Monday.com (NASDAQ:MNDY) Reports Bullish Q3, Provides Optimistic Guidance For Next Quarter

Adam Hejl /
2021/11/10 7:15 am EST
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Project management software maker Monday.com (NASDAQ:MNDY) reported strong growth in the Q3 FY2021 earnings announcement, with revenue up 94.9% year on year to $83 million. Guidance for next quarter's revenue was surprisingly good, being $87.5 million at the midpoint, 13.4% above what analysts were expecting. Monday.com made a GAAP loss of $28.8 million, improving on its loss of $41 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) Q3 FY2021 Highlights:

  • Revenue: $83 million vs analyst estimates of $74.6 million (11.1% beat)
  • EPS (non-GAAP): -$0.26 vs analyst estimates of -$0.60
  • Revenue guidance for Q4 2021 is $87.5 million at the midpoint, above analyst estimates of $77.1 million
  • Free cash flow of $180 thousand, up from negative free cash flow of $1.48 million in previous quarter
  • Net Revenue Retention Rate: 130%, up from 125% previous quarter
  • Customers: 613 customers paying more than $50,000 annually
  • Gross Margin (GAAP): 87.6%, up from 85.1% same quarter last year

“We achieved another strong quarter of top-line growth driven by the continued rapid adoption of our Work OS by new customers along with expansion within our existing customer base,” 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. While the trend of collaborative work management has been strong for a while, the Covid pandemic has definitely 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 $42.5 million, to $83 million.

Monday.com Total Revenue

This was another standout quarter with the revenue up a splendid 94.9% year on year. On top of that, revenue increased $12.4 million quarter on quarter, a solid improvement on the $11.6 million increase in Q2 2021, and happily, a slight re-acceleration of growth.

Analysts covering the company are expecting the revenues to grow 41.6% over the next twelve months, although estimates are likely to change post earnings.

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 400% since the IPO in 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 130% in Q3. That means even if they didn't win any new customers, Monday.com would have grown its revenue 30% 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 Q3 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on Monday.com’s balance sheet, but we note that with a market capitalization of $19.6 billion and more than $876.2 million in cash, the company has the capacity to continue to prioritise growth over profitability.

We were impressed by how strongly Monday.com outperformed analysts’ revenue expectations this quarter. And we were also excited to see the really strong revenue growth. Zooming out, we think this impressive quarter should have shareholders feeling very positive. But the market was likely expecting more and the company is down 2.35% on the results and currently trades at $435 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.