monday.com Ltd. (MNDY) Earnings Call Transcript & Summary

Yes, it's a good question. I think like we are in a time in the company that our penetration within our existing customers is small and every incremental productivity gain we give that is so dramatic as AI will just increase seats and payments on those like values. I don't think AI is going to be embedded in the platform without like -- on the same seat cost. It has so much value, customers will be happy to pay more for it. So I think conceptually, like pricing and revenue wise, I think it will increase. I also think there is a good chance we'll get more seats out of it, even if the seats in general decrease. But yes, that's our perspective.

Yes. Yes. Got it. Okay. Pivoting a little bit, let's talk about macro, that's another topic of discussion nowadays. But you recently -- where there was last week, I guess, reported really strong results. I mean how would you kind of sense the business environment at this point? Just talking to customers, what are you seeing?

What we see like -- I'll refer to the results, right? Like what we see is like on the downside, just less upgrades, like everything else is very stable. So we don't see the -- we are coming down in the NDR from historical highs of last year where we had a lot of growth within enterprises and large customers who also like saw their growth in seat count. And now that, that's gone -- you see them they are coming down and they're not upgrading like they used to. But in terms of stability and all that stuff, it's very stable, like retention-wise, of the ARR. On the other hand, we see like a very healthy top of funnel demand, like the customers we get that sign up for the platform are -- have like stronger intention because the people who are looking now for solutions obviously want them more than in other economic situations and we get more market share out of those customers because -- mainly because of our ability to track really well where we put each dollar on performance marketing using our internal BI tool called BigBrain, so we know really how to measure every dollar we spend, how much we get back on every campaign. So it enables us to kind of keep at the same pace and even increase where others are drastically decreased compared to what they did last year. And even if they, like, it will stabilize and maybe their spending will go back up, we will still get more market share than we got last year when the spending was like completely out of return conditions. So the top of funnel is really healthy.

That's always good to know, top of funnel, healthy. So I wanted to ask maybe, Daniel, on the mondayDB upgrade, right? We talked to investors, I actually got some questions from investors saying, why are they offering a database, which is not what mondayDB is. But talk about what is the aspiration around mondayDB upgrade, it seems like you're kind of ahead of expectations. Now you'd be finishing it by Q2, but it's 1.0, you'll have more versions of that. I understand that. But yes, help us understand what does that enable you? And could it be actually a tailwind to the business looking forward?

Yes. So first let's just say, mondayDB is not a product that we are going to sell, rather it's our new data infrastructure. And I think that mondayDB in an essence, monday architecture is quite unique, and it's what Roy talked about, about being so flexible. Basically, it means that we are in a scheme-less architecture where everyone can build their own products and in order to support such a unique architecture with great performance and scale, it's quite a challenge engineering-wise. And mondayDB is here for that. So mondayDB is actually our solution of providing better performance, better scale for this unique value that we are giving of the flexibility. And it's indeed comprised of multiple versions. The first version is around faster boards. We are happy to share that we already rolled out it more over than 50% of our accounts ahead of plans. And next versions that are coming this year would be version 2 to be around faster dashboards and also additional scale around the end of the year and beginning of next year. And in terms of the value, I think that mondayDB would benefit everything that monday has to offer. I think that from one hand, people can suddenly build much more elaborated solutions. It means new use cases. It means more growth of the existing customer base, but also it's tailing for our new products as well. So think for instance, about monday sales CRM, having the ability to capture more leads, for instance, is very meaningful for our ability to continue to push up. So I think that the right way to think about mondayDB is that it's actually something that will drive everything that we do forward. And for us, it's a new ballpark in terms of what we can achieve, our motion going up market, larger deployments. So we're really excited about that.

Do you have anything to add around growth, tailwind? Okay. Just checking. One thing I wanted to ask you is I heard that the prior to mondayDB, there was a limit of about 30,000 rows in board, mondayDB expands that to 100,000, apparently the version 1 and with the aspiration to go to 1 million rows. Is that how we should think about kind of the progression?

So first, we have our current limits. At the beginning, we want mondayDB, the faster boards and dashboards to increase the performance within the existing limits. And later this year, we do want to raise limits. And I think that limits, many times we talk about the number of records. But I think that in monday, what we enable customers to do if the board is super unique in terms of what you can do with each one of these work records, let's say, it's not only the data that you have there, it's the automation, the permissions, it's the connectivity between different boards. Is the visualization and so many more things. So although we are not in V1 raising our limits, we really feel it actually provides a lot of room to go. And later this year, we're also going to raise the limits and also next year. So it's an ongoing effort.

I hope that over time, we'll always say we're like increasing the limits. And like Daniel said, it's like kind of magic. It's not just like a number of rows. It's like the things you can do with them and all the stuff customers can build on top of them that makes us very unique and powerful. So -- and over time, we're going to increase the limits all the time.

Got it. I want to talk about sales CRM, which that product seems like it's on fire. You kind of doubled the number of customers, I believe, sequentially versus last quarter, Q4 to Q1 -- Q1 to Q4. What is driving that solid traction in that product? And who are you seeing in the market around that product?

Yes. So One important thing is that we're showing the number of its accounts and not customer is a little bit different than other metrics, with your customers. And yes, it's scaling really fast compared to like how monday scale in the beginning. It's like 5x as fast as monday itself scaled when we started. That's why we're excited about it. For us, the most Important thing to emphasize is that the CRM is a thin layer of software built on top of the platform itself. And what we used to see when people signed up for project management, they said like, oh, this is the great project management tool. I can build whatever I want. I can do this and connect it and have other stuff connected to it and it's like super powerful project management. Now they're saying the same thing about the CRM. But what they're saying essentially is that like the platform is what makes it so great. And when we look at the competitive landscape, what we see is 2 things. One is that CRM is a great market for digitization. A lot of like companies, when they go digital, it starts there, like managing their customers' relationship. And so we see it as a greenfield as well and a lot of scale on that front. Another big part of the scale is companies maturing from other CRMs. And I don't know if you've got a chance to see the G2 Cloud CRM competitive landscape, it's like tiled with like 100 CRMs. And we're like on the top 4 -- top 3 on the top right, and we got there like super fast like within 6 months. And the reason is a lot of companies maturing from other, let's say, rigid -- more rigid CRMs that are built in a certain way, and you can't really change it and do whatever you want with them, when they graduate, they now have us as an alternative that is like very simple, easy to adopt. And those are great customers. They know what they want. They're maturing, they're doing that because they're successful. So that's like very -- that's exciting in this space, specifically.

Yes. I want to see a few -- if anybody has questions as well. I think we have a mic at the back. So if anybody has questions, please raise your hand and we'll get the mic. Don't see any as of now. So continuing on Work OS. You have started -- you have not opened it up to existing customers. I think last quarter, you said you have opened it up to selected number of customers. Help us understand kind of the opportunity in that existing base. You are pricing some of the Work OS products, I think, a little bit higher than the base product. How to think of the opportunity in the existing base and Eliran, maybe you can talk about how can it impact the net retention at some point?

Cool. So we still will refer to the CRM as the Work OS product built on top of the platform and the Work OS platform. So essentially, we are just enable existing customers to start rolling it out. The reason we've done it now is that a lot of our customers have really complex workflows and we wanted the CRM to grow like a start-up to start like small for us to learn for the organization itself to also learn enough to help those customers. When you go after more, let's say, horizontal solution that is specific like CRM, the customers expect you to understand what CRM is. And we need to train the sales team and learn ourselves. And so like each time we mature, it takes us -- it will take us a while to reach that level of maturity for the larger organization. So we're very conscious about that. And I'm excited to see how we're going to roll it out to existing customers. There is a very strong demand for them that we will do it. And now that we've started, it will be exciting to see that.

Maybe just to add that we were transparent about the fact that NRR for the end of the day, we see moderate pressure. It's going to be 110% for all customers and 115% to 120% for the larger accounts. The combination of what Roy just said earlier about tailwind of mondayDB together with the products that we are introducing to the market, CRM and dev is now is in beta, I believe that once we get traction this year with existing customers going into next year, potentially there's going to be opportunities for upsell and cross-sell. And this will positively, I believe, will impact the NRR. I don't want to tell you that it will be immediate, but I think, obviously, if we are going to have expansion within existing customer base, then we're going to see stabilization and potentially uptick with NRR. Yet to be seen, but this is the direction.

It's a stabilization around 110% and then maybe there's an uptick?

Yes.

Okay. Understood. And then you have also launched Dev developers. I think that's out of beta, if I remember that correctly. Talk about that, what is that going up seems? Is it going after something like a Jira or Atlassian products? Like talk about that. And what is kind of the traction or what are you hearing from customers? I know it's very early, but...

Yes. So first, it's very early for monday dev, but this quarter, we announced it's out of beta. For us, it symbolizes that we have like the initial product market fit and enough value to say that we feel that it's a good solution for different teams that does software development. I think that indeed, in terms of the competition, it's mainly Jira and what we get is an initial feedback, which we found very encouraging is that, first of all, people really enjoy using the product. I think that this is something that is really important for us across all of our products. But I think that specifically for Dev, it's something that could be very meaningful. And another important thing is that I think that also in terms of software development, the world has progressed. And now it's not about just engineers. It's also about the product teams, and it's also about the designers and the data practitioners and so on. And one of the best feedback that we are getting is that with monday Dev, they can connect the work between everyone that are working on the projects, including also the client-facing teams. So support, for instance, getting feedback from tickets and it can be with the sales and the marketing. So it's definitely 2 main values that we see repeating in customers' feedback.

Got it. Any questions? No, I don't see one. So Eliran, maybe we can end with you since we have 1 minute. You had a great quarter and you raised revenue which not many companies are doing at this point in time. So talk about what gives you that confidence? And maybe touch upon the profitability side as well. How should we see that beyond kind of fiscal '23?

Sure. So we went public 2 years ago, 8 quarters in a row that we exceed expectations and everything that Roy and Daniel spoke about, with everything -- and you said you spoke with someone who actually said he's going to maybe replace Zendesk with monday. So I think what companies can do in monday is limitless. And then we said sometimes it's hard for people to understand, but we see that the stickiness, the retention, the profile in a challenging macro environment, we're doing well. And it provides us with comfort and confidence that we will continue to see upside across our business. And that is why we feel comfortable with everything that we are doing to raise the numbers, to raise guidance and to be more optimistic about the future of monday. What was the second question?

Profitability.

So profitability, we said that we're going to be originally by 25%. We are ahead of schedule, but I want to -- it's just the fact that growth is still the #1 priority, equally focused on improving margin and showing that we not only gaining profitability, but we grow at scale. But if we are going to see opportunity out there in the market, we are going to pursue it. I think this is the time for us to take advantage and double down our investment thinking not only about 2023, but also about 2024, 2025. When our competitors pulled back, this is the time for us to see the returns, to put on the -- to put the leg on the gas, and this is what we're going to do and profitability will come with it.

Okay. With that, thank you so much for the time, and thanks for the [indiscernible].

Thank you.