Q2 2025 monday.com Ltd Earnings Call
Speaker #4: Good day. My name is Bella, and I'll be your conference operator today. At this time, I would like to welcome everyone to monday.com’s second quarter fiscal year 2025 earnings conference call.
Speaker #4: I would like to turn the call over to monday.com's vice president of investor relations, Mr. Byron Stephen. Please go ahead.
Speaker #5: Hello, everyone, and thank you for joining us on today's conference call to discuss the financial results for monday.com's second quarter fiscal year 2025. Joining me today are Roy Mann and Eran Zinman, co-CEOs of monday.com, and Eliran Glazer, monday.com's CFO.
Speaker #5: We release our results for the second 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 I/O website at ir dot monday.com.
Speaker #5: 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 #5: 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.
Speaker #5: 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.
Speaker #5: Which are posted on our investor relations website. Now, let me turn the call over to Roy.
Speaker #6: Thank you, Byron, and thank you, everyone, for joining us today. We are pleased to report another outstanding quarter for monday.com. Underscored by robust revenue growth of 27%, this performance reflects surging demand for our platform and the powerful value we deliver to customers across industries.
Speaker #6: Our relentless focus on efficiency is bearing fruit, with a Q2 non-GAAP operating margin of 15%, a testament to the strength of our business model and disciplined execution.
Speaker #6: We continue to make significant strides in our AI offering, expanding capabilities and accelerating innovation to empower teams and drive impactful results at scale. In Q2, customer adoption of our AI capabilities accelerated across the monday.com platform, with users performing 46 million AI-driven actions since launch, a strong indicator of increasing engagement and the growing value that our AI tools deliver.
Speaker #6: This quarter, we introduced mondayMagic, mondayVibe, and mondaysidekick, three AI-powered capabilities that mark a major step forward in our evolution from work management to work execution.
Speaker #6: These innovations enabled users to instantly generate workflows, build secure custom applications without code, and receive proactive context-aware support, all within the monday.com platform. By embedding AI into the heart of our product, we're unlocking new levels of speed, flexibility, and productivity for teams across every industry.
Speaker #6: Let me now turn it over to Eliran to walk you through some of our business highlights for the quarter.
Speaker #7: Thank you, Roy. The enterprise continues to be our fastest-growing segment, and the investments we have made in our offerings for these customers are bearing fruit.
Speaker #7: In Q2, we achieved a record number of net new ads of customers paying over $100,000 annually, further validating our traction with enterprise organizations. We are very excited to share that mondayCRM earns recently reached $100 million in annual recurring revenue, marking a significant milestone in our product rapid growth.
Speaker #7: This achievement underscores the strong demand for our flexible, customizable CRM platform and the trust our ustomers place in monday.com to power their business operation, reaching this benchmark reflects our relentless focus innovation and customer experience and expanding the capabilities of our CRM to address evolving market needs.
Speaker #7: We are very excited to build on this momentum as we continue to scale and deliver exceptional value to our ustomers. We recently announced the appointment of Eris Bebber as monday.com's new Chief Marketing Officer, based in our New York City office.
Speaker #7: Eris brings over 20 years of marketing leadership from leading global organizations, most recently overseeing global marketing for Google Workspace and previously serving as CMO at Waze and Vimeo.
Speaker #7: Where he was instrumental in driving significant growth and innovation. At monday.com, Eris will lead our global marketing organization and drive forward our evolving strategy focused on creative, human-centered storytelling to support continued dynamic growth.
Speaker #7: We are pleased to announce the appointment of Adidar as our first Chief Customer Officer. In this important role, Adi will be responsible for overseeing the end-to-end customer journey, including adoption, retention, and long-term satisfaction.
Speaker #7: Adi will continue to serve as Chief Operating Officer until his successor is appointed. Lastly, we're happy to invite all of you to our upcoming Investor Day on September 17.
Speaker #7: As part of this year's Elevate New York conference, Investor Day 2025, we'll be a key moment to showcase our progress and our ition. Whether you join us in person or virtually.
Speaker #7: You'll hear directly from our leadership team as we highlight our achievements and outline our long-term vision, strategy, and product roadmap. We look forward to sharing deeper insights into our business and the opportunities ahead.
Speaker #7: With that, I'll now turn it over to Eliran to cover our financials and guidance.
Speaker #8: Thank you, Eliran, and thank you to everyone for joining our call. Q2 marked another strong quarter with solid revenue growth and improving efficiency. Total revenue came in at $299 million, up 27% from the year-ago quarter.
Speaker #8: Our overall NDR was 111% in Q2, with our expected overall NDR to be stable at 111% throughout fiscal year 2025. As a reminder, our NDR is a trailing four-quarter weighted average calculation.
Speaker #8: For the remainder 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 #8: Second quarter gross margin was 90%. In the medium to long term, we continue to expect gross margin to be in the high 80s range.
Speaker #8: Research and development expense was $59.2 million in Q2, or 20% of revenue, up from 16% in the year-ago quarter. Sales and marketing expense was $139.2 million in Q2, or 47% of revenue, compared to 51% in the year-ago quarter.
Speaker #8: Net income was $58.3 million in Q2 2025, up from $49.3 million in Q2 2024. Diluted net income per share was $1.09 in Q2, based on 53.3 million fully diluted shares outstanding.
Speaker #8: Total employees headcount was 2,867 and increased by 172 employees since Q1. We continue to expect to grow headcount by approximately 30% in fiscal year '25.
Speaker #8: Moving on to the balance sheet and cash flow, we ended the quarter with $1.59 billion in cash and cash equivalents, up from $1.53 billion at the end of Q1.
Speaker #8: Adjusted free cash flow for Q2 was $64.1 million, and the adjusted free cash flow margin was 21%. Adjusted free cash flow margin is defined as adjusted free cash flow as a percentage of revenue.
Speaker #8: We remain on target to meet our Investor Day goal, generating over $1 billion in free cash flow from fiscal year '23 to fiscal year '26.
Speaker #8: Adjusted free cash flow is defined as net cash from operating activities, less cash used for property and equipment and capitalized software costs, plus costs associated with the build-out and expansion of our corporate headquarters.
Speaker #8: Now, let's turn to our updated outlook for fiscal year 2025. For the third quarter of fiscal year 2025, we expect our revenue to be in the range of $211 million to $313 million, representing growth of 24% to 25% year over year.
Speaker #8: We expect non-GAAP operating income of $34 million to $36 million, and an operating margin of 11% to 12%. For the full year 2025, we expect revenue to be in the range of $1.224 billion to $1.229 billion, representing growth of approximately 26% year over year.
Speaker #8: We expect full-year non-GAAP operating income of $154 million to $158 million, with an operating margin of approximately 13%. We anticipate full-year adjusted free cash flow of $320 million to $326 million, resulting in an adjusted free cash flow margin of 26% to 27%.
Speaker #8: Let me now turn it over to the operator for your questions.
Speaker #1: At this time, I would like to remind everyone in order to ask a question, please press star 1 and read your request for today's session that you please limit to one question and one follow-up.
Speaker #1: We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of cash wrangling with Goldman Sachs.
Speaker #1: Your line is now open. Please go ahead.
Speaker #9: Hi. Thank you very much, for the chance to ask your question. nice results, but I'm ondering that, that you're pivoting to the enterprise NDR and the enterprise is picking up, the growth rate in the second half is good.
Speaker #9: But you didn't take it up. Typically, there is a bit of a raise to second-half expectations as you finish up the first half.
Speaker #9: And, the product, customer ads for the new products also seem good, but it feels like there's n you're waiting to hit an inflection point in the business where the new products and the pivot to the enterprise can stabilize the growth rate and maybe cause a bit of an lection.
Speaker #9: But we're not quite there yet. I would love to get our thoughts, and also, simultaneous with that inflection that you're looking to achieve, presumably, you're adding on a couple of new executives as well.
Speaker #9: So help us walk through all the puts and takes of the executive ads and the inflections that you're looking to achieve for your business.
Speaker #9: Thank you so much.
Speaker #8: Yeah. Hi, Cash. This is Eliran. So, first of all, like you mentioned, we really put, we brought in our go-to-market leadership, appointing Casey as our CRO and Harris now as the CMO.
Speaker #8: And also, Adi is our Chief Customer Officer, and I think a lot of this will greatly contribute to increasing momentum with the upmarket part of the business.
Speaker #8: Improving retention of customers and driving more expansion over the long term. On the other hand, like you mentioned, we also have the engine of going multi-product.
Speaker #8: Just as a reminder, while work management is very mature for, you know, enterprise customers and the high end of mid-market, the newer products, the CRM, currently serve more of the SMB segment.
Speaker #8: So, on one hand, we feel the multi-product strategy will help in bundling and selling more products to the lower-tier SMB and mid-market segments of the business.
Speaker #8: While the changes we've made to, you know, our go-to-market team and organization, as well as many other factors, are driving upmarket expansion, I think both aspects are contributing to, you know, the continued expansion of our revenue and growth.
Speaker #8: although, ou know, it's, it's definitely two, two separate efforts that overall time, as we mature the products and sell it to higher-tier customers, will become one.
Speaker #1: Thank you. Your next question comes from the line of Alex Zukin with Wolf Research. Please go ahead.
Speaker #10: Yeah. Hey, guys. Thanks for taking the question. I guess maybe, can you talk about the demand environment, the spending environment, and specifically, was there anything different with the linearity in the quarter?
Speaker #10: particularly with the large deals. And I have a quick follow-up.
Speaker #8: Cool. I can take the marketing or demand side and how it's Roy. So, we do see a lot of demand in different areas.
Speaker #8: Like, in CRM that we've been growing, we shift things into mobile, but we do see some pressure from Google on the news side.
Speaker #8: Though, it's, it's not, something we didn't encounter before, so it's, it's considerably small, on that respect. And, within like the CRM, we, do shift a lot of resources into other areas.
Speaker #8: Okay? like w that we see, a better place to grow. Like, you know, we have the big brain and we monitor all the performance stuff, so we, we see areas that we are more efficient in, so we move resources there.
Speaker #8: Yeah. Alex, this is Eliran. Maybe just to add to what Roy said, to summarize: demand in general remains very strong. Upmarket, you know, we have record net ads for the 100K customers.
Speaker #8: And we see a very od traction and momentum in the upmarket, mid and upmarket customers. as Roy said, we are seeing some softness within the downmarket due to the changes in the Google algorithm.
Speaker #8: But this is temporarily, we believe, and we're already taking actions proactively to address this. We believe this is going to be recovered going into the second half of the year.
Speaker #8: Overall, our enterprise momentum, the record large customer additions, and continued expansion within our fastest-growing segments provide us with a lot of confidence. And we feel very comfortable with the second half of the year.
Speaker #10: Perfect. And then maybe just in the context of improving enterprise traction, talk a little bit about billings. They were, it seemed like they were down a little bit sequentially.
Speaker #10: From a deceleration perspective, it decelerated a little bit. Maybe is that still the right way to think about a forward-looking metric?
Speaker #10: Is it possible that we'll get an RPO comment at some point, if that's a better gauge of traction? And maybe just comment a little bit more on NRR, specifically how we should think about it progressing through the year?
Speaker #8: Sure. So, with regards to calculated billings, we said it in the past few times that this is an imperfect measure of our business. We look at ARR growth.
Speaker #8: This is something, because I wouldn't want to take you through the accounting things, but we don't record deferred revenue only on a cash basis.
Speaker #8: And this is why we don't think it's the right measurement of the business. With regards to NDR, as expected, we said there are also prior quarter debts.
Speaker #8: The lapping of the 2024 price increase is going to impact non-duplication revenue (NDR). This is why the number came down from 112 to 111. We believe this is going to stabilize through the end of the year.
Speaker #8: The flip side of it is we see a very strong momentum with gross retention that continues to improve. And the addition of the customers in enterprise, both the $50K customers and $100K customers, we believe are going to contribute to the expansion of NDR in the beginning of next year.
Speaker #10: Perfect. Thank you, guys.
Speaker #1: Your next question comes from the line of Jackson Ader with KeyBank Capital Markets. Please go ahead.
Speaker #11: Great. Thanks for taking our questions, guys. A couple on sales hiring and productivity. So first, is sales hiring, either in the enterprise or elsewhere, building inline, behind, or ahead of your expectations as you headed into the year?
Speaker #8: Yeah. Hi, Jackson. This is Eliran. So, we ramped up pretty significantly in the first half of the year. Our main strategic areas were mostly sales and marketing.
Speaker #8: Hiring across all fronts: people who specialize in the new products, and also people that are kind of more focused on the enterprise part.
Speaker #8: So it's pretty much in line with our plans, and we continue to hire more people in the second half of the year.
Speaker #8: And again, we see great inventory within our own customer base for more expansion. We see healthy funnel movements with new customers.
Speaker #8: So overall, there's more room to grow within the sales team, and we'll continue hiring coming into H2 and the beginning of next year. Jackson, maybe this is Eliran.
Speaker #8: Sorry, Eliran, just to add to what Eliran said, and, we have Casey who joined us, in prior quarter, at the end of prior quarter, and this is, part of the CRO organization transition.
Speaker #8: So there is a high focus on continuing improving and enhancing the sales organization across the board. throughout, the end of this year and going into next year.
Speaker #11: Okay. All right. Great. That makes sense. Thank you, Eliran. And actually, I'm gonna pivot over to, to CRM accounts. The net new number was pretty far below what you guys have typically been doing on a quarterly basis.
Speaker #11: What should we be reading into that? Is this kind of a new normal, and you're landing higher-valued customers, or was this more of a blip?
Speaker #11: Thank you.
Speaker #8: Yeah. hi, Jackson. This is Eliran. So first of all, you know, wanna emphasize that we were very proud mondayCRM to reach 100 million, in such a short amount of time.
Speaker #8: And it's a very significant milestone for us as a company, so we're very proud of that. I think some of it is seasonality.
Speaker #8: I mean, traditionally, like we mentioned, Q1 is stronger in terms , net accounts ad, and Q2 is, is relatively lower compared to Q1. but yeah, p-part of it is the pressure.
Speaker #8: Eliran and Roy mentioned, in the low end of the market, and also part of our strategy in CRM, and we kind of repeated that several times, is landing bigger customers and having higher ACV customers, would drive lot of focus on, that front.
Speaker #8: And we continue to improve the product and landing larger and larger customers. So I think that just the amount of customers is not the perfect indicator of our success within the product.
Speaker #8: And maybe over time, we'll shift to a more telemetric that represents that.
Speaker #11: Okay. All right. Great. That makes sense. Thank you very much.
Speaker #1: Your next question comes from the line of Brent Breslin with Piper Sandler. Please go ahead.
Speaker #12: Thank you. Good morning. I wanted to double-click into the CRM business; I clearly saw the results here in Q2. You took that from $0 to $100 million ARR in three years.
Speaker #12: M-maybe walk through, is this really resonating as a lower-cost replacement product? Is it greenfield? H-how much of the business has been net new logos versus cross-sale?
Speaker #12: Any additional color on scaling that to 100 million dollars here and, and, and, and it oks like l about three, a little less than three years.
Speaker #8: cool. Hi. It's Roy. So, I think CR our, our CRM is, like, amazingly good for customers because it offers, complete flexibility where they don't have that options in other CRMs.
Speaker #8: Like, they can really build whatever they want. So it's not just a lower cost; it's the capabilities that come with it.
Speaker #8: and there is a huge demand for that in the market, something that is simple that people really love to use, and that you can actually build anything you want with it.
Speaker #8: And, together with that, like, we started with a more SMB-style audience, but as we add more capabilities, like marketing and other stuff, it becomes a whole suite.
Speaker #8: And we move upmarket, like Eliran mentioned.
Speaker #11: A couple of color there. And just a quick follow-up. Vibe coding has really just taken off, lit and fire here. I know it looks like you guys are releasing your own kind of vibe coding tool.
Speaker #11: Can you just talk about just given the launch of GTB5 and now you're releasing video coding? W-what are some of the foundational models ou're using and, and how do you think , you know, vibe coding and being differentiated for, for monday with a with its own vibe coding tool versus other vibe coding tools out there?
Speaker #11: Thanks.
Speaker #8: Yeah. Hi, Roy, again. So, we're super excited about that. That's like an acceleration to our vision. We always wanted to have tools that give people the power to build whatever they want to control their own destiny.
Speaker #8: And, with vibe coding, we, we can give them that. and it's really tremendous, and we see the feedback we get now is, is amazing.
Speaker #8: And I think we are in a very unique point, like monday, 'cause we've, historically built everything in our platform that is very open. The platform is open.
Speaker #8: It's built out of building blocks. It's all modular, and that gives us a huge head start into building enterprise-grade applications that really work seamlessly.
Speaker #8: And that is also connected to the rest of your workflow. So, essentially, if you need an addition to monday.com, you can build your own building block or completely new apps, but it's completely integrated.
Speaker #8: So it's connected with our, integrations and automations and everything works together. So, we're super excited about this one.
Speaker #1: Thank you for the question. Your next question comes from the line of Arjun Badla with William Blair. Please go ahead.
Speaker #13: Yep. fect. thank you so much. Can I, go back just for a second on the on the Google changes? I'm, 'm curious, how you go about kind of remediating the, the impact from, from AI search.
Speaker #13: On customer acquisition cost, I understand that for work management it may not be as big of a deal, given you're getting upmarket traction and it's more sales-led.
Speaker #13: But I, I imagine it impacts service and CRM and dev a little bit more. And then Eliran, how long like, how do you contemplate that into the guidance?
Speaker #13: For the rest of the year, in terms of how long that might take to remedy? Thank you.
Speaker #8: Okay. So hi. It's Roy. I, I can start and Eliran can, can complete. So, so it's not something we didn't see before. It's, it's now it's not a huge impact that we see on performance marketing.
Speaker #8: And we have a lot of room to grow in other areas, and we can optimize for that. So, we're also doing a lot of AIO in AI and what’s been searched by people in AI, and that they find us there.
Speaker #8: But, generally, it's not such a big, impact right now when we can mitigate it in, in many different ways.
Speaker #14: Hi, Jun. This is Eliran. So just as an indicator, when we look at guidance, it's grounded on the analysis of the latest market trends and the internal performance indicators that we are seeing at the time of the guidance.
Speaker #14: As Roy said, we believe this is something that is temporary, and we are already taking actions to reallocate resources to places where we see a greater return.
Speaker #14: So, in terms of the impact that's already baked into the guidance, we want to make sure that we deliver the most accurate and transparent outlook possible.
Speaker #14: and this is, something that, we took into account.
Speaker #10: Okay. understood. Thank ou. And then, maybe this 's probably for you, Roy, but the, the some of the AI capabilities that you rolled out, you talked about vibe coding just now.
Speaker #10: But they sound very exciting. I think you mentioned in your prepared remarks and the shareholder letter that you're transitioning from a system of work to a system of action.
Speaker #10: And I'm curious what that means in terms of how customers are using monday, how they're implementing it, and the value that they get out of it.
Speaker #10: How does that change with all these AI capabilities that you've now incorporated into the platform?
Speaker #8: yeah. Tha-that's, like, other exciting thing. So we released, like, three, different products. One is, like, a vibe oding, monday vibe. And then magic, which is building whole solutions on monday.
Speaker #8: And sidekick, which I think you are referring to, is doing the work for you. So essentially, we have all the context. We know everything people are trying to achieve because it's in a Monday.com project, their context, their history. And so we're able to create, with a single click, an AI that helps you accomplish the actual work and not just help you manage work better.
Speaker #8: And that's our vision. As AI progresses, we will progress with it, and we'll be able to perform more and more actual work for our customers.
Speaker #8: So, for example, instead of figuring out which venue you want to create an event, we find the venues for you and create a comparison.
Speaker #8: So that's work we can do for other people, and there are, like, hundreds of those examples that customers were testing out, and it's really cool.
Speaker #10: Awesome. Thank you so much.
Speaker #1: Your next question comes from the line of John Baer with Morgan Stanley. Please go ahead.
Speaker #15: Hi. It's Josh. thanks for the estion. You're putting up some really strong, growth numbers. I ink at a high level, this year could be thought of as, as an investment year with 30% headcount growth and that's slightly ahead of top-line growth.
Speaker #15: a bit of margin compression. And the result, obviously, a ton of product innovation, the go-to-market, motion that's maturing, and able to penetrate upmarket. So I'm just wondering, as we look ahead, beyond this year, can we see the yield on these investments in the form of higher or more durable growth or more operating leverage as looking ahead?
Speaker #15: Any thoughts on, you know, how you'd characterize the future if, if this is more of a, an investment year?
Speaker #8: Yeah, Josh. This is Eliran. I can start. I mean, definitely coming into 2025, we had a very concrete plan. On one hand, we had some catching up to do in terms of hiring for the sales organization.
Speaker #8: Because we saw so much potential within our existing customer base and a lot of demand. And we're doing that. It will continue to grow into '26, but in lower percentages.
Speaker #8: I would say, for the sales organization, and then for the R&D part, we definitely saw a big opportunity in investing into R&D.
Speaker #8: A-and coming into this year, we put a lot of effort into building new AI capabilities into the platform and just working on each one of the products.
Speaker #8: So, it was a year of investment, but we're already starting to see the fruits of all that investment in how people leverage AI or how people use the products. Going upmarket, we definitely see the fruits of that.
Speaker #8: I think '26 is gonna be very different in terms of headcount growth. We're gonna be more efficient compared to '25, but we're gonna see a lot of the investment and the results of what we've done in '25 coming into '26.
Speaker #11: Great. Thank ou.
Speaker #1: Your next question comes from the line of Mark Murphy with J.P. Morgan. Please go ahead.
Speaker #16: Hi, this is Noah On for Mark Murphy. Thanks for taking our questions. Can you maybe just touch a little bit on some of the adoption you're seeing in terms of managed services as you're moving upmarket into these enterprise accounts?
Speaker #16: What are some of the most typical managed services that are being adopted by customers? And just have a quick follow-up.
Speaker #8: This is Eliran. Can you just repeat? So, you're asking about the addition to the Monday service product, or were you referring to something else?
Speaker #16: Some of the add-on services, some of, like, security.
Speaker #8: Oh, okay.
Speaker #16: Governance that is being adopted. Yeah.
Speaker #8: Yeah, got it. So, we have a bunch of add-ons that we offer to our customers in addition to the licenses that we provide to them.
Speaker #8: Some of them are about kind of more robust security or managed services, and other parts of the business. Definitely, as we go upmarket, our customers want a little bit more security and customization to how they use monday.
Speaker #8: So, we offer that as part of our enterprise package. And, yeah, we see some growth over there definitely. As we go upmarket, it becomes more common for customers to attach.
Speaker #8: One of these add-ons to their license. So we see a healthy growth, but it's pretty much in line with the growth we've seen in the enterprise segment.
Speaker #11: Great. And then just a quick follow-up. On the fiscal year 2025 guidance, is there any change to the pricing contribution and also the FX impact for the year?
Speaker #11: Thank you.
Speaker #8: Hey, Mark. It's Eran. There isn't any change to what we have seen in what we have said in the past with regards to FX.
Speaker #8: It's going to be, not material. We estimate the, the full year impact to be, below, 60 basis points. and with regards to pricing, this is in accordance with what we have said, in the prior year, that over the next the, the three years between '25 to '24 to '26 is going to be altogether 80 million with 40 million dollar impact, this year.
Speaker #1: Thank you for the question. Your next question comes from the line of Steve Enders with CD. Please go ahead.
Speaker #17: Okay. Great. Thanks for, , thanks for taking the questions today. I guess just to start, I wanna ask on, I guess, go-to-market changes and with, you know, Casey being in there now for, for a quarter and Audi being promoted to, the, the chief, chief, I guess, ief commercial role.
Speaker #17: I guess, what changes with the go-to-market? And I guess, is there anything to read into the change from a COO to a CCO here?
Speaker #8: Yeah, Steven. So, this is Eliran. So, yeah, first of all, we're happy for Casey to join. You know, it's already driving significant impact to the sales organization and, you know, going back to what Eliran referred to at the beginning of the call.
Speaker #8: So, we have some weakness in the low-touch part of the business, but actually, the enterprise part of the business, the T-touch part of the business, performed really well.
Speaker #8: And we had a record add of enterprise customers over 100K. So, I think we're very happy so far with the transition, and there's a lot of positive impact to the sales organization.
Speaker #8: As we mature as a company, we accumulate more and more enterprise customers that use monday.com. We're very strategic, part of their business.
Speaker #8: And part of it is why we established now the Chief Customer Organization to support those accounts, improve retention, enhance their expansion ability, and provide a better service—putting the customer in the center.
Speaker #8: and I think this is part of us maturing as a company, going more upmarket. and we expect this to drive higher NDR over, over, over, over time and also improve the continuing to improve the growth retention of the company.
Speaker #8: So very positive about all the recent changes we made to the go-to-market leadership, and already we're seeing great results.
Speaker #17: Okay. That's, that, that's, that's great to hear. and then I wanna follow up on, I guess, of the Google commentary from, from earlier in, in the impact of search.
Speaker #17: But it seems like you already have put some of those or some of those plans in, into place. I, I guess, what has been maybe the efficacy of those, those changes so far?
Speaker #17: I guess, at kind of gives you, you know, confidence, you know, the, the changes you've e, you ow, will kind of play out as expected and, I guess, I guess, you know, the confidence you're gonna have in the second half guide from, from, from the Google impact?
Speaker #8: Hi, it's Y. So, one thing to remember is that we have around 250,000 customers, and a lot of the growth we see comes from expanding them.
Speaker #8: Okay? And multi-product and giving them service. The new part is obviously smaller, but very important for the long term. And like I said before, it's not such a significant impact until now.
Speaker #8: Not nothing we didn't see before. So it's just a matter of budget allocation and, scaling on areas that we, we improve on. So we, we do that always.
Speaker #8: Okay? Like, we improve some areas of the product and then shift to another, some other areas and media, like YouTube and other platforms. So it's not just that we have a lot of things to do, and we see the impact quickly.
Speaker #8: So it's, it's something we can improve and iterate quickly. So, yeah, it's not that, that big. Yeah. May, be Steven, just to add to what Roy said, look, over the, over the last four or five years, we, we've seen many, many things change in the market.
Speaker #8: Prices spiked up by 30% at some point three years ago, but now they are going down. I think what gave us a lot of confidence throughout all the years we've been doing performance marketing is, one, don’t only do just, you know, AdWords.
Speaker #8: So we have a lot of other channels as well. And also, we monitor every campaign, every click, every expense, so we're not, we're not flying blind.
Speaker #8: Everywhere we feel is unoptimized, we optimize. so we know we can optimize. We know we have full visibility into, how we spend that budget.
Speaker #8: And we're doing the right tweaks to kind of remain efficient and just distribute the funds in a very organized way.
Speaker #17: Yeah. Perfect. Appreciate the, context and, and thanks for taking the estions.
Speaker #1: Your next question comes from the line of Brent Hill with Jeffries. Please go ahead.
Speaker #11: Thanks. I think there are a lot of questions just as it relates to the Google change. And what percent of that impacted your business? If you think about just X, Y, Z percents covered in this category from Google?
Speaker #11: What, what would that ha-have been in the quarter?
Speaker #8: Hi again, Roy. So, given that there are so many questions on that, maybe we can double-click a little bit more into it. Like, the better, high-quality customers still click on Google and ads.
Speaker #8: If you're looking for a solution such as a CRM or project management, you're going to reach us, okay? So the drop that we see is just on volume because they are experimenting with AI on top.
Speaker #8: And it's not that significant for the higher quality of customers, so it's more volume than quality. We can get that from many other areas.
Speaker #8: So again, like I don't, I think we can mitigate that relatively quickly.
Speaker #11: Okay. Yeah. I think this is just going back to the magnitude of the raise in earnings, trying to figure out, was it enterprise or S&P?
Speaker #11: It sounds like there was some weakness in the S&P. You're blaming on Google. Everyone's just trying to put the pieces together of what the impact is to the forward guidance because it's a lot lower than you've usually put up in terms of magnitude.
Speaker #11: So, I think everyone's just trying to reconcile that. So, that's all the color we're gonna get on that.
Speaker #1: Thank you for that question. At this time, I would like to remind everyone in order to ask a question, press star. Then the number one on your telephone keypad.
Speaker #1: We do request for today's session that you please limit to one question and one follow-up. We will pause again for just a moment to compile the Q&A roster.
Speaker #1: Your next question comes from the line of Raymo Lenshow with Barclays. Please go ahead.
Speaker #16: Perfect. Thank ou. And two quick questions from me. one is, on services. That's from our text. That sounds like it's a really nice emerging opportunity.
Speaker #16: Can you k a little bit about how services compares to the CRM, rollout? Like, you ow, obviously, you got the 100 million ARR for CRM, but, like, ices almost looks more interesting.
Speaker #16: Can you speak to that? And then maybe just a very quick math question. you know, Brent. So you beat the quarter and Q2 by six, but you only raised the full year by three.
Speaker #16: Million. And so I guess we're all wondering a little bit, like, is that kind of buffer on the Google search side? Is that the new CRO?
Speaker #16: Where is that buffer coming from? Thank you.
Speaker #8: Yeah, so this is Eliran. So maybe, maybe I'll start with the second part of the question. So, yeah, definitely not the new CRO. As I mentioned, the enterprise part of the business is performing well, according to our expectations, summarizing the first half of the year.
Speaker #8: We saw some weakness in the lower side of the business. Part of it is because of the Google changes. Part of it may be due to some other trends that are kind of hard to understand, and it's difficult to pinpoint where exactly they're coming from. Nevertheless, we see a little bit of weakness regardless of the Google search.
Speaker #8: And, and look, we try to be as transparent as possible about the impacts we see from the search engines. It's just not that mature right now, but it's a start of a trend.
Speaker #8: So we're starting to be, we want to be a little bit more conservative about, you know, I don't exactly, I don't control, we don't control exactly how Google will play this out, how the world is going to be.
Speaker #8: So we are trying to understand what are the implications. Currently, in terms of percentages, I don't have the exact figures, but it's very, very low.
Speaker #8: Almost insignificant, but it has some effect on our ability to acquire some part of, you know, the lower end of our customer base.
Speaker #8: So, that's the best visibility we can give right now. Yeah. And maybe I, Remo, this is Eliran. Maybe to add to what Eliran said.
Speaker #8: So our full year guidance already reflects a strong execution that we have seen year-to-date. Including Q2 performance, we remain super confident in our ability to deliver against our fiscal year 2025 outlook.
Speaker #8: And we continue to call for areas of uncertainty, as we already mentioned in the call, that could influence some of the numbers for the end of the year, but they're ready-baked into the guidance.
Speaker #8: And our approach is always to provide guidance we believe is both achievable and prudent. We want to make sure that we maintain focus on the longer-term growth and profitability as well.
Speaker #8: Yeah, and, and just to add, answering the first one about service, we are super excited about service. We see it as a huge opportunity. It is scaling.
Speaker #8: Really fast. Absolutely. And, and what's also exciting, it's like, it's not the same go-to-market. It's not Google, if you like. It's from existing customers.
Speaker #8: And we have a different go-to-market that succeeds really well with service, so we're like super excited about that one.
Speaker #11: Okay. Perfect. Thank ou.
Speaker #1: Your next question comes from the line of Matt Bullock with Bank of America. Please go ahead.
Speaker #17: Great. Thank you. Good morning. Thanks for taking the question. I wanted to ask about AI actions. Obviously, the cumulative numbers, you know, are growing nicely, but it looked like the end-quarter AI actions' sequential growth did slow.
Speaker #17: Maybe just help us think about how the AI actions trended relative to your internal expectations, and then help us think about the potential monetization story in 2026.
Speaker #17: And I have one follow-up.
Speaker #8: Yeah, sure. So this is Iran. We are actually very happy with the adoption of the AI actions. It grew by almost 20 million.
Speaker #8: This quarter, and just as a reminder, we started to introduce payment at the beginning of the year. So, obviously, it had some effect on adoption. Apart from that, we see more and more accounts kind of surpass the $500 AI monthly credit limit, and we're starting to see more revenue accumulate from the AI actions.
Speaker #8: So, we're very happy with the progress and the adoption of the AI actions. Also, we have some new generation AI features, like Roy mentioned, Magic 5 and Sidekick.
Speaker #8: which also kind of contributes to the AI usage. So overall, we're very happy with the AI adoption within the platform.
Speaker #17: Fantastic. And then one follow-up quickly. I, I hate to harp on the SEO question, but we're getting a lot of inbounds on it.
Speaker #17: Is there anything you can provide in terms of, you know, data points around conversion rates, maybe traffic, performance marketing costs, and then help us understand, you know, why call this out now?
Speaker #17: You know, how did the influence of, you know, Google SEO disruption change this quarter versus Q1, for example? Thank you.
Speaker #8: Yeah. So, look, I, I ink, like we said, we optimize in real time. you know, we, we adjust the budget on a, on a daily basis.
Speaker #8: Right now, the effects are very minor. In terms of acquiring new accounts, definitely in the mid-market enterprise segment, we see a little impact on the SMB part.
Speaker #8: But still, it is very insignificant. We optimize this on a day-to-day basis. So, we've done some optimization last month, and we continue to do optimization this month.
Speaker #8: But overall, nothing very significant that impacts our ability to acquire new customers.
Speaker #17: Awesome. Thank you.
Speaker #1: Your next question comes from the line of DJ Hines with Canaccord. Please go ahead.
Speaker #16: Hey, thank you, guys. Eliran, just one for you. So, Josh asked earlier about this being an investment year. Do you see that 30% headcount growth as a surge, or is that kind of more a steady-state hiring pace given the growth of the business?
Speaker #16: A-and then looking forward, I know we're not guiding to next year, but just if you think budgeting, do you expect a moderation in the pace of hiring?
Speaker #16: Like, wh-what's the kind of go-forward view of where we are?
Speaker #8: Yeah. yeah. Go ahead.
Speaker #16: Hey, DJ. Eliran. Sure. So we already said that we expect headcount growth to be this year in fiscal 2025, around 30%. And it's actually going to start; the growth in headcount is going to start to decelerate in H2.
Speaker #16: Going into next year, I think we said that last year and we said at the beginning of this year, we have huge opportunities.
Speaker #16: The market is great. We have multiple products. We want to make sure that we capture the opportunity. Therefore, we invested in product, in R&D, and in sales and marketing.
Speaker #16: We believe that by the end of the year, we will have the right resources going into the next few years. So we expect this to be more moderate and capture the opportunity—the huge opportunity that we have in front of us—going into '26 and beyond.
Speaker #11: Perfect. Thank ou.
Speaker #1: Your next question comes from the line of Connor Murphy. Your next question comes from the line of Tom Blakey with Cancer. Please go ahead.
Speaker #18: Oh, hey! Great, guys. Thank you for taking the question. I had a couple on CRM. ARR—great update there. I think there have been a couple of questions.
Speaker #18: Wondering about the contribution to growth related to seat growth and pricing. This could maybe make a comment on that. Specifically, it seemed like there was an increase from Q4 '23 disclosure in terms of, you know, obviously, average deal size moving upmarket.
Speaker #18: But I wanted to just kind of explore the interplay there in terms of seat growth and pricing, and discounting. Specifically, on the slope of that, was there anything that changed maybe in 2025 specifically with regard to pricing?
Speaker #18: And then the second question was just, could you maybe double-click on why stock-based compensation jumped in Q2, in the quarter? Thank you for the questions.
Speaker #8: Yeah. Hi. This is Eliran. So just in reference to, you know, what we're seeing in CRM products. So definitely, we see the ACV growing in CRM.
Speaker #8: Actually, we see it, you know, over 20% year-over-year increase in Q2 in terms of the ACV of our customers in CRM. Mostly, it's seat expansion and larger lands of customers.
Speaker #8: So definitely, it shows that the investment that we put into the products, making them more upmarket, adding features and functionality pays off.
Speaker #8: So, like we said, accounts count is not the only indicator. We see accounts utilizing monday.com CRM in a broader way, so it's definitely very encouraging to see that.
Speaker #8: and exactly in line with our strategy.
Speaker #18: Hi, this is Eliran. I will refer to the question about why there is an increase in the service compensation. It's largely seasonality related to a broad-based equity refresh for existing employees, which occurs every year in Q2.
Speaker #18: This is the compensation cycle of the company, and new grants are tied to strategic hiring and retention of employees, with the addition of a few members to the executive team and the mid-executive team of the company.
Speaker #18: We view this as necessary, as part of the playbook of monday. In terms of retention of employees, we aim to refresh equity for some of the employees going into the next few years.
Speaker #11: Thank you.
Speaker #1: Your next question comes from the line of Connor Murphy with Capital One Securities. Please go ahead.
Speaker #17: All right. Thanks. So I just want to go back to the SEO question. I mean, I understand the component where, you know, it's impacting net ads, but are you guys seeing more churn downmarket as well?
Speaker #17: 'Cause I'm just, I mean, I'm looking at the NDR down percent. Upmarket is flat. So I just want to get a little bit more color on the downmarket customer base.
Speaker #17: And then I have one follow-up.
Speaker #8: Yeah. Hi, Connor. This is Eliran. So we actually see the exact opposite. Our gross attention is at an all-time high, and it's not just on the enterprise part of the business, but across the whole customer base.
Speaker #8: So, we don't see any change in S of churn or their ability to expand. Like I said, it looks very good. And like we've said before, it impacts a little bit the customer ads in the beginning of the funnel, but overall, it doesn't change the churn profile.
Speaker #17: Understood. Thanks. And then, you guys are sitting on, let's call it $1.6 billion in cash, and you're generating over $300 million this year, despite heavy investment.
Speaker #17: Can you just go back and talk a little bit about your strategic priorities, whether M&A or, you know, potential buybacks, just given where the stock is?
Speaker #17: Thanks.
Speaker #8: Hi, this is Eliran. Going forward, the priority number one remains on organic growth, and we would like to continue the investment in product and sales.
Speaker #8: investing in the platform, in mondayDB, in AI. we're also considering inorganic growth, viously. we now have multiple products that each one of them can have is, has its own roadmap, and we would be consider M&A to further enhance and accelerate those pro-roadmaps.
Speaker #8: on the longer term, we are, we might think about other, return on investment, methodologies or, but, but for now, this is the main focus is organic growth as well as consider attacking, M&As potentially.
Speaker #17: Awesome. Thank you.
Speaker #1: Your next question comes from the line of Derek Wood with TD Cowen. Please go ahead.
Speaker #19: Great. Thanks. Given the enterprise strength, how much focus do you have on going after larger multi-thousand seat opportunities, especially in light of the mondayDB upgrades?
Exactly that. Like I think we're, uh, driving more usage with value and pricing. It, uh, allows us to get the feedback and optimize the product to give enough value. That customers will continue to buy more and like your Ron mentioned. We're adding new products of AI that build more solutions and workflows to Consumers those credits and and we see that we we are expecting to increase it over time.
Thank you.
Your next question comes from the line of Scott Burg with NEM. Please go ahead.
Take my questions. Uh, first 1 probably for Roy uh with the release of magic Vibe inside kick. Can those be kind of I guess new lead AI, you know, type functionality, or modules, or do you or do what you see with AI actions? Are they still kind of the the lead AI functionality for the platform? Thanks.
Um, hey, so like there are, it's a good point. There are 2 sides. Okay, 1 within the platform. After you build the solution or you're working with the platform, and that's mostly Sidekick, which does the work for you. And when you want to build a new solution or solve something new, then you'll use.
Either magic or Vibe. And Magic essentially is like you. You ask it, anything you want. You can go now and and check it out. It's a Monday magic AI, uh, you type whatever you want and it's amazing to see what customers ask it. They really, uh, put in their business problems in there and expect it to solve it for them. And it does, it gives them like a really great solution to how they need to operate. It's even great to see how the AI thinks about it. It's a great way to get a reflection on your business and how you need to think about it. And then it gives you the full solution, even creates a movie that explains the solution and and and that's the new way for us to give people the power to build the tools they need. And it incorporates also blocks and psychic in there. So it's like,
It's a compound value.
That is very helpful and then uh eleron. Uh in your guidance. Probably another question, on the Performance Marketing, Google here. Um, it looks like, yeah, I know it looks like your your your uh, flowed through your profitability from Q2 for the back half of the year. But it's is your strategy and approach in the back half.
Similar to the second quarter, should we prioritize more profitability or our growth from those lower customers? Or should we maybe view that guy differently? Thank you.
No, we we apply the same philosophy on guidance as we did in q1 just as a reminder, overall India we believe is going to be stable at 111%. Uh, we do think that customer growth is going to be in the mid single digits. This is something that has might have changed. And uh, we also took into account a small amount of Monday service Revenue uh with some potentially small ethics Tailwind, uh very minimal. And as we go back to headcount we said that it's going to be the accelerated in terms of the percentage uh of what we have done in H1. But if there are going to be opportunities for us with everything that we spoke of you said no Performance Marketing and we will see some recovery. Definitely would make the investment if we then this is the appropriate 1.
Very helpful. Thank you for taking my questions.
Your next question comes from the line of Rob Oliver with Beard, please.
Um, I want to transmit a question on the partner network. So I wanted to ask about that. When you guys look into your partner network, how important of a role is that playing in the move up market, you know, $50K, $100K, and then anything relative to the current pipeline and demand? If you're seeing particular verticals or geographies that are outperforming, or you see as opportunities as you look into the back half of the year and into 2026. Thank you.
Yeah, so so we don't see any uh, particular segments that are over performance or underperforming and uh, like we said we're going to continue, uh, and do Performance Marketing, uh, in H2, across all products. And we'll continue to invest in all of them. Uh, we don't see 1 particular segment, uh, whether it's SNB or Enterprise or any, you know, specific business sector. That's over, performing or underperforming. I mean, into H2.
Thank you for your question. Your next and last question comes from the line of Taylor McInnis with UBS. Please go ahead.
Yeah, hi thanks so much. Um, for for taking my questions, on the revenue guide. So for the second half, it implies growth stabilizing in the mid 20s. When we compare this to the initial base case framework of high 20s low, 30s growth, can you just talk about which assumptions have changed relative to your initial expectations? And then as we look into next year, I know you're going to be lapping. Some of the bigger price increases so is mid 20s. Still a good starting point or maybe you could just walk us through the puts and takes given the product roadmap and and hiring ramps. Thanks.
Hi, this is Dean. So, with regards to next year, we're, we are now working with the budget. So obviously, once we have, we will finish the year. We will provide you Guidance with regards to that, with regards to, this fiscal year, we're operating in accordance with the Playbook that we have set at the beginning of the year, taking into account, all of the things that we mentioned earlier. Uh, the fact that ndr is going, uh, to 111% some, uh, uh, uncertainty, with the, I think we already, uh, uh, said about the Google search that we want to make sure that we, uh, deal with. As we already proactively addressing it and the assumptions that you got to headcount hiring, as well as the new products contribution to the revenue. These are all the things that we took into account as part of the guidance based on what we know today and we want to make sure this is uh, responsible and put it.
Awesome. Thank you. And then, um, just lastly for me, could you maybe give a little bit more color on what, um, in-period NRR looked like? So was it around the 111 trailing 12 months metric? And as like a second part to that, it looks like, you know, where there was maybe some internal pressure was amongst the smallest customers. So when you talk about stability going forward in NRR, does that apply across all of the customer segments? Thanks.
Yes, it's pretty much a broad-based. Uh, we we do see strength in the midmarket and uh and uh up Market, the Enterprise accounts. As we said, the reason why we see the deceleration from 12 to 1111, is mostly the lapping of 2024 price increase. Other than that, we didn't see anything that uh, you know, impact and they are.
Perfect. Thanks so much for taking my questions.
Thank you all for joining our Q&A session and today's call, ladies and gentlemen. You may now disconnect. Everyone, have a great day.
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