Business Breakdowns
· 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?
· Ben Hensman
[00:00:00] S1: If we think about the major successes in software that have surpassed $10 billion of revenue, extraordinary companies like ServiceNow or Salesforce, they have three things in common among many others. But they have three things in common. The first is they're able to deliver multiple levers of growth that can work together over time through solving many problems across a range of areas of overhead and labor within their customers. The second is that they can continuously evolve and scale multiple go-to-market pathways to enable business from new customers to scale. But also they generate the majority of their growth from existing customers. And I'm going to talk to that. The third point is that they execute that with financial discipline and efficiency to create enormous value for the business. And interestingly, a lot of these businesses that have reached that scale, and there are only a few, they were led by the passion drive and vision of founders. We think Monday has all of these attributes. But looking specifically at multiple levers of growth and tying that to the go-to-market pathways, something that we've seen these successes do consistently is really evolve product and evolve, go to market in a pace that makes sense. And Monday has achieved that. If you look at their levers I mentioned, they can expand across seats and teams within organizations, they can expand in usage tiers, they can expand across products, they can use pricing as a leverage, and they're moving consistently across geographies with customers and into new customers. These levers all have really significant longevity. If you look at the typical pathway into a large customer, it often starts with a very small deployment and that moves through use cases, becomes more and more important over time to become a large account. And we've seen incredible cohort behavior akin to the kind of cohort behavior we've seen in the early years from companies like ServiceNow where you're seeing 3, 4, 5 year type expansions of very, very large 40 or 50% increases per annum in spend. And that's happening across teams. It's also happening with the tiers and increasingly it's starting to happen with product cross-sell.