Q4 2023 monday.com Ltd Earnings Call
Operator: Good morning, and welcome to the Monday.com fourth quarter fiscal year 2023 earnings conference call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise.
Good morning, and welcome to the Monday, Dotcom fourth quarter fiscal year 2023 earnings Conference call. Today's conference is being recorded all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply.
Operator: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press the star key followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. At this time, I'd like to turn the conference over to Byron Steven, Director of Investor Relations. Please go ahead.
Press the Star key followed by the number one on your telephone keypad. If you would like to draw. Your question Press Star one again.
At this time I would like to turn the conference over to Byron Stephen Director of Investor Relations. Please go ahead, Hello, everyone and thank you for joining us on today's conference call to discuss the financial results for Monday, Dot Coms fourth quarter and fiscal year 2023.
Byron Steven: Hello, everyone, and thank you for joining us on today's conference call to discuss the financial results for Monday.com's fourth quarter and fiscal year 2023. Joining me today are Roy Mann and Aaron Zinman, co-CEOs of Monday.com, and Elron Glazer, Monday.com's CFO.
With me today are Roy Man and Airlines Zinman co Ceos, the Monday Dot com and all around Glaser Monday Dot Coms CFO.
Byron Steven: We released our results for the fourth quarter and fiscal year 2023 earlier today. You can find our quarterly shareholder letter along with our investor presentation and a replay of today's webcast under the news and events section of our IR website at ir.monday.com. Certain statements made on the call today will be forward-looking statements that reflect management's best judgment based on the currently available information. These statements involve risk and uncertainties that may cause actual results to differ from our expectations.
We released our results for the fourth quarter and fiscal year 2023 earlier today.
You can find our quarterly shareholder letter along with our Investor presentation, and a replay of today's webcast under the news and events section of our IR website at IR Dot Monday Dot com.
Certain statements made on the call today will be forward looking statements, which reflect managements best judgment based on currently available information. These.
These statements involve risks and uncertainties that may cause actual results to differ from our expectations.
Byron Steven: 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 statement. Additionally, non-GAAP financial measures will be discussed on the call. Reconciliations to the most directly comparable GAAP financial measures are available in the earnings release and the earnings presentation for today's call, which are posted on our investor relations website. Now, I turn the call over to Roy.
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 the most directly comparable GAAP financial measures are available in the earnings release any earnings presentation for today's 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.
Roy Mann: Thank you, Byron, and thank you, everyone, for joining us today. As we reflect on our recent Elevate World Tour, including our first ever Investor Day, we are filled with an incredible sense of energy and purpose as we embark on 2024. The events were a resounding success, bringing together customers, analysts, and investors from around the world. Our Elevate World Tour provided us with an opportunity to connect with our users, demo our latest AI and CRM product advancements, and gather valuable feedback. The enthusiasm and engagement displayed in our attendance were truly inspiring, reaffirming our commitment to delivering innovative products that empower teams to achieve their full potential. Furthermore, the addition of our first-ever Investor Day was significant, my friends. It allowed us to showcase our progress, present our vision for the future, and highlight our expected financial performance in the coming years.
As we reflect on our recent elevate world tour, including our first ever Investor Day, we are filled with an incredible sense of energy and purpose as we embark on 2020 for the events were a resounding success, bringing together customers analysts and investors from around the world are elevates World Tour provided us with.
An opportunity to connect with our users demo, a religious AI and CRM product advancements and gather valuable feedback and.
The enthusiasm and engagement displayed in our attendance, we're truly inspiring reaffirming our commitment to delivering innovative products that empower teams to achieve their full potential.
Furthermore, the additions of our first ever Investor day with significant milestone.
It allowed us to showcase our progress presents our vision for the future and highlight our expected financial performance in the coming years. The positive response, we received from the investment community fuels, our motivation and drives us to reach new heights in the years ahead.
Roy Mann: The positive response we received from the investment community fuels our motivation and drives us to reach new heights in the years ahead. Now turning to our business results for the year, 2023 was a year of incredible growth and progress for Monday. Despite the prevailing global economic and geopolitical uncertainties, we exceeded all expectations. Revenue for fiscal year 2023 grew a remarkable 41% driven by strong customer acquisition. In addition to a strong top line, we continue to see improving efficiency and reported record annual non-gap operating margin. Commitment to innovation played a key role in the success of 2020. Over the past year, we launched new capabilities and delivered hundreds of new features, including Monday. We have also elevated our mobile experience and enhanced our security, data protection, and permissions.
Now turning to our business results for the year 2023 was a year of incredible growth and progress at Monday Dot com, despite the prevailing global economic and geopolitical uncertainties, we exceeded all expectations.
Revenue of fiscal year, 2023 grew a remarkable 41% driven by strong customer acquisition and expansion.
Especially with our larger accounts.
In addition to our strong top line, we continued to see improving efficiency and reported record annual non-GAAP operating margin and free cash flow.
Our commitment to innovation played a key role in the success of 2023.
Over the past year, we launched new capabilities and deliver hundreds of new features including Monday, I and Monday workflows, we also elevated our mobile experience and enhance our security data protection and permission settings.
Eran Zinman: Let me now turn it over to Eran to walk you through some additional products. Thank you, Roy. In 2023, we upgraded our infrastructure with MondayDB, which boosted board performance by 5x. MoneyDB continues to exceed expectations and remains on. We are now entering Phase 2.0, with a focus on the most complex work scenarios, allowing customers to build and manage workflows at scale without being limited by performance. This quarter, we're excited to announce the launch of Monday Code. Monday Code provides a secure, serverless environment within the WorkOS platform where developers can host and run apps with Monday security and compliance standards built in. With Monday Code, developers can now avoid the heavy lifting associated with setting up and managing production servers and more easily create apps for our market.
Let me now turn it over to Iran to walk you through some additional product highlights.
Roy in 'twenty to 'twenty, three we upgraded our infrastructure with Monday, DB, which boosted board performance by five ex <unk>.
<unk> continues to exceed expectations and remains on schedule. We are now entering phase two pointed out with a focus on the most complex work scenarios.
<unk> customers to build and manage workflows that scale without main limited by performance constrains.
This quarter, we're excited to announce the launch of Monday Code Monday code provided secure server list environment within the work with platform, where developers can host and run apps with Monday security and compliance standards built in.
With Monday code developers can now avoid the heavy lifting associated with setting up and managing production servers and more easily create apps for our marketplace.
Eran Zinman: Let me now turn to pricing. Following several months of extensive testing, we recently introduced an updated pricing model ahead of... As part of the rollout, we notified our customers that we would be updating lease prices across... Our customers are at the heart of everything we do. And we've heavily invested in providing the best-in-class WorkOS platforms. We believe that our products have evolved to provide even greater benefits and meet the ever-changing needs of both. The updated pricing model reflects the value and quality that our products deliver, ensuring that our customers receive the best possible return on their investment.
Let me now turn to pricing following several months of extensive testing. We recently introduced an updated pricing model ahead of schedule as part of the rollout we notified our customers that will be updating these prices across our product suite. Our customers are at the heart of everything we do and we've heavily invested in providing the best in class work.
As platforms and product.
We believe that our products have evolved to provide even greater benefits and meet the ever changing needs of our customers.
The updated pricing model reflects the value and quality that product deliver ensuring that our customers receive the best possible return on their investment as we enter 'twenty 'twenty four we are more energized than ever to continue innovating and pushing the boundaries of what is possible. Our focus remains on enhancing our workers platform and product suite.
Eran Zinman: As we enter 2024, we are more energized than ever to continue innovating and pushing the boundaries of what is possible. Our focus remains on enhancing a worker's platform and product suite, expanding our enterprise presence, and delivering unparalleled value to our customers. Looking ahead, we are well positioned to build our achievements and continue our upward trajectory, with a strong customer base. Focus on Innovation and Resilient Design.
Expanding our enterprise presence and delivering unparalleled value to our customers.
Looking ahead, we are well positioned to build our achievements and continue our upward trajectory with a strong customer base and our focus on innovation and our resilient business model money Dot com is poised for sustained growth and success in the coming years.
Eliran Glazer: Monday.com is poised for sustained growth and success in the coming years. With that, I'll now turn it over to Eliran to cover our financials. Thank you, Iran, and thank you to everyone for joining our call. Today, I'll review our fourth quarter and fiscal 2022 results in detail and provide initial 2024 guidance. As Roy highlighted, Q4'23 was a strong finish to an exceptional year. Total revenue in Q4'23 came in at $202.6 million, up 35% from a year ago. Revenue for FY23 was $729.7 million, up 41% from the prior year. Our overall net dollar retention rate declined slightly in Q4'23 to 110%, reflecting continued macroeconomic adversity.
With that I'll now turn over to Ed I want to cover our financial and guidance. Thank you Ron and thank you to everyone for joining our call today I'll review, our fourth quarter and fiscal 2022 results in detail and provide initial 2024 guidance as Roy highlighted Q4, 23 was a strong finish to an exceptional year total revenue in.
Q4, 'twenty three came in at $202 6 million up 35% from a year ago quarter revenue for fiscal year 'twenty three was $729 7 million up 41% from the prior year.
Our overall net dollar retention rate declined slightly in Q4, 23% to 110% reflecting continued macroeconomic headwinds. We currently anticipate the reported MBR to begin to recover in the second half of fiscal year 'twenty four as a reminder, our net dollar retention rate is a trailing four quarter weighted average.
Eliran Glazer: We currently anticipate reported NDR to begin to recover in the second half of FY24. As a reminder, our net dollar retention rate is a trailing 4.25 weighted average calculation. As Eran mentioned, we have recently revised our release prices to accurately reflect the enhanced value of our work operating system platform and product suite for our customers. We expect that this price adjustment will contribute an estimate of $15-20 million in revenue in FY24. For the reminder of the financial metrics discovered, unless otherwise noted, I will be referencing non-GAAP financial measures. We have provided a reconciliation of GAAP to non-GAAP financials in our earnings release.
Calculation.
As Ron mentioned, we have recently revised our list prices to accurately reflects the enhanced value of our walk operating system platform and product suite for our customers. We expect that this price adjustment will contribute an estimate of 15 to 20 million dollar of revenue in fiscal year 'twenty four.
For the remainder of the financial metrics difficult 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.
Eliran Glazer: Fourth quarter gross margin was 90%. In the medium to long term, we continue to expect gross margin to remain in the high 80s range. Research and development expense was 33.3 million in Q4'23, or 16% of revenue, in line with the year-ago quarter, and 117.8 million in Q5'23, or 16% of revenue, down from 18% in the prior year. We plan to increase investment in R&D for the foreseeable future as we build out our product suite and scale our work operating system platform both horizontally and vertically. Sales and marketing expense was $110 million in Q4'23, or 54% of revenue, in line with the year-ago quarter, and $413 million in fiscal year'23, or 57% of revenue, compared to 69% in the prior year.
Fourth quarter gross margin was 90% in the medium to long term. We continue to expect gross margin to remain in the 18th range Research and development expense was $33 3 million in Q4, 'twenty three or 16% of revenue in line with the year ago quarter, and $117 8 million in fees.
<unk> 23, or 16% of revenue down from 18% in the prior year, we plan to increase investment in R&D for the foreseeable future as we build out our product suite and scale our work operating system platform, both horizontally and vertically.
Selling and marketing expense was 110 million in Q4, 23 or 54% of revenue in.
In line with the year ago quarter, and 413 million in fiscal year, 'twenty, three or 57% of revenue compared to 69% in the prior year G&A.
Eliran Glazer: G&A expense was $17.3 million in Q4'23, or 9% of revenue, compared to 10% in the year-ago quarter, and $63 million in FY'23, or 9% of revenue, compared to 11% in the prior year. Net income was $33.7 million in Q4'23, up from $22.2 million in Q4'22, and $94.9 million in Q4'23, up from a loss of $33.4 million in Diluted net income per share was $0.65 in Q4'23 and $1.85 in Q4'23, based on $51.6 million and $51.2 million fully diluted shares outstanding, respectively.
G&A expense was $17 3 million in Q4, 'twenty, three or 9% of revenue compared to 10% in the year ago quarter, and 63 million in fiscal year, 'twenty, three or 9% of revenue compared to 11% in the prior year.
Net income was $33 7 million in Q4 23 up from $22 2 million in Q4, 'twenty to a $94 9 million in fiscal 'twenty three up from a loss of $33 4 million in fiscal year 'twenty two diluted net income per share was <unk> 65 cents in Q4 23.
And 1.85 in fiscal 'twenty, three based on $51 6 million and $51 2 million fully diluted shares outstanding respectively.
Total employee head count was 1854, an increase of 110 employee since Q3 'twenty three we expect to ramp hiring in fiscal 'twenty four with the continued focus on our R&D product and sales team as we build out our platform and product suites moving onto the balance sheet and cash flow we ended the quarter.
Eliran Glazer: Total employee headcount was 1,854, an increase of 110 employees since Q3'23. We expect to ramp hiring in FY'24, with a continuous focus on our R&D product and sales team as we build out our platform and product team. Moving on to the balance sheet and cash flow, we ended the quarter with $1.12 billion in cash and cash equivalents, up from $1.05 billion at the end of Q3. For Q4'23, free cash flow was $55.4 million, and free cash flow margin, as defined as free cash flow as a percentage of revenue, was 27%. In fiscal year 2023, free cash flow was $204.9 million, and free cash flow margin was $28.3. Free cash flow is defined as net cash from operating activities, less cash used for property and equipment, and capitalized software costs, excluding non-recurring items.
With one point $12 billion in cash and cash equivalents up from $1.05 billion at the end of Q3 23.
In Q4, 23 free cash flow was $55 4 million and free cash flow margin is defined as free cash flow as a percentage of revenue was 27%.
In fiscal year 'twenty, three free cash flow was $204 9 million and free cash flow margin was 28%.
Free cash flow is defined as net cash from operating activities less cash used for property and equipment and capitalized software costs, excluding nonrecurring items now.
Now, let's turn to our outlook for fiscal year 2024 for.
For the first quarter of fiscal year 2024, we expect our revenue to be in the range of 207 million to $211 million representing growth of 28% to 30% year over year, we expect non-GAAP operating income of 8 million to $12 million and an operating margin of 4% to 6%, we expect free cash flow.
A 56 million to 60 million and free cash flow margin of 27% to 29% for the full year 'twenty 'twenty four we expect revenue to be in the range of 926 million to 932 million representing growth of 27% to 28% year over year, we expect full year non-GAAP operating income of <unk>.
Eliran Glazer: Now, let's turn to our outlook for fiscal year 2024. For the first quarter of fiscal year 2024, we expect our revenue to be in the range of $207 million to $211 million, representing growth of 28% to 30% year-over-year. We expect non-GAAP operating income of $8 million to $12 million and an operating margin of 4% to 6%.
58 million to 64 million and an operating margin of 6% to 7%. We expect full year free cash flow of 200 million to 206 million and free cash flow margin of approximately 22%.
I'll now turn it over to the operator for your questions.
Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
We will take our first question from Kash Rangan at Goldman Sachs.
Operator: We expect free cash flow of $56 million to $60 million and a free cash flow margin of 27% to 29%. For the full year 2024, we expect revenue to be in the range of $926 million to $932 million, representing growth of 27% to 28% year-over-year. We expect full-year non-GAAP operating income of $58 million to $64 million and an operating margin of 6% to 17%. We expect full-year free cash flow of 200 million to 206 million and a free cash flow margin of approximately 22%.
Hey, guys. Thank you so much ROI, Iran, Iran for giving us all the details.
Two quick ones. One is really the growth algorithm, we talked we talked about 27 points of growth.
But I look at customized with 10, plus USA as a general proxy that has grown about 20% and then you have net expansion rates, 110% suggest that base logic alone should give you a pretty decent level of growth and then when I dig underneath the numbers is everybody that that's a PK plus there are customers, it's growing faster, but 36% and 100 case growing even faster to help.
Just to understand how you constructed the guidance in light of.
The SKU and the metrics that suggest that the underlying business is healthier than the guidance seems to suggest.
Operator: I'll now turn it over to the operator for your questions. Thank you. At this time, I would like to remind everyone that in order to ask a question, press the star, then the number one on your telephone keypad.
So net expansion rates, you said second half of 'twenty for you expect an improvement I'm wondering if you're getting out a little bit more common a commentary on what you saw in the quarter that gives you the confidence that you can see kind of a pull but thank you. So much once again.
Kash Rangan: We'll take our first question from Kash Rangan at Goldman Sachs. Hey, guys, thank you so much, Roy, Aaron, and Eliran, for giving us all the details. Two quick ones.
Hey, Kash, Italy.
Thank you for the question so with regards to our guidance philosophy.
Not materially changed we're focused on providing always prudent achievable and responsible guidance based on the lift on the latest data that we have.
Eliran Glazer: One is when you look at the growth algorithm, we talked about 27 points of growth. But I look at customers with 10 plus users as a general proxy, and that's grown about 20%. And then you have the 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 50k plus ARR customers are growing faster, 56%, and 100k is growing even faster. So help us understand how you constructed the guidance in light of this queue in the metrics that suggest the underlying business is healthier than the guidance might seem to suggest. Also, net expansion rates, you said in the second half of 24, you expect an improvement. I'm wondering if you can add a little bit more commentary on what you saw in the quarter that gives you the confidence that you can see some improvement. Thank you so much once again.
We mentioned the price increase so it's still early days and it's going to be staged throughout the year and then we would like to make sure that we understand what would be the impact throughout the year.
With regard to demand that we already took into account the nothing has changed much from what we saw in Q4 of last year still.
Still some headwinds in the macro economy environment and we assume this is this will continue also in Q1 and Q2.
So this is with regards to guidance with regards to your question on the MBR.
So when thinking about the D R.
We're looking at the trailing 12 months as well as the weighted average just as a reminder, we report later average so as I mentioned with regards to guidance, we are still seeing lingering macro headwinds.
Our customers are still cautious in the spend.
We said that we expected to stabilize in the second quarter of 2024. However, it's important to mention that the overall gross retention has and has had even a small improvement and you no longer term, we remain optimistic with the with an updated pricing model and further scaling Monday DB and the productivity that is going.
To be showing.
An uptick at the second half of the year.
Eliran Glazer: Hey, Kash. It's Eliran. So, thank you for the question. As regards our guidance philosophy, this has not materially changed. We're focused on providing always prudent, achievable, and responsible guidance based on the latest data that we have. You know, we mentioned the price increase, so it's still early days, and it's going to be staged throughout the year, and then we would like to make sure that we understand what the impact will be throughout the year. With regard to demand, which we already took into account, nothing has changed much from what we saw in Q4 of last year. There are still some headwinds in the macroeconomic environment, and we assume this will continue in Q1 and Q2. So, this is with regard to guidance. With regard to your question on NDR, so, you know, when thinking about NDR, we're looking at the trailing 12 months, as well as the weighted average.
Okay.
Yes.
Well move to our next question from pendulum bar at J P. Morgan.
Oh, great Hey.
Thank you for taking the questions earlier on maybe digging a little bit more on the pricing side. You said 15 to 20 in the analyst day Youre talking about 10 years.
Materially kind of changed the timing of the price increasingly so maybe help us understand.
What are the assumptions that you're making to get to that 15% to 20 in terms of churn maybe or.
Assuming more of the existing to come in the second half of the year, maybe maybe dig in a little bit more.
Yeah pendulum hi, its Ron I'll start with regard to the royalty or the price changes and then.
The two other ones to talk about the.
<unk> for the rest of the year. So overall our initial plan also when we presented during the Investor day. It was throughout the new Dow.
Pricing model around June.
Eliran Glazer: Just as a reminder, we report a weighted average. So, as I mentioned, with regard to guidance, we're still seeing lingering macro headwinds, where customers are still cautious with their spend. We said that we expect it to stabilize in the second quarter of 2024.
Towards H two beginning of H two.
And we actually manage to finish our AB testing sooner than that and we were ready in terms of our technical stack. So we decided to make it.
I would say three or four months earlier than we initially thought we thought kind of mid June.
And it's now starting to roll out to existing customers.
So it's like three or four months head start instead of in terms of the process again.
Eliran Glazer: However, it's important to mention that overall, gross retention has shown even a small improvement, and, you know, longer term, we remain optimistic with an updated pricing model and further scaling Monday DB and the product suite that is going to be showing, you know, an uptick in the second half of the year. We'll move to our next question from Pinjalim Bora at JP Morgan. So, great. Hey, thank you for taking the questions. Eliran, maybe I should dig in a little bit more on the pricing side. You said 15 to 20.
Again. This is the first thing we ever done a price increase to our existing base. We in the past we've done into new customers.
So we also tried to be cautious here and we're still learning I would say that so far for what we see.
Action from customers were good we didn't see anything we didn't expect everything was in line with our models. So we remain very optimistic yes.
Maybe to continue to look to Ronnie saying with regards to the assumption on the numbers.
Cause we advanced it in a quarter, we assume that there is going to be an impact of around 15% to 75% on what we said on Investor day. So if you take the 10 million. This is roughly between 15% to 20% and I think one of the things that you even mentioned in I believe in your coverage when we introduced it in the Investor Day, we don't.
Pinjalim Bora: In the analysis, you were talking about 10, and you've materially kind of changed the timing of the price increase release. So, maybe help us understand what are the assumptions that you're making to get to that 15 to 20 in terms of churn. Maybe you're assuming more of the existing to come in the second half of the year. Maybe dig in a little bit more. Yeah, Pinjalim. Hi. It's Ron.
No to anticipate the churn so just as a as a reminder, 80% of our customers our annual subscribed.
Subscribers, 20% of monthly and we assume we took into account certain assumptions currently.
Going to be something that we are going to see effectively 16th of January February when it kicked in so.
Eran Zinman: I'll start with regarding the wealth of the price change, and then I'll hand it over to Eliran to talk about the assumptions for the rest of the year. So overall, our initial plan, also when we presented during investor day, was to roll out the new updated pricing model around June towards H2, beginning of H2. And we actually managed to finish our A-B testing sooner than that, and we were ready in terms of our technical stack. So we decided to make it, I would say, three or four months earlier than we initially thought. So we thought kind of mid-June, and it's now starting to roll out to existing customers. So it's like three, four months head start in terms of the process.
So we took some assumptions with regard to possible scenarios and that is what we baked into the numbers.
Yep understood what question for Roy and I'll cede the floor.
We've recently heard from some of your customers and Monday is becoming kind of an orchestration engine rather than.
Just the work management platform somebody was saying that Mondays a layer between workday and <unk>.
Another person orchestrating a manufacturer orchestrating between.
A number of their systems do you see when they're becoming that orchestration layer facilitating denim business workflow across multiple systems and in the environment.
And hi, sorry, so thank you for the question.
Yes, that's part of how we see the platform.
Eran Zinman: Again, this is the first time we've ever done a price increase to our existing base. In the past, we've done it to new customers. So we also try to be cautious here, and we're still learning. I would say that, so far, from what we see, the reaction from customers has been good. We didn't see anything we didn't expect.
We worked a lot into creating their workflow tool and integrations and automation so definitely we see it.
Cross company workflows.
Underling also orchestration in between and many other tools, but we also see Monday as the platforms that kind of trickles through areas that you don't have software or you couldn't have specific software and complete any workflow you want so other than us create.
Eliran Glazer: Everything was in line with our model, so we remain very optimistic. Yeah, and maybe to continue on what Eliran is saying with regard to the assumption about the numbers, because we advanced it by a quarter, we assumed that there was going to be an impact of around 15% to 75% on what we said on investor day. So if you take the $10 million, this is roughly between 15% to 20%.
<unk> products for core needs of the organization that they do know okay. We wanted to also fit into areas, where you just need an extra input or another process in place and then obviously connect any other tool you want in your stack to work together.
Pinjalim Bora: And I think one of the things that you even mentioned in your coverage when we introduced it at investor day was that we didn't know to anticipate the churn. So just as a reminder, 80% of our customers are annual subscribers, 20% are monthly, and we took into account certain assumptions. So currently, it's going to be something that we are going to see effectively in February when it kicks in. So we took some assumptions with regard to possible scenarios, and that is what we backed into the numbers. Yep, understood. One question for Roy, and I'll cede the floor.
Yeah.
Understood very helpful. Thank you.
We will go next to Brent baseline at Piper Sandler.
Thank you.
I had two quick ones, if I could number one.
If I look at the number of Monday Dev net new ads that actually accelerated on a quarter over quarter basis. In Q4 could you talk a little about kind of what drove the momentum there little surprised and acceleration at this point, but and then I've got one quick follow up thanks.
Hi, Brent this is Ron so so overall, we continue to improve the product and also improve our go to market.
As we mentioned overtime, we open our multi product suite to more and more customers.
Eran Zinman: We have recently heard from some of your customers that Monday is becoming kind of an orchestration engine rather than just a work management platform. Somebody was saying that Monday is a layer between Workday and JIRA. Another person orchestrating, a manufacturer orchestrating between a different number of their systems.
And we're now finalized and the final batch of it should be over by the end of Q1.
So as more of our users are exposed to our multi product and we improve the acquisition engine and improve the features.
We've seen the acceleration.
We shared some of the data during the Investor day, but overall, we continue to see good momentum.
Eran Zinman: Do you see Monday becoming that orchestration layer facilitating some kind of business workflow across multiple systems in an, And hi, sorry, so thank you for the question. Yes, that's part of how we see the platform. We worked a lot on creating the workflow tool and integrations and automation. So definitely, we see cross-company workflows, handling also orchestration and between many other tools. But we also see Monday as a platform that kind of trickles through areas that you don't have software or you couldn't have specific software and completes any workflow you want. So other than us creating products for core needs of the organization that they do know, we want it to also fit into areas where you just need an extra input or another process in place and then, obviously, connect any other tool you want in your stack to work together.
With all products.
Perfect and then obviously I know you've been trying to focus on larger enterprise customers. We saw a record number of those net new 50, K cohort customers you talked about the big deal could you just walk us through the pipeline of large deals going into next year is that going to continue to be an area of strength or.
Is that more seasonal that you would expect to happen more in Q4. Thanks.
Hey, Brent it's Ron again, so definitely we continue to see good momentum.
Our pipelines.
So during the Investor day, we mentioned accounted over 25000 feet, but we continue to see other opportunities like that.
Some are smaller some are larger but definitely very good momentum in our pipeline. So we expect it to be throughout the year not just concentrated in Q4.
Brent Bracelin: Thank you. Thank you. We'll go next to Brent Bracelin at Piper Sam. Thank you. I had two quick ones, if I could.
Helpful color. Thank you guys.
Well move next to Steve Anderson City.
Okay.
Okay, great. Thanks for thanks for taking the question.
Maybe just to start on that.
Eran Zinman: Number one, if I look at the number of Monday dev net new ads that actually accelerated on a quarter-over-quarter basis in Q4, could you talk a little bit about kind of what drove the momentum there, a little surprise and acceleration at this point? And then I want one quick follow-up. Hi, Brent. This is Eran.
On the holiday well for I guess, what has been the feedback.
Hi, Brian and customary volume.
And our newer products and our initiatives.
What was kind of expecting.
<unk> 700, newer solutions that you have coming out.
Okay.
Yes Stephen.
This is Ryan so overall the feedback from customers will really good there was.
Eran Zinman: So, overall, we continue to improve the product and also improve our go-to-market. As we mentioned, over time, we open our multiproduct suite to more and more customers, and we're now finalizing the final batch of it. It should be over at the end of Q1.
A mixture of customers that use Monday work management, and CRM and Dev and I think the.
The places where we saw the best feedback was around going deep on our platform. Both in terms of scale and performance, but also a lot of New York features that we have in the roadmap and definitely around security that allows them to increase their usage.
Eran Zinman: So, as more of our users are exposed to our multiproducts and we improve the acquisition engine and improve the features, we've seen acceleration. We shared some of the data during investor day, but overall, we continue to see good momentum with all products.
Overall, the feedback was good it also.
We got great feedback on other customers with ammonia or the thing just seeing the variety of use cases really.
Open the mind of our customers of what they can achieve more out of elevate and we continue to plan to continue and do this event annually.
Eran Zinman: And then obviously, I know you've been trying to focus on larger enterprise customers. We saw a record number of those net new 50k cohort customers. You talked about the big deal.
Going forward and scale the Venezuela.
Okay perfect great.
And then maybe just on the free cash flow guidance for the year.
How should we be thinking about I guess seasonality.
Eran Zinman: Could you just walk us through the pipeline of large deals going into next year? Is that going to continue to be an area of strength? Or is that more seasonal, something you'd expect to happen more in Q4? Hey Brent, it's Iran again.
Looking at the one key strengths in particular are there any factors that we see.
Keeping in mind, there kind of any assumptions on maybe some of the early renewal activity and price increases.
Heading into the quarter.
Sure, It's David Kelly, Ron So with regards to free cash flow I would say that the second quarter and the fourth quarter. This is the time when we pay bonuses in Q2, we pay bonuses for the employees and for the quota carrying people and in Q4 were paying bonuses for the sales quota carrying people. So you would see probably slightly decline if you compare it to <unk>.
Eran Zinman: So definitely, we continue to see good momentum in our pipelines. During investor day, we mentioned accounts with over 25,000 seats, but we continue to see other opportunities like that. Some are smaller, some are larger, but definitely very good momentum in the pipeline. So we expect it to be throughout the year, not just concentrated in Q4.
Q1, overall, because 80% of our customers are on an annual contracts and 20% on monthly this is <unk>.
Something that contributes to the scale and the strength of the free cash flow on the other end you know this allows us to continue to invest.
Steven Enders: Thank you, guys. We'll move next to Steve Enders at Citi. Okay, great. Thanks for taking the questions. Maybe just to start on the Elevate World Tour, I guess, what has been the feedback that you've received. I'm going to start off by saying that we're very excited about the new products that we've had from customers on some of the newer products, newer initiatives, and what was the most excitement around for some of those newer solutions that you have coming out. Yeah, Steven. This is Aran.
Potentially they are going to be quarters that we're going to see opportunity. It's might open an opportunity to invest therefore, there might be some seasonality, but other than what I said, it's pretty much stable throughout the year.
Okay.
Okay perfect. Thanks for taking the questions.
Okay.
We'll go next to Arjun Bhatia at William Blair.
Perfect. Thank you guys.
I'll just ask on the on the new products and it looks like we're set to roll those out to the entire customer base. In Q1 here can you just give us a sense of how you are expecting.
Eran Zinman: So, overall, the feedback from customers was really good. There was a mixture of customers that used Monday for Work Management, CRM, and Dev. And I think the places where we saw the best feedback were around going deep on our platform, both in terms of scale and performance, but also a lot of nuanced features that we have on the roadmap and definitely around security that allows them to increase their usage. Overall, the feedback was good.
Contribution in cross sell from those solutions to take place throughout the year and then maybe one on the go to market as it relates to those do you anticipate at least as you get into the enterprise.
It might be an overlay sales team our specialist sales teams that are just focused on selling.
RM and data, where the whole the whole suite versus.
Eran Zinman: And also, we got great feedback on other testimonials. I think just seeing the variety of use cases really opened the minds of our customers to what they could achieve more out of Elevate. And we continue to plan to continue and do this event annually going forward and scale the event as well. Hey, everybody, great to hear.
Maybe maybe just focusing entirely on wealth management I guess, how do you see the go to market is evolving in these products go out to the entire customer base here.
Yes.
May or June it's ROI, so I'll answer the first part of the pricing and how it looks like throughout the year. So the way we model it and we see that.
Eliran Glazer: And then maybe just on the free cash flow guide for the year, how should we be thinking about, I guess, seasonality of that and, you know, looking at the 1Q strength in particular? Are there any factors that we should be keeping in mind there and any assumptions on maybe some of the earlier renewal activity from price increases coming into the quarter? Sure, Steven. It's Eliran.
Yeah.
We have monthly and yearly so the monthly will be first in the first.
A month or so.
And then throughout the year.
Sure.
Renewal rate comes for a yearly customers they will renew.
Yes, and I think you specifically asked about.
Eliran Glazer: So with regard to free cash flow, I would say that the second quarter and the fourth quarter are the time when we pay bonuses. You know, in Q2, we pay bonuses for the employees and for the quota-carrying people. And in Q4, we're paying bonuses for the self-quota-carrying people. So you would probably see a slight decline if you compare it to Q1. Overall, because 80% of our customers are on an annual contract and 20% are on a monthly contract, this is something that contributes to the scale and the strength of the free cash flow. On the other hand, you know, this allows us to also continue to invest. So potentially, there are going to be quarters that we are going to see opportunities. It might open an opportunity to invest. Therefore, there might be some seasonality. But other than what I said, it's pretty much stable throughout the year.
The cross sell between the mix of products sold.
Just regarding the price increase it was.
Mostly for wealth management, we increased the price of the other products throughout the year.
<unk> shared in previous quarters that we see a large amount of cross sell being done between the products and we continue to see such momentum.
Also in Q4 and go into Q1.
So again like it's hard to model, because it's still small numbers, but.
Would you expect this to be substantial going forward.
Regarding the sales team architecture should so definitely.
We're going to see team specializing in each one of those products. So.
Right now it is.
As more of like one team during the sales process, but we are starting to have more people specialized Intel in CRM and Monday Dev and over time, we're going to see those teams scaling as we scale the revenue for each one of those products.
Arjun Bhatia: Thanks, everybody. Thanks for taking the questions. I'll go next to Arjun Bhatia at William Blair. Thank you guys. I wanted to ask about the new products; it looks like we're set to roll those out to the entire customer base.
Okay perfect that's helpful and then.
Maybe one on the <unk>.
Excellent.
In fact might change I know this year it actually ended up being a pretty.
Roy Mann: Contribution and crossover. Maybe one on the go-to-market as it relates. Page 9 of 9, There might be an overlay sales team or specialist sales. CRM and Dev, or the whole suite versus. The Go-To-Markets Evolved, go out. Hey, Arjun, it's Roy.
A very strong year from a new customer adds perspective.
And with the price increase flaring in.
This year.
How do you anticipate the growth trajectory you might get impacted between <unk>.
Roy Mann: So I'll answer the first part of the pricing and how it looks throughout the year. So the way we model it, we see that we have a monthly and yearly price. So the monthly will be first in the first, like a month or so. And then throughout the year, as the renewal rate comes for yearly customers, they will renew. Yeah, and I think you specifically asked about the cross-sale between the Mutu products. So, just because of the price increase, it was mostly for work management. We increased the price of the other products.
New new net new customer adds versus expansion.
Versus expansions with existing customers.
Yes.
Hi, Troy so.
EBIT stood that of course like the price increase so we can say like we didn't see any material change to the edge.
We get it from the price increase and we obviously the shift to.
There was obviously a small tianjin.
Eran Zinman: Throughout the year, we shared in a previous quarter that we see a large amount of cross-selling being done between the products, and we continue to see such momentum in Q4 and going into Q1. So again, it's hard to model because it's still small numbers, but we do expect this to be substantial going forward. Regarding the sales team architecture, definitely, we're going to see teams specializing in each one of those products. So right now, it's more of one team doing the sales process, but we're starting to have more people specialize in selling CRM and Monday dev. And over time, we're going to see those teams scale as we scale the revenue for each one of those products. Okay, perfect. That's helpful.
Conversion in the number of customers, we get but that's like mostly smaller customers. So overall, we see that as a very positive effect and long term as well.
Alright, perfect. Thank you guys.
Okay.
We will take our next question from DJ Hynes of Canaccord.
Hey, Good morning, guys, maybe just building on the that's right around go to market strategy can you talk about how you're thinking through the strategy with product bundles I'm just curious as the portfolio continues to expand.
Where do you see the most linkage between solutions what might that look like when could you do something on this front any color there would be interesting.
Roy Mann: And then maybe one on how the growth impact might change. I know this year it actually ended up being a pretty, a very strong year from a new customer ads perspective. And, you know, with the price. How do you anticipate the growth trajectory might be impacted? www.youtube.com.au and the Versace Sewing Museum.
Yeah, Hi, DJ it's Ron so the right now we don't offer any bundles yet to our customers. They can buy each product individually and then over time purchase other product as well.
But going forward, we are definitely going to offer a bundle to our customers bear in mind that we also have Monday work canvas and work forums.
Roy Mann: Hi, it's Roy. So, we've A-B tested that, of course, like the price increase. So, we can say, like, we didn't see any material change to the ARR we get from the price increase. And obviously, it's a shift to, but there was obviously a small change in conversion in the number of customers we got, but that's mostly smaller customers. So, overall, we see that as a very positive effect in the long term as well. All right, perfect.
In addition to CRM Devin work management.
So going forward, we're going to offer bundles may be a little bit of discount if you take two to three products.
And maybe offer that as like one solution. So for example.
For our company's focus on and that we might offer Monday that and in addition to that Monday, what's management to manage the projects.
As part of managed just adapting.
David E. Hynes: Thank you, guys. We'll take our next question from D.J. Hynes at Canaccord.
So that's something we probably going to start rolling out this year again, we'll <unk> that and again feedback from our sales team, but definitely something that were going to rollout.
David E. Hynes: Hey, good morning, guys. Maybe just building on the thread around the go-to-market strategy. Can you talk about how you're thinking through the strategy with product bundles? I'm just curious, as the portfolio continues to expand, where do you see the most linkage between solutions? What might that look like? When could you do something on this front? Any color there would be interesting.
In the next year and this year sorry, okay.
Yes understood.
Then as you look at nearly 2300 customers that spend 50, K plus per year.
And how many of those would you say, there's a centralized buying center versus maybe still a dependence on departmental level Decisioning I'm just trying to think about.
At what point, our level of spend the customers start thinking about strategies for standardizing around Monday and kind of what you can do to move that effort board.
Eran Zinman: Yeah, hi, DJ. It's Ron. So right now, we don't offer any bundles yet to our customers. They can buy each product individually and then, over time, purchase other products as well. But going forward, we're definitely going to offer bundles to our customers. Bear in mind that we also have Monday Work Canvas and Work Forms in addition to CRM, Dev, and Work Management. So going forward, we're going to offer bundles, maybe with a little bit of a discount if you take two or three products and maybe offer that as one solution. So, for example, for companies focused on their own development, we might offer Monday Dev and, in addition to that, Monday Work Management to manage projects as part of managing just the development team.
Yes, so Ron again, so I would say its mixed.
Part of it is kind of more top down decision, where the company kind of buys Monday throughout.
The whole company, but like a management decision and some is more department based or VP based in a specific region within the company.
But we're seeing a shift within a sheet, where more and more money.
Monday becomes.
Significant.
Platform within the company driven by management, so definitely there is a shift towards that.
Perfect. Thank you guys for the color.
We will go next to Derrick wood at TB counter.
Great.
Thank you.
Eran Zinman: So that's something we're probably going to start rolling out this year. Again, we'll A-B test that, and we'll get a little feedback from our sales team, but definitely something that we're going to roll out in the next year. Okay. Yep, I understand. And then, as you look at your nearly 2300 customers that spend, And I'm going to ask you a question about the 50K plus per year. In how many of those would you say there's a centralized buying center versus, you know, maybe still a dependence on departmental level decisioning? I'm just trying to think about, you know, at what point or level of spend do customers start thinking about strategies for standardizing around Monday and kind of what you can do to move that effort forward. Yeah, Suran again.
At the Analyst day, you guys guided for.
Base case of high 20% low 30%.
In the medium term and.
Maybe it's not the right way to look at it but if I take the price increase impact out youre guiding for around 25%. So it had below that kind of base case.
Just wondering if you'd flag anything in terms of bringing that down maybe you could comment on the SMB part of the market. Other companies have flagged incremental pressure there and can you just comment on kind of what youre seeing in the middle East given given the war.
Yeah, So hi, tele long winter.
Regards to the guidance, we said that mostly what's going on there were two scenarios that we focused in there was the base case scenario and the wealth lowercase scenario and the thing that we focused on was the MBR, we said based on their.
Eran Zinman: So I would say it's mixed. Part of it is kind of a more top-down decision, where the company kind of buys Mondays throughout the whole company, but it's more of a management decision. And some of it is more department-based or VP-based in a specific region within the company. But we're seeing a shift. We're seeing a shift where more and more Mondays become a significant platform within the company, driven by management. So definitely, there's a shift towards that. Perfect. Thank you guys for the call. We'll go next to Derrick Wood at TB Count.
Behavior of the MDI, we're going to kind of.
See what model fit better two hour.
Throughout the year I think now we feel that it's something in between and as we said, it's going to probably stabilize at age two of this year and we took it into account as part of our guidance. So we embedded into the numbers and this is the main reason for us to kind of assume this guidance with regards to the middle East where we didn't see.
See any impact on our numbers, we are a global company so nothing that.
Derrick Wood: Great. Thank you. At analyst day, you guys guided for a base case of high 20%, low 30% in the medium term. And maybe that's not the right way to look at it, but if I take the price increase impact out, you're guiding for around 25%. So it's had below that kind of base case.
Worth calling out until now.
Since.
It's actually begin begun we actually didn't see anything and hopefully we're going to continue to see no impact on our business.
Great helpful color.
And I'm curious if you guys have pricing going up I guess this week for your existing customers.
Eliran Glazer: Just wondering if you'd flag anything in terms of bringing that down, maybe you could comment on the S&P part of the market. Other companies have flagged incremental pressure there. And can you just comment on kind of what you're seeing in the Middle East given the war? Hi, it's Eliran.
I know this is the first time, you've done that but you can often see pull forward dynamics, where people want to buy walk in seat expansion before pricing goes up.
Would you expect any kind of pull forward in Q1, I'm just curious what youre seeing in terms of buying behavior right now.
Eliran Glazer: With regard to the guidance, we said that mostly what's going on, there were two scenarios that we focused on. There was the base case scenario and there was the lower case scenario, and the thing that we focused on was the NDR. We said based on the behavior of the NDR, we're going to kind of see which model fits better throughout the year. I think now we feel that it's something in between.
Okay.
Yes, Derek it's Ron so.
So far as we said it's onto rollout next week.
Taking into effect.
So far in terms of.
Churn in downgrade, we saw some number is pretty much in line with our expectations.
Within the reaction for customers, where overall good we didn't get any negative reaction.
Eliran Glazer: And NDR, as we said, is going to probably stabilize at H2 of this year, and we took it into account as part of our guidance, so we incorporated it into the numbers. And this is the main reason for us to kind of assume this guidance. With regard to the Middle East war, we didn't see any impact on our numbers.
Overall, our reception customers was good.
Again. This is the first time, we've ever done it not just as a public company, but ever.
So we still we also want to be.
Eliran Glazer: We are a global company, so nothing that has, you know, worth calling out until now. Since it's actually begun, we actually haven't seen anything, and hopefully we're going to continue to see no impact on our business. A great, helpful color.
Cautious and be aware that we're not aware to the whole dynamic of how this will roll out so maybe.
Being more a bit more cautious here at the company, but overall so far the seamless look good.
And I think after Q1, we'll have a better.
Kind of understanding of the dynamic and how this will rollout throughout the rest of the year.
Derrick Wood: And I'm curious, you guys have pricing going up, I guess this week for your existing customers. I know this is the first time you've done that, but you can often see pull-forward dynamics where people want to buy, you know, lock in, and Seeds expansion before pricing goes up. Would you expect any kind of pull forward in Q1? I'm just curious what you're seeing in terms of buying behavior right now. Yeah, Derrick, it's Iran.
Hi, there. This is ilene I'll, maybe I will add that it takes a while for it to layer into the model simply because they are effective when the agreements are signed upon renewals and that happens over the course of time.
The annual or multi year agreements or annual contracts. So this is why we are not really.
Can't anticipate <unk> muscles as Ron said, so far signs are good.
Got it okay. Thank you.
Well move next to Brent Thill at Jefferies.
Thanks.
Eran Zinman: So far, as we said, it's starting to roll out next week, i.e., it will start taking effect. So far, in terms of churn and downgrade, we saw some numbers pretty much in line with our expectations. The reactions from customers were overall good. We didn't get any negative reactions.
Look at that.
Results relative to your guide Q4 was the lowest magnitude beat you've had.
As a public company and I'm just curious was there anything in Q4 that didn't meet your expectations or are we just simply going through a cycle.
Youre still beating but the magnitude is coming down and that's kind of what youre anticipating in the guide.
Eran Zinman: Overall, the reception from customers was good. Again, this is the first time we've ever done it, not just as a public company, but ever. So we also want to be cautious and be aware that we're not aware of the whole dynamic of how this will roll out. So maybe we should be a bit more cautious here at the company. But overall, so far, the signals look good, and I think after Q1, we'll have a better understanding of the dynamic and how this will roll out throughout the rest of the year. Yeah, yeah. And hi there. This is Eliran. Maybe I will add that it takes a while for it to layer into the model simply because they're effective when the agreements are signed, you know, upon renewals. And that happens over the course of time for annual multi-year agreements or annual contracts. So this is why we are not really, you know, can't anticipate all the behavior.
I think everyone's trying to kind of reconcile.
Happened in Q4, and then obviously it seems like that's leaning into that to a more conservative guide for this year.
It had been silicon Yeah, I would say its the latter its.
The macroeconomic headwinds that are still do still exist.
Change from what we've seen in the past I think customers are still cautious with their spend and that is why probably there was an impact on our Q4 results also going into this macroeconomic situation also going into the beginning of this year.
Okay, and just real quick on the Q1 Op margin guide you exited at 10% Youre getting four to six this is just a heavier upfront load or is there anything changing here as it relates to the trajectory of margin.
Sure. So when we did Investor day, we said that our number one focus for 2024 is going to be increasing top line.
Eliran Glazer: But as Eliran said, so far, the signs are good. Got it. Okay. Thank you. We'll move next to Brent Thill at Jeff... Thanks. Q4 was the lowest magnitude, as far as public comment is concerned. And I'm just curious, was there anything in Q4, Page PAGE of NUMPAGES www.verbalink.com, You're still beaming, but the magnitude's coming down, and that's...
Throughout the investment.
There is some seasonality obviously because Q1, you always put more on the performance marketing because this impacted the entire year, but we said that the focus is going to be on the topline and we are not going to improve our operating margin and the way we did in the past.
So I would have expected to improve but this just in.
Brent Thill: Yeah, I would say it's the latter. The macroeconomic headwinds do still exist; they just haven't changed from what we have seen in the past. I think customers are still cautious with their spend, and that is why probably there was an impact on our Q4 results, also going into this macroeconomy situation, also going into the beginning of this year. Okay, and just real quick on the Q1 operating margin guide. Thank you. Thank you. Thank you. Is this just a heavier up-front load, or is anything changing?
In line with what we have set.
Great. Thanks.
We'll go next to George <unk> at Oppenheimer.
Thank you for taking my questions. So with the continued strong adoption of Dev and sales CRM are you seeing any changes to the way you are landing.
With new customers and then on the.
The competitive landscape.
Yeah, Hi, George Suraj so.
Look obviously, when we land with CRM and that we see different competitors.
Eliran Glazer: Sure, so when we did invest today, we said that our number one focus for 2024 is going to be increasing the top line through investment. There is some seasonality, obviously, because Q1 you always put more on performance marketing because this impacts the entire year, but we said that the focus was going to be on the top line, and we are not going to improve operating margin in the way we did in the past. So, I would have expected them to improve, but it's just in line with what we have said. We'll go next to George Iwanyc at Oppenheimer.
As opposed to work management.
I would say that still 50% of the deals so far that we saw in CRM.
<unk>.
We didnt compete with anybody outside the rest of the 50% people will consider Monday compared to other players and in terms of the work management. It's pretty much remained the same I'll say, 70% Greenfield and then the rest we see some competition.
A little bit more competition in CRM and Dev, but still.
We see other but as I mentioned, we see other players that we compete against in those specific products.
George Michael Iwanyc: Thank you for taking my questions. So with the continued strong adoption of Dev and Sales CRM, are you seeing any changes to the way you're landing, both with new customers and then in the competitive landscape? Yeah. Hi George. This is Ron.
Just following up on that can you give us maybe some color on the work you're doing on the services side and do you have any.
Feedback on how the timing of that launch the go forward this year.
Eran Zinman: So, Look, obviously, when we land on CRM and Dev, we see different competitors as opposed to work management. I would say that still 50% of the deals so far that we saw in CRM and Dev, we didn't compete with anybody. I would say the rest of the 50% people will consider Monday compared to other players.
Yes, so we continue to build the Monday service and plan to launch it on schedule.
Two this year, so far we have a bunch of customers and beta feedback. So far is really good and as I've mentioned like we had our users a lot of our users already using Monday to manage some aspect of it.
Eran Zinman: And in terms of work management, it pretty much remained the same. I would say 70% Greenfield, and then the rest; we see some competition. So there's a little bit more competition in CRM and Dev, but still, we see other, but as I mentioned, we see other players that we compete against in those specific products. Just following up on that, can you give us maybe some color on the work you're doing on the services side and, you know, do you have any... Feedback on how the timing of that launch could go forward this year.
And service within the company so.
We talk with them, we learn from them and that's going to.
Sets. The set of features that we're going to launch as part of the.
First version.
Thank you.
We'll go next to tailor mcginnis at UBS.
Yeah, Hi, thanks, so much for taking my question on <unk> can you comment on the performance of the quarterly number and what your thoughts towards their stabilization with the three key numbers such that we can begin to see and Dr. Trough or are you still seeing pockets of incremental weakness in the macro and if so what is that.
Eran Zinman: Yeah, so we continue to build the Monday service and plan to launch it on schedule H2 this year. So far, we have a bunch of customers in beta, and feedback so far is really good. And as I mentioned, a lot of our users were already using Monday to manage some aspects of ITSM and service within the company. So we talked with them, we learned from them, and just kind of... set the set of features that we're going to launch as part of the first version. Thank you. We'll go next to Taylor McGinnis at UBS.
Looked like.
So hi, silicon by and large we are still seeing it stabilizing pretty flat what we have seen.
In prior monthly trailing 12 months, obviously with the impact of price increase and potentially all the additional products and add ons that we are adding to our customers and incremental value. We expected as I said to get better in H two of this year.
Taylor McGinnis: Yeah, hi. Thanks so much for taking my question. On NDR, can you comment on the performance of the quarterly number and what you saw? So, was there stabilization with the 3Q number such that we can begin to see NDR trough, or are you still seeing pockets of incremental weakness in the macro? And if so, you know, what does that look like?
Great. Thank you.
Yeah.
Our next question comes from Jason <unk> at Keybanc capital markets.
Great. Thanks for fitting me in and all the color so far.
One question on linearity curious what you saw in terms of top of funnel demand and conversion and the exiting of the quarter and then anything in the first few weeks, if you're willing to provide.
Eliran Glazer: Thanks. So, hi, this is Eliran. By and large, we're still seeing it stabilizing pretty flat compared to what we have seen, you know, in prior monthly trading 12 months. Obviously, with the impact of price increases and potentially, all the additional products and add-ons that we are adding to our customers and incremental value, we expect it, as I said, to get better in H2 of this year. Great, thank you. Our next question comes from Jason Salino at KeyBank Capital Markets. Great, thanks for fitting me in and all the color so far. You know, one question on linearity, curious what you saw in terms of top of funnel demand and conversion, you know, exiting the quarter, and then anything in the first few weeks, if you're willing to provide. Yeah, hi, it's Rui.
Yeah, Hi, <unk>, so well.
And we see very healthy top of funnel activity like.
Yeah.
We increased marketing we feel more leads more pipeline generated so it's all in line with what we expected.
Okay. Thanks.
And then maybe as my quick follow up.
Environmental performance based marketing.
Pricing I think it's kind of stabilized over the last several quarters, but let me think about the upcoming year are you baking any change here from what we saw in 2023.
Yes, Jason this is Ron so so it's pretty much in line with what we saw last years overall.
Prices compared to the past are still lower but stabilized and doesn't improve more than that.
We said we saw very healthy so far.
Jason Salino: So we see very healthy top of the funnel activity, like we increased marketing, we saw more leads, and more pipeline generated. So it's all in line with what we expected. Okay, excellent. And then, you know, maybe my quick follow-up: the environment for performance-based marketing, the pricing, I think it's kind of stabilized over the last several quarters, but when we think about the upcoming year, are you making any changes here from what you saw in 2023? Yeah, Jason, this is Iran.
But right generation of new customer sign ups coming into 2024.
So overall pipelines healthy cost of that pipeline is also healthy in line with what we saw last year.
Patiency more or less remains the same.
Thank you.
Okay.
We will go next to Ivan <unk> Zap at Tigris Tigress financial partners.
Hi, Good morning, Thank you for taking my question.
What do you see the functionality is being like the biggest driver of new customer adoption or a customer increase use.
Eran Zinman: So, it's pretty much in line with what we saw last year. Overall prices compared to the past are still lower, but stabilizing doesn't improve them more than that. As we said, we saw very healthy pipeline generation and new customer signups coming into 2024. So, overall, the pipeline is healthy, and the cost of that pipeline is also healthy, in line with what we saw last year.
Yes, Ivan this is Ron so I wont say its much of specific product functionality I think it's a combination of our efficient performance marketing engine and also.
Our products are becoming more and more dominant.
So our products will allow us to acquire customers from different parts within the company. So the VP of sales the VP of R&D work.
Eran Zinman: So, efficiency more or less remains the same. Thank you. We'll go next to Ivan Feinzeff at Tigris Financial Park. Good morning.
Work management, obviously, so that in addition to our existence performance marketing engine just allow us to have a very healthy customer acquisition engine.
Ivan Feinzeff: Thank you for taking my question. What do you see the functionality as being like the biggest driver of new customer adoption or, Yeah, Ivan, this is Ron, so I wouldn't say it's much of a specific product functionality. I think it's a combination of our efficient performance marketing engine and also our products becoming more and more dominant, so our products would allow us to acquire customers from different parts within companies, so the VP of sales, the VP of R&D, work management, obviously. So that, in addition to our existing performance marketing engine, just allows us to have a very healthy customer acquisition engine. And what do you see, though, as the biggest use? The Bulletproof Executive 2013, Hi, it's Rui.
And what do you see though is the biggest use case is that new customers are signing up for where we are using it for.
Yeah, Hi, <unk>. So our biggest segment by far is the work management, which is very very we have like very different use cases within work management, whereas in the CRM and Dev, it's more focused on being more specific more targeted obviously.
And so.
And with that our ability to target to work management in the long run it is very broad.
And one last question, where do you see the opportunity to rollout increasing AI functionality within in a lot of these products.
Alright, three again so.
Roy Mann: So, our biggest segment by far is work management, which is very varied. We have very different use cases within work management, whereas in CRM and Dev, it's more focused on being more specific, more targeted, obviously. So, with that, our ability to target work management at the moment is very broad. And one last question, where do you see the opportunity to roll out increasing AI functionality within NLM? Hi, it's Roy again.
AI is the core part of the way, we see the platform evolve like we.
We've introduced like.
Investor Day, a few.
The areas, we're launching AI in it.
And currently we launched some of the few.
One building block in the automation segment, and we see great enthusiasm around it because we really allow.
Our customers to build and kind of.
Use AI.
On their own how they want it in their workflows.
Roy Mann: So AI is a core part of the way we see the platform evolve. Like we've introduced at investor day a few areas where we're launching AI, and currently, we launched some of the first building blocks in the automation segment, and we see great enthusiasm around it because we really allow our customers to build and kind of use AI on their own how they want it in their workflows. And we are also thinking about and doing adding AI to the core of the service when we launch it and other products. So we're, I put a lot of emphasis there, as we think this will allow us to grow a lot and again, democratize AI and give it to our customers.
And we are also thinking about and doing adding AI and.
The core of service when we launched it and other products. So we are in.
And I put a lot of emphasis there is we think this is.
It will allow us to grow a lot and again like democratize AI and give it to our customers.
And then one last question to kind of support the price increase where do you see the development of added value there.
We'll help easier youre clients easier pay the price increase.
So.
Rory again, so like Ron mentioned we've.
We've never done this before.
So I think the feedback we got until now from customers is that they get it like we've added so much value in the past few years.
Roy Mann: Then one last question to kind of support the price increase, where, Development of Added Value, www.thevenusproject.com, Hey, so Roy again, so like Eran mentioned, we've never done this before, so I think the feedback we got until now from customers is that they get it, like we've added so much value in the past few years to the platform without increasing the price, and so I think it's, we see acceptance of that change now, so I think it's behind us, as well as always bringing more value to the platform. So we see wide acceptance of the new price. We'll go next to Scott Berg at Needham & Company. Hi, everyone. Two questions for me.
To the platform without increasing the price.
And so I think it's we see acceptance of that change now so I think it is behind us as well.
Always bringing more value to the platform.
So we see wide acceptance of the new price.
We'll go next to Scott Berg with Needham <unk> company.
Yes.
Hi, everyone two questions for me. Thank you.
First of all with more proof points on the AI side with Monday AI.
How much more confident are you on the companys ability to actually monetize some of the functionality and Theyre just now that you've had more of a chance to get some feedback from customers.
Scott Berg: Thank you. First of all, with more proof points on the AI side with Monday AI, I guess, how much more confident are you in the company's ability to actually, and how you've had, you know, more of a... Hi, so this is a great question. I think we are, it's still ahead of us, like baking pricing specific to AI, although we're thinking about and working on it. I do think it will allow us to penetrate faster and, you know, get more market segments for the products that we include AI in. So I see a lot of upside there, but we're still working on monetizing the AI, and like automation is an example, we just launched it, so I think it's too early days to say how impactful the pricing of that will be. Got it helpful, and then my follow-up question is on your million-dollar customer cohorts that, or excuse me, 100k, 1,000 customer cohorts that you're announcing.
Hi, So this is a great question.
I think we are.
It's still ahead of us like baking.
Pricing specific to weigh a little lower.
Thinking and working on it I do think it will allow us to penetrate faster and get more market segment for the products that we.
Include AI width.
So I see a lot of upside there.
But we're still working on.
On monetizing the AI and <unk>.
Like automation as an example, we just launched it so I think it's too much early days too.
And to say, how impactful the pricing of that will be.
Okay.
Got it helpful. And then my follow up question is on your million dollar customer cohorts.
Or.
Or excuse me 100, <unk> thousand customer cohorts that you're announcing I know at the conference at the Analyst Day, you announced at your largest customer ever at 25000 seats historically theres been a big focus on seat expansion and moving into some of these larger accounts, but as we think about that cohort going forward how much of the growth there will be driven by customers expanding seats.
Scott Berg: I know at the conference, the analyst announced that you're the largest customer ever at 25,000. Historically, there's been a big focus on seed expansions and moving into some of these larger, But as we think about that cohort going forward, how much of the growth there will be driven by customers? Page 10 of 10, Yeah, hi, it's Ron. So I would say that the vast majority of growth is probably going to be by seed expansion, but we'll also be able to sell them more functionality, the new products, add-ons we're preparing, we're going to launch, so like extension modules. But overall, you know, those enterprise accounts tend to increase more in terms of seats and usage over time, as opposed to smaller businesses where it's harder for them to extend the number of seats.
Or adding additional functionality that theyre going to be paying in top of the.
The core user charges.
Yes, Hi, Turan, so I would say that the vast majority of growth is probably going to be by seat expansion, but also we were able to sell them more functionality the new products add ons.
We're going to launch so like extension module.
But overall.
Those enterprise accounts tend to increase more in terms of seats and usage over time.
Posed to smaller businesses that it's harder for them to extend.
Extend the amount of seats.
Eran Zinman: So overall, like this cohort, we expect it to have better NDR and more seat expansion over time. Great, thank you. And that concludes the question and answer session and today's conference call. Thank you for your participation. You may now disconnect.
Like this quarter, we expect it to have better endear Morris at extension overtime.
Okay.
Great. Thanks for taking my questions.
And that concludes the question and answer session and today's conference call. Thank you for your participation you may now disconnect.
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Okay.
Yes.
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