Monday.com (NASDAQ:MNDY) Exceeds Q1 Expectations, Stock Jumps 12%

Jabin Bastian /
2023/05/15 7:07 am EDT
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Project management software maker Monday.com (NASDAQ:MNDY) announced better-than-expected results in the Q1 FY2023 quarter, with revenue up 49.5% year on year to $162.3 million. Guidance for next quarter's revenue was $169 million at the midpoint, 2.25% above the average of analyst estimates. monday.com made a GAAP loss of $14.7 million, improving on its loss of $66.7 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) Q1 FY2023 Highlights:

  • Revenue: $162.3 million vs analyst estimates of $155.3 million (4.49% beat)
  • EPS (non-GAAP): $0.14 vs analyst estimates of -$0.29 ($0.43 beat)
  • Revenue guidance for Q2 2023 is $169 million at the midpoint, above analyst estimates of $165.3 million
  • The company lifted revenue guidance for the full year, from $690.5 million to $704 million at the midpoint, a 1.96% increase
  • Free cash flow of $38.7 million, up 30.4% from previous quarter
  • Net Revenue Retention Rate: 125%, down from 130% previous quarter
  • Customers: 1,683 customers paying more than $50,000 annually
  • Gross Margin (GAAP): 89.5%, up from 86.5% same quarter last year

“The monday.com team is off to a strong start in 2023, with our results reflecting increasing customer demand for our Work OS platform and product suite, as well as our ongoing commitment to improving efficiency and profitability,” 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 two years, growing from quarterly revenue of $59 million in Q1 FY2021, to $162.3 million.

monday.com Total Revenue

And unsurprisingly, this was another great quarter for Monday.com with revenue up 49.5% year on year. Quarter on quarter the revenue increased by $12.3 million in Q1, which was in line with Q4 2022. 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 36.6% year on year to $169 million, slowing down from the 75.2% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 28.2% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. 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 Q1. That means even if they didn't win any new customers, monday.com would have grown its revenue 25% year on year. Despite it going down over the last year this is still 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 Q1 Results

With a market capitalization of $6.26 billion monday.com is among smaller companies, but its more than $935.6 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

It was good to see monday.com outperform Wall St’s revenue expectations this quarter. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations and that free cash flow was up. On the other hand, it was less good to see the deterioration in revenue retention rate. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic about this "beat and raise" quarter. The company is up 12% on the results and currently trades at $146.9 per share.

Should you invest in monday.com 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.