What Happened:
Shares of project management software maker Monday.com (NASDAQ:MNDY) jumped 5.17% in the morning session after the company reported a "beat and raise" quarter. Second quarter results exceeded key top-line metrics, including revenue and calculated billings. non- GAAP operating income and earnings per share also beat Consensus estimates. In addition, the company continued to generate positive operating cash flows.
Looking ahead, it was good to see that next quarter's revenue and adjusted operating profit guidance came in higher than Wall Street's estimates. Full year guidance for revenue and adjusted operating profit were both raised from previous guidance given in mid-May 2023, with a particularly meaningful upward revision to adjusted operating profit. This shows that the company is growing profitably and paving a path to higher long-term margins, which is a key focus of investors in software today. The revised guidance beat Consensus estimates across the board.
On the other hand, its net revenue retention fell. Regardless, it was still a very positive quarter, and the company continued to introduce new features and capabilities to provide more value to users, including the launch of the Monday AI Assistant.
During the quarter, Daniel Lereya was appointed the first Chief Product and Technology Officer (CPTO) to oversee these ideas. With a tenure of seven years at Monday.com, Lereya's guidance spearheaded the inception of some of the company's groundbreaking products. Notably, his leadership facilitated the transformation of monday.com into a Work OS, the current expansion into a multi-product company, featuring recent introductions like Monday sales CRM and Monday dev, as well as innovations such as Monday AI.
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What is the market telling us:
Monday.com's shares are very volatile and over the last year have had 51 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move was three months ago, when the stock gained 12.1% on the news that the company reported a "beat and raise" quarter. First-quarter results exceeded analysts' expectations for revenue, gross margin, operating income, free cash flow, and earnings per share. Revenue guidance for the next quarter and full year also came in above Consensus, with the company raising the full-year guidance. Adding to the improved cash position, Monday.com enhanced its profitability with non-GAAP operating income at near break even. Likewise, the operating income margin guidance for the full year showed expectations of near break even.
Management highlighted the continued focus on profitability, adding that "the monday.com team is off to a strong start in 2023, with our results reflecting increasing customer demand for our Work OS platform and product suite, as well as our ongoing commitment to improving efficiency and profitability." The Q1 results were strong, with solid revenue growth and improved margins and cash position.
Overall, it was a standout quarter compared to the mixed results from other tech companies, and this should cause investors to raise their projections.
Monday.com is up 46.8% since the beginning of the year, and at $174.87 per share it is trading close to its 52-week high of $186.72 from July 2023. Investors who bought $1,000 worth of Monday.com's shares at the IPO in June 2021 would now be looking at an investment worth $980.04.
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