monday.com Ltd. Q3 FY2024 earnings call

• Reached the $1 billion ARR milestone, a pivotal moment in the company's journey.
• Highlights from the Elevate conference: it was the largest ever with attendance doubling, featuring monday AI with a 150% increase in AI block usage since Q2, integration of monday AI across the product suite, expansion of monday CRM with upcoming email marketing functionality, and monday Service in beta showing cross-sell potential.
• Appointed Adi Dar as Chief Operating Officer; Chief Revenue Officer Yoni Osherov to depart at the end of December, with a global search underway for his successor.
• Total employee head count was 2,305, an increase of 195 since Q2 '24, with plans to increase head count by mid-30% in fiscal year '24, focusing on R&D, product, and sales teams.

In the third quarter of fiscal year 2024, monday.com reported total revenue of $251 million, representing a 33% increase from the year-ago quarter. The company achieved a significant milestone by surpassing $1 billion in annual recurring revenue (ARR). The total addressable market spans over $100 billion across four segments: work management, CRM, service management, and software development, growing at 14% annually. Revenue contribution details weren't explicitly broken down by each segment, but the overall financial performance was strong with the net dollar retention rate (NDR) increasing to 111% in Q3 '24.

• For the fourth quarter of fiscal year 2024, revenue is expected to be in the range of $260 million to $262 million, representing 28% to 29% year-over-year growth. Non-GAAP operating income is projected to be $29 million to $31 million with an operating margin of 11% to 12%, and free cash flow $63 million to $66 million.
• For the full year 2024, revenue is expected to be in the range of $964 million to $966 million, a year-over-year growth of approximately 32%. Full year non-GAAP operating income is forecasted to be $121 million to $123 million with an operating margin of 12% to 13%, and free cash flow $286 million to $289 million.

• Macro-economic choppiness impacting enterprise customer additions in the third quarter.
• Potential challenges in fully rolling out pricing changes as the new pricing is still being rolled out to about 50% of customers.
• Competitive environment affecting net new customer additions.

Q: As seen softening of net new customer adds, how is engagement evolving and competitive environment?

A: Eran Zinman noted good retention results, with NRR improving and gross retention at record levels, stating demand is steady despite less customer adds, part of focus on large enterprises. Eliran Glazer added cross-sell potential with new products like Service.

Q: Thoughts on growth initiatives and hiring uptick in 4Q?

A: Eran Zinman said hiring more salespeople due to demand and opportunity, focusing on expanding existing customers and acquiring new ones.

Q: Key milestones for monday Service to GA?

A: Eran Zinman mentioned ensuring product maturity to scale, finalizing features like customer portal and AI functionality, with good customer feedback.

Q: Impact of pricing increases on performance marketing spend?

A: Roy Mann said performance marketing driven by results, with less pure number of customers but higher quality ones with potential to scale upwards.

Q: Large customer expansion and management changes?

A: Eran Zinman discussed a large customer with 24x increase in seat count, adding departments using the product, and Adi Dar bringing experience in scaling organizations. Roy Mann added Adi helps across the company in transition.

Q: Choppiness in Q3 and impact on Q4 outlook?

A: Eliran Glazer said steady demand across segments, gross retention at record levels, but some cautious spend environment, with no baked conservatism in guidance.

Q: R&D spend increase and sales hiring?

A: Eliran Glazer said R&D increase due to investment in product innovation, hiring for R&D and operations, with sales hiring expected to rebound in Q4 and ramp up in '25.

Q: AI monetization timeline?

A: Eran Zinman said monetization tied with AI might be in 2025, but no specific date committed.