monday.com (NASDAQ:MNDY) Exceeds Q2 Expectations, Stock Jumps 20.8%

Jabin Bastian /
2022/08/08 7:08 am EDT

Project management software maker Monday.com (NASDAQ:MNDY) announced better-than-expected results in the Q2 FY2022 quarter, with revenue up 75.2% year on year to $123.7 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $130.5 million at the midpoint, 3.78% above what analysts were expecting. monday.com made a GAAP loss of $45.6 million, down on its loss of $32.4 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 FY2022 Highlights:

  • Revenue: $123.7 million vs analyst estimates of $118.2 million (4.65% beat)
  • EPS (non-GAAP): -$0.33 vs analyst estimates of -$0.75
  • Revenue guidance for Q3 2022 is $130.5 million at the midpoint, above analyst estimates of $125.7 million
  • The company lifted revenue guidance for the full year, from $490 million to $500 million at the midpoint, a 2.04% increase
  • Free cash flow was negative $19.2 million, compared to negative free cash flow of $16.1 million in previous quarter
  • Net Revenue Retention Rate: 135%, in line with previous quarter
  • Customers: 1,160 customers paying more than $50,000 annually
  • Gross Margin (GAAP): 86.4%, in line with same quarter last year

“We continue to deliver strong top line growth with revenue growing 75% in the second quarter,” 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 $70.6 million, to $123.7 million.

monday.com Total Revenue

This was another standout quarter with the revenue up a splendid 75.2% year on year. On top of that, revenue increased $15.2 million quarter on quarter, a solid improvement on the $12.9 million increase in Q1 2022, and happily, a slight re-acceleration of growth.

Guidance for the next quarter indicates monday.com is expecting revenue to grow 57.1% year on year to $130.5 million, slowing down from the 94.9% 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 40.1% 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 135% in Q2. That means even if they didn't win any new customers, monday.com would have grown its revenue 35% year on year. Trending up over the last year, 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 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 a market capitalization of $5.76 billion and more than $834.6 million in cash, the company has the capacity to continue to prioritise growth over profitability.

We were impressed by the exceptional revenue growth monday.com delivered this quarter. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations. Overall, we think this was still a really good quarter, that should leave shareholders feeling very positive. The company is up 20.8% on the results and currently trades at $154.5 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.