monday.com Ltd.

Good day. My name is Melissa, and I'll be your conference operator today. At this time, I would like to welcome everyone to Monday.com's first quarter fiscal year 2022 earnings conference call. I would like to turn the call over to Monday.com's Director of Investor Relations, Mr. Byron Stephen. Please go ahead.

Good day, everyone, and thank you for joining us on today's conference call to discuss the financial results for Monday.com's first quarter fiscal year 2022. Joining me today are Roy Mann and Aaron Zinman, co-CEOs of Monday.com, and Elrond Glazer, Monday.com's CFO. We released our results for the first quarter fiscal year 2022 earlier today. Our earnings materials are available on our investor relations website at ir.monday.com. There you will find the investor presentation that accompanies our prepared remarks and a replay of today's webcast under the news and events section. Certain statements made on the call today will be forward-looking statements which reflect management's best judgments based on the currently available information. These statements involve risks and uncertainties that may cause actual results to differ from our expectations. Please refer to our earnings release for more information on the specific factors that could cause actual results to differ materially from our forward-looking statements. Additionally, non-GAAP financial measures will be discussed on the call. Reconciliations to the most directly comparable GAAP financial measures are available in the earnings release and the earnings presentation for today's call. which are posted on our investor relations website. With that, let me turn the call over to Roy.

Thanks, Byron. Good day, everyone, and welcome to our Q1 2022 earning call. Our first quarter revenue grew 84% to a record $108.5 million. This is an exciting milestone for us as it represents our first $100 million revenue quarter as a company. We continue to see strong demand for our product with our sales teams driving new logo acquisition and strong expansion within our existing customer base during the quarter. 50% of the Fortune 500 companies use our platform, up from 38% just a year ago. To address the needs of our customers in the enterprise segment, we are investing in creating more value for these customers, including in security, governance, and compliance requirements. Because we see enterprise customers as an important growing segment of our business, we are releasing our net dollar retention rate for enterprise customers with more than $50,000 in ARR and their percentage of our total ARR. In Q1, the total number of these customers was 960, up 187% from a year ago. These enterprise customers with more than $50,000 ARR now represent 22% of our total ARR As we continue to go upmarket, more customers are increasing their adoption and usage of Monday across their organization. In Q1, the net dollar retention rate for customers over $50,000 in ARR was above 150%. This high NDR reflects our potential to continue to expand among large customers. Please refer to our Q1 investor presentation for historical comparisons for these metrics. Among customers with more than 10 users, net dollar retention rate is above 135%. And among all customers, the net dollar retention was over 125%. As a reminder, our net dollar retention rate is a trailing four-quarter weighted average calculation. In the first quarter, we increased sales and marketing spend by approximately $50 million, up 84% from Q1-21. These sales and marketing efforts accelerated our acquisition of new customers while keeping the same marketing efficiency metrics. We've also been very successful in meeting our aggressive talent requirement targets. We believe that these efforts have great potential to grow our business over time as also our strong net dollar retention rate indicates. As we expand our customer base, we continue to invest in and grow our partner ecosystem to serve our customers. This quarter, we are excited to announce we have signed an authorized reseller agreement with SHI International, one of North America's largest IT solution providers. This partnership will help us work with and sell to more public, state, and local agencies and federal agencies in the United States. Our customers span industries and use cases, and they use Monday.com to run complex operations around the world. Recently, we partnered with Vogue for the Met Gala's first ever branded content software partnership. Using our platform, the Met Gala's set designer managed the cool workflows for fashion's biggest night of the year. Let me now turn it over to Aran to walk you through how we plan to better serve our larger customers. Thank you, Roy.

This quarter, we are excited to announce the launch of our new WorkOS product suite with four new products. each with their own unique pricing models. These new products represent an exciting new evolution of our existing product solutions based on the momentum and success we've seen among our customers. We are stepping up our product solutions to become four new end-to-end products, Monday Projects, Monday Dev, Monday Marketer, and Monday Sales CRM. Marketing and creative teams use Monday Marketer to manage marketing and creative processes all in one place. Product design and R&D teams can plan, execute, and collaborate to deliver better products faster using Monday Dev. Project managers use Monday Projects to run, manage, and track projects and portfolios. And sales team use Monday Sales CRM to manage all aspects of their sales cycle. WorkOS products are complete end-to-end products built on top of the money.com WorkOS. They are designed to completely and comprehensively address the needs of a specific use case and live within the entire WorkOS ecosystem with seamless integrations and connectivity. Customers can add more products at any given time or move data between products. That way, when customers purchase one of the new products, They also get the same flexibility, connectivity, and ease of use that they know and love from Money.com. Those new products will allow us to better address growth within our existing accounts and capture new markets. With products, we are better positioned to compete and win deals against vertical tools in specific markets. We plan to gradually increase the rate of accounts with access to the products, with the goal of fully launching them to all of our customers later this year. Let me now turn back over to Roy.

Thank you, Eran. To close, it's amazing to see the progress we've made in the short time period. Our growth efforts in Q1 placed us on a new growth trajectory, breaking the 100 million revenue per quarter milestone. Our market-leading retention rate and focus on our enterprise segment continues to drive our product focus and vision. We're proud of the work we've made to evolve monday.com from a single product company to a multiple product company. Two of the reasons we've been able to do this include, one, the work and continued dedication of our amazing team across the globe. The second is our flexible architecture, which has allowed us to execute extremely quickly and with high quality to meet the growing needs of our customers. This emphasis on agile and quick execution at high level has enabled us to continue to meet the needs of customers across Vertical. with 70% of our customers coming from non-tech industries. With that, I'll turn it over to Eliran to cover our financial and guidance.

Thank you, Roy, and thank you to everyone for joining our call. Today, I will review our first quarter results in detail and provide an update guidance for the second quarter and full year 2022. We continue to deliver strong growth driven by customers increasingly adopting the broader Monday work operating system platform across their organization. As Roy mentioned, revenue surpassed 100 million for the first time ever this past quarter. Total revenue came in at 108.5 million in the first quarter, up 84% from a year ago. Growing and scaling the company remains our top priority. With the large and growing market opportunity in front of us, and with most deals still being green-filled, we executed on an ambitious hiring plan this quarter and remain committed to investing in top-tier talent to scale the company. We ended the first quarter with 1,284 employees globally, representing an increase of 220 employees, our largest headcount growth quarter on record. Over half of the added headcount during the past year is attributable to increase in client-facing roles and R&D. For the reminder of the financial metrics disclosed, unless otherwise noted, I will be referring to non-GAAP financial measures. We have provided a reconciliation of GAAP to non-GAAP financials in our earnings release. First quarter growth margin was 89%. In the medium to long term, we continue to expect growth margin to remain in the high 80% range. Research and development expense was 19.2 million, or 18% of revenue. we'll continue to invest significantly in r d as we build out our product offerings and scale our work operating system platform both horizontally and vertically sales and marketing expense was 108.6 million or 100 of revenue compared to 100 of revenue in the year ago quarter this includes one-time super bowl advertising cost of 11 million during the quarter As mentioned above, we accelerated our hiring of employees during the quarter, reflecting on our ability to attract some of the best talent to scale the business. As we have front-loaded certain expenses, which have driven our growth, we anticipate sales and marketing expenses as a percentage of revenue to come down to lower 80s by the end of the year. G&A expenses was 12.4 million, or 11% of revenue, compared to 10% in the year-ago quarter, reflecting increased costs since becoming a public company. Operating loss was 43.8 million and operating margin was negative 40%. Net loss was 43.2 million and loss per share was negative 96 cents. It is important to note that as we scale the company, we remain focused on improving operating margins and capital efficiency. We anticipate that operating margins will improve throughout the year and into fiscal year 23. Moving on to the balance sheet and cash flow, we ended the quarter with approximately $849.6 million in cash and cash equivalents. Net cash used in operating activities was $12.9 million in the quarter. Adjusted free cash flow was negative $16.2 million, reflecting the additional investment we made during the quarter. Adjusted free cash flow is defined as net cash from operating activities, less cash used for property and equipment, and capitalized software costs, excluding non-recurring items. Now, let's turn to our updated outlook for fiscal year 2022. For the second quarter of fiscal year 2022, we expect our revenue to be in the range of $117 million to $119 million, representing growth of 66% to 69% year-over-year. We expect a non-GAAP operating loss of $35 million to $33 million. For the full fiscal year 2022, we now expect revenue to be in the range of $488 million to $492 million, representing growth of 58% to 60% year-over-year. We expect a full year non-GAAP operating loss of $139 million to $135 million and a negative operating margin of 28% to 27%. Looking ahead, we'll continue to invest in growth with a strong focus on driving business efficiency. With that, let me now turn it over to the operator for questions.

Thank you. If you would like to ask a question today, please press star followed by the number one on your telephone keypad. If you do change your mind or feel that your question has already been answered, you can press star followed by two to withdraw your question. Please also ensure that you are unmuted locally when you go to ask your question. We'll be taking our first question today from Kash Rangan of Goldman Sachs. Kash, over to you.

Great to see Monday's results on a Monday. Congratulations on an excellent start of the fiscal year. If you could chime in on the macroeconomic environment. Obviously, everybody's concerned about recession, the value proposition of software. Can you just give us your take on how customers are prioritizing Monday If you noticed any changes in the demand environment as the quarter progressed. And secondly, maybe this is an Eleanor question as well. You sound very confident that you can improve operating leverage for the business as the year unfolds. Can you just give us a little bit more detail and color as to how you expect this operating leverage to really come to fruition?

Thank you so much and congratulations. Thank you for the question. And so I'll start and then Iran will follow on. So we saw a great Q1 in terms of our ability to grow and find new customers. And we see a lot of demand and we feel confident about where we are as a business and our ability to keep growing. So that's from the results we saw. We are obviously aware of the macroeconomics now and what's happening, and we're keeping a very close watch on everything that is unfolding.

So to your question with regard to why we are confident about the margins getting better. So as a reminder, this is what we said we are going to do on the last call, on the last earning call. So from a spend perspective, if we think about Q1 in sales and marketing, for example, this is an outlier. And we did it in accordance with Monday's playbook, if you look back at Q1 2021. So we front-ordered expenses, we invested in bringing the best headcount that we can, which was on record. And from now on, we believe that we are going to continue to invest in accordance with efficiency metrics, unit economics, taking into account the net dollar retention rates that we have, the payback time, the cut. So altogether, when we're going back to normal in Q2, as we mentioned in the script, that S&M, for example, is going back to low 80s, we believe that we're going to leverage the investment that we did and benefit from the fact that this will improve margins and capital efficiency.

Wonderful. Thank you so much.

Thank you, Kash. We'll take our next question today from Arjun Bhatia of William Blair. Arjun, please go ahead.

Perfect. Thank you very much and congrats on a great quarter to the team. Maybe for Roy or Iran, the WorkOS product suite announcement seems like a very interesting evolution for the company. I'm curious Does that bundle in capabilities like work forms and Canvas, like some of the more recent products that you've launched into each of these suites from a pricing and packaging perspective? And then as you think about the future, how do you envision adding more suites to this, to the four that you've announced today? Is there room to create more additional product suites like IT or other use cases that you might go after in the future?

Yeah, thanks Arjun for the question. This is Iran. So first of all, we're very excited about launching those new Ford products. Like you've mentioned, this is an evolution to the product solutions that we offered before. But truly what we've done as a company is to take all those products one step forward. We saw a lot of demand from our customers, a lot of usage on those product solutions, and we felt it makes a lot of sense to mature them and to make our solutions more deep, more features, more capabilities, pack them in a proper way, have specific onboarding and specific feature sets for each one of them, And going forward, we're dedicated as a company to continue and invest in each one. Obviously, also the fact that we're able to package those products as independent products will also give us the ability to sell them separately and have different pricing for each one, while benefiting from having the entire company on our WorkOS platform. So for us, it's very strategic. In terms of the other products that we announced in the previous quarter, meaning the work frames, So those are two other products that are independent of our platform and those products, and we'll continue to offer them to our customers separately with separate pricing, if this answers your question.

Yes, perfect. No, that's very helpful. And then I noticed the 50K NRR disclosure at 150% plus, obviously very healthy, but it's also ticked up quite a bit from last year or from when it was for where it was four quarters ago. What are you attributing that uptick to? Is it the ability to retain your customers better? Are you, I think you called out maybe wall-to-wall adoption a little bit more. We'd just love to hear a little bit more of the drivers that have driven that enterprise net retention rate higher.

So this is Roy. So this is something we've been talking about for a while, that there is a shift in our business that we've added the sales team like a few years ago, and we see constant growth within the enterprise segment. We have more customers, as you can see in the metrics we discussed, and also And their expansion within each company is always growing, the sweet spots we have within those companies are growing. And so it's something that we should expect that will continue in terms of like our growth into enterprise customers. And We also invest a lot in the product in that respect, like adding a lot of enterprise security and a lot of stuff that opens more and more doors always to those markets or those customer segments.

Perfect. That's very helpful. Thank you very much, and congrats again, guys. Thank you.

Thank you, Ajit. Our next question comes from the line of Mark Massey from JP Morgan. Mark, over to you.

Thank you very much. And I'll also add my congrats on a very healthy looking top line, a great start to the year. First question is, I believe your largest deployment is sitting at 7,000 feet. Do you have line of sight into when you might break through that ceiling, either through an expansion process or perhaps even landing? a new customer with a larger footprint. And then secondly, kind of following up on Cash's question earlier, because you produce more than half of revenue outside of the U.S., can you provide any sense of business confidence specifically in Europe and overall pipeline growth in Europe? We're just wondering if there's any degradation at all, as many other software companies have seen, Or is it basically feel like it's all systems go for Monday at this point?

Yeah. Thank you, Mark. It's Roy. And then I'll tell you on the other one. And so we're, like I mentioned, really excited about enterprise. We see the switch, but always excited. growing and we're widening our approach to more and more customers. As you can see in the growth in the number of customers and also the depth of solutions that we offer them. So I think we have great results also in the MDR and definitely a major focus area for the company.

Okay, hi Mark in Tehran. So as of right now, we are seeing nothing unique in Europe or elsewhere. Growth rates in Europe are comparable to the overall company. So this is good news for us. And because we have a very diverse customer base of more than 150,000 customers in our best earnings and the number continues to grow, we serve SMB to the largest global companies across all kinds of industries and geographies. Therefore, we don't see any sign of softness yet.

Yes, in this term. And maybe one more thing I would add, Mark, this is Iran, is that still 70% of our customers come from non-tech companies, and we serve over 200 different business verticals. So we have a very diverse customer base. So, you know, as a result of that, we're not affected by any specific sector or any specific trend that we've seen.

Thank you very much.

Thank you, Mark. We'll take our next question today from Scott Berg of Needham. Scott, please go ahead.

Hi, everyone. Congrats on the good quarter. Thanks for taking my questions. I got two. First one was on, I think it was Iran's commentary about accelerating acquisition of new customers. Can you help maybe qualify or quantify that statement a little bit in the quarter? I know you don't report total customers necessarily, but how do you think about what that quote-unquote acceleration looks like?

Yeah, Scott, this is Iran. So I think the best indicator is that we've increased ourselves in marketing expense this quarter significantly. anyone mentioned that this is part of our playbook and how we kind of plan our year throughout. But one thing we can comment just to give you some more color is that our customer acquisition in Q1 remained very efficient. We measure everything, every click and every new customer acquisition cost. And we managed to maintain very high efficiency in acquiring new customers. And this is a huge investment for us going forward as we feel this is the right thing to do, given the huge opportunity that we have as a company. So our unit economics remain strong and very efficient as we manage to scale our marketing efforts.

Got it. Helpful. And then from a follow-up perspective, I know there's commentary, I think with 60% of the Fortune 500 is now customers of yours in some scenario. How should we think about how those customers purchase today relative to some of your smaller customers? Is the purchasing motion or I guess the products they're buying very similar and it's just a larger seat count? Or have you noticed any nuances on how they acquire that might be different than your historical smaller customers?

Hey, Scott. It's Roy. And so I think alongside the growth we have in enterprise, we see a slow shift. in those adoption patterns. So first of all, the vast majority of customers do land and expand. They start with a small account and then we expand over time. So like every new deal we have is a door open for another deal. Meaning we always expand within our customer base. You can see that in the NDR. Okay. So that's one. On the other side, we do see larger deals happening up front, like they start bigger, and we also expand faster. So that's a trend that's been happening in the last two years even, all the time. And I think as Monday grows as a brand, as customers understand it's a solution, and they can trust them more and more like we see more of those top-down deals starting. Hope that helps.

Very much. Thank you. Congrats again.

Thank you, Scott. We will now move over to our question from Brent Still of Jefferies. Brent, over to you.

Thank you. This is John Bianco-Bentel. I have two questions. On the new WorkOS products, I'm just wondering, you know, how full-featured it may be versus, you know, the best-of-breed solutions out there. You know, does that mean you're going to compete more versus some of the partners you're integrated with? And I guess timing on G&A. And then second, on your SHI retail partnership, does that mean you're making a bigger push into the U.S. public sector? How is your presence today? Thank you.

If you don't mind, this is Aaron. Just repeat the first part of your question. You were breaking up.

Sure. On the new WorkWise products, you know, in terms of capabilities, how do they compare versus the best of breed solutions out there? You know, does this mean you're competing more versus some of the partners that you're integrated with? And any update on timing for general availability?

Hi. Thank you. It's Roy here. and so it doesn't mean that we're competing with other uh like i don't know like large enterprise solutions and we actually integrate really well into them like this quarter we're also enhancing our integration into salesforce and elysian and you know we see a lot of deep integrations into uh companies uh workflows in in many ways uh those uh the the partnership with SGI actually opens the door for a lot of enterprise customers in America, and yeah, we're excited about that.

Thank you. Thank you.

Yeah, I think we're going to move to the second part of the question. Sorry, you were breaking up with the second question. If you could repeat that, please. Thank you.

Yes. So in the prepared markets, I think you mentioned that they do a lot with U.S. government sector. So I'm wondering, does that mean you're making a bigger push into the U.S. public sector? And do you have a meaningful presence today in that sector or industry?

Yeah. Yeah, thank you. This is Zoran. So definitely, you know, the new partnership with SHI is very strategic for us. As we go more to enterprise companies and larger enterprises, you know, definitely this specific sector is very interesting for us. So, you know, this specific partner is working in North America with a lot of focus on local government and other companies. And for us, this is a very strategic part of allowing our products to be available to more sectors and more parts of our customer base. So definitely we're going to invest more resources into that going into the future. Thank you for that. Thank you.

Thank you. Our next question comes from Brent Braceland of Piper Sandler. Brent, please go ahead.

Thank you. Maybe I'll start here with Elrond. Net dollar retention across all users has increased pretty substantially here this quarter. Is that a function of just the mix shift to enterprise? Maybe can you talk a little bit about churn at all? But just a little surprised to see that metric continue to move up. I suspect it's all enterprise, but just trying to understand why you're seeing that improve so much here sequentially. Thanks.

Adrian, it's Eliran. So thank you for the question. Obviously, I would say that first, we are seeing product improvement because we are very focused on continuing to innovate and invest in our products. And this is why we are having R&D talent. So this is one of the reasons for the expansion. Second is our ability to expand within existing customers. Once we unlock the value of the Monday product, together with the additional product solutions that we introduce, They continue to increase the number of seats and number of verticals horizontally. I would expect with regards to the numbers that, you know, we got to a point this is really best in the industry to be above 125% for total customers and, you know, about 150% to enterprise. I believe we're going to see potentially two basis point improvements, but we believe this is kind of stabilizing and we're going to see this raise over time.

So it makes sense. I guess, Ron, following up on the four Monday products, intuitively, it seems like Monday products would be the bulk of the use cases. But maybe could you talk about which of those four use cases, sales, marketer, projects, dev is kind of the fastest growing use case for Monday? That would be helpful. Thanks.

Yeah, Brian, thank you. So first of all, we're excited about all four. Part of the reason that we focused on those four is because we saw a lot of demand. Our customers use Monday for many use cases, but those four really stood out. It has the most potential. I would say that we see a lot of traction in our sales CRM product. But also our developer product is very interesting. We see a lot of them in the marketing product as well. And obviously project management for us is really the sweet spot. So we see a lot of momentum in each one of those. I would say that when we kind of planned the guidance and our model, you know, we didn't take those products into account. They're still new, and we have a lot of growth to do in each one of them. But definitely we see a lot of positive signs and a lot of very excited, exciting customer feedback from our customers using them. So we're very excited for the future of those products.

Hey, Rory, I have something more to add. Hey, so I'd like to add to what Aaron said. So what makes Monday special is the fact that you can build anything you want on top of it. So that's also true for each one of these products. So if you Adopt one, you can still build whatever you want on top of each one and also connect them together and have them work really well together because it's all one platform. It's all built on top of the WorkOS. So I think that's also something important to understand where the customers are adopting them. They can still do anything else they want even now on top of the other bases of products.

Thank you.

Thank you, Brent. Our next question comes from Andrew de Gasperi of Berenberg. Andrew, over to you.

Thanks. Hi, everyone. I just had a question in terms of one of the metrics you used to provide. Just wondering how that trended the percent of AR from over 10 users. I know you give the over 50K, but just wondering if if you had anything to add to that comment. And then secondly, in terms of your deferred, it sequentially increased quite a bit. I was just wondering if there's any kind of larger seven-figure deals that you've added this quarter, anything that you could provide would be appreciated.

Hi, Andrew. This is Eliran. With regards to your first question, so the share of error from customers with 10-plus users is continuing to improve. Last time we disclosed, it was above 70%. So as part of us going up market together with enterprise accounts, we see this trend continue to improve. They are becoming more meaningful in our total error. I can tell you that more than 85% of our customers are, you know, coming from customers that are buying the pro and enterprise tiers. So this is definitely a trend that we see continue moving forward. With regard to your question, your second question, you were asking about calculated billing, just to make sure what you were asking about.

Yes, that's right. It was a sequential increase.

Yes. So while we are very happy with the increase, we said it in the past that calculated billing is not a leading indicator of our business. We usually look at growth, revenue growth, net dollar retention rate, number of customers. This is more of a leading indicator. Obviously, there is going to be fluctuation with calculated billing, but we definitely saw a sequential increase this quarter versus the previous one.

That's helpful. And if I may add another one, sales and marketing, you mentioned you front-loaded it in Q1, and you obviously had a pretty sizable headcount increase. I was just wondering what drove you to do that this quarter? And secondly, can you maybe provide a little more data in terms of where the distribution of this headcount is? Is it mostly U.S. or other regions? Thank you. Yeah, Andrew, this is Iran. So just to give you more color about the increase in spend. About 10 to 11 million of it was Super Bowl advertising, which we mentioned in the previous quarter. Another 10 million, I would say, roughly, is increasing our headcount. So usually we accelerate hiring around Q1 in terms of salespeople, customer success, managers, customer support, and so on, which the effect of this in terms of sales power will unfold in the next few quarters. But For us, it was an opportunity to increase our sales force. And the rest of the increase, give or take, is increasing performance marketing, usually in Q1. We see strong demand in the market for two-like hours with continuous Q2, Q3, and Q4, but there's usually an acceleration in Q1. And for us, it's a great opportunity. And as I've mentioned previously, we managed to scale our performance marketing while keeping the same efficiency and unit economics in terms of acquiring new customers. So we're very happy about our investments. in terms of performance marketing.

I can add that if you look at the history of the company, we've been doing this around each year. And during January, compared to last year, we kept the same efficiency metrics and ratios. So we're really happy with the results.

And Andrew, maybe this is Eliran, just to add with regards to the distribution of the headcount that we hired. So we hired people in both outside of the US, not in Israel. It's a combination of Israel, US, and London, Sydney and other places around the world. With regards to sales and marketing resources, we're also hiring enterprise sales managers and quota bearing to continue the growth of the business outside of Israel. Thank you.

Thank you, Andrew. Our next question comes from George Ivanik of Oppenheimer. George, please proceed with your question.

Thank you for taking my question. So maybe just following up on the sales comments, with the introduction of the new WorkOS products, do you anticipate any changes to your sales and go-to-market motion layering in either specialists or putting more focus on particular verticals?

Yeah, so I'm kind of a sanctuary. Yeah, I'll take it. This is Ron. So in terms of go-to-market,

for those new WorkOS products. So definitely, we see here a huge opportunity, mainly because those products allow us to market to specific audiences, specific customers, so we can have more targeted marketing to those audiences, as opposed to having like a more of a broader broadcast to a mass audience when we talk about the WorkOS. Having those independent products will allow us to have more specific targeting, resulting in what we've already seen early signs of lower customer acquisition costs and better adoption in terms of acquiring new customers. Over time, and this is the big opportunity here, we already see that as well, we see those customers expanding from that specific use case to start with, to more use cases, and eventually, you know, as part of our vision of the company, to have the whole company working on the WorkOS platform. So this is part of the reason why we're so excited about those new products. Not only that it allows us to have a more efficient go-to market, but better onboarding and more potential to expand within an organization.

Yeah, I only wanted to add, Troy, that we see this as a long-term, like all these products that we released, you know, like it's not something, it's a gradual change into those areas. And like Iran mentioned, we didn't model this year according to any results from them.

And this may be following up on the kind of broader competitive landscape. Are you seeing any changes with relative to, are you mostly landing in greenfield opportunities? Are you seeing any vendor displacement or, you know, just changes into the way you're dealing with multiple products at individual customers?

Yeah, so this is Iran. So we kind of see the same environment that we saw before. 70% of the deals, we see no competition. It's still a huge green field in terms of the opportunity and our ability to acquire new customers. In terms of those new products, definitely in each one of those categories, there are existing competitors. It's still early days, but as I've mentioned, from What we already see by releasing those products and doing, although limited, but some marketing to them, we see a lot of efficiency in terms of customer acquisition, and for us it's another growth opportunity in terms of go-to-market. So that's kind of the dynamics that we see.

Yeah, and I can add that, you know, we emphasize that we, for the last two years, have been marketing to those exact four segments. What we're doing now is another step of evolution of packaging it as separate products, but we've always had those as solutions that Monday customer adopted. So we feel very confident in this going forward.

Thank you very much.

Thank you, George. At this time and before we move on to our next questions, we would like to remind you that if you would like to ask a question, you can do so by pressing star followed by 1 on your telephone keypad. If you do change your mind, please press star followed by 2 and ensure that you are unmuted locally when proceeding with your question. We will now move over to our next question, which comes from the line of DJ Hinds of Canaccord. DJ, please go ahead.

Hey, good morning, guys. Just one question on my end. Roy or Aran, can you just remind me of the signals that you guys use internally to trigger direct sales engagement? Like, are you looking at spend thresholds? Is it usage metrics? And I guess the question is, given the strength you're seeing in your largest cohorts, which I assume is favorably impacted by direct sales touch, does it make you think direct sales engagement even earlier in the funnel would be beneficial? How do you think about that?

Yeah. Thank you, David, DJ. This is Iran. Thank you for the question. And this is a great question because... Like we've mentioned, usually the way customers adopt Monday is bottom-up, and we see customers starting using Monday from all companies, all sizes, and different roles, different positions within the company. The way our sales algorithm works is that whenever a customer signs up, we ask that customer about details during the sign-up process about company size, their role in the company, and how large deployment they want. And also, we're using third-party tools to enrich that information. Using all that information, we classify accounts that have potential to grow. So once we see a paying account with engagement within the account and a potential to grow to, let's say, 1,000 people or more, our sales team is engaging the customers. And basically, it's a different process because the customer is already using Monday, happy with the product, and then we try to extend the usage to more of their offerings. And usually, it's a short sales cycle, which leads to future sales cycles as well. So the motion is pretty much the way I've described it. Any questions you have about any changes we see? So definitely we see a lot of opportunity on top of that. We see an opportunity to create a strong outbound motion. We see a strong opportunity to create a B2B mechanism where we can market to senior executives. So definitely that's a huge upside that we have as a company, which we're also investing in. So we are investing in all fronts in terms of customer acquisition and creating more opportunities for our sales team.

Excellent. Thank you for the color.

Thank you, DJ. Our next question comes from Derek Wood of Cohen. Derek, please go ahead.

Thank you for taking my questions. You guys keep announcing some new SI partners. You've mentioned SHI and you've mentioned Tata in the past. Can you just talk about the kind of growth you're seeing from the partner channel and what kind of incremental leverage you're expecting this year?

Hi, it's Roy. Hi, Derek. So we see a lot of the partnership we have with them as something that is long-term. Obviously, the bigger the partner, you know, the larger customers they address, and you know the true significant result is a flywheel that takes more time. And I think we're very bullish on those partnerships, as you mentioned that we're adding them, and putting a lot of emphasis on it. So we see partners as a true, well, partners, because they add a lot of value to customers in a lot of ways, and especially the large ones. So we definitely see this as a strategic for the company.

Got it. I wanted to ask about pricing, too, given the inflation rates and we're seeing other vendors change pricing. How are you guys thinking about potential price increases or, you know, what kind of price changes can we expect coming out of these new products being launched? Thank you.

Yeah, Derek, this is Aaron. Thank you for the question. Basically, I'll start with the products. So in terms of the new products, we do intend to have different pricing for each one of those products. It depends on the industry. But that's regardless of the macroeconomics and inflation. So it's more about our go-to-market and what people expect from each one of those product segments. In terms of inflation and So we monitor everything that's going on very closely, but currently we don't have any specific plans to raise prices, but we're continuing to monitor and if anything changes, we re-evaluate as we go. Understood. Thanks.

Thank you, Derek. We'll take our next question from Robert Simmons of DA Davidson. Robert, please proceed with your question.

Thank you. Can you update us on Marketplace, the attraction you're seeing there, updates on the monetization plans, and then also does the annual guidance include any contribution from Marketplace?

Yeah, Robert, this is Iran. Thank you for the question. Definitely, our marketplace is something that's very important for us as we scale the company. Last quarter, we released our own payment system within the marketplace. So basically, app developers can now monetize their apps using our payment platform. We release any numbers attached to it, but just to give you the sentiment, we see very good results from that new release. New app developers that create new applications, see higher conversion rates, more customers are willing to pay using that payment system. So definitely it's something that made a huge impact on our workspace, and we continue to invest. We've seen the number of developers going up, the number of applications being created and also used. going up consistently quarter over quarter. So we continue to heavily invest into that. I wouldn't say it has much impact on our revenues yet because it's still small numbers, but going forward, this big product has a lot of potential as well.

Got it. Great. Thank you very much.

Thank you, Robert. Our final question is a follow-up question from Kash Rangan of Goldman Sachs. Kash, the floor is yours.

Hi, thank you so much for taking my question. I'm curious just that given that you just started hiring heavy duty sales capacity, but you're already starting to see net expansion rates in 50,000 plus customers at 150. Could this metric even get better as your programs? That's interesting.

Yeah, cash. This is Iran. Uh, thanks for the follow up question. Uh, so this is the first quarter that we released on the office accounts. And, um, you know, we're, we're super happy with it and definitely those customers, have a lot of room to grow. We still have much more scale to have in them. I would say that over time we'll continue to keep releasing that metric quarter over quarter, but we do see this metric stabilizing. But going forward, definitely we're going to have more up-to-date opportunities. Now with the new products that we've released and also the work firms and the canvas, we're going to need more opportunities to extend our usage with other products. So definitely there's potential for that number to go up, but as it is right now, when we also benchmark this compared to other companies, this is definitely NDR numbers, and we'll continue to invest in those enterprise customers.

Cast your lines to Ayten. Okay, thank you, Cash. That was our last question today, so we would like to conclude by thanking you all for joining the call, and we wish you a lovely rest of your day. You may now all disconnect.