monday.com's (NASDAQ:MNDY) Q3 Sales Top Estimates, Stock Soars

Kayode Omotosho /
2022/11/14 7:05 am EST

Project management software maker Monday.com (NASDAQ:MNDY) beat analyst expectations in Q3 FY2022 quarter, with revenue up 64.8% year on year to $136.8 million. Guidance for next quarter's revenue was $141 million at the midpoint, which is 1.69% above the analyst consensus. monday.com made a GAAP loss of $23 million, improving on its loss of $28.8 million, in the same quarter last year.

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monday.com (MNDY) Q3 FY2022 Highlights:

  • Revenue: $136.8 million vs analyst estimates of $130.4 million (4.94% beat)
  • EPS (non-GAAP): $0.05 vs analyst estimates of -$0.54 ($0.59 beat)
  • Revenue guidance for Q4 2022 is $141 million at the midpoint, above analyst estimates of $138.6 million
  • Free cash flow of $13.9 million, up from negative free cash flow of $19.2 million in previous quarter
  • Net Revenue Retention Rate: 135%, in line with previous quarter
  • Customers: 1,323 customers paying more than $50,000 annually
  • Gross Margin (GAAP): 86.9%, in line with same quarter last year

“The strength of our Work OS platform and continued execution in the quarter resulted in strong top line growth, with revenue growing 65%,” 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 $42.5 million in Q3 FY2020, to $136.8 million.

monday.com Total Revenue

This was another standout quarter with the revenue up a splendid 64.8% year on year. But the growth did slow down a little compared to last quarter, as monday.com increased revenue by $13.1 million in Q3, compared to $15.2 million revenue add in Q2 2022. So while the growth is overall still impressive, we will be keeping an eye on the slowdown.

Guidance for the next quarter indicates monday.com is expecting revenue to grow 47.5% year on year to $141 million, slowing down from the 90.5% 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 34% 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 Q3. 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 Q3 Results

With a market capitalization of $4.29 billion monday.com is among smaller companies, but its more than $852.5 million in cash and the fact it is operating close to free cash flow break-even put it in a robust financial position to invest in growth.

We were impressed by the exceptional revenue growth monday.com delivered this quarter. And we were also excited to see that it outperformed Wall St’s revenue expectations. Overall, we think this was still a really good quarter, that should leave shareholders feeling very positive. The company is up 5.94% on the results and currently trades at $100.84 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.