Q3 2024 Earnings Summary
- Total AI actions increased by over 250% compared to Q2, and AI blocks grew by 150%, showing strong customer adoption of AI features and presenting significant opportunities for future monetization.
- Price increases are exceeding expectations, with positive customer reception and better-than-anticipated retention, leading to an expected additional revenue contribution of $80 million between fiscal '24 and '26.
- Significant expansion within large enterprise customers, including one customer expanding from 25,000 seats and adding multiple departments like consulting, infrastructure, finance, operations, and sales, demonstrates strong product adoption and potential for further growth.
- The company experienced a decline in net new customer additions, partly due to price increases and a strategic shift towards larger enterprises, which could limit future revenue growth from new customers. ,
- Management noted "continued choppiness in the macro" and a "cautious spend environment" among customers, leading to fewer enterprise customer additions and potential limitations on growth in the near term. , ,
- The slower-than-expected growth in monday dev product, as the company pivots to focus on developers, may impact overall growth prospects.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q4 2024 | no prior guidance | $260M–$262M (28%–29% YoY) | no prior guidance |
Non-GAAP Operating Income | Q4 2024 | no prior guidance | $29M–$31M | no prior guidance |
Operating Margin | Q4 2024 | no prior guidance | 11%–12% | no prior guidance |
Free Cash Flow | Q4 2024 | no prior guidance | $63M–$66M | no prior guidance |
Free Cash Flow Margin | Q4 2024 | no prior guidance | 24%–25% | no prior guidance |
Revenue | FY 2024 | $956M–$961M (31%–32% YoY) | $964M–$966M (~32% YoY) | raised |
Non-GAAP Operating Income | FY 2024 | $100M–$105M | $121M–$123M | raised |
Operating Margin | FY 2024 | 10%–11% | 12%–13% | raised |
Free Cash Flow | FY 2024 | $270M–$275M | $286M–$289M | raised |
Free Cash Flow Margin | FY 2024 | 28%–29% | ~30% | raised |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Macroeconomic headwinds and choppy spend environment | Mentioned in Q1 ( ), Q2 ( ), and Q4 2023 ( ) as a continuing challenge, with customers remaining cautious. | Q3 2024 ( ) reiterates ongoing choppiness and cautious spending, impacting enterprise growth. | Persistent theme; conditions remain unsettled with no major improvement. |
Price increases and their effect on retention and growth | Seen in Q1 ( ), Q2 ( ), and Q4 2023 ( ) as positively received, contributing incremental revenue. | Q3 2024 ( ) shows continued positive impact on retention and additional revenue beyond initial expectations. | Strengthening impact on revenue; rollout remains on track with minimal churn. |
Enterprise expansion and upmarket traction | Highlighted in Q1 ( ), Q2 ( ), and Q4 2023 ( ) as a major growth driver with longer sales cycles but higher deal values. | Q3 2024 ( ) notes larger deals, though macro headwinds have slowed some activity. Significant expansions continue. | Ongoing push to capture larger customers, balanced by lengthier deal cycles. |
AI adoption, feature usage, and uncertainty around monetization | Introduced in Q1 ( ) and expanded in Q2 ( ), with Q4 2023 ( ) still in early monetization stage. | Q3 2024 ( ) reports strong usage growth (AI actions +250%), but no set timeline for monetization (possibly 2025). | Rapid adoption; monetization remains tentative. |
Shifts in sentiment for monday dev | Q1 ( ) through Q2 ( ) and Q4 2023 ( ) show strong adoption and steady growth with new features. | Q3 2024 ( ) indicates a slower-than-expected growth rate, partly due to pivoting focus toward developers. | Temporary slowdown as strategy evolves, though long-term potential remains. |
Partner network | Discussed in Q1 ( ) and Q2 ( ), with no reference in Q4 2023. | Q3 2024 ( ) confirms continued momentum, with more specialized partners helping onboard larger customers. | Still critical in revenue composition; specialization is growing. |
Potential large impact from AI initiatives, enterprise deals, and pricing strategy | Q1 ( ), Q2 ( ), and Q4 2023 ( ) identified these as major levers for future growth. | Q3 2024 ( ) reaffirms significant opportunity in enterprise upsell, AI-driven adoption, and ongoing price rollout. | Likely to shape the company’s long-term trajectory and drive future gains. |
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Net Retention Rate Improvement
Q: Has NRR turned the corner, and what's driving it?
A: NRR increased to 111%, ahead of expectations. This improvement is due to moving up-market and the price increase contributing 100 to 200 basis points. Gross retention is at a record high, and we foresee continued improvement next fiscal year. -
CRO Transition
Q: How will you manage the transition with Yoni leaving?
A: Yoni will remain in his role until year-end and then stay as an advisor until a new CRO is found. We're confident in finding a suitable replacement globally and have an orderly transition plan in place. We believe things will remain stable, supported by our strong leadership team, as we have ambitious plans for 2025. -
Demand Outlook and Guidance
Q: How is demand shaping up towards year-end and next year?
A: Demand has been stable and broad-based. We see strong momentum from SMBs and are moving up-market. We expect demand to get slightly better next year, though there are still signs of choppiness in some segments. Overall, we have strong momentum but acknowledge some market uncertainty. -
Price Increase Impact
Q: How is the price increase affecting growth and customer adds?
A: The price increase is proceeding well, with about 50% of customers transitioned. We expect a $30 million impact on fiscal 2024 revenue, up from the previous $25 million estimate. While we see fewer new customer adds due to the price increase, we're acquiring higher-quality customers with more potential to scale . -
monday Service Progress
Q: What milestones are needed for monday Service to reach GA?
A: We're finalizing features like the customer portal and AI functionality. We want to ensure the product is mature enough to scale within existing mid-market and enterprise customers. We're close to launching the full release, and customer feedback has been very positive. -
Sales Hiring and Strategy
Q: Any impact from sales hiring, and how will roles change?
A: Sales hiring was slower than anticipated but is expected to ramp up in Q4 and into fiscal 2025 . Our sales teams focus on SMB, mid-market, and enterprise segments, with Account Executives acquiring new business and Account Managers expanding existing accounts. We plan to scale this model and invest more in larger accounts. -
CRM Traction and Future Plans
Q: What's the update on CRM progress and future milestones?
A: We're scaling CRM to serve larger businesses, enhancing infrastructure to support large data sets, and adding AI features to expedite the sales process. CRM remains a strong growth area, and we continue to invest in it. -
M&A Opportunities
Q: Are you considering M&A for AI capabilities?
A: Yes, we have an M&A team constantly monitoring the market for opportunities. Given our cash reserves and strategic goals, we're exploring potential acquisitions when we find the right fit. -
Competitive Landscape
Q: How is competition impacting your move up-market?
A: As we pursue larger deals, we encounter more competition. While many new adoptions are still greenfield, customers do compare us with competitors, especially in CRM. We continue to focus on offering connectivity across organizations. -
monday Dev Progress
Q: Why has monday Dev growth been softer than expected?
A: Growth in monday Dev was softer as we pivot to focus on developers . We're refining our go-to-market strategy and adding developer-specific features. While this may slow net adds short-term, we're confident in the product's long-term potential.