monday.com Ltd.

Ladies and gentlemen, thank you for standing by. My name is Desiree and I will be your conference operator today. At this time, I would like to welcome everyone to Mondays.com's second quarter fiscal year 2023 earnings conference call. I would like to turn the call over to Mondays.com's Director of Investor Relations, Mr. Byron Stephen. Please go ahead.

Hello, everyone, and thank you for joining us on today's conference call to discuss the financial results for Monday.com's second quarter fiscal year 2023. 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 second quarter earlier today. You can find our quarterly shareholder letter, along with our investor presentation, and a replay of today's webcast under the News and Events section of our IR website at ir.monday.com. Certain statements made on the call today will be forward-looking statements, which reflect management's best judgment 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. Now let me turn the call over to Roy.

Thank you, Byron, and thank you everyone for joining us today. In the second quarter, we continued to make significant strides in executing our long-term strategy, deliver exceptional results, revenue grew 42% as demand for our customers remained healthy. We continued to demonstrate improved operating efficiency and cash generation. Reflecting our ongoing commitment to driving sustainable growth, Eliran will talk you through our financial performance in more detail. This quarter, we are thrilled to announce the completion and release of MondayDB 1.0 to all our accounts. This is the initial version of our brand new infrastructure for the WorkOS platform. With MondayDB, customers are already experiencing large and more complex boards loading five times faster. Enable them to work more efficiently and handle data intensive and complicated workflows. Future releases of MondayDB will provide even more speed, enhancements, scalability, and functionality. In Q2, we also launched our AI Assistant and introduced several new AI capabilities. These include automated task generation, formula builder, email composition, and content generation. Additionally, we opened our AI Assistant infrastructure to external developers and hosted a global AI hackathon, which generated tremendous interest. With over 1,600 registrants and more than 40 AI apps developed, the hackathon showcased the enthusiasm and talent within our monday.com community. We have also been working to optimize our infrastructure and interface to enhance the user experience and reinforce a robust multi-product ecosystem. we see an extraordinary opportunity to enhance cross-selling efforts, strengthen inter-department organizational connection, and solidify Monday.com as a vital partner across all business use cases. Let me now turn it over to Eran to walk you through some of our recent innovation efforts. Thank you, Roy.

As Roy mentioned, we remain focused on our multi-product strategy and ensuring that our products can successfully enable cross-functional collaboration for our customers. Monday Sales CRM is now available to approximately half of our customers, and we continue to see strong demand for the product. We are committed to continuously elevating our Sales CRM product with best-in-class features. This quarter, we introduced new mass emailing capabilities, allowing users to reach out to multiple contacts through Monday Sales CRM. In addition, we've revamped and upgraded our mobile item page, making it easier than ever before to access and update information on the go. We also recently announced that Monday Dev successfully transitioned out of beta. Initial demand for the product has been strong, and Monday Dev has already earned a place as one of the top-rated bug-tracking softwares on G2. As we gradually roll out Monday Sales CRM and Monday Dev to our existing customer base, we see an incredible opportunity to foster cross-selling. Since the launch of our product suite in 2022, we've seen an impressive 1,656 accounts initially begin with our work management product and later expand their portfolio with an additional product. Separately, we are excited to announce that we are elevating the workflow experience for our customers with the introduction of Monday Workflows add-on. Monday Workflows offers a fully customizable and visually intuitive interface, empowering users to build workflows with ease. By utilizing drag-and-drop blocks, Monday Workflows simplifies the entire workflow creation process, making it accessible to users of all levels of technical expertise. The new Monday workflow is currently open to 20% of our customers and will be gradually open to all customers by the end of Q3. With that, let me turn it back over to Roy.

Thank you, Eran. As we continue to grow, we are focused on ensuring we have the right team in the right place to lead Monday.com into the future. and we took steps in the quarter to strengthen our management team with the promotion of two senior executives. Daniel Leria, appointed as the first chief product and technology officer, and Shiran Nawi was appointed as our chief people and legal officer. Both Daniel and Shiran have served as outstanding senior leaders for many years here at Monday.com, and we are confident that they will both excel in these new roles. Finally, we are excited to announce that this year's New York City Elevate Conference on December 6th will feature a segment exclusively for our shareholders. Mark your calendars and join us for our first ever Investor Day as we showcase our exciting journey ahead. We are incredibly proud of what the Monday.com team accomplished this quarter. We are just scratching the surface of our potential, and we are excited about the opportunities to continue to generate sustainable long-term value for our shareholders. With that, I'll turn it over to Eliran to cover our financial and guidance.

Thank you to everyone for joining our call. Today, I'll review our second quarter fiscal 2023 results in detail and provide updated guidance. Q2-23 was another strong quarter, driven by increasing customer demand for the Monday.com WorkOS platform and product suite. Total revenue in Q2 came in at $175.7 million, up 42% from the year-ago quarter. Excluding the impact of foreign exchange, revenue grew 43% year-over-year. Our overall net dollar retention rate declined in Q2, reflecting a continued slowdown in customer seat expansion amid the challenging macroeconomic environment. We continue to expect some pressure on NDR in the second half of fiscal year 23, and our guidance now assumes full-year NDR slightly below 110%. As a reminder, our NDR is trailing four-quarter weighted average calculation. For the remainder of the financial metrics disclosed, unless otherwise noted, I will be referencing non-GAAP financial measures. We have provided a reconciliation of GAAP to non-GAAP financials in our earnings release. Second quarter gross margin was 90%. In the medium to long term, we continue to expect gross margin to be in the high 80s range. Research and development expense was $27.9 million, or 16% of revenue, compared to 19% in Q2 2022. For fiscal year 23, we anticipate that R&D expenses as percentage of revenue to be in the high teens as we build our product suite and scale our work OS platform both horizontally and vertically. Sales and marketing expense was 98.8 million, or 56% of revenue, compared to 70% in Q2 2022. G&A expense was 14.7 million, or 8% of revenue, compared to 12% in Q2 2022. Net income was 21 million, up from a loss of 14.9 million in Q2 2022. Diluted net income per share was 41 cents, based on 51.2 million fully diluted shares outstanding. As of the end of the quarter, total employees headcount was 1,646, an increase of 64 employees since Q1 23. We expect to continue hiring throughout the course of fiscal year 23, with the focus on our R&D product and sales teams as we build out our platform and product suite. Moving on to the balance sheet and cash flow, we ended the quarter with $989.4 million in cash and cash equivalents up from $935.6 million at the end of Q1-23. Free cash flow for Q2 was 45.9 million and free cash flow margin as defined as free cash flow as a percentage of revenue was 26%. We continue to expect to report positive free cash flow on a consistent quarterly basis moving forward and to achieve our third consecutive year of being free cash flow positive in fiscal year 23. Free cash flow is defined as net cash from operating activities, less cash used for property and equipment, and capitalized software costs. Now let's turn to our updated outlook for fiscal year 2023. For the third quarter of fiscal year 2023, we expect our revenue to be in the range of $181 million to $183 million, representing growth of 32% to 34% year-over-year. We expect non-GAAP operating income of $4 million to $6 million and an operating margin of 2% to 3%. For the full year of 2023, we now expect revenue to be in the range of $713 million to $717 million, representing growth of 37% and 38% year-over-year. We expect full-year non-GAAP operating income of $24 million to $28 million and an operating margin of 3% to 4%. I'll now turn it over to the operator for your questions.

Thank you. The floor is now open for your questions. To ask a question this time, please press star, then the number one on your telephone keypad.

We'll pause for just a moment to compile the Q&A roster.

Your first question comes from Kash Angan with Goldman Sachs. Your line is open.

Great. Congratulations on a superb quarter, Roy, Eran, and Eliran. Glad to see the growth and the free cash flow margin expansion here. I'm curious to get your thoughts on the DevOps and also the database product. What is the unique differentiation that Monday has for these products within its customer base? And if these products are successful, should we expect net expansion rate to stabilize at some point? And when do you think we see the bottom in that? Because obviously, if we've got the installed base potential for these two products, we should start to see a turn in that metric. So just wondering if you have any thoughts on that. Thank you so much once again.

Yeah, thanks, Kesh. This is Iran.

So just to repeat the first part of your question, you were asking about Monday DB and Monday DEV.

Exactly, exactly the differentiation of these two products within your base versus the competition.

Yeah, so MondayDB, Monday Database is basically, it's not a product, but a new set of capabilities that we release to all of our accounts and users. You can think about it as an infrastructure change. And the impact of that, we just announced that we finished the deployment of version 1.0, which is ahead of schedule and a major milestone for us as a company. This new infrastructure just allows customers to dramatically scale on top of our platform in terms of size of boards, size of dashboards. automations, integrations, and we think that this will lead to enterprise customers being able to dramatically scale their operations and accounts, add more users, more use cases, which will ultimately lead to more net extension and more usage and more retention among our larger customers. Monday Dev is our product that's competing in the dev industry, basically allowing developers and product managers and designers to work effectively on agile sprints and manage R&D operations. And this product is getting very nicely. We just launched out of beta, as we mentioned, and we see some good numbers and momentum. And we see this as a very strategic industry for us as a company.

um yeah hi cash uh it's roy i can add that like the differentiator we see for dev and all our products also crm and and the work management is the fact that we are in a platform the products are built on top of a platform which allows our customers to shape uh the solution to whatever they see fit and how their organization works. And we see this as a huge advantage also on deals and with customers when we talk with them, it's a major thing that it's built on top of the WorkOS.

And now, Kasia, I will address your question on MDR. Yes. Thank you. I wanted to address MDR, but please follow up on maybe you have...

No, I just wanted to get the thoughts on what is kind of missing in the marketplace with the dev community that you think you could address the particular problem. That was what I was curious about.

And so I think there is like one major player within this market. And what we see is that it's very geared towards developers. And when we look at the R&D teams, it's comprised also of product people and designers. And then you have the rest of the company that you want to connect to. And with Monday, we feel, our customers feel they can customize it better to have a workflow where everyone takes part more and it's also more connected to other parts of the organization and not just the developers.

Okay. Thank you, Roy.

This is Eliran Keshe. I will address your questions with regards to MDR. So as we said, we continue to expect moderate pressure on MDR throughout the remainder of the year. And by the way, we took it into account in our guidance And we assume fully your NDR to be slightly below 110%. To your question, when we expect it to stabilize, though, already going into July, we see signs of stabilization, and we expect it to level off by the end of the year. Just as a reminder, because it's a weighted four-quarters average, then there is a lagging effect. Maybe just also worth mentioning that the growth retention on the same level remains stable. And even though we saw some NDR decline, it was offset by strong customer acquisition.

Our next question comes from Pinjalin Bora with JP Morgan. Your line is open.

Oh, great. Hey, thank you so much and congrats on the great quarter. Roy, I want to ask you about the platform itself as you were talking in the previous question. mainly about the marketplace. It seems like the percentage of apps that are being monetized are kind of going up steadily. I see it about 45%. You recently launched the API versioning. One of your partners said it could accelerate third-party development. You are exposing the AI layer as well as the workflow engine, it seems like, to the partners. Do you think marketplace starts emerging as a material growth driver in 2024?

Hey, Benjamin.

It's Roy. It's hard to say how much material it would be because we have our core product, the CRM, the dev, the work management, which is the main growth driver. We do believe that the marketplace will help us close larger deals. There's a lot of Like you mentioned, partners are working on it and making each of those products more complete, more suited for long-term solutions. And so we put a lot of emphasis on the marketplace and a lot of investment in the ecosystem. And I think it's a longer-term play rather than just like making the numbers for next year.

Understood. Just one follow-up on the macro environment. Seems like that 110% earlier on, you were expecting it to stabilize at about 110. Seems like it's a little bit of a tick down. You're now saying slightly below. What are you seeing in the macro? Has that changed a bit? You also said that it's stabilized. I'm a little bit confused on maybe what are you seeing on the macro environment. Help us tease through that. And maybe if you can talk about the top of the funnel in July and August, that'll help. Thank you.

So demand environment hasn't really changed to what we said, the pendulum in the prior quarters. We still see some pressure with the new customers expansion, mostly expansion with regards to, you know, decision makers are brought to the table and longer sales cycles. So there wasn't really a big change. And the pressure on net dollar retention, we also called it out in prior quarters. And now said that it's going to be slightly below 110%, but we did see some stabilization with the net dollar retention going into July. as kind of it's getting flat. So by the end of the year, because of the lagging effect of the four trailing quarters, it's going to continue, but then we believe that it's going to pretty much flatten by then, and then hopefully next year we're going to see a change in the trend.

Understood. Any comments on the top of the funnel demand at this point, July and August? Top of funnel demand?

Top of funnel activity remains healthy. We still see a very healthy stream of new customers that are joining Monday. Also, having in mind the fact that we now have CRM and Monday dev is out of beta, it definitely contributes to the fact that we are bringing a healthy stream of customers.

Thank you very much.

Next question comes from Jackson Ader with MoFet Nathanson. Your line is open.

Great. Thanks for taking our questions, guys.

First one on the commentary from MondayDB. Are there any quantitative metrics to report in terms of whether these faster load times on big boards are driving either increased usage or adoption or seat count or something at some of your largest customers?

Yeah. Hi, Jackson. This is Ron. So in terms of the impact MondayDB has already, it's about 5x the performance in terms of loading large boards. And as we release additional versions, we'll see more impact on other parts of the platform. So definitely customers feel it. We get great feedback from customers. Customers are able to use larger and larger boards. We don't see it yet in terms of revenue numbers or net retention because, just as a reminder, we just finished rolling it out to our customers, and we expect this to have a longer-term effect on customer expansion and usage. But in terms of customer feedback and the results that we measure in terms of loading time and performance, the results are super positive. So we're pretty certain it will have an impact. It's really hard to quantify it exactly right now.

Okay, yep, that makes sense.

And then, you know, in terms of the net retention rate, you know, I hate to kind of keep coming back to it, but I'm just curious whether there's any, in the signs of turning around that we kind of, you know, that you talked to in July, any particular segment of the market, whether it's enterprise or 10 plus users or small end that seem to be stabilizing ahead of time and might have a little bit more lift as we head into next year?

Jackson, it's Eliran. It's pretty broad-based. We're seeing it, you know, when you look on a month-on-month basis, first of all, it's, you know, the decline is becoming more and more moderate, but across the board. So I wouldn't call out any specific segments, just more encouraging across all segments.

All right. Okay, great. Thank you.

Next question comes from Steve Enders with Citi. Your line is open.

Okay, great. Thanks for taking the questions here. I do want to ask on the CRM side and the success of the cross-sell back into the customer base at this point. I guess as we think about that and look at those numbers, I guess what's like the typical customer journey look like going from the platform to the CRM? And is it for kind of net new use cases or is it customers kind of converting over from

may be already using some of those existing capabilities for a CRM-like use case. Yeah. Hi, Stephen. This is Iran.

So, as we mentioned, Over 1,600 accounts that were using work management have bought the CRM product and the dev product in addition to that. And so it's not like initially buying those two products, but accounts that were already using Monday, sometimes for a few months, sometimes over a year, have explored our product offering and then decided to buy the CRM product. I think what's interesting, what we found is that Almost in all cases, the CRM users were in addition to the one that were using the work management platform. So you would see people, you know, salespeople and manager from the sales team buying additional seats. uh for the crm product so i think this is kind of um really encouraging to see other departments joining and having a large deployment within customers so mostly with with new teams sometimes they would already use this from the work management but a lot of times it was new teams that were introduced to the new crm product and just a reminder we didn't put a lot of effort yet to promote it within the platform or did any promotions or sales teams start approaching customers and some of them found it organically but We're very encouraged with the numbers, and this is really connected to our strategy of selling moving products to different departments within the organization.

Okay, gotcha. That's helpful. And then maybe for Elrond, really strong free cash flow in the first half of the year. Is there anything that we should be thinking about in terms of linearity throughout the rest of the year and you know, anything like one time in nature that maybe got pulled into the first half that would change some of the typical seasonality there?

Yeah, so with regards to, Steve, with regards to free cash flow, so when we're looking at Q3, we're probably looking at tight teams, and we're looking at fiscal year 23 as a whole, you know, probably low 20s.

We're seeing a very healthy, you know, discipline spending and, you know, improving efficiency that also contributes to that. A very healthy topofunnel activity that contributes to the collection cycle. So, all in all, we kind of increased our expectations for Q3 and the end of the year.

All right.

Perfect. Thanks for taking the questions.

Next question comes from Argon Bathia with William Blair. Your line is open.

Perfect. Thank you and congrats, guys, on a great quarter. I wanted to touch on some of the upmarket traction that you're seeing. It's clear, you know, 50K customers are strong. You're rolling out product capabilities with DB and workflows that are going to be more catered to the enterprise. Have you thought just at a high level about how far up market you would want to go? What's the ideal customer profile for you as you focus on more enterprise capabilities, whether that's from a company size or complexity perspective? Is there a limit that you're putting on it or do you want to just keep moving as high as possible into the enterprise?

Hey, thank you for the question. It's Roy. So I think it's a journey going up market. We've been taking it for a while now and every time we keep seeing as we roll out new features and new capabilities, we see strong demand for even deeper and newer ones. Like a good example would be MondayDB. This opens up the door for a lot of new use cases. And then those use cases will want probably more stuff. So we do not see ourselves as limiting the company to an exact size. But I think it's a journey that will take a few years to really go and to larger and larger companies all the time. And we are pushing towards that direction.

Maybe Arjun, just to add to Roy, this is Eliran. At the end of last year, we had the 196,000 customers. When you think about adding more capabilities and more functionalities and more products, basically it allows us to have better retention and increase monetization. not only new customers but existing customer base and as part of these journeys you know customers that may be joined as SMBs or mid-market can be become enterprise accounts in the following year so we have both the new customers the land and as well as expansion within with an existing customer base that our potential for growth all right perfect that's that's very helpful and then

I want to touch on the new products again because it seems you're getting a lot of good adoption on Dev and CRM both from new customers and cross-sell into the base. If I look at the 1,600 customers that you've said have kind of cross-sold from work management, there's quite a few that have just adopted CRM or Dev net new. And so the question I guess is how do you think about Dev and CRM becoming a top of funnel, a landing point for customers, and then cross-selling the other way into the work management platform. Is that an opportunity that's still out there or have you seen those 8,000 plus customers adopt your work management platform already?

Yeah, uh, this is, uh, thanks for joining.

This is Iran. So I think you made a great point. Uh, you know, obviously those, those products are, are obviously new, um, more new than the work management product. So we were more focused on seeing how existing customers can move from work, uh, work management to CRM or dev. But, you know, one thing that we really focused on from the very beginning was to make those products also, um, you know, uh, a substantial go-to market for us as a company. That was our initial focus. So definitely going forward, we'll see accounts moving from CRM to work management. And going back to our strategy, I think it really helps us as a company in two ways. One, really expands our go-to market. So instead of having just one, which is work management, now we have multiple, so both. CRM and dev and work management, but also it allows us to have a greater ACV for customers. So you can buy customer, but the potential revenue, potential expansion is not limited only to that specific vertical, but to have multiple products on top of that. So I think that creates a big opportunity for us in terms of go to market and going forward, we'll see the other way around people moving from CRM to work management as well.

Got it. Thank you very much, and great job on execution, guys.

Next question comes from Derek Wood with TD Cohen. Your line is open.

Great. Thanks for taking my questions. You guys mentioned that you launched the AI Assistant this quarter. Can you just talk about what the initial interest has been, and then just remind us how you're thinking about the approach to monetizing AI down the road?

Sure. Hi, it's Roy.

So we have taken a several layer approach to AI where we started with like adding a layer to the platform, to the entire platform that you can add any AI capabilities you want to any section of the product. And we released a few examples for it, like Formula Builder and like auto-complete stuff and those kind of things. The reaction we got from the marketplace, actually, from developers was amazing because we had like 1,600 people sign up for our hackathon and a lot of apps are being built right now. And we were hoping to launch them going forward. I think it's very early days and we see a lot of customer interest in those areas. And we feel it's a journey ahead that we'll take and we're really committed to AI and even adding more stuff going forward. with AI as really it's like the place for us to give more power to people to control how they manage their business.

Got it. Thanks. That's helpful. I guess just staying on product discussion, now that you're through 1.0 of MondayDB, what's the next phase? I guess the 2.0, can you just give us... some color as to what things we should be expecting out of 2.0 and what that timeline may look like.

Yeah, so first of all, we have a complete timeline on our website, which we share with our customers as well. But overall, next phase, which is the Monday DB 1.1, is going to be released in Q4. This year, the focus is going to be on large dashboards. Just as a reminder, a dashboard contains data from multiple boards, so that will go through a radical transformation in terms of performance and capability. And then we plan another minor release of Monday 1.2, which is going to focus on our API and incentive builds such as filter and sort and aggregations. Going into next year, 2024, we're going to do a major release of Monday 2.0, which will be a really game changer in terms of accommodating larger and larger accounts. So we're going to focus a lot on just sheer size of and accommodating very large enterprise accounts. So we have a lot of releases in the pipeline, but having MoneyDB 1.0 already released is, I think, the most significant part because now all customers are using the new engine, and those incremental releases are going to be much easier to get out to our customers.

Great. Thanks. Congrats.

Next question comes from Brent Thiel with Jefferies. Your line is open.

Thanks. The magnitude of the beat was great. You actually raised the guidance more than the beat. I'm just curious if you could maybe characterize the strength that you're seeing, where you're seeing it to raise the guidance more than you actually saw flow through. And I had a quick follow-up.

Hey, Brent. It's Eliran. Yes, so, you know, based on just a wealth reminder, we beat the revenue by $7 million and, you know, with the help of also the FX, you know, dollar versus the Israeli shekel was very strong. It's also contributed to the fact that we are healthy on our cost side. So the combination of, you know, the new product that we have, the momentum that we are seeing together with the disciplined, and efficient spend that we have as part of a Monday playbook provide us with comfort to increase the guidance for the end of the year and to achieve these numbers.

And when you think about, for CRM, the type of price uplift that you're seeing in some of these deals, is there an average or when you think about the monetization, ultimately, what do you think this looks like in terms of the additive nature to what you're seeing already in the core platform.

Yeah, Brian, so this is Iran. So I think it goes two ways. One, as I've mentioned, we see new users using those additional products. So that's additional seats. that we didn't have before. In addition to that, the CRM product has higher pricing per seat, and we're going to experiment with that. We're still below the market average, so there's more room to increase those prices. So I think both in terms of the individual pricing for each product and also the potential in having more seats per company, those two factors as a major upside to increase the average ACV of our customers.

Thanks.

Next question comes from George Iwanek with Oppenheimer. Your line is open.

Thank you for taking my question. Maybe digging into the competitive environment, are you seeing any differences in use case expansion, head-to-head competition, any signs of tool consolidation within, you know, either across departments or across divisions?

Yeah, hi, this is Iran. So I think it's pretty much aligned with what we mentioned before. As a reminder, 70% of ideas will see 70% no competition at all. I do want to mention that in terms of the vertical products, we are seeing new competitors in the CRM markets. We see new competitors such as Zoho CRM and Hotspot and a little bit of Salesforce And in the dev tool, we are seeing new competitors. I think that's another part of the fact that we are addressing new audiences and seeing those vertical tools appearing in deals. But still, not one significant competitor or anything that has any impact on the business. Still pretty much the same as before.

Great. And, you know, maybe NCRMs. when a customer is already using Salesforce? Are you seeing your deployment in parallel with Salesforce, or do you see some of the opportunity actually with smaller customers to take over the overall account?

Hey, Troy. We definitely see ourselves alongside Salesforce, and we have a lot of those deals. Even it's our number one integration to Monday, Salesforce, and we do a lot of deals together. And definitely this is the strategy going forward when we go to larger companies is to be like a, something that completes Salesforce and built around it to connect the rest of the organization to the CRM rather than displace them at all. So what we do see is like on the small mid-market, There, we see that we compete with other CRMs that have graduated from the very simple ones and the rigid ones, and when they're looking upward, they see us as one of the only solutions that they can really customize to what they need, and that's a big part in CRM, to be able to make it your own.

Great. Thank you.

Next question comes from DJ Heinz with Canaccord Genity. Your line is open.

Hey, good morning, guys. Just one for me. Roy and Aran, how do you think about the opportunity to revisit product packaging to kind of incentivize multi-product lands as the scope of the platform continues to expand?

Hi, DJ. This is Iran. I think you touched on a great point. It's actually things we're discussing right now in terms of our strategy going forward. One of the, you know, options that we now have as we expand our product offering and, you know, also taking into account previously launched products such as WorkForums and WorkCanvas, is the ability to package multiple products into a product suite and then offer that not just as a package of individual products, but actually as a business solution that we can sell to senior management within companies. I think that will also help drive more enterprise deals and talking more with decision makers and allow us to do top-down sales. So definitely pause our strategy going forward, and we're definitely looking into that.

Yeah, okay, I appreciate the call. Thank you, guys.

Next question comes from Andrew Degasperi with Berenberg. Your line is open.

Thanks for taking my question. Maybe first on Monday, Dev, just noticed you have, what, just under 800 customers. Wondering if the ramp-up for this product could be similar to CRM in terms of where it was at this stage, or should we expect a different path?

and then have a follow-up. Um, yeah. Hi, Andrew, this is Iran.

So, uh, it's still early days, I would say with the dev product, uh, but we're very happy with the traction, uh, and what we've seen so far with the numbers. Uh, it's hard to tell, you know, if we will play a faster than CRM or a bit slower than the CRM, but overall, uh, uh, if we compare it to benchmarks or, You know, even our own growth rate when we started Monday.com, we're very happy with the results. Momentum is very strong. And also the feedback we get from customers is very positive. So we're very happy with the growth and we'll see how it plays out. And I think, you know, this specific product has a lot of potential to further expand within our organization. Roy mentioned that as part of the previous answer, but our customers are not using that product just for the dev team. We see product teams joining. We see designers. We see analysts. So basically, we got people using their own ecosystem around building products using this Monday Dev product. So I think this has a lot of potential in terms of growth within the accounts they're using.

Thank you. And then maybe, Elrond, on the opera performance marketing side, I mean, there was a – maybe can you elaborate a little bit in terms of what did you see in the market this quarter? Was it, you know, unique in terms of what happened, and do we expect this to change in the back half?

sure andrew uh so you know the digital marketing environment has been largely stable we didn't see anything materially change that we should call out pretty much what we saw before obviously some of the competitors have to come back into the performance marketing stand in order to start to acquire new customers but it doesn't really yet affect significantly on the prices There is some uptake, but nothing material that we're seeing.

Thank you.

Next question comes from Scott Berg with Needham and Company. Your line is open.

Hi, this is Ron Morelli. I'm for Scott Berger. Thanks for taking the question. I got disconnected a little bit, so apologies if some of these questions were already asked. But with the release of Monday DB and future releases coming, you know, are you anticipating that these will allow you to target and offer, you know, different use cases? And then, you know, hearing a lot of discussions surrounding consolidation trends within the CWN space, have you noticed any shifts in your top of funnel or, you know, with existing customer discussions? Thanks.

yeah hi this is a ron so the first part of your question uh i think we referred to it as part of the other questions but basically um as we mentioned we released monday db 1.0 and more than anything we feel this has a lot of potential to go up market and to serve larger and larger enterprise deals uh we got great feedback from customers and we see them scaling uh using this new infrastructure and we plan to release additional minor versions and major versions in the next few months. And can you just repeat the second part of your question? Sorry.

Just from a consolidation, you know, trend in regards to consolidation trends, have you guys noticed anything, you know, shifting within your top of funnel or just with existing customer discussions?

Yeah, so we haven't noticed any change in customer behavior. We did see some customers consolidating on Monday, taking a few products into the Monday platform, but nothing that, you know, super substantial. We also don't see any customers stop using Monday because of any consolidation. As anyone mentioned, churn has been very stable. Downgrades are very stable. So overall, we don't see any movement like this.

Got it. Thanks for calling.

Next question comes from Jason Salino with Keyback. Your line is open.

Great. Thanks for taking my question. Yaron, I think you mentioned in your prepared remarks of doing faster cross-sell. I didn't quite hear it in your response to some of the other questions on the topic. Are you expanding here with the help of sales reps or marketing efforts? And then if not, when might it make sense to make a more forward approach here?

Yeah. Hi, Jason. It's Oran.

So we see both. We see both customers expanding what we call no touch, meaning discover those new products by themselves and then buying into those new products and inviting new team members. And we also had our sales team starting to approach existing customers and offering them this different product. So we see both. Definitely with our sales team, we are managing to land large deals with more potential to expansion. But going forward, we'll keep optimizing that funnel and expand our ability to cross-sell into other accounts.

Great. Thanks. And then, Eliran, just a quick clarification question. I know we've touched on your comments on July and seeing some signs of stabilization, but Curious on maybe some of the subtle details, if you're able to help us out. You know, is this a reflection of slowing down cells or slowing seed optimizations or, you know, slower down-tiering? Just curious on some of those subtleties.

Hi, Jason.

So, with regards to the recovery, I believe that, you know, during the last year and a half with macroeconomy, that was challenging, there was a decline that now we see the effect. If you think about the way we look at our net dollar retention, it's a trade in 12 months and then weighted average. And now we're starting to see a kind of a pickup from, if you compare it to a year ago. Pretty much there is some positive signs of getting back into the deals, and we're starting to see the group cohorts that actually joined at the end of last year. Now we are seeing the positive impact, and this is what drives stabilization in the NDR that we're seeing. Still not calling a trend, but positive signs.

Great. Thank you very much.

Next question comes from Robert Simons with DA Davidson. Your line is open.

Hey, thanks for taking the question. I was wondering, in the marketplace, are there any interesting or surprising trends that you're seeing there, maybe areas with more customer interest than you had expected that you might be able to pull into the core platform or into the product suite?

Yeah, can you repeat the first part of the question? There was some breaking up.

Yeah, sorry about that.

Yeah, in the marketplace, I'm wondering about interesting or surprising trends that you're seeing there and how that might inform your future product plans.

Yeah, so we see a good traction with our marketplace and we see some apps being more popular than others. I think the most popular apps we're seeing right now are additional capabilities on top of the Monday.com platform to kind of finalize our use cases. Definitely, it opens up opportunities in terms of additional features that we can add to the platform or maybe even thoughts going forward about potential acquisitions or expanding our capabilities as a platform, but nothing significant that I can point on right now in terms of specific product features or capabilities.

Got it, great. Thank you very much.

Again, if you would like to ask a question, press the star then the number one on your telephone keypad.

There are no further questions at this time.

Ladies and gentlemen this concludes today's conference call. You may now disconnect. you Thank you. Bye. Thank you. you you Thank you. Ladies and gentlemen, thank you for standing by. My name is Desiree and I will be your conference operator today. At this time, I would like to welcome everyone to Mondays.com's second quarter fiscal year 2023 earnings conference call. I would like to turn the call over to Mondays.com's Director of Investor Relations, Mr. Byron Stephen. Please go ahead.

Hello, everyone, and thank you for joining us on today's conference call to discuss the financial results for Monday.com's second quarter fiscal year 2023. 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 second quarter earlier today. You can find our quarterly shareholder letter, along with our investor presentation, and a replay of today's webcast under the News and Events section of our IR website at ir.monday.com. Certain statements made on the call today will be forward-looking statements, which reflect management's best judgment 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. Now let me turn the call over to Roy.

Thank you, Byron, and thank you everyone for joining us today. In the second quarter, we continued to make significant strides in executing our long-term strategy, deliver exceptional results, revenue grew 42% as demand for our customers remained healthy. We continued to demonstrate improved operating efficiency and cash generation. Reflecting our ongoing commitment to driving sustainable growth, Eliran will talk you through our financial performance in more detail. This quarter, we are thrilled to announce the completion and release of Monday DB 1.0 to all our accounts. This is the initial version of our brand new infrastructure for the WorkOS platform. With MondayDB, customers are already experiencing large and more complex boards loading five times faster. Enable them to work more efficiently and handle data intensive and complicated workflows. Future releases of MondayDB will provide even more speed, enhancements, scalability, and functionality. In Q2, we also launched our AI Assistant and introduced several new AI capabilities. These include automated task generation, formula builder, email composition, and content generation. Additionally, we opened our AI Assistant infrastructure to external developers and hosted a global AI hackathon, which generated tremendous interest. With over 1,600 registrants and more than 40 AI apps developed, the hackathon showcased the enthusiasm and talent within our monday.com community. We have also been working to optimize our infrastructure and interface to enhance the user experience and reinforce a robust multi-product ecosystem. we see an extraordinary opportunity to enhance cross-selling efforts, strengthen inter-department organizational connection, and solidify Monday.com as a vital partner across all business use cases. Let me now turn it over to Eran to walk you through some of our recent innovation efforts. Thank you, Roy.

As Roy mentioned, we remain focused on our multi-product strategy and ensuring that our products can successfully enable cross-functional collaboration for our customers. Monday Sales CRM is now available to approximately half of our customers, and we continue to see strong demand for the product. We are committed to continuously elevating our Sales CRM product with best-in-class features. This quarter, we introduced new mass emailing capabilities, allowing users to reach out to multiple contacts through Monday Sales CRM. In addition, we've revamped and upgraded our mobile item page, making it easier than ever before to access and update information on the go. We also recently announced that Monday Dev successfully transitioned out of beta. Initial demand for the product has been strong, and Monday Dev has already earned a place as one of the top-rated bug-tracking softwares on G2. As we gradually roll out Monday Sales CRM and Monday Dev to our existing customer base, we see an incredible opportunity to foster cross-selling. Since the launch of our product suite in 2022, we've seen an impressive 1,656 accounts initially begin with our work management product and later expand their portfolio with an additional product. This significant expansion underscores the value of our offering and the trust our customers have placed in us. Separately, we are excited to announce that we are elevating the workflow experience for our customers with the introduction of Monday Workflows Add-on. Monday Workflows offers a fully customizable and visually intuitive interface, empowering users to build workflows with ease. By utilizing drag-and-drop blocks, Monday Workflows simplifies the entire workflow creation process, making it accessible to users of all levels of technical expertise. The new Monday Workflows is currently open to 20% of our customers and will be gradually open to all customers by the end of Q3. With that, let me turn it back over to Roy.

thank you Iran as we continue to grow we are focused on ensuring we have the right team in the right place to lead monday.com into the future and we took steps in the quarter to strengthen our management team with the promotion of two senior executives daniel area appointed as the first chief product and technology officer and shiran nawi was appointed as our chief people and legal officer both daniel and shiran has served as an outstanding senior leader for many years here at monday.com, and we are confident that they will both excel in these new roles. Finally, we are excited to announce that this year's New York City Elevate Conference on December 6th will feature a segment exclusively for our shareholders. Mark your calendars and join us for our first ever Investor Day as we showcase our exciting journey ahead. We are incredibly proud of what the Monday.com team accomplished this quarter. We are just scratching the surface of our potential, and we are excited about the opportunities to continue to generate sustainable long-term value for our shareholders. With that, I'll turn it over to Eliran to cover our financial and guidance.

Thank you to everyone for joining our call. Today, I'll review our second quarter fiscal 2023 results in detail and provide updated guidance. Q2 2023 was another strong quarter, driven by increasing customer demand for the Monday.com WorkOS platform and product suite. Total revenue in Q2 came in at $175.7 million, up 42% from the year-ago quarter. Excluding the impact of foreign exchange, revenue grew 43% year-over-year. Our overall net dollar retention rate declined in Q2, reflecting a continued slowdown in customer seat expansion amid the challenging macroeconomic environment. We continue to expect some pressure on NDR in the second half of fiscal year 23, and our guidance now assumes full-year NDR slightly below 110%. As a reminder, our NDR is trailing four-quarter weighted average calculation. For the remainder of the financial metrics disclosed, unless otherwise noted, I will be referencing non-GAAP financial measures. We have provided a reconciliation of GAAP to non-GAAP financials in our earnings release. Second quarter gross margin was 90%. In the medium to long term, we continue to expect gross margin to be in the high 80s range. Research and development expense was $27.9 million, or 16% of revenue, compared to 19% in Q2 2022. For fiscal year 23, we anticipate that R&D expenses as percentage of revenue to be in the high teens as we build our product suite and scale our work OS platform both horizontally and vertically. Sales and marketing expense was 98.8 million, or 56% of revenue, compared to 70% in Q2 2022. G&A expense was 14.7 million, or 8% of revenue, compared to 12% in Q2 2022. Net income was 21 million, up from a loss of 14.9 million in Q2 2022. Diluted net income per share was 41 cents, based on 51.2 million fully diluted shares outstanding. As of the end of the quarter, total employees headcount was 1,646, an increase of 64 employees since Q1-23. We expect to continue hiring throughout the course of fiscal year 23, with a focus on our R&D product and sales teams as we build out our platform and product suite. Moving on to the balance sheet and cash flow. We ended the quarter with $989.4 million in cash and cash equivalents up from $935.6 million at the end of Q1 2023. Free cash flow for Q2 was 45.9 million and free cash flow margin as defined as free cash flow as a percentage of revenue was 26%. We continue to expect to report positive free cash flow on a consistent quarterly basis moving forward and to achieve our third consecutive year of being free cash flow positive in fiscal year 23. Free cash flow is defined as net cash from operating activities, less cash used for property and equipment, and capitalized software costs. Now let's turn to our updated outlook for fiscal year 2023. For the third quarter of fiscal year 2023, we expect our revenue to be in the range of $181 million to $183 million, representing growth of 32% to 34% year-over-year. We expect non-GAAP operating income of $4 million to $6 million and an operating margin of 2% to 3%. For the full year of 2023, we now expect revenue to be in the range of $713 million to $717 million, representing growth of 37% and 38% year-over-year. We expect full-year non-GAAP operating income of $24 million to $28 million and an operating margin of 3% to 4%. I'll now turn it over to the operator for your questions.

Thank you. The floor is now open for your questions. To ask a question this time, please press star, then the number one on your telephone keypad.

We'll pause for just a moment to compile the Q&A roster.

Your first question comes from Cash Angan with Goldman Sachs. Your line is open.

Great. Congratulations on a superb quarter, Roy, Eran, and Eliran. Glad to see the growth and the free cash flow margin expansion here. I'm curious to get your thoughts on the DevOps and also the database product. What is the unique differentiation that Monday has for these products within its customer base? And if these products are successful, should we expect net expansion rate to stabilize at some point And when do you think we see the bottom in that? Because obviously if you've got the installed base potential for these two products, we should start to see a turn in that metric too. So just wondering if you have any thoughts on that. Thank you so much once again.

Yeah, thanks, Kesh. This is Iran.

So just to repeat the first part of your question, you were asking about MondayDB and MondayDev?

Exactly, exactly. The differentiation of these two products within your base versus the competition.

Yeah, so MondayDB, Monday Database, is basically, it's not a product, but a new set of capabilities that we release to all of our accounts and users. You can think about it as an infrastructure change. And the impact of that, we just announced that we finished the deployment of version 1.0, which is ahead of schedule and a major milestone for us as a company. This new infrastructure just allows customers to dramatically scale on top of our platform in terms of size of boards, size of dashboards, automations, integrations, and we think that this will lead to enterprise customers being able to dramatically scale their operations and accounts, add more users, more use cases, which will ultimately lead to more net extension and more usage and more retention among our larger customers. Monday Dev is our product that's competing in the dev industry, basically allowing developers and product managers and designers to work effectively on agile sprints and manage R&D operations. And this product is getting very nicely. We just launched out of beta, as we mentioned, and we see some good numbers and momentum. And we see this as a very strategic industry for us as a company.

Yeah, hi, Cash. It's Roy. I can add that, like, the differentiator we see for Dev and all our products, also CRM and the work management, is the fact that we are a platform. The products are built on top of a platform, which allows our customers to shape the solution to whatever they see fit and how their organization works. And we see this as a huge advantage also on deals and with customers when we talk with them, it's a major thing that it's built on top of the WorkOS.

And now, Kasia, I will address your question on MDR. Yes. Oh, thank you. I wanted to address MDR, but please follow up on maybe you have...

No, I just wanted to get the thoughts on what is kind of missing in the marketplace with the dev community that you think you could address the particular problem. That was what I was curious about.

And so I think there is like one major player within this market. And what we see is that it's very geared towards developers. And when we look at the R&D teams, it's comprised also of product people and designers. And then you have the rest of the company that you want to connect to. And with Monday, we feel, our customers feel they can customize it better to have a workflow where everyone takes part more and it's also more connected to other parts of the organization and not just the developers.

Okay. Thank you, Roy.

This is Eliran Keshe. I will address your questions with regards to MDR. So as we said, we continue to expect moderate pressure on MDR throughout the remainder of the year. And by the way, we took it into account in our guidance And we assume fully your NDR to be slightly below 110%. To your question, when we expect it to stabilize, though, already going into July, we see signs of stabilization, and we expect it to level off by the end of the year. Just as a reminder, because it's a weighted four-quarters average, then there is a lagging effect. Maybe just also worth mentioning that the growth retention on the same kind of, on the same level remains stable. And, you know, even though we saw some NDR decline, it was offset by strong customer acquisition.

Our next question comes from Pinja Limbora with JP Morgan. Your line is open.

Oh, great. Hey, thank you so much and congrats on the great quarter. Roy, I want to ask you about the platform itself as you were talking in the previous question, mainly about the marketplace. It seems like the percentage of apps that are being monetized are kind of going up steadily. I see it about 45%. You recently launched the API versioning. One of your partners said it could accelerate third-party development. you are exposing the AI layer as well as the workflow engine seems like to the partners. Do you think marketplace starts emerging as a material growth driver in 2024?

Hey, Benjamin, it's Roy.

It's hard to say how much material it would be because we have our core product, the CRM, the dev, the work management, which is the main growth driver. We do believe that the marketplace will help us close larger deals. There's a lot of Like you mentioned, partners are working on it and making each of those products more complete, more suited for long-term solutions. And so we put a lot of emphasis on the marketplace and a lot of investment in the ecosystem. And I think it's a longer-term play rather than just like making the numbers for next year.

Understood. Just one follow-up on the macro environment. Seems like that 110% earlier on, you were expecting it to stabilize at about 110. Seems like it's a little bit of a tick down. You're now saying slightly below. What are you seeing in the macro? Has that changed a bit? You also said that it's stabilized. I'm a little bit confused on maybe what are you seeing on the macro environment. Help us tease through that. And maybe if you can talk about the top of the funnel in July and August, that'll help. Thank you.

So demand development hasn't really changed to what we said, the pendulum in the prior quarters. We still see some pressure with the new customers expansion, mostly expansion with regards to decision makers are brought to the table and longer sales cycles. So there wasn't really a big change. And the pressure on net dollar retention, we also called it out in prior quarters. and now said that it's going to be slightly below 110%, but we did see some stabilization with the net dollar retention going into July. as kind of it's getting flat. So by the end of the year, because of the lagging effect of the four trailing quarters, it's going to continue, but then we believe that it's going to pretty much flatten by then, and then hopefully next year we're going to see a change in the trend.

Understood. Any comments on the top of the funnel demand at this point, July and August? Top of funnel demand?

Top of funnel activity remains healthy. We still see a very healthy stream of new customers that are joining Monday. Also, having in mind the fact that we now have CRM and Monday dev is out of beta, it definitely contributes to the fact that we are bringing a healthy stream of customers.

Thank you very much.

Next question comes from Jackson Ader with MoFET Nathanson. Your line is open.

Great. Thanks for taking our questions, guys.

First one on the commentary from MondayDB. Are there any quantitative metrics to report in terms of whether these faster load times on big boards are driving either increased usage or adoption or seat count or something at some of your largest customers?

Yeah. Hi, Jackson. This is Ron. So in terms of the impact MoneyDB has already, it's about 5x the performance in terms of loading large boards. And as we release additional versions, we'll see more impact on other parts of the platform. So definitely customers feel it. We get great feedback from customers. Customers are able to use larger and larger boards. We don't see it yet in terms of revenue numbers or net retention because, just as a reminder, we just finished rolling it out to our customers, and we expect this to have a longer-term effect on customer expansion and usage. But in terms of customer feedback and the results that we measure in terms of loading time and performance, the results are super positive. So we're pretty certain it will have an impact. It's really hard to quantify it exactly right now.

Okay, yep, that makes sense.

And then, you know, in terms of the net retention rate, you know, I hate to kind of keep coming back to it, but I'm just curious whether there's any, in the signs of turning around that we kind of, you know, that you talked to in July, any particular segment of the market, whether it's enterprise or 10 plus users or small end that seem to be stabilizing ahead of time and might have a little bit more lift as we head into next year?

Jackson, it's Eliran. It's pretty broad-based. We're seeing it, you know, when you look on a month-on-month basis, first of all, it's, you know, the decline is becoming more and more moderate, but across the board. So I wouldn't call out any specific segment, just more encouraging across all segments.

All right. Okay, great. Thank you.

Next question comes from Steve Enders with Citi. Your line is open.

Okay, great. Thanks for taking the questions here. I do want to ask on the CRM side and the success of the cross-sell back into the customer base at this point. I guess as we think about that and look at those numbers, I guess what's like the typical customer journey look like going from the platform to the CRM? And is it for kind of net new use cases or is it customers kind of converting over from

maybe already using some of those existing capabilities for a CRM-like use case. Yeah. Hi, Stephen. This is Iran.

So, as we mentioned, Over 1,600 accounts that were using work management have bought the CRM product and the dev product in addition to that. And so it's not like initially buying those two products, but accounts that were already using Monday, sometimes for a few months, sometimes over a year, have explored our product offering and then decided to buy the CRM product. I think what's interesting, what we found is that Almost in all cases, the CRM users were in addition to the one that were using the work management platform. So you would see people, you know, salespeople and manager from the sales team buying additional seats for the CRM product. So I think this is kind of really encouraging to see other departments joining and having a larger deployment within customers. So mostly with new teams, sometimes they were already users from the work management, but a lot of times it was new teams that were introduced to the new CRM product. And just a reminder, we didn't put a lot of effort yet to promote it within the platform or did any promotions. our sales team started approaching customers and some of them found it organically, but we're very encouraged with the numbers and this is really connected to our strategy of selling moving products to different departments within the organization.

Okay, gotcha. That's helpful. And then maybe for Elrond, really strong free cash flow in the first half of the year. Is there anything that we should be thinking about in terms of, like, linearity throughout the rest of the year and, you know, anything, like, one time in nature that maybe got pulled into the first half that would change some of the typical seasonality there?

Yeah, so with regards to, Steve, with regards to free cash flow, so when we're looking at Q3, we're probably looking at tight teams, and we're looking at fiscal year 23 as a whole, you know, probably low 20s.

We're seeing a very healthy, you know, discipline spending and, you know, improving efficiency that also contributes to that. A very healthy top of funnel activity that contributes to the collection cycle. So, all in all, we kind of increased our expectations for Q3 and the end of the year.

All right. Perfect.

Thanks for taking the questions.

Next question comes from Argan Bathia with William Blair. Your line is open.

Perfect. Thank you and congrats, guys, on a great quarter. I wanted to touch on some of the upmarket traction that you're seeing. It's clear, you know, 50K customers are strong. You're rolling out product capabilities with DB and workflows that are going to be more catered to the enterprise. Have you thought just at a high level about how far up market you would want to go? What's the ideal customer profile for you as you focus on more enterprise capabilities, whether that's from a company size or complexity perspective? Is there a limit that you're putting on it or do you want to just keep moving as high as possible into the enterprise?

Hey, thank you for the question. It's Roy. So I think it's a journey going up market. We've been taking it for a while now and every time we keep seeing as we roll out new features and new capabilities, we see strong demand for even deeper and newer ones. Like a good example would be MondayDB. This opens up the door for a lot of new use cases. And then those use cases will want probably more stuff. So we do not see ourselves as limiting the company to an exact size. But I think it's a journey that will take a few years to really go and to larger and larger companies all the time. And we are pushing towards that direction.

Maybe, Arjun, just to add to Roy, this is Eliran. At the end of last year, we had 196,000 customers. And when you think about adding more capabilities and more functionalities and more products, basically, it allows us to have better retention and increase monetization. of not only new customers, but existing customer base. And as part of these journeys, customers that may be joined as SMBs or mid-market can become enterprise accounts in the following year. So we have both the new customers, the land, as well as expansion within existing customer base that are potential for growth.

All right, perfect. That's very helpful. And then... I want to touch on the new products again because it seems you're getting a lot of good adoption on Dev and CRM both from new customers and cross-sell into the base. If I look at the 1600 customers that you've said have kind of cross-sold from work management, there's quite a few that have just adopted CRM or Dev net new. And so the question I guess is how do you think about Dev and CRM becoming a top of funnel landing point for customers cross-selling the other way into the work management platform. Is that an opportunity that's still out there or have you seen those 8,000 plus customers adopt your work management platform already?

Yeah, uh, this is, uh, thanks for joining. This is Iran. So I think you made a great point. Uh, you know, obviously those, those products are, are obviously new, um, more new than the work management product. So we were more focused on seeing how existing customers can move from work, uh, work management to CRM or dev. But, you know, one thing that we really focused on from the very beginning was to make those products also, um, you know, a substantial go-to market for us as a company. That was our initial focus. So definitely going forward, we'll see accounts moving from CRM to work management. And going back to our strategy, I think it really helps us as a company in two ways. One, really expands our go-to market. So instead of having just one, which is work management, now we have multiple, so both. CRM and dev and work management, but also it allows us to have a greater ACV for customers. So you can buy customer, but the potential revenue, potential expansion is not limited only to that specific vertical, but to have multiple products on top of that. So I think that creates a big opportunity for us in terms of go to market and going forward, we'll see the other way around people moving from CRM to work management as well.

Got it. Thank you very much, and great job on the execution, guys.

Next question comes from Derek Wood with TD Cohen. Your line is open.

Great. Thanks for taking my questions. You guys mentioned that you launched the AI Assistant this quarter. Can you just talk about what the initial interest has been and then just remind us how you're thinking about the approach to monetizing AI down the road?

Sure. Hi, it's Roy.

So we have taken a several layer approach to AI where we started with like adding a layer to the platform, to the entire platform that you can add any AI capabilities you want to any section of the product. And we released a few examples for it, like Formula Builder and like auto-complete stuff and those kind of things. The reaction we got from the marketplace, actually, from developers was amazing because we had like 1,600 people sign up for our hackathon. A lot of apps are being built right now and we were hoping to launch them going forward. I think it's very early days and we see a lot of customer interest in those areas and we feel it's a journey ahead that we'll take and we're really committed to AI and even adding more stuff going forward

uh with ai as really it's like the place for us to give more power to people and to control how they manage their business got it thanks that's helpful i guess just staying on a product discussion um now that you're you're through 1.0 of monday db what's the next uh phase i guess the 2.0 can you just give us some color as to what things we should be expecting out of 2.0 and what that timeline may look like?

Yeah, so first of all, we have a complete timeline on our website, which we share with our customers as well. But overall, next phase, which is the Monday DB 1.1, is going to be released in Q4 this year. The focus is going to be on large dashboards. Just as a reminder, a dashboard contains data from multiple boards, so that will go through a radical transformation in terms of performance and capability. And then we plan another minor release of Monday 1.2, which is going to focus on our API and accessibility such as filter and sort and aggregation. Going into next year, 2024, we're going to do a major release of Monday 2.0, which will be a really game changer in terms of accommodating larger and larger accounts. So we're going to focus a lot on just sheer size of databases and accommodating very large enterprise accounts. So we have a lot of releases in the pipeline, but having MoneyDB 1.0 already released is, I think, the most significant part because now all customers are using the new engine, and those incremental releases are going to be much easier to get out to our customers.

Great.

Thanks. Congrats.

Next question comes from Brent Thiel with Jefferies. Your line is open.

Thanks. The magnitude of the beat was great. You actually raised the guidance more than the beat. I'm just curious if you could maybe characterize the strength that you're seeing, where you're seeing it to raise the guidance more than you actually saw flow through. And I had a quick follow-up.

Hey, Brent. It's Eliran. Yes, so, you know, based on just a wealth reminder, we beat the revenue by $7 million and, you know, with the help of also the FX, you know, dollar versus the Israeli shekel was very strong. It's also contributed to the fact that we are healthy on our cost side. So the combination of, you know, the new product that we have, the momentum that we are seeing together with the disciplined, and efficient spend that we have as part of a Monday playbook provide us with comfort to increase the guidance for the end of the year and to achieve these numbers.

And when you think about, for CRM, the type of price uplift that you're seeing in some of these deals, is there an average or when you think about the monetization, ultimately, what do you think this looks like in terms of the additive nature to what you're seeing already in the core platform.

Yeah, Brent, so this is Iran. So I think it goes two ways. One, as I've mentioned, we see new users using those additional products. So that's additional seats. that we didn't have before. In addition to that, the CRM product has higher pricing per seat, and we're going to experiment with that. We're still below the market average, so there's more room to increase those prices. So I think both in terms of the individual pricing for each product and also the potential in having more seats per company, those two factors as a major upside to increase the average ACV of our customers.

Thanks.

Next question comes from George Iwanek with Oppenheimer. Your line is open.

Thank you for taking my question. Maybe digging into the competitive environment, are you seeing any differences in use case expansion, head-to-head competition, any signs of tool consolidation within, you know, either across departments or across divisions?

Yeah, hi, this is Iran. So I think it's pretty much aligned with what we mentioned before. As a reminder, 70% of ideas will see 70% no competition at all. I do want to mention that in terms of the vertical products, we are seeing new competitors in the CRM markets. We see new competitors such as Zoho CRM and Hotspot and a little bit of Salesforce And in the dev tool, we are seeing new competitors. I think that's another part of the fact that we are addressing new audiences and seeing those vertical tools appearing in deals. But still, not one significant competitor or anything that has any impact on the business. Still pretty much the same as before.

Great. And maybe NCRMs. when a customer is already using Salesforce? Are you seeing your deployment in parallel with Salesforce or do you see some of the opportunity actually with smaller customers to take over the overall account?

Hey Troy, so We definitely see ourselves alongside Salesforce, and we have a lot of those deals. Even it's our number one integration to Monday, Salesforce, and we do a lot of deals together. And definitely this is the strategy going forward when we go to larger companies is to be like a, something that completes Salesforce and built around it to connect the rest of the organization to the CRM rather than displace them at all. So what we do see is like on the small mid-market, There, we see that we compete with other CRMs that have graduated from the very simple ones and the rigid ones. And when they're looking upward, they see us as one of the only solutions that they can really customize to what they need. And that's a big part in CRM, to be able to make it your own.

Great. Thank you.

Next question comes from DJ Heinz with Canacore Genity. Your line is open.

Hey, good morning, guys. Just one for me. Roy and Aran, how do you think about the opportunity to revisit product packaging to kind of incentivize multi-product lands as the scope of the platform continues to expand?

Hi, DJ. This is Iran. I think you touched on a great point. It's actually things we're discussing right now in terms of our strategy going forward. One of the, you know, options that we now have as we expand our product offering and, you know, also taking into account previously launched products such as WorkForums and WorkCanvas, is the ability to package multiple products into a product suite and then offer that not just as a package of individual products, but actually as a business solution that we can sell to senior management within companies. I think that will also help drive more enterprise deals and dock in more with decision makers and allow us to do top-down sales. So definitely part of our strategy going forward, and we're definitely looking into that.

Yeah, okay, I appreciate the call. Thank you, guys.

Next question comes from Andrew Degasperi with Berenberg. Your line is open.

Thanks for taking my question. Maybe first on Monday, Dev, just noticed you have, what, just under 800 customers. Wondering if the ramp-up for this product could be similar to CRM in terms of where it was at this stage, or should we expect a different path?

and then have a follow up. Um, yeah. Hi, Andrew, this is Iran. So, uh, it's still early days, I would say with the dev product.

Uh, but we're very happy with the traction, uh, and what we've seen so far with the numbers. Uh, it's hard to tell, you know, if we will play, uh, faster than CRM or a bit slower than the CRM, but overall, uh, uh, if we compare it to benchmarks or, You know, even our own growth rate when we started Monday.com, we're very happy with the results. Momentum is very strong. And also the feedback we get from customers is very positive. So we're very happy with the growth and we'll see how it plays out. And I think, you know, this specific product has a lot of potential to further expand within our organization. Roy mentioned that as part of the previous answer, but our customers are not using that product just for the dev team. We see product teams joining. We see designers. We see analysts. So basically, we got people using their own ecosystem around building products using this Monday dev product. So I think this has a lot of potential in terms of growth within the accounts they're using.

Thank you. And then maybe, Elron, on the opera performance marketing side, I mean, there was a – maybe can you elaborate a little bit in terms of what did you see in the market this quarter? Was it, you know, unique in terms of what happened, and do we expect that to change in the back half?

Yeah. Sure, Andrew.

So, you know, digital marketing environment has been largely stable. We didn't see anything materially change that we should call out, pretty much what we saw before. Obviously, some of the competitors have to come back into the performance marketing stand in order to start to acquire new customers, but it doesn't really yet affect significantly on the prices. There is some uptick, but nothing material that we're seeing.

Thank you.

Next question comes from Scott Berg with Needham and Company. Your line is open.

Hi, this is Rob Morelli. I'm for Scott Bergen, answering the question. I got disconnected a little bit, so apologies if some of these questions were already asked. But with the release of Monday DB and future releases coming, you know, are you anticipating that these will allow you to target and offer, you know, different use cases? And then, you know, hearing a lot of discussions surrounding consolidation trends within the CWN space, have you noticed any shifts in your top of funnel or, you know, with existing customer discussions? Thanks.

yeah hi this is a ron so the first part of your question uh i think we referred to it as part of the other questions but basically um as we mentioned we released monday db 1.0 and more than anything we feel this has a lot of potential to go up market and to serve larger and larger enterprise deals uh we got great feedback from customers and we see them scaling uh using this new infrastructure and we plan to release additional minor versions and major versions in the next few months. And can you just repeat the second part of your question? Sorry.

Just from a consolidation, you know, trend in regards to consolidation trends, have you guys noticed anything, you know, shifting within your top of funnel or just with existing customer discussions?

Yeah, so we haven't noticed any change in customer behavior. We did see some customers consolidating on Monday, taking a few products into the Monday platform, but nothing that, you know, super substantial. We also don't see any customers stop using Monday because of any consolidation. As everyone mentioned, churn has been very stable. Downgrades are very stable. So overall, we don't see any movement like this.

Got it. Thanks for calling.

Next question comes from Jason Salino with Keyback. Your line is open.

Great. Thanks for taking my question. Yaron, I think you mentioned in your prepared remarks of doing faster cross-sell. I didn't quite hear it in your response to some of the other questions on the topic. Are you expanding here with the help of sales reps or marketing efforts? And then if not, When might it make sense to make a more forward approach here?

Yeah. Hi, Jason.

So we see both. We see both customers expanding what we call no touch, meaning discover those new products by themselves and then buying into those new products and inviting new team members. And we also had our sales team starting to approach existing customers and offering them the same product. So we see both. Definitely with our sales team, we are managing to land large deals with more potential to expansion. But going forward, we'll keep optimizing that funnel and expand our ability to cross-sell into other accounts.

Great. Thanks. And then, Eliran, just a quick clarification question. I know we've We've touched on your comments on July and seeing some signs of stabilization, but curious on maybe some of the subtle details, if you're able to help us out. You know, is this a reflection of slowing down sales or slowing seat optimizations or, you know, slower down-tiering? Just curious on some of those subtleties.

Hi Jason.

So with regards to the recovery, I believe that during the last year and a half with macroeconomy that was challenging, there was a decline that now we see the effect if you think about the way we look at our net dollar retention. It's a trailing 12-month and then weighted average. And now we're starting to see kind of a pickup from, you know, if you compare it to a year ago. So pretty much there is some positive signs of getting back into the deals, and we're starting to see the good cohorts that actually joined at the end of last year. Now we are seeing the positive impact, and this is what drives stabilization in the NDR that we're seeing. Still not calling a trend, but positive signs.

Great. Thank you very much.

Next question comes from Robert Simons with DA Davidson. Your line is open.

Hey, thanks for taking the question. I was wondering, in the marketplace, are there any interesting or surprising trends that you're seeing there today? maybe areas with more customer interest than you had expected that you might be able to pull into the core platform or into the product suite?

Yeah, can you repeat that first part of the question? There was some breaking up.

Yeah, sorry about that.

Yeah, in the marketplace, I'm wondering about interesting or surprising trends that you're seeing there and how that might inform your future product plans.

Yeah, so we see a good traction with our marketplace, and we see some apps being more popular than others. I think the most popular apps we're seeing right now are additional capabilities on top of the Monday.com platform to kind of finalize our use cases. Definitely, you know, it opens up opportunities in terms of additional features that we can add to the platform, or maybe even, you know, thoughts, you know, going forward about potential acquisitions or expanding our capabilities as a platform, but nothing significant that I can point on right now in terms of specific product features or capabilities.

Got it, great. Thank you very much.

Again, if you would like to ask a question, press the star then the number one on your telephone keypad.

There are no further questions at this time. Ladies and gentlemen, this concludes today's conference call.

You may now disconnect.