monday.com Q1 2025 Earnings Report

monday.com EPS Results

• Actual EPS: $1.10
• Consensus EPS: $0.70
• Beat/Miss: Beat by +$0.40
• One Year Ago EPS: $0.61

monday.com Revenue Results

• Actual Revenue: $282.25 million
• Expected Revenue: $275.93 million
• Beat/Miss: Beat by +$6.32 million
• YoY Revenue Growth: +30.20%

monday.com Announcement Details

• Quarter: Q1 2025
• Date: 5/12/2025
• Time: Before Market Opens
• Conference Call Date: Monday, May 12, 2025
• Conference Call Time: 8:30AM ET

monday.com (NASDAQ:MNDY), together with its subsidiaries, develops software applications in the United States, Europe, the Middle East, Africa, the United Kingdom, and internationally. The company provides Work OS, a cloud-based visual work operating system that consists of modular building blocks used and assembled to create software applications and work management tools. Its products include monday work management that manages workflows, projects, and portfolios for team collaboration and productivity; monday sales CRM, whcih tracks and manages various sales cycle; monday dev that builds agile product and software development workflows; WorkCanvas, a digital whiteboard; and WorkForms, which allows users to create personalized forms or surveys and gain organizational insights. It serves organizations, educational or government institution, and distinct business unit of an organization. The company was formerly known as DaPulse Labs Ltd. and changed its name to monday.com Ltd. in December 2017. monday.com Ltd. was incorporated in 2012 and is headquartered in Tel Aviv, Israel.

monday.com Q1 2025 Earnings Call Transcript

Presentation

[Operator]

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.com's First Quarter Fiscal Year 20 20 5 Earnings Conference Call. I would like to turn the call over to monday.com's Vice President of Investor Relations, Mr. Byron Steven.

[Operator]

Please go ahead.

[Byron Stephen, Vice President of Investor Relations at monday.com]

Hello, everyone, and thank you for joining us on today's conference call to discuss the financial results for monday.com's first quarter fiscal year 20 20 five. Joining me today are Roy Mann and Aaron Zimmerman, Co CEOs of monday dot com and Eleron Glaser, monday dot com's CFO. We released our results for the first quarter fiscal year twenty twenty five earlier today. You can find our quarterly shareholder letter along with our investor presentation and a replay of today's webcast under the News and Events section of our IR website at ir.monday.com. Certain statements made on the call today will be forward looking statements, which reflect management's best judgment based on currently available information.

[Byron Stephen, Vice President of Investor Relations at monday.com]

These statements involve risks and uncertainties that may cause actual results to differ from our expectations. Please refer to our earnings release for more information on the specific factors that could cause actual results to differ materially from our forward looking statements. Additionally, non GAAP financial measures will be discussed on the call. Reconciliations to the most directly comparable GAAP financial measures are available in the earnings release 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.

[Roy Mann, Co-Founder, Co-CEO & Director at monday.com]

Thank you, Byron, and thank you, everyone, for joining us today. We are pleased to report that 2025 is off to an exceptional start for monday.com. 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. These results reflect the strengths of our multi product offering, the dedication of our teams and our continued focus on operational excellence. We also continue 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 Mann, Co-Founder, Co-CEO & Director at monday.com]

As of the end of Q1, we've seen our users perform more than 26,000,000 AI actions to date, up more than 150% since the end of twenty twenty four. We are thrilled to see such rapid growth and usage of AI as our customers utilize the features to automate complex tasks, extract insights, and accelerate decision making. Our strong financial performance and disciplined operations position us to weather any uncertainties in the year ahead. During times of market volatility, customers increasingly rely on monday.com for our flexible platform and cost effective solutions. Our adaptable product suite and scalable pricing enable businesses to stay agile, optimize resources and confidently manage the changing demands.

[Roy Mann, Co-Founder, Co-CEO & Director at monday.com]

Let me now turn it over to Iran to walk you through some of our business and product highlights of the quarter.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

Thank you Roy. The enterprise continued to be our fastest growing segment and present significant opportunities for market share expansion and we're excited to be strengthening our efforts with these customers. 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. This includes exciting new features such as AI powered risk insights, AI powered portfolio reports, managed templates, resource planning capabilities and more. We're also very happy to announce the appointment of Casey George as Chief Revenue Officer.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

Casey brings nearly thirty years of experience in scaling enterprise software organization and driving strategic market expansion. Most recently he served as Executive Vice President of Global Sales at Qlik where he oversaw $1,300,000,000 in annual recurring revenue and led a global team of over a thousand employees. His leadership track record also includes senior roles at Talend, Verint and IBM, where he successfully built and aligned go to market organizations across multiple business environments. Casey will be based out of our North America headquarters in New York City. This marks an exciting milestone as we welcome our first global C level leader to Money.com.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

We are confident that his expertise will further accelerate our enterprise growth, strengthen customer relationship and support the next phase of our go to market strategy. In sum, the strong momentum we achieved at the close of 2024 has continued into the first month of twenty twenty five, setting 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. Despite recent macroeconomic uncertainty, we believe that our strong product offering, resilient business model and disciplined approach position us well to build market share and continue delivering value for customers and shareholders. With that, I'll now turn it over to Eliran to cover our financials and guidance.

[Eliran Glazer, CFO at monday.com]

Thank you, Eran, and thank you to everyone for joining our call. As Roy and Eran mentioned, Q1 marked a strong start to 2025 with solid revenue growth and improving efficiency. Total revenue came in at $282,000,000 up 30% from the year ago quarter. Overall NDR was stable at 112% in Q1, with improving retention for our larger customers cohort. As a reminder, our NDR is a trailing four quarter weighted average calculation.

[Eliran Glazer, CFO at monday.com]

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. First quarter gross margin was 90%. In the medium to long term, we continue to expect gross margin to be in the high 80s range. Research and development expense was $53,800,000 in Q1 or 19% of revenue, up from 16% in the year ago quarter.

[Eliran Glazer, CFO at monday.com]

Sales and marketing expense was $135,900,000 in Q1 or forty eight percent of revenue compared to 56% in the year ago quarter. Net income was $58,400,000 in Q1 twenty twenty five, up from $31,700,000 in Q1 twenty twenty four. Diluted net income per share was $1.1 in Q1 based on 53,000,000 fully diluted shares outstanding. Total employee headcount was 2,695, an increase of 187 employees since Q4. We continue to expect to grow headcount by approximately 30% in fiscal year twenty twenty five.

[Eliran Glazer, CFO at monday.com]

Moving on to the balance sheet and cash flow. We ended the quarter with $1,530,000,000 in cash and cash equivalents, up from $1,410,000,000 at the end of Q4. Adjusted free cash flow for Q1 was $109,500,000 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. We remain on target to meet our Investor Day goal, generating over $1,000,000,000 in free cash flow from fiscal year twenty twenty three to fiscal year twenty twenty six.

[Eliran Glazer, CFO at monday.com]

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 built out and expansion of our corporate headquarters. Now let's turn into our updated outlook for fiscal year twenty twenty five. For the second quarter of fiscal year twenty twenty five, we expect our revenue to be in the range of $292,000,000 to $294,000,000 representing growth of 24% to 25% year over year. We expect non GAAP operating income of $32,000,000 to $34,000,000 and an operating margin of 11% to 12%. For the full year 2025, we expect revenue to be in the range of 1,000,000,002 and $20,000,000 to $1,226,000,000 representing growth of 25% to 26% year over year.

[Eliran Glazer, CFO at monday.com]

This forecast now assumes a negative impact from FX of less than 100 basis points. We expect full year non GAAP operating income of $144,000,000 to $150,000,000 and an operating margin of approximately 12%. We expect full year adjusted free cash flow of $310,000,000 to $316,000,000 and adjusted free cash flow margin of 25 to 26%. Let me now turn it over to the operator for your questions.

[Operator]

So, first question is coming from the line of Kash Rangan with Goldman Sachs. Please go ahead.

[Kash Rangan, Managing Director at Goldman Sachs]

Thank you so much. Congratulations on a spectacular start to the year. With the new addition of your Chief Revenue Officer coming on board, I'm curious to get your take on one of the things about the go to market approach from Monday, which has worked really so beautifully, that you preserve with this new executive going forward, and one of the things that you would like to be done differently, especially with the broader diversification of the product, you've got multiple products now, you've got the work management, you've got a dev, CRM, a whole bunch of ITS and etcetera. Given that the company wants to scale and become even more successful, what changes in go to market do you foresee ahead? Thank you so much and that's it for me.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

Hey, Kesh, this is Eran. So first of all, I want to say we're very excited for Casey to join. I actually joined last week and it's been a long process and we feel very confident about Casey and joining the company. I can say that on one hand, I think like you mentioned, it's a machine that we built over the years that combines product led growth with sales led motion. And I think we would love to preserve our ability to do both performance marketing and to do more top down selling at the same time.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

Also the multi product strategy has been very successful. We definitely want to preserve that and scale that. I think Casey brings a lot of experience overall, but even more specifically, I think can help accelerate our go to market or up market motion. It's been one of our most strategic pillars and things will be focused on as a company. Casey brings a lot of expertise and knowledge about selling to larger enterprises and scaling that operation and I'm sure it's going to help us accelerate what we've already been doing.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

In addition to improving a lot of the things, increasing efficiency and I think it's going to be a smooth transition with a lot of potential upside going forward.

[Kash Rangan, Managing Director at Goldman Sachs]

Super, thank you so much.

[Operator]

Your next question is coming from the line of Alex Zukin from Wolfe Research. Please go ahead.

[Alex Zukin, Analyst at Wolfe Research LLC]

Hey, guys. Thanks for taking the question and congrats on great quarter. Maybe just run us through what you saw this quarter from the CRM and the service business. And then, Deb, it looked surprisingly strong actually, according to our numbers.

[Alex Zukin, Analyst at Wolfe Research LLC]

So just maybe give us a little bit of an

[Alex Zukin, Analyst at Wolfe Research LLC]

explanation there. Then on NRR or NDR, it was solid flat at 112%. There were some moving pieces where it looks like it's continuing to strengthen up market. So maybe help us understand how to think about that going forward as we go through 2025. Thanks guys.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

Yes. Thanks, Alex. This is Aron. So yes, we see great momentum overall with our product suite. More specifically, Q1 had a strong performance in terms of net adds of customers.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

I think part of it is seasonality of our performance marketing spend. Traditionally, Q1 is a strong quarter for us in terms of performance marketing investment. And because of the nature of those products and the fact that it's a new go to market for us, just the net adds that we saw in Q1 were high and kind of aligned with our expectations. With that, would say service is not just an SMB product. We see 70% of the AR for Monday service coming from mid market and enterprise segments, so also strong momentum there.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

For Monday, we're very encouraged with the go to market. We're making some changes and optimizations and overall we feel there's good momentum. So overall, it's pretty much in line with what we expected from Q1. Momentum is strong across all products and we continue the investment in terms of performance marketing going forward. In terms of retention, I'll refer to Eliran.

[Eliran Glazer, CFO at monday.com]

Yes, sure. Hi Alex, it's Eliran. With regards to MDR, look, while we haven't seen any changes in customer behavior, there is more uncertainty in the macroeconomic environment. So when we think about MDR, currently it's around 112%. We believe it's going to be slightly below 112% potentially by the end of the year, having in mind the uncertainty that it currently exists.

[Operator]

Your next question comes from the line of Pinjalim Bora with JPMorgan. Please go ahead.

[Pinjalim Bora, Executive Director, Equity Research at JP Morgan]

Just want to ask on the action. It seems like that's growing exponentially. Maybe talk about that strength. How much of that is experimentation at this point versus being added to production workflows or automations? Have you heard any kind of productivity improvements from customers?

[Pinjalim Bora, Executive Director, Equity Research at JP Morgan]

And have you started kind of monetizing the actions at this point?

[Roy Mann, Co-Founder, Co-CEO & Director at monday.com]

Yes, hi, it's Roy. So, yes, we're very happy with the adoption on a lot of levels. First off, we see a lot of customers great, get a lot of value out of those actions and the numbers are great, but they don't really represent the value. It's like real business value in a lot of aspects and we are monetizing it. It's still, I would say like the usage we see is deep in many areas, but the monetization is still early in early stages and we're experimenting with it.

[Roy Mann, Co-Founder, Co-CEO & Director at monday.com]

We do see a correlation between usage and pricing and the fact that people do actually pay when they get the real value.

[Pinjalim Bora, Executive Director, Equity Research at JP Morgan]

Understood. One quick follow-up for Eliran. Eliran, you help us understand the FX impact in Q1? And if I it seems like you're kind of taking down the FX headwind assumption, which kind of makes sense. But the guidance is not coming up as much, right?

[Pinjalim Bora, Executive Director, Equity Research at JP Morgan]

So, I wanted to ask you anything you said you're not seeing any change in behavior, but is that purely based on prudence or is there anything that you're seeing at this point?

[Eliran Glazer, CFO at monday.com]

Sure, Peng Joleen. So we did have some negative FX impact to Q1 revenue, but as a reminder, when we started the year, once the tariff was announced FX became very volatile. Going into April, there is some more balanced kinds of trends. So we assume that the effect for the entire year is going to be less than 1%. And the reason not everything is reflected in the guidance is because we did take a more conservative approach with regards to our expectations for the end of the year because of the macro economy situation and the uncertainties that are still exist.

[Operator]

Your next question is coming from the line of Arjun Bhatia with William Blair. Please go ahead.

[Arjun Bhatia, Co-Group Head - Technology, Media & Communications at William Blair]

Perfect. Thank you, guys, and congrats on the strong Q1 here. What if I can ask, it seems like the on the market motion, it seems like you're seeing quite a bit of success there, especially with the core work management offering moving up. I guess 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?

[Arjun Bhatia, Co-Group Head - Technology, Media & Communications at William Blair]

Are those kind of on their own independent trajectory to enterprise kind of on its own from work management? How would you think about that? Thank you.

[Roy Mann, Co-Founder, Co-CEO & Director at monday.com]

Hi, it's Roy. Yeah, you're right like work management is going a lot up market. We're leading that category also in all the reviews and we're seeing a lot of deep features or capabilities that we're releasing that enterprise really need to manage things at scale. Regarding other products, it varies according to each product. So for example, service is obviously targeted into the larger customers like mid market to higher size, while CRM, we see a lot of success in the SMB low mid market.

[Roy Mann, Co-Founder, Co-CEO & Director at monday.com]

And so one may not have that impact on the other like you suggested and each product has their own path. Having said that, I'll tell you like all we push all the product upward all the time. As we increase the capabilities and deepen each product suite ecosystem, we naturally go upmarket.

[Operator]

Your next question is coming from the line of Steve Enders with Citi. Please go ahead.

[Steven Enders, Equity Research Analyst at Citi]

I guess I just want

[Steven Enders, Equity Research Analyst at Citi]

to dig a little bit more onto the guidance. Just want to get a better sense for how the uncertainty that you're seeing with customers is playing out with the assumptions that you're making. Just anything on, I guess, related to deal cycles or deals pushing or conversion rate change assumptions? Just how is the uncertainty actually kind of manifested into how you're thinking about, I guess, what's incrementally changed with the outlook versus before?

[Eliran Glazer, CFO at monday.com]

Sure. Hey, Steve, it's Eliran. So first of all, overall customer growth, we believe it's going to be in the mid to high single digit growth year over year. 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. Overall NDR that always is taking into account as part of guidance, we said it's going to be slightly below 112%.

[Eliran Glazer, CFO at monday.com]

We don't have any revenue from AI that we are currently taking into account in fiscal year twenty twenty five 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 with everything that is going on. We did take a more conservative approach and we want to see how it's going to develop throughout the year.

[Operator]

Your next question is coming from the line of Brent Thiel with Jefferies. Please go ahead.

[Brent Thill, Tech Sector Leader, Software/Internet Research at Jefferies Financial Group]

Thanks. I'm curious if you could just give us a sense of what you saw in April versus March and how the current quarter's trending. Just curious if you looked at enterprise versus SMB, any notable trends that you're seeing? Thanks.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

Hey, Brent, this is Iran. Yes, mean across all segments, enterprise and SMB is pretty consistent throughout Q1 and also going into April. So we don't see any major changes. The enterprise, our fastest growing segment, but pretty much in line with what we saw in Q1. And also we've seen very strong demand in terms of mid market and SMB in Q1 and also going into April.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

Like we mentioned, like the net adds was strong Q1 as we expected. So I would say all in all, it's pretty much in line. We don't see anything special going into April.

[Operator]

Your next question is coming from the line of Brent Bracelin with Piper Sandler. Please go ahead.

[Brent Bracelin, Sr. Research Analyst at Piper Sandler Companies]

Thank you for taking the call here. I wanted to double click into the larger cohort of customers. Another good quarter here of expansion. How much of the momentum here is driven by cross sell where larger enterprises are actually adding new apps versus expansion? Obviously, expansion has been a pretty the biggest driver of the move up market.

[Brent Bracelin, Sr. Research Analyst at Piper Sandler Companies]

Wondering how much of a role cross sell has now as well in aiding that move? Thanks.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

Yes. Hi, Brent. This is Ron. So look, definitely a lot of the expansions are a lot of the enterprise accounts are coming from expansions of accounts that's going to grew within the platform. We do see more and more accounts that close kind of bigger deals from the beginning, but I would say, still the vast majority is account expanding.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

We do see more cross sell definitely on monthly service. It's more meaningful, but also happens with other products. I would say the vast majority of like the major expansions we see today are based on adding significant amount of seats and not like significant cross sells yet. But over time we think this will change obviously.

[Brent Bracelin, Sr. Research Analyst at Piper Sandler Companies]

Helpful color. And then just one follow-up for Ella Leron 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.

[Brent Bracelin, Sr. Research Analyst at Piper Sandler Companies]

It sounds like things continue to plug along here for you. But from a geo perspective, was there any sort of unusual activity by any sort of geography or again was it still pretty balanced for what you've seen so far?

[Eliran Glazer, CFO at monday.com]

Yes. 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 in a different manner.

[Brent Bracelin, Sr. Research Analyst at Piper Sandler Companies]

Fair enough. Thank you.

[Operator]

Your

[Operator]

next question is coming from the line of Jackson Edert with KeyBanc Capital Markets. Please go ahead.

[Jackson Ader, Managing Director at KeyBanc Capital Markets]

Thanks for taking our questions guys. The first one on the on dev, the customer additions saw a really nice bounce back here in the first quarter. And so can we just get an update on where we are in the timing of kind of devs repositioning in the market? Thank you.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

Yes. So hi, Jackson.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

This is Ron. So look, I mean, overall, we're happy with the progress with Monday Dev and definitely we see momentum there and the team is doing a great job and good service 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 are able to expand efficiently. So there's not like major go to market change in Monday Dev and it's more of a seasonality I would say that's skewed a little bit towards Q1. But yes, I mean overall we're happy with the progress.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

The team is launching a lot of new features and capabilities and there's good feedback from customers. So overall we're happy with the progress and the momentum.

[Jackson Ader, Managing Director at KeyBanc Capital Markets]

Okay, great. And then just as a quick follow-up. I mean, if you think, okay, periods of uncertainty and that might manifest itself in the business. I mean, 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?

[Jackson Ader, Managing Director at KeyBanc Capital Markets]

Is it people buying more standard basic instead of pro? What does that look like if it were to happen?

[Roy Mann, Co-Founder, Co-CEO & Director at monday.com]

Hi, it's Ray. So I think what we saw is like in the past is that for larger enterprises it takes more time to buy, more decision making and they might optimize way more scrutinize overseas and see that each one is like really used over time. So like that's where we see things like I can say right now from where we look at things that demand is very healthy and we're able to continue and invest in growth in a very good way and also expand really well. But again that's what happens and sometimes that's what we see in different geos.

[Operator]

Your next question is coming from the line of Michael Burke with Wells Fargo Securities. Please go ahead.

[Michael Berg, Analyst at Wells Fargo]

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. I know there's a lot of focus around hiring enterprise sales reps.

[Michael Berg, Analyst at Wells Fargo]

So maybe you can help us get some better color on the typical timing of ramps for enterprise sales reps and how much of the contribution from this new cohort of sellers is embedded in the guidance. Thanks.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

Yes. Hi, Michael. This is Ron. So yes, I mean, overall, see strong hiring trends in Q4 and into Q1. Just to mention in Q1, we added about 187 new employees and overall, there's almost 2,700 people in the company.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

And we expected to see this going into Q2 and the remainder of the year. Just as a reminder, we expect to grow our headcount this year in about 30% overall. I would say the vast majority of our investment goes into the CRO organizations and mostly around sales, people that are joining the enterprise motion and also R and D. That's a big part of our investment in terms of improving product and our roadmap. And yes, look, we see a lot of opportunity to upsell and expand our existing customer portfolio.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

The hiring pretty much started with the performance that we've seen, the return on investment. So, so far, we're very happy with the results and we continue to invest through the remainder of the year.

[Michael Berg, Analyst at Wells Fargo]

Helpful. Thank you.

[Operator]

Your next question is coming from the line of Tom Blakey with Cantor. Please go ahead.

[Thomas Blakey, Managing Director at Cantor Fitzgerald]

Hey, guys. Thanks for squeezing me in here. Just maybe a couple of quick ones. You mentioned the use of MCP in your shareholder letter. There's been an uptick in that in recent months.

[Thomas Blakey, Managing Director at Cantor Fitzgerald]

I'd just like to know how you're planning on using that and this is going to open up the WorkOS platform for other agents and other applications across other larger platforms? That's the question. And then secondly, as you move an upmarket, any changes in competition that you're seeing maybe in the recent kind of months in 1Q and recent months, any change there that you're seeing any win rate changes that'd be helpful as well? Thanks for taking the question.

[Roy Mann, Co-Founder, Co-CEO & Director at monday.com]

Hi, it's Roy. So regarding the LCP, it's super exciting. It's a new way for LLMs to interact with the platform and I think we're happy we're like one of the first to kind of release it and adopt it. It is going to in general allow anyone to interact better with Monday also to build stuff to work with the platform better. We're always like our approach is being very open also to developers and our customers that can build whatever they want.

[Roy Mann, Co-Founder, Co-CEO & Director at monday.com]

And I think MCP is a great addition into that AI tool set and it's very early days, right? Like you say, it's been picked up, it was invented in the last quarter. So like that's moving really quickly and I think a lot of really good things are coming that way.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

Regarding the second part of your question, we don't see any changes in terms of this is Eran, we don't see any changes in terms of competition or win rates across enterprise and SMB mid market segments. So no changes here.

[Operator]

Your next question is coming from the line of Michael with Bank of America. Please go ahead.

[Matt Bullock, Equity Research Associate at Bank of America Merrill Lynch]

Great. Good morning. This is Matt Bullock on for Mike Funk. My question is on Monday CRM. Looks like a really strong quarter with net adds accelerating.

[Matt Bullock, Equity Research Associate at Bank of America Merrill Lynch]

Maybe if you could just comment on what you're seeing out there in terms of competition, who you're seeing out there most often during RFPs, win rates and then maybe what's resonating most significantly with customers from a functionality standpoint?

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

Yes, definitely. Hi, this is Aaron. So, in terms of CRM, so we don't see any changes I would say in the last quarter in terms of competition. I would say the players we kind of made the most would be Pipedrive, Zoho, SugarCRM, HubSpot from time to time. So it's mostly, I would say, players that focus right now on SMB mid market that would be the most.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

And I think here the power of the platform, the flexibility play a major role in why we win and why customers prefer to purchase Monday over other solutions. But definitely we keep investing into the product and over time we'll sell to hopefully larger and larger enterprise as we add more enterprise functionality.

[Matt Bullock, Equity Research Associate at Bank of America Merrill Lynch]

Got it. Thank you.

[Operator]

Your next question is coming from the line of Raimo Lenschow with Barclays. Please go ahead.

[Raimo Lenschow, Managing Director at Barclays]

Perfect. Thank you. Thanks for squeezing me in. Question on cash flow, had a strong one in Q1. Was there anything special in there that we should be aware of?

[Raimo Lenschow, Managing Director at Barclays]

And how should we think about seasonality for the rest of the year there? Thank you.

[Eliran Glazer, CFO at monday.com]

Sure. Hi, it's Eliran. So with regards to seasonality, Q1 is usually our strongest quarter. In Q2, you have the bonus payments to the sales people, the results of the hiring in Q1, the salary increases and the comp adjustments that we're doing in Q1, some events, they're all kind of in Q2. So Q1 usually at the beginning of the year we see strong billings and collections from customers that acquired our products and solutions at the end of the year.

[Eliran Glazer, CFO at monday.com]

Overall, in accordance with what we gave as part of our full year guidance, this is the level that we are expecting throughout the year. Okay, perfect. Thank you.

[Operator]

Your next question is coming from the line of TJ Heinz with Canaccord. Please go ahead.

[David Hynes Jr., Managing Director, Software Lead Analyst at Canaccord Genuity - Global Capital Markets]

Hey, good morning guys. Eliran, if we strip price out from the NRR calculus, what are the underlying trends look like there? Are they more stable or are they still trending upwards?

[Eliran Glazer, CFO at monday.com]

I think they are more stable pretty much. We said last year that the contribution of price increase would be around 1% to 2%. Now obviously the impact was mostly last year, so I would say more stable by and large.

[David Hynes Jr., Managing Director, Software Lead Analyst at Canaccord Genuity - Global Capital Markets]

Yes, makes sense. Then Ron or Roy, 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? I mean, they've recently made big bets with you guys. Is there some digestion that needs to happen?

[David Hynes Jr., Managing Director, Software Lead Analyst at Canaccord Genuity - Global Capital Markets]

Or does that increased surface area actually make it more likely that they add additional functionality sooner?

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

Hi, DJ, it's Ron. So

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

look,

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

I think when it comes to CRM and dev, think those products are not mature enough in order to be kind of cross sell to large enterprises. We're talking here, let's say over 10,000 seats. But we've seen some maybe surprising momentum with managed service where there's more adoption with the larger enterprises. So here I think there's an opportunity for more cross sell to larger customers. So I think it's still premature for CRM and that, but with managed services more potential, we're starting to see more and more cross sell, not just for SMBs in market, but also for enterprise customers.

[David Hynes Jr., Managing Director, Software Lead Analyst at Canaccord Genuity - Global Capital Markets]

Perfect.

[Roy Mann, Co-Founder, Co-CEO & Director at monday.com]

And if I can add,

[David Hynes Jr., Managing Director, Software Lead Analyst at Canaccord Genuity - Global Capital Markets]

No, please Roy.

[Roy Mann, Co-Founder, Co-CEO & Director at monday.com]

So we do see for some of them that they adopted really well and you know people are using and they have like appetite like you said for growth.

[David Hynes Jr., Managing Director, Software Lead Analyst at Canaccord Genuity - Global Capital Markets]

Excellent. Thank you guys.

[Operator]

Your next question is coming from the line of Connor Murphy with Capital One. Please go ahead.

[Connor Murphy, Analyst at Deutsche Bank]

Hey, good morning, guys. Thank you. I just want to take another crack at the NDR downtick in guidance. In the last quarter, you thought it was stable for the year. This year, it sounds like you're now it's going be below 112%.

[Connor Murphy, Analyst at Deutsche Bank]

Can you just unpack that a little more? It sounds like trends are stable through April, expansion sounds pretty good with larger customers. Is it purely just conservatism because of the macro? Or is there anything else you guys can give us on that?

[Connor Murphy, Analyst at Deutsche Bank]

Thank you.

[Eliran Glazer, CFO at monday.com]

Hey Coram, it's Eliran. Again, it's mostly the recent uncertainty and we did take some conservatism to our MDR expectations because really we don't know how it's going to evolve throughout the year. So I would say this is probably the most significant factor.

[Operator]

Your next question is coming from the line of Scott Berg with Needham. Please go ahead.

[Scott Berg, Managing Director at Needham & Company]

Hi, everyone. Nice quarter. Eliran, I wanted to expand on an answer you gave to, I think it was Brent earlier around the geographic kind of traction, what you've seen 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?

[Scott Berg, Managing Director at Needham & Company]

Or was there an FX component? Trying to understand why that growth in that particular geo was meaningfully different from last quarter? Thank you.

[Eliran Glazer, CFO at monday.com]

Hi, It's Eliran. With regard to Europe, Europe for the past last year we saw some weakness when we called it out versus North America. North America continues to be strong. I think with Europe there is some challenges in the region in some places. But overall, I think we are getting a more clearer picture.

[Eliran Glazer, CFO at monday.com]

We are actually stabilizing still not what we have seen in North America, but overall we are pretty happy with the progress that we are seeing there.

[Scott Berg, Managing Director at Needham & Company]

Understood. Thank you.

[Operator]

Your next question is coming from the line of Taylor McGinnis with UBS. Please go ahead.

[Taylor McGinnis, Equity Research Analyst at UBS Group]

Yes. Hi. Thanks so much for taking my question. So if I look at the guide from 2Q through 4Q, it implies stability and growth in the mid-20s. So Eliran, could you just walk us through the different assumptions and what's supporting your comfort in stability in the mid-20s?

[Taylor McGinnis, Equity Research Analyst at UBS Group]

I think before you talked about price contributing an incremental $40,000,000 and then seeing CRM dev and service scaling to maybe like low teens ARR. So any changes in those inputs or second half growth catalysts that could offset some of the macro headwinds potentially? Thanks.

[Eliran Glazer, CFO at monday.com]

So changed. Our approach and philosophy to guidance has been consistent. As I said, it's a bit more conservative due to the factors that I mentioned earlier, just to recap them really quickly, the overall MDR that is going to be below 112%, the FX impact, potentially customer growth that is going to be mid to high single digits. In the past we said high single digits, but we got to a scale of 245,000 customers at the end of last year and now we're focusing more on expanding rather than growing them. We're still going to increase headcount in significant way, 30%.

[Eliran Glazer, CFO at monday.com]

So I think all of these reasons are taken into account when we think about the guidance, but nothing really changed in the philosophy or the way we are building our guidance.

[Taylor McGinnis, Equity Research Analyst at UBS Group]

Perfect. Thank you.

[Operator]

Your next question is coming from the line of Alan Rakowski with Scotiabank. Please go ahead.

[Allan Verkhovski, Associate Director - Equity Research at Scotiabank]

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 we're in today relative to the base case scenario? Thanks guys.

[Roy Mann, Co-Founder, Co-CEO & Director at monday.com]

I'll take the AI one. So what we see now is that with blocks, AI blocks we've released something that is a very core capability, something that you can do and where we see it adopting the most is where we have champions that are more tech oriented or solution oriented and they are playing with it, they use it. What we are doing now is like understand those use cases and then rolling them out and explain more deeply with templates, with use cases to other customers like what can they use it for and how can they build a solution that really give them value. So it's like any technology, you start with the people who adopt it and then productize it more and more and more and give it in more people hands.

[Eliran Glazer, CFO at monday.com]

Hi, it's Eliran. I'm now going to take the question on the Investor Day model. So we are still in the base case based on current performance. We haven't seen anything guided to a weakened macro. And when we see it, we called it out like we said about our conservative approach to guidance.

[Eliran Glazer, CFO at monday.com]

We do see some improvements to the margins that we have said that we're going to get at the Investor Day, but other than that we continue with the base case scenario.

[Operator]

Your next question is coming from the line of Rob Oliver with Baird. Please go ahead.

[Rob Oliver, Senior Research Analyst at Robert W. Baird & Co]

Great. Thank you guys. Good afternoon. Two part question on go to market. First on the K.

[Rob Oliver, Senior Research Analyst at Robert W. Baird & Co]

C. George hire, just would love to hear from you guys, perhaps Roy, what was it about 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 up market, how if at all the partner strategy needs to evolve? Thank you very much.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

Yes. Hi, Rob. This is Eran. So I would say a combination of a few things. I've mentioned the enterprise experience at the beginning of the call.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

So that definitely was a key part of why we felt like Casey can be a major accelerator to our strategy. Also, think his previous experience was one in large enterprise, but also in smaller companies. And also in his last company, he managed a large scale of customer over 50,000 customers. So, I think he kind of brings the knowledge of on one hand going upmarket and dealing with large enterprises, on the other hand dealing with large amount of organization, its customers on the same funnels, large numbers and kind of more of an analytical approach to sales and go to market. So overall, I think for us it was the perfect fit in terms of on one hand, the complexity of managing a large customer base, while on the other hand scaling to large enterprises and doing more top down selling.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

I would say also on a personal level, we felt a strong connection and felt like it was going be a great opportunity to work together and kind of saw eye to eye on what's important for us in terms of managing the team and scaling the team going forward. So that's kind of the high level and as I said, we're very excited for him to join and be part of the team. In terms of 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 sales presence and partners help us reach enterprise customers and scale our sales operation. They also bring a lot of technical expertise. A lot of our partners are doing professional services to customers to help with anywhere from data migration, integration to help them build solutions on top of Monday.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

And they offer like white glove implementation services for customers. And also we have partners who specialize in specific industries so they can help with a specific knowledge on specific implementation 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, it becomes more significant over time.

[Eran Zinman, Co-Founder & Co-CEO at monday.com]

I think ACC is the same way as we do about partners and potential and we continue to invest in that part of the business going forward.

[Operator]

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Participants

Executives

• Byron Stephen, Vice President of Investor Relations
• Roy Mann, Co-Founder, Co-CEO & Director
• Eran Zinman, Co-Founder & Co-CEO
• Eliran Glazer, CFO

Analysts

• Kash Rangan, Managing Director at Goldman Sachs
• Alex Zukin, Analyst at Wolfe Research LLC
• Pinjalim Bora, Executive Director, Equity Research at JP Morgan
• Arjun Bhatia, Co-Group Head - Technology, Media & Communications at William Blair
• Steven Enders, Equity Research Analyst at Citi
• Brent Thill, Tech Sector Leader, Software/Internet Research at Jefferies Financial Group
• Brent Bracelin, Sr. Research Analyst at Piper Sandler Companies
• Jackson Ader, Managing Director at KeyBanc Capital Markets
• Michael Berg, Analyst at Wells Fargo
• Thomas Blakey, Managing Director at Cantor Fitzgerald
• Matt Bullock, Equity Research Associate at Bank of America Merrill Lynch
• Raimo Lenschow, Managing Director at Barclays
• David Hynes Jr., Managing Director, Software Lead Analyst at Canaccord Genuity - Global Capital Markets
• Connor Murphy, Analyst at Deutsche Bank
• Scott Berg, Managing Director at Needham & Company
• Taylor McGinnis, Equity Research Analyst at UBS Group
• Allan Verkhovski, Associate Director - Equity Research at Scotiabank
• Rob Oliver, Senior Research Analyst at Robert W. Baird & Co