Monday.com's (NASDAQ:MNDY) Q4: Beats On Revenue But Stock Drops

Adam Hejl /
2024/02/12 7:07 am EST

Project management software maker Monday.com (NASDAQ:MNDY) reported Q4 FY2023 results topping analysts' expectations, with revenue up 35.1% year on year to $202.6 million. The company expects next quarter's revenue to be around $209 million, in line with analysts' estimates. It made a non-GAAP profit of $0.65 per share, improving from its loss of $0.03 per share in the same quarter last year.

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Monday.com (MNDY) Q4 FY2023 Highlights:

  • Revenue: $202.6 million vs analyst estimates of $197.8 million (2.4% beat)
  • EPS (non-GAAP): $0.65 vs analyst estimates of $0.32 (100% beat)
  • Revenue Guidance for Q1 2024 is $209 million at the midpoint, roughly in line with what analysts were expecting
  • Management's revenue guidance for the upcoming financial year 2024 is $929 million at the midpoint, in line with analyst expectations and implying 27.3% growth (vs 41.2% in FY2023)
  • Management's adjusted operating income guidance for the upcoming financial year 2024 is $61 million at the midpoint, below analyst expectations of $68 million
  • Free Cash Flow of $55.44 million, down 14.6% from the previous quarter
  • Net Revenue Retention Rate: 115%, up from 110% in the previous quarter
  • Customers: 2,295 customers paying more than $50,000 annually
  • Gross Margin (GAAP): 88.9%, in line with the same quarter last year
  • Market Capitalization: $11.39 billion

“We concluded 2023 with strong Q4 results, demonstrating our ability to drive sustainable growth and profitability while continuing to scale,” said Eliran Glazer, monday.com CFO.

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.

Project Management Software

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 exceptional over the last two years, growing from $95.55 million in Q4 FY2021 to $202.6 million this quarter.

Monday.com Total Revenue

Unsurprisingly, this was another great quarter for Monday.com with revenue up 35.1% year on year. Quarter on quarter, its revenue increased by $13.38 million in Q4, which was roughly in line with the Q3 2023 increase. This steady growth shows that the company can maintain a strong growth trajectory.

Next quarter's guidance suggests that Monday.com is expecting revenue to grow 28.8% year on year to $209 million, slowing down from the 49.5% year-on-year increase it recorded in the same quarter last year. For the upcoming financial year, management expects revenue to be $929 million at the midpoint, growing 27.3% year on year compared to the 40.6% increase in FY2023.

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Large Customers Growth

This quarter, Monday.com reported 2,295 enterprise customers paying more than $50,000 annually, an increase of 218 from the previous quarter. That's quite a bit more contract wins than last quarter and quite a bit above what we've typically observed in past quarters, demonstrating that the business has good sales momentum. We've no doubt shareholders will take this as an indication that the company's go-to-market strategy is working very well.

Monday.com customers paying more than $50,000 annually

Key Takeaways from Monday.com's Q4 Results

We were impressed by Monday.com's growth in net revenue retention this quarter. We were also glad its revenue outperformed Wall Street's estimates. On the other hand, its revenue guidance for next year suggests a significant slowdown in demand, and operating income guidance for the same period was below expectations. Zooming out, we think this was still a mixed quarter with the guidance dragging the stock down. The market was likely expecting more, and the stock is down 7% after reporting, trading at $220 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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