Q4 2024 monday.com Ltd Earnings Call
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Desiree: Ladies and gentlemen, thank you for standing by. My name is Desiree and I will be your conference operator today. At this time, I would like to welcome everyone to the Monday.com Fourth Quarter Fiscal Year 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.
Desiree: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad.
Desiree: If you would like to withdraw your question again, press the star 1. I would now like to turn the conference over to Byron Stephen, Vice President of Investor Relations. You may begin.
Speaker Change: Hello, everyone, and thank you for joining us on today's conference call to discuss the financial results for Monday.com's fourth quarter and fiscal year 2024. Joining me today are Roy Mann and Eran Zinman, co-CEOs of Monday.com, and Eliran Glazer, Monday.com CFO.
Speaker Change: 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: 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 Roy.
Speaker Change: Thank you, Byron, and thank you everyone for joining us today. We close out Q4 on a high note, capping off an incredible year.
Roy Mann: 2024 has been a period of transformation and growth, with our business reaching new heights across every area. We've made substantial progress in solidifying our market leadership, while driving innovation to meet the evolving needs of our customers.
Roy Mann: A major milestone this year was reaching $1 billion in annual recurring revenue, underscoring the strength of our WorkOS platform and the increasing demand of our solutions.
Roy Mann: Our financial performance was equally exceptional in 2024. We achieved record operating margins and delivered record free cash flow, reflecting both the efficiency of our business and the scalability of our model.
Roy Mann: and 972 million in FY24, up 33% from the prior year. On the product front, we continue to make considerable progress in our multi-product strategy. Monday's CRM has exceeded expectations and we added a record number of net new accounts for both CRM and dev during the year.
Roy Mann: We were also proud to be recognized as a leader in the Gartner Magic Quadrant in three different categories. This recognition further validates our strategy and our continued commitment to delivering value to our customers.
Roy Mann: In 2024, we made significant strides in our AI development, unveiling several new capabilities, including AI blocks. Since AI was integrated into the Monday platform, users have performed approximately 10 million AI actions.
Roy Mann: This ongoing progress highlights our commitment to enhancing the user experience and driving greater efficiency through innovating AI solutions.
Roy Mann: One of the most significant milestones of 2024 was our strategic expansion into the enterprise market. We successfully grew our largest seat count to 80,000 seats, signaling strong adoption and deepening enterprise customer engagement.
Roy Mann: All this enterprise expansion would not have been possible without MondayDB, our data architecture. In 2024, we completed the latest phase of MondayDB, MondayDB 2.0, enhancing the platform's scalability to support larger, more complex use cases.
Roy Mann: As we look ahead to 2025, we remain focused on continuing this momentum.
Roy Mann: Building on our achievement and further expanding our reach and impact with Fronk Foundation in place, we are excited for the opportunities to come. Let me now turn it over to Eran to walk you through some of the product highlights of this quarter.
Eran Zinman: Thank you, Roy. We're excited to announce that Monday Service is now officially available to all customers. Monday Service is an AI-first enterprise service management solution that helps service teams deliver exceptional support faster through smart AI-powered automations.
Eran Zinman: Initial customer demand has been very strong with Monday service already showing the highest cross-sell of our new products and the highest ACV of the entire Monday product suite.
Speaker Change: As Roy mentioned, we have been very busy on the AI front. To make AI more accessible, we have introduced a flexible, consumption-based pricing model for AI blocks, offering a baseline level of free usage for all plans.
Speaker Change: For organizations with larger AI needs, additional usage can be purchased at different levels.
Speaker Change: In 2025, our AI strategy will be focused on three main areas. AI Blocks
Product Power Apps, and Digital Workforce.
Speaker Change: AI blocks will be expanded to provide more advanced ways to automate tasks.
Speaker Change: DIV Facilitator and Service Analyzer, which will offer actionable insights and streamline processes for users.
Speaker Change: Looking ahead to 2025, we have a lot to be excited about. Our momentum is stronger than ever, positioning us for continued growth and innovation.
Speaker Change: The success this year would not have been possible without the dedication and talent of the Money.com team. In 2024, we increase our workforce by 35%, bring in our total employee count to over 2,500 and expect strong hiring in 2025.
Speaker Change: As we move forward, we remain focused on investing in our people, delivering exceptional value to our customers, and driving sustainable, long-term growth for our shareholders.
Speaker Change: With that, I'll now turn over to Eliran to cover our financial and guidance.
Eliran Glazer: Thank you, Eran, and thank you to everyone for joining our call. Today, I'll review our fourth quarter and full year 2024 results in detail and provide initial fiscal year 2025 guidance.
Eliran Glazer: As Roy mentioned, 2024 was an exceptionally strong year. Total revenue in Q4 came in at $268 million, up 32% from the year-ago quarter, and $972 million in FY24, up 33% from the prior year.
Eliran Glazer: Overall NDR increased to 112% in Q4. We expect NDR to remain stable throughout 2025. As a reminder, our NDR is a trailing 4 quarter weighted average calculation.
Speaker Change: 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 financials in our earnings release.
Speaker Change: Fourth quarter gross margin was 89%. In the medium to long term we continue to expect gross margin to remain in the high 80s range.
Speaker Change: Research and Development Expense was $48.1 million in Q4, or 18% of revenue, up from 16% in the year-ago quarter, and $162.7 million in FY24, or 17% of revenue, up from 16% in the prior year.
Speaker Change: The sales and marketing expense was $127.8 million in Q4, or 48% of revenue, compared to 54% in the year ago quarter.
Speaker Change: and $499.7 million in FY24 or 51% of revenue compared to 57% in the prior year.
Speaker Change: Net income was $57.3 million in Q4'24, up from $33.7 million in Q4'23.
Speaker Change: For fiscal year 24, net income was $183.3 million, up from $94.9 million.
Speaker Change: Diluted net income per share was $1.08 in Q4 and $3.5 in FY24 based on $52.9 million and $52.4 million fully diluted shares outstanding, respectively.
Speaker Change: Total employee headcount was 2,508, an increase of 203 employees since Q3. We expect to grow headcount by approximately 30% in FY25, with heavier investment in the first half of the year as we continue to ramp up hiring for our sales, R&D and product teams.
Speaker Change: Moving on to the balance sheet and cash flow, we ended the quarter with $1.41 billion in cash and cash equivalents, up from $1.34 billion at the end of Q3.
Speaker Change: Free cash flow for Q4 was $72.7 million and free cash flow margin as defined as free cash flow as a percentage of revenue was 27%.
Speaker Change: In fiscal year 24, free cash flow was $295.8 million, and free cash flow margin was 30%. We remain on target to meet our Investor Day goal of generating over $1 billion in free cash flow from fiscal year 23 to fiscal year 26.
Speaker Change: Pre-cash flow is defined as net cash from operating activities, less cash used for property and equipment, and capitalized software costs. Now let's turn to our updated outlook for fiscal year 2025.
Speaker Change: For the first quarter of fiscal year 2025, we expect our revenue to be in the range of $274 million to $276 million, representing growth of 26% to 27% year-over-year. We expect non-GAAP operating income of $25 million to $27 million and an operating margin of 9% to 10%.
Speaker Change: For the full year 2025, we expect revenue to be in the range of $1,208,000,000 to $1,221,000,000, representing growth of 24-26% year-over-year.
Speaker Change: This forecast assumes a negative impact from FX of 100 to 200 basis points. We expect full year non-gap operating income of $134 million to $142 million and an operating margin of 11% to 12%.
Speaker Change: We expect full year free cash flow of $300 million to $308 million and free cash flow margin of approximately 25%. Let me now turn it over to the operator for your questions.
Speaker Change: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue.
Speaker Change: If you would like to withdraw your question, simply press star 1 again.
Speaker Change: If you are called upon to ask your question and are listening via speakerphone in your device, please pick up your handset to ensure that your phone is not on mute when asking your question. We do request for today's session that you please limit to one question and one follow-up. Again, press star 1 to join the queue.
Speaker Change: And our first question comes from the line of Pinja Limbora with JP Morgan. Your line is open.
Pinja Limbora: Oh, great. Hey, thank you for taking the questions and congrats on a strong quarter. I want to start with AI. It seems like your AI capabilities are seeing really strong momentum on AI actions.
You introduced some AI credits.
Pinja Limbora: Maybe help us understand how these AI credits are supposed to work. It seems like 500 credits is in the plan.
Pinja Limbora: What is how is that going to consume? Is that per AI action? How are you defining an action and if somebody wants to buy more? What is what is that pricing look like?
Hi, it's Roy. Thank you for the question.
Pinja Limbora: within our platform, like a summary, like doing any kind of action on the board, so essentially if you create a workflow you can use a lot of AI actions to build a complete workflow and really automate things in a way you couldn't before.
Pinja Limbora: and as you progress and use it more and more in a consumption model we have different plans and that you can purchase more actions.
Eliran Glazer: Yeah, understood. Okay, Eliran, one question on guidance. The constant currency guide seems very strong, seems like about 26% or over 26% at the high end.
Speaker Change: Can you talk about some of those assumptions? Because you were seeing a little bit of a choppiness around macro in Europe. How did that progress? What are you assuming for the guide? What are you assuming on pricing benefit? And then lastly,
Speaker Change: How should we think of contribution from kind of non-core, non-CWM products for 2025? Thank you.
Speaker Change: Sure. So with regards to 2025 guidance, what we took into account is, first of all, we saw consistent demand trends across all regions.
Speaker Change: The U.S. demand is very healthy. The rest of the world, including Europe and Middle East, is stabilizing compared to what we have seen in November. We took into account the fact that the NDR remains stable at 112 percent.
Um, you know.
Speaker Change: We expected negative FX impact, as you stated, because of geopolitical and strong dollar versus the other currencies. 65% of our revenues, or ARR, is U.S. dollar-based in terms of reporting, so we estimated around 100 to 200 basis points based on calculations that we have done.
Speaker Change: We took into account, you know, the growth of 30% in headcount in 2025.
Speaker Change: And we didn't take into account, for example, your prior questions, any revenue from AI. It's still early days to take it into account.
Speaker Change: And mostly, you know, when we think about products, there is becoming, CRM is becoming more significant in terms of the contribution to the ARR, so we already took it into account. Service is still just out of beta, contributing.
Speaker Change: Small amount of revenue, but it's growing really fast. And they've pretty much also took into account certain contribution. But overall, we see the trends that I mentioned as part of our 2025 guidance assumption.
Anything on the pricing benefit, Eliran?
On the pricing...
Speaker Change: So what we have said last year that we estimate between 2024 to 2026 an $80 million contribution. The way we looked at it was around $30 million in fiscal year 24, around $40 million in fiscal year 25. That is already baked into the guidance, and also there is going to be about $10 million in 2026.
Speaker Change: because pricing will be rolled out by July 2025. This is where we're going to end the kind of pricing rolled out that we have done started last year.
Thank you very much.
Alex Zoukine: And our next question comes from the line of Alex Zoukine with Wolf Research. Your line is open.
yeah hey guys congratulations on another great
A great order, I guess maybe
Speaker Change: Back to the pendulum question. If you look at what the what happened in the quarter for you guys with respect to Europe and the U.S.
Speaker Change: What actually transpired in the month of December, and as you think about the pipeline, and specifically on the enterprise, did you see it being more seasonally weighted? Did you see kind of the...
Speaker Change: any impacts from the changing competitive landscape kind of walk us through a little bit of the shape of the demand curve in the quarter and what it's telling you about go as you really head into next year.
Yeah, hi Alex, this is Eran.
Speaker Change: Yeah, like Eliran mentioned, the U.S. demand has been pretty much healthy and stable throughout November and January and December. Outside the U.S., like we stated, we saw a little bit of choppiness in November, but
Speaker Change: Right now, you know, judging what we've seen, including Europe as well, we see signs of stabilization. So that's great to see, gives us a lot of confidence going forward. Like I mentioned, there's some ethics impact, but apart from that, that's kind of the environment that we've seen going forward.
Speaker Change: Overall, I would say that growth retention continues to be at record level, so very strong growth retention and NDR as well.
Speaker Change: Enterprise has been our fastest-growing segment, and it continues to be.
like that.
Speaker Change: We see the growth accelerating in the enterprise segment as well. So judging, you know, all those parameters together, it feels healthy and it feels like we're on track to fill a plan for 2025.
Speaker Change: Maybe I would just, Alex this is Eran, maybe just adding to Eran, something that we have said last year, as we see a transition in the business from PLG to SLG motion, we're also starting to see the results of each quarter coming in the back end of the quarter, so going into December like we used to see a more kind of flat in the prior years, now there is also skewed
Speaker Change: It's skewed towards the end of each quarter. So we have seen good signs in December when we compare to what we've seen in November back in Europe Middle East last year.
Speaker Change: Perfect and then with respect to the guidance guys I'm not going to ask you about price but what I'm going to ask you about is just given how much stronger the guidance looks I think to what some people were expecting.
Maybe
Speaker Change: Just walk us through, A, how are you thinking about the conservatism and the prudence given, you know, changing go-to-market dynamics from a...
Speaker Change: talent perspective this year as well as just how many products you have from service to AI blocks to CRM to dev. How are you thinking about or layering more importantly in those assumptions into this guide relative to previous peers?
And thank you guys.
Yeah, so...
Speaker Change: Sure, Alex. I will repeat what I said to Pendulum. So, first of all, maybe one thing worth mentioning that this year, I think, is more
Speaker Change: Unpredictable when you compare it to prior years. The geopolitical situation across the world is, you know, to a certain extent there are some things that you can't really predict. So this is also something that we took into account as part of our guidance.
Speaker Change: To your question on products, we have four products on the platform with now being out of data, Monday Dev, Monday CRM, and Monday Work Management. So this is something that obviously we took into account. NDR continues to be stable at 110% and 12%, sorry.
Speaker Change: The new products, you know, will contribute a certain amount of revenue, it's growing, but other than CRM that is now becoming more significant, we will see the results of the other products next year.
Speaker Change: So when we took all this into account, bearing in mind that we also increased headcount last year in 35%, and now we see the full impact of this hiring last year. So we tried to have a prudent, I don't know what to call it.
Speaker Change: Conservative or not, this is a responsible guidance based on what we know today.
Speaker Change: And our next question comes from the line of Arjun Bhatia with William Blair. Your line is open.
Arjun Bhatia: perfect thank you guys and I'll add my congrats very nice end to the year here
Speaker Change: One thing, Roy or Eran, that stuck out in your shareholder letter in regards to service
Speaker Change: more add-ons, what makes service higher ACV and should we expect that to continue as customer count grows for that product?
Hi Arjun, it's Eran.
Arjun Bhatia: Yeah, I think it's a combination of a few things. One is, we see, you know, every product, I would say, has a different go-to-market.
Arjun Bhatia: But one thing that really stood out with Mindless Service is that it feels like there's a big overlap between our existing customer base and the potential customer base for service. So, relatively to other products, we see more momentum with CrossSell to begin with. It's still low numbers, but just percentage wise, it feels like there's a big overlap between the audiences.
Arjun Bhatia: of who we already have as a customer and people that are interested in minded service.
Arjun Bhatia: And that led to more mature customers buying into my new service.
Arjun Bhatia: Also, it's more of a top-down decision process, so we have
You know, management kind of involved in the process, which.
Arjun Bhatia: Ultimately, if you combine those two things, leads to higher ACV deals, more top-down deals, and it just feels like it had a lot of potential to grow into a more kind of mature ACV mid-market enterprise going forward business.
All right, that's very helpful. Thank you.
Maybe to follow up, just...
Arjun Bhatia: When I'm looking at, I think, some of the annual customer count disclosures you've given, and if I look at Q4, I think net customer ads for CRM and dev, it's the only thing that looks like, you know, there's a little bit of a slowdown.
Arjun Bhatia: Can you just help us understand what's what's what's going on there? Is that mostly your move up market and greater focus on cross-sell or is there something else on the net new customer front that we should be reading into?
Speaker Change: So Arjun, just want to make sure that I understood the question. You relate to the total number of customer or you speak about CRM and dev? Just want to make sure that I follow the question.
Eran Zinman: Thanks, Eran. It's a little bit of both. I think the total customer number also slowed compared to 2023, and then in Q4, CRM and Dev. I'm trying to maybe encompass all of it in one question.
Sure. So in terms of total number of customers.
Eran Zinman: You know, we now have 245,000 customers, which is more than, I think, most of our peers. And as we said in the past few times, we are going to focus on expanding within existing customer base, going up market. And we said that
Eran Zinman: You know, we are going to probably grow high single digits within the total number of customers. With regards to CRM and dev,
Eran Zinman: this is related mainly to seasonality of performance marketing spend in Q4 usually in Q4 of the year due to the holidays
Eran Zinman: that are coming at the end of the year. You know...
Customer Acquisition Channel
Eran Zinman: Spend is usually lower than what we are doing before that. And it's similar to prior year. We allocate more budget to performance marketing spend at the beginning of the year, because we want to get the full impact of the performance rather than the second half of the year.
Eran Zinman: So this is, I would say, the main reason for the numbers that you have seen.
Okay, got it. Very clear. Thank you.
Steve Enders: Next question from Steve Enders with Citi. Your line is open.
Okay, great. Thanks for taking the questions here.
Steve Enders: I guess maybe just to start, I want to ask on some of the I guess enterprise sales changes that are going on. I know the CRO left last quarter and sounds like maybe there's some other changes, but how are you kind of thinking about
Steve Enders: you know, how that search is going, how you're thinking about kind of future changes in the go-to-market structure or strategy within that. Just, yeah, any more color details or anything like that would be helpful.
Prosper.
Yeah, hi Stephen, this is Eran.
Stephen: Yeah, definitely we're looking for a new CRO. We've been pretty invested in the process.
Steve Enders: Hopefully, we're kind of looking to finalize this process by the end of Q2.
Steve Enders: We're looking for a person with a proven track record and...
Steve Enders: Deep understanding of the complexities of scaling up markets. I just share that we see great candidates and hopefully we'll get somebody across the finish line.
Steve Enders: in the next few months. I would say that given all that, in the last few months, we've seen great results from the
Steve Enders: See our organization, you can see that with the enterprise ads and overall momentum feels good. So definitely looking for a replacement, but so far the management within the organization is doing phenomenal work to drive results forward.
Okay, great. That's great to hear.
Speaker Change: I guess maybe following up on that, you know, it sounds like.
Steve Enders: There's maybe even some catch-up spend in that kind of organization and
Steve Enders: further kind of investments coming from a headcount perspective this year. Just, I guess, what is it that you're seeing out there, maybe that's leading to the confidence to kind of invest behind that? And just kind of what are you kind of seeing in the pipeline that leads to, yeah, the confidence to to fully back that motion?
Eran Zinman: Yeah, so this is Eran again. So yeah, definitely we continue to invest into the sales org.
Eran Zinman: Overall, between sales and general partners, managers, our total quota carries have grown to almost 400, 395 by the end of Q4.
Ah You
It's a significant increase Q over Q.
Speaker Change: Overall, we feel confident scaling the organization for a few reasons. First, we see the results.
Eran Zinman: and we see that we have a lot of potential for
Eran Zinman, Roy Mann, Roy Mann Group, Inc.
Amazing fuel for our sales team.
Eran Zinman: Our existing customers are scaling more to the enterprise. MoneyDB was a big unlock for enterprise customers to scale even further. So it just feels that within our own customer base, there's a lot of potential for growth. And we can add even more account managers to expand our customer base. And also, performance marketing continues to be strong. And we've seen great demand, not just across work management,
Eran Zinman: but across the other products as well. So if you put all those things together, it just feels that it's very healthy to increase the sales organization. We see the ROI for that, and we continue to do that in 2025.
Perfect. Great to hear. Thanks for taking the question.
Speaker Change: Next question comes from the line of Gilian Nastalovic with Goldman Sachs. Your line is open.
Gillian Nastalovic: Hi, good morning everybody. It's Gillian for CAST. Thanks for taking the question. I have one for Roy and Eran and maybe a follow-up if I can.
First um
Gillian Nastalovic: If we can talk about AI, right, it's so central to the top three pillars you laid out as your strategic priorities in 2025. I'd love to get your perspective on how you see the AI landscape evolving over the next few years. What do you envision this meaning for Monday? Like, how do you believe the engagement with the platform may change? And how are you positioning the company to take this opportunity?
Yeah. Hi, Billy, it's Roy. So.
Gillian Nastalovic: When we look at AI and where Monday plays in it, we feel we have a huge power of democratizing it, meaning really giving the power to people to build whatever they want.
to harness AI into their business, into improving efficiency.
Gillian Nastalovic: And that's what we're doing, and that's the feedback we get from, you know, the beta we have with blocks and what we've seen customers do. And going forward, this is what we're planning to go for.
Gillian Nastalovic: next, you know, in the vision to actually give people technology they can use and they can implement like right off the bat. And you know that it's easy and fun to use.
Speaker Change: Yeah, very clear. And so the second question I had was a little bit more on the record net number of net news CRM and dev accounts that you mentioned you are able to add this quarter. Can you talk about what drove that momentum? Is this a leading indicator or byproduct of the headcount growth that you guys saw this year or is it a result of maybe a multitude of different factors?
Eran Zinman: Yeah, I think, you know, overall, we're very happy with the, this is Eran, with the ads of customers, both in CRM and dev. I would say that convert to Q3, Q4 was a little bit slower. And we mentioned that because of performance marketing seasonality.
But going to 2025, we'll definitely see the momentum.
continues with both of those products.
Eran Zinman: I would say that in both, we invested more into going up market in each one of those products, adding more features and functionality, which will also contribute not just to the total number of customers, but to higher ACV in both. So that's kind of what we focused on right now going forward.
Speaker Change: Next question comes from the line of Brent Thiel with Jeffries. Your line is open.
Brent Thiel: Thanks. Just back on the hiring front, when you think about quota-carrying sales rep hiring versus the stated goal of 30% total growth, are you growing your reps at or below or above that that line? And then when you mentioned 395 quota reps...
Brent Thiel: Can you just update us what that growth was for 24 over 23 and just give us a sense of what you're seeing?
from a higher-end perspective. Yeah.
Yeah, hi Bryan, this is Eran.
Brent Thiel: So, for the first part of your question, the year-over-year growth in terms of
Brent Thiel: Total quota carriers is about 26%, so a little bit below the overall 30% that you mentioned. We plan to ramp up hiring for sales into the first half of 2025. So this is kind of the plan going forward for 2025. Just a year ago in Q4 of the.
Brent Thiel: In 2023, we had about 313 total quota carriers, so now almost 400. That's a significant growth in the last year.
Speaker Change: Okay, great, and now with the service added in, when you think about the packaging that go to market, as you move to enterprise, these...
Speaker Change: We've seen a lot larger companies do these ELAs or bundles. I mean, how are you thinking about how your packaging is evolving to make it easier to consume the breadth of all these new solutions you're coming to market with?
Eran Zinman: Yeah, so this is Eran. So look, I think going forward, definitely we see a future where we sell a bundle of products. Definitely the ones that we see high percentages of cross-sale. I think I mentioned this earlier, but
Eran Zinman: I think what's unique with the Monday service release is that we see a high percentage of cross-sell.
Eran Zinman: So that's definitely an indication from work management, so that's definitely an indication for us that potentially, you know, work management and Monday service can be packaged together because
Eran Zinman: For a lot of people, a ticket or a request is basically a beginning of a project or a workflow, so those two products really work well together. So going forward, we might sell those products in a bundle to begin with, but currently it's mostly focused on cross-sell between existing customers.
Great. Thanks.
Speaker Change: Next question comes from the line of Brent Braslin with Piper Sandler. Your line is open.
Brent Braslin: Thank you, good afternoon, good morning. I wanted to double-click in North America. It looks like growth in North America accelerated 200 basis points sequentially here, more than offsetting a decellular sign internationally. What what drove the strength in North America? Are you seeing
Brent Braslin: SMB optimism start to kind of drive activity? Is it more influenced by large enterprise expansions? Just walk through the strength that you saw in North America this quarter here and what drove that acceleration. Thanks.
Eran Zinman: Yeah, hi Byron, this is Eran. So, I think it's mostly been enterprise customers that are driving that. I mean, we mentioned that we have some choppiness in November in EMEA, but that seems to be stabilized, but
Eran Zinman: I think overall, if we look at longer term trends, definitely in North America, our enterprise segment has been the strongest in terms of growth. And also we're reaching bigger and bigger customers. So that's definitely a very significant driver in that region.
Eliran Glazer: Brent, this is Eliran also to Eran. I also think this is a, you know, we are gaining market share. One of the things that we have seen last year is that we are basically, we have a strong machine that works really well. You know, there is, there has been some changes in our competitive landscape, which allowed us actually to take market share, to grab market share. Some of our competitors also, you know, focused on enterprise. So it leaves the down market to us in terms of S&Bs and mid markets. So overall, few trends that are actually
Eliran Glazer: pushing us into gaining more market share and increasing our footprint in North America.
Speaker Change: Great to see that and then just as a follow-up here I know historically
Eliran Glazer: Sales, Dev. These were largely new products that were landing new customers. I think you mentioned service. I know it was just kind of in beta here, early release, but it was something like 60%.
Eliran Glazer: cross-sell of the service customers which is very different than what you saw with dev and sales. So can you just double click into maybe the cross-sell, why is service different and are you starting to see broader cross-sell opportunity across all platforms? Thanks.
Eran Zinman: Yeah, so this is Eran. So overall we see more cross-sale between all products, but like I mentioned, there's
Eliran Glazer: A lot of synergy between Monday Service and Monday Work Management, mainly because
Hi everyone!
Eliran Glazer: and then kind of move on to actually executing the workflow. I think that's a big benefit also in terms of the market position for customers, but also shows the strength of having multiple Monday products.
Eliran Glazer: It just feels like the overlap between the buyer for watch management and the buyer for monthly services is very large compared to other products, and the synergy between the products is very high as well, so that's what kind of drove the very high cross-sell percentages that we've seen.
Speaker Change: Okay, so just to clarify, you're not seeing service and sales bundled and cross-sell together. You're seeing service and work management more often.
Speaker Change: Yeah, I mean we also see Monday Dev and Monday CRM as well, but just the percentages with services are way higher.
Got it. Helpful. Thank you.
Speaker Change: Next question from Michael Berg with Wells Fargo. Your line is open.
Michael Berg: Hi, congrats on the Corps and thanks for taking my question. I want to double-click on service one more time.
Michael Berg: Maybe you can help us understand or provide a little bit more color on what it looks like when you land with service initially. Are you landing alongside existing other service solutions? Are you displacing something? Maybe you can help us understand what the customers have in place when you are lending, whether they are Monday.com customers or not. Thank you.
Eran Zinman: Hi, this is Eran. First of all, it's important to mention it's not just IT service. What we've seen from the product launch
Eran Zinman: Obviously, we have IT service, but we have HR requests, operations, financial requests, marketing requests.
Custom support so it's a
Variety of different departments within the organization.
Eran Zinman: In terms of competition, sometimes we land with another vendor and sometimes we are the only vendor, sometimes we compete with other players in the market and win the deal. So I would say it's a combination of all of the above.
Eran Zinman: Mainly, I think, what we, again, still early days, but from what we've talked with customers,
Eran Zinman: They love the flexibility of the platform. I think all the big players in this industry have a high degree of flexibility, and this is something that we offer from the very beginning. So the fact it's built on the Monday platform is a huge benefit.
and also the fact that
Eran Zinman: In a way, Monday for them is the centralized way to work. And because Monday service is so deeply integrated with Monday CRM and work management, it also gives us a huge benefit over other players in the market.
Eran Zinman: So that's kind of the dynamic we currently see, but as I've mentioned, it's still early days, so I think as time goes by, we'll have more clarity around this.
Helpful. And then one quick follow-up for you, Eliran.
On NRR, it inflected in the quarter.
Speaker Change: in pretty much every metric, and you talked about stabilization on the NRR moving forward. How can we think about the impact of price there and how that's baked into your comment for stabilization of that metric for 2025?
Speaker Change: Sure, Michael. So in terms of, just by way of reminding to everyone, we are reporting a weighted average of the last four quarters.
Speaker Change: So we said that gross retention has improved significantly. We have seen good trend last year of increasing numbers. So now we're starting to see the results of this. And we said we're going to be, last year we said we're going to be slightly above 110.
Speaker Change: and 1.11 we will see the tick up as we start this year and this is what happened. We estimate that the pricing adjustment will positively contribute around 100 basis points to the reported MDR in fiscal year 25.
Oh, thank you.
Speaker Change: Next question comes from the line of Michael Fong with Bank of America. Your line is open.
Thank you for the questions this morning.
Speaker Change: the success with larger customers that you've seen recently. If you can just frame maybe the greater complexity of those deals, expansion prospects. May also come back to a comment you made earlier about market share gains and maybe some consolidation you might be seeing among the larger customers.
Eliran Glazer: Sure, Micah, this is Eliran. So maybe again, to take you a step back, we have started a process of improving the platform.
Eliran Glazer: two years ago with MondayDB. So we had, you know, our plan to make sure that the platform is going to be, you know, scalable. We're going to address speed, performance, and scale.
So we are now in Monday Debate 2.1.
Eliran Glazer: And we keep improving, you know, the infrastructure to allow bigger larger customers to work on the platform. In addition to that
Eliran Glazer: We hired people throughout the hiring process of a year, going into this year, that are more familiar with selling to the enterprise customers in terms of mid-market and enterprise, and this is the process that we continue to do.
We invested in the depth.
Eliran Glazer: of the products, not only on the breadth of the products, although we have Monday service. So all of that together, you know, by way of
Eliran Glazer: You know, the acknowledgement of the market at Monday is indeed a platform that can be used within larger and larger customers.
Eliran Glazer: also having in mind the fact that we took market share from competitors. So, you know, we said that the enterprise is our fastest growing business segment. You know, the sales teams are performing well, particularly in the U.S.
Eliran Glazer: And, you know, you can also see the increase in 50K and 100K customers NDR that is related to large contract expansion, sorry.
Eliran Glazer: with the enterprise customers. All of the above, all of the things that we have done over the past, I see, I would say two years, the investment in people, in technology, in product is something that is driving the business forward into the enterprise.
Eliran Glazer: Great, thank you for the color. One more quickly if I could. Against the backdrop of the strong net ads for CRM and in dev and your comments from the macro and adding more quota carrying reps
Eliran Glazer: Is there any reason to believe that NetEdition is slow in 2025 for CRM and Dev?
Yeah, this is Eran.
Eliran Glazer: Look, it might slow a little bit. I mean, it's kind of hard to predict, but overall we continue with strong momentum around performance marketing. I would say that overall strategy.
Eliran Glazer: Not just for CRM and DEV, but for the company itself, is to go up market and have our customer ACVs.
Eliran Glazer: So, I would say that our product focus is not necessarily to add a lot of, you know, very small businesses.
Eliran Glazer: but rather to scale within our existing customers in CRM and debt and bring larger customers. So I would say definitely in terms of revenue and AR portion, we continue to accelerate in the product.
Eliran Glazer: It's just going to be a different mix between amount of customers and ACV.
Roy Mann: Hi, it's Roy. Adding to what Eran said, the decision to make the price increase is also a decision towards that end. We prefer larger customers, more in-fret rather than increasing the number of total customers.
Great, thank you for the questions.
Roy Mann: I'd like to remind everyone to please limit yourself to one question. Thank you. Our next question comes from the line of Tom Blakey with Cantor. Your line is open.
Tom Blakey: A couple of clarifications and a longer-term question. Is it safe to say that there was close to zero, if not zero, AI revenue in calendar 24?
Speaker Change: You don't include any AI revenue in your calendar 25 guide. Just wondering what you're seeing in terms of that big uptick in interactions and what if you look out a little bit where you think AI revenue could be at this company in the longer term. I have a follow-up.
Roy Mann: Hi, it's Roy. So, it's really too early to say because what we saw is increased usage.
Roy Mann: And then you introduce pricing and then you want to see customer reactions and how they grow so we didn't
predict anything and we couldn't, you know, bake it in.
Roy Mann: Going forward, I think when we look at the market, we see like so many different pricing strategies for AI. Some is for winning markets, some is for revenue. You know, like we feel confident in the blocks and the usage of actions.
Roy Mann: as an additional value that customers are willing to pay for but we'll have to wait and see how much this is true and what we can expect looking forward.
Thank you for watching. Bye.
Speaker Change: And our first question comes from the line of Derek Wood.
With Dede Cowan, your line is open.
Great, thanks.
Speaker Change: 2025 versus 2024. Just wondering if we can see a notable uptick in that kind of deal activity or if that will kind of be gradual over looking out over the next few years.
Eliran Glazer: Sure Derek, this is Eliran. So the way we do it is either, you know, we lend bigger to begin with and then, you know, like a top-down transaction that we are now seeing more and more.
Eliran Glazer: so this is one way to do it and we are you know the hiring in the sales organization the changes that we are now doing in the sales organization the profile um are also contributing to that and on the other end we have customers that grew with us for a few years
Eliran Glazer: And, you know, once they unlock the value of the platform and we are adding additional products, they are doing consolidation on Monday.
Eliran Glazer: other vendors in terms of switching. So the trend I think this is something that we started to see I would say about a year and a half ago and now we're seeing more and more and it comes with the growth of the platform the additional product and the profile of the people that we have.
Eliran Glazer: together with Acknowledgement of Monday as a solution that can address enterprise-level needs.
Speaker Change: Next question comes from the line of Itay Kidron with Oppenheimer. Your line is open.
Thanks, Peter.
Guys, I guess a couple small ones for me.
Speaker Change: How many of those are in the wild? And then second question is regarding AI. Do you see any risk of seed cannibalization with the adoption of your AI solutions? Thank you.
Yeah, high-tides run, so...
Look I think like I mentioned overall overall we see
Speaker Change: definitely more potential for larger deals. We had those expansion also this quarter and we continue to have potential within our existing customer base for more deals like that. So it's kind of hard to predict because it's
Speaker Change: It's happening over a few quarters, but definitely something that might happen as well in 2025.
Speaker Change: Regarding AI, so we made the decision, like Roy mentioned, to base it based on consumption and not based on seats because
Speaker Change: You know, it's kind of hard to predict the long-term trends, but...
Speaker Change: You know, if AI can replace some manual work and automate some processes, we want people to be able to scale on that regardless of the...
Speaker Change: and they are adding more people or not. So that made a lot of sense for us to base the pricing based on consumption. So I don't think it will cannibalize the seat count that we have, but just offer a different path of...
Speaker Change: Next question from DJ Heinz with Canaccord. Your line is open.
DJ Heinz: Hey guys, so on one of the slides in your deck, the slide is where do we want to go from here, it lists expanding core work product lines as a key initiative. So I guess that begs the big-picture question, like where does Monday go next? Any thoughts?
Speaker Change: Yeah, so a general question, Roy. So one big thing is really deepening each one of our products into a suite. Like we took a conscious decision
Speaker Change: to deepen everything. Like what Eran mentioned, the platform itself, the scalability, robustness and
Speaker Change: that you can rely on it more and more. Each one of our products, like we released in CRM.
Speaker Change: the marketing solution. And, you know, and we have like massive markets to go after. And so we want to deepen the offering. And then AI is also a huge thing.
Speaker Change: Blocks is one of them but we're also embedding AI within each one of the products in a way that really
Speaker Change: accelerates the vision we have. Like in project management it will help people
Speaker Change: turn all their portfolio into being way more predictable. For example, CRM sell more, you know? And so we have a very clear roadmap of like giving the same value, just more, faster, better, and deeper.
Jackson Ader: Next question from Jackson Ader with KeyBank Capital Markets. Your line is open.
Jackson Ader: Great, thanks for taking our questions. So my questions are around the sales-led growth function. Just curious how you guys are managing...
Jackson Ader: The puts and takes on sales cycles as you begin to stack up, you know, multi-product deals that might elongate some sales cycles and just make things generally more complex. So I'm curious about just the basic blocking and tackling you're doing around those sales cycles. And then the other thing is
Jackson Ader: What would be like the best indicator of the efficacy of the sales-led growth motion that we should be kind of tuning into?
Jackson Ader: You know, is there a way to split out maybe the enterprise customer lands versus existing customers or kind of graduates into that 50 or 100,000? But yeah, just some of the KPIs that we should all be looking out for to see if this sales-led growth motion is really working out. Thank you.
Yeah. Hi, Jackson. It's Eran.
Jackson Ader: Regarding the first part of the question about the product, so definitely we put a lot of thought into this. So I would say it's a combination of a few things. One, we have customers lending for multiple marketing campaigns. Some lend for CRM products, some for work management.
Daft Service, et cetera. So.
Jackson Ader: Right now the way it works, we have specialized teams for each one of those products that are handling new customers depending on the products that they chose. And we basically scale those things based on the demand that we see and just to scale the product.
Jackson Ader: And then in addition to that, we have the account manager that.
are already engaged with customers and
Jackson Ader: When they identify an opportunity for expansion, whether it's through our big brain system,
Jackson Ader: that identify new people joining the organization from other departments or where it's by relationship and conversation, we have special functions called overlays, which basically helps them process with people that specialize in those.
Jackson Ader: You know, area, whether it's CRM or service and so on. And they help them close kind of initial deals with the decision makers in the organization.
Jackson Ader: So we have different functions depending on the phase of the sales process that help go through this and we're really kind of shaping that in terms of scale and just create an autonomy for them to kind of build their own sales strategies.
Eran
to the second part of the question about...
Jackson Ader: I think you mentioned about scanning the sales org and inserting to larger enterprises.
Jackson Ader: So also there we have AEs, Account Executives that close new deals.
And it's a totally different sales process for each one.
And we have the same segmentation for account managers.
Jackson Ader: We really kind of segmented the business based on products and then based on company size.
Speaker Change: Next question from Scott Berg with Needham. Your line is open.
https://www.youtube.com
Speaker Change: Hi everyone, really nice quarter here. I guess my question is on the digital workforce, you know, strategy part of your AI initiatives here. For this year we've seen many other vendors, you know, release different agents and when they have it's kind of created a halo effect.
Speaker Change: You know, for customers having to maybe buy more, you know, components of the solution to really make those agents work.
Speaker Change: If you think about agents or digital workforce on the Monday platform here this year, I guess what parts of the platform does the customer really need to kind of create this? Is it just the core work management system or is there other pieces of functionality, add-ons that they need to also purchase to enable this technology?
Roy Mann: Hi, it's Roy. So, like, we see agents as another layer on top of the work OS, meaning it's like across everything. Because when you work with...
Roy Mann: With an agent, you'd love it to know, first of all, you'd love to control what it knows, but you'd eventually want it to be a cross product.
Roy Mann: create a dashboard across a lot of different products, so it will be able to do that.
Roy Mann: And so we don't have a plan for monetization for that part yet.
Roy Mann: I think we opened it up so we will have in the future once we see the different agents. Okay. And so I'm excited about this because I think it's like a massive.
Roy Mann: opportunity for us to build a marketplace, a lot of agents that can do different things and you can communicate with them and achieve.
Roy Mann: way more. And obviously, because it's on top of the Monday platform, each one of our agents will be able to do a lot of things across the platform and, you know, really perform powerful things you'd want them to do and not just like talk with them or those kinds of stuff.
Speaker Change: Next question from Taylor McKinney's with UBS. Your line is open.
Speaker Change: Focus Up Market. So, Eliran, can you just help us, you know, understand some of the puts and takes there? Thanks.
Eliran Glazer: Yes, sure, Taylor. This is Eliran. So, you know, first of all, we've been very encouraged about NDR improving faster than we initially anticipated, you know, back in 2024, and we're very transparent about it.
Eliran Glazer: On the other hand, you know, given recent demand volatility and macroeconomic uncertainty
Eliran Glazer: You know, we're adopting a bit more cautious outlook on NDR because I think we are in some places We are not yet the word in terms of global headwinds You know economy headwinds are not yet out of the woods. So we're trying to be a bit more prudent on that front
Speaker Change: Our next question comes from the line of Alan Perovsky with Scotiabank. Your line is open.
Speaker Change: Hey, thanks guys. Can you talk about how based on your AI product roadmap, how are you thinking about a few years from now, what an average customer could be spending for AI credits relative to their seat license cost?
Speaker Change: Oh, that's like a predicting the future kind of question. So really, we just released it. We'd love to see more data from customers, so we'll be able to answer those questions. So I can't really say.
Speaker Change: Sorry. And that ends the question-and-answer session. Ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.
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