Monday.com (NASDAQ:MNDY) Exceeds Q2 Expectations, Provides Optimistic Full-Year Guidance

Adam Hejl /
2023/08/14 7:04 am EDT

Project management software maker Monday.com (NASDAQ:MNDY) announced better-than-expected results in Q2 FY2023, with revenue up 42% year on year to $175.7 million. Guidance for next quarter's revenue was also better than expected $182 million at the midpoint, 1.43% above analysts' estimates. Monday.com made a GAAP loss of $7.04 million, improving from its loss of $45.7 million in the same quarter last year.

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Monday.com (MNDY) Q2 FY2023 Highlights:

  • Revenue: $175.7 million vs analyst estimates of $169.3 million (3.77% beat)
  • EPS (non-GAAP): $0.41 vs analyst estimates of $0.21 ($0.20 beat)
  • Revenue Guidance for Q3 2023 is $182 million at the midpoint, above analyst estimates of $179.4 million
  • The company lifted revenue guidance for the full year from $704 million to $715 million at the midpoint, a 1.56% increase
  • Free Cash Flow of $45.9 million, up 18.7% from the previous quarter
  • Net Revenue Retention Rate: 120%, down from 125% in the previous quarter
  • Customers: 1,892 customers paying more than $50,000 annually
  • Gross Margin (GAAP): 88.9%, up from 86.5% in the same quarter last year

“We saw healthy customer demand in the second quarter, reflecting our commitment to rapid innovation,” 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 $70.6 million in Q2 FY2021 to $175.7 million this quarter.

Monday.com Total Revenue

Unsurprisingly, this was another great quarter for Monday.com with revenue up 42% year on year. On top of that, its revenue increased $13.4 million quarter on quarter, a solid improvement from the $12.3 million increase in Q1 2023. This is a sign of slight acceleration of growth.

Next quarter's guidance suggests that Monday.com is expecting revenue to grow 33% year on year to $182 million, slowing down from the 64.9% year-on-year increase it recorded in the same quarter last year. Ahead of the earnings results announcement, the analysts covering the company were expecting sales to grow 27.7% over the next 12 months.

While most things went back to how they were before the pandemic, a few consumer habits fundamentally changed. One founder-led company is benefiting massively from this shift and is set to beat the market for years to come. The business has grown astonishingly fast, with 40%+ free cash flow margins, and its fundamentals are undoubtedly best-in-class. Still, its total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.

Product Success

One of the best parts about the software-as-a-service business model (and a reason why SaaS companies trade at such high valuation multiples) is that customers typically spend more on a company's products and services over time.

Monday.com Net Revenue Retention Rate

Monday.com's net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 120% in Q2. This means that even if Monday.com didn't win any new customers over the last 12 months, it would've grown its revenue by 20%.

Despite falling over the last year, Monday.com still has a good net retention rate, proving that customers are satisfied with its software and getting more value from it over time, which is always great to see.

Key Takeaways from Monday.com's Q2 Results

Sporting a market capitalization of $7.52 billion, Monday.com is among smaller companies, but its more than $989.4 million in cash on hand and positive free cash flow over the last 12 months puts it in an attractive position to invest in growth.

It was good to see Monday.com beat analysts' revenue and non-GAAP operating profit expectations this quarter. We were also glad that next quarter and full-year revenue and adjusted operating profit guidance came in higher than Wall Street's estimates. On the other hand, its net revenue retention fell. Zooming out, we think this was still a good quarter, showing that the company is staying on track. The stock is up 5.33% after reporting and currently trades at $164.02 per share.

So should you invest in Monday.com right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

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