On that.

It sounds that you are making.

Can you help us understand what portion of your schools.

<unk> today.

And where do you see that kind of going on.

The regional heads kind of start building their teams.

Should we expect kind of an acceleration in the <unk>.

Rep hiring going into next year.

And.

Already layering in kind of the CRM and the Dev.

Go to market in that outbound motions.

Yes. This is Ron so you were breaking up a little bit you were asking about the outbound momentum that we see is that correct.

Yes, there is.

I was talking to the regional sales structure.

Yes.

Hmm.

Yeah Okay.

Uh huh.

Yes, sorry go ahead.

At the regional sales structure.

Delighted.

Leadership.

Yes, yes, yes, yes, so basically we announced last quarter that we promoted both Jamie.

Be.

Regional manager for North America, and Dean for our APAC region and definitely it's part of a movement that we've seen a stronger presence in both of those regions, but also scale in those regions dramatically.

As we said we also doing a lot of outbound sales, reaching larger customers fortune 500 customers.

In addition to our performance marketing.

So for us it's <unk>.

With that momentum as a company and it just gives us overtime, where access to larger and larger enterprises and we're continuing to scale that effort.

Thank you.

Our next question comes from the line of Steve Enders with Citi. Please go ahead.

Okay.

Okay, great. Thanks for taking my question and glad to hear everyone is.

Our SaaS over at Rattler today.

I guess, maybe just like to kind of start off on that.

7% of employees that then call up the reserves.

At this point I guess, how do you go about managing the organization when you have that level of.

Disruption.

I guess secondarily when you think about hiring it seems like that's continued expectations for that going into next year.

How do you think about.

What that means for future hiring plans and backfill some of those called up individuals' there.

Hey, Rohit so the.

The impact we have right now on the plans we have is minimal.

There is an impact.

But but it's something where we're dealing with and it's a it has a very short term effect regarding hiring.

Have a very strong hiring plan for next year and also this year. So we're on track and that's been going well.

Yes, maybe Steven this is Ron.

Can add that Israel only accounts for a low single digit percentage of our IRR and there's very little impact over there, although we see a little bit but very small impact.

As part of our revenue.

And also in terms of data servers. It's all distributed globally. We don't have currently any data centers in Israel across North America Europe, Australia. So so in terms of data integrity servers operations, we see no impact.

As we mentioned on the business side its minimal impact mostly.

Israeli customers.

Okay Gotcha.

That's helpful.

And then just on the free cash flow in the quarter I mean, really really strong there I guess anything to call out that was either onetime in nature, how should we be thinking about.

And maybe some of the puts and takes there as we think about.

Going into next quarter next year.

Hey, Hi, Steve Italy, Iran.

Yes, so 34% obviously there is a very high percentage and we would like to think about this as the one off although we said that we are going to be.

Slightly above 20% originally when we gave our Q2 guidance so by the end of the year.

It's mostly both I would say disciplined spending.

As part of the improving efficiency.

Even though with.

The macro environment.

We have a very.

Consistent customer collections and billings, we don't come across any significant issue is actually it's very healthy.

And also just to be fair with over $1 billion in bank in the bank on the bonds. We continue to generate nice returns with the environment of inflation. So all of the above it is a very healthy healthy for us in terms of efficient free cash flow.

Okay perfect. Thanks for taking the question.

Our next question comes from the line of Brent bracelet with Piper Sandler. Please go ahead.

Good morning here I will echo best wishes and support here for you your family and colleagues impacted by the tragedy in Israel.

Maybe Roy obviously super impressed with the strong execution given some of the challenges obviously, we're seeing some mixed trends in S. N D. I wanted to pivot a little bit towards the.

Future product, specifically, the Monday Dot Com AI assistant can you just talk a little bit about what youre seeing there and that data what.

Early response is banned then I have one quick follow up.

Yeah.

Yes, hi, its rice.

So it was a very nicely accepted.

We're building boards, so we used our assistant to kind of help.

<unk> build things that are usually complex like the formula builder and like the board and the workflow itself and we saw that people were surprised about the suggestions they got and said like they were really happy with the boards. They got from the AI. So it's kind of like it's really an assistant.

And thats onboard customers and help them get the.

Most out of the system.

Right now.

Very encouraging and then I guess as a follow up for you Al Iran.

Impressed here by continued improvement in margins.

It sounded like you're leaning a little bit in on performance Smart performance marketing the LTV to CAC sounds like its improving can you continue to kind of sustain.

Margins here, even while getting a little aggressive.

With with performance marketing spend just given the the returns youre seeing right now.

Yes.

So brand Tai.

I think that's the lever that is most I would say.

Impactful of the numbers on that on a quarter basis is definitely the performance marketing because it allows us either to spend when we see the return or to hold back if we don't see the return from our perspective.

This has not really changed from the last few quarters.

So.

We kind of manage the spend in accordance with the with the returns that we see we don't see anything it's not getting any better but its not getting any worse in terms of what the returns that we're seeing.

Maybe some of the competitors has already started to spend more on the performance marketing.

But for us, it's pretty much what we anticipated or what we saw in prior quarters, we actually thought that.

When the year goes by we might see more aggressive behavior from other players, but we didn't so far so as long as it meets our return criteria, we continue to spend.

And if it will be debt.

More aggressive spend will provide us better results than we are going to do it.

Great to see impressive execution here guys. Thanks.

Our next question comes from the line of Arjun Bhatia with William Blair. Please go ahead.

Perfect. Thank you guys and I'll add my best wishes to you all in Israel.

First maybe just to start on I noticed that.

The upmarket trends look very strong right, especially.

The percentage of <unk> that youre getting from your larger PK plus customers can you just talk a little bit about if youre seeing any difference in customer behavior between those larger enterprise customers that are deployed on Monday versus smaller customers, whether it's in terms of.

Upsell our seat expansion et cetera. Thank you.

Yes, <unk> this is the wrong so.

Yeah overall in terms of our enterprise accounts as Ive mentioned, we see great momentum those enterprise accounts tend to upgrade more and increase their silicon more over time.

So definitely we see higher levels of MBR.

In terms of usage.

Little bit of a difference between the way Smbs users and enterprise customers Smbs, what we see is they usually consolidate on Monday, managing a lot of departments and almost their entire operation on Monday.

In enterprise customers, usually we sold two or three kind of main business use case for them and then over time, they might add more departments, but it's more of a gradual process.

But definitely in terms of <unk>.

Retention stability growth, we invest a lot in that in enterprise customers because over time.

To generate more revenue and intend to expand more.

Okay got it perfect. That's very helpful and then just going onto <unk>.

Monday DB it sounds like the next phase here is going to be on.

API enhancements and an improving scalability, how much is that impacting your ability to go after these larger customers and.

So then the scalability and the improvements you are making in infrastructure to get them to use Monday is that something that you're seeing already or something that we anticipate further down the road as more DB versions get rolled out.

Yes. This is Ron again, so definitely you touched on the point here because I think one of the changes that really help us accelerate scalable data enterprise customers is Monday VB.

We mentioned this during the beginning of the earnings call, but we got great feedback from version one point, though we saw customers already scaling the operation.

And how they use Monday.

And now with the release of 1.1, we've really accelerated that a major part, which a lot of enterprise use which is dashboards.

It's been a significant boost to how they use the platform and usually.

It's managers and high level management, they use dashboards that definitely this is a huge game changer for our ability to scale within the enterprise and we have a lot of other.

Sub versions that we aim to launch in terms of Monday, DB, and we'll share that each duration really help us accelerate our penetration into larger enterprises.

Alright, perfect. Thank you and congrats on the strong execution areas.

Our next question comes from the line of Derrick Wood with TD Cowen. Please go ahead.

Oh, great. Thanks, It's Andrew and I'll Echo My Alright.

Alright thoughts to everyone in Israel.

Hello, Rod on the sales CRM strong net new growth.

11000 customers is about 6% of your total base is that keeps growing do you think you could see this become a material contributor to revenue next year and also moving into the mid market.

Hi, Derek its early on yes, so CRM is growing really nicely.

Just as a reminder, we plan to finish opening access to the CRM in depth to all customers by the end of Q1 next year. So definitely we expect this to continue to grow.

Although it's still early days, we just announced that earlier this year, but the cross selling opportunity looks very encouraging.

And you know it seems to have introduced the product suite, we have 25, <unk> walk management accounts that they've added to the additional product. So I think that over time with the fact that we are increasing the sales rep number and we're going to focus on cross selling and Upselling.

I think that we're going to see a more proactive sales motion and is going to be resulted in further growth next year.

Okay.

Great and then also for you.

The IRR from 50, K, plus a nice uptake the 31% of IRR any color on what drove that and is that most of the existing expansions are you seeing larger lands to and and should this.

Continue to uptake into next year.

Derek I think it's all of the above.

Landing bigger we are we are a multi product strategy that now customers find us to be part of their core.

Business operation. The fact that we are growing the sales team and we bring people who are expecting selling to enterprise accounts. So all of the above I think once you unlock the value of Monday, and you see how it contributes to bigger organizations and a bigger audience within the organization. This is something that <unk>.

To drive the upmarket motion.

Together with of course, the Monday DB.

Awesome. Thank you.

Our next question comes from the line of Brent Thill.

With Jefferies. Please go ahead.

Thanks, John.

Can you just walk us through what Youre seeing through the start of the quarter.

Last month <unk> seen any change in customer behavior or is it is it the same consistency year Youre speaking to that you saw in the last quarter.

Hey, Brent.

We're still seeing.

What we saw in prior quarters as I said earlier, it's not getting any better but it is not getting any worse I think there is still.

A lot of pressure on the economy.

I would say, sometimes choppy you know customers still.

Very cautious on their spend.

The sales cycles are still taking longer.

But.

On the other end, we are still seeing a very healthy.

Customer demand and top of funnel activities. So I think these are kind of setting one another.

And contributing to our execution.

And just back on the enterprise.

That momentum looks really encouraging if there.

One or two.

Customer data points, not necessarily naming the customer, but maybe what you've been shocked at her or.

Has been has been significant in terms of milestones is there in terms of seat count or in terms of how they're deploying can you is there any more color you can add to what is giving you encouragement what youre seeing in that segment.

Yes, Brian.

A larger deployment is about 7000 seats, but maybe I can share more color that we are seeing.

Very interesting deals in the pipeline, we see more momentum of large enterprise interested in buying.

By Monday and do much.

Much wider deployment, so definitely we see this momentum within our customer interest and customer.

Pipeline that we're seeing so that gives us a lot of inside that.

<unk> and opens the door to bigger and bigger deals going forward yes.

And maybe maybe Brian just to add to this is really around the level of engagement that we see we have some internal metrics like active.

Participating people in.

Octave fits that then we are seeing strong momentum as well. So this is something that is encouraging for us to believe that.

We're going to see continued growth in the enterprise usage within the existing customers and new customers.

Good to hear thank you.

Our next question comes from the line of George <unk> with Oppenheimer. Please go ahead.

Thank you for taking my question and I'll add my best question for everyone's safety.

Maybe going back to the AI topic can you give some perspective on how you feel this maybe changes.

Additive environment.

Okay.

Hi, it's Roy.

So I think like customers don't really know what to expect from AI. It's not as if like everyone is demanding this or that I think we're in a phase that.

Everyone is trying to explore what works.

And it's not there.

Is it things to make to turn into a really great product for our customers and I think we're on a really good track with the results we've seen and shared so.

I don't think.

It's still like something that is materially competitive, but it might be in the future.

And then just following up on all the new product additions that you're putting into that platform can you maybe provide some perspective on pricing and the type of leverage you are getting from the additions.

Okay.

Yes, so where we are.

Sure.

Permitting with things and thing.

What are we going to do with pricing.

We feel that's like the.

Production of new products will allow us to cross sell and then extract.

And give more value to customers.

And like allow us to have like a higher dollar value for rich.

Customer.

Alongside other improvements that we're making to the platform and various.

Advancement in every area and the work management and CRM.

So that will also expose us to new customers and new use cases and again like.

Improve that cycle of expansion.

Thank you.

Our next question comes from the line of DJ Hynes with Canaccord.

Please go ahead.

Hey, guys I'll echo the sentiment of others and my congrats on the quarter.

Im curious what youre seeing in terms of activity and engagement in the marketplace ecosystem. It seems like as.

As you make improvements in scalability and continue to rollout new product is just that much more surface area for our partners to build around so curious if youre seeing any signs of that playing out and what it can mean for the model overtime.

Yeah.

It's Ron so.

We see good momentum there, we're starting to see more and more kind of a more significant IRR coming from our marketplace.

Partnership with both up fired and adapt to this are growing really nicely. It takes time, but currently dosed.

Two partners have some of the most popular apps in a marketplace. So definitely we see the momentum that they bring in their experience it's definitely helpful.

So we're very encouraged where everything we see we see some vertical applications built.

Just for the platform, but for each one of our.

Apps those for CRM for wealth management for that.

So definitely this really enriches the marketplace and the opportunity for each one of them.

And in addition to the bigger area.

As we can you just see large momentum of smaller an indie developers that build in the marketplace, but all in all we're very encouraged with the development and the type of application that are being built.

Yes, Okay. Good to hear and then how do you think about sizing the opportunity for Monday gas, maybe relative to CRM I mean, I assume it's probably narrower but trying to get an understanding of kind of the composition of your customer base, how big that develop our footprint is in kind of what it means for the serviceable opportunity for Devin the base realizing it's a multiyear.

Tony.

Yeah. So this is Ron again.

Yes, so Phil.

Look I mean that is.

<unk> has great momentum.

It's a little bit younger compared to CRM, but again, if we compare it to how we grew as a company like it is growing faster than Monday itself. So also has great momentum as the product.

I think theres great players right now in this market that prove that you can build a huge business out of it so we definitely.

Encouraged by the growth, we're encouraged by seeing the type of customers that adopt the product.

Still we have a lot of features we need to complete but all in all it looks.

Very promising as promising I would say is CRM.

A year ago, so definitely something we invest a lot into im very encouraged by the results we see so far.

Great. Thanks for the color.

Again as a reminder, the floor is now open for your questions if you'd like to ask a question. Please press star one on your telephone keypad now.

Our next question comes from the line of Scott Berg with Needham and company. Please go ahead.

Yeah.

Yes.

Hi, everyone nice quarter, and I will certainly echo the.

Concerns with all what you all are dealing with right now and good luck.

Questions for me Hello, Ron you talked about sales and marketing expecting to be in the high teens.

<unk> intermediate term your spend in sales or excuse me R&D in the high teens your R&D spend really hasnt been in the high teens for several quarters. How should we think about your investments. There is are we going to see kind of a ramp back up to the high teens or what does that kind of balance look like I guess.

So it's a great question I would say that in fiscal year 'twenty three to your point, we probably are now looking at more mid teens.

So first of all.

When you think about hiring we continue to hiring in R&D, we continue to investment in R&D.

The reason why we see.

Lower cost to a certain extent the short term on the longer term. We believe it's going to continue to grow. It's first of all the FX currencies R&D team, mostly based in Israel all of the people.

So we took advantage or we benefit from the fact that the.

The dollar was strong growth as these really shekels.

Some accounting things like allocation.

<unk> both go.

Sales as well as R&D.

And it is mostly going to be dependent on their recruitment program. So we continue to hire aggressively R&D people are not easy to find always that there is a good fit for them.

But we will continue to hire and expand the team.

<unk>.

We believe that for the next year, we're going to see this number growth.

Okay.

Understood helpful. Thank you and then from a follow up perspective.

You talked about net revenue retention trends starting to trough out the last couple of quarters I know, it's items like CRM and Dev tools are still reasonably new in terms of customer adoption and how you are selling them, but from your early statistics how are those.

Modules are tools impacting your net revenue retention rate are you seeing some different trends there versus the overall work management platform. Thank you.

Yeah.

Yes. This is Iran. So look it's still early days.

In terms of you know.

The amount of revenue and our experience with it but.

I can share that overall in terms of engagement and potential extension.

We see an upside there.

I think it just because of the nature of the products that some of them are more sticky than another then.

Once you get a team I'll start using it you get the whole department potentially using that tool.

So definitely we see an option there for a higher end Dr. Both endeavor in CRM, but again, it's still early days. So we don't have a lot of cohort data yet, but just judging by the nature of usage right now.

And I have an upside there.

Excellent. Thanks again.

Our next question comes from the line of tailored Mcguinness with UBS. Please go ahead.

Yes, hi, thanks for taking the question and like everyone else I want to extend thoughts to you all and everyone at Monday in Israel, and well done on the execution this quarter considering the circumstances.

Looking at the <unk> guide it looks really solid and assuming some upside we could actually start to see an acceleration in quarter over quarter growth. So first can you maybe talk about what you've seen in terms of the demand environment. That's giving you comfort in this outlook and then second there's been some evidence in with another software companies this quarter.

Softening F&B try and then some other macro events. So can you talk about can you just provide more color on that.

The assumption being embedded in the guide for the environment and maybe the level of conservatism for some of these events.

Yeah.

Hi, Tyler this is Ron.

Thanks for joining.

I can comment on the matter and maybe alone and conduct a little bit about the guidance next quarter. So so.

In terms of demand like we mentioned, we see very strong demand.

Not just in SMB, but also in enterprise customers.

In terms of usage and expansion, we also see positive signs overall.

Ron mentioned, although the environment is still kind of choppy.

Like in the beginning of the year.

In terms of demand and stability of demand as well.

Feel very comfortable.

So that's in terms of what we see in the market I don't know if you want to add anything around in terms of guidance for Q4, or so I would say with that with regards to guidance. We always report what we know when we do the guidance.

So it takes into account the latest trend that we're seeing and theyre not that hasnt really changed much over the year as I said earlier, we still have challenging macroeconomic conditions with some moderate pressure on <unk> and as we mentioned we.

We continue to expect full year MBR to be slightly below 110%.

But we do expect it to level off at the end of this year.

With regards to the top of funnel demand and strong new customer growth, it's offset some of the trends that we're seeing and I believe this is taking into account. The fact that we introduced first Monday DB is one of the CRM and Devon other multiple use cases so.

While there is to summarize while there is some pressure coming from the macro economy is definitely offset by by top of funnel strong demand that we're seeing from new customers.

Okay.

Great. Thanks, so much.

Yeah.

Our next question comes from the line of Jason <unk> with Keybanc capital markets. Please go ahead.

Alright, Thanks for taking my question I'll start with maybe a philosophical question Roy I know you said that it's too early and known running now as yet, but a lot of software companies, including your content collaborative work management peers are rolling out these AI teacher and bundling them in our core products.

But it seems like AI might become table Stakes. Yes. This is the case, how do you think AI can still be a differentiator.

Hi.

I appreciate the philosophical question so.

Tell you what.

We can divide into two areas. One is the table Stakes area right like making AI improve the software itself and the team's ability and I think that's less monetize able but like improved performance overall of everything.

The other part is adding more productivity.

Ponant with AI that.

Customers will pay for and I think there is a good upside.

We're looking at what everyone is doing across the field not only in productivity in AI and we're putting a lot of emphasis on it.

And we have a strong team working on it and I feel we have a lot to say because Monday is.

A true platform and we are able to take them and like make AI very accessible for the customers that come to us and want to build workflows improve their business, we're really able to take that power and give it to them, but that's like a working progress.

And I think that will not be table Stakes.

Great. Thank you and then earlier on you mentioned, having a lot of cash crossing the $1 billion, Mark and you are generating more.

Can you speak to some of your capital deployment strategy.

Yes, so with regards to cash obviously, it's going to be used for corporate initiatives, we're going to continue to invest in.

Investing in the business, bringing in hiring people are expanding.

<unk>.

Leadership team the management team.

As well as thinking about nonorganic growth opportunities, we're going to look potentially next year at companies thinking about M&A again, mostly tuck in equity hiring.

Complementary.

Product.

But this is something that we definitely started to think about and to deploy potentially in the next.

12 to 18 months.

Excellent. Thank you.

Our next question comes from the line of Robert Simmons with D. A Davidson. Please go ahead.

Hey, Thanks for taking the question so it's great to see.

The App CRM and scaling so well I'm wondering where are we seeing the most.

I'll take for those by vertical or by geography.

Yes, Robert this is Ron so you're asking where do we see the most.

What do you mean like uptake just looking.

Like where are you seeing the strongest adoption.

The customers for the for the for sale side.

Doug.

In terms of vertical like we see we see adoption across all verticals and also across different sizes I would say in terms of company sizes. We don't see large enterprise currently adopting Monday sales CRM or Monday that but definitely we see the bar rising.

Starting with small teams and expanding into hundreds of people.

And we will continue to grow as we add more features and more complexity in terms of industry its really across the industry. Both tech companies and non tech obviously endeavors is more focused on untapped, but in terms of sales CRM, we really see a wide variety of <unk>.

Verticals in different kinds of companies that adopt the products pretty similar to what we saw.

And Monday work management.

<unk>.

Yes.

The color we have right now.

Okay got it and then do you.

Two other apps you want at the same time.

Those performance on Florida.

Can you repeat the question sorry house what.

You had two other assay launched at the same time as those two how are those performance. So far I was starting to ramp to your expectations or is there a little bit earlier, but.

Yes.

Okay.

Yeah, well, we have a bunch of product that we launched we had Monday work forms and Monday, what canvas that we launched as part of that.

We had our initial product called a Monday marketing, but we kind of discontinue that emerged out into Monday, what's management.

And in terms of the other products, we can invest in workforce, there still kind of in their initial phase, we see nice momentum there, but it's still kind of in a small scale compared to the other products that we have.

Great. Thanks.

Okay.

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Followed by the number one on your telephone keypad now.

There are no further questions at this time I would like to thank our speakers for today's presentation and thank you all for joining US just now concludes today's call and you may now disconnect.

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