monday.com (NASDAQ:MNDY) Delivers Impressive Q4 But Stock Drops 15.1%

Jabin Bastian /
2022/02/23 7:14 am EST
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Project management software maker Monday.com (NASDAQ:MNDY) reported Q4 FY2021 results beating Wall St's expectations, with revenue up 90.5% year on year to $95.5 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $101 million at the midpoint, 7.34% above what analysts were expecting. monday.com made a GAAP loss of $32.6 million, improving on its loss of $62.8 million, in the same quarter last year.

Is now the time to buy monday.com? Access our full analysis of the earnings results here, it's free.

monday.com (MNDY) Q4 FY2021 Highlights:

  • Revenue: $95.5 million vs analyst estimates of $87.7 million (8.82% beat)
  • EPS (non-GAAP): -$0.26 vs analyst estimates of -$0.52
  • Revenue guidance for Q1 2022 is $101 million at the midpoint, above analyst estimates of $94 million
  • Management's revenue guidance for upcoming financial year 2022 is $472.5 million at the midpoint, beating analyst estimates by 6.64% and predicting 53.3% growth (vs 90.9% in FY2021)
  • Free cash flow of $10.1 million, up from $180 thousand in previous quarter
  • Net Revenue Retention Rate: 135%, up from 130% previous quarter
  • Customers: 793 customers paying more than $50,000 annually
  • Gross Margin (GAAP): 87.6%, up from 86.6% same quarter last year

“We had another great quarter at monday.com and finished fiscal year 2021 exceptionally strong. Compared to last year, we delivered 91% revenue growth and 200% enterprise customer growth, while generating record free cash flow in Q4,” said monday.com founder and co-CEO, Roy Mann.

Founded in Israel in 2014, and named after the dreaded first day of the work week, Monday.com (NASDAQ:MNDY) makes software as a service platforms that helps teams plan and track work efficiently.

The future of work requires teams to collaborate across departments and remote offices. Project management software is both driving this change and benefiting from it. While the trend of collaborative work management has been strong for a while, the Covid pandemic has definitively accelerated the demand for tools that allow work to be done remotely.

Sales Growth

As you can see below, monday.com's revenue growth has been incredible over the last year, growing from quarterly revenue of $50.1 million, to $95.5 million.

monday.com Total Revenue

This was another standout quarter with the revenue up a splendid 90.5% year on year. Quarter on quarter the revenue increased by $12.5 million in Q4, which was roughly in line with the Q3 2021 increase. This steady quarter-on-quarter growth shows the company is able to maintain a strong growth trajectory.

Guidance for the next quarter indicates monday.com is expecting revenue to grow 71.2% year on year to $101 million, slowing down from the 84.6% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $472.5 million at the midpoint, growing 53.3% compared to 90.9% increase in FY2021.

There are others doing even better than monday.com. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 150% since the IPO last December. You can find it on our platform for free.

Product Success

One of the best things about software as a service businesses (and a reason why they trade at such high multiples) is that customers tend to spend more with the company over time.

monday.com Net Revenue Retention Rate

monday.com's net revenue retention rate, an important measure of how much customers from a year ago were spending at the end of the quarter, was at 135% in Q4. That means even if they didn't win any new customers, monday.com would have grown its revenue 35% year on year. Significantly up from the last quarter, this is a great retention rate and a clear proof of a great product. We can see that monday.com's customers are very satisfied with their software and are using it more and more over time.

Key Takeaways from monday.com's Q4 Results

With a market capitalization of $7.83 billion monday.com is among smaller companies, but its more than $886.8 million in cash and positive free cash flow over the last twelve months give us confidence that monday.com has the resources it needs to pursue a high growth business strategy.

We were impressed by the very optimistic revenue guidance monday.com provided for the next quarter. And we were also excited to see the really strong revenue growth. On the other hand, the revenue guidance for next year indicates a significant slowdown. Overall, we think this was still a really good quarter, that should leave shareholders feeling very positive. But the market was likely expecting more and the company is down 15.1% on the results and currently trades at $150.4 per share.

monday.com may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.