Monday.Com Ltd Q1 2022 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Great to see monday's results on a Monday. Congratulations on an excellent start of the fiscal year. If Roy you could chime in on the macroeconomic environment. Obviously, everybody is concerned about recession, the value proposition of software. Can you just give us your take on how customers are prioritizing monday? Have you noticed any changes in the demand environment as the quarter progressed? And secondly, maybe this is -- and I have an added-on question as well. You sound very confident that we 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? Congratulations. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 16, 2022 / 12:30PM, MNDY.OQ - Q1 2022 Monday.Com Ltd Earnings Call Roy Mann - monday.com Ltd. - Co-Founder, Co-CEO & Director Kash, thank you for the question. So I'll start, and then Eliran will follow up. 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 -- from the results, 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.

Question: Arjun Rohit Bhatia - William Blair & Company L.L.C., Research Division - Analyst : Perfect. And congrats on a great quarter to the team. Maybe for Roy or Eliran, around the Work OS product suite announcement, seems like a very interesting evolution for the company. I'm curious, does that bundle in capabilities like WorkForms 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 4 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? Eran Zinman - monday.com Ltd. - Co-Founder, Co-CEO, & Director Yes. Thanks, Arjun, for the question. This is Eran. So first of all, we're very excited about launching those new 4 products. Like you've mentioned, this is an evolution to the product solutions that we offer 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 are dedicated as a company to continuing to 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 Work OS platform. So for us, it's very strategic. In terms of the other products that we announced in the previous quarter, meaning the WorkForms and the Canvas. So those are 2 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. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 16, 2022 / 12:30PM, MNDY.OQ - Q1 2022 Monday.Com Ltd Earnings Call

Question: Andrew Lodovico DeGasperi - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : I just had a question in terms of one of the metrics you used to provide. Just wondering how that trended, the percent of ARR from over 10 users. I know you gave the over $50,000. But just wondering 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 sort of bigger deals that you've added this quarter. Anything that you could provide would be appreciated.

Question: Andrew Lodovico DeGasperi - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Yes, that's right. It was a sequential increase.

Question: Andrew Lodovico DeGasperi - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : That's helpful. And if I may add another one, sales and marketing. You mentioned you've 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? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 16, 2022 / 12:30PM, MNDY.OQ - Q1 2022 Monday.Com Ltd Earnings Call Eran Zinman - monday.com Ltd. - Co-Founder, Co-CEO, & Director Yes, Andrew, this is Eran. So just to give you more color about the increase in spend. So about $10 million 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 the performance market. And usually in Q1, we see strong demand in the market for 2 like hours which continue to 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 investment in terms of performance marketing. Roy Mann - monday.com Ltd. - Co-Founder, Co-CEO & Director I can add -- it's Roy that, like if you look at the history of the company, we've been doing this around each year during January. And compared to last year, we kept the same efficiency metrics and ratios. So we're really happy with that ability.

Question: David E. Hynes - Canaccord Genuity Corp., Research Division - Analyst : Just one question on my end. Roy or Eran. Can you just remind me of the signals that you guys use internally to trigger direct sales engagement? Like are you looking at spend threshold? 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 that make you think direct sales engagement even earlier in the funnel would be beneficial? Like how do you think about that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 16, 2022 / 12:30PM, MNDY.OQ - Q1 2022 Monday.Com Ltd Earnings Call Eran Zinman - monday.com Ltd. - Co-Founder, Co-CEO, & Director Yes. Thank you, David, DJ. This is Eran. Thank you for your 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 work is that, whenever a customer signs up, we ask that customers advances detail during the final process about company size, their role in the company and how large a 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 paying account with engagement within the account and the potential to grow to, let's say, 1,000 people or more. Our sales team is engaging that customer. And basically, it's a different process because the customer is already using monday, happy with a product and then we try to expand the usage to more with the (inaudible). And usually, it's a short sales cycle, which leads to future sale cycles as well. So the motion is pretty much the way I've described it. And your question you asked about any change that 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 also invested in. So we are investing in all fronts in terms of customer acquisition and creating more opportunities for our sales team.

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : I'm curious, just given that you just started hiring heavy-duty sales capacity, that you're already starting to see net expansion rate and $50,000-plus customers at 150. Could this metric even get better as it progress? That's it for me. Eran Zinman - monday.com Ltd. - Co-Founder, Co-CEO, & Director Yes, Kash, this is Eran. Thanks for the small question. So this is the first quarter that we released NDR $50,000 for accounts, and we're super happy with it. And definitely, those customers have a lot of room to grow. We still have much more scale to having them. I would say that, over time, we'll