monday.com(MNDY) - 2024 Q3 - Quarterly Report

Third Quarter Fiscal Year 2024 Overview monday.com's Q3 FY2024 saw strong revenue growth, ARR exceeding $1 billion, and improved operational and financial metrics Executive Summary monday.com achieved strong Q3 FY2024 results with 33% revenue growth, ARR over $1 billion, and 111% net dollar retention - Third quarter revenue reached $251 million, a 33% year-over-year increase[1][6] - Annual Recurring Revenue (ARR) surpassed $1 billion for the first time[1][6] - Net dollar retention rate increased to 111%[1][6] - The second largest customer's seat count doubled to 60,000[1][6] Management Commentary Management highlighted product and platform enhancements, celebrating the ARR milestone, and noted robust Q3 growth with improved retention - Management emphasized deepening product capabilities and strengthening the platform to support customers of all sizes[2] - Achieving $1 billion in ARR represents a significant milestone in the company's journey[2] - The CFO expressed satisfaction with Q3's robust revenue growth, profitability, and improved retention trends, confident in continued strong growth for FY2025[2] Key Financial and Business Highlights monday.com's Q3 FY2024 saw 33% revenue growth, significant non-GAAP operating income and free cash flow increases, and strong customer acquisition Third Quarter Fiscal Year 2024 Financial and Business Highlights | Metric | Q3 2024 | Q3 2023 | YoY Change | | :-------------------------------- | :---------- | :---------- | :--------- | | Revenue ($ million) | $251.0 | $189.19 | +33% | | GAAP Operating Loss ($ million) | $(27.4) | $(2.5) | - | | GAAP Operating Margin (%) | -11% | -1% | - | | Non-GAAP Operating Income ($ million) | $32.2 | $24.1 | +33.6% | | Non-GAAP Operating Margin (%) | 13% | 13% | 0% | | GAAP Basic and Diluted Net Loss Per Share ($) | $(0.24) | $0.15 | - | | Non-GAAP Basic and Diluted Net Income Per Share ($) | $0.90 | $0.68 | +32.4% | | Net Cash Provided by Operating Activities ($ million) | $86.6 | $66.6 | +30% | | Free Cash Flow ($ million) | $82.4 | $64.9 | +27% | | Net Dollar Retention Rate (%) | 111% | - | - | | Net Dollar Retention Rate (10+ Users) (%) | 114% | - | - | | Net Dollar Retention Rate (ARR > $50K) (%) | 115% | - | - | | Net Dollar Retention Rate (ARR > $100K) (%) | 115% | - | - | | Paying Customers (10+ Users) | 58,760 | 52,015 | +13% | | Paying Customers (ARR > $50K) | 2,907 | 2,077 | +40% | | Paying Customers (ARR > $100K) | 1,080 | 749 | +44% | | Annual Recurring Revenue (ARR) | Exceeded $1 billion | - | - | | Second Largest Customer Seat Count | 60,000 | 25,000 | +140% | Leadership Changes monday.com announced key leadership transitions, including a new COO appointment and the CRO's upcoming departure Adi Dar Appointed as Chief Operating Officer monday.com appointed Adi Dar as COO, leveraging his 20+ years of experience in driving sustainable growth at leading global tech companies - Adi Dar was appointed Chief Operating Officer, bringing over 20 years of experience driving sustainable growth at leading global technology companies[5] - He previously served as CEO of ELOP, an electro-optics subsidiary of Elbit Systems, and founded Cyberbit, a cybersecurity company[7] - Management believes his expertise will enhance the platform and expand global reach[8] Yoni Osherov to Step Down as Chief Revenue Officer monday.com's Chief Revenue Officer, Yoni Osherov, will step down at the end of December 2024, after significantly contributing to the company's growth - Yoni Osherov will step down as Chief Revenue Officer at the end of December 2024[8] - He was a key driver of company growth, helping ARR increase from $10 million to over $1 billion[8] - He will continue as an advisor to the CEO until a new CRO is appointed[9] Financial Outlook monday.com provided Q4 and full-year FY2024 financial guidance, projecting continued revenue growth and strong profitability Fourth Quarter Fiscal Year 2024 Guidance monday.com anticipates Q4 FY2024 total revenue between $260 million and $262 million, with non-GAAP operating income of $29 million to $31 million Fourth Quarter Fiscal Year 2024 Financial Guidance | Metric | Guidance Range | YoY Growth | | :-------------------- | :-------------------- | :--------- | | Total Revenue ($ million) | $260 - $262 | 28% - 29% | | Non-GAAP Operating Income ($ million) | $29 - $31 | - | | Non-GAAP Operating Margin (%) | 11% - 12% | - | | Free Cash Flow ($ million) | $63 - $66 | - | | Free Cash Flow Margin (%) | 24% - 25% | - | Full Year Fiscal Year 2024 Guidance The company expects full-year FY2024 total revenue of $964 million to $966 million, with non-GAAP operating income of $121 million to $123 million Full Year Fiscal Year 2024 Financial Guidance | Metric | Guidance Range | YoY Growth | | :-------------------- | :-------------------- | :--------- | | Total Revenue ($ million) | $964 - $966 | Approx. 32% | | Non-GAAP Operating Income ($ million) | $121 - $123 | - | | Non-GAAP Operating Margin (%) | 12% - 13% | - | | Free Cash Flow ($ million) | $286 - $289 | - | | Free Cash Flow Margin (%) | Approx. 30% | - | Non-GAAP Financial Measures monday.com utilizes non-GAAP financial measures to provide management and investors with useful insights into financial and business trends Explanation and Rationale monday.com uses non-GAAP financial measures to offer useful insights into financial and business trends for management and investors - Non-GAAP financial measures aim to provide useful information to management and investors regarding financial and business trends[11] - Management uses these metrics for performance comparison, trend analysis, and budgeting and planning[11] - Non-GAAP metrics help investors assess ongoing operating performance and trends, and compare with other software companies[11] - Certain non-GAAP financial measures exclude share-based compensation expense and charitable contributions[10][29] Limitations Non-GAAP financial measures are supplementary, not substitutes for GAAP, as they exclude significant GAAP-required expenses and involve management judgment - Non-GAAP financial measures should not be considered in isolation or as a substitute for GAAP financial measures[13] - They exclude significant expenses and income required to be recorded under GAAP, and their determination involves management judgment[13] - Management cannot reasonably predict GAAP operating income (loss) and net cash provided by operating activities on a forward-looking basis without unreasonable effort[14] Definitions of Business Key Performance Indicators This section defines key business performance indicators, including Net Dollar Retention Rate and Annual Recurring Revenue (ARR) Net Dollar Retention Rate Net dollar retention rate compares a cohort's ARR at the end of a period to their ARR 12 months prior, including upsells, downsells, and churn - Net dollar retention rate is calculated by dividing the ARR from customers at the end of the current period by the ARR from the same cohort of customers 12 months prior[15] - The current period's ARR calculation includes any upsells, downsells, and churn[15] - For the trailing 12-month calculation, a weighted average of the net dollar retention rates from the most recent four quarters is used[15] Annual Recurring Revenue (ARR) Annual Recurring Revenue (ARR) is defined as the annualized value of customer subscription plans at the measurement date, assuming renewals at existing terms - ARR is defined as the annualized value of customer subscription plans at the measurement date[16] - It assumes any contracts expiring within the next 12 months are renewed at their existing terms[16] Forward-Looking Statements This press release contains forward-looking statements regarding financial outlook and market positioning, subject to various risks and uncertainties Forward-Looking Statements This press release contains forward-looking statements based on current expectations, estimates, and management's beliefs, subject to various risks - Forward-looking statements are based on current expectations, estimates, forecasts, and management's beliefs and assumptions[17] - Actual results may differ materially due to various factors, including limited operating history, ability to manage scope and complexity of business, and foreign currency fluctuations[17] - monday.com assumes no intention or obligation to update or revise any forward-looking statements[18] Company Information This section provides an overview of monday.com, details on its earnings webcast, and contact information for investor and media relations About monday.com monday.com offers a low-code/no-code Work OS platform enabling organizations to easily build work management tools and software applications - monday.com Work OS is a low-code/no-code platform enabling organizations to easily build work management tools and software applications[22] - The platform is currently used by over 225,000 customers across more than 200 industries and 200 countries[22] - monday.com maintains offices in multiple global cities, including Tel Aviv, New York, London, and Tokyo[22] Earnings Webcast and Investor Presentation monday.com held a public webcast on November 11, 2024, to discuss Q3 2024 results and financial outlook, with investor materials available online - The company held a public webcast on November 11, 2024, at 8:30 a.m. Eastern Time[19] - The investor presentation is available at http://ir.monday.com[20](index=20&type=chunk) Contacts Contact information for monday.com's investor relations and media relations is provided - Investor Relations contact: Byron Stephen (byron@monday.com)[24] - Media Relations contact: Julie Case (julieca@monday.com)[24] Condensed Consolidated Financial Statements (GAAP) This section presents monday.com's GAAP condensed consolidated financial statements, including statements of operations, balance sheets, and cash flows Statements of Operations In Q3 2024, monday.com's GAAP revenue grew 33% to $251 million, but GAAP operating loss expanded, resulting in a net loss compared to net income last year Condensed Consolidated Statements of Operations (Q3 2024 vs Q3 2023) | Metric ($ thousand) | Q3 2024 | Q3 2023 | YoY Change | | :-------------------- | :-------- | :-------- | :--------- | | Revenue | $251,000 | $189,190 | +33% | | Cost of Revenue | $25,972 | $21,707 | +19.7% | | Gross Profit | $225,028 | $167,483 | +34.3% | | Total Operating Expenses | $252,430 | $170,004 | +48.5% | | Operating Loss | $(27,402) | $(2,521) | - | | Net Financial Income | $14,942 | $11,555 | +29.3% | | Net Income (Loss) | $(12,026) | $7,488 | - | | Basic Net Income (Loss) Per Share | $(0.24) | $0.15 | - | Balance Sheets As of September 30, 2024, monday.com's total assets increased to $1,585.11 million, driven by higher cash and cash equivalents, with corresponding increases in liabilities and equity Condensed Consolidated Balance Sheets (September 30, 2024 vs December 31, 2023) | Metric ($ thousand) | September 30, 2024 | December 31, 2023 | Change | | :-------------------- | :----------- | :----------- | :----- | | Cash and Cash Equivalents | $1,337,155 | $1,116,128 | +$221,027 | | Total Current Assets | $1,455,354 | $1,173,142 | +$282,212 | | Total Assets | $1,585,110 | $1,275,656 | +$309,454 | | Total Current Liabilities | $546,066 | $416,013 | +$130,053 | | Total Liabilities | $613,993 | $462,148 | +$151,845 | | Total Stockholders' Equity | $971,117 | $813,508 | +$157,609 | Statements of Cash Flows In Q3 2024, net cash from operating activities increased to $86.605 million, while net cash used in investing activities significantly rose due to marketable securities purchases Condensed Consolidated Statements of Cash Flows (Q3 2024 vs Q3 2023) | Metric ($ thousand) | Q3 2024 | Q3 2023 | YoY Change | | :-------------------------------- | :-------- | :-------- | :--------- | | Net Cash Provided by Operating Activities | $86,605 | $66,579 | +$20,026 | | Net Cash Used in Investing Activities | $(53,763) | $(1,689) | - | | Net Cash Provided by Financing Activities | $14,071 | $3 | +$14,068 | | Increase in Cash and Cash Equivalents | $46,913 | $64,893 | - | | Cash and Cash Equivalents at End of Period | $1,337,155 | $1,054,270 | +$282,885 | Reconciliation of GAAP to Non-GAAP Financial Information This section provides reconciliations of GAAP to non-GAAP financial measures for gross profit, operating expenses, operating income, net income, and free cash flow Gross Profit and Gross Margin Reconciliation In Q3 2024, non-GAAP gross profit was $226.91 million with a 90% non-GAAP gross margin, slightly higher than GAAP due to the exclusion of share-based compensation Gross Profit and Gross Margin Reconciliation (Q3 2024 vs Q3 2023) | Metric | Q3 2024 | Q3 2023 | | :-------------------- | :-------- | :-------- | | GAAP Gross Profit ($ thousand) | $225,028 | $167,483 | | Share-based Compensation Expense ($ thousand) | $1,881 | $1,383 | | Non-GAAP Gross Profit ($ thousand) | $226,909 | $168,866 | | GAAP Gross Margin (%) | 90% | 89% | | Non-GAAP Gross Margin (%) | 90% | 89% | Operating Expenses Reconciliation Non-GAAP operating expenses were lower than GAAP across R&D, S&M, and G&A, primarily due to the exclusion of share-based compensation and charitable contributions Operating Expenses Reconciliation (Q3 2024 vs Q3 2023) | Metric ($ thousand) | GAAP Q3 2024 | Non-GAAP Q3 2024 | GAAP Q3 2023 | Non-GAAP Q3 2023 | | :-------------------- | :----------- | :--------------- | :----------- | :--------------- | | Research and Development | $56,509 | $42,973 | $38,433 | $28,051 | | Sales and Marketing | $140,284 | $130,339 | $108,360 | $101,504 | | General and Administrative | $55,637 | $21,417 | $23,211 | $15,234 | | Share-based Compensation Expense (R&D) | $(13,536) | - | $(10,382) | - | | Share-based Compensation Expense (S&M) | $(9,945) | - | $(6,856) | - | | Share-based Compensation Expense (G&A) | $(10,012) | - | $(7,977) | - | | Charitable Contributions to Foundation (G&A) | $(24,208) | - | — | - | Operating Income (Loss) Reconciliation In Q3 2024, monday.com's GAAP operating loss of $27.402 million converted to a non-GAAP operating income of $32.18 million after adjustments Operating Income (Loss) Reconciliation (Q3 2024 vs Q3 2023) | Metric ($ thousand) | Q3 2024 | Q3 2023 | | :-------------------- | :-------- | :-------- | | GAAP Operating Loss | $(27,402) | $(2,521) | | Share-based Compensation Expense | $35,374 | $26,598 | | Charitable Contributions to Foundation | $24,208 | — | | Non-GAAP Operating Income | $32,180 | $24,077 | | GAAP Operating Margin (%) | (11%) | (1%) | | Non-GAAP Operating Margin (%) | 13% | 13% | Net Income (Loss) and EPS Reconciliation Q3 2024 GAAP net loss was $12.026 million, or $0.24 per basic share, which adjusted to a non-GAAP net income of $44.969 million, or $0.90 per basic share Net Income (Loss) and EPS Reconciliation (Q3 2024 vs Q3 2023) | Metric | Q3 2024 | Q3 2023 | | :------------------------------------------ | :-------- | :-------- | | GAAP Net Income (Loss) ($ thousand) | $(12,026) | $7,488 | | Share-based Compensation Expense ($ thousand) | $35,374 | $26,598 | | Charitable Contributions to Foundation ($ thousand) | $24,208 | — | | Tax Benefit Related to Share-based Compensation ($ thousand) | $(2,587) | $(1,075) | | Non-GAAP Net Income ($ thousand) | $44,969 | $33,011 | | GAAP Basic Net Income (Loss) Per Share ($) | $(0.24) | $0.15 | | Non-GAAP Basic Net Income Per Share ($) | $0.90 | $0.68 | | GAAP Diluted Net Income (Loss) Per Share ($) | $(0.24) | $0.15 | | Non-GAAP Diluted Net Income Per Share ($) | $0.85 | $0.64 | Free Cash Flow Reconciliation In Q3 2024, free cash flow increased to $82.412 million, up from $64.89 million in Q3 2023, with a 33% free cash flow margin Free Cash Flow Reconciliation (Q3 2024 vs Q3 2023) | Metric ($ thousand) | Q3 2024 | Q3 2023 | | :-------------------------------- | :-------- | :-------- | | Net Cash Provided by Operating Activities | $86,605 | $66,579 | | Purchases of Property and Equipment | $(3,800) | $(779) | | Capitalized Software Development Costs | $(393) | $(910) | | Free Cash Flow | $82,412 | $64,890 | | Free Cash Flow Margin (%) | 33% | 34% |