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Monday.com (NASDAQ:MNDY) Surprises With Strong Q2, Provides Optimistic Guidance For Next Quarter


Kayode Omotosho /
2021/08/17 7:56 am EDT
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Project management software maker Monday.com (NASDAQ:MNDY) reported strong growth in the Q2 FY2021 earnings announcement, with revenue up 93.6% year on year to $70.6 million. Monday.com made a GAAP loss of $32.4 million, down on its loss of $28.4 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) Q2 FY2021 Highlights:

  • Revenue: $70.6 million vs analyst estimates of $62.1 million (13.6% beat)
  • EPS (non-GAAP): -$0.26 vs analyst estimates of -$1 ($0.74 beat)
  • Revenue guidance for Q3 2021 is $74.5 million at the midpoint, above analyst estimates of $65.9 million
  • Free cash flow was negative -$1.48 million, compared to negative free cash flow of -$5.27 million in previous quarter
  • Net Revenue Retention Rate: 125%, up from 107% previous quarter
  • Gross Margin (GAAP): 87.1%, in line with previous quarter

“We delivered strong results in our first quarter as a public company, as strong execution and expanding adoption of monday.com Work OS drove total revenue growth of 94%. We are pleased with the momentum in our business that demonstrates continued high growth at scale,” 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 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 $36.4 million, to $70.6 million.

Monday.com Total Revenue

This was another standout quarter with the revenue up a splendid 93.6% year on year. On top of that, revenue increased $11.6 million quarter on quarter, a very strong improvement on the $8.83 million increase in Q1 2021, and a sign of re-acceleration of growth, which is very nice to see indeed.

Analysts covering the company are expecting the revenues to grow 40.7% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

There are others doing even better. 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 125% in Q2. That means even if they didn't win any new customers, Monday.com would have grown its revenue 25% year on year. Significantly up from the last quarter, this a good retention rate and a proof that Monday.com's customers are satisfied with their software and are getting more value from it over time. That is good to see.

Key Takeaways from Monday.com's Q2 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 market capitalisation of $10.8 billion and more than $875.3 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 was a fantastic quarter that should have shareholders cheering. The company is flat on the results and currently trades at $246 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 full report which you can read here, it's free.

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