Q1 2025 monday.com Ltd Earnings Call
Good day my name is Janice and I'll be your conference operator today at this time I would like to welcome everyone to Monday Dotcoms first quarter fiscal year 2025 earnings conference call I would like to turn the call over to Monday, Dotcoms Vice Pres.
Byron Steven: Didn't of Investor Relations Mr. Byron Steven Please go ahead.
Byron Steven: Hello, everyone and thank you for joining us on today's conference call to discuss the financial results for Monday Dot com its first quarter fiscal year 2025.
Roy man: Joining me today are Roy man in Iran, Ziman co Ceos of money Dot com.
Glazer: Glazer money Dotcom CFO, we released our results for the first quarter fiscal year 2025 earlier today, you can find our quarterly shareholder letter along with our Investor presentation and a replay of today's webcast under the news and events section of our IR website at IR Dot Monday Dot com.
Glazer: Certain statements made on the call today will be forward looking statements, which reflect managements best judgment based on currently available information.
Glazer: Statements involve risks and uncertainties that may cause actual results to differ from our expectations.
Glazer: Please refer to our earnings release for more information on the specific factors that could cause actual results to differ materially from our forward looking statements. Additionally, non-GAAP financial measures will be discussed on the call.
Glazer: 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 Thank.
Roy man: Thank you Byron and thank you everyone for joining US today. We're pleased to report that 2025 is off to an exceptional start for Monday Dot Com, Inc.
Roy man: In Q1, we delivered robust revenue growth of 30% year over year achieved record quarterly operating profit and generated our highest ever cash flow for a single quarter.
Roy man: These results reflect the strength of our multi product offering the dedication of our teams and our continued focus on operational excellence.
We also continued to invest in product innovation, including the launch of New Monday work management capabilities and AI powered features which are being rapidly adopted by our customers.
Roy man: As of the end of Q1, we've seen our user perform more than 26 million AI actions to date.
Roy man: Up more than 150% since the end of 2024.
Roy man: We are thrilled to see such rapid growth in usage of AI as our customers utilize the features to automate complex task.
Roy man: Strict insights and accelerate decision making.
Roy man: Our strong financial performance and disciplined operations position us to whether any uncertainties in the year ahead.
Roy man: During times of market volatility customers increasingly rely on Monday dot com for our flexible platform and cost effective solutions are adaptable product suite and scalable pricing enables businesses to stay agile optimize resources and confidently manage the changing demand led.
Iran: Let me now turn it over to Iran to walk you through some of our business and product highlights for the quarter.
Iran: Thank you Roy.
Iran: The enterprise continues to be our fastest growing segment and presents significant opportunities for market share expansion and we're excited to be threatening our efforts with these customers.
Iran: In Q1, we launched a set of new capabilities available exclusively in the work management enterprise tier designed to provide business leaders with enhanced visibility and control over execution across departments.
Iran: This includes exciting new features such as AI powered risk insights AI powered portfolio reports men stent place resource planning capabilities and more.
KC George: We're also very happy to announce the appointment of KC George Chief.
Speaker Change: Chief revenue officer.
Speaker Change: Casey brings nearly 30 years of experience in scaling enterprise software organization and driving strategic market expansion.
Speaker Change: Most recently he served as executive Vice President of global sales click where you are.
Speaker Change: It's a $1 $3 billion in annual recurring revenue and let a global team of over 1000 employees.
Speaker Change: Little sheep track record also include senior roles at talent variant and IBM, where he successfully built and align go to market organizations across multiple business environment.
Speaker Change: Casey will be based out of our North America headquarters in New York City.
Speaker Change: This marks an exciting milestone as we welcomed our first global sea level leader to money Dot Com. We are confident that his expertise will further accelerate our enterprise growth strengthen customer relationships and support the next phase of our go to market strategy.
Speaker Change: In sum the strong momentum we achieved with the close of 2024 has continued into the first months of 2025.
Speaker Change: A solid foundation for sustained growth looking ahead, we remain confident in our ability to execute on our strategic initiatives and capitalize on the significant growth opportunities that lie before us.
Speaker Change: Besides recent macroeconomic uncertainty, we believe that our strong product offering.
Speaker Change: <unk> business model and disciplined approach position us well to build market share and continue delivering value for customers and shareholders.
Speaker Change: With that I'll now turn it over to Ron to cover our financials and guidance.
Speaker Change: Thank you Ron and thank you to everyone for joining our call Israelian. Ron mentioned Q1 marked a strong start to 2025 with solid revenue growth and improving efficiency.
Speaker Change: Revenue came in at 282 million up 30% from the year ago quarter.
Speaker Change: Overall, India was stable at 112% in Q1 with improving retention for our larger customers cohort as a reminder, our India is a trailing four quarter weighted average calculation.
Speaker Change: For the remainder of the financial metrics disclosed unless otherwise noted I will be referencing non-GAAP financial measures. We've provided a reconciliation of GAAP to non-GAAP financials in our earnings release first quarter gross margin was 90% in the medium to long term. We continue to expect gross margin to be in the high 80 range.
Speaker Change: Research and development expense was $53 8 million in Q1 or 19% of revenue up from 16% in the year ago quarter. It.
Speaker Change: Sales and marketing expense was $135 9 million in Q1, or 48% of revenue compared to 56% in the year ago quarter.
Speaker Change: Net income was $58 4 million in Q1 25 up from $31 7 million in Q1 'twenty four diluted net income per share was $1.10 in Q1 based on 53 million fully diluted shares outstanding.
Speaker Change: Total employee head count was 2695, an increase of 197 employees. Since Q4, we continue to expect to grow head count by approximately 30% in fiscal year 'twenty five.
Speaker Change: Moving onto the balance sheet and cash flow, we ended the quarter with $1 $53 billion in cash and cash equivalents up from $1 $41 billion at the end of Q4 adjusted.
Speaker Change: Adjusted free cash flow for Q1 was $109 $5 million and adjusted free cash flow margin was 39% adjusted free cash flow margin is defined as adjusted free cash flow as a percentage of revenue.
Speaker Change: We remain on target to meet our in vessel day goal.
Speaker Change: Generally think of a $1 billion in free cash flow for fiscal year 'twenty three to fiscal year 'twenty six adjusted free cash flow is defined as net cash from operating activities less cash used for property and equipment and capitalized software costs plus cost associated with the build out and expansion of our corporate headquarters now, let's turn to our updated outlook for fiscal.
Speaker Change: 2025 for the second quarter of fiscal year 2025, we expect our revenue to be in the range of 292 million to 294 million representing growth of 24% to 25% year over year.
Speaker Change: We expect non-GAAP operating income of 32 million to $34 million and an operating margin of 11% to 12%.
Speaker Change: For the full year 2025, we expect revenue to be in the range of $1.220 billion.
Speaker Change: Two $1.226 billion, representing growth of 25% to 26% year over year. This forecast now assumes a negative impact from FX of less than 100 basis points. We expect full year non-GAAP operating income of $144 million to 150 million and an operating margin of approximately 12.
Speaker Change: We expect full year adjusted free cash flow of 310 million to $360 million and adjusted free cash flow margin of 25% to 26% let.
Speaker Change: Let me now turn it over to the operator for your questions.
Speaker Change: At this time I would like to remind everyone in order to ask a question press.
Speaker Change: The star and the number one on your telephone keypad, we will pause for just a moment to compile the Q&A roster.
Speaker Change: So your first question is coming from the line of Kash Rangan with Goldman Sachs. Please go ahead.
Kash Rangan: Well. Thank you so much congratulations.
Speaker Change: Spectacular start to the year with the.
Speaker Change: The New addition of the Chief revenue officer coming onboard I'm curious to get your take on one of the things about the go to market approach for Monday, just work so beautifully.
Speaker Change: With this new executive going forward and what are the things that you would like to be done differently, especially with a broader diversification of the product. We've got multiple products now you've got the work management you got it yes.
Speaker Change: What I would call a bunch of Ips and et cetera, So given that the company wants to scale and become even more successful what changes in go to market and it'd be a forced the issue. Thank you. So much that's it for me.
Speaker Change: Hey, guys.
Ron: This is Ron.
Ron: So first of all I want to say, we're very excited for Casey to join I actually joined last week.
Ron: It's been a long process and we feel very confident about Casey.
Ron: Joining the company.
Ron: I can say that on one hand.
Ron: I think like you mentioned, it's a machine that we've built over the years.
Ron: Combined product led growth with sales led motion.
Ron: And I think we would love to preserve our ability to do both performance marketing and to do more top down selling to the same time also.
Ron: We will give broad strategy has been very successful definitely wanted to preserve that and scale that I think Casey brings a lot of experience overall, but even more specifically I think can help accelerate.
Ron: I will go to market.
Ron: Market motion.
Ron: It's been one of our most strategic pillars and things will be focused on as a company. If he brings a lot of expertise and knowledge about selling to larger enterprises and scaling that operation and I'm sure. He is going to help us accelerate what we've already been doing in addition to improving and a lot of the things increase in efficiency.
Ron: And I think it's going to be a smooth transition with a lot of potential upside going forward.
Ron: Super Thank you so much.
Speaker Change: Your next question.
Speaker Change: From the line of Alex Zukin.
Speaker Change: From Wolfe Research. Please go ahead.
Alex Zukin: Hey, guys. Thanks for taking my question and congrats on a great quarter, maybe just run us through what you saw this quarter from the CRM and the service business and then Devin surprisingly strong actually according to our numbers. So just maybe give us a little bit of a.
Alex Zukin: An explanation there and then on <unk>.
Alex Zukin: <unk> was it was solid.
Alex Zukin: At flat at 112% there were some moving pieces, where it looks like it's continuing to strengthen upmarket so maybe help us understand.
How to think about that going forward.
Alex Zukin: Go through 2025, thanks, guys.
Ron: Yeah. Thanks, Alex this is Ron so.
Ron: Yes, we see great momentum overall with our product suite more specifically Q1 had a strong performance in terms of net adds of customers.
Ron: Part of it is seasonality of our performance marketing spend traditionally Q1 is a strong quarter for us in terms of the marketing investment and because of the nature of those products and the fact that it's a new go to market for us.
Ron: Just the net adds that we saw in Q1 were high and can I aligned with our expectations.
Ron: With that I would say services not just in F&B product, we see 70% of they are for Monday service coming from mid market and enterprise segments also strong momentum there.
Ron: And for Monday, David we're very encouraged with the go to market, we're making some changes and optimizations and overall, we feel there's good momentum overall, it's pretty much aligned with what we expected from Q1 momentum is strong across all products.
Ron: And we continued investment in terms of performance marketing going forward.
In terms of residential I will referred to earlier on.
Alex Zukin: Sure, Alex, Italy, Ron with regards to <unk> no.
Ron: While we haven't seen any changes in customer behavior. There is more uncertainty in the macroeconomic.
Ron: Like environment. So when we think about MBR currently it's around 112%, we believe it's going to be slightly below 100% potentially by the end of the year, having in mind the uncertainty that they currently exist.
Speaker Change: Your next question comes from the line of thinking in Bora with J P. Morgan. Please go ahead.
Bora: Just wanted to ask on the action seems like that's growing exponentially.
Bora: Maybe talk about that trend how much of that is experimentation at this point. This is being added to production workflows.
Bora: Automation.
Bora: Have you heard any kind of productivity improvements from our customers and have you started kind of monetizing the actions at this point.
Bora: Yes.
Roy: Yes, Hi, Roy.
Roy: So, yes, we're very happy with it.
Speaker Change: Adoption on a lot of levers first stuff, we see a lot of customers great get a lot of value out of those actions.
Speaker Change: The numbers are great, but they don't really represent the value, it's like real business value and a lot of aspects and we are monetizing it still.
Speaker Change: I would say like the usage, we see deep in many areas, but the monetization is still early in early stages and we're experimenting with that we do see a correlation between user Jen.
Speaker Change: And pricing and the fact that people do actually pay when they get the real value.
Speaker Change: Understood one quick follow up for <unk>.
Speaker Change: Hello, Andrew.
Speaker Change: Can you help us understand the FX.
Speaker Change: Impact in Q.
Speaker Change: Q1, and if I. It seems like you are kind of taking down the FX headwind assumption, which kind of makes sense.
Speaker Change: But the guidance is not coming up as.
Speaker Change: As much right. So window, asking anything you said youre not seeing any any change in behavior, but is that purely based on prudence or is there anything that youre seeing at this point.
Speaker Change: Yes, sure Ben Julien. So we did have some negative FX impact Q1 revenue, but but.
Speaker Change: As a reminder, when we started the year.
Speaker Change: Once that was announced FX BK.
Speaker Change: It became very volatile.
Speaker Change: Going into April there is some more balanced.
Speaker Change: Kinds of trend so we assume that the effect for the entire year is going to be less than 1%.
Speaker Change: And the reason you know not everything.
Speaker Change: Reflected in the guidance because we did take a more conservative approach with regards to our expectations for the end of their because of the macroeconomic situation and the uncertainties that are still active.
Speaker Change: Your next question is coming from the line of R&D Arjun Bhatia with William Blair. Please go ahead.
Speaker Change: Perfect. Thank you guys and congrats on the strong.
Speaker Change: Sure.
Speaker Change: Wonder if I can ask it seems like these.
Speaker Change: Market motion it seems like Youre seeing quite a bit of success there.
Speaker Change: Especially with the core work management offering moving out.
Speaker Change: My question is as the work management offering moves upmarket does that drag your other solutions upmarket as well with CRM service Dev and what kind of traction are you seeing there are those kind of on their own independent trajectory to enterprise.
Speaker Change: Kind of on its own from work management, how would you think about that thank you.
Speaker Change: Yes, hi, right so yes.
Speaker Change: Yes, Youre right like work management is going upmarket, we're leaving that category also and I'm going to review them.
Speaker Change: And we're seeing a lot of deep.
Speaker Change: Features or capabilities that we're releasing that enterprises really mean to manage things at scale.
Speaker Change: Regarding other products.
Speaker Change: It varies according to each product. So for example.
Speaker Change: Services, obviously targeted into the larger.
Speaker Change: Customers like mid market to higher size.
Speaker Change: And while CRM and we see a lot of success.
Speaker Change: SMB low mid market.
Speaker Change: So.
Speaker Change: Well, one may not have that impact.
Speaker Change: On the other than like you suggested and each product has their own path, having said that I'll tell you like.
Speaker Change: We push all of the product's upward all the time.
Speaker Change: We increased our capabilities and deepen each product suite.
Speaker Change: The ecosystem.
Speaker Change: Naturally go upmarket.
Speaker Change: Your next question is coming from the line of Steve <unk> with Citi. Please go ahead.
Speaker Change:
Steve: I guess I just wanted to dig a little bit more onto the guidance just wanted to get a better sense for.
Speaker Change: How does the uncertainty that we're seeing with customers is playing out with.
Speaker Change: Assumptions that youre, making and just anything on the I guess related in deal cycles or deals pushing our conversion rate change assumptions as to how does the I guess uncertainty actually kind of manifesting into how youre thinking about I guess, what incrementally changed with the outlet versus before.
Speaker Change: Sure Hey, Steve its celadon, so first of all overall the customer growth.
Speaker Change: Believe it is going to be in the mid to high single digit growth year over year.
Speaker Change: We still continue to believe that the FX impact as I mentioned earlier is going to be less than 1% as we have seen it's very volatile.
Speaker Change: Overall MBR that always is taking into account as part of guidance, we said, it's going to be slightly below 112%.
Speaker Change: Don't have any revenue from AI that we are currently taking into account in fiscal 2025.
Speaker Change: And we have a very small amount of Monday service revenue that we built into the guidance, but I think all of that is again with some uncertainty in the market still exists.
Speaker Change: And that is going on.
Speaker Change: Did take a more conservative approach.
Speaker Change: We want to see how it's going to develop throughout the year.
Speaker Change: Okay.
Speaker Change: Just wanted to remind everyone that if you'd like to ask question Press Star one on your telephone keypad. Your next question is coming from the line of Brent <unk> with Jefferies. Please go ahead.
Speaker Change: Hi, Thanks, I'm curious if you could just give us a sense of what you saw in April.
Speaker Change: Mark.
Speaker Change: The current quarters.
Speaker Change: And just curious if you looked at enterprise versus SMB any.
Speaker Change: Notable trends that youre seeing thanks.
Speaker Change: Hey, Brian This is Ron.
Speaker Change: Yes.
Speaker Change: I mean across all segments enterprise and SMB it pretty consistent throughout Q1 and also going into April So we don't see any major changes.
Speaker Change: Enterprise, our fastest growing segment, but pretty pretty much in line with what we saw in Q1.
Speaker Change: And also we've seen very strong demand in terms of Midmarket and SMB.
Speaker Change: In Q1, and also going into April.
Speaker Change: Like we mentioned like the net adds were strong in Q1 as we expected. So I would say all in all it's pretty much in line, we don't see any few special going into April.
Speaker Change: Okay.
Speaker Change: Your next question is coming from the line of Brent <unk> with Piper Sandler. Please go ahead.
Brent: Thank you for taking the call here wanted to double click into the larger cohort of customers. Another good quarter here of expansion.
Speaker Change: How much of that.
Speaker Change: The momentum here is driven by cross sell where large larger enterprises are actually adding.
Speaker Change: New apps versus expansion, obviously expansion has been a pretty the biggest driver of the move up market wondering how much of a role cross sell has now as well in <unk>.
Speaker Change: Yes.
Speaker Change: Hi, Brian This is Ron so.
Speaker Change: Definitely a lot of.
Speaker Change: The expansions are.
Speaker Change: The enterprise accounts are coming from expansions of account Thats kind of grew within the platform, we do see more and more accounts that close going to bigger deals from the beginning but I would say the vast majority is accounts expanding we do see more cross sell definitely definitely on Monday service.
Speaker Change: It's more meaningful that also happens with other products. So I would say the vast majority of the like the major expenses with you today are based on adding significant amount of seats.
Speaker Change: And not like significant cross sell yet but over time, we think this will change obviously.
Speaker Change: Helpful Color and then just one follow up for Ll around if I could you talked a little bit about linearity in the quarter could you talk about Geo obviously, we're all kind of nervous around what happens next it sounds like things continue to plug along here for you, but from a geo perspective.
Speaker Change: Was there any sort of unusual activity by any sort of G O geography, or again was it still pretty balanced for what <unk> seen so far.
Speaker Change: Yeah, Hey, Brent So the short answer is demand has been healthy and consistent across all regions. In Q1, we didn't see anything that we can call out.
Speaker Change: In a different manner.
Speaker Change: Fair enough. Thank you.
Speaker Change: Your next question is coming from the line of Jackson Ader with Keybanc capital markets. Please go ahead.
Jackson Ader: Thanks for taking my questions guys.
Speaker Change: The first one on the <unk>.
Jackson Ader: On the customer additions saw really nice bounce back here.
Jackson Ader: Here in the first quarter and so can we just get an update on where we are and the timing of kind of repositioning.
Jackson Ader: And the market. Thank you.
Ron: Yes, So hi, Jackson this is Ron so.
Speaker Change: Overall, we're happy with the progress with Monday.
Speaker Change: And definitely we see momentum there and the team is doing a great job and exclusive customers I would say the thing that drove most of the change in terms of customer adds in Q1 was stronger performance marketing that we able to span efficiently.
Speaker Change: So there's no like major go to market change in Monday, Dev and it's more of a seasonality I would say that's kind of skewed a little bit towards Q1.
Speaker Change: But yes, I mean overall, we're happy with the progress the team is launching a lot of new features and capabilities and theirs.
Speaker Change: Good to hear from customers. So overall, we're happy with the progress and the momentum.
Speaker Change: Okay, Great and then.
Speaker Change: Just a quick follow up I mean, if you if you think okay periods of uncertainty and that might manifest itself in the business.
Do you expect that that would be like how would that show up would it be your performance marketing channels like kind of top of funnel becomes more difficult is it people buying more.
Speaker Change: Standard basic and set a pro what does that look like if it were to happen.
Speaker Change: Hi, great.
Speaker Change: So I think what we saw is like.
Speaker Change: The past is that for <unk>.
Speaker Change: Larger enterprises, it takes more time to buy more decision making.
Speaker Change: And they might optimize away more.
Speaker Change: Scrutinize the receipts of the season, each one is like really over.
Speaker Change: Over time, so that's where we see things like.
Speaker Change: I can say right now from where we look at things the demand is very healthy and we're able to continue and invest in growth.
Speaker Change: In a very good way and also.
Speaker Change: And really well, but.
Speaker Change: Again like that's what.
What happens in sometimes.
Speaker Change: No.
Speaker Change: That's what we're seeing different juice.
Speaker Change: Your next question is coming from the line of Michael Barrett with Wells Fargo Securities. Please go ahead.
Michael Barrett: Hi, there thanks for taking my questions and congrats on the quarter I wanted to touch on the hiring plans you had another uptick on year over year growth.
Speaker Change: I know, there's a lot of focus around.
Speaker Change: Enterprise sales Rep. So maybe you can help us get some better color on the typical timing of ramps for enterprise sales reps at how much the contribution from new cohorts of sellers is embedded in the guidance. Thanks.
Speaker Change: Yeah, Hi, Michael This is Ron so yeah, I mean overall, we see strong hiring trends in Q4 and into Q1.
Speaker Change: Yes.
Speaker Change: As I mentioned in Q1, we added about <unk>.
Speaker Change: 187, new employees and overall it is almost 2700 people.
Speaker Change: In the company.
Speaker Change: We expected to see this going into Q2, and the reminder of the year just as a reminder, we expect to grow our head count this year and about 30% overall I would say the vast majority of our investment goes into the CLO organizations, mostly around sales.
Speaker Change: People that are joining the enterprise motion and also R&D, that's a big part of our investment in terms of improving product and our roadmap.
Speaker Change: And yes look we see a lot of opportunity to upsell and expand our existing customer portfolio.
Speaker Change: Hiring Tim I'll start with the performance that we've seen the return on that.
Speaker Change: So so far we're very happy with the results and we continue to invest through the reminder of the year.
Speaker Change: Helpful. Thank you.
Speaker Change: Your next question is coming from the line of Cantor.
Speaker Change: Cantor. Please go ahead.
Speaker Change: Hey, guys. Thanks for squeezing me in here, just maybe a couple of quick ones you mentioned.
Speaker Change: The use of MCP in your in your shareholder letter.
Speaker Change: It's been an uptick in that in recent months I'd just like to know how are you planning on using that and this is going to open up the work OS platform for other agents in other applications across all of our larger platforms.
That's the question and then secondly, as you move up market any changes in competition that youre seeing maybe in the recent months.
Speaker Change: <unk> in recent months any change there that you are seeing any win rate changes that'd be helpful. As well thanks for taking the question.
Speaker Change: Okay.
Roy: Hi, it's Roy so regarding the MCP.
Roy: It's Super exciting you know, it's a new way for <unk> to interact with the platform and I think we're happy we're like one of your first two kind of released it and adopt it.
Roy: His garden to in general allow.
Roy: Anyone to interact better with Monday also to build stuff to work with the platform better we're always like our approach as being very open also to developers and our customers that can build whenever they want to and I think MCP as a great addition into that.
Roy: Hi.
Roy: Toolset in its very early days right like you say, it's been picked up it was invented.
Roy: Last quarter, so like Thats moving really quickly.
Roy: I think a lot.
Roy: Really good things are coming back to me.
Speaker Change: Regarding the second part of your question, we don't see any changes in terms of this is Ron who does anything change in terms of competition or win rates.
Speaker Change: Across enterprise and SMB mid market segments, So no changes here.
Speaker Change: Your next question is coming from the line of Michael Funk with Bank of America. Please go ahead.
Speaker Change: Great. Good morning, This is Matt <unk> on for Mike Funk.
Speaker Change: My question is on Monday, Crs it looks like a really strong quarter with net adds accelerating maybe if you could just comment on what youre seeing out there in terms of competition, you're seeing out there most often during rfps win rate and then maybe what's resonating.
Speaker Change: Significantly with customers from a functionality standpoint.
Speaker Change: Yes definitely.
Speaker Change: This is Ron so in terms of CRM.
Speaker Change: So we don't see any any changes I would say in the last quarter in terms of competition I would say the players we kind of mid the most would be.
Speaker Change: <unk> drives.
Sugar CRM I'll start from time to time, so it's mostly I would say players are focused right now on SMB and mid market that would be the most.
Speaker Change: And I think here the power of the platform and the flexibility to play a major role.
Speaker Change: Why we win and why customers preferred to.
Speaker Change: Purchase Monday or the.
Speaker Change: The solution, but definitely you know, we keep investing into the product and over time, we will go to hopefully larger and larger enterprise as we add more and more enterprise functionality.
Speaker Change: Got it thank you.
Speaker Change: Your next question is coming from the line of Raimo <unk> with Barclays. Please go ahead.
Speaker Change: Perfect. Thank you. Thanks for squeezing me in and Christian on cash flow yet to a very strong one in Q1 was there anything, especially now that we should be aware of and how should we think about seasonality for the rest of the year. There. Thank you.
Speaker Change: Yes, sure hi till it on so with regards to seasonality Q1 is usually our strongest quarter in Q2.
Speaker Change: You have the bonus payments to the salespeople the results of the hiring in Q1.
Speaker Change: The salary increases and the comp adjustment that we're doing in Q1. Some event, though they are all kind of in Q2. So Q1, usually at the beginning of the year, we see strong billings and collections from customers that the acquired our product and solution at the end of the Europe overall.
Speaker Change: In accordance with what we gave as part of our.
Speaker Change: Full year guidance. This is the level that we're expecting throughout the year.
Speaker Change: Okay perfect. Thank you.
Speaker Change: Your next question is coming from the line of P. J Hynes with Canaccord. Please go ahead.
Speaker Change: Hey, good morning, guys Hello.
Speaker Change: Ron if we price out from the NRI calculus, what are the underlying trends look like there or are they more stable or are they still trending upwards.
Speaker Change: I think there are more stable pretty much.
Speaker Change: We said last year that the contribution of price increase would be around 1% to 2%.
Now obviously the impact of <unk>, So I would say more favorable.
Speaker Change: By and large.
Speaker Change: Yes, It makes sense and then Ron our ROI. So if I think back to last year Q2, Q3, you had some pretty major seat expansion deals with some of your largest customers I'm curious what the appetite looks like within those folks for additional product adoption right.
Speaker Change: Recently made big bets with you guys is there some digestion that needs to happen or does that increased surface area actually make it more likely that they add additional functionality sooner.
Ron: Yes, Hi, DJ it's Ron so so.
Speaker Change: So look I think when it comes to <unk>.
Speaker Change: CRM and Dave I think those products are not mature enough in order to be kind of cross sell to large enterprises.
Speaker Change: Talking to here.
Speaker Change: Over 10000 seats.
Speaker Change: But we've seen some maybe surprising momentum with managed service, which is more adoption with the large enterprises. So here I think there is an opportunity for more cross sell to larger customers. So I think it's still premature with CRM and that that would mean.
Speaker Change: On the services more potential and we're starting to see more and more cross sell not just for Smbs and in market, but also for enterprise customers.
Speaker Change: Perfect and if I can add.
Speaker Change: Now please right.
Speaker Change: Yeah. So yeah. So we do see for some of them that they adopted really well and you know when people are using and they have.
Speaker Change: Appetite like you said.
Speaker Change: For growth.
Speaker Change: Excellent. Thank you guys.
Speaker Change: Your next question is coming from the line of Conor Murphy with capital one. Please go ahead.
Conor Murphy: Hey, good morning, guys. Thank you I just wanted to take another crack at that and Dr. Downtick in guidance.
Speaker Change: Last quarter, you thought would be stable.
Speaker Change: Sure.
Speaker Change: This year it sounds like you are.
Speaker Change: Can be below 112%.
Can you just unpack that a little more it sounds like trends are stable through April.
Speaker Change: Expansion it sounds pretty good with larger customers is it purely just conservatism because of the macro or is there anything else you guys have that.
Speaker Change: Give us on that thank you.
Carter: Hey, Carter I'll tell it again.
Carter: Again, it's mostly the recent uncertainty and we did take some conservatism to our NDA our expectations because really we don't know how it's going to evolve throughout the year, Although I would say this is probably the most significant factor.
Carter: Your next question is coming from the line of Scott Berg with Needham. Please go ahead.
Carter: Okay.
Speaker Change: Hi, everyone nice quarter.
Speaker Change: Wanted to expand on the answer you gave to I think it was branch earlier around it geographic kind of track.
Speaker Change: Traction what you're seeing there it looks like your European business in particular did see some kind of I don't know meaningful growth deceleration in the quarter was it something on the sales side or was there an FX component and trying to understand why that growth in that particular geo was meaningfully different from last quarter. Thank you.
Speaker Change: So hi, Scott it sell it on with regard to Europe Europe for the past.
Speaker Change: Last year, we sell some.
Speaker Change: When we called it out versus North America, North America continued to be strong I think what you have there is some challenges in the region in some places.
Speaker Change: Overall, I think we are getting a more clearer picture, we're actually stabilizing still not what we have seen in North America, but overall, we are pretty happy with.
Speaker Change: Progress in addressing that.
Speaker Change: Understood. Thank you.
Speaker Change: Your next question is coming from the line of Taylor <unk> with UBS. Please go ahead.
Taylor: Yes, hi, thanks, so much for taking my question. So if I look at the guide from Q Q3, <unk> it implies stability and growth in the mid 20. So all Ron could you just walk us through the different assumptions and what's supporting your comfort and stability in the mid twenties I think before you talked about price contributing an incremental $40 million and then seeing.
Taylor: CRM Devin service scaling to maybe like low teens IRR. So any changes in those input or second half growth catalysts that could offset some of the macro headwinds potentially.
Taylor: Sure.
Taylor: Nothing nothing that.
Nothing has changed our approach and philosophy to guidance has been consistent.
Taylor: As I said, it's a bit more conservative due to the factors as I mentioned earlier, just a recap them really quickly.
Taylor: The overall MBR that is going to be below 112% FX impact potentially of customer growth that is going to be mid to high single digits in the past, we said high single digits, but we got this scale.
Taylor: 245000 customers at the end of last year, and our focusing more on expanding rather than growing them, we're still going to increase headcount insignificant way 30%.
Taylor: So I think all of these reasons take.
Taylor: Taken into account then we think about the guidance, but nothing really changing the philosophy or the way we are.
Taylor: Building our guidance.
Taylor: Perfect. Thank you.
Speaker Change: Your next question is coming from the line of Alan Rykowski with Scotia Bank. Please go ahead.
Speaker Change: Hey, Thank you for taking the question can you unpack what stands out in terms of what types of customers are using AI credits more than others and then considering the financial framework you laid out at the last analyst day through fiscal 'twenty. Six can you just reconcile what kind of macro or in today realm.
Speaker Change: Relative to the base case scenario thanks, guys.
Speaker Change: Okay I'll take that.
Speaker Change: So.
Speaker Change: Yes.
Speaker Change: What do we see now is that with block.
Speaker Change: AI blocks, we've released something that is a very core capability is something that you can do.
Speaker Change: And where we see adopting the most of the where we have championed the remarks.
Speaker Change: Oriented or solution oriented.
Speaker Change: We are playing with it they use it.
Speaker Change: What we are doing now is like understand those use cases, and then rolling them out and explain more.
Speaker Change: More deeply and with templates with use cases.
Speaker Change: Two other customers like what kind of a use it for and how can they build solutions that really.
Speaker Change: It gives them value. So it's like any technology now you start with the people who adopt it and then.
Speaker Change: You know you get more.
Speaker Change: More and more and more and.
Speaker Change: And more people hands.
Speaker Change: Yes sure.
Speaker Change: In Italy, and I am now going to take the question on the <unk>.
Speaker Change: Investor Day model. So we are still in the base case based on credit performance.
Speaker Change: We haven't seen anything guided to a weekend macro.
Speaker Change: And when we when we see it we called it out like we said about our conservative approach to guidance.
Speaker Change: We did see some improvements to the margins that we have said.
Speaker Change: That we're going to get at the Investor day, but other than that we can see we continue with the base case scenario.
Rob Oliver: Your next question is coming from the line of Rob Oliver with Baird. Please go ahead.
Rob Oliver: Great. Thank you guys good afternoon.
Speaker Change: Question on go to market first.
Speaker Change: On the KC George higher just would love to hear from you guys, perhaps right, but what was it about.
Speaker Change: His background in particular that made him the right fit for you guys I'm sure you guys certainly had your pick and then secondly would just be curious as you have more success moving upmarket how if at all the partner strategy needs to evolve. Thank you very much.
Speaker Change: Yes, Hi, Rob This is Ron so I would say a combination of a few things I've mentioned the enterprise experience at the beginning of the call. So that definitely was a key part of why we fell like case it can be a major accelerated into our strategy also I think.
Speaker Change: His previous experience was.
Speaker Change: One in large enterprise, but also in smaller companies and also in his last company scale and manage large scale customer over 50000 customers.
Speaker Change: <unk> kind of brings the knowledge of on one hand to go enough market in dealing with large enterprises on the other hand dealing with large amount of organization its customary so understanding the funnels.
Speaker Change: Large numbers and kind of kind of more of our analytical approach to sales and go to market. So overall I think for US It was the perfect fit in terms of on one.
Speaker Change: Extending the complexity of managing a large customer base was on the other hand.
Speaker Change: Scaling to large enterprises and doing more top down selling I would say also on a personal level, we feel a strong connection.
Speaker Change: It's going to be a great.
Speaker Change: 280 to work together and can we sell.
Speaker Change: And what's important for us in terms of managing the team and the team going forward.
Speaker Change: So that's kind of the.
Speaker Change: High level and as I said, we're very excited for him to join and be part of the team.
Speaker Change: In terms of the partner strategy, So I would say that pretty much didn't change in the last quarter, but overall I would say a combination of one focus on additional geographies that we don't have scale presence and partnering to help us reach enterprise customers and Scott go our sales operation.
Speaker Change: Also brings a lot of technical expertise allows our partners are doing professional services to customers to help with anywhere from data migration and integration to help them build solutions on top of a Monday.
White glove.
Speaker Change: Services for customers and also we have partners are specialized in specific industry. So they can help with.
Speaker Change: Specific knowledge on specific of invitation for industry overall, I would say we continue to invest partners is a big part of our go to market motion as a company if anything that become more significant over time I think ACC as the same way as we do about partners and potential and we continue.
Speaker Change: To invest in that part of the business going forward.
Speaker Change: Again, if you'd like to ask question Press Star one on your telephone keypad.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
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