Q2 2024 monday.com Ltd Earnings Call

August 12, 2024

Thank you for standing by.

Operator: Thank you for standing by. I would like to welcome everyone to the Monday.com second quarter fiscal year 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press the star and the number one on your telephone keypad. And if you'd like to withdraw your question, press star 1 again. I would now like to turn the call over to Byron Stephens, Vice President of Investor Relations. Please go ahead.

Michael Funk: Our next question comes from the line of Michael Funk from Bank of America.

Operator: I would like to welcome everyone to the Monday.com second quarter fiscal year 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Speaker Change: I would like to welcome everyone to the Monkey Dot Com second quarter fiscal year 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Speaker Change: After the Speakers' remarks, there will be a question and answer session.

Speaker Change: If you'd like to ask a question. During this time simply press star and the number one on your telephone keypad.

Speaker Change: If you'd like to withdraw your question Press Star one again.

Operator: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star and the number 1 on your telephone keypad. And if you'd like to withdraw your question, press star 1 again. I would now like to turn the call over to Byron Stephens, Vice President of Investor Relations. Please go ahead.

Speaker Change: I would now like to turn the call over to Byron Stevens Vice President of Investor Relations. Please go ahead.

Michael Funk: Great. Thank you for the question this morning. You know, I think you briefly mentioned earlier that, you know, part of what you're seeing is consolidation, you know, a small part of your growth, but still seeing it. Anything to call out on your product advantage or the reason customers are consolidating on to Monday, or maybe why they're moving away from competitor products?

Byron Stephens: Hello, everyone, and thank you for joining us on today's conference call to discuss the financial results for Monday.com's second quarter, fiscal year 2024. Joining me today are Roy Mann and Eran Zinman, co-CEOs of Monday.com, and Eliran Glazer, Monday.com CFO.

Eran Zinman: Yeah, hi, Mike, this is Eran. I think the main reason why what we've seen, again, it's not huge numbers, but, you know, it's definitely a little bit growing. The customer consolidated on Monday, mainly because it can do many things because of its flexibility. I think where other products, you know, don't have this ability is where they're kind of built for one purpose. And then if you want to add more use cases or want to add, kind of consolidate, other products, it's almost impossible technically to do it.

Byron Stephens: Hello, everyone, and thank you for joining us on today's conference call to discuss the financial results for Monday.com's second quarter of fiscal year 2020. Joining me today are Roy Mann and Eran Zinman, Co-CEOs of Monday.com, and Eliran Glazer, Monday.com CFO. We released our results for the second quarter of fiscal 2024 earlier today. You can find our quarterly shareholder letter, along with our investor presentation and a replay of today's webinar, 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, which reflect management's best judgment based on currently available information. These statements involve risk and uncertainties that may cause actual results to differ from our expectations.

Byron Stevens: Hello, everyone and thank you for joining us on today's conference call to discuss the financial results for Monday Dot Coms second quarter fiscal year 2020 for.

Speaker Change: Joining me today are really man in Aaron's Zinman co Ceos of Monday, Dotcom and al around Glaser money Dotcom CFO.

Byron Stephens: We released our results for the second quarter of fiscal 2024 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, which reflect management's best judgment based on currently available information. These statements involve risk and uncertainties that may cause actual results to differ from our expectations.

Speaker Change: We released our results for the second quarter of fiscal 2024 earlier today.

Speaker Change: 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.

Speaker Change: Certain statements made on the call today will be forward looking statements, which reflect managements best judgment based on 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.

Byron Stephens: 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.

Byron Stephens: Please refer to our earnings release for more information on the specific factors. Page 10 of 10, Additionally, non-GAAP financial measures will be discussed on the Reconciliations to the Most Directly Comparable Gap Finan are available in the earnings release and the earnings presentation for today's call, which are posted on our investor relays. Now, let me turn the call over to Roy.

Speaker Change: Looking statements.

Ray: 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 let me turn the call over to Ray.

Eran Zinman: And with Monday, a lot of our customers managed to do it and kind of consolidate different products they're using into the platform. So just by the nature of the flexibility, it allows our customers to do more and more of that consolidation.

Roy Mann: Thank you, Byron, and thank you, everyone, for joining us today. Since our debut on NASDAQ three years ago, we have made significant progress in realizing our vision of becoming the platform to run the core of all work for customers. In that time, we have transitioned from a single product offering to a true platform with multiple products. This transition and our strong execution have allowed us to nearly double our customer base, triple annual recurring revenue, and increase our largest customer seat count tenfold.

Eliran Glazer: Thank you for that. And that's a comment on the macro. I know you mentioned you are seeing some macro impact, but an interesting quarter with some other software companies, you know, highlighting a real slowdown in the end of the quarter and demand. So, you know, love to hear your thoughts and maybe why you're seeing less macro impact. And then, you know, if there's been any shift in, you know, in incentives, you know, sales force compensation that you've implemented to maybe address some of the some of the weak macroeconomics

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

Eliran Glazer: Yeah, hey, Mike, it's Eliran. So maybe, as we said earlier, the demand environment, you know, in general, is still a bit inconsistent and choppy. But for us, we emphasize the past. So despite the macro challenges, we see steady demand across all segments. SMB is an area of strength for us, but also mid market and enterprise continue to grow in a very nice way. So it's not related to the fact that we implemented a new compensation program.

Ray: Since our debut in NASDAQ3 years ago, we have made significant progress in realizing our vision of becoming the platform to run the core of all work for customers in that time, we have transitioned from a single product offering to a true platform with multiple products.

Ray: This transition and our strong execution has allowed us to nearly double our customer base triple annual recurring revenue and increase our largest customer seat count 10 fold.

Roy Mann: Despite our impressive growth trajectory aside, Monday.com's unique strength lies in our ability to achieve this expansion while driving operational efficiency. This quarter, we achieved a record non-GAAP operating profit and notably attained GAAP operating profitability for the first time in the company's history. Our investment in the enterprise go-to-market and platform infrastructure through MondayDB continued to yield promising results. In December 2023, we announced a significant increase in our largest seed count, growing over threefold to 25,000. This quarter, we are pleased to announce another significant milestone. Our largest seed count has more than tripled once again to reach 80,000.

Ray: Our impressive growth trajectory aside Monday dotcoms unique strength lies in our ability to achieve this expansion while driving operational efficiency. This quarter, we achieved a record non-GAAP operating profit and notably at turns GAAP operating profitability for the first time in the company's history.

Eliran Glazer: This is the very early days of this implementation, but hopefully, over time, we're going to see the benefits of that, as we continue to kind of segregate between segments and the way we compensate the salespeople for each segment. I would say it's also related to the fact that, you know, our gross retention is at a record level. Although we see a kosher spend environment, we're encouraged by the fact that, you know, customers are unlocking the value of the Monday platform as we continue to add more value and more features and functionality. Great, thank you for your time.

Ray: Our investments in the enterprise go to market and platform infrastructure through Monday debate continues to yield promising results in December 2023, we announced a significant increase in our largest seat count growing over three fold to 25000. This quarter. We are pleased to announce another significant milestone are.

Roy Mann: This quarter, we are pleased to announce another significant milestone. Our largest seed count has more than tripled once again to reach 80,000. Beginning with the finance and product teams to address multiple use cases, this multinational healthcare company rapidly extended its Monday usage to encompass additional teams within the organization. Impressing its WorkOS ease of use and customization capabilities, the company made a strategic decision in Q2 to expand Monday work management across the entire organization to address all work and project management needs. Let me now turn it over to Eran to walk you through some of our product highlights for the quarter.

Ray: Larger seat count has more than tripled once again to reach 80000 seats.

Roy Mann: Beginning with the finance and product teams to address multiple use cases, this multinational health care company rapidly extended its Monday usage to encompass additional teams within the organization. Impressing its WorkOS's ease-of-use and customization capabilities, the company made a strategic decision in Q2 to expand Monday work management across the entire organization to address all work and project management needs. Let me now turn it over to Eran to walk you through some of our product highlights for the quarter. Thank you, Roy.

Ray: Beginning with the finance and product teams to address multiple use cases. This multinational health care company rapidly extended its Monday usage to encompass additional teams within their organization impressed by our workhorse is ease of use and customization capabilities. The company made the strategic decision in Q2.

To expand Monday work management across the entire organization turned dress. All work is project management needs. Let me now turn it over to Ron to walk you through some of our product highlights for the quarter.

Unknown Attendee: Great. Thank you for the time. Sure. Thank you. Our next question comes from the line of D.J. Hunt from Canaccord Genuity. Your line is open. Hey guys, congrats on a nice course.

Ron: Thank you Roy.

D.J. Hynes: Our next question comes from the line of D.J. Hynes from Canaccord Genuity.

Eran Zinman: Our efforts to enhance our underlying architecture with MondayDB remain on schedule and will reach another exciting milestone in Q2 with the launch of MondayDB 2.0. MindDB 2.0 will elevate scalability, enabling customers to manage boards with up to 100,000 items and linked items, and dashboards with up to 500,000 items. Significantly advancing work capability. AI continues to be a top priority, and we're actively integrating it across all areas of. In mid-2023, we deployed a third-party GNI chatbot for managing chat-based customer services. Yielding Impressive Results, the chatbot has resolved around 50% of customer service tickets automatically.

Ron: Our efforts to enhance our underlying architecture with Monday DB remains on schedule and Richard another exciting milestone in Q2 with the launch of money DB to point out.

Eran Zinman: Yeah, hi, Vijay. It's Eran.

Ron: Mainly be 2.0 well.

Eran Zinman: Unfortunately, from my own experience, spending more on R&D doesn't always correlate with more execution. So, I wish this was the case, but, you know, being efficient in terms of R&D, developers, product, and designers has always been a goal for us, and it's very important for us. You know, often what we've found is sometimes having less people on the team makes the team more efficient as opposed to having a lot of people on the team. And, you know, you've seen our execution over the years. We always believe in, you know, high-velocity execution.

Ron: Elevates scalability, enabling customers to manage board with up to 100000 items and linked items.

Richard: And dashboards with up to 500000 items.

Eran Zinman: Significantly advancing their work capabilities. AI continues to be a top priority, and we are actively integrating it across all areas of Monday. In mid-2023, we deployed a third-party GNI chatbot for managing chat-based customer service, Yeldin, Impressive Results. The chatbot has resolved around 50% of customer service tickets automatically. The initial success led to a significant increase in chat ticket volume and reduced our reliance on external support for ticket management, as customers benefit from the chatbot's quick and accurate response.

Richard: Significantly invest in the what capabilities.

Richard: AI continues to be a top priority and we are actively integrated across all areas of Monday.

Speaker Change: Mid 2023, we deployed a third party Gen AI chat bot for imagine Chet best customer service tickets, yielding impressive results. The chatbot is resolved around 50% of customer service tickets automatically.

Eran Zinman: We try to make an impact with our product teams and give them a lot of ownership. So we're very proud of how we manage our R&D team and execution. In terms of the percentage of spend, it might go up a little bit in terms of maybe Eliran can add more calls on this, but we're keen to keep our efficiency and, even more than that, we're keen to continue and execute as we scale the company. Yeah. Hi, it's Eliran.

Eliran Glazer: Maybe, DJ, just to add that, you know, in terms of R&D, we always want to hire. This is the number one priority for hiring, bringing resources to Monday, but, you know, the flip side of it, if you compared us to Atlassian, there is always, like, if you look at S&M and R&D, I would look at them together because it's also important to understand the other divisions as well So S&M, we're able to reduce, you know, the cost of a percentage of revenue in the case of other companies.

Eran Zinman: The initial success led to a significant increase in chat ticket volume and reduced our reliance on external support for ticket management. These customers benefit from the ChessBot Quick and Accurate Response. We expect this trend to continue through 2025 and beyond, as GenAI further enhances our efficiency in meeting customer needs. Additionally, we are leveraging GenAI to improve the user experience through advanced automation and task management collaboration. In Q2, we'll introduce the new GenAI features to the Monday platform. Including auto-generated action items, thread summaries, and enhanced text extraction capability.

Speaker Change: The initial success at led to a significant increase in jet ticket volume and reduce our reliance on external support for ticket management.

Speaker Change: As customers benefit from the chatbot quick and accurate responses.

Eran Zinman: We expect this trend to continue through 2025 and beyond, as GenAI further enhances our efficiency in meeting customer needs. Additionally, we are leveraging GenAI to improve the user experience through advanced automation and task management collaboration. In Q2, we will introduce new GenAI features to the Monday platform, including auto-generated action items, thread summaries, and enhanced text extraction capabilities.

We expect this trend to continue through 2025 and beyond at Jennie I further enhances our efficiency and meeting customer needs.

Speaker Change: Additionally, we're leveraging gen AI to improve the user experience through advanced automation and tax management collaboration.

Speaker Change: In Q2, we introduced the new Gen AI features the Monday platform.

Auto generated action items threat summaries and enhanced text extraction capabilities.

Eran Zinman: We continue to make significant progress in enhancing and expanding our product suite. Monday CRM has been a major success, and it continues to exceed expectations, expanding to over 20,000 accounts since its launch in 2022. In Q2, we introduced several new features, including email engagement tracking and timeline reminders, to further enhance its functionality. For Monday Work Management, we are focused on addressing the needs of larger accounts. In Q2, we will launch our portfolio solution for enterprise work management, which has already shown strong initial adoption.

Eran Zinman: To continue to make significant progress in enhancing and expanding our products. Monday CRM has been a major success, and it continues to exceed expectations. Expanded to over 20,000 accounts since its launch in 2022. In Q2, we introduced several new features, including email engagement tracking and timeline reminders. Footer Enhancement Functionality.

Speaker Change: We continue to make significant progress in enhancing and expanding our product suite.

Speaker Change: Monday CRM has been a major success and it continues to exceed expectations extending to over 28000 accounts since its launch in 2022.

Speaker Change: In Q2, we introduced several new features including email engagement tracking and timeline reminders the photo enhances such analogy.

Eran Zinman: For Monday Work Management, we are focused on addressing the needs of larger accounts. In Q2, we launched our portfolio solution for enterprise work management, which has already shown strong initial adoption. Monday Dev continues to resonate with customers by offering a comprehensive suite of tools for managing the entire development process.

Speaker Change: For Monday work management, we are focused on addressing the needs of larger accounts in Q2, we launched our portfolio solution for enterprise work management, which has already shown strong initial adoption.

Eran Zinman: Monday Dev continued to resonate with customers by offering a comprehensive suite of tools for managing the entire development process. This quarter, we introduced the Roadmap Tracker, which enables users to visualize company APEX, track progress, and focus on key commitments. And finally, our latest product, Monday Service, is now in beta and is scheduled for full release by the end of 2024. We remain highly enthusiastic about its potential. In closing, we are less than a month away from the kickoff of our annual conference, Elevate.

Speaker Change: Monday Dev continue to resonate with customers by offering a comprehensive suite of tools for managing the entire development process. This quarter, we introduced our roadmap tracker, which enables users to visualize company ethics track progress and focus on our key commitments.

Eran Zinman: This quarter, we introduce the Roadmap Tracker, which enables users to visualize the company app, track progress, and focus on key commitments. And finally, our latest product, Monday Service, is now in beta and is scheduled for full release by the end of 2024. We remain highly enthusiastic about it. Closing, We are less than a month away from the kickoff of our annual conference, Elevate. Elevate is a must-attend event for Money.com passionate customers and anyone excited about. This year's Elevate will take place in London, New York City, and Sydney over the coming months.

Speaker Change: And finally, our latest product Monday service is now in beta and the schedule for full release by the end of 'twenty 'twenty four will remain highly enthusiastic about its potential.

Eliran Glazer: Sometimes it can be the other way around. So, you know, I think that, all in all, investment in R&D is the top priority for us, and we continue to be efficient, but definitely, this is something that we would like to highlight. Yeah, I'll do that

Speaker Change: In closing.

Steve Enders: Our next question comes from the line of Steve Enders from Citibank.

Speaker Change: We have less than a month away from the kickoff of our annual conference elevate.

Eran Zinman: Elevate is a must-attend event for Monday.com passionate customers and anyone excited about work. This year's Elevate will take place in London, New York City, and Sydney over the coming months. Please join us live or online as we will share our vision, strategy, and product roadmap, allowing you to gain deeper insights into our product and future plans. With that said, I'll now turn it over to Eliran to cover our financials and guidance. Thank you, Eran, and thank you to everyone for joining us.

Speaker Change: Elevate is a must attend event for money dotcom passionate customers and anyone excited about work deck.

Speaker Change: This is elevate will take place in London, New York City, and Sydney over the coming months. Please.

Eran Zinman: Please join us live or online as we will share our vision, strategy, and product roadmap, allowing you to gain deeper insights into our product and future. With that, I'll now turn it over to Eliran to cover our financials and guidance. Thank you, Eran, and thank you to everyone for joining our call.

Please join us live or online as we will share our vision strategy and product roadmap, allowing you to gain deeper insights into our product and future plans.

Speaker Change: With that I'll now turn over to Iran to cover our financials and guidance. Thank you Ron and thank you to everyone for joining our call before I walk you through our second quarter, resulting detail. Let me first give you a brief update on pricing power.

Eliran Glazer: Thank you, Eran, and thank you to everyone for joining our call. Before I walk you through our second quarter results in detail, let me first give you a brief update on pricing. Our new pricing structure that was introduced in Q1 2024 continues to yield positive results and has now been extended to approximately 40% of our customer base. We maintain our forecast of a $25 million revenue benefit from this new pricing structure for fiscal year 2024.

Steve Enders: Okay, great. Thanks for taking the questions here. I guess maybe just to start, I want to ask about the annual customers coming up for renewal and the impact that the price increases are having on that base. Is there a way to frame kind of how those conversations are trending and how much of the price increases are being adopted today versus maybe that driving discussion to drive more adoption and maybe the price increase will come in kind of later, or in fact, will come in later down the line?

Eliran Glazer: Before I walk you through our second quarter results in detail, let me first give you a brief update on pricing. Our new pricing structure that was introduced in Q1 2024 continues to yield positive results and has now been extended to approximately 40% of our customer base. We maintain our forecast of a $25 million revenue benefit from this new pricing structure for FY24, with a projected total revenue benefit of $75 to $80 million from FY24 to FY26.

Eliran Glazer: Sure, hi Steve, it's Eliran. So in terms of price increase, we already communicated, you know, to I would say around 40% for our customers. The price increase. Just as a reminder, we ended last year with 225,000 customers, significantly higher than, you know, some of our peers. So, on that front, we also would like to mention that we anticipate total customer account growth around, you know, to grow this year in the high single digits.

Eliran Glazer: The fact that we basically implemented the price increase, obviously, the ones that were kind of small users or, you know, students or small companies that didn't see the value would have expected churn. So now we're focused on more high-value customers. With regard to the enterprise customers, obviously, they are in a higher tier. So there are negotiations going on. You know, reception was very good, but it's important to mention, you know, the thing that I highlighted as part of us continuing to onboard the pricing.

Iran: Our new pricing structure that was introduced in Q1 24 continues to yield positive results and has now been extended to approximately 40% of our customer base, we maintain our forecast of a $25 million in revenue benefit from this new pricing structure for fiscal year 'twenty four we.

Eliran Glazer: We project a total revenue benefit of $75 to $80 million from fiscal year 2024 to fiscal year 2026. We delivered strong results in Q2, marked by robust revenue growth and enhanced profitability. These results highlight our effective execution and the strong demand for our work operating system products across companies of all sizes.

Iran: With projected total revenue benefit of 75 to 80 million from fiscal year 'twenty four to fiscal year 'twenty six.

Eliran Glazer: We delivered strong results in Q2, marked by robust revenue growth and enhanced profitability. These results highlight our effective execution and the strong demand for our work operating system products across companies of all sizes. Total revenue in Q2'24 came in at $236.1 million, up 34% from the year-ago quarter. Our overall net dollar retention rate was stable in Q2'24 at 110%, reflecting recent pricing updates and strong demand for our work operating system products.

Steve Enders: Okay, that's a helpful context there. And then I guess maybe we should think about the impact on metrics. I mean, the, you know, 50k, 100k ads came in pretty solid. How much of that is attributable to the pricing increases coming in here? And how should we think about the trends on those ads throughout the rest of the year?

Eran Zinman: Yeah, hi Steven, it's Eran. So I don't think it's had almost any impact on the growth in terms of the 6K and 100K. Those conversations take longer; we expect the, you know, the kind of first sort of price increase to finish by the end of Q3 of next year. I think that's where most of the enterprise accounts, definitely above 50K, will renew and, you know, will benefit from the price increase for those accounts. So it will take another kind of full year to do the full cycle for those enterprises.

Iran: We delivered strong results in Q2 marked by robust revenue growth and enhance profitability. These results highlight our effective execution and the strong demand of our walk operating system products across companies of all sizes.

Unknown Attendee: Okay, perfect. Thanks for taking the question.

Eliran Glazer: Total revenue in Q2'24 came in at $236.1 million, up 34% from the year-ago quarter. Our overall net dollar retention rate was stable in Q2'24 at 110%, reflecting recent pricing updates and strong demand for our work operating system products. We continue to anticipate reported NDR to remain stable throughout FY24, with an expected small improvement by the end of the year. As a reminder, our NDR is trailing 4.25 weighted average calculations.

Scott Berg: Thank you. Our next question comes from the line of Scott Berg from Needham Company.

Iran: Total revenue in Q2 24 came in at 236 million 0.1 up 34% from the year ago quarter. Our overall net dollar retention rate was stable in Q2, 24, it's 110%, reflecting the recent pricing updates and strong demand for our work operating system products, we continue to anticipate that.

Scott Berg: Hi everyone. Really nice quarter here. I had a question on the 80k seat deal, certainly more than the last largest customer size of 25k we heard last year. But as you think about a deal that size, is that customer fundamentally purchasing anything different in terms of feature functionality, relative to maybe another customer at 500 or 1000?

Roy Mann: Hi, it's Roy here. So basically, I'm sorry about that. So essentially, they're not using us for anything materially different just at scale. So they did take us on the work management ticket, managing projects, portfolios, and workflows across the organization. They understand our roadmap; they've been with us for a long time. And essentially, when you reach those scales, there are things that are needed from the platform, like, let's say, different user management and other such governance features, which we do have.

Roy Mann: And so, and I'm working on it all the time. So the product, the core product is the same, but the, let's say, management around it is a bit different. And we have been working on those things for a long time.

Eliran Glazer: We continue to anticipate reported NDR to remain stable throughout FY24, with an expected small improvement by the end of the year. As a reminder, our NDR is trailing 4.25 weighted average calculations. For the reminder of the financial metrics disclosed, unless otherwise noted, I will be referencing non-GAAP financial measures. We have provided a reconciliation of GAAP to non-GAAP financial measures in our earnings release.

Iran: Ported India ought to remain stable throughout fiscal year 'twenty. Four we then expect that small improvement by the end of the year.

Speaker Change: As a reminder, our NDA was 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 financial in our earning release second quarter gross margin was 91% in the medium term.

Eliran Glazer: For the reminder of the financial metrics disclosed, unless otherwise noted, I will be referencing non-GAAP financial measures. We have provided a reconciliation of GAAP to non-GAAP financial measures in our earnings release. Second quarter gross margin was 91%. In the medium to long term, we continue to expect gross margin to remain in the high 80s range.

Roy Mann: understood helpful. And then Eliran, as I look at your gross margins, they were an all-time high in the quarter, greater than 90%. Should we assume that they're going to remain greater than 20% or, excuse me, greater than 90% going forward, you know, especially with how you've been able to reduce some of those customer service costs through the Gen AI technology?

Eliran Glazer: Second quarter gross margin was 91%. In the medium to long term, we continue to expect gross margin to remain in the high 80s range. Research and development expense was $36.9 million in Q2-24, or 16% of revenue compared to 16% in Q2-23. Sales and marketing expense was $120.7 million in Q2'24, or 51% of revenue compared to 56% in Q2'22. G&A expense was $18.2 million in Q2'24, or 8% of revenue, compared to 8% of revenue in Q2'23. Net income was $49.3 million in Q2'24, up from $21 million in Q2'23. Diluted net income per share was $0.94 in Q2'24, based on 52.2 million fully diluted shares outstanding.

Eliran Glazer: Hey Scott, Eliran. So, you know, I think, as we mentioned in our script, it's going to be high 80s. I think the 91% is an outlier to a certain extent. Timing, spending, I would say the high 80s is probably the right number to look at. Very helpful.

Long term, we continue to expect gross margin to remain in the high eighties range research and development expense was $36 9 million in Q2, 'twenty, four or 16% of revenue compared to 16% in Q2 'twenty three.

Eliran Glazer: Research and development expense was $36.9 million in Q2'24, or 16% of revenue compared to 16% in Q2'23. Sales and marketing expense was $120.7 million in Q2'24, or 51% of revenue compared to 56% in Q2'23. G&A expense was $18.2 million in Q2'24, or 8% of revenue, compared to 8% of revenue in Q2'23. Net income was $49.3 million in Q2'24, up from $21 million in Q2'23. Diluted net income per share was $0.94 in Q2'24, best on 52.2 million fully diluted shares outstanding. Total employee headcount was 2,110 employees, an increase of 122 employees since Q1-24.

Sales and marketing expense was $120 7 million in Q2, 'twenty, four or 51% of revenue compared to 56% in Q2 'twenty three.

Speaker Change: G&A expense was $18 2 million in Q2, 'twenty, four or 8% of revenue compared to 8% of revenue in Q2 'twenty three.

Scott Berg: Very helpful. Congratulations on a good quarter. Thank you.

Speaker Change: Net income was $49 3 million in Q2 24 up from 21 million in Q2 'twenty three diluted net income per share was <unk> 94 cents in Q2 24 based on $52 2 million fully diluted shares outstanding.

Taylor McGinnis: Our next question comes from the line of Taylor McGinnis from UBS.

Eliran Glazer: Total employee headcount was 2,110 employees, an increase of 122 employees since Q1-24. We expect to ramp throughout FY24 with a continued focus on our R&D, product, and sales teams as we build out our platform and product portfolio. Moving on to the balance sheet and cash flow, we ended the quarter with $1.3 billion in cash and cash equivalents, up from $1.1 billion at the end of Q4 2020. In Q2 2024, free cash flow was $50.8 million, and free cash flow margin, defined as free cash flow as a percentage of revenue, was 22%. Free cash flow is defined as net cash from operating activities, less cash used for property and equipment, and capitalized software costs.

Total employee head count was 2110 employees, an increase of 422 employees since Q1, 'twenty four we expect to ramp throughout fiscal year 'twenty four with the continued focus on our R&D product and sales team as we built out our platform and product suite.

Eliran Glazer: We expect to ramp throughout fiscal year 2024, with a continued focus on our R&D, product, and sales team as we build out our platform and product. Moving on to the balance sheet and cash flow, we ended the quarter with $1.3 billion in cash and cash equivalents, up from $1.1 billion at the end of Q4-23. In Q2'24, free cash flow was 50.8 million, and free cash flow margin, defined as free cash flow as a percentage of revenue, was 22%. Free cash flow is defined as net cash from operating activities, less cash used for property and equipment, and capitalized software costs.

Speaker Change: Moving onto the balance sheet and cash flow, we ended the quarter with $1 $3 billion in cash and cash equivalents up from $1 $1 billion at the end of Q4 'twenty three.

Speaker Change: In Q2, 24 free cash flow was 58 million and free cash flow margin is defined as free cash flow as a percentage of revenue was 22% 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 other.

Eliran Glazer: Now, let's turn to our updated outlook for fiscal year 2024. For the third quarter of fiscal year 2024, we expect our revenue to be in the range of $243 million to $247 million, representing growth of 28% to 31% year over year. We expect non-GAAP operating income of $19 million to $23 million and an operating margin of 8% to 9%. We expect free cash flow of $70 million to $74 million and a free cash flow margin of 29% to 30%.

Eliran Glazer: Now let's turn to our updated outlook for fiscal year 2024. For the third quarter of fiscal year 2024, we expect our revenue to be in the range of $243 million to $247 million, representing growth of 28% to 31% year-over-year. We expect non-GAAP operating income of $19 million to $23 million and an operating margin of 8% to 9%.

Speaker Change: The outlook for fiscal year 'twenty 'twenty four for the third quarter of fiscal year 2024, we expect our revenue to be in the range of 243 million to 247 million representing growth of 28% to 31% year over year, we expect non-GAAP operating income of 19 million to $23 million and an operating margin.

Speaker Change: Of 8% to 9%, we expect free cash flow of 70 million to 74 million and free cash flow margin of 29% to 30% for the full year of 2024, we expect revenue to be in the range of 956 million to 961 million representing growth of 31% to 32% year over year.

Eliran Glazer: We expect free cash flow of $70 million to $74 million and a free cash flow margin of 29% to 30%. For the full year 2024, we expect revenue to be in the range of 956 million to 961 million, representing growth of 31 to 32% year over year. We expect full-year non-GAAP operating income of 100 million to 105 million and an operating margin of 10% to 11%. We expect 4-year free cash flow of $270 million to $275 million and a free cash flow margin of 28% to 29%.

Eliran Glazer: For the full year 2024, we expect revenue to be in the range of $956 million to $961 million, representing growth of 31% to 32% year-over-year. We expect full year non-GAAP operating income of $100 million to $105 million and an operating margin of 10% to 11%. We expect full-year free cash flow of 270 million to 275 million and a free cash flow margin of 28% to 29%. I will now turn it over to the operator for your question.

Speaker Change: We expect full year non-GAAP operating income of 100 million to 105 million and an operating margin of 10% to 11%. We expect full year free cash flow of 270 million to 275 million and free cash flow margin of 28% to 29%. Let me now turn it over to the operator for your questions.

Operator: As a reminder, if you'd like to ask a question, please press star and the number 1 on your telephone keypad. We'd also like to ask you to please kindly limit yourself to one question and one follow-up. Thank you. With that, we will begin the question and answer session. And your first question comes from the line of Brent Bracelin on Piper Sandler.

Taylor McGinnis: Yeah, hi, thanks so much for taking my questions. The first one is, so you saw stabilization to an inflection this quarter in NRR with those larger customers. And I think that was a little earlier than expected. But you reiterated the stable NRR guide and then made a slight improvement in 4Q. So can you just comment on what's driving some of that conservatism despite recent trends and the uplift from price? Anything to be mindful of in the second half in terms of renewal or gross retention or sources of that burden?

Operator: Let me now turn it over to the operator for your questions. Thank you. As a reminder, if you'd like to ask a question, please press star and the number 1 on your telephone keypad. We'd also like to ask you to please kindly limit yourself to one question and one follow-up. Thank you.

Speaker Change: Thank you.

Speaker Change: As a reminder, if you'd like to question if you'd like to ask a question. Please press star and the number one on your telephone keypad.

Speaker Change: Also liked it.

Speaker Change: Ask you to please kindly limit yourself to one question and one follow up thank you.

Operator: With that, we will begin the question and answer session. And your first question comes from the line of Brent Bracelin from Piper Sandler. Good morning.

Speaker Change: With that we will begin the question and answer session.

Speaker Change: Your first question comes from the line of Brent embracing from Piper Sandler.

Brent embracing: Good morning.

Brent Bracelin: Good morning, and thank you for taking the question here. I wanted to touch base on the large customer cohort. You added a record number of 100K customers this quarter from a net ad perspective. The net expansion metrics actually improved here despite some macro headwinds. So can you just talk through what seems to be responding in this environment that's still challenged with those larger customers? Why they're turning to Monday would be super helpful. Thanks. Yeah, Brent.

Eliran Glazer: Sure. Hi Taylor. It's Eliran.

Brent embracing: Good morning, and thank you for taking the question here.

Speaker Change: The touch base on the large customer cohort you added a record number of 100 K customers this quarter from a net add perspective.

Speaker Change: Net expansion metrics actually improved here. Despite some macro headwinds. So can you just talk through what seems to be resonating in this environment. That's still challenged with those larger customers why they are turning to Monday would be super helpful. Thanks.

Eliran Glazer: So, just by way of expectations, they didn't change from Q1. Therefore, we expect reported NDR to be largely stable throughout fiscal year 24. As a reminder, just to remind you, we are reporting the weighted average of the last four quarters. So, even if you see an uptick due to price increases or to consolidations on our platform of larger customers on the trailing 12-month aspect, the impact on the reported NDR is going to be delayed a bit.

Eran Zinman: Hi, this is Eran. So yeah, we continue to see strong traction on our larger accounts. A lot of them are just accounts we already had on the platform to continue to expand and grow and increase the number of users. Some of it is software consolidation, but a lot of it is just natural growth and more usage of Monday within their own company. So that's continued to trend and looks fairly healthy, even given the environment right now.

Eran Zinman: Yeah, Brent. Hi, this is Eran.

Eliran Glazer: So, this is why we kind of said that we expected the impact to be when we exit fiscal year 24 going into 2025. And long-term, we expect overall NDR to be between 110 to 115, as we have said in the past.

Speaker Change: Yes, Brent Hi, this is Ryan so yes, we're continuing to see strong traction in larger accounts.

Speaker Change: A lot of them are just accounts, we already had on the platform to continue to expand and grow increase number of users.

Eran Zinman: So yeah, we continue to see strong traction in our larger accounts. A lot of them are just accounts we already had on the platform to continue to expand and grow, and increase the number of users. Some of it is software consolidation, but a lot of it is just natural growth and more usage of Monday within their own company. So that's continued to trend and looks fairly healthy, even given the environment right now. So that's basically what contributed to the increase in the 50K and 100K and also their NDR.

Taylor McGinnis: Great, thank you so much. And then, just as a follow-up, it seems like CRM and dev customer growth is trending really nicely, and they're scaling well. So can you help us, you know, quantify maybe how that might be contributing to growth this year? Are we getting to the point where it could be more than just a one to two point contributor? Any, any help, as you know, we think about that, that into this year? Yeah, hi, Taylor. It's Eran. So

Speaker Change: Some of it is software consolidation, but a lot of it is just natural growth and more usage.

Speaker Change: Monday.

Within their own company.

Speaker Change: That's continuing to trend in looks fairly healthy even given the environment right now.

Speaker Change: So thats basically what contributed to the increase in the <unk> and also the MBR.

Eliran Glazer: Helpful color there as a follow-up, Eliran, I know you talked about kind of trying to still wanting to reinvest in the business, but operating margins came in better than expected in the quarter. Is that improvement tied to some of those customer support cost savings that you referenced using JetAI, or are there other factors that contributed to margin out performance here in the first half?

Eran Zinman: Yeah, hi Taylor. It's Eran.

Eliran Glazer: So that's basically what contributed to the increase in the 50K and 100K and also their NDR, helpful color there as a follow-up. Eliran, I know you talked about kind of trying to still wanting to reinvest in the business, but operating margins came in better than expected in the quarter. Is that improvement tied to some of those customer support cost savings that you referenced using JetAI? Or are there other factors that contribute to margin outperformance in the first half? Hey, Brent, it's Eliran.

Speaker Change: Helpful color there as a follow up Ron I know you talked about kind of trying to still wanting to reinvest in the business op margins came in here better than expected in the quarter.

Eran Zinman: So, look, again, it's pretty early days for CRM. Although, you know, both are growing really well, and we showed some numbers on Investor Day about CRM, it continues to grow really well, beyond our expectations, but still, it's relatively low in terms of percentages compared to our total revenue count. But given the high growth rate, you know, over time, we expect this to become a more and more material part of our revenue in terms of percentages. But again, right now, it's still early days in terms of growth and relative size.

Rob Oliver: Our next question comes from the line of Rob Oliver from Baird.

Speaker Change: Is that improvement tied to some of those customer support cost savings that you referenced using jet AI or are there other factors that contribute to margin outperformance here in the first half.

Eliran Glazer: Sure. So I would say some of it is related to the fact that we are using GenAI for customer success, so we don't need as many people like we used to in the past. In addition to that, you know, we're always speaking about efficient growth. So on the one hand, while we are behind on hiring this quarter, you know, we have some ambitious plans for hiring, as well as our spend on performance marketing that is related to the big brain system that we have.

Eliran Glazer: Hey, Brent, it's Eliran. Sure. So I would say some of it is related to the fact that we are using GenAI for customer success, so we don't need the amount of people we used to in the past. In addition to that, you know, we're always speaking about efficient growth. So on the one hand, while we are behind on hiring this quarter, you know, we have some ambitious plans for hiring, as well as our spend on performance marketing that is related to the big brain system that we have. This is something that we always monitor.

Rob Oliver: Great. Thank you. Good morning.

Lillian: Hey, Brian it's Lillian.

Ron: Sure. So I would say some of it related to the fact that we are using gen AI and customer success. So we don't need as the amount of people like we used to in the past. In addition to that you know we're always speaking both efficient growth. So on one hand, while we are behind on hiring this quarter, we have some ambitious plan on hiring.

Ron: As well as you know our spend on the performance marketing that is related to the big brain system that we have then this is something that we always monitor so as part of our efficient growth, we kind of look at our cost as well not only on the top line and this is the result of some of the things that I mentioned.

Eliran Glazer: So as part of our efficient growth, we kind of look at our costs as well, not only on the top line. And this is the result of, you know, some of the things that I mentioned. Fantastic.

Eliran Glazer: Then this is something that we always monitor. So as part of our efficient growth, we kind of look at our costs as well, not only on the top line. And this is the result of, you know, some of the things that I mentioned. Fantastic. Phenomenal results, guys. Thanks for the color.

Unknown Attendee: Fantastic. Phenomenal results, guys. Thanks for the color.

Speaker Change: Fantastic phenomenal results guys. Thanks for the color.

Speaker Change: Thank you.

Operator: Thank you. Your next question comes from the line of Jackson Ader from KeyBank Capital Markets. The line is open.

Jackson Ader: Your next question comes from the line of Jackson Ader from KeyBank Capital Market.

Speaker Change: Your next question comes from the line of Jackson Ader from Keybanc capital markets.

Speaker Change: Your line is open.

Jackson Ader: Thanks for taking our questions, guys. The first one is on usage and utilization, maybe between the different customer segments. So, what does utilization look like for your down-the-middle, small and medium-sized business customer versus maybe some of your largest customers? It doesn't have to be the 80,000 seat, but like the large customers versus SMB utilization.

Roy Mann: Thanks for taking my questions. The first one is on sales CRM. I know you guys referenced in your prepared remarks or in response to a question that most of your wins generally are still greenfield, but I'd be curious to know what you're seeing in terms of early trends on sales CRM. Is that still kind of filling that void in the market at the low to mid range where traditional CRM hasn't historically served? Or, as you move up the market, are you starting to bump up against some competitors and some potential competitive displacement?

Jackson Ader: Thanks for taking our questions, guys. The first one is on usage and utilization, maybe between the different customer segments. So, what does utilization look like for your down-the-middle, small and medium-sized business customer versus maybe some of your largest customers? Not, it doesn't have to be the 80,000 seat, but like the large customers versus SMB utilization. Hi, this is Roy.

Jackson Ader: Great. Thanks for taking my questions guys.

Jackson Ader: First one is on usage and utilization maybe.

Speaker Change: Maybe between the different customer segment. So what does utilization look like for you down the middle of small and medium sized business customer versus maybe some of your largest customers not it doesn't have to be the 80000 feet, but like the large customers versus SMB utilization.

Roy Mann: So you mean utilization in terms of like their seat count versus their usage of it or use cases? Yeah, yeah, like, you know, you've got 100 people and 70 of them really use it every day, and 30 kind of check in every once in a while. Utilization of the product, meaning how often they're using it, and I guess if there's any measure of depth to how they're using it, Yeah, so we have a lot of different measurements, obviously, and we see ourselves as a core tool.

Roy Mann: Hi, this is Roy. So you mean utilization in terms of like their seat count versus their usage of it, or use cases? Yeah, yeah, like, you know, you've got 100 people, and 70 of them really use it every day, and, you know, I don't know, 30 kind of check in every once in a while. Like, utilization of the product may be like, how often they're using it, and I guess, like, if there's any measure of depth... The How They Are.

Roy Mann: Yeah, hi, it's Roy. So I would still say we're like 50% greenfield in CRM. It's a largely growing segment. Okay.

Speaker Change: Okay.

Speaker Change: Hi, This is Roy so you mean utilization in terms of their seat count versus their usage of it or use cases, yes, yes, yes.

Roy Mann: And we're mostly growing, I think, in accounts in the SMB space, but we're growing, going up market into the meat market as well. And yes, at 50%, we do see other CRMs that we compete against, and what I think makes us succeed and be in a really good sweet spot is, on the one end, our customability and the fact that we're really good at creating any workflow you want around CRM.

Speaker Change: 100 people and.

Speaker Change: 70 of them really use it every day and I don't know.

Speaker Change: 30 kind of check in every once in a while like utilization of the product being like how often they're using it.

Speaker Change: And I guess like if there is any measure depth.

Speaker Change: How they are using as well.

Roy Mann: Yeah, so we have a lot of different measurements, obviously, and we see ourselves as a core tool. We go after core use cases, meaning it manages the core of work. And we see really high engagement across our customer base. Having said that, like being part of the flywheel motion, what we see is that you have a team using a core use case, which runs the core of what they do.

Roy Mann: Obviously, if you have projects involved as well in the sales process or after that, so that's where we shine, and CRMs, in general, need a lot of customization. That's what customers really want. And on the other hand, we're seeing great success on the performance marketing side. So we're able to capture a large segment, like a great deal of market demand.

Speaker Change: Yes, so we have a lot of different measurement, obviously, and we see ourselves as a core tool.

Roy Mann: We go after core use cases, meaning it manages the core of work, and we see really high engagement across our customer base. Having said that, like being part of the flywheel motion, what we see is that you have a team using a core use case, which is really the core of what they do, and then they invite other people that are helping them or connecting to them.

Rob Oliver: Great. That's very helpful. Thank you.

We go after or use cases, meaning.

Speaker Change: He managed the core fork.

Speaker Change: And we see really high engagement across our customer.

Speaker Change: Customer base.

Speaker Change: Having said that like being part of the flywheel motion. What we see is that you have team using a core use case. We're trying is really the core of what Theyre doing then they invite other people.

Roy Mann: And then they invite other people that are helping them or connecting to them. And the flywheel motion means that, over time, they will start creating their own core use case. And then we scale there. So we have two tiers, if you like, of types of customers, the one who are in the main use case, and the one who are kind of like more invited and part of others' workflows. And that's how we grow over time.

Speaker Change: Helping them or connecting to them and the flywheel motion means that over time, they will start creating their own core use case and then we.

Roy Mann: And the flywheel motion means that over time, they will start creating their own core use case, and then we scale from there. So we have two tiers, if you like, of types of customers, the one who are in the main use case, and the one who are kind of like more invited and part of others' workflows. And that's how we grow over time. Okay, all right, great. And then it's actually staying kind of on the product side.

Speaker Change: Okay is there. So we have two tiers, if you like of types of customers. The one who are like in the main use case and the ones who are kind of like more in.

Speaker Change: Invited in part of others workflow and Thats, how we grow overtime.

Unknown Attendee: Okay, all right, great. And then?

Roy Mann: And then just a quick question, you know, on your partner network, which continues to have impressive numbers. Can you talk a little bit about the role that partners are playing, particularly as you move up market and bring more of a multi-product solution to customers? Are you seeing partners buy in and sense an opportunity? I mean, you just mentioned the customization necessary in CRM. That's obviously great for the customer, but could also be a source of consultation for the partner. So just wondering what you're seeing there as you move up the market. Thank you. And cool. So yeah, partners are important.

Speaker Change: Okay, Alright, great and then.

Speaker Change: Im actually staying kind of on the on the product side.

Eran Zinman: It's actually staying kind of on the product side. [inaudible] For MondayDB, can we, can you guys just put the scalability in context? 100,000 items on a board, 500,000 on a dashboard sounds like a lot, but can you compare that maybe to what those statistics look like under Monday DB 1.0 and then maybe even prior to Monday DB being rolled out last.

Unknown Attendee: [inaudible] For MondayDB, can we, could you guys just put the scalability in context? 100,000 items on board, 500,000 on a dashboard sounds like a lot, but can you compare that maybe to what those statistics look like under Monday DB 1.0 and then maybe even prior to Monday DB being rolled out last? Yeah, Jackson, this is Eran. So compared to MoneyDB 1.0, that's 10x from the limits we had before in the prior version.

Speaker Change: For Monday ADB can we can you guys just put the scalability in context.

Speaker Change: 100000 items onboard 500000 on a dashboard sounds like a lot, but can you compare that maybe to.

Speaker Change:

Speaker Change: What those statistics look like under London, ADB, One point and then maybe even prior to Monday, ABB being rolled out last year.

Eran Zinman: Yeah, Jackson, this is Eran. So compared to MoneyDB 1.0, that's 10x from the limits we had before in the prior version, and the number of items will continue to scale in future releases. So there is a significant growth, both in terms of boards and dashboards. And in future releases, we're going to have another kind of significant step system in terms of the scale of what the boards can contain. Okay.

Eran Zinman: And the number of items will continue to scale in future releases. So there is significant growth, both in terms of boards and dashboards. And in future releases, we're going to have another kind of significant step in terms of the scale of what the boards can contain. Okay, awesome. That's helpful. Thank you. Thank you. Your next question comes from the line of Aleks Zukin from Wolf Research. The line is open. Hey guys, thanks for taking my question and congrats. Maybe just help us give us a flavor for

Speaker Change: Yes, Jackson this is Ron so.

Speaker Change: Compared to money to be 1.0, that's <unk>.

Speaker Change: The limits, we had before the prior version.

Speaker Change: And the number of items will continue to scale and future releases.

Speaker Change: There is significant growth both in terms of boards and dashboards.

Speaker Change: In future releases, we're going to have another significant.

Speaker Change: Steps since then in terms of.

Speaker Change: Scale.

Speaker Change: The boys can contain.

Unknown Attendee: Okay, awesome. That's helpful. Thank you.

Speaker Change: Okay Awesome that's helpful. Thank you.

Aleksandr Zukin: Thank you. Your next question comes from the line of Aleks Zukin from Wolf Research.

Speaker Change: Thank you.

Roy Mann: Cool. So yeah, partners are a significant part of our go-to-market, and we're gradually seeing and driving actually towards partners, giving more and more services to our customers and helping them adopt them. We're even having a nice evolution in the partner space to larger partners, doing more professional services to customers, creating deeper integrations and implementations of Monday, and that's an area we keep investing in.

Speaker Change: Your next question comes from the line of Alex Zukin from Wolfe Research. Your line is open.

Eliran Glazer: Hey guys, thanks for taking my question and congratulations. Maybe just help us give us a flavor for kind of the demand environment, the linearity of the quarter, and particularly the large deal cadence, which was, again, quite, quite extraordinary. Maybe how did it compare to last quarter? How did it compare to your expectations, and how to think through again this kind of macro dicey macro environment that we seem to be in?

Operator: Seeing as there are no more questions in the queue, that concludes our question and answer session. That also concludes this call. Thank you for joining us. You may now disconnect.

Alex Zukin: Hey, guys. Thanks for taking my question and congrats maybe just help us give us a flavor for kind of the demand environment, the linearity of the quarter and particularly the large deal cadence, which was again quite quite extraordinary maybe how did it compare to last quarter, how does it compare to the <unk>.

Please wait; the conference will begin shortly.

Speaker Change: Patients and how to think through again this kind of macro dicey macro environment that we seem to be in for this year.

Eliran Glazer: Sure. Hey, Aleks, this is Eliran.

al Iran: Sure Hey, Alex This is al Iran. So with regards to demand few things that I would like to highlight so SMB and the strength of.

Eliran Glazer: So with regard to demand, a few things that I would like to highlight. So SMB, the strength of Monday, and it continues to perform very well. In terms of what we see, the demand environment, in general, in terms of macro, is inconsistent and choppy. We also saw that from other companies that mentioned it.

Speaker Change: Monday and it continues to perform very well.

In terms of what we see demand environment in general in terms of macro is inconsistent and choppy. We also saw it from other companies that mentioned it.

Speaker Change: The fact that <unk>.

Speaker Change: <unk> persistent macro challenges, we see the demand steady across all segments.

Eliran Glazer: But the fact that, despite persistent macro challenges, we see demand steady across all segments is something that is very encouraging for us. And in addition to that, maybe to provide a KPI to demonstrate the strength, our growth retention is at record levels, but we're still seeing some cautious spend environment with many other customers. So, all in all, pretty consistent with what we saw in the past. It's not getting any better, but it's not getting any worse either. And we maintain our strength in SMBs and across all segments. Yeah, but maybe I'll have to

Speaker Change: Something that is very encouraging for us and in addition to that maybe to provide the kpis that demonstrate the strength is that our gross retention is at record levels.

Speaker Change: But we're still seeing some cautious spend environment with many other customers. So all in all pretty.

Speaker Change: Consistent with what we saw in the past, it's not getting any better but its not getting any worse and we maintain our strength in smbs and no across all.

Speaker Change: <unk>.

Speaker Change: Yes.

Speaker Change: Yes sure.

Alright.

Eran Zinman: Now, you also asked about the large deal that we closed. So maybe this is Iran.

Speaker Change: No just.

Speaker Change: You asked about the large deal that we closed so.

Ron: This is Ron.

Ron: So maybe just to give you some more color on this.

Ron: It's a European based multinational health care company.

Speaker Change: There were actually an existing customer of Monday since I think.

Speaker Change: About 2024 years now.

Speaker Change: The first use case was mostly focused on.

Eran Zinman: So maybe just to give some more color on this, it's a European-based multinational health care company. They're actually an existing customer of Monday since, I think, about 2020, four years now. The first use case was mostly focused on finance and R&D, managing workflows and projects. And then we expanded. Now it's been used across procurement, design, and internal ticketing management. And basically, last year, kind of the end of last year, but close now, they made a decision to consolidate on Monday and kind of basically standardize the whole company on the platform. So that's a large seed count, but it's a very healthy expansion. And a long kind of use case over the years, and happy partners of them since 20.

Speaker Change: Finance and R&D manage workflows and project.

And then we expanded.

Speaker Change: It's been used across procurement design.

Speaker Change: And management.

Speaker Change: Basically last year, it kind of end of last year, but.

Speaker Change: Now they've made a decision to consolidate on Monday and can then basically standardize the whole company on the platform.

Speaker Change: So that's the larger accounts that it's a very healthy expansion and kind.

Speaker Change: Kind of use case over the years and happy partners of them since 2020.

Eran Zinman: Perfect. And maybe just as a follow-up, on the CRM sales net customer ads going forward, it's been about 4,000 now, a quarter of the past two. Is this the right way to think about it going forward? And given the launch of DBT, the 2.0 version of MondayDB, is it fair to think that we should start to see that ASRPC go a little higher on the sales side as well?

Speaker Change: Perfect.

Speaker Change: And maybe just as a follow up.

Speaker Change: On the CRM sales net customer adds going forward, it's been about 4000 now.

Speaker Change: <unk>.

Speaker Change: Past two is this the right way to think about it going forward and given the launch of DVT.

Speaker Change: The two point out version of Monday, DB is it fair to think that we should start to see that.

Speaker Change: RPC go a little higher on the sales.

Speaker Change: Side as well.

Eran Zinman: I think it's, this is Eran again, so I think it's a fair assessment to say that's more or less the pace of growth, most of the growth is still coming from existing users, so it's less of a case of MoneyDB making a huge impact on the numbers, it's mostly customer acquisition of new customers that kind of generate and kind of help this number grow.

Speaker Change: Yes, I think this is it.

Speaker Change: Ron again, so I think it's a fair assessment to say that's more of that's going to be.

Most of the growth is still coming from existing users. So it's less of a case of money they would be making a huge impact on the numbers, it's mostly customer acquisition.

Speaker Change: Of new customers that generate and kind of helped us number growth.

Eran Zinman: Yeah, and I'm sorry, and if you're if we're talking about the CRM product, like we see nice growth, and we're always going up market and improving our capabilities there. So we do expect to be able to get a bigger ACV, let's say for CRM.

Speaker Change: Yes.

Hi, sorry, and if you're if we're talking about the CRM.

Speaker Change: Product like what we see nice growth and we're always going up market then.

Speaker Change: And improving our capabilities.

Speaker Change: There. So we do expect us to be able to get bigger ACG.

Thank you for standing by.

Byron Stevens: I would like to welcome everyone to the Monday.com second quarter fiscal year 2024 earnings conference call. All lines have been placed on mute to prevent any background dollars.

Speaker Change: Our CRM.

Unknown Attendee: Perfect. Thank you guys. Congratulations again.

Unknown Attendee: Perfect. Thank you, guys. Congratulations again.

Speaker Change: Perfect. Thank you guys congrats again.

Speaker Change: Thank you.

Arjun Bhatia: Our next question comes from the line of Arjun Bhatia from William Blair. The line's up.

Our next question comes from the line of Arjun Bhatia from William Blair.

Byron Stevens: After the speakers read marks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star and the number one on your telephone keypad. If you'd like to withdraw your question, press star one again.

Your line is open.

Arjun Bhatia: Thank you. And congrats, guys, on the strong quarter here.

Arjun Bhatia: Alright, Thank you and congrats.

Arjun Bhatia: Congrats guys on the strong quarter here.

Arjun Bhatia: Maybe I wanted to ask about the service management products build out it seems like youre in full beta with that.

Byron Stevens: I'd not like to turn the call over to Byron Stevens, Vice President of Investor Relations. Please go ahead.

Speaker Change: And maybe now you have a little bit of a better idea of what it looks like at launch. So what is your sense of how that product will differentiate versus competitive products in the market now that you have some feedback from customers and.

Roy Mann: Hello everyone and thank you for joining us on today's conference call to discuss the financial results for Monday.com's second quarter fiscal year 2024.

Byron Stevens: Joining me today are Roy Mann and Eran Zinman, co-ceozamunday.com, and Eliran Glazer, Monday.com's CFO. We release our results for the second quarter fiscal 2024 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 event section of our IR website at ir.munday.com.

Speaker Change: How quickly it might scale and get adoption out of the gains compared to some of the other solutions or watch like CRM adults.

Eran Zinman: I wanted to ask about the service management product build out. It seems like you're in full beta with that. And maybe now you have a little bit of a better idea of what it looks like at launch. So, what is your sense of how that product will differentiate versus competitive products in the market now that you have some feedback from customers, and how quickly it might scale and get adoption? Out of the gates compared to some of the other solutions you've launched, like CRM and Dove?

Eran Zinman: Yeah, thanks, Arjun. This is Eran.

Speaker Change: Yes, Thanks for doing this is Ron.

So first of all we launched one to service now in beta.

Ron: We already have a few dozens of customers using it and paying for the product.

Byron Stevens: Certain statements made on the call today will be for looking statements which reflect management's best judgment based on currently available information. These statements involve risk 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-gap financial measures will be discussed on the call. Reconciliation to the most directly comparable gap financial measures are available in the earnings release and the earnings presentation for today's call which are posted on our investor relations website.

Speaker Change: Look it's very early days to say compared to how this will compared to monday's CRM or Monday Dev.

Speaker Change: We can share that the feedback is very positive from customers a lot of excitement.

Speaker Change: The things that really resonates compared to other players in the market again is the flexibility.

Eran Zinman: So first of all, we launched Monday, a service now in beta. We already have a few dozens of customers using it and paying for the product. Look, it's very early days to say compared to how this will compare to Monday CRM or Monday dev. But what we can share is that the feedback is very positive from customers, and there is a lot of excitement. One of the things that really resonates compared to other players in the market is the flexibility, kind of similar to the CRM and dev products.

Speaker Change: Similar to the CRM and products, but I think specifically for service it kind of yes.

Speaker Change: Fact of this.

Speaker Change: Even more significance to our customers because they want to automate a lot of the processes within.

Speaker Change: It service management.

Roy Mann: Now let me turn the call over to Roy. Thank you, Byron, and thank you everyone for joining us today. Since our debut in Nasdaq three years ago, we have made significant progress in realizing our vision of becoming the platform to run the core of all work for customers. In that time, we have transitioned from a single product offering to a true platform with multiple products. This transition and our strong execution have allowed us to nearly double our customer base, triple annual recurring revenue, and increase our largest customer seat count tenfold. Our impressive growth trajectory aside, Monday.com's unique strengths lies in our ability to achieve this expansion while driving operational efficiency.

Speaker Change: Management product and they want to have amongst custom ability on how they kept data and now the process workflows.

Speaker Change: So this is exactly where Monday shines. The feedback is very positive people want to use. This in addition to other products are already using with Monday.

Eran Zinman: But I think specifically for service, the effect of this has even more significance for our customers because they want to automate a lot of the processes within the IT service management product, and they want more customability in how they capture data and how they process workflows. So this is exactly where Monday shines. The feedback is very positive. People want to use this in addition to other products they're already using with Monday.

Speaker Change: It looks very promising but again early days, we are going to have a full release towards the end of the year.

Speaker Change: And then we will get more traction and we will be able to share more numbers.

Unknown Attendee: So it looks very promising. But again, it's early days; we're gonna have a full release towards the end of the year. And then we'll get more traction, and we'll be able to share more knowledge.

Speaker Change: Okay perfect that's helpful.

Speaker Change: And then I think you had.

Speaker Change: You talked about in the shareholder letter.

Speaker Change: Work management portfolio of products.

Speaker Change: Can you just expand on what that product is a little bit how customers use it in conjunction with the core wealth management solutions why it's important for enterprises and then on the economics side of the equation.

Roy Mann: This quarter, we achieved a record non-gap operating profit and notably attained gap operating profitability for the first time in the company's history. Our investment in the enterprise go-to-market and platform infrastructure through Monday.db continued to yield promising results. In December 2023, we announced a significant increase in our largest seat count growing over threefolds to 25,000. This quarter, we have pleased to announce another significant milestone. Our largest seat count has more than tripled once again to reach 80,000 seats.

Speaker Change: You price.

Speaker Change: So Mike this and how should we think about the upsell sorry, a lot of questions in there but.

You get the gist of it.

Roy Mann: Okay, perfect. That's helpful.

Speaker Change: Yes, sure hi, its Rory here so.

Mike: Portfolio management is essentially.

Speaker Change: A way to manage like.

Speaker Change: <unk> thousand projects, let's say a lot of projects together so until now Monday was.

Speaker Change: Our amazing managing really complex project with.

Roy Mann: Beginning with the finance and product teams to address multiple use cases, this multinational healthcare company rapidly extended its Monday usage to encompass additional teams within the organization. Impressed by our work OS's ease of use and customization capabilities, the company made a strategic decision in Q2 to expand Monday work management across the entire organization to address all work and project management needs.

Speaker Change: With different workflows across their organization and and this is a step up for us in terms of the volume of projects, even super complex ones, but.

Roy Mann: And then I think, you know, you talked about in the shareholder letter the work management portfolio product. Can you just expand on what that product does a little bit, how customers would use it in conjunction with the core work management solution, why it's important for enterprises, and then, on the economics side of the equation, how do you price a solution like this? And how should we think about the upsell? Sorry, there are a lot of questions in there, but you get the gist of it.

Speaker Change: Giving a highly liver.

Speaker Change: Overview and managements of massive projects, even to management and essentially it said.

Speaker Change: Building block for us.

Speaker Change: Towards managing massive organizations.

Eran Zinman: Let me now turn it over to Iran to work you through some of our product highlights for the quarter. Thank you, Roy. Our efforts to enhance our underlying architecture with Monday D.B, remains on schedule and reach another exciting milestone in Q2 with the launch of Monday D.B. 2.0. Monday D.B. 2.0 will elevate scalability, enabling customers to manage boards with up to 100,000 items and linked items. And that's board with up to 500,000 items, significantly advancing their work capabilities.

Complete project portfolio and its entire hierarchy.

Speaker Change: And so this allows us essentially to go upmarket to have larger customers depend on us and like really managed at core.

Speaker Change: Their entire.

Speaker Change: Project operations.

Speaker Change: Okay.

Speaker Change: Okay perfect. Thank you.

Speaker Change: Thank you.

Roy Mann: Yeah, sure. Hi, it's Roy here.

Speaker Change: Our next question comes from the line of Ryan Macwilliams from Barclays. Your line is open.

Roy Mann: So, portfolio management is essentially a way to manage like 1000 projects, let's say a lot of projects together. So until now, Monday was amazing at managing really complex projects with different workflows across the organization. And this is a step up for us in terms of the volume of projects, even super complex ones, but giving a high-level overview and management of massive projects, even to management. And, essentially, it's a building block for us.

Roy Mann: Towards managing massive organizations, a complete project portfolio, and its entire hierarchy. And so this allows us, essentially, to go up market to have larger customers depend on us and like really manage the core of their entire project operations. Okay, perfect.

Eran Zinman: AI continues to be a top priority and we're actively integrated it across all areas of Monday. In mid-2023, we deployed a third-party GNI-I chatbot for managing chat-based customer service tickets, yielding impressive results, the chatbot has resolved around 50% of customer service tickets automatically. The initial success had led to significant increase in chat tickets volume and reduce our reliance on external support for ticket management, as customers benefit from the chatbot quick and accurate responses.

Unknown Attendee: Okay, perfect. Thank you.

Ryan Macwilliams: Hey, guys. Thanks for taking my question.

Ryan Macwilliams: Our next question comes from the line of Ryan MacWilliams from Barclays. The line's open.

Ryan Macwilliams: Interesting. How you noted you added jenne AI to your customer service efforts and while interactions double you were still able to reduce 30% of your external customer service headcount any learnings here as it relates to the upcoming launch of your Monday service product.

Ryan Macwilliams: Hey guys, thanks for taking the question. I thought it was interesting how you noted you added Gen AI to your customer service efforts. And while interactions doubled, you were still able to reduce 30% of your external customer service account. Any learnings here as it relates to the upcoming launch of your Monday service product?

Unknown Attendee: Can you repeat the last part of the question about the...

Speaker Change: Can you repeat the last part of your question about.

Ryan Macwilliams: Yes.

Ryan Macwilliams: Yeah, just like how did this customer service experience with Gen AI relate to your upcoming launch of Monday service or anything you could bring over to the new product?

Ryan Macwilliams: Yes.

Speaker Change: Yeah, how does this customer service experience and genii relate to your upcoming launch of Monday surface like anything you could bring over to the new product.

Eran Zinman: We expect this trend to continue through 2025 and beyond as GNI further enhances our efficiency in meeting customer needs. Additionally, we're leveraging GNI to improve the user experience through advanced automation and text management collaboration. In Q2, we introduced a new GNI features to the Monday platform, including auto-generated action items, thread summaries, and enhanced text extraction capabilities.

Eran Zinman: Yeah, yeah, thanks, Ryan. It's Ron.

Yeah, Yeah. Thanks, Ryan it's Ron yes, its completely separate so.

Speaker Change: Basically we kind of build.

And use some third party.

Speaker Change: Tools to automate some of our external customer support that means supporting our own customers.

Speaker Change: And that's regardless of building Monday service.

Speaker Change: Regards to them on the service definitely we're going to have.

Eran Zinman: We continue to make significant progress in enhancing and expanding our product suite. Monday CRM has been a major success and it continues to exceed expectations, expanding to over 20,000 accounts since this launch in 2022. In Q2, we introduced several new features, including email engagement tracking and timeline reminders to further enhance its functionality. For Monday work management, we are focused on addressing the needs of larger accounts. In Q2, we launch our portfolio solution for enterprise work management which has already shown strong initial adoption.

Speaker Change: AG because within the product and it's a good.

<unk> for us to kind of expound on ourselves saving costs and the benefit of that.

Speaker Change: But that's going to be kind of more of a future release of that product. The initial version of manager service will.

Speaker Change: Won't have a lot of.

Speaker Change: Okay.

Speaker Change: And the first version, but later on we are going to release, a future versions with more AI capabilities, but it's definitely a good experience for us.

Speaker Change: Definitely a huge cost saver for us as a company.

Speaker Change: I appreciate that color and then just on the pricing impact.

Speaker Change: Our conversation customer conversations been so far around contract renewal like are you capturing the pricing benefit you expected and then how can we think about the contribution to net retention from pricing this year. Thanks.

Eran Zinman: Monday Dev continued to resonate with customers by offering a comprehensive suite of tools for managing their entire development process. This quarter, we introduced a relevant tracker which enables users to visualize company AppX, track progress, and focus on key commitments.

Eran Zinman: But that's going to be kind of more of a future release of that product. The initial version of Monday Service won't have a lot of capabilities in the first version. But later on, we're going to release future versions with more AI capabilities, but definitely a good experience for us and definitely a huge cost saver for us as

Eran Zinman: Yeah, it's completely separate. So basically, we kind of build and use some third-party tools to automate some of our external customer support, which means supporting our own customers. And that's regardless of building Monday Service. In regards to Monday Service, definitely, we're going to have AI capabilities within the product. And it's a good experience for us to kind of experiment on ourselves and save costs and see the benefit of that.

Speaker Change: Hey, Ryan it's really Ron so just by welfare.

Eran Zinman: And finally, our latest product, Monday service, is now on beta, and is scheduled for full release by the end of 2024. We remain highly enthusiastic about its potential.

Ron: We are on target and consistent with what we communicated communicated in Q1.

Ron: The new pricing structure already rolled out to 40% of the customers.

Speaker Change: So this is stage, obviously, we said that it's going to be.

Eran Zinman: In closing, we are less than a month away from the kickoff of our annual conference, Elevate. Elevate is a must at any event from running.com, passionate customers, and anyone excited about work tech. This year's Elevate will take place in London, New York City, and Sydney, over the coming month. Please join us live or online as we will share our vision, strategy, and product roadmap. Allow you to gain deeper insights into our product and future plans.

Speaker Change: Until then.

Speaker Change: H one of next year because this is a rolling forecast. This is a rolling process of 12 months.

Speaker Change: So all in all conversations are going well.

Speaker Change: With regards to enterprise accounts, obviously, because there are big accounts. There is some negotiation in the way, we kind of increased prices, but all in all a reaction is good and continue to evolve this.

Eliran Glazer: With that, I'll now turn over to Aliran to cover our financials and guidance. Thank you, Aliran, and thank you to everyone for joining our call. Before I walk you through our second quarter results in detail, let me first give you a brief update on price, base revenue growth and enhanced profitability. These results highlight our effective execution and the strong demand of our work-operating system products across companies of all sizes. Total revenue in Q2, 24 came in at 236 million.1 up 34% from the year ago quarter.

Speaker Change: Yes.

Speaker Change: Thank you for the color.

Alright, thank you.

Eliran Glazer: I appreciate that, Keller. And then just on the pricing impact, how have our conversations with customers been so far around contract renewal? Like, are you capturing the pricing benefit you expected? And then how can we think about the contribution to net retention from pricing? Hey Ryan, it's Eliran. So just by way of a reminder, we're on target and consistent with what we

Speaker Change: Our next question comes from the line of Derrick Wood from TD Cohen.

Speaker Change: Your line is open.

Derrick Wood: Great. Thanks Al I'll comeback congratulations.

Speaker Change: As you are driving some of the strongest growth in the SaaS market from a competitive standpoint.

Derrick Wood: Would you say that win rates against core competitors have gone up or would you say youre tapping into new budgets, you've never been in before.

Speaker Change: Kind of competing against different vendors just wondering how you talk about the strength of your competitive positioning.

Eliran Glazer: Hey, Ryan, it's Eliran. So just by way of a reminder, we're on target and consistent with what we communicated in Q1. New pricing structure already rolled out to 40% of the customers. So this is stage, obviously, we said that it's going to be until the, you know, H1 of next year because this is a rolling forecast. This is a rolling process of 12 months. So, all in all, the conversations are going well. With regard to enterprise accounts, obviously, because they are big accounts, there is some negotiation in the way we kind of increase prices, but all in all, reaction is good and will continue to evolve.

Speaker Change: Hi, it's Roy here so.

Roy: One I feel like we're still doing super strong and the performance marketing and because we have great visibility into the return.

Eliran Glazer: Our overall net dollar retention rate was stable in Q2, 24 at 110%, reflecting the recent pricing updates and strong demand for our work-operating system products. We continue to anticipate reported NDR to remain stable throughout fiscal year 24, with an expected small improvement by the end of the year. As a reminder, our NDR is training for water-weighted average calculation. So the reminder of the financial metrics disclosed, unless otherwise noted, I will be referencing non-gov financial measures.

Roy: All of our campaigns, we know where to put the money and see the returns and I think that's it.

Roy: It's something we can do way better.

Roy: And we still gain a larger share of new market because of that.

Unknown Attendee: Thank you. All right, thank you. Our next question comes from the line of Derek Woods from TD Cohen.

Roy: On the new site.

Roy: The other hand I can tell you we're still like treating this as a greenfield.

Speaker Change: Space, Okay, we see most of our deals were not up against competitors, but in some areas we doing.

Eliran Glazer: We have provided a reconciliation of gap to non-gov financial in our earning release. Second quoted growth margin was 91%. In the medium to long term, we continue to expect growth margin to remain in the high 80s range. Research and development expense was 36.9 million in Q2, 24 or 16% of revenue compared to 16% in Q2, 23. Seven marketing expense was 120.7 million in Q2, 24 or 51% of revenue compared to 56% in Q2, 23.

Speaker Change: And where when we win a lot because of the platform and our capabilities and the fact that companies see if they can.

Speaker Change: Hi on us in the future as well.

Speaker Change: In a lot of other things that you can.

Speaker Change: Can do so yeah. So on all fronts. So we see we see our position as positives competitively.

Speaker Change: Great.

Speaker Change: Just to touch on that Greenfield aspect I mean, we've heard that your new AI powered templates are.

Eliran Glazer: DNA expense was 18.2 million in Q2, 24 or 8% of revenue compared to 8% of revenue in Q2, 23. Net income was 49.3 million in Q2, 24, up from 21 million in Q2, 23. Deluted net income per share was 94 cents in Q2, 24, best on 52.2 million fully diluted shares outstanding. Total employee headcount was 2110 employees and increased of 122 employees since Q1, 24. We expect to ramp throughout fiscal year 24, with the continued focus on our R&D, product and sales team as we built out our platform and product suite.

Speaker Change: Really helping to drive greater user adoption and just makes it a lot easier to spin up new use cases on the platform can you can you talk about how your new AI technology is helping drive higher adoption and maybe expansion rates.

Speaker Change: Hi, So it's still early days to know the exact impact of it we see great positive.

Speaker Change: Feedback from customers using it.

Speaker Change: And it is like you said with it.

Speaker Change: It's a lot of power because we built it on top of the platform, it's totally integrated into it in a way that you can build whatever you want.

Speaker Change: Like we showcased in the demo we did an investor day, essentially can build any AI work integrate AI into our new workflow, you want and Super powerful and we see people building great things with it.

Eliran Glazer: Moving on to the balance sheet and cash flow, we ended the quarter with $1.3 billion in cash and cash equivalence up from $1.1 billion at the end of Q4, 23. In Q2, 24, 3 cash flow was 50.8 million and 3 cash flow margin as defined as 3 cash flow as a percentage of revenue was 22%. 3 cash flow is defined as a net cash from operating activities, less cash used for property and equipment and capitalized software costs.

Speaker Change: Going into the future, we expect great things from this.

Speaker Change: Awesome. Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Peter Jelimo Bora from JP Morgan.

Eliran Glazer: Now let's turn to our updated outlook for fiscal year 2024. For the third quarter of fiscal year 2024, we expect our revenue to be in the range of 243 million to 247 million, representing growth of 28% to 31% year over year. We expect non-gap operating income of 19 million to 23 million and an operating margin of 8% to 9%, to 275 million and free cashflow margin of 28 percent to 29 percent.

Speaker Change: Your line is open.

Derek Woods: Great. Thanks, Al. Come on. Congratulations.

Speaker Change: Great Hey, Thank you for taking the questions and congrats on a solid quarter here.

Unknown Attendee: Are you driving some of the strongest growth in the SaaS market from a competitive standpoint? Would you say that when rates against core competitors have gone up, or would you say you're going to new budgets you've never been in before, kind of competing against different vendors. Just wondering how you talk about the strength of your competitive position.

Speaker Change: One question on guidance Slash macro I guess.

Speaker Change: Seems like you're raising the full year guide by more than the Q2 beat and Youre not raising the pricing benefit for the year. So trying to understand what gives you confidence in this macro to essentially raised the core guide is that largely the large deal dynamics that youre seeing is that mainly because of the gross retention improving any color.

Roy Mann: Hi, it's Roy here. So for one, I feel like we're still doing super strong on the performance marketing end because we have great visibility into the return on all our campaigns; we know where to put the money and see the returns. And I think that's something we can do way better. And we still gain a larger share of the market because of that, on the new side. And on the other hand, I can tell you we're still treating this as a greenfield space.

Speaker Change: Hello.

Roy Mann: Okay, we see that most of our deals are not up against competitors, but in some areas, we do, and where we win, we win a lot because of the platform and our capabilities and the fact that companies see they can rely on us in the future as well as a lot of other things they can do. So yeah, so on all fronts, we see our position as a positive competitor.

Speaker Change: Yes, hi, pendulum itself so.

Roy Mann: Great. And maybe just to touch on that Greenfield aspect. I mean, we've heard that your new AI-powered templates are really helping to drive greater user adoption and just make it a lot easier to spin up new use cases on the platform. Can you talk about how your new AI technology is helping drive higher adoption and maybe even expansion rates? Hi. So it's still early days

Roy Mann: Hi, So it's still early days to know the exact impact of it. We get great positive feedback from customers using it. And it is, like you said, with a lot of power because we built it on top of the platform. It's totally integrated into it in a way that you can build whatever you want. Like we showcased in the demo we did at Investor Day, essentially, you can build any AI work, and integrate AI into any workflow you want. And it's super powerful, and we see people building great things with it. And going into the future, we expect great things from it.

Speaker Change: So as you know first of all we didn't adjust our pricing estimates since Q1 earnings. So it remains at 25 <unk> for.

Pinjalim Bora: Our next question comes from the line of Pinjalim Bora from J.P. Morgan.

Speaker Change: For the year fiscal year 'twenty, four and just as a reminder by fiscal year 'twenty six we're looking at it wrong.

Unknown Attendee: Great. Hey, thank you for taking the questions and congrats on a solid quarter here. One question on guidance, slash macro, I guess, it seems like you're raising the full-year guide by more than the Q2 beat, and you're not raising the pricing benefit for the year. So I'm trying to understand what gives you confidence in this macro to essentially raise the core guide? Is that largely the large deal dynamics that you're seeing? Is that mainly because gross retention is improving?

Eliran Glazer: Any color help?

Speaker Change: $75 million to $80 million.

Speaker Change: We followed the same playbook that we always do based on what we know today based on the.

Operator: Let me now turn it over to the operator for your questions. Thank you. As a reminder, if you'd like to ask a question, please read star and the number one on your top on keypad.

Speaker Change: The data that we have the sentiment we are always fully account for the sentiment in the market.

Operator: We'd also like to ask you to please kindly limit yourself to one question and one follow-up. Thank you. With that, we will begin the question and answer session.

Speaker Change: We provide our guidance nothing has changed in terms of philosophy, but we do encouraged by the fact that you know.

Speaker Change: Our top of funnel is still very healthy.

Speaker Change: Fact that we achieved.

Speaker Change: The large customer that is proving our use cases is becoming.

Brent Grayson: And your first question comes from the line of Brent Grayson from Piper Sandler.

Speaker Change: More.

Speaker Change: <unk> received by our customers so all of the above.

Speaker Change: According to what we know today provide us with the confidence that we can achieve the numbers that we provided this guidance.

Brent Grayson: Good morning. Good morning and thank you for taking the question here. One of the touch base on the large customer cohort. We added a record number of 100k customers this quarter from a net ad perspective. The net expansion metrics actually improved here despite some macro headwinds. So can you just talk through what seems to be resonating in this environment that's still challenged with those larger customers, why they're turning to Monday would be super helpful. Thanks. Yeah, Brent.

Speaker Change #100: Got it very helpful. Thank you and one follow up.

Speaker Change #101: Maybe talk about the pricing environment in general in this market one of your competitors lowered prices, while almost everyone seems like raised prices do you see any pressure on the pricing dynamics in the market, especially among the enterprise customers or do you think people are looking beyond list prices for Monday.

Speaker Change #102: And kind of focusing on ROI.

Speaker Change #103: Yeah you.

Eliran Glazer: Yeah, hi Pinjalim, it's Eliran. So as you know, first of all, we didn't adjust our pricing estimates since Q1 earnings. So it remains at $25 million for the year, fiscal year 24. And just as a reminder, by fiscal year 26, we're looking at around $75 to $80 million.

Speaker Change #104: You want to.

Speaker Change #105: Yes, I can take it yes.

Speaker Change #105: Hi, Julien it's Ron so.

Eran Zinman: Hi, this is Iran. So yeah, we continue to see strong traction in our larger accounts. A lot of them are just accounts we already had on the platform to continue to expand and grow and increase number of users. Some of it is software consolidation, but a lot of it is just natural growth and more usage of Monday within their own company. So that's continued to trend and looks really healthy, even given the environment right now.

Eran Zinman: So that's basically what contributed to the increase in the 50k and 100k and also their NDR. Healthful color there as a follow up, L Iran.

Speaker Change #106: Look the price increase reception really wells from our customers.

Speaker Change #106: Physically in the enterprise segment are very receptive.

Speaker Change #106: Yes.

Speaker Change #107: Literally the first time.

Speaker Change #107: As prices for existing customers. So given all the value added to the platform.

Speaker Change #107: <unk> received we do well I would say that in the.

Speaker Change #107: AB tests that we've done before and also we see now it has some a little bit of impact on.

Customers that are very very small businesses, I mean individual users or companies of two to three people.

Speaker Change #107: So that might impact the total customer count but.

Speaker Change #107: We anticipated this and we kind of plan that this will happen.

Brent Grayson: I know you talked about kind of trying to still wanting to reinvest in the business. Up margins came in here better than expected in the quarter.

Speaker Change #107: Wishing that kind of correlates with our focus to go up market and focus on teams and kind of larger mid market and enterprise customers and that's pretty much in line.

Brent Grayson: Is that improvement tied to some of those customer support cost savings that you reference using JDI or their other factors that contribute to margin out performance here in the first half.

Speaker Change #107: But apart from that like we see no impact on our existing customer base and definitely not the enterprise segment.

Speaker Change #108: Got it thank you very much.

Eran Zinman: Hey Brent, it's L Iran. Sure, so I would say some of it related to the fact that we are using JNI and customer success, so we don't need as amount of people like we used to in the past. In addition to that, you know, we're always picking both efficient growth. So on one hand, while we are behind on hiring this quarter, you know, we have some ambitious plan on hiring. As well as, you know, our spend on the performance marketing that is related to the big brain system that we have, then this is something that we always monitor for part of our efficient growth. We kind of look at our cost as well, not only on the top line, and this is the result of, you know, some of the things that I mentioned.

Speaker Change #108: Thank you.

Speaker Change #108: Our next question comes from the line of Catherine Inc. From Goldman Sachs.

Speaker Change #109: Your line is open.

Catherine Inc.: Gallium arsenide John for Kash. Thank you for taking the question you had impressive internal metrics regarding the implementation of <unk> services.

Speaker Change #111: Also mentioning the rollout of new functionality to our customers on the platform.

Speaker Change #112: You have seen over the last few quarters is shaping your view on this technology and how it's going to be incorporating plug in novato halfway ecosystem and Monday in particular, Hello, Ron curious to hear how you guys. Thank you that does sometimes if it's ability to maybe change customers' propensity to pay or the need for the number of subscription customers asking to you and I have a follow up.

Brent Grayson: Fantastic. Phenomenal results, guys. Thanks for the color. Thank you.

Eliran Glazer: We, you know, we follow the same playbook that we always do, based on what we know today, based on the data that we have, the sentiment. We obviously account for the sentiment in the market, we provide our guidance, and nothing has changed in terms of philosophy. But we are encouraged by the fact that, you know, Topo Funnel is still very healthy. The fact that we achieved, you know, large customers that are proving our use cases is becoming more, you know, perceived by our customers. So all of the above, in accordance with what we know today, provides us with the confidence that, you know, we can achieve the numbers that we provided in this guide.

Speaker Change #113: Yeah sure so.

Speaker Change #114: Yes definitely.

Speaker Change #115: Definitely the technology is real and we.

Jackson Ader: Your next question comes from the line of Jackson Ader from Keybank Capital Market. The line is open. Alright, thanks for taking our questions, guys.

Speaker Change #116: Are you seeing some great benefits from adding features.

Speaker Change #117: I think so far we mostly focus on adding passenger abilities in terms of AI, meaning, allowing our customers the same flexibility and allow them to integrate AI workloads into their existing work.

Jackson Ader: First one is on usage and utilization, maybe between the different customer segments. So what does utilization look like for your down the middle, small and medium-sized business customer versus maybe some of your largest customers? It doesn't have to be the 80,000 C, but the large customers versus SMB utilization.

Speaker Change #117: The next phase for US right now is to add AI capabilities into our.

Unknown Attendee: Got it. Very helpful. Thank you. And one follow-up.

Speaker Change #117: Product suite. So adds specific AI features to CRM, obviously Monday service is going to benefit from AI features so right now our future focus is.

Speaker Change #117: Adding more AI capabilities to the products themselves.

Roy Mann: Hi, this is Roy. So you mean utilization in terms of like their seat count versus their usage of it or use cases? Yeah. Yeah, like, you know, you've got a hundred people and 70 of them really use it every day and, you know, I don't know, 30 kind of check in every once in a while. Like utilization of the product mean like how often they're using it. And I guess like if there's any measure of depth to how they're using it as well.

Speaker Change #117: But again, we're working on both fronts.

Speaker Change #117: The feedback is good it takes time for people to adopt those features definitely but the ones that do.

Speaker Change #118: We have great feedback and maybe to follow up to your questions on customers I think that the big question with yes, it's always about monetization. So obviously, we sold the infrastructure companies as well as the hardware are benefiting from the fact that there is.

Pinjalim Bora: Maybe talk about the pricing environment in general in this market. One of your competitors lowered prices, while almost everyone seems to have raised prices. Do you see any pressure on the pricing dynamics in the market, especially among enterprise customers? Or do you think people are looking beyond list prices for Monday and kind of focusing on ROI?

Speaker Change #119: AI kind of boom, but I think.

Eran Zinman: Yeah, Eran, you want to... Yeah, I can take it. Yeah. Hi Julian.

Roy Mann: Yeah, so we have a lot of different measurement, obviously, and we see ourselves as a core tool. We go after core use cases, meaning like it managed the core of work. And we see really high engagement across our customer base. Having said that, like being part of the flywheel motion, what we see is that you have a team using a core use case, which runs really the core of what they do.

Speaker Change #119: We are now focusing on adding value.

Speaker Change #119: To monetize this we will have a few options in the future either as part of an add on or to add feature functionality to our existing.

Speaker Change #119: Solutions, but nothing I mean, we didn't count toward this this year I think in this year, we are looking mostly at the development and the contribution to retention and adoption of the platform by our customers.

Roy Mann: And then they invite other people that are helping them or connecting to them. And the flywheel motion means that over time they will start creating their own core use case. And then we scale there. So we have two tiers if you like types of customers, the one who are like in the main use case and the one who are kind of like more invited and part of others workflow. And that's how we grow over time.

Eran Zinman: Yeah, I can take it. Yeah. Hi Pinjalim, it's Eran.

Speaker Change #120: Perfect. Thanks.

Eran Zinman: So look, the price increase reception went really well from our customers, specifically in the enterprise segment, very receptive. Again, it's literally the first time we've raised prices for existing customers. So given all the value that we added to the platform, they received really well. I would say that in the A-B test that we've done before, and also we see now, it has some, a little bit of impact on customers that are, you know, very, very small businesses.

Eran Zinman: I mean, individual users or companies of two or three people. So that might impact the total customer account. But we anticipated this, and we kind of planned for this to happen. And we think that, you know, it kind of correlates with our focus to go up market and focus on teams and kind of larger mid market and enterprise customers. That's pretty much in line. But apart from that, we see no impact on our existing customer base, and definitely not the end.

Speaker Change #120: The adoption curve.

Jackson Ader: Okay, all right, great.

Speaker Change #121: Shaping your view on pricing quite a market more broadly, particularly as you will have to the Gis Monday service on future products can we expect this to follow the same Kara.

Speaker Change #122: In the sense that it will be released to new customers for existing or are you guys, taking a different approach.

Katherine Ng: Our next question comes from the line of Katherine Ng from Goldman Sachs.

Speaker Change #122: Gili.

Italy: Italy, Iran. We are using the same approach as I said monetization will come later.

Speaker Change #124: Maybe it will be not maybe it will be part of the total offering but in terms of changing the pricing due to AI.

Jackson Ader: And then actually staying kind of on the on the product side.

Speaker Change #125: Still early days and I think not now, but I think maybe goes to be asked about minus service rollout so specifically about that.

Gili Naftalovich: Hi, it's Gili Naftalovich on behalf of KASH. Thank you for taking the question. You highlighted impressive internal metrics regarding the implementation of Gen AI services, while also mentioning the rollout of new functionality to customers on the platform. How is the success you have seen over the last few quarters shaping your view on the technology and how it's going to be incorporated both in the broader software ecosystem and Monday in particular? Eliran, curious to hear how you're thinking about this in terms of its ability to maybe change customers' propensity to pay or the need for the number of subscriptions customers opt into. And there's a follow-up.

Jackson Ader: From Monday to be can we could you guys just put the scalability and context 100,000 items on board 500,000 on a dashboard sounds like a lot. But can you compare that maybe to what those statistics look like under Monday DB 1.0 and then maybe even prior to Monday DB being rolled out last year.

Speaker Change #125: Probably going to follow the same path that mean.

Speaker Change #125: Go to market with a new product but.

Speaker Change #125: Judging from what we're already seeing in terms of demand from our own customer base.

Speaker Change #125: I think that's also going to be a strong cross sell opportunity that would mundus service. So again, it's very early days, so it's really hard to determine.

Eran Zinman: Yeah, Jackson, this is Iran. So compared to Monday DB 1.0, that's a 10X from the limits we had before in the prior version. And the number of items will continue to scale in future releases. So there is a significant growth growth in terms of boards and dashboards. And in future releases, we're going to have another kind of significant steps in terms of scale of what the boards can. Okay. Awesome. That's helpful.

Speaker Change #125: But in terms of people searching for such products online and also our own customer base.

Jackson Ader: Thank you.

Speaker Change #125: We're going to benefit from both.

Speaker Change #126: Perfect. Thanks.

Speaker Change #127: Thank you.

Speaker Change #127: Our next question comes from the line of Michael Berg from Wells Fargo.

Speaker Change #128: The line is open.

Michael Berg: Hi, congrats on the quarter and thanks for taking my question I wanted to touch on cash flow for a second it looks like cash in the quarter wasn't quite as robust operating margins, but the implied rest of year outlook looks incredibly strong in particular in Q3, but Q4 remains a little bit low implied anything to point to you on.

Alex Zukin: Your next question comes from the line of Alex Zukin from Wolf Research. The line is open. Hey guys, thanks for taking my question and congrats. Maybe just help us give us a flavor for kind of the demand environment, the linearity of the quarter. And particularly the large deal cadence, which was again quite quite extraordinary. Maybe how did it compare the last quarter? How did it compare to the your expectations and how to think through again this kind of macro, dicey macro environment that we seem to be in for this year?

Speaker Change #130: Seasonality or timing of free cash flow and maybe how to think about that beyond this year and I have a follow up thank you.

Eliran Glazer: Yeah, sure. Hi Gili.

Yes, sure so with regards to free cash flow.

Eliran Glazer: So yeah, look, definitely the technology is real, and we have already seen some great benefits from adding features. I think so far, we mostly focused on adding platform capabilities in terms of AI, meaning allowing our customers the same flexibility and allowing them to integrate AI workflows into their existing work. Kind of the next phase for us right now is to add AI capabilities to our product suite. So, add specific AI features to CRM.

Eliran Glazer: Obviously, the Monday service is going to benefit from AI features. So right now, our kind of future focus is, you know, adding more AI capabilities to the products themselves. But again, we're working on both fronts. And, you know, the feedback is good. It takes time for people to adopt those features, definitely. But the ones that do, we hear great feedback.

Eliran Glazer: Yeah, maybe to follow up, Gili, on your questions about customers, I think that the big question with AI is always about monetization. So obviously, we saw that the infrastructure companies, as well as the hardware, are benefiting from the fact that there is, you know, an AI kind of boom. But I think, you know, we are now focusing on, as Eran said, adding value. To monetize this, we will have a few options in the future, either as part of an add-on or to add it as a feature of functionality to our existing solutions. But nothing, I mean, we didn't account for this this year. I think this year, we are looking mostly at the development and the contribution to retention and adoption of the platform by our customers.

Gili Naftalovich: And how is the adoption curve of CRM and DEV shaping your view on pricing and go-to-market more broadly, particularly as you look to the GA of the Monday service and future products? Should we expect this to follow the same curve in the sense that it will be released to new customers before existing ones, or are you guys taking a different approach?

Speaker Change #131: Mentioned in the past that there is some seasonality for example in Q2. This is the month or the quarter, where you pay the salary increases where we pay commission for the salespeople.

Eliran Glazer: Gili, it's Eliran, we're using the same approach, as I said, monetization will come later, you know, maybe it will be, not maybe, it will be part of the total offering, but in terms of changing the pricing due to AI, it's still early days, and I think not now. Yeah, but I think maybe Gili specifically asked about mindless service rollout, so specifically about that, we're probably going to follow the same path, that means, you know, go to market with a new product, but again, judging from what we've already seen, in terms of demand from our own customer base, I think there's also going to be a strong cross-sale opportunity there with mindless service, so again, it's very early days, so it's really hard to determine, but in terms of people searching for such products online, and also our own customer base, I think we're going to benefit from both.

Speaker Change #131: Vacation days and all of the above so this is something that is usually traditionally more expensive in terms of free cash flow.

Speaker Change #131: Q3 and Q4.

Eliran Glazer: Sure. Hey Alex, this is Eliran. So with regards to demand few things that I would like to highlight. So SMB, the strength of, you know, of Monday and it continues to perform very well. In terms of what we see demand environment in general, in terms of macro is inconsistent and choppy. We also saw it from other companies that mentioned it, but the fact that, you know, despite persistent market challenges, we see the demand steady profile segments. This is something that is very encouraging for us.

Speaker Change #131: We said there is some seasonality mostly related to the fact that there are sometimes one time events.

Other than that.

Speaker Change #131: With the exception of Q2, which is more seasonality wise and some Q4 that we paid some commission for the salespeople.

This is basically basically the behavior of the free cash flow I would mentioned one thing that is part of our moving to new offices in London.

Speaker Change #131: We get the benefit of $11 million cash incentive related from the prior landlord. So this is something that obviously, obviously took we took into account as part of our annual estimate so.

Eliran Glazer: And in addition to that, maybe to provide the KPI, the demonstrated strength is our growth retention is at record levels. But, you know, but we're still seeing some kosher spend environment with many other customers. So all in all, pretty consistent with what we saw in the past. It's not getting any better, but it's not getting any worse and we maintain our strength in, you know, SMBs and across all segments.

Speaker Change #131: So this is something that I would say, it's a one off $11 million that we are getting but all in all we see the fact that basically operating profit and free cash flow are getting more closer in terms of the numbers.

Speaker Change #131: Percentage wise.

Speaker Change #132: Helpful. So to be clear that $10 million of the incremental free cash flow ratios from the incentives and then does that also exclude the tick up in Capex.

Eran Zinman: Yeah, and maybe I'll be honest, sorry. Yeah, go ahead. Now, just, you also asked about the large deal that we closed.

Speaker Change #132: Pick up in Capex is related to the fact that as we grow.

Eran Zinman: So maybe this is Iran to maybe just to give some more, more color on this. It's, it's a European based multinational health care company. There were, there were actually an existing customer of Monday, since I think 20, about 2020, four years now, they started, the first use case was mostly focused on finance and R&D management workflows and projects. And then we expanded now it's been used across procurement design until until until ticketing management.

Speaker Change #133: In terms of number of people, we add the 123 people and were exceeded.

Speaker Change #134: 2100 employees, yes, we invest in offices to accommodate for these people. So this is the increase in capex.

Speaker Change #134: Helpful. And then a quick follow up so with service coming out later this year you had three strong new products from over the past call. It 18 to 24 months nothing has been announced beyond that so how can we think about new products or how youre thinking about new products or areas to focus on beyond service repair.

Eran Zinman: And basically last year, kind of end of last year, but closed now they made decision to consolidate on Monday and kind of basically started out as the whole company on the platform. So that's the lawsuit counts, but it's a very healthy expansion and long kind of use case over the years and happy partners of them since 2020.

Speaker Change #134: Yes. This is Ron so.

Ron: Right now, we don't expect to add new products in the I.

Speaker Change #134: I would think come.

Ron: Coming future, we are very much focused on going deep for each one.

Ron: That means we're going to focus on on CRM Dev work management, obviously in service.

Ron: And going deep means adding more functionality.

Ron: Maybe it was going to have like sub products within those kind of many products suite.

Alex Zukin: Perfect. And maybe just as a follow up on the CRN fails net customer ads going forward, it's been about 4,000 now a quarter of the past two. Is this the right way to think about it going forward and given the launch of DBT of the 2.0 version of Monday DB, is it fair to think that you should, we should start to see that ASRPC go a little higher on the sales side as well.

Speaker Change #135: Not going to open we're not going to open more product lines in the upcoming future.

Speaker Change #135: Helpful.

Speaker Change #135: Thank you.

Michael Berg: Thank you. Our next question comes from the line of Michael Berg from Wells Fargo.

Speaker Change #135: Our next question comes from the line of Michael Funk from Bank of America.

Speaker Change #136: Your line is open.

Michael Berg: Hi, congrats on the quarter and thanks for taking my question. I want to touch on cash flow for a second. It looked like cash from the quarter wasn't quite as robust as operating margins, but the implied rest of your outlook looks incredibly strong, in particular in Q3, but Q4 remains a little bit low implied. Anything to point to on seasonality or timing of free cash flow and maybe how to think about that beyond this year? And then we'll follow up. Thank you.

Michael Funk: Great. Thank you for the questions. This morning.

Alex Zukin: Yeah, I think it's a run again. So I think it's a fair assessment to say that it's more than that's going to be the pace. Most of the growth is still coming from existing users. So it's less of a case of money to be making a huge impact on the numbers. It's mostly customer acquisition of new customers that kind of generate and kind of help this number growth. Yeah.

Speaker Change #138: I think you briefly mentioned earlier that are part of what Youre seeing is consolidation small part of your growth, but still seeing it.

Speaker Change #139: Anything to call out on your pocket vantage or raising customers are consolidating on a monday or maybe why they are moving away from competitive products.

Eliran Glazer: Yeah, sure. So, with regard to free cash flow, you know, we mentioned in the past that there is some seasonality. For example, in Q2, this is the month or the quarter where you pay salary increases or you pay commission for the salespeople, you know, vacation days and all of the above. So, this is something that is traditionally more expensive in terms of free cash flow. In Q3 and Q4, I would say there is some seasonality, mostly related to the fact that there are sometimes one-time events.

Speaker Change #139: Yeah, Hi, Mike This is Ron.

Eran Zinman: And I'm sorry. And if you're if we're talking about the CRM product, like we see nice growth and we're always going up market and improving our capabilities there. So we would do expect us to be able to get bigger ACV. Let's say for sure.

Alex Zukin: Perfect. Thank you guys.

Speaker Change #140: I think that the main reason why we've seen again, it's not huge numbers, but.

Speaker Change #140: It's definitely a little bit growing.

Speaker Change #140: Customers consolidate on Monday, mainly because it can do many things because of its flexibility.

Speaker Change #140: I think where other products.

Alex Zukin: Congrats again. Thank you.

Speaker Change #140: Don't have disability is where the kind of built for one purpose and then if you add more use cases or when I had kind of consolidate the other products.

Speaker Change #141: Most impossible technically to do it and wouldn't Monday, a lot of our customers manage to do it.

Arjun Bhatia: Our next question comes from the line of Arjun Bautia from William Blair. The line is open. Thanks. Thank you.

Speaker Change #141: On a consolidated different products they are using into the platform. So just the nature of that flexibility allows our customers to do more and more of that consolidation.

Arjun Bhatia: And congrats guys on the strong quarter here.

Speaker Change #142: Thank you for that and just a comment on the macro I know you mentioned you are seeing some macro impact, but an interesting quarter with some other software companies.

Eran Zinman: Maybe I wanted to ask about the service management product build out. It seems like you're in full beta with that. And maybe now you have a little bit of a better idea of what it looks like at launch. So what is your sense of how that product will differentiate versus competitive products in the market. Now that you have some feedback from customers. And how quickly it might scale and get adoption out of the gates compared to some of the other solutions you've launched like CRM does. Yeah.

Eran Zinman: Thanks Arjun.

Speaker Change #142: Highlighting a real slowdown and a quarter on demand.

Speaker Change #144: Love to hear your thoughts on maybe why you are seeing less macro impact and then if there's been any shift in and incentives.

Speaker Change #145: Sales force compensation that you've implemented to maybe address some of the some of the week metric MACRA.

Eliran Glazer: But other than that, with the exception of Q2, which is more seasonality wise, and some Q4 where we pay some commission to the salespeople, you know, this is basically the behavior of the free cash flow. I would mention one thing that, as part of our moving to new offices in London, we get the benefit of an $11 million cash incentive related to the prior landlord. So, this is something we obviously took into account as part of our annual estimate.

Speaker Change #145: Yeah, Hey, Mike It's Ron So maybe as we said earlier the demand environment in general is still a bit inconsistent and choppy.

Eran Zinman: This is Iran. So the first of all, we launch one to service now in beta. We already have a few dozens of customers using it and paying for the product. Look, it's very early days to say, you know, compared to how this will compare to Monday CRM or Monday dev. What we can share that the feedback is very positive from customers. A lot of excitement. One of the things that really resonates compared to other players in the market.

Speaker Change #146: But for us we.

Speaker Change #147: <unk> emphasized in the past.

Speaker Change #147: So despite the macro challenges.

Speaker Change #148: Steady demand profile segment, SMB, then strengthen us, but also our midmarket and enterprise continues to grow in a very nice way.

Mike: So it's not related to the fact that we implemented a new compensation. This is very early.

Eliran Glazer: So, this is something that I would say it's a one-off $11 million that we are getting. But all in all, we see the fact that basically operating profit and free cash flow are getting more closer in terms of the seasonality of the business. So, this is something that I would say it's a one-off $11 million that we are getting. But all in all, we see the fact that basically operating profit and free cash flow are getting more closer in terms of the seasonality of the business. So, this is something that I would say it's a one-off $11 million that we are getting. Inter-percentage-wise.

Mike: There is also this implementation, but hopefully over time, we're going to see the benefits of that as we continue to kind of segregate between segments and the way, we compensate our salespeople or each segment I would say it's also related to the fact that you know our gross retention is at record levels.

Eran Zinman: Again, it is the flexibility kind of similar to the CRM and their products, but I think specifically for service, it kind of, you know, the fact of this as a even more significant store customers because they want to automate a lot of the process within the IT service management product. And they want to have most custom ability on how they kept data and how the process workflows. So this is exactly where Monday shines.

Mike: So we see cautious spend environment, we're encouraged by the fact that.

Mike: Customers are unlocking the value of Monday platform as we continue to add more value and more features and functionalities.

Eran Zinman: The feedback is very positive. People want to use this in addition to other products already using with Monday. So it looks very promising. But again, early days, we're going to have a full resource the end of the year. And then we'll get more traction and we'll be able to share more numbers. Okay, perfect. That's the central.

Speaker Change #149: Great. Thank you for the time.

Speaker Change #149: Sure.

Speaker Change #149: Yeah.

Speaker Change #149: Thank you.

Michael Berg: Helpful. So to be clear, the $10 million of the incremental free cash flow raise was from the incentives. And then does that also explain the tick up in CapEx?

Speaker Change #150: Our next question comes from the line of DJ Hynes from Canaccord Genuity.

Speaker Change #151: Line is open.

Speaker Change #152: Hey, guys congrats on a nice quarter here good to see the results.

Roy Mann: And then I think, you know, you talked about in the shareholder letter, the work management portfolio product. Can you just expand on what that product does a little bit how customers use it in conjunction with the core work management solution, why it's important for enterprises and then on the economics side of the equation. And how do you price a solution like this? And how should we think about the upsell? Sorry, a lot of questions in there, but you get the, I think the gist of it. Yeah, sure.

DJ Hynes: Just one for me Ron I want to ask you a high level question around R&D spend I mean, you guys clearly continue to innovate quickly, but when I look at your business compared to say somebody like atlassian rate, which maybe they're not the best comp given the unique P&L, but you.

Speaker Change #154: Guys spend quite a bit less on R&D can you just talk about that product development efficiency, what drives it and how we should think about trends in R&D spend over time.

Eliran Glazer: Yeah, yeah, the pick-up in capex is related to the fact that, you know, as we grow, in terms of the number of people, we added 123 people, and we exceeded 2100 employees. Yes, we invest in offices to accommodate all these people. So this is the increasing

Speaker Change #154: Yes, Hi, Vijay it's Ron so.

Speaker Change #155: Unfortunately from my own experience anymore.

Speaker Change #156: Any more R&D doesn't always colored correlate with more execution. So I wish it was the case, but.

Roy Mann: Hi, it's Roy here. Portfolio Management is essentially a way to manage like a thousand projects. Let's say, a lot of projects together. So until now, Monday was amazing at managing really complex projects with different workflows across the organization. And this is a step up for us in terms of the volume of projects, even super complex ones, but giving a high level overview and management of massive projects, even to management. And essentially, it's a building block for us towards managing massive organizations, a complete project portfolio and its entire hierarchy. And so this allows us essentially to go up market, to have larger customers depend on us and like really manage the core of their entire project operations.

Roy Mann: Okay, perfect, thank you.

Speaker Change #157: Being efficient in terms of R&D developers product and designers has always been a goal of us and it's very important for us oftentimes. What we found is sometimes having less people on the team makes it even more efficient as opposed to having a lot of people on the team and.

Roy Mann: Thank you.

Speaker Change #157: You've seen our execution over the years.

Speaker Change #158: Always believe in.

Speaker Change #158: High velocity execution will drive to make an impact with the productivity and given them a lot of ownership so.

Speaker Change #158: We're very proud of how we manage our R&D team and execution.

Speaker Change #158: The percentage of spend it might go up a little bit in terms of.

Speaker Change #159: Maybe I can add more calls on this but.

Ron: We're keen to keep our efficiency and even more than that we are keen to continue to execute as we scaled the company Yeah, Hi, Ron maybe D. J just to add that in terms of R&D. We always wanted to hire this is the number one priority of hiring.

Michael Berg: Helpful. And then a quick follow-up. So, with the service coming out later this year, you've had three strong new products come out over the past, we'll call it 18-24 months. Nothing's been announced beyond that. So, how can we think about new products or how you're thinking about new products or areas to focus on beyond service from here? Yeah, this is Eran.

Speaker Change #160: Bringing the resources to Monday.

Speaker Change #161: But the flip side, if you compared us to Atlassian. There is always like if you look at SMN and R&D I would look at them together because it is also important to understand the other divisions as well for us and where we're able to reduce.

Ryan Macwilliams: Our next question comes from the line of Ryan MacWilliams. From Barclays, the line's open. Thanks for the question. I thought it was interesting how you noted you added Gen AI to your customer service efforts. And while interaction is double, you're still able to reduce 30% of your external customer service account. Any learnings here as it relates to the upcoming launch of your Monday service product. Can we repeat the last part of question about just like that? How did this customer service experience with Gen AI relate to your upcoming launch of Monday service, like anything you could bring over to the new product?

Speaker Change #161: No cost as a percentage of revenue indicates so other companies sometimes it can be the other way around so I think that all in all investment in R&D is a top priority of us and we continue to be efficient, but definitely this is something that you would like to highlight.

Ryan Macwilliams: Yeah, thanks Ryan.

Speaker Change #162: Yes, yes, all makes sense helpful color. Thank you guys.

Speaker Change #163: Thank you.

Speaker Change #163: Our next question comes from the line of Steve Anderson from Citibank.

Speaker Change #164: Your line is open.

Steve Anderson: Okay, great. Thanks for thanks for taking the questions here.

Steve Anderson: I guess, maybe just to start I want to ask about.

Steve Anderson: The I guess annual customers coming up for renewal and the impact that the price increases are having into that base.

Eran Zinman: It's completely separate. So basically, we kind of build and use some third-party tools to automate some of our external customer support. That means supporting our own customers. And that's regardless of building Monday service. In regards to Monday service, definitely we're going to have AI capabilities within the product. And it's a good experience for us to kind of experience on ourselves and saving costs and seeing the benefit of that. But that's going to be kind of more of a future release of that product.

Steve Anderson: Is there a way to frame kind of how those conversations are trending and how much of the price increases is being adopted today.

Speaker Change #166: Versus maybe that's driving a discussion.

Speaker Change #167: And to drive more adoption and maybe the pricing increase will come in kind of later in fact will come in later down the line.

Speaker Change #167: Yeah, sure Hi, Steve, Italy, Iran. So in terms of price increase we already communicated.

Steve Anderson: I would say around 40% for our customers the pricing increase just as a reminder.

Eran Zinman: The initial version of Monday service will, you know, won't have a lot of kind of activities in the first version. But later on, we're going to release future versions with more AI capabilities. But definitely a good experience for us and definitely a huge cost-saving process as a company.

Speaker Change #168: We ended last year with 225000 customers significantly.

Speaker Change #168: Significantly higher than some of our peers.

Speaker Change #168: So and on that front, we also would like to mention that we anticipate total customer.

Speaker Change #168: Account growth around to grow.

Ryan Macwilliams: I appreciate that color. And then just on the pricing impact, how are customer conversations been so far around contract renewal? Like are you capturing the pricing benefit you expected? And then how can we think about the contribution to net retention from pricing this year? Thanks.

Speaker Change #168: This year high single digits.

Speaker Change #169: The fact that we basically implemented the price increase obviously, the one that's where it kind of small users or you know.

Speaker Change #169: Students or small companies that didn't see the value we would've expected churn. So now we are focused on more of the high value customers.

Eliran Glazer: Hey Ryan, it's Ali Ran. So just by way of a reminder, we're on target and consistent with what we communicated in Q1, new pricing structure already rolled out to 40% of the customers. So this is stage, obviously, we said that it's going to be until the you know, H1 of next year because this is a rolling forecast. This is a rolling process of 12 months. So all in all, conversations are going well with regards to enterprise accounts, obviously, because there are big accounts, there is some negotiation in the way we kind of increase prices, but all in all, reaction is good and continue to evolve.

Speaker Change #169: With regards to the enterprise customers, obviously they are in higher tier. So there is there are negotiations going on.

Speaker Change #170: The reception was very well, but it's important to mentioned the things that I highlighted as part of US continue to onboard a price increase.

Speaker Change #170: Okay.

Speaker Change #171: Helpful context, there and then I guess, maybe we think about the.

Speaker Change #171: This impacted metrics.

Speaker Change #171: Hey, Hunter Kay ads came in pretty solid I guess, how much of that is attributable to the price increases coming in here.

Speaker Change #172: How should we think about the trends on those ads throughout the rest of the air.

Speaker Change #172: Yes, Hi, Stephen it's Ron so.

Ron: I don't think <unk> had almost any impact on the growth in terms of the <unk> and <unk> okay.

Ryan Macwilliams: Please. Thank you. Right, thank you.

Speaker Change #173: Those conversation takes longer we expect.

Speaker Change #174: Kind of this first of all to the price increase to finish by the end of the Q.

Q3 of next year, I think that's where most of the enterprise accounts definitely about 50, K will renew and.

Speaker Change #175: We will benefit from the price increase for those accounts. So it will take another kind of full year to do that full cycles with those enterprise customers.

Derek Wood: Our next question comes from the line of Derek Wood. Great. Thanks. I'll come. I congratulations.

Speaker Change #176: Okay perfect. Thanks for taking the questions.

Roy Mann: As you're driving some of the strongest growth in the SaaS market from a competitive standpoint, would you say that when rates against core competitors have gone up or would you say you're happening to new budgets? You've never been in before and kind of competed against different vendors. Just wondering how you talk about the strength of your competitive position.

Speaker Change #177: Thank you.

Speaker Change #178: Our next question comes from the line of Scott Berg from Needham <unk> Company.

Speaker Change #179: Your line is open.

Scott Berg: Hi, everyone really nice quarter here.

Scott Berg: I had a question on the ATK CTF certainly more than the last largest customer size of 25, K, we heard last year, but as you as you think about a deal that size is that customer fundamentally purchasing anything different in terms of feature functionality.

Roy Mann: Hi, it's Roy here. So for one, I feel like we're still doing super strong on the performance marketing and because we have a great visibility into the return of all our campaigns. We know where to put the money and see the returns.

Speaker Change #181: Relative to maybe some of them maybe another customer at 500 or 1000 seats.

Rob: Hi, Rob.

Roy Mann: And I think like that's something we can do way better. And we still gain a larger share of the markets because of that on the news side.

Speaker Change #183: <unk> here so.

Speaker Change #184: Sorry about that.

Speaker Change #185: Essentially they're not using us for anything materially different just at scale.

Roy Mann: On the other end, I can tell you we're still like hitting this as a greenfield space. Okay, we see most of our deals were not up against competitors, but in some areas we do and And when we win, we win a lot because of the platform and our capabilities and the fact that companies see they can rely on us in the future as well as in a lot of other things they can do. So yeah, so on all fronts, we see with your position as positive competitive.

Speaker Change #186: So they did take us on the work management.

Speaker Change #186: Ticket and managing.

Roy Mann: Great.

Speaker Change #186: Project portfolios and workflows across their organization they understand our roadmap they are with us for a long time.

Speaker Change #186: And essentially when you reach those scale there are things that are needed from the platform like let's say different user management and other.

Speaker Change #186: Such governance features which we do have and so.

Speaker Change #186: Im working on all the time so.

Speaker Change #186: The core product is the same but the.

Roy Mann: And maybe just a touch on that greenfield aspect. I mean, we've heard that your new AI powered templates are really helping to drive greater user adoption and just making it a lot easier to spin up new use cases on the platform. Can you can you talk about how your new AI technology is helping drive higher adoption and maybe expansion rates?

Speaker Change #186: Let's say management around it.

Speaker Change #186: There is a bit different and we haven't been working on those things for a long time as well.

Speaker Change #187: Understood helpful and then <unk> as I look at your gross margins. They were an all time high in the quarter greater than 90% should we assume that they're going to remain greater than 20% or excuse me greater than 90% going forward, especially with how you've been able to reduce some of those customer service costs through the journey.

Eran Zinman: Hi, so it's still early days to know the exact impact of it. We see great positive feedback from customers using it. And it is, like you said, with it's a lot of power because we built it on top of the platform. It totally integrated into it in a way that you can build whatever you want. Like we showcased in the demo we did an investor day, essentially, you can build any AI work integrate AI into any workflow you want. And it's super powerful and we see people building great things with it. And going into the future, we expect great things from this.

Roy Mann: Awesome. Thank you.

Speaker Change #187: AI technologies.

Speaker Change #188: Hey, Scott Daily Ron So you know I think as we mentioned in our script is going to be high $8, 18% to 91%.

Speaker Change #189: It is an outlier to a certain expense timing spending I would say.

Speaker Change #190: It's probably the right number to look at.

Speaker Change #191: Very helpful. Congrats on a good quarter.

Speaker Change #192: Thank you.

Speaker Change #193: Thank you.

Speaker Change #194: Our next question comes from the line of Taylor <unk> from UBS. Your line is open.

Speaker Change #195: Yes, hi, Thanks for taking my question. The first wanted to thank you saw stabilization to an inflection this quarter and NR with those larger customers and I think that was a little earlier than expected, but you reiterated the stable NR guide and then slight improvement embark here. So can you just comment on what's driving some of that conservatism. Despite.

Pinjalim Bora: Our next question comes from the line of Pinjalim Bora from JP Morgan. The line is open. Great.

Pinjalim Bora: Hey, thank you for taking the questions and congrats on our solid quarter here. One question on guidance, slash macro, I guess. Seems like you're raising the full year guide by more than the Q2 beat, and you're not raising the pricing benefit for the year. So trying to understand what gives you confidence in this macro to essentially raise the core guide. Is that largely the large deal dynamics that you're seeing? Is that mainly because of the growth retention, improving any color health?

Speaker Change #196: <unk> trends and the uplift from price anything to be mindful of in the second half in terms of renewal our gross retention are sources of that burden.

Speaker Change #196: Yeah sure Hi, Taylor, it's Kelly so just by way of expectations are not didn't change from Q1.

Speaker Change #197: So we expect reported and they ought to be largely stable throughout our fiscal year 'twenty four as a reminder, just to remind you. We are reporting the weighted average of the last four quarters. So even if you see an uptick due to price increase or two consolidations on our platform of larger customers.

Eliran Glazer: Yes, hi, Pinjalim. It's Eliran. So as you know, first of all, we didn't adjust our pricing estimates since Q1 earnings. So it remains a 25 million for the year, fiscal year 24, and just as a reminder, by fiscal year 26, we're looking at the round 75-24. We're going to go to 80 million dollars. We follow the same playbook that we always do based on what we know today, based on the data that we have, the sentiment, we obviously come for the sentiment in the market.

Speaker Change #196: On the <unk>.

Speaker Change #196: Trailing 12 months aspect the impact on that.

Speaker Change #196: Reported <unk> is going to be delayed to beat. So this is why we kind of said that we expect.

Speaker Change #196: The impact to be when we exit fiscal year 'twenty for going into 2025 and long term, we expect overall, India to be between 1% to $1 15, as we said in the past.

Speaker Change #198: Great. Thank you so much and then just as a follow up so it seems like CRM and that customer growth is trending really nicely and they are scaling well. So can you help us quantify maybe how that might be contributing to growth. This year or are we getting to the point, where these could be more than just the one to two point contributor.

Eliran Glazer: We provide our guidance. Nothing has changed in terms of philosophy, but we do encourage by the fact that top of the funnel is still very healthy, the fact that we achieve the large customer that is proving our use cases. It's becoming more perceived by our customers.

Any help as we think about that.

Speaker Change #198: Into this year.

Pinjalim Bora: So all of the above, in accordance with what we know today, provide us with the confidence that we can achieve the numbers that we provide the guidance. Got it. Very helpful. Thank you. And one follow up.

Yes, Hi, Taylor, it's Ron so.

Speaker Change #199: Look again, it's pretty early days for Jeremy although both are growing really well and we've shared some numbers in investor day about CRM continue to grow really well.

Eliran Glazer: Maybe talk about the pricing environment in general in this market. One of your competitors, Lord prices, well, almost everyone seems like raised prices. Do you see any pressure in the pricing dynamics in the market, especially among the enterprise customers? Or do you think people are looking beyondless prices from Monday, and kind of focusing on ROI? Yeah, everyone you want to.

Our expectations, but still it's relatively low in terms of percentages compared to our total revenue count, but given the high growth rate.

Speaker Change #199: Over time, we expect this to become more and more material part of our revenue in terms of percentages, but again right now it's too early days in terms of growth.

Eliran Glazer: Yeah, I can take it. Yeah. I believe it's around.

Speaker Change #199: Relative size.

Thank you so much.

Eliran Glazer: So look, the price increase reception went really well from our customers, specifically in the enterprise segment, very receptive. Again, it's literally the first time we've raised prices for existing customers. So giving all the value that we added to the platform, they received really well. I would say that in the.

Thank you.

Speaker Change #199: Our next question comes from the line of Rob Oliver from Baird.

Speaker Change #199: Your line is open.

Rob Oliver: Great. Thank you good morning, Thanks for taking my questions.

Rob Oliver: First one is on sales CRM I know you guys referenced in your prepared remarks or in response to a question that most of your wins generally are still greenfield, but I'd be curious to know what youre seeing in terms of early trends on sales CRM is that still kind of filling that void in the market at the low to mid range, where traditional CRM has historically served or as <unk>.

Eliran Glazer: Maybe that's what we've done before and also we see now it has some a little bit of impact on customers that are, you know, very, very small businesses, I mean individual users or companies of two or three people. So that's my impact at all customer account, but we anticipated this and we kind of plan that this will happen and we think that, you know, it's kind of correlates with our focus to go up market and focus on teams and kind of larger. Meet market and enterprise customers, that's pretty much in line. But apart from that, like we see no impact on our customer base and definitely not the enterprise segment. Got it.

Speaker Change #201: You move up market are you starting to see some bump up against some competitors so some potential competitive displacements.

Speaker Change #202: Yes, hi, it's three so I would still say were like 50% Greenfield in CRM, it's largely growing segment.

Speaker Change #203: And we're like mostly growing thinking in accounts.

Speaker Change #203: SMB space, but we're growing going upmarket into the mid market as well and yes.

Catherine Ingh: Thank you very much. Thank you.

Speaker Change #203: 50%, we do see other CRM.

Catherine Ingh: Our next question comes from the line of Catherine Ingh from Goldman Sachs. The line is open.

And in which we compete against and what I think what makes us succeed and being really good sweet spot is on one end, our custom ability and the fact that we're really good at creating any workflow you want around CRM, obviously, if you have projects in.

Catherine Ingh: Hi, it's Gili Naftalovich on for task. Thank you for taking a question. You have an impressive internal metrics regarding the implementation of Gen. A.I, services. We're also mentioning the rollout of new functionality to customers on the platform. How is the success you have seen of the last few quarters shaping your view on this technology and how it's going to be incorporated both in the broader software ecosystem and Monday in particular? Eliran curious to hear how you're thinking about this in terms of its ability to maybe change customers' propensity to pay or the need for the number of cost subscriptions customers opt into.

Eliran Glazer: And I have a follow-up. Yeah, sure.

Speaker Change #203: As well as in the sales process so roster that.

Speaker Change #203: So thats, where we are.

Speaker Change #203: <unk> and CRM in general needs a lot of customization, that's what customers really want.

Speaker Change #203: And on the other hand.

Speaker Change #203: I mean, we're.

Speaker Change #203: Seeing great success.

Speaker Change #203: Performance marketing side so we're.

Eliran Glazer: I agree. So yeah, look, definitely the technology is real and we already seen some great benefits from adding features. I think so far we mostly were focused on adding platform to abilities in terms of AI, meaning allowing our customers the same flexibility and allowed them to integrate AI workflows into their existing work.

Speaker Change #203: To capture large.

Speaker Change #203: Great deal of the market demand.

Speaker Change #203: Yes.

Speaker Change #204: Great. That's helpful. Thank you and then just a quick question on your partner network, which continues to have impressive numbers can you talk a little bit about the role that partners are playing particularly as you move upmarket and bring more of a multi product solution.

Eliran Glazer: Kind of the next phase for us right now is to add AI capabilities into our product suite. So add specific AI features to CRM. Obviously Monday service is going to benefit from AI features. So right now our future focus is adding more AI capabilities to the product themselves. But again, we're working on both fronts and the feedback is good. It takes time for people to adopt those features definitely. But the ones that do, we hear great feedback.

Speaker Change #205: Two customers are you seeing partners.

Speaker Change #206: By an intense and opportunity I mean, you just mentioned customization necessary in CRM. That's obviously great for the customer could also be a source of console for the partners as well. So just wondering what youre seeing there is as you move up market. Thank you.

Speaker Change #207: And of course, so yes partners are a significant part of our go to market and we're gradually seeing and driving actually towards partners, giving more and more services to our customers and helping them adopt.

Eliran Glazer: Yeah, maybe to follow up a gilet through your questions on customers. I think that the big question with AI is always about monetization. So obviously we saw that the infrastructure companies as well as hardware are benefiting from the fact that there is, you know, an AI kind of boom. But I think, you know, we are now focusing on and the ones that adding value to monetize this. We will have a few options in the future either as part of an add-on or to edit the feature functionality to our existing solutions. But nothing, I mean, we didn't account for this this year. I think in this year, we are looking mostly at the development and the contribution to retention and adoption of the platform by our customers.

Eliran Glazer: Perfect. Thanks.

Speaker Change #207: Even having a nice evolution in the partner space to larger partners doing more professional services to customers.

Speaker Change #207: Creating deeper.

Speaker Change #207: Our integrations and implementations of Monday.

Speaker Change #207: And that's like an area, we keep investing.

Speaker Change #208: Okay, great. Thank you again.

Speaker Change #208: Thank you.

Speaker Change #209: As there are no more questions in the queue. So that concludes our question and answer session that also concludes this call. Thank you for joining you may now disconnect.

Eliran Glazer: And how is the adoption curve of CRM shaping your view on pricing, go to market more broadly, particularly as you look to the GA of Monday service and future products. So we expect this to follow the same curve in the sense that it will be released to new customers before existing or are you guys taking a different approach. Now, where you gilets are, we're using the same approach as I said monetization will come later.

Speaker Change #209: Goodbye.

Eran Zinman: Right now, we don't expect to add new products in the, I would say, you know, coming future. We're pretty much focused on going deep for each one. That means we're going to focus on CRM, dev, work management, obviously, and service. And going deep means adding more functionality. Maybe we're going to have like sub products within those kind of mini product suites, but we're not going to open; we're not going to open more product lines in the future

Speaker Change #210: Please wait the conference will begin shortly.

Speaker Change #210: [music].

Speaker Change #210: Okay.

Speaker Change #210: Yes.

Speaker Change #210: [music].

Eliran Glazer: You know, maybe it will be not maybe it will be part of the total offering, but in terms of changing the pricing due to AI, it's still early days and I think not now. Yeah, but I think maybe because the city has about minus service, the Royal, so specifically about that, probably going to follow the same path. That mean, you know, go to market with the new product, but again, judging from what we already seen in terms of demand from our own customer base, I think that's also going to be a strong cross the opportunity there with Monday service. So again, it's very early days, so it's really hard to determine. But in terms of people searching for such products online and also our own customer base, I think we're going to benefit from both.

Speaker Change #210: Yeah.

Speaker Change #210: Yes.

Eliran Glazer: Perfect, thanks. Thank you.

Speaker Change #210: [music].

Michael Berg: Our next question comes from the line of Michael Berg from Wells Fargo. The line's open. Hi, congrats on the quarter, and they're taking my question. I wanted to touch on Kasthuri for a second. It looked like Kasthuri on the quarter wasn't quite as robust as operating margins, but the implied. Rest of your outlook looks incredibly strong. It's like you're in Q3, but Q4 remains a little bit low implied.

Eliran Glazer: I need to point you on seasonality or timing of free cash flow, and maybe how I think about that beyond this year. And then we'll follow up. Thank you. Yeah, sure. So with regards to free cash flow, you know, we mentioned in the past that there is some seasonality. For example, in Q2, this is the month where or the quarter where you pay the salary increases or we pay commission for the salespeople.

Eliran Glazer: You know, vacation days and all of the above. So this is something that is usually traditionally more expensive in terms of free cash flow. Q3 and Q4, I would say there is some seasonality mostly related to the fact that there are sometimes one-time events. But other than that, with the exception of Q2, which is more seasonality wise, and some Q4 that we pay some commission for the salespeople. You know, this is basically the behavior of the free cash flow.

Eliran Glazer: I would mention one thing that as part of our moving to new offices in London, we get the benefit of $11 million cash incentive related from the prior landlord. So this is something, obviously, we took into account as part of our annual estimate. So this is something that I would say is the one of $11 million that we are getting. But all in all, we see the fact that basically operating profit and free cash flow are getting more closer in terms of the numbers percentage wise.

Eliran Glazer: So to be clear, the $10 million of the incremental free cash flow is from the incentives, and then does that also explain the take-up in CAPEX? Yeah, yeah. Pick up in CAPEX is related to the fact that, you know, as we grow in terms of number of people, we added the 123 people, and we exceeded 2100 employees. Yes, we invest in offices to accommodate for these people. So this is the increasing CAPEX.

Eliran Glazer: Helpful, and then quick follow-up.

Eran Zinman: So with service coming out later this year, you had three strong new products coming over the past, we call it 18, 24 months. Nothing's been announced beyond that.

Eran Zinman: So how can we think about new products or how you're thinking about new products or areas to focus on beyond service from here?

Eran Zinman: Yeah, this is Iran. So right now we don't expect to add new products in the, I would say, you know, coming future with very much focus on going deep for each one. That means we're going to focus on CRM, dev work management, obviously, and service, and going deep means adding more functionality. Maybe we're going to have like sub-products within those kind of mini-products, but not going to open, we're not going to open more product lines in the upcoming future.

Michael Funk: Our next question comes from the line of Michael Funk from Bank of America. The line's open. Great. Thank you for the questions this morning. I think you briefly mentioned earlier that part of what you're seeing is consolidation, small part of your growth, but still seeing it. Anything to call out on your product advantage or reason customers are consolidating on to Monday, or maybe why they're moving away from competitive products. Yeah, hi Mike, this is Eran.

Michael Funk: I think the main reason what we've seen. Again, it's not huge numbers, but it's definitely a little bit growing. The customer consolidating on Monday mainly because it can do many things because of its flexibility. I think where other products don't have this ability is where it kind of builds for one purpose. And then if you wanted more use cases or want to have kind of consolidate other products, it's almost impossible technically to do it.

Michael Funk: And with Monday, a lot of our customers managed to do it and kind of consolidate different products are using into the platform. So just the nature of the flexibility allows our customers to do more and more of that consolidation. Thank you for that. It's a comment on a macro. I know you mentioned you are seeing some macro impact, but an interesting quarter with some other software companies highlighting a real slowdown and a quarter in demand.

Michael Funk: So, you know, love to hear your thoughts maybe why you're seeing less macro impact. And then, you know, if it's been any shift and, you know, and incentives, you know, sales scores compensation that you've implemented to maybe address some of the some of the weak matter at macro. Yeah, hey, Mike, it's a Iran.

Eran Zinman: So maybe as we said earlier, the demand environment, you know, in general, is still a bit inconsistent and choppy. But for us, we emphasize in the past. So despite macro challenges, we see a steady demand profile segments, SMBs and AI are strengthened on us, but also mid market and enterprise continue to grow in a very nice way.

Eran Zinman: So, it's not related to the fact that we implemented a new compensation. This is very early days of this implementation, but hopefully over time, we are going to see the benefits of that as we continue to kind of segregate between segments and the way we compensate myself people reach segment. I would say it's also related to the fact that, you know, our growth retention is at record level. Although we see kosher spend environment, we're encouraged by the fact that, you know, customers are unlocking the value of Monday platform as we continue to add more value and more features and functionalities.

Eran Zinman: Great.

Eran Zinman: Thank you for the time. Sure.

DJ Hans: Thank you. Our next question comes from the line of DJ Hans from kind of core genuity. Your line is open.

DJ Hans: Hey guys, congrats on a nice quarter here. Good to see the results. Just one for me around.

Eran Zinman: I want to ask you a high level question around R&D spend. I mean, you guys clearly continue to innovate quickly, but when I look at your business compared to say somebody like it last year, right? Maybe they're not the best comp given the unique DNL, but you guys spend quite a bit less on R&D. Can you just talk about that product development efficiency, what drives it and how we should think about trends in R&D spend over time?

Eran Zinman: Yeah, hi, DJ. It's Aron. So, unfortunately, for my own experience, spending more on R&D doesn't always correlate with more execution. So, I wish this was the case, but being efficient in terms of R&D developers, product and designers has always been a goal of us, and it's very important for us.

Eliran Glazer: You know, often what we found is sometimes having less people on the team makes the team more efficient, as opposed to having a lot of people on the team. And, you know, you've seen our execution over the years. We always believe in, you know, high velocity execution. We drive to make an impact with our product teams, and given them a lot of ownership. So, we're very proud in how we manage our R&D team and execution.

Eliran Glazer: In terms of the percentage of 10, it might go up a little bit. In terms of maybe, maybe I learned to add more cause on this. But we're keen to keep our efficiency and even more than that, we're keen to continue and execute as we scout the company.

Eliran Glazer: Yeah, hi, Celiran. Maybe DJ just to add that, you know, in terms of R&D, we always want to hire, this is the number one priority of hiring, bringing resources to Monday. But, you know, the flip side of it, you compare us to Atlassian, there is always like if you look at SMM and R&D, I would look at them together because it's also important to understand the other divisions as well. So, SMW were able to reduce, you know, cost of percentage of revenue.

Eliran Glazer: In the case of other companies, sometimes it can be the other way around. So, you know, I think that all you know investment in R&D is the top priority of us and we continue to be efficient, but definitely this is something that we would like to highlight. Yeah, yeah, I'll make sense.

Eliran Glazer: Hope for color.

Steve Enders: Thank you, guys. Thank you.

Steve Enders: Our next question comes from the line of Steve Enders from CD Bank. The line is open. Okay, great. Thanks for thanks for taking the questions here.

Steve Enders: I guess maybe just to start, I want to ask about the, I guess, annual customers coming up for renewal and the impact that the pricing creases are having into that base. Is there a way to prefer and kind of how those conversations are trending and how much of the pricing creases is being adopted today versus maybe that driving a discussion. To drive more adoption and maybe the pricing increase will come in kind of later or the effect will come in later down the line.

Steve Enders: Sure, hi Steve. It's a lot. So in terms of pricing increase, we already communicated, you know, to I would say around 40% for customers, the pricing increase, just as a reminder, we ended last year with 225,000 customers significantly higher than, you know, some of our peers. So, and on that front, we also would like to mention that we anticipate auto customer come growth around, you know, to grow this year, high single digits.

Steve Enders: The fact that we basically implemented the pricing, which obviously the ones that were kind of small users or, you know, students or small companies that didn't see the value, we would have expected churn. So now we are focused on more high value customers, with regards to the enterprise customers, obviously they are in higher tier. So there is there are negotiations going on, you know, reception was very well, but it's important to mention, you know, the thing that I highlighted as part of us continue to onboard the pricing.

Steve Enders: Okay, that's the public context there.

Steve Enders: And then I guess maybe we think about the like impacts to metrics. I mean, the, you know, 50k, 100k ads came in pretty solid. I guess how much of that is attributable to the pricing pieces coming in here. And how should we think about the trends on those ads throughout the rest of the year? Yeah, I see when it's around. So I don't think he's having almost any impact on the growth in terms of the shoes gay and 100k.

Steve Enders: Those conversation takes longer. We expect the, you know, the kind of the first lot of the price increase to finish, but the end of the few three of next year. I think that's where most of the enterprise accounts, definitely about 50k where we're new. And, you know, we'll benefit from the price increase for those accounts. So it will take another kind of full year to do that full cycle for those enterprise customers.

Steve Enders: Okay, perfect. Thanks for taking the question.

Scott Burke: Thank you. Our next question comes from the line of Scott Burke from Needham Company. The line's open. Hi, everyone. Really nice quarter here. I had a question on the 80k seat deal, certainly more than the last largest customer size of 25k we heard last year. But as you think about a deal that size, is that customer fundamentally purchasing anything different in terms of feature functionality relative to maybe some, maybe another customer at 500 or 1000 seats?

Roy Mann: Hi, it's Roy here. So essentially, sorry about that. So essentially they're not using us for anything materially different, just at scale. So they did take us on the work management ticket and managing projects and portfolios and workflows across the organization. They understand our roadmap. They are with us for a long time. And essentially when you reach those scales, there are things that are needed from the platform like let's say different user management and other such governance features, which we do have.

Roy Mann: And so and working on all the time. So the product, the core product is the same, but let's say management around it is a bit different and we have been working on those things for a long time as well. Understood helpful. And then all around is I look at your gross margins. They were an all time high in the quarter greater than 90%. Should we assume that they're going to remain greater than 20% or excuse me, greater than 90% going forward, you know, especially with how you've been able to reduce some of those customer service costs through the GNI technologies.

Roy Mann: So, you know, I think as we mentioned in our script, it's going to be high 80s. I think the 91% is an outlier to a certain extent, you know, time and spending. I would say I 80s is probably the right number to look. Very helpful.

Roy Mann: Congrats on a good quarter.

Scott Burke: Thank you. Our next question comes from the line of Taylor McGinnis from UBS. The line is open. Yeah, hi. Thank you much for taking my questions. The first one is you saw a stabilization to an inflection this quarter in NRR with those larger customers, and I think that was a little earlier than expected, but you reiterated the stable NRR in our guide and then slight improvement in 4K. So can you just comment on what's driving some of that conservatism despite recent trends in the uplift from price, anything to be mindful of in the second half in terms of renewal or gross retention or sources of that burden. Sure.

Taylor McGinnis: Hi, Taylor. It's really done. So just by worth expectations, that are not didn't change from Q1. So, you know, we expect reported NDR to be largely stable throughout fiscal year 24 is a reminder just to remind you, we are reporting the weight of the average of the last four quarters. So even if you see an optic due to price increase or two consolidations on our platform of larger customers, you know, on the 12th, trailing 12 months aspect.

Taylor McGinnis: The impact on the reported NDR is going to be delayed a bit. So this is why we kind of said that we expect, you know, the impact to be when we exit fiscal year 24 going into 2025. And long term, we expect overall NDR to be between 110 to 115 as we said in the past.

Taylor McGinnis: Great. Thank you so much. And then just as a follow up, so it seems like CRM and dev customer growth is trending really nicely and they're scaling well. So can you help us, you know, quantify maybe how that might be contributing to growth this year? Are we getting to the point, you know, where these could be more than just the, you know, one to two point contributor any any help is, you know, we think about that that into this year.

Taylor McGinnis: Yeah, hi teller, it's Iran. So, look, again, it's it's pretty early days for us, you know, although, you know, both were growing really well and we shot some numbers and invested about CRM continue to grow really well above our expectations, but still it's relatively low in terms of percentages compared to our total revenue count. But given the high growth rate, you know, over time, we expect this to become more more material part of our revenue, internal percentages. But again, right now it's two early days in terms of growth and relative size. Thank you so much.

Taylor McGinnis: Thank you.

Rob Oliver: Our next question comes from the line of Rob Oliver from Beard. Line is open. Great.

Rob Oliver: Thank you, good morning. Thanks for taking my questions. First one is on sale CRM. I know you guys referenced in your prepared remarks or in response to a question that most of your wins generally are still greenfield, but I'd be curious to know what you're seeing in terms of early trends on sale CRM. Is that still kind of filling that void in the market at the low to mid range where traditional CRM has and historically served or as you move up market, are you starting to see some, Bob, Bob, up against some competitors and some potential competitor displacement.

Rob Oliver: Yeah, hi, Troy. So I would still say we're like 50% green field in CRM. It's like a largely growing segment. Okay, and we're like mostly growing, I think in the in accounts in the SMB space, but we're growing, going off market into the mid market as well. And yes, on 50% we do see other CRM's. Which we compete against and what they I think what makes us succeed and being a really good switch spot is on one end, our custom ability and the fact that we're really good at creating any workflow you want around CRM.

Rob Oliver: Obviously if you have projects involved as well in the sales process or after that. So that's where we shine and CRM's in general needs a lot of customization. That's what customers really want. And on the other hand, we're seeing great success in the performance marketing style. So we're able to capture a large thing like a great deal of the market demand. Great. That's helpful. Thank you.

Rob Oliver: And then just a quick question, you know, on your partner network, which continues to have impressive numbers. Can you talk a little bit about the role that partners are playing, playing, particularly as you move up market and bring more of a multi product solution to customers? Are you seeing partners? You buy an incense and opportunity. I mean, you just mentioned customization necessary in CRM. That's obviously great for the customer could also be a source of consult for the partners as well. So just wondering what you're seeing there as you as you move up market.

Rob Oliver: Thank you. Cool. So yeah, partners are a significant part of our go to market and we're gradually seeing and driving actually towards partners, giving more and more services to our customers and helping them adopt. We're even having a nice evolution in the partner space to larger partners doing more professional services to customers creating deeper integrations and implementations of Monday. And that's like an area we keep investing in.

Rob Oliver: Great.

Rob Oliver: Thank you again.

Operator: Thank you.

Operator: Seeing as there are no more questions in the queue, that concludes our question as a session.

Operator: That also concludes this call. Thank you for joining.

Operator: You may now disconnect. Please wait. The conference will begin shortly.

Operator: Thank you very much.

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