monday.com Ltd. Price & Performance (MNDY)

Hello, everyone, and thank you for joining us on today's conference call to discuss the financial results for monday.com's fourth quarter and fiscal year 2024. Joining me today are Roy Mann and Aaron Zimman, Co CEOs of monday.com and Elaron Glaser, monday.com's CFO. We released our results for the fourth quarter and fiscal twenty twenty four 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 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 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 [indiscernible] We close out Q4 on a high note, capping off an incredible year 2024 has been a period of transformation and growth with our business reaching new heights across every area. We've made substantial progress in solidifying our market leadership while driving innovation to meet the evolving needs of our customers. A major milestone this year was reaching $1,000,000,000 in annual recurring revenue. Underscoring the strength of our Work OS platform, and the increasing demand of our solutions. Our financial performance was equally exceptional in 2024. We achieved record operating margins and delivered record free cash flow, reflecting both the efficiency of our business and the Total revenue in Q4 came in at $268,000,000 up 32% from a year ago quarter and $972,000,000 in FY 'twenty four up 33% from the prior year. On the product front, we continue to make considerable progress in our multiproduct strategy. Monday.com has exceeded expectations and we added a record number of net new accounts for both CRM and dev during the year. We were also proud to be recognized as a leader in the Gartner Magic Quadrant in three different categories: This recognition further validates our strategy and our In 2024, we made a significant strides in our AI unveiling several new capabilities, including AI blocks.

Since AI was integrated into the Monday.com platform, users have approximately 10,000,000 AI actions This ongoing progress highlights our commitment to enhancing the user experience and driving greater efficiency through innovating AI solutions. One of the most significant milestones of 2024 was our strategic expansion into the enterprise market. We successfully grew our largest seat count to 80,000 seats signaling strong adoption and deepening enterprise customer engagement. All this enterprise expansion would not have been possible without MondayDB, our data architecture. In 2024, we completed the latest phase of MondayDB MondayDB two point zero. Enhancing the platform's scalability to support larger, more complex use cases. As we look ahead to 2025, we remain focused on continuing this momentum. Building on our achievement and further expanding our reach and impact with foundation in place we are excited for the opportunities to come. Let me now turn it over to Aran to walk you through some of the product highlights of this [indiscernible] Thank you, Roy. We're excited to announce that Monday service is now officially available to all customers. Monday Service is an AI first enterprise service management solution that helps service teams deliver exceptional support faster through smart AI powered automations.

Initial customer demand has been very strong. With Monday service already showing the highest cross sell of our new products and the highest ACV of the entire Mander product suite. As Roy mentioned, we have been very busy on the AI front. To make AI more accessible, we've introduced a flexible consumption based pricing model for AI blocks. Offering a baseline level of free usage for all plans. Organization with larger AI needs, additional usage can be purchased at different levels. In 2025, our AI strategy will be focused on three main areas: AI blocks, [indiscernible] and digital workforce. AI blocks will be expanded to provide more advanced ways to automate tasks. Through product power apps, AI will be deeply integrated into each product to address specific user needs. And finally, the digital workforce will include AI agents like Monday.com Expert, Deal Facilitator and Service Analyzer, which will offer actionable insights streamline processes for users. Looking ahead to 2025, we have a lot to be excited about. Our momentum is stronger than ever. Positioning us for continued growth and innovation. The success this year would not have been possible without the dedication and talent of the Money.com team. In 2024, we increased our workforce by 35% bringing our total employee adds count to over 2,500.

And expect strong hiring in 2025. As we move forward, we remain focused on investing in our people, delivering exceptional value to our customers and driving sustainable long term growth for our shareholders. With that, I'll now turn over to Eleron to cover our financial and guidance.

Thank you, Eiran, and thank you to everyone for joining our call.

Today, I'll review our fourth quarter and full year twenty twenty twenty four results in detail and provide initial fiscal year 2025 guidance.

As Roy mentioned, 2024 was an exceptionally strong year, Total revenue in Q4 came in at 68,000,000 up 32% from the year ago quarter and $972,000,000 in fiscal year 'twenty four, up 32% from the prior year. Overall NDR increased to 112% in Q4. We expect NDR to remain stable throughout 2025.

As a reminder, our NDR is a trailing four quarter weighted average calculation. The reminder 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. Fourth quarter gross margin was 89% In the medium to long term, we continue to expect gross margin to remain in the high 80s range Research and development expense was $48,100,000 in Q4 or 18% of revenue up from 16% in the year ago quarter. And $162,700,000 in fiscal year 'twenty four or 17% of revenue, up from 16% in the prior year. Sales and marketing expense was $127,800,000 in Q4, or 48% of revenue compared to 54% in the year ago quarter and $499,700,000 in fiscal year 'twenty four fifty one percent of revenue compared to 57% in the prior year. Net income was $57,300,000 in Q4 up from $33,700,000 in Q4 twenty twenty three. For fiscal year 'twenty four, net income was $183,300,000 up from $94,900,000 Diluted net income per share was $1.08 in Q4 and $3.5 in fiscal year 'twenty four, based on 52,900,000.0 of fully diluted shares outstanding respectively. Total employee headcount was 2,508 an increase of two zero three employees since Q3.

We expect to grow headcount by approximately 30% in fiscal year 'twenty five, with heavier investment in the first half of the year as we continue to ramp up hiring for our sales, R and D and product teams. Moving on to the balance sheet and cash flow, we ended the quarter with $1,410,000,000 in cash and cash equivalents, up from $1,340,000,000 at the end of Q3. Free cash flow for Q4 was 72.7 as free cash flow as a percentage of revenue was 27%. In fiscal year 'twenty four, free cash flow was 295,800,000.0 and free cash flow margin was 30%.

We remain on target to meet our Investor Day goal of generating over $1,000,000,000 in free cash flow from fiscal year twenty twenty three to fiscal year twenty twenty six. 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 twenty twenty five. For the first quarter of fiscal year twenty twenty five, we expect our revenue to be in the range of $274,000,000 to $276,000,000 representing growth of 26% to 27% year over year. We expect non GAAP operating income of 25,000,000 to $27,000,000 and an operating margin of 9% to 10%. For the full year 2025, expect revenue to be in the range of $10,000,000,008,000,000,000 dollars to $1,221,000,000 representing growth of 24% to 26% year over year. This forecast assumes a negative impact from FX of 100 basis points to 200 basis points. We expect full year non GAAP operating income of $134,000,000 to $142,000,000 and an operating margin of 11% to 12%. We expect full year free cash flow of $300,000,000 to $3,000,000 free cash flow margin of approximately 25%. Let me now turn it over to the operator for your questions.

Thank you. We will now begin the question and answer session. And our first question comes from the line of Pimjalim Bora with JPMorgan. Your line is open.

Great. Hey, thank you for taking the questions and congrats on a strong quarter.

I want to start with AI. It seems like your AI AI capabilities are seeing really strong momentum on AI actions. You introduced some AI credits. Maybe help us understand how these AI credits are supposed to work Seems like 500 credits is in the plan. What is how is that going to consume? Does that per AIM action? How are you defining an action? And if somebody wants to buy more, what does that pricing look like?

Hi, it's Roy. Thank you for the question. So what we wanted to do with this different pricing of consumption is that everyone can use it, like all our customer base. And essentially, we have like a starting plan, like you said, post 500 and action is everything that AI does within our platform. Like a summary [indiscernible] doing any kind of [indiscernible] to build a complete workflow and really automate things in a way you couldn't before.

And as you progress and use it more and more, in a consumption model, we have different plans that you can purchase more [indiscernible] Yes, understood. Okay. Eliran, one question on guidance here. The constant currency guide seems very strong, seems like about 26% or over 26% at the high end. Can you talk about some of those assumptions because you were seeing a little bit of a choppiness macro in Europe, how did that progress? What are you assuming for the guide? What are you assuming on pricing benefit? And then lastly, how should we think of contribution from kind of non core, non CWM products for 2025? Thank you. Sure, Pindjalyn. So with regards to 2020 guidance, what we took into account is, first of all, we saw a consistent demand trend The U. S. Demand is very healthy. The rest of the world including Europe and Middle East is stabilizing compared to what we have seen in November. We took into account the fact that MDR remained stable at 112 We expected negative FX impact as you stated because of geopolitical and strong dollar versus the other currencies. 65% of our revenues ARR. Is U. S. Dollar based in terms of reporting.

So we estimated around 100 basis points to 200 basis points based on calculations that we have done. We took into account the growth of 30% in headcount in 2025, And we didn't take into account, for example, your prior questions, and it any revenue from AI It's still early days to take it into account. And mostly, when we think about products, there is becoming CRM becoming more significant in terms of the contribution to the ARR. We already took it into account. Service is still just out of beta one amount of revenue, but it's growing really fast and [indiscernible] pretty much also took into account certain contribution. But overall, we see the trends that I mentioned as part of 2025 guidance as Anything on the pricing benefit?

On the pricing, so what we have said last year that we estimate between 2024 to 2026, $80,000,000 contribution The way we looked at it was around 30,000,000 in fiscal year 'twenty four, around $40,000,000 in fiscal year 'twenty five that is already baked into the guidance. And also there is going to be about $10,000,000 in 2026. Because pricing will be rolled out by July 2025. This is where we're going to end the kind of pricing rolled out that we have done started last year.

Thank you very much.

And our next question comes from the line of Alex Zukin with Wolfe Research. Your line is open.

Yes. Hey, guys. Congratulations on another great A great quarter. I guess maybe back to the pendulum question. If you look at what happened in the quarter for you guys with respect to Europe and The U. S, Kind of what actually transpired in the month of December? And as you think about the pipeline and specifically on the enterprise, did you see it being more seasonally weighted Did you see kind of any impacts from the changing competitive landscape Kind of walk us through a little bit of the shape of the demand curve in the quarter and what it's telling you about go as you really head into next year? [indiscernible] yes, like Elmer mentioned, The U. S. Demand has been pretty much healthy and stable throughout November and January and December.

Outside The U. S, like we stated, we saw a little bit of choppiness in November, but right now, judging what we've seen, including Europe as well, we see signs of stabilization. So that's it's great to see give us a lot of confidence going forward. Like Liber mentioned, there's some FX impact, but apart from that, that's kind of the environment that we're seeing going forward. Overall, I would say that gross retention continue to be at record levels, so very strong gross retention and MDR as well. Enterprise has been our fastest growing segment and it continued to beat like that. And we see the growth accelerating in the enterprise segment as well. So judging all those parameters together, it feels healthy and it feels like we're on track to fill our plans for 2025 Maybe I would just Alex, this is Adrian. Maybe just adding to Ron, something that we have said last year, as we see a transition in the business, PLG to SLG motion. We're also starting to see the results of each quarter coming in the back end of the quarter. So going into December like we used to see a more kind of flat in the prior years.

Now there is also skewed it skewed towards the end of each quarter. So we have seen good signs in December, when we compared to what we've seen in November back in Europe, Middle East last year. Perfect. And then with respect to the guidance guys, I'm not going to ask you about price. But what I'm going to ask you about is just given how much stronger the guidance looks, I think to what some people were expecting, Maybe just walk us through a how are you thinking about the conservatism and the prudence given changing go to market dynamics from a talent perspective this year as well as just how many products you have from service to AI blocks to CRM to dev How are you thinking about or layering more importantly in those assumptions into this guide relative to previous peers? And thank you guys. Yes.

So sure, Alex. So I will repeat what I said to Pingjalim.

So first of all, maybe one thing worth mentioning that this year I think is more unpredictable when you compare to prior years. The geopolitical situation across the world is to a certain extent there are something that you can't really predict. So this is also something that we took into account as part of our guidance. To your question on products, we have four products on the platform. We've now service being out of data Monday dev, Monday CRM, and Monday work management. So this is something that obviously we took into account. NDR continues to be stable at 110% 12% sorry The new products will contribute a certain amount of revenue. It's growing. But other than CRM that is now becoming more significant, we will see the results of the other product next year. So when we took all these into account, bear in mind that we also increased headcount last year in 35% and now we see the full impact of of this hiring last year. So we try to have a prudent I don't know what to call it, conservative or not. This is a responsible guidance based on what we know today.

And our next question comes from the line of Arjun Batya with William Blair. Your line is open.

Perfect. Thank you guys.

And I'll add my congrats Very nice end to the year here. One thing Roy, around that stuck out in your shareholder letter in regards to service I think you called out that it's the highest ACV across your product line that you're seeing. I understand, I know, I think it's still a small customer count given how early it is. But can you you walk through what the drivers there are? Like are you selling this product to larger customers? More add ons? What makes service higher ACV? And should we expect that to continue as customer count grows for that product?

Yes. Hi, Arjun. It's Ron. So yes, I think it's a combination of a few things. One is, we see every product I would say has a different go to market. But one thing that really stood out with Minden's service is that it feels like there's a big overlap we our existing customer base and the potential customer base for service. So relatively to other products, we see more momentum with cross sell to begin with. It's still low numbers, but just percentage wise, it feels like there's a big overlap between the audiences of who we already have as a customer and people that are interested in monthly service.

And that led to more mature customers buying into managed service. Also, it's more of a top down decision process. So we have management kind of involved in the process.

Ultimately if you combine those two things leads to higher ACV deals. More top down deals And it just feels like it had a lot of potential to grow into a more kind of mature ACV mid market enterprise going forward. [indiscernible] That's very helpful. Thank you. And then maybe to follow-up just when I'm looking at, I think some of the annual customer count disclosures you've given and if I look at Q4, I think that's customer adds for CRM and dev, it's the only thing that looks like there's a little bit of a slowdown Can you just help us understand what's going on there? Is that mostly your move upmarket and greater focus on cross sell or is there something else on the net new customer front that we should be reading into?

So Arjun, just want to make sure that I'm the question relates to the total number of customer or you speak about CRM and dev? Just want to make sure that I follow the question.

Yes. Thanks, Arun. It's a little bit of both. Maybe I think the total customer number also slowed compared to 2023 or sorry 2023 and then in Q4 CRM and Dev. I'm trying to maybe encompass all of it in one question.

Sure. So in terms of total number of customers, we are now at 245,000 customers. Which is more than I think most of our peers as we said in the past few times, we are going to focused on expanding within existing customer base, going up market. And we said that we are going to probably grow high single digits within the total number of customers. With regards to CRM and dev, this is related mainly to seasonality of performance marketing spend. In Q4, usually in of the year due to the holidays that are coming at the end of the year, Customer acquisition channel spend is usually lower than what we are doing before that. And it's similar to prior year. We allocate more budget to performance marketing spend at the beginning of the year.

Because we want to get the full impact of the performance rather than the second half of the year.

So this is, I would say, the main reason for the numbers that you're seeing.

Okay, got it. Very clear. Thank you.

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

Okay, great. Thanks for taking the questions here. I guess maybe just to start I want to ask on some of the, I guess, enterprise sales changes that are going on. I know that CRO left last quarter and it sounds like maybe there's some other changes, but how are you kind of thinking about how that search is going, how you're thinking about kind of future changes in the go to market structure or strategy within that? Just yes, any more color or details around that would be helpful.

Yes. Hi, Steven. This is Iran. So yes, definitely, we're looking for a new CRO We've been pretty invested in the process. Hopefully, we're kind of looking to finalize this process by the end of Q2. We're looking for a person with a proven track record and deep understanding of the complexities of scaling our market. I can share that we see great candidates and hopefully we'll get somebody across the finish line in the next few months.

I would say that given all that, In the last few months, we've seen great results from the CR organization. You can see that with the enterprise adds and overall momentum feels good. So definitely looking for a replacement, but so far the management within the organization is doing phenomenal work to drive results forward.

Okay, great.

That's great to hear. I guess maybe following up on that.

It sounds [indiscernible] there's maybe even some catch up spend in that kind of organization and further kind of investments coming from a headcount perspective this year, just I guess what is it that you're seeing out there maybe that's leading to the confidence to kind of invest behind that and just kind of what are you kind of seeing in the pipeline that leads to yes, the confidence to to fully back that motion. [indiscernible] is Ron again. So yes, definitely, we continue to invest into the sales org. Overall, between sales and channel partners, managers, our total quota carriers have grown to almost 400.

Three ninety five by the end of Q4.

It's a significant increase Q over Q. Overall, we feel confident scaling the organization for a few reasons. First, we see the results. And see that we have a lot of potential for expansion within our existing customer base. We have those additional products that amazing fuel for our sales team. Our existing customers are scaling more to the enterprise. Money2B was a big unlock for enterprise customers to scale even further. So it just feels that within our own customer base, there's a lot of potential for growth in we can add even more account managers to expand our customer base. And also performance marketing continue to be strong and we've seen great demand not just [indiscernible] but across the other products as well.

So if you put all those things together, it just feels that it's very healthy to increase the sales organization. We see the ROI for that and we continue to do in 2025.

Okay, perfect. Great to hear. Thanks for taking the question. Next question comes from the line of Guillaume Nastalovek with Goldman Sachs.

Your line is open. Good morning, everybody. It's Gillian for Cash. Thanks for taking the question. I have one for Roy and Aran and maybe a follow-up if I can. First, if we can talk about AI, right? It's so to those top three pillars you laid out as your strategic priorities in 2025. I'd love to get your perspective on how you see the AI landscaping landscape evolving over the next few years. What do you envision this meeting for Monday, like how do you believe the engagement with the platform may change? And how are you positioning the company to take this opportunity? Yes. Hi, Gil, it's Roy.

So when we look at AI and where Monday plays in it, we feel we have a huge power of democratizing it, meaning really giving the power to people to build whatever they want.

To harness AI into their business, into improving efficiency, And that's what we're doing and that's the feedback we get from the beta we have with blocks and what we've seen customer do. And going forward, this is what we're planning to go for next in the vision. To actually give people technology they can use and they can implement like right off the bat and that it's easy and fun to use.

Yes, very clear. And so the second question I had was a little bit more on the record number of net new CRM and dev accounts that you mentioned you are able to add this quarter. Can you talk about what drove that momentum? Is this a leading indicator or byproduct of the headcount growth that you guys saw this year? Or is it a result of maybe a multitude of different factors?

Yes.

I think overall, we're very happy with the this is Iran with the adds of customers both in CRM and dev, I would say that converted Q3, Q4 was a little bit slower and we met mentioned that because of performance marketing seasonality. But going to 2025, we'll definitely see the momentum continues with both of those products. I would say that in both, we invested more into going up market in each one. Of those products adding more features and functionality. Which will also contribute not just to the total number of customers, but to higher ACV in both. That's kind of what we focused on right now going forward.

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

Thanks. Just back on the hiring front. When you think about quota carrying sales rep hiring versus the stated goal of 30% total growth. Are you growing your reps at or below or above that line? And then when you mentioned three ninety five quota reps, Can you just update us what that growth was for '24 over '23 and just give us a sense of what you're seeing from a hiring perspective?

Yes. Hi, Bren. This is Arag. So So for the first part of your question, the year over year growth in terms of total quota carriers is about 26%, so a little bit below the overall 30% that you mentioned. We plan to ramp up our hiring for sales into the first half of twenty twenty five. So this is kind of the plan going forward for 2025. Just a year ago in Q4 of twenty twenty three, we had about three thirty total quota carry. So now almost 400.

That's a significant growth in the last year.

Okay, great. And now with service added in, when you think about the packaging, the go to market kind of the as you move to enterprise, these we've seen larger companies do these ELAs or bundles. I mean, how are you thinking about how your packaging is evolving to make it easier to consume the breadth of all these new solutions you're coming [indiscernible] [indiscernible] So look, I think going forward definitely we a future where we sell a bundle of products. Definitely in the ones that we see high percentages of cross sell, think I mentioned this earlier, but I think what's unique with the Mondi service release that we see high percentage of cross sell So that's definitely an indication from work management. So that's definitely an indication for us that potentially work management and Monday.com service can be packaged together because for a lot of people, a ticket or a request is basically a beginning of a project or a workflow So those two products really work well together. So going forward, we might sell those products in a bundle to begin with, but currently it's mostly focused on cross sell. Between existing customers.

Great.

Thanks. Next question comes from the line of Brent Bracelin with Piper Sandler.

Your line is open.

Thank you. Good afternoon, good morning.

Wanted to double click in North America. It looks like growth in North America accelerated 200 basis points sequentially here. More than offsetting a deceler you saw internationally. What What drove the strength in North America? Are you seeing SMB optimism start to kind of drive activity? Is it more influence by large enterprise expansions? Just walk through the strength that you saw in North America this quarter here and and what drove that acceleration? Thanks.

Yes. Hi, Brian. This is Iran. So So I think it's mostly been enterprise customers that are driving that. I mean, we mentioned that we have some choppiness in November in EMEA, but that seemed to be stabilized. But I think overall, if we look at longer term trends, definitely North America, our enterprise segment has been the strongest in sort of and also we're reaching bigger and bigger customers. So that's definitely a very significant driver in that region.

Yes. Brent, this is Elivhan also to run I also think this is we are gaining market share. One of the things that we have seen last year is that we are basically we have a strong machine that works really well There has been some changes in our competitive landscape. Which allowed us actually to take market share, to bring market share, Some of our competitors also focus on enterprise, so it leaves the down market to us in terms of [indiscernible] few trends that are actually pushing us into gaining more market share and increasing our footprint in North America.

Great to see that. And then just as a follow-up here, I know historically sales dev, these were largely new products that were landing new customers I think you mentioned service I know it was just kind of in beta here early release, but it was something like 60% cross sell of the service customers, which is very different [indiscernible] maybe the cross sell, why is service different and And are you starting to see broader cross sell opportunity across all platforms? Thanks.

Yes.

So this is Ron.

So overall, we see more cross sell between all products, but like I mentioned, lot of synergy between Monday Service and Monday Work Management, mainly because You know, month to service is usually the beginning of a process or workflow. So a lot of people kind of use Mindo Service to manage the request and the admin around the request. And then kind of move on to actually executing the workflow. I think that's a big benefit also in terms of the kind of our market position for customers, but also shows the strength of having multiple Monday.com products. It just feels like the overlap between the buyer for management and the buyer from under services is very large compared to other products and synergy between the product is is very high as well. So that would kind of drove the very high crossover percentage that we see.

Okay. So just to clarify, you're not seeing service and sales bundled and cross sell together, you're seeing service and work management more often.

Yes.

I mean, we also see Monday.com and Monday CRM as well, but just the percentage has the services are way higher.

Got it.

Helpful.

Thank you.

Next question from Michael Berg with Wells Fargo. Your line is open.

Hi, congrats on the quarter and thanks for taking my question.

Want to double click on service one more time.

Maybe you could help us understand or provide a little bit more color on what it looks like when you land with service initially. Are you landing alongside existing other service solutions? Are you displacing something? Maybe you could help us understand what the customers have in place when you are lending whether they are monday.com customers or not?

Yes.

Hi, this is Arun.

So first of all, Timorji mentioned it's not just IT service.

What we've seen from the product launch is that obviously we have IT service, but we have HR requests, operations, finance requests, marketing requests, customer support. So it's a variety of different departments within the organization.

In terms of competition, sometimes we land with another vendor and sometimes we are the only vendor. Sometimes we compete with other players in the market. And win the deal. So I would say it's a combination of all the above. Mainly, I think what we again, still early days, but from what we start with customers, they love the flexibility of the platform. I think all the big players in this industry have high degree of flexibility and this is something that we offer from the very beginning. So the fact it's built on the Monday.com platform is a huge benefit. And also the fact that in a way Monday.com them is a centralized way to work And because Monday Service is so deeply integrated with Monday CRM and work management, that also give us a huge benefit over other players in the market.

So that's kind of the dynamic we currently see. But as I've mentioned, still early days. So I think as time goes by, we'll have more clarity around this.

Helpful. Then one quick follow-up for you, Eleron. On NRR, it inflected in the quarter, pretty much every metric mean, you talked about stabilization on the NRR moving forward. Can we think about the impact of price there and how that's baked into your comment for stabilization of that metric for 2025?

Sure, Michael. So in terms of just by way of reminding to everyone, we are reporting weighted average of the last four quarters. So we said that gross retention is improving significantly. We have seen good trend last year of increasing numbers. So now we're starting to see the results of this. And we said we're going to be last year, we said we're going to be slightly above 110. And 111, we will see the tick up as we start this year and this is what happened.

We estimated the pricing adjustment will positively be contributed around 100 basis points. To the reported NDR in fiscal year twenty twenty five.

Next question comes from the line of Michael Fong with Bank of America. Your line is open.

Thank you for the questions this morning. I wanted to ask about the success with larger customers that you've seen where you [indiscernible] the greater complexity of those deals, expansion process, May I also come back to a comment you made earlier about market share gains and maybe some consolidation you might be seeing among the larger customers? Sure. Michael, this is Elivan.

So maybe again to take you step back, we have started a process of improving the platform. Two years ago. With MondayDB, So we had our plan to make sure that the platform is going to be scalable we're going to address speed, performance and scale. So we are now in MongoDB 2.1. And we keep improving the infrastructure to allow bigger larger customers to work on the platform. In addition to that, we hired people throughout the hiring process of our year going into this year that are more familiar with selling to the enterprise customers in terms of mid market and enterprise. And this is the process that we continue to do We invested in the depth of the product, not only on the breadth of the products, although we have Monday service. So all of that together [indiscernible] the acknowledgment of the market that Mondi is indeed a platform that can be used within larger and larger customers.

Also having in mind the fact that we took market share from competitors also So we said that enterprise is our fastest growing business segment. The sales teams are performing well, particularly in The U. S. And you can also see the increase in 50,001 customers NDR that is related to large contract expansion, sorry, with the enterprise customers. Of the above, all of the things that we have done over the past, I would say, two years the investment in people, in technology, in product is something that is driving the business forward into the enterprise. Great.

Thank you for the color. One more quickly if I could.

I guess the backdrop of the strong net adds for CRM and dev and your comments on the macro and adding more quota carrying reps, Is there any reason to believe that net additions slow in 2025 for CRM and dev?

Yes. This is Aron. So look, it might slow a little bit.

I mean, kind of hard to predict. But overall, we continue with strong momentum performance margin. I would say that overall, our strategy not just for CRM and DEV, but the company itself is to go up market and have higher customer ACVs. So I would say that our product focus is not Certainly to add a lot of very small businesses, but rather to scale within our existing customers in CRM and that and bring larger customers. So I would say definitely in terms of revenue and ARR portion, we continue to accelerate in the product. It's just going to be a different mix between amount of customers and ACV. Going forward.

Yes. Hi, it's Rory. Like adding to what Ron said, like the decision to make the price increase is also a decision towards that end, okay? We preferred larger customers, more in threat rather than increase the number of total customers.

Great. Thank you for the questions.

I'd like to remind everyone Thank you. Our next question comes from the line of Tom Blakey with Cantor. Your line is open.

Hi. Thanks for taking my question. I might I might have two here. The just going back to AI being a Kind of parabolic increase in AI interactions.

Couple of clarifications and a longer term question.

Is it safe to say that there was close to zero, if not zero AI revenue in calendar twenty four? I think you mentioned you don't include any AI revenue in your calendar twenty five guide.

Just wondering what you're seeing in terms of that big uptick in interactions and what if you look out a little bit, where you think AR revenue could be at this company in the longer term? And I have a follow-up.

Hi, it's Roy. So It's really too early to say because what we saw is increased usage and then you introduce pricing and then you want to see customer reactions and how they grow. So we didn't predict anything and we couldn't bake it in. Going forward, I think when we look at the market, we see like so many different pricing strategies for AI. Some is for winning markets, is for revenue Like we feel confident in the blocks and usage of actions as addition value that customer are willing to pay for, but we'll have to wait and see how much this is true and what we can expect looking forward.

And our first question comes from the line of Derek Wood with TD Cowen. Your line is open.

Great. Thanks.

Congrats on a strong quarter. And I wanted to talk about come back to the larger deal theme and you guys highlighted in the shareholder letter you captured an 80,000 seat customer in 2024, which I know you've about previously.

Could you talk about how you feel about the opportunity to see more multi thousand seat engagements in 2025 versus 2024. Just wondering if can see a notable uptick in that kind of deal activity or if that will kind of be gradual over looking out over the next few years? Sure, Derek. This is Elilan.

So the way we do it is either we land bigger to begin with and then like a top down transaction that we are now seeing more and more. So this is one way to do it and we are the hiring in the sales organization, the changes that we are now doing in the sales organization, the profile are also contributing to that. On the other hand, we have customers that grew with us for a few years And once they unlock the value of the platform and we are adding additional products, they are doing consolidation on Monday. We are replacing other vendors in terms of switching So the trend, I think this is something that we started to see, I would say about one point five years ago and now we're seeing more and more. It comes with the growth of the platform, the additional product and the profile of the people that we have. Together with acknowledgment of Monday.com a solution that can address enterprise level solutions. Needs, sorry.

Next question comes from the line of Itay Kidron with Oppenheimer. Your line is open. [indiscernible] Guys. I guess a couple of small ones for me.

Following on Derek's question on the 80,000 seats, great to see the Maybe you could give us little bit more color on the the breadth of 10 ks plus seat customers.

How many of those are in the wild? And then second question is regarding AI. Do you see any risk of seed cannibalization with the adoption of your AI solutions?

Yes. Hi, Ty, it's Ron. So look, I think like everyone mentioned, overall, we see definitely more potential for larger deals. We had those expansion also this quarter and we continue to have potential within our existing customer base for more deals like that. So it's kind of hard to predict because it's it's happening over a few quarters, but definitely something that might happen as well in 2025. Regarding AI, so we made decision, like Corey mentioned, to base it based on consumption and not based on seats because it's kind of hard to predict the long term trends, but if AI can replace some manual work and automate some processes we want people to be able to scale on that regardless of the fact that they're adding more people or not. So that makes a lot of sense for us to base it to base the pricing based on consumption I don't think it will cannibalize seat count that we have, but just offer different path of capability for our customers based on usage and not necessarily people. Next question from D. J. Hynes with Canaccord.

Line is open.

Hey, guys.

So on one of the slides in your deck, the slide is where do we want to go from here, It lists expanding core work product lines as a key initiative. So I guess that where does Monday go next? Any thoughts? [indiscernible] one big thing is really deepening each one of our products into a suite like we took a conscious decision to deepen everything.

Like what Elifan mentioned, the platform itself, the scalability, robustness, that you can rely on it more and more. Each one of our products like we released in CRM The marketing solution and we have like massive markets to go after And so we want to deepen the offering. And then AI is also a huge thing Blocks is one of them. But we're also embedding AI within each one of the products in a way that really accelerates the vision we have. Like in project management, it will help turn all their portfolio into being way more predictable. For example, CRM sell more. And so we have a very clear roadmap of like giving the same value just more fast better and deeper.

Next question from Jackson Eyder with KeyBanc Capital Markets. Your line is open.

Great. Thanks for taking our questions.

So my questions are around the sales led growth function. Just curious how you guys are managing the puts and takes on sales cycles as you begin to stack up multi product deals that might elongate some sales cycles and just make things generally more complex. I'm curious about just the basic blocking and tackling you're doing around those sales cycles? And then the other thing is, what would be What would be like the best indicator of the efficacy of the sales led growth motion that we should be kind of tuning into? Is there a way to split out maybe the enterprise customer lands versus existing customers or kind of graduates into that 50,000 or 100,000 But yes, just some of the KPIs that we should all be looking out for to see if this sales led growth motions really working out. Thank you.

Yes. Hi, Jackson. It's Ron. So regarding the first part of your question about the product, so definitely, we put a lot of thought into this. So I would say it's a combination of a few things. One, we have customers lending multiple marketing campaigns. Some lend for our CRM products, some for work management. That service, etcetera. So right now, the way it works, we have specialized teams for each one of those products that are handling new customers depending on the products that they chose. And we basically scaled those things based on the demand that we see and just to scale the product.

And then in addition to that, we have account managers that are already engaged with customers and when they identify an opportunity for expansion, whether it's through our big brain system, that identify new people joining the organization from one of the departments or where it's by relationship and conversation, We have special functions called overlay, which basically helps them cross sell with people that specialize in those area, whether it's CRM or service and so on. And they help them close kind of initial deals with decision makers in the organization. So we have different functions depending on the phase of the sales process that help go through this and we're really kind of shaping that in terms of scale and just create an economy for them to kind of build their own sales strategies.

And to the second part of the question about I think you mentioned about securing the sales org and selling to larger enterprises. So also there, we have AEs, account executives that closed new deals. For each segment. So we have some SMBs, some for mid market and enterprise. It's a totally different sales process for each one.

And we have the same segmentation for account managers. So we really kind of segmented the business based on products and then based on company size. And for each one, we have different kind of dynamics in terms of the sales process and also time it takes to close the deal. So this is kind of how we think about this now and obviously obviously it will evolve over time.

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

Hi, everyone. Really nice quarter here. I guess my question is on the the digital workforce strategy part of your AI initiatives here. For this year, we've seen many other vendors release different agents and when they have, it's kind of created a halo effect.

For customers having to maybe buy more components of the solution to really make those agents work 50 think about agents or digital workforce on the Monday platform here this year. I guess what parts of the platform does it customer really need to kind of create this? Is it just the core work management system or is there other pieces of functionality add ons that they need to also purchase to enable this technology?

Hi, it's Ray. So like we see agents as another layer on top of the Work OS, meaning it's like across everything. Because when you work with with an agent, you'd love it to know first of all, you'd love to control what it knows, but you eventually want it to be a cross product. Okay? And I think that's a lot of the power of Mandy. Let's say you want the Monday expert agent to create a dashboard across a lot of different products. So we will be able to do that. And so we didn't we don't have a plan for monetization for that part yet. I think we opened it up So we will have in the future once we see the different agents. Okay? And so I'm excited about this because I think it's like a massive opportunity for us to build a marketplace, a lot of agents that can do different things and you can communicate with them and achieve way more. And obviously, because it's on top of the Monday.com platform, each one of our agents will be able to do a lot of things because the platform and Really [indiscernible] powerful things you'd want them to do and not just like talk with them [indiscernible] Next question from Taylor McKinney with UBS.

Your line is open.

Yes. Hi, congrats on the quarter and thanks so much for taking my question.

Just focusing on the outlook for stable NRR. So the math seems to be pointing to an in period NRR number that is higher than the 112% trailing twelve month metrics. So first, is that true? And then second, I guess why couldn't we see NRR trend up? Is that just conservatism? Are you not yet maybe seeing seat expansions recover in this macro? It seems that that would just be more biased up given the cross sell opportunity focus up market. So, Eleron, can you just help us understand some of the puts and takes there? Thanks.

Yes.

Yes, sure, Tello. This is Elerian. So first of all, we have been very encouraged about MDR improving faster than we initially anticipated anticipated back in 2024 and we were very transparent about it. On the other hand, given recent demand volatility and macroeconomic uncertainty, we're adopting a bit more cautious outlook on NDR because I think we are in some places are not yet the world in terms of global headwinds, economy headwinds are not yet out of the woods. So we're trying to be a bit more prudent for that front.

Our next question comes from the line of Alan Perovski with Scotiabank.

Your line is open.

Hey, thanks guys.

Can you talk about how based on your AI product roadmap, how are you thinking about a few years from now what an average customer could be spending for AI credits relative to their seat license cost That's like predicting the future kind of question. So really, we just released it. We'd love to see more data from customers. So we'll be able to answer those questions. [indiscernible] And that ends the question and answer session.

Ladies and gentlemen, this concludes today's conference call. Thank you all for joining. May now disconnect. Please wait. The conference will begin shortly.