monday.com (NASDAQ:MNDY) Surprises With Q4 Sales, Stock Jumps 10.3%

Anthony Lee /
2023/02/13 7:06 am EST
Add to Watchlist

Project management software maker Monday.com (NASDAQ:MNDY) beat analyst expectations in Q4 FY2022 quarter, with revenue up 56.9% year on year to $149.9 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $155 million at the midpoint, 3.45% above what analysts were expecting. monday.com made a GAAP loss of $1.49 million, improving on its loss of $32.6 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) Q4 FY2022 Highlights:

  • Revenue: $149.9 million vs analyst estimates of $141.6 million (5.85% beat)
  • EPS (non-GAAP): $0.44 vs analyst estimates of -$0.36 ($0.80 beat)
  • Revenue guidance for Q1 2023 is $155 million at the midpoint, above analyst estimates of $149.8 million
  • Management's revenue guidance for upcoming financial year 2023 is $690.5 million at the midpoint, beating analyst estimates by 4.55% and predicting 33% growth (vs 70.2% in FY2022)
  • Free cash flow of $29.7 million, up 113% from previous quarter
  • Net Revenue Retention Rate: 130%, down from 135% previous quarter
  • Customers: 1,474 customers paying more than $50,000 annually
  • Gross Margin (GAAP): 88.4%, in line with same quarter last year

“Q4 capped off an amazing year, exceeding our expectations on both the top and bottom lines,” 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 $50.1 million in Q4 FY2020, to $149.9 million.

monday.com Total Revenue

And while we saw even higher rates of growth previously, the revenue growth was still very strong; up a rather splendid 56.9% year on year. Quarter on quarter the revenue increased by $13 million in Q4, which was roughly in line with the Q3 2022 increase. 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 42.9% year on year to $155 million, slowing down from the 84% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $690.5 million at the midpoint, growing 33% compared to 68.4% increase in FY2022.

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 130% in Q4. That means even if they didn't win any new customers, monday.com would have grown its revenue 30% year on year. Despite it going down over the last year this is still 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 Q4 Results

With a market capitalization of $5.91 billion monday.com is among smaller companies, but its more than $885.9 million in cash and positive free cash flow over the last twelve months give us confidence that monday.com has the resources it needs to pursue a high growth business strategy.

We were impressed by the exceptional revenue growth monday.com delivered this quarter. And we were also glad that the revenue guidance for the rest of the year exceeded expectations. On the other hand, revenue retention rate deteriorated slightly. Overall, this quarter's results still seemed pretty positive and shareholders can feel optimistic. The company is up 10.2% on the results and currently trades at $144.3 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.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

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