Business Breakdowns
· Ben Hensman
[00:00:00] S1: Sales has evolved really significantly. We've been using this timescale of looking at the business pre-IPO in 2019 and coming through to present day. The primary path to market back in 2019 primarily to small businesses was self-serve. So a significant performance marketing and solution-based selling approach, driving inbound and self-serve onto the platform. Those were the very early days as well of expansion-based selling and using customer success reps to identify use cases within businesses and identify champions and decision makers within the organization to advance use cases. And those were also the early days of Monday's partner channel, which is now really materially scaled. If you look at the mix of ARR added in 2024 versus 2019, it's completely different. Self-serve—and this is added ARR in the total year—was about 40% of the dollars added. Expansion or outbound sales were about 40% and then partners represented 20% back in 2019. That was 70% self-serve and the remainder mixed between sales and partners. So a totally different change. And that was really important for serving the enterprise as was defining the product and the use cases in more specific ways for the enterprise. But many, and I would say most customers that are enterprise scale with Monday.com started as a very small individual team or a small initial deployment of somewhere between 10 and 100 seats. It's only recently that they've started selling much, much larger seat counts. If you look at the last couple of years, in 2022 their largest customer was 7,000 seats. Now in 2024 that's 80,000 seats. Wow. So those customers have expanded over time, but the initial deployments for some of those larger enterprise businesses, and these are large banks or large health services companies, have increasingly started with much larger deployments and sometimes top-down sales.
· Matt Reustle
[00:00:00] S0: You've alluded to the various structures, but what does a contract look like today? You have seat-based pricing, is it usage-driven? How do they go about structuring the pricing of a contract term and anything else that's relevant in there?
· Ben Hensman
[00:00:00] S1: Sure. So this is a traditional SaaS model, so it's priced per seat, but it is tiered based on usage and the depth of usage and the functionality that the customers are using. So at the small business end, the prices range from 10 to $30 a month. And the tiers are based on how customers are using different automations, integrations. Those have different tiers and lifts, monitoring-type functionality. So if you're using multi-team or multi-project dashboards, moving into dependencies and calculations and more sophisticated use cases, you move into another tier and then there's another tier for enterprise. So when you're moving into enterprise-grade scaling, SLAs, security requirements and governance permissioning, premium integrations, all of those things are possible in the enterprise plan. What you see typically is that customers, and this has been historically true of Monday, and we can talk about how this flows through to Financials. About 70% of customers have typically moved into upfront billing. I mentioned that was a feature from the very beginning. Today that's about 80% of customers running upfront billing. And so that leads to a very efficient cash model. You've got different areas of expansion that customers can move through that allow those accounts to expand really, really quickly. And so beyond those tiers of pricing, we think of the revenue model as really having five key levers. The first is seats and team expansion. The second is the tier expansion that I've talked about. And then recently we've also seen them move across geographies in a much more concerted way and give autonomy to individual geographies. They've been selling into many, many countries from the very beginning. But now in recent times, there's been a real concerted effort to build capabilities individually in APAC, in EMEA, in North America and the rest of the world. We've also seen them move into product cross-sell and so those can layer on top of the original use case. If you come in as a customer on work management, you can then expand into CRM, you can expand into service or dev. And then most recently, pricing has been a lever of growth as well. And it historically hasn't been part of the mix. But in 2024, the company went through a material pricing adjustment across products and segments and they've executed on that really successfully.
· Ben Hensman, Matt Reustle
That drove an additional 30 million of revenue in 2024, or about 4 points of growth. And price will continue to flow through into their 2025 and to a lesser extent their 2026 numbers. But it was an interesting test of how deeply the customers used the product and how important it was to them and to the partners that sell Monday as well. And the feedback was very positive. And the churn has actually improved to record levels in terms of gross dollar retention. [00:00:00] S0: On that point of whether it's stickiness, the ability to retain customers. When you think about the various offerings that they have, work management, CRM system, are there certain segments that really have a stickiness to them in terms of low churn? Is that something they break out or differentiate and how do you think about it? [00:00:00] S1: Yeah, I think the way that we think about churn within Monday is twofold. One is the importance of the use case and the other is the level of commitment from the customer. And often that is correlated with size, but it's not always correlated with size. You have a lot of small business customers who are incredibly committed and use it for core workflows. There are two things that define whether a customer will move into a really favorable churn profile. One is the importance of the use case and how quickly that scales. And the second is the billing and the commitment. Are they billing and paying upfront? Are they willing to expand and explore other use cases?
· Ben Hensman, Matt Reustle
[00:00:00] S1: Yeah, I think the way that we think about churn within Monday is twofold. One is the importance of the use case and the other is the level of commitment from the customer. And often that is correlated with size, but it's not always correlated with size. You have a lot of small business customers who are incredibly committed and use it for core workflows. There are two things that define whether a customer will move into a really favorable churn profile. One is the importance of the use case and how quickly that scales. And the second is the billing and the commitment. Are they billing and paying upfront? Are they willing to expand and explore other use cases? [00:00:00] S0: In my mind, the investment in a CRM system is insanely painful. So to consider changing is a major overhaul. Whereas a project management, once you cycle off a project, you can theoretically switch with a bit less friction. [00:00:00] S1: Yeah, I think that what you often see is while an individual project might be the starting point for using Monday, it might be the catalyst to try it. What we typically see is that customers will see the benefits of it and see how they can use it on an ongoing basis and will make that switch. And that's when you start seeing champions emerge or introduction of other teams.
· Ben Hensman, Matt Reustle
[00:00:00] S1: Yeah, I think that what you often see is while an individual project might be the starting point for using Monday, it might be the catalyst to try it. What we typically see is that customers will see the benefits of it and see how they can use it on an ongoing basis and will make that switch. And that's when you start seeing champions emerge or introduction of other teams. [00:00:00] S0: And you referenced pricing and the impact that that had on top-line growth. This was a business where the growth numbers were just off the charts for many years. It's still growing at an insanely high level. From a revenue perspective, how do you think about those different levers and what is driving the majority of growth? To the extent that you can break out, whether it's the seats, the moving across geographies, what level of detail can you share there in terms of growth results and drivers going forward?