Monday.Com Ltd

NASDAQ:MNDY

Earnings Call Transcript 2022-Q1

[Operator]

Good day. My name is Melissa, and I'll be your conference operator today. At this time, I would like to welcome everyone to monday.com's First Quarter Fiscal Year 2022 Earnings Conference Call.

I would like to turn the call over to monday.com's Director of Investor Relations, Mr. Byron Stephen. Please go ahead.

[Byron Stephen, Director of IR]

Good day everyone, and thank you for joining us on today's conference call to discuss the financial results for monday.com's first quarter fiscal year 2022. Joining me today are Roy Mann and Eran Zinman, co-CEOs of monday.com and Eliran Glazer, monday.com's CFO.

We released our results for the first quarter fiscal year 2022 earlier today. Our earnings materials are available on our Investor Relations website at ir.monday.com. There you will find the investor presentation that accompanies our prepared remarks and a replay of today's webcast under the News and Events section.

Certain statements made on the call today will be forward-looking statements which reflect management's best judgment based on the 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 on 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.

With that, let me turn the call over to Roy.

[Roy Mann, Co-CEO]

Thanks Byron. Good day everyone and welcome to our Q1 2022 earnings call.

Our first quarter revenue grew 84% to a record $108.5 million. This is an exciting milestone for us, as it represents our first $100 million revenue quarter as a company. We continue to see strong demand for our product with our sales teams driving new logo acquisition and strong expansion within our existing customer base during the quarter. 50% of the Fortune 500 companies use our platform, up from 38% just a year ago.

To address the needs of our customers in the enterprise segment, we are investing in creating more value for these customers, including in security, governance and compliance requirements. Because we see enterprise customers as an important, growing segment of our business, we are releasing our net dollar retention rate for enterprise customers with more than $50,000 in ARR and their percentage of our total ARR.

In Q1, the total number of these customers was 960, up 187% from a year ago. These Enterprise customers with more than $50,000 ARR now represent 22% of our total ARR. As we continue to go up market, more customers are increasing their adoption and usage of monday across their organizations. In Q1, the net dollar retention rate for customers over $50,000 in ARR was above 150%. This high NDR reflects our potential to continue to expand among large customers. Please refer to our Q1 investor presentation for historical comparisons for these metrics.

Among customers with more than 10 users, net dollar retention rate is above 135%. And among all customers the net dollar retention rate was over 125%. As a reminder, our net dollar retention rate is a trailing four quarter weighted average calculation.

In the first quarter we increased sales and marketing spend by approximately $50 million, up 84% from Q1 '21. These sales and marketing efforts accelerated our acquisition of new customers, while keeping the same marketing efficiency metrics. We've also been very successful in meeting our aggressive talent recruitment targets. We believe that these efforts have great potential to grow our business over time as also our strong net dollar retention rate indicates.

As we expand our customer base, we continue to invest in and grow our partner ecosystem to serve our customers. This quarter, we are excited to announce we have signed an authorized reseller agreement with SHI International, one of North America's largest IT solutions providers. This partnership will help us work with and sell to more public, state and local agencies and federal agencies in the United States.

Our customers span industries and use cases, and they use monday.com to run complex operations around the world. Recently, we partnered with Vogue for the Met Gala's first-ever branded content software partnership. Using our platform, the Met Gala's set designer managed decor workflows for fashion's biggest night of the year.

Let me now turn it over to Eran to walk you through how we plan to better serve our larger customers.

[Eran Zinman, Co-CEO]

Thank you, Roy.

This quarter, we are excited to announce the launch of our new Work OS product suite with four new products, each with their own unique pricing models. These new products represent an exciting new evolution of our existing product solutions, based on the momentum and success we've seen among our customers. We are stepping up our product solutions to become four new, end-to-end products: monday projects, monday dev, monday marketer, and monday sales CRM.

Marketing and creative teams use monday marketer to manage marketing and creative processes all in one place. Product, design and R&D teams can plan, execute and collaborate to deliver better products, faster using monday dev. Project managers use monday projects to run, manage and track projects and portfolios. And sales teams use monday sales CRM to manage all aspects of their sales cycle.

Work OS products are complete end-to-end products built on top of the monday.com Work OS. They are designed to completely and comprehensively address the needs of a specific use case and live within the entire Work OS ecosystem with seamless integrations and connectivity. Customers can add more products at any given time or move data between products. That way, when customers purchase one of our new products, they also get the same flexibility, connectivity, and ease-of-use that they know and love from monday.com.

Those new products will allow us to better address growth within our existing accounts and capture new markets. With products we are better positioned to compete and win deals against vertical tools in specific markets. We plan to gradually increase the rate of accounts with access to the products, with the goal to fully launch them to all our customers later this year.

Let me now turn it back over to Roy.

[Roy Mann, Co-CEO]

Thank you, Eran.

To close, it's amazing to see the progress we've made in a short timer period. Our growth efforts in Q1 placed us on a new growth trajectory breaking the 100 million revenue per quarter milestone. Our market-leading retention rate, and focus on our enterprise segment continues to drive our product focus and vision. We're proud of the work we've made to evolve monday.com from a single product company to a multiple product company.

Two of the reasons we've been able to do this include one, the work and continued dedication of our amazing team across the globe. The second, is our flexible architecture, which has allowed us to execute extremely quickly and with high quality to meet the growing needs of our customers. This emphasis on agile and quick execution at a high-level has enabled us to continue to meet the needs of customers across verticals, with 70% of our customers coming from non-tech industries.

With that, I'll now turn it over to Eliran to cover our financials and guidance.

[Eliran Glazer, CFO]

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

Today, I'll review our first quarter results in detail and provide an updated guidance for the second quarter and full year 2022. We continue to deliver strong growth driven by customers increasingly adopting the broader monday Work Operating System platform across their organization. As Roy mentioned, revenue surpassed $100 million for the first time ever this past quarter. Total revenue came in at $108.5 million in the first quarter, up 84% from a year ago. Growing and scaling the company remains our top priority.

With a large and growing market opportunity in front of us and with most deals still being greenfield, we executed on an ambitious hiring plan this quarter and remain committed to investing in top-tier talent to scale the company. We ended the first quarter with 1,284 employees globally, representing an increase of 220 employees, our largest headcount growth quarter on record.

Over half of the added headcount during the past year is attributable to increases in client facing roles and R&D. For the remainder 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.

First quarter gross margin was 89%. In the medium to long term, we continue to expect gross margin to remain in the high 80's percent range. Research and development expense was $19.2 million or 18% of revenue. We will continue to invest significantly in R&D as we build out our product offerings and scale our Work Operating System platform both horizontally and vertically.

Sales and marketing expense was $108.6 million or 100% of revenue compared to 100% of revenue in the year ago quarter. This includes one-time Super Bowl advertising costs of $11 million during the quarter. As mentioned above, we accelerated our hiring of employees during the quarter reflecting our ability to attract some of the best talent to scale the business. As we have front-loaded certain expenses which have driven our growth, we anticipate sales and marketing expense as a percentage of revenue to come down to low 80% by the end of the year.

G&A expense was $12.4 million or 11% of revenue, compared to 10% in the year ago quarter reflecting increased costs since becoming a public company. Operating loss was $43.8 million, and operating margin was negative 40%. Net loss was $43.2 million and loss per share was negative $0.96.

It is important to note that as we scale the company, we remain focused on improving operating margins and capital efficiency. We anticipate that operating margins will improve throughout the year and into fiscal year '23.

Moving on to the balance sheet and cash flow. We ended the quarter with approximately $849.6 million in cash and cash equivalents. Net cash used in operating activities was $12.9 million in the quarter. Adjusted free cash flow was negative $16.2 million reflecting the additional investments we made during the quarter. Adjusted free cash flow is defined as net cash from operating activities, less cash used for property and equipment and capitalized software costs, excluding non-recurring items.

Now let's turn to our updated outlook for fiscal year 2022. For the second quarter of fiscal year 2022, we expect our revenue to be in the range of $117 million to $119 million representing growth of 66% to 69% year-over-year. We expect a non-GAAP operating loss of $35 million to $33 million.

For the full fiscal year 2022, we now expect revenue to be in the range of $488 million to $492 million representing growth of 58% to 60% year-over-year. We expect a full year non-GAAP operating loss of $139 million to $135million and a negative operating margin of 28% to 27%. Looking ahead, we will continue to invest in growth with a strong focus on driving business efficiency.

With that, let me now turn it over to the operator for questions.

[Operator]

[Operator Instructions] We'll be taking our first question today from Kash Rangan of Goldman Sachs. Kash, over to you.

[Kash Rangan, Goldman Sachs]

Hi, great to see monday's results on a Monday. Congratulations on an excellent start of the fiscal year. Roy, around if you can chime in on the macroeconomic environment. Obviously everybody is concerned about recession, the value proposition of software. Can you just give us your take on how customers are prioritizing monday, if you noticed any changes in the demand environment as the quarter progressed?

And secondly, maybe this is an added on question as well. You sound very confident that you can improve operating leverage for the business as the year unfolds. Can you just give us a little bit more detail on color as to how you expect this operating leverage to really come to fruition? Thank you so much, and congratulations.

[Roy Mann, Co-CEO]

Hi Kash, thank you for the question. So I'll start and then Eran will follow up. So we saw a great Q1 in terms of our ability to grow and find new customers. And we see a lot of demand and we feel confident about where we are as a business and our ability to keep growing. So that's -- from the results we saw, we are obviously aware of the macroeconomics now and what's happening and we're keeping a very close watch on everything that is unfolding.

[Eran Zinman, Co-CEO]

Hi Kash, it's Eran. So to your question, with regards to why we are confident about the margins getting better. So as a reminder, this is what we said we're going to do on the last call, on the last earning calls. So from a spend perspective if we think about Q1 in sales and marketing for example, this is an outlier. And we did it in accordance with monday playbook. If you look back at Q1 2021.

So we front-loaded expensive, we invested in bringing the best headcount that we can, which was on record. And from now on, we believe that we are going to continue to invest in accordance with efficiency metrics, unit economics, taking into account the net dollar retention rates that we have, the payback time, the cart. So all together when we are going back to normal in Q2, as we mentioned in the script, that S&M for example, is going back to low 80s, we believe that we are going to leverage the investment that we did and benefit from the fact that this will improve margins and capital efficient.

[Kash Rangan, Goldman Sachs]

Wonderful, thank you so much.

[Operator]

Thank you, Kash. We'll take our next question today from Arjun Bhatia of William Blair. Arjun, please go ahead.

[Arjun Bhatia, William Blair]

Perfect. Thank you very much. And congrats on a great quarter to the team. Maybe for Roy around the Work OS product suite announcement seems like a very interesting evolution for the company. I'm curious, does that bundle in capabilities like WorkForms and Canvas like some of the more recent products that you've launched into each of these suites from a pricing and packaging perspective? And then as you think about the future, how do you envision adding more suites to this, to the four that you've announced today? Is there room to, you know, create more additional products suite, like IT or other use cases that you might go after in the future?

[Eran Zinman, Co-CEO]

Yes, thanks Arjun, for the question. This is the Eran. So first of all, we're very excited about launching those new four products. Like you've mentioned, this is an evolution to the product solutions that we offer before. But really what we've done as a company is to take all those products and run that forward.

We saw a lot of demand from our customers, a lot of usage on those products solutions. And we felt it makes a lot of sense to mature them and to make our solutions more deep, more features, more capabilities, pack them in a proper way, have specific onboarding and specific feature sets for each one of them. And going forward, we're dedicated as a company to continuing invest in each one.

Obviously, also, the fact that we're able to package those products as independent product will also give us the ability to sell them separately and have different pricing for each one, while benefiting from having the entire company on our Work OS platform.

So for us, it's very strategic. In terms of the other products that we announced in the previous quarter, meaning the WorkForms and the Canvas. So those are two other products that are independent of our platform and those products and we'll continue to, you know, offer them to our customers separately with separate pricing, if this answer your question.

[Arjun Bhatia, William Blair]

Yes, perfect. Now that's very helpful. And then I had noticed the 50k NRR disclosure at 150%-plus, obviously very healthy. But it's also ticked up quite a bit from last year or from where it was for four quarters ago. What are you attributing that uptick to? Is it the ability to retain your customers better, are you I think you called out maybe wall-to-wall adoption a little bit more. We just love to hear a little bit more of the drivers that have driven that enterprise net retention rate higher.

[Roy Mann, Co-CEO]

[Good, Arjun], so this is Roy. So this is something we've been talking about for a while that there is a shift in our business that we've added the sales team like a few years ago when we see constant growth within the enterprise segment. We have more customers, as we can see in the metrics we've disclosed and also, their expansion within each company is always growing. The sweet spot we have within those companies are growing.

So it's something that we should expect that will continue in terms of like our growth into enterprise customers. And, we also invest a lot in the product and in that respect, like adding a lot of like enterprise security, and a lot of stuff that opens more and more doors. All the ways to those markets or those customer segments.

[Arjun Bhatia, William Blair]

Perfect. That's very helpful. Thank you very much, and congrats again, guys.

[Roy Mann, Co-CEO]

Thank you.

[Operator]

Thank you, Arjun. Our next question comes from the line of Mark Murphy from JPMorgan. Mark, over to you.

[Mark Murphy, JPMorgan]

Thank you very much, and I'll also add my congrats on a very healthy looking top line and a great start to the year. First question is, I believe your largest deployment is sitting at 7,000 feet. Do you have line of sight into when you might break through that ceiling, either through an expansion process or perhaps even landing a new customer with a larger footprint?

And then secondly, kind of following up on Kash's question earlier. Because you produced more than half of revenue outside of the U.S., can you provide any sense of business confidence specifically in Europe, and overall pipeline growth in Europe? We're just wondering if there's any degradation at all, as many other software companies have seen? Or is it basically feel like it's all systems go for monday at this point?

[Roy Mann, Co-CEO]

Yes, thank you, Mark, it's Roy, and then let Eran take the other one. And so we're, like I mentioned really excited about enterprise, we see the sweet spot always growing, and we're widening our approach to more and more customers, as you can see in the growth in the number of customers, and also the depths of solutions that we offer them. So I think we have like great results also in NDR. And you know, definitely a major focus area for the company.

[Eliran Glazer, CFO]

Hi Mark, it's Eliran. So, as of right now, we are seeing nothing unique in Europe or elsewhere. Growth rates in Europe are comparable to the overall company. So this is good news for us. And because we have a very diverse customer base of more than 150,000 customers in our best earnings, and the number continues to grow, we serve SMB to the largest global companies across all kinds of industries and geographies. Therefore, we don't see any sign of softness yet in mid-term.

[Eran Zinman, Co-CEO]

And maybe one more thing I would add Mark, this is Eran is that, still 70% of our customers come from non-tech companies. And we serve over 200 different business verticals. So we have a very diverse customer base. So as a result of that we're not affected by any specific factor or any specific trend that we think.

[Mark Murphy, JPMorgan]

Thank you very much.

[Operator]

Thank you, Mark. We'll take our next question today from Scott Berg of Needham. Scott, please go ahead.

[Scott Berg, Needham]

Hi, everyone, congrats on the new quarter. Thanks for taking my questions. I guess first one was I think it was Ron's commentary about accelerating acquisition of new customers. Can you help maybe qualify or quantify that statement a little bit in quarter? I know you don't report total customers necessarily but how should we think about what that quarter-to-quarter acceleration looks like?

[Eran Zinman, Co-CEO]

Yes Scott, this is Eran. So I think the best indicator is that we've increased our sales and marketing expense this quarter. Eliran mentioned that this is part of our playbook and how we kind of plan our year throughout. But one thing we can comment just to give you some more color is that, our customer acquisition in Q1 remained very efficient. We measure everything, every click and every new customer acquisition costs.

And we managed to maintain very high efficiency and acquire new customers. And this is a huge investment for us going forward as we feel this is the right thing to do given the huge opportunity that we have as a company. So our economic, unit economics remain strong and very efficient, as we've managed to scale our marketing efforts.

[Scott Berg, Needham]

Got it, helpful. And then from a follow-up perspective, I know there is commentary I think it was 60% of the Fortune 500 is now customers of yours in some scenario. How should we think about how those customers purchase today relative to some of your smaller customers? Is the purchasing motion or I guess the products you're buying is very similar and it's a larger seat count or have you noticed any nuances of how they acquire that might be different than your historical smaller customer.

[Roy Mann, Co-CEO]

Hi Scott, its Roy. And so I think alongside the growth we have in enterprise, we see a close shift in those adoption partners. So first of all, the vast majority of customers do land and expand. They start with a small account and then we expand over time. So like every new deal we have is an door open for another deal. Meaning we always expand within our customer base. You can see that in the NDR.

Okay, so that's one. On the other side we do see larger deals happening upfront like they start bigger and we also expand faster so that's a trend that's been happening in the last like two years even, okay all the time. And I think as monday grows as a brand, as customers understand it's a solution and they can trust on more and more, like we see more of those top-down deals starting. Hope that helps.

[Scott Berg, Needham]

Thanks very much. Thank you. Congrats again.

[Operator]

Thank you, Scott. We will now move over to our question from Brent Thill of Jefferies. Brent, over to you.

[John Byun, Jefferies]

Thank you. This is John Byun for Brent Thill. I had two questions on the new Work OS products. Just wondering, you know, half full featured, and maybe this is, you know like the best of breed solutions out there. Does that mean, you're going to compete more versus some of the partners you're integrating with, and I guess timing on G&A. And then second on your SHI. We saw partnership, does that mean you're making a bigger push into the U.S. public sector, how's your presence today? Thank you.

[Eran Zinman, Co-CEO]

If you don't mind, this is Eran. Just repeat the first part of the question you were breaking up?

[John Byun, Jefferies]

Sure, on the new Work OS products, in terms of capabilities, how do they compare versus best of breed solutions out there? Does this mean you're competing more versus some of the partners that you integrated with and any update on timing for general availability?

[Roy Mann, Co-CEO]

Hi, thank you, it's Roy here. So it doesn't mean that we're competing with other like, I don't know, like large enterprise solutions. We actually integrate really well into them, like this quarter, we're also enhancing our integration into Salesforce and inflation. And you know, we see a lot of deep integrations into companies, workflows, in many ways.

Those -- the partnership with SHI actually opens the door for a lot of enterprise customers in America. And yes, we're excited about that.

[Operator]

Thank you. Our next question --

[Roy Mann, Co-CEO]

Yes, I think we missed the second part of the question? Yes. Sorry, you're breaking up the second question. If you could repeat that, please. Thank you.

[John Byun, Jefferies]

Yes, so in the prepared remark I think you mentioned that they do a lot with U.S. government sector. So I'm wondering, does that mean you're making a bigger push into the U.S. public sector? And do you have a meaningful presence today in that sector or industry?

[Eran Zinman, Co-CEO]

Yes, thank you. This is Eran. So that only, you know, the new partnership with SHI is very strategic for us. As we go more to enterprise companies and larger enterprises, you know, definitely this specific sector is very interesting for us. So, this strategic partner is working in North America, with a lot of focus on local government and other companies. And for us, this is a very strategic part of allowing our products to be available to more sectors and more parts of our customer base. So definitely, we're going to invest more resources into that going to the future.

[John Byun, Jefferies]

Thank you for that.

[Eran Zinman, Co-CEO]

Thank you.

[Operator]

Thank you. Our next question comes from Brent Bracelin of Piper Sandler. Brent, please go ahead.

[Brent Bracelin, Piper Sandler]

Thank you. Maybe I'll start here with Eliran. The net dollar retention across all users has increased prices substantially here this quarter, is that a function of just the mix shift to enterprise. Maybe can you talk a little bit about churn at all, but just a little surprised to see that that metric continue to move up? I suspect its all enterprise, but just trying to understand why you're seeing that improve so much here sequentially? Thanks.

[Eliran Glazer, CFO]

Hi Brent, it's Eliran. So thank you for the question. Obviously I would say that, first, we are seeing product improvement because we are very focused on continuing to innovate and invest in our products. And this is why we are handling R&D talent. So this is one of the reasons for the expansion.

Second, is our ability to expand within existing customers. You know, once they unlock the value of the monday product together with the additional solutions -- product solutions that we introduced, they continue to increase the number of seats and number of verticals horizontally. I would expect with regards to the numbers that we got to a point, this is really best in the industry to be above 125% for total customers and above 150% to enterprise. I believe we are going to see potentially a few basis point improvements, but we believe this is kind of stabilizing, and we are going to see these rates over time.

[Brent Bracelin, Piper Sandler]

So it makes sense. I guess, Eran following up on the four monday products. Intuitively it seems like monday products would be the bulk of the use cases. But maybe could you talk about which of those four use cases, sales, marketing, projects, dev is kind of the fastest-growing use case for monday? That would be helpful. Thanks.

[Eran Zinman, Co-CEO]

Yes, Brent, thank you. So first of all, we're excited about all four part of the reasons that we focus on those four is that we to sell a lot of demand. Our customers use monday for many use cases, but those four really stood out has the most potential. I would say that we see a lot of traction in our sales CRM product, but also our developer product is very interesting. We see a lot of demand in the marketing products as well. And obviously, project management for us, it's really the sweet spot.

So we see a lot of momentum in each one of those. I would say that when we kind of planned the guidance and our model, we didn't take those products into account. They are still new and we have a lot of growth to do in each one of them. But definitely, we see a lot of positive signs and a lot of very exciting customer feedback from our customers using them. So we're very excited for the future of those for us.

[Eliran Glazer, CFO]

Hi Roy, I've something more to add. So I'd like to add to what Eran said. So what next monday special is the fact that you can build anything you want on top of it. So that's also true for each one of these products. So if you adopt one, you can still build whatever you want on top of each one and also connect them together and have them work really well together because it's all one platform, it's all built on top of the Work OS.

So I think that's all something important to understand when customers are adopting them. They can still do anything else they want, even now on top of the other basis of products.

[Brent Bracelin, Piper Sandler]

Thank you.

[Operator]

Thank you, Brent. Our next question comes from Andrew DeGasperi of Berenberg. Andrew, over to you.

[Andrew DeGasperi, Berenberg]

Thanks. Hi, everyone. I just had a question in terms of one of the metrics you used to provide. Just wondering how that trended, the percent of ARR from over 10 users. I know you gave the over 50k. But just wondering if you had anything to add to that comment.

And then secondly, in terms of your deferred, it sequentially increased quite a bit. I was just wondering if there's any kind of larger sort of bigger deals that you've added this quarter. Anything that you could provide would be appreciated.

[Eliran Glazer, CFO]

Hi Andrew, this is Eliran. With regards to your first question, so the share far from customers with 10-plus users continue to improve. Last time we disclosed, it was above 70%. So as part of us going up market together with enterprise accounts, we see this trend continue to improve and they are becoming more meaningful in our total ARR.

I can tell you that more than 85% of our customers are -- ARR is coming from customers that are buying the pro and enterprise use. So this is definitely a trend that we see continue moving forward.

With regards to your question, second question you were asking about calculated billing just to make sure what you were asking about.

[Andrew DeGasperi, Berenberg]

Yes, that's right. It was really about -- it was a sequential increase.

[Eliran Glazer, CFO]

Yes. So while we are very happy with the increase, we said it in the past that calculated billing is not a leading indicator of our business. We usually look at growth -- revenue growth, net dollar retention rate, number of customers. This is more of a leading indicator. Obviously, there is going to be fluctuation with calculation billings but we definitely saw a sequential increase this quarter versus the previous one.

[Andrew DeGasperi, Berenberg]

That's helpful. And if I may add another one, sales and marketing. You mentioned you front-loaded it in Q1. I mean we obviously had a pretty sizeable headcount increase. I was just wondering what drove you to do that this quarter? And secondly, can you maybe provide a little more data in terms of where the distribution of this headcount is? Is it mostly U.S. or other regions? Thank you.

[Eran Zinman, Co-CEO]

Yes, Andrew, this is Eran. So just to give you more color about the increase in spend. So about $10 million to $11 million of it was Super Bowl advertising, which we mentioned the previous quarter. Another $10 million, I would say, roughly is increasing our headcount. So usually we accelerate hiring around Q1 in terms of sales people, customer success, managers, customer support and so on which -- the effect of this in terms of sales power will unfold in the next few quarters.

But [indiscernible] was an opportunity to increase our sales force. And the rest of the increase give-or-take is increasing performance marketing. Usually in Q1, we saw strong demand in the market for two like hours, would continue to keep you forward. But there's usually an acceleration in Q1. And for us, it's a great opportunity.

And as I've mentioned previously, we managed to scale our performance marketing while keeping the same efficiency and unit economics in terms of acquiring new customers. So we're very happy about our investment in terms of performance marketing.

[Roy Mann, Co-CEO]

I can add, I throw it that, like, if you look at the history of the company, you know, we've been doing this around each year. And during January, and compared to last year, you know, we kept the same efficiency metrics and ratios. So we're really happy with it.

[Eliran Glazer, CFO]

And Andrew maybe -- this is Eliran just to add with regard to the distribution of the headcount that we hired. So we hired people in both outside of the U.S., not in Israel there. It's a combination of Israel, U.S., and London, Sydney, and other places around the world. With regards to sales and marketing resources, we're also hiring enterprise sales managers in [indiscernible] to continue the growth of the business outside of Israel.

[Andrew DeGasperi, Berenberg]

Thank you.

[Operator]

Thank you, Andrew. Our next question comes from George Iwanyc of Oppenheimer. George, please proceed with your question.

[George Iwanyc, Oppenheimer]

Thank you for taking my question. So maybe just following up on the sales comments, with the introduction of work, the new Work OS products, do you anticipate any changes to your sales and go-to-market motion layering in either specialists or putting more focus on particular verticals?

[Roy Mann, Co-CEO]

Yes, hi, thanks it's Roy, George, sorry, sorry. And so we're --

[Eran Zinman, Co-CEO]

I'll take this, this is Eran. So in terms of our go-to-market for Disney World Class products, so definitely, we see here a huge opportunity, mainly because those products allow us to market to specific audiences, and specific customers. So we can have more targeted marketing to those audiences, as opposed to having like a more of a broader broadcast to a mass audience when we talk about the work with having those independent products will allow us to have more specific targeting resulting in what we already seen early signs of lower customer acquisition costs, and, you know, better adoption in terms of acquiring new customers.

Over time and this is the big opportunity here. We already see that as well. We see those customers expanding from that specific use case that just start with. To more use cases and eventually, you know, as part of our vision of the company to have the whole company working on the Work OS platform. So this is part of the reason why we're so excited about those new products. Not only that it allows us to have a more efficient, go-to-market but better onboarding, and more potential to expand within an organization.

[Roy Mann, Co-CEO]

Yes, I only wanted to add, it's Roy, that we see this as a long term, like all these products that we released, you know, like it's not something it's a gradual change. into those areas. And like Eran mentioned we didn't model this year according to new results from them.

[George Iwanyc, Oppenheimer]

And just maybe following up on the kind of broader competitive landscape, are you seeing any changes with relative to -- are you mostly landing in greenfield opportunities? Are you seeing any vendor displacement, or just changes into the way you're dealing with multiple products at individual customers?

[Eran Zinman, Co-CEO]

Yes, so this is Iran. So we've kind of the same environment that we saw before 70% of the deals, which we see no competition, it feels still a huge greenfield, in terms of the opportunity, and our ability to acquire new customers. In terms of the new products, definitely in each one of those categories are existing competitors. It's still early days, but as I've mentioned, from what we already see, by releasing those products, and doing although limited, but some are getting to them, we see a lot of efficiency in terms of customer acquisition, and profits and other growth opportunity in terms of go-to-market. This is kind of the dynamics that we see.

[Roy Mann, Co-CEO]

Yes, and I can add that, you know, we'll emphasize that we, for the last two years have been marketing to those exact four segments. Okay, what we're doing now is another step of evolution of packaging it as a separate product, but we've always had those solutions that monday customer adopted, so we'll feel very confident in, you know, in this going forward.

[George Iwanyc, Oppenheimer]

Thank you very much.

[Operator]

Thank you, George. [Operator Instructions] We will now move over to our next question, which comes from the line of DJ Hynes of Canaccord Genuity. DJ, please go ahead.

[DJ Hynes, Canaccord Genuity]

Hi, good morning, guys. Just one question on my end, Roy or Eran. Can you just remind me of the signals that you guys use internally to trigger direct sales engagement? Like are you looking at spend threshold? Is it usage metrics? And I guess the question is but given the strength you're seeing in your largest cohorts, which I assume is favorably impacted by direct sales touch? Does it make you think direct sales engagement even earlier in the funnel would be beneficial? Like how do you think about that?

[Eran Zinman, Co-CEO]

Yes, Thank you, David, DJ, so this is Eran. Thank you for that question. And this is a great question, because like we've mentioned, usually the way customers adopt monday is bottom up. And we see customers started using monday from all companies, all sizes, and different roles, different positions within the company. The way ourselves, algorithm works is that whenever a customer signs up, we ask that customers a bunch of details, during the final process about company size, their role in the company, and how large deployment they want. And also, we're using third party tools to enrich that information.

Using all the information we classify accounts that have potential to grow. So once we see a paying account with engagement within the account, and a potential to grow to let's say, you know, 1000 people or more, all sales team is engaged in that customers. And basically, it's a different process, because the customer is already using monday, happy with the product. And then we try to expand the usage more with the top end, and usually it's a short sales cycle, which leads to future sales cycles as well.

So the motion is pretty much the way I've described it. Any question you have about any change that we see. So definitely we see a lot of opportunity on top of that. We see an opportunity to create a strong outbound motion, we see a strong opportunity to create a B2B mechanism where we can market to senior executives. So definitely that's a huge upside that we have as a company which we also invest in. So we are investing in all fronts in terms of customer acquisition, and creating more opportunities for our sales team.

[DJ Hynes, Canaccord Genuity]

Excellent. Thank you for the color.

[Operator]

Thank you, DJ. Our next question comes from Derrick Wood of Cowen. Derrick, please go ahead

[Derrick Wood, Cowen]

Thanks for taking my questions. You guys keep announcing some new SI Partners. You've mentioned SHI, and you've mentioned Qualcomm attached? Can you just talk about the kind of growth you're seeing from the partner channel and what kind of incremental leverage are expecting this year?

[Eliran Glazer, CFO]

Hi, it's Eliran, hi Derrick. So we see a lot of the partnership we have with them is something that is long term, obviously, the bigger the partner, and you know, the larger customers they address. And you know, the true significant results, is a flywheel that takes more time. And I think we're very bullish on those partnerships, as you mentioned, that we're adding them and putting a lot of emphasis on it. So we see partners as a true partners, because they add a lot of value to customers in a lot of ways that especially the large one. And so we definitely see this as a strategic for the company.

[Derrick Wood, Cowen]

Got it. I wanted to ask about pricing, too, given the inflation rates, and we're seeing other vendors change pricing, how are you guys thinking about potential price increases? Or, you know, what kind of price changes can we expect coming out of these new products being launched? Thank you.

[Eran Zinman, Co-CEO]

Hi, Derrick, this is Eran. Thank you for the question. So basically, I'll start with the product. So in terms of the new products, we do intend to have different pricing for each one of those products depends on the industry. But that's regardless of the macroeconomics and inflation. So it's more about our go-to-market and what people expect from each one of those products segments.

In terms of inflation and so we monitor everything that's going on very closely. But currently, we don't have any specific plans to raise prices. But we're continuing to monitor and if anything changes, we reevaluate as we go.

[Derrick Wood, Cowen]

Understood. Thanks.

[Operator]

Thank you, Derrick. We'll take our next question from Robert Simmons of D.A. Davidson. Robert, please proceed with your question.

[Robert Simmons, D.A. Davidson]

Thank you. Guys, can you update us on the marketplace? Any contraction you're seeing there, updates on the monetization plans? And then also does the annual guidance includes any contribution from marketplace?

[Eran Zinman, Co-CEO]

Yes, Robert, this is Eran, thank you for the question. So definitely, our marketplace is something that's very important for us as we scaled the company. Last quarter, we released our own payment system within the marketplace. So basically, app developers can now monetize their apps using our payment platform. We release any numbers attached to it. But just to give you the sentiment, we see very good results from that new release. New app developers that create new applications, like see higher conversion rates, more customers are willing to pay using that payment system.

So definitely it's something that made a huge impact on our marketplace. And we continue to invest within the number of developers going up and numbers of application being created. And also use going up consistently quarter-over-quarter. So we continue to heavily invest into that.

I wouldn't say it has much impact on our revenues yet, because it's still small numbers. But going forward, this is a big part of the product has a lot of potential as well.

[Robert Simmons, D.A. Davidson]

Got it. Great. Thank you very much.

[Operator]

Thank you, Robert. Our final question is a follow-up question from Kash Rangan of Goldman Sachs. Kash, the floor is yours.

[Kash Rangan, Goldman Sachs]

Hi, thank you so much for taking my question. I'm curious, just given that you just started hiring heavy duty sales capacity that you're already starting to see net expansion rate and 50,000 plus customers at 150. Could this metric even get better as you progress. That's it from me.

[Eran Zinman, Co-CEO]

Yes, Kash. This is Eran. Thanks for the follow-up question. So this is the first quarter that we released our NDR accounts and you know, we're super happy with it. And definitely those customers have a lot of room to grow. We still have much more scale to having them.

I would say that over time we'll commit to keep releasing that metric quarter-over-quarter but we do see this metric stabilizing, but going forward, definitely we're going to have more upsell opportunities. Now with a new products that we've released, and also the WorkForms and the Canvas, they're going to be more opportunities to expand our usage with other products. So definitely there's potential for that number to go up but as it is right now, when we also benchmark this compared to other companies, this is best-in-class NDR numbers, and we'll continue to invest in those enterprise customers.

[Operator]

Kash, your line is still open. Okay, thank you Kash. That was our last question today. So we would like to conclude by thanking you for joining the call, and we wish you a lovely rest of your day. You may now all disconnect