Project management software maker Monday .com (NASDAQ:MNDY (NASDAQ:MNDY)) beat analysts' expectations in Q3 FY2023, with revenue up 38.2% year on year to $189.2 million. Guidance for next quarter's revenue was also better than expected at $197 million at the midpoint, 1% above analysts' estimates. Turning to EPS, Monday.com made a GAAP profit of $0.15 per share, improving from its loss of $0.51 per share in the same quarter last year.
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Monday.com (MNDY) Q3 FY2023 Highlights:
- Revenue: $189.2 million vs analyst estimates of $182.5 million (3.7% beat)
- EPS (non-GAAP): $0.64 vs analyst estimates of $0.21 (212% beat)
- Revenue Guidance for Q4 2023 is $197 million at the midpoint, above analyst estimates of $195 million
- Free Cash Flow of $64.89 million, up 41.3% from the previous quarter
- Net Revenue Retention Rate: 115%, down from 120% in the previous quarter
- Customers: 2,077 customers paying more than $50,000 annually
- Gross Margin (GAAP): 88.5%, up from 87% in the same quarter last year
Founded in Israel in 2014, and named after the dreaded first day of the work week, Monday.com (NASDAQ:MNDY) makes software as a service platforms that helps teams plan and track work efficiently.
Project Management SoftwareThe future of work requires teams to collaborate across departments and remote offices. Project management software is both driving this change and benefiting from it. While the trend of collaborative work management has been strong for a while, the Covid pandemic has definitively accelerated the demand for tools that allow work to be done remotely.
Sales GrowthAs you can see below, Monday.com's revenue growth has been incredible over the last two years, growing from $83.02 million in Q3 FY2021 to $189.2 million this quarter.
Unsurprisingly, this was another great quarter for Monday.com with revenue up 38.2% year on year. Quarter on quarter, its revenue increased by $13.51 million in Q3, which was roughly in line with the Q2 2023 increase. This steady growth shows that the company can maintain a strong growth trajectory.
Next quarter's guidance suggests that Monday.com is expecting revenue to grow 31.4% year on year to $197 million, slowing down from the 56.9% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 26.8% over the next 12 months before the earnings results announcement.
Product SuccessOne of the best parts about the software-as-a-service business model (and a reason why SaaS companies trade at such high valuation multiples) is that customers typically spend more on a company's products and services over time.
Monday.com's net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 115% in Q3. This means that even if Monday.com didn't win any new customers over the last 12 months, it would've grown its revenue by 15%.
Despite falling over the last year, Monday.com still has a good net retention rate, proving that customers are satisfied with its software and getting more value from it over time, which is always great to see.
Key Takeaways from Monday.com's Q3 Results Sporting a market capitalization of $6.76 billion, Monday.com is among smaller companies, but its more than $1.05 billion in cash on hand and positive free cash flow over the last 12 months puts it in an attractive position to invest in growth.
It was good to see Monday.com beat analysts' revenue expectations and show impressive free cash flow. We were also glad its full-year revenue guidance came in higher than Wall Street's estimates. On the other hand, its net revenue retention fell. Zooming out, we think this was a strong quarter, showing that the company is staying on track to profitability, while still growing fast. The stock is up 9.7% after reporting and currently trades at $154 per share.
The author has no position in any of the stocks mentioned in this report.
