Monday.Com Ltd

NASDAQ:MNDY

Earnings Call Transcript 2021-Q4

[Operator]

Ladies and gentlemen, thank you for standing by and welcome to the monday.com Q4 Fiscal 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers’ presentation there will be a question and answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to turn the conference over to your speaker for today, Byron Stephen. You may begin.

[Byron Stephen, Director of Investor Relations]

Good day 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 2021. 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 fourth quarter and fiscal year 2021 earlier today. Our earnings materials are available on the 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 currently available information. These statements involve risk 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 on the earnings release and the earnings presentation for today's call, which are posted on the Investor Relations website. With that, let me turn the call over to Roy.

[Roy Mann, Co-Founder & Co-CEO]

Thanks Byron, and thank you everyone for joining us today. We had another great quarter at monday.com and ended the fiscal year of 2021 exceptionally strong. During the past quarter, revenue grew by 91%, compared to the fourth quarter of 2020. We are again seeing strong revenue growth across all verticals, customer segments and geographies, with over a half of our revenue coming from outside the U.S. Let me discuss three main factors that drove our strong top line performance. First, we remain highly focused on acquiring new customers. In 2021 we added 38,000 net new customers, bringing our total customer count to 152,000 customers, representing 34% growth from the prior year. Second, we are seeing great momentum with large customers. In Q4, the total number of customers with more than 50K in annual recurring revenue was 793, up 200% from a year ago. The enterprise tier remains our fastest growing customer tier. New accounts with 100+ users are now more inclined to take the enterprise tier as a default, as we continue to add more value to the tier. During the last quarter, we enhanced the enterprise tier by adding several new administrative and security features including content directory, audit log, and encryption key enhancements. These improvements will allow enterprise customers to manage and grow their business with confidence and ease, while making their data more secure than ever. Third, we continue to see strong expansions within our existing customer base. Once customers adopt the Work OS platform and realize its value, their usage often grows organically, expanding across use cases and departments. In Q4, net dollar retention for customers with more than 10 users improved to over 135%. Customers with more than 10 users now account for 72% of our ARR, up from 63% a year ago. Overall net dollar retention rates for all customers improved to over 120%. As a reminder, our net dollar retention rate is a trailing four quarter weighted average calculation. Our continued net dollar retention rate improvements are further proof to our ability to deliver strong ROI and a great user experience for our customers. Let me now turn it over to Eran to walk you through some exciting product announcements.

[Eran Zinman, Co-Founder & Co-CEO]

Thank you Roy. We continue to take our product innovation to new heights, as we give our customers more capabilities to easily create software applications and work management tools that suit their needs. Our mission is to allow anyone to run the core of their business on monday.com. That’s why we are so excited to announce today that we are expanding from one product into a product suite that will further push our mission forward. Going forward, our users will be able to switch between products within their Work OS platform so they can unify work across their organization. These new products expand and augment our go-to-market strategy, and create additional entry points for new customers to our platform. It is a great way for us to reach new audiences and to explore new markets. This quarter, we are thrilled to announce two new standalone products to the monday ecosystem, monday WorkForms and monday Canvas. These products continue our vision to cater to the “beginning of work” when teams first begin their projects, processes, and workflows. Let me first touch on monday WorkForms, which we launched in beta this past quarter. Forms are the beginning of so many workflows. People understand that they need to collect information with forms, even before they know exactly what they’re going to do with it later. We created monday WorkForms to capture data and collect feedback, with built in conditions and data insights. WorkForms can be used for inventory tracking, order management, surveys and much more. With monday WorkForms, users can create personalized forms for their business with a no-code form builder allowing users to easily set conditions to get the right information, and reduce the back and forth. monday WorkForms can easily embed any form to your website, launch in an email, and you can instantly share the link with all the stakeholders to see results, faster. Once a form is completed, users can visualize and analyze data all in one place and generate shareable reports. Let me turn it back over to Roy to discuss monday Canvas.

[Roy Mann, Co-Founder & Co-CEO]

Thanks Eran. In addition to monday WorkForms, we are pleased to announce the launch of monday Canvas. Ideas and innovation often begin in an unstructured space, and digital whiteboards have become the go-to tool for brainstorming and collaborating together. monday Canvas provides users with real-time collaboration in a visual way on an infinite canvas that is full of brainstorming, editing features and templates for any use case. In monday Canvas, users can add sticky notes, do free drawings, create diagrams and user flows using shape and connectors, and add text using text blocks. monday Canvas will help teams to collaborate, brainstorm, and manage work together with more business impact. We are super excited about these new products and you can signup and use them on workforms.com and canvas.monday.com Let me now touch on the continued success of monday workdocs, which is out of beta and available to 100% of our customers. It’s amazing to see how much our customers love monday workdocs. Over 60,000 customers are using monday workdocs for a range of use cases and industries, such as marketing, operations, CRM, and more. monday workdocs remains one of the fastest adoptions of a building block we ever had. With customers having created over 800,000 workdocs to-date. Lastly, we were proud to be named CRN’s 2021 Tech Innovator Award Winner for office productivity software during the fourth quarter. This award reflects our investments in research and development and our ability to hire top talent are paying off. Let me now turn it back over to Eran to further discuss our expanding Work OS ecosystem.

[Eran Zinman, Co-Founder & Co-CEO]

Thanks Roy. This is all super exciting. We continue to grow and empower our strong partner ecosystem by allowing others to more easily operate and build on top of our Work OS platform. Let me first touch on our app marketplace which continues to expand. We now have over 100 applications that have been developed on top of the Work OS platform. In this quarter, we are pleased to announce that we have gone live with a new built-in payment solution for the apps marketplace. This new solution will enhance developers’ abilities to monetize their applications. No longer will our marketplace partners and external developers need to develop and manage their own monetization system. It will also create a better overall experience for our users as they can now easily pay within the Work OS platform and manage their payments all in one place. We are also excited to announce that we have expanded the partnership we have with KPMG and signed a Strategic Alliance Agreement with the firm. This alliance leverages the business insights of KPMG with the low-code/no-code technology of monday.com to build enterprise-grade solutions that empower KPMG member firms across the world to deliver strategic operating models to customers on top of an agile work operating system. With the announcement of this alliance, monday.com joins a select network of leading technology and data companies working in alliance with KPMG to solve pressing business challenges and accelerate digital transformation. We are super excited to grow together with KPMG as we continue to expand globally and push the boundaries of the way enterprises work. Lastly, I’d like to briefly touch on our progress with the Digital Lift Initiative which we launched as part of our June 2021 IPO. As a reminder, the Digital Lift Initiative was established to further our mission of closing the digital divide between the for-profit sector and the nonprofit sector. For every dollar of revenue we earn, we have committed to donating up to one dollar worth of monday.com licenses to nonprofit teams. To-date, monday.com has donated licenses worth over $7 million of ARR to over 5,000 non-profits in 52 countries. For us, it’s just a beginning. The digital lift initiative is open to all non-profits across the globe. We believe our commitment to ESG will pay a large role in shaping the future of monday.com, our values and our ecosystem in the coming years. With that, I’ll now turn it over to Eliran to cover our financial and guidance.

[Eliran Glazer, Chief Financial Officer]

Thank you, Eran and thank you to everyone for joining our call. Today, I will review our most recent financial results in detail and provide initial guidance for the first quarter and full fiscal year 2022. We are extremely pleased with the way we finished the year. Total revenue in the fourth quarter came in at $96 million, up 91% from a year ago. This brought our fiscal year 2021 revenue to $308 million, an increase of 91% from the prior year. These results demonstrate our continued expansion within our existing customer base and acquisition of new larger customers. We continue to execute against an ambitious hiring plan. We ended the year with 1,064 employees globally. This represents an increase of 51% from a year ago, with the majority of additions coming from R&D, sales & marketing. We continue to have ambitious goals for hiring in these categories for the foreseeable future. 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. Gross margin came in at 90%, up from 88.6% in the year-ago quarter. R&D expense was $15.4 million or 16% of revenue. We will continue to invest significantly in R&D as we position monday.com to drive durable growth and win our large addressable markets. Sales and marketing expense was $69.4 million or 73% of revenue, compared to 107% in the year-ago quarter. The improvement was driven primarily by continued efficiencies as we continue to scale our sales and marketing spend to focus on customers with enterprise customers and 10+ users which now account for 72% of ARR in Q4. G&A expense was $11.1 million or 12% of revenue compared to 10% in the year ago quarter reflecting increased costs of being a public company. Operating loss was $9.9 million, and operating margin improved to negative 10%. Net loss was $11.7 million and loss per share was negative $0.26. Moving on to the balance sheet and cash flow. On a GAAP basis, we ended the quarter with approximately $886.8 million in cash and cash equivalents. Net cash provided by operating activities was $13.5 million in the quarter. Adjusted free cash flow was $10.1 million and was driven by strong collections stemming from our continued strong billings. 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. We are very proud of our achievements during this exceptional year and look forward to carrying the business momentum into 2022. Now let’s turn to our outlook for fiscal year 2022. For the first quarter of fiscal year 2022 we expect our revenue to be in the range of $100 million to $102 million representing growth of 70% to 73% year-over-year. We expect a non-GAAP operating loss of $47 million to $45 million. This includes one-time Super Bowl advertising costs of $8 million. For the full year 2022, we expect revenues to be in the range of $470 million to $475 million representing growth of 53% to 54% year-over-year. We expect a full year non-GAAP operating loss of $147 million to $142 million and a negative operating margin of 31% to 30%. With a large market opportunity and customers increasingly adopting the broader monday Work OS platform across their organizations, we are committed to investing aggressively in our company. We will continue to prioritize growth, which we believe is in the best interest of our shareholders, employees, and customers. Let me now turn it over to the operator for questions.

[Operator]

Thank you. [Operator Instructions] Our first question comes from the line of Kash Rangan with Goldman Sachs. Your line is open.

[Kash Rangan, Goldman Sachs]

Hi. Thank you so much and congratulations on a spectacular finish. Strong top-line growth also you are generating free cash flow. So it’s very remarkable. Question for the team. Can you tell us a little bit more about how the breadth of use cases is evolving for the company? We all know that monday.com is not just project management something beyond the concept of Work OS. If you can elaborate a little bit on the breadth of use cases and also touch upon the competitive environment that you are putting away or how do things look from the standpoint of your traditional competitors? And I guess, on the financial front, the disconnect is that you are generating better than expected operating margins, better than expected free cash flow which escalates with the guidance. It’s not really changed that much for calendar 2022 it would alter with the time you went public with respect to non-GAAP operating losses. So can you help us bridge the tremendous progress you are making on the financials with the very conservative financial outlook for our operating margins? Thank you so much and congrats.

[Roy Mann, Co-Founder & Co-CEO]

Thank you, Kash. Hi. So, I will start with the use cases and then I will continue on the second part. So, it’s true monday has so many different use cases and I think you can look at it in two different ways. One is horizontal. So we are also a CRM as much as a project management tool. We are also used as a tool for R&D teams to manage their work for marketing teams. So that’s like a horizontal view. But then we have over a 130 different business use cases where you see different types of businesses from manufacturing plants that use monday to run their operations to clinical trial research, to really any kind of business out there and also 70% of our customers come from non-tech segments like not tech companies. So, we see a really wide spread usage of monday throughout those different verticals and through horizontals. So it really is reaching the 1.3 billion information worker that this is our vision to enable them to work better. So, thank you and Eliran can touch on the second part. Yes.

[Eliran Glazer, Chief Financial Officer]

Thank you, Roy. Hi, Kash. So truly we had an exceptional year and- in 2021 and we would like to provide a responsible guidance for 2022 continue demonstrate hyper growth at scale. So, few things that we have we have to take in mind. We are now – as we said in Q2, we now would like to invest and further grow the business not only 2022 but also beyond 2022. Therefore we took advantage of the fact that we finished the year with cash flow positive much ahead of what we said even in the IPO. We have a massive opportunity ahead of us. This is the time for us to grab land to increase our market share and as you saw in the script we are coming with new products, innovation and product openness is a big thing for us this year. So we said, let’s take advantage of the fact that we are actually well ahead of what we anticipated and where we anticipate it to be and continue to invest and drive hyper growth for the segment future. This is the number one priority for us, but we do it with scale and therefore also mindful to the changes we are doing and other business initiatives that we are currently pursuing.

[Kash Rangan, Goldman Sachs]

Wonderful. Thank you so much.

[Operator]

Thank you. Our next question comes from the line of Brent Bracelin with Piper Sandler. Your line is open.

[Brent Bracelin, Piper Sandler]

Thank you and good morning, good evening. I want to start with the new products you talked about worforms and canvas. Could you talk a little bit about pricing? And then, talk a little bit about kind of adoption trends, how broadly it could be possibly cross sold in the installed base? Thanks.

[Eran Zinman, Co-Founder & Co-CEO]

Yes. Thanks, Brent. This is Eran. So first of all we are very excited to launch those two new products. This is the first time for us as a company that we expand our product line, adding two new products and basically given a product suite to our customers. Currently, our focus was to build two new products where we feel people start to do their work. So people might start a new process or a new project with a form to capture data or to manage internal requests. And also people might start with a white board just to organize their thoughts or to start a process. We see this as a huge opportunity to capture new markets and new people that might be potential user for the platform over time. So those are going to be independent products and we are going to charge them separately. People will be able to use them, but we feel that both form and whiteboards are never the goal. They are on the path to achieve something and basically by allowing them to use both of those products and over time also integrate with monday to continue the work and the process they started in each one of those tools might be a great leverage for us as a platform. So we see this as a strategic part of us growing our ecosystem of products and capturing more users, more audiences and more people that want to start any kind of work process or a project.

[Brent Bracelin, Piper Sandler]

Helpful color. So it sounds like these are actually going after potential new lands not necessarily new products going out and targeting a big cross-sell opportunities, helpful color there. I guess, Eliran, my last follow-up for you is just on free cash flow. Two consecutive quarters of positive free cash flow or just can’t quite call it a trend yet. But very impressive execution there. As you think about the investments you are making in the coming year, it is a bit of a departure from what we’ve seen in the last couple quarters. Walk us through the biggest areas you are investing? Is it still largely around sales capacity? Is it still tied to digital advertising? Just trying to better understand where you are prioritizing the investments in 2022 year? Thanks.

[Eliran Glazer, Chief Financial Officer]

So, Brent, so, with regard to your questions – with regard to your questions on free cash flow, so, we are coming from an exceptional year, but we had COVID. So, many things that we plan to do during the year even in Q4 we have only grown. So getting back to normal we are going to invest in having conferences. People will travel to see one another, exhibitions, company events. This is one of the areas that we would like to continue to invest. Second thing is we accelerated highly. So what we are doing we saw the trend in Q4, which we had a massive filing continued by the way into the fiscal year 2022. So this is a place where we are going to invest significantly. In addition to that, we are going to do things that we will add to new products and new investments to address new markets that we are currently not operating to enhance our existing work operating system and to – versus competition. So from our perspective, investing in headcount, investing in getting back to normal and with an add-on brand, for example the Super Bowl event that we did this was an exceptional $8 million. These are the things that we are aiming this year.

[Roy Mann, Co-Founder & Co-CEO]

Hi. It’s Roy

[Brent Bracelin, Piper Sandler]

Very helpful.

[Roy Mann, Co-Founder & Co-CEO]

Hi. It’s Roy. I’d love to add to Eliran that we see a massive opportunity in our ability to grow this year both in marketing - market demand, like in a lot of areas is like makes us confident in investing a lot of money to do that.

[Brent Bracelin, Piper Sandler]

Very helpful. Thank you.

[Operator]

Thank you. Our next question comes from the line of Mark Murphy with JPMorgan. Your line is open.

[Mark Murphy, JPMorgan]

Yes. Thank you very much and I will add my congratulations as well on just a fantastic free cash flow performance. I did want to start, Roy, you had just mentioned I believe the Super Bowl ad. What is your early sense of the effectiveness of that ad? That for instance, did it drive website traffic? Did it drive free tier sign-ups? Could it produce customer metrics or billings metrics in Q1? Any kind of insights would be greatly appreciated there. And then I have a quick follow-up.

[Roy Mann, Co-Founder & Co-CEO]

Sure, so, thank you for the good questions. So actually we love the Super Bowl. It was amazing and we do like being the [Indiscernible] that we are. In fact everything we cannot measure, ramp ups between countries and the website and searches and a lot of different things. So, we saw a big spike following the ad itself. But for us, it’s mainly an ability to jump to the next level of brand recognition in the world. It’s a long-term play. It’s not something that we measure on a day-to-day basis although that was also great and the overall coverage we got for the ad was amazing.

[Mark Murphy, JPMorgan]

Okay. Okay, excellent. And I have a follow-up, Eliran if you drill into the sequential change in billings and I think we understand the numbers can bounce around. But I believe it’s 15% for Q4. The prior couple of years had been 23% to 24%. So I was curious just if there was any impact to billings perhaps stemming from duration or FX or timing and any other factors and if you might just have any thought on perhaps on how to model billings if anything is unusual in that set up for Q1?

[Eliran Glazer, Chief Financial Officer]

Sure. So, with regards to billing, just as a reminder, our business model based on the ARR is 70% or more now actually it’s coming from annual subscription and 30%-ish is coming from market subscription. So we see some trend covers the annual which obviously we benefit from but this is pretty much the trend as a leading indicator, this is one of the reasons why we care about billings, but you cannot really forecast the trend over time. This is important for us in terms of the health of the business when we look at the return of the spend that we are doing either in performance marketing or social marketing or sales, by the way then we see return, much of the return the we kind of forecast the billings as well going together. We have an algorithm to address this. And with regards to our growth in the next year which is a main driver of the cash flow in the billing. Revenue growth this year was 91%, obviously drove strong cash collection, net dollar retention that was above 120% for all customers and about 135% were offers driving this. The growth in the enterprise customers is also a driver. So, all this unit economics are main drivers of our ability to continue and collect and have a very healthy business model.

[Mark Murphy, JPMorgan]

Thank you very much.

[Operator]

Thank you. Our next question comes from the line of Bhavan Suri with William Blair. Your line is open.

[Bhavan Suri, William Blair]

Great. Thanks for taking my question team. I appreciate it. I want to touch a little bit on the 50k plus cohort. Growth there is really, really strong. I guess, I would love to understand a little bit about sort of who you are replacing as you are expanding or landing these large accounts. Like, is there an incumbent or is it’s still pretty much manual work process that you are replacing? And sort of how sophisticated are these workflows when you get above 50k? Is it sort of replacing sort of very sophisticated workflows? How should we think about what’s being done with monday that was not able to do or poorly done with the other products? How is that space? I would love to talk about that for a minute.

[Eran Zinman, Co-Founder & Co-CEO]

Sure, so, thank you, Bhavan for the question. This is Eran. So, basically as we scale into the enterprise and again this is right for slow businesses, but also for the larger companies. We see that 70% of the deals, we see literally no competition. People use spreadsheets and emails and PowerPoint, and usually we replace those. So, taking whether easy to offline or use – it’s very basic tools and using that and replacing that with monday. So it’s not exactly replacing, but it’s filling a lot of vacuum that exists within the organization. People use a variety of tools and then move and using monday to fill all those gaps, all those processes that they’ll have a place to be. And another thing that monday plays a major role in is integrate a lot of the tools that are being used already in the organization. So whether a company uses a CRM software or another project management tool, by integrating that in to monday it creates one place where you can reflect that other data that happens in other departments within the organization, connect different people and basically break the silo that exists, because different people use different software. So, it’s not really displacing an existing software but more about filling the vacuum and connecting everything in the office being used by the organization.

[Roy Mann, Co-Founder & Co-CEO]

Hey. This is Roy and – sorry, I can add to what Eran said, yes, that the use cases themselves can grow to be really complex doing a lot of things across department, some stuff customers built like really blows our mind and – but it happened gradually. They onboard initially everyone used to track the work and really manage everything and then it grows over time with complexity and our help over time. So that’s kind of like the – I don’t know the lifecycle of usually most our customers.

[Bhavan Suri, William Blair]

Got it. Yes, and I agree with it, Eran, like email and excel is not automation, right? So that makes a ton of sense. I guess, you guys have said earlier, you are sort of data nerds. We all know each other, well I know you are. The premium model is something you guys started. We all talk about is that the right way to do it and obviously working really well. But I’d love to get a little more color on how that’s impacting the top of the funnel activity and then new customers, obviously healthy growth there. But I guess, what does the early data tell you about sort of customer awareness and the return you are seeing from the premium strategy? I’d love to get a little more depth or color there?

[Eran Zinman, Co-Founder & Co-CEO]

Yes. This is Eran again. So, the feature that launched is very successful. So far we see significant increase in the amount of people that use the premium version of monday while not hurting our reach in funnel. We mentioned that previously but we having said that thoroughly and just to make sure does it hurt funnel that actually have a lot of tier users. What we are seeing and actually seeing this accelerating as a trend as customers from the free tier moving into and becoming paying customers. It’s not a second way which you like of those kind of customers but we see this growing and accelerating. So this is very exciting and also another thing that unfortunately we can’t measure is the awareness of the brand and people using monday to do other things apart from work. So it’s kind of hard to measure the effect of this but it definitely has some effects of the brand and the awareness of monday can do.

[Bhavan Suri, William Blair]

Yes, now it’s good to see that, that premium conversion accelerate. I appreciate the color guys. Nice job and thank you for taking my questions.

[Operator]

Thank you. Our next question comes from the line of Brent Thill with Jefferies. Your line is open.

[Unidentified Analyst]

Hi, thank you. This is Sanjay for Thill. So, I was hoping maybe you can dig a little bit more on the new products WorkForms and Canvas, both being in beta. Just wondering when you expect those go GA? And then, the pricing is a little bit higher. I guess, the WorkForms the standard is around $29 and wondering about the go to market for those, as well as you can shed in light on the pricing for Canvas? And lastly, how to think about contribution within the guidance for this year? Thank you.

[Eran Zinman, Co-Founder & Co-CEO]

Yes. So, this is Eran. Thank you for the question. So, basically, we just launched these products. They are now in beta. We actually are still experimenting with pricing and the pricing also might be different. For example, we might charge not per user with the forms, but use different metrics to price our product. So it’s still work in progress. As I mentioned, it’s just a beginning. These are kind of new seasonal products that we plan at and we will see the results in the future. From our perspective, we didn’t take those products into account with our guidance and kind of revenue going forward. But we see this as a huge potential for the next few years both in user acquisition as I’ve mentioned previously, but also as a revenue generator over time. Again, it’s early days. We are still experimenting. We will change the pricing over time. But we are very excited about this. We’ve got some great initial feedback from customers. It seems like there is a huge need in the market for those kinds of products. So, we feel this might be a great opportunity with those going forward.

[Eliran Glazer, Chief Financial Officer]

This is Eliran, maybe just to add to what Eran said also related to a question earlier on where we are going to invest. Innovation is one of the key drivers within monday and we speak about this a lot. So, we would like to continue to innovate and add additional products over time, as I said not only for 2022, and this is where we do some experiment but also beyond. So with regard to the ecosystem, this is a place of high focus for us as part of our continued investment in R&D and adding additional resources.

[Unidentified Analyst]

Thank you.

[Eliran Glazer, Chief Financial Officer]

Thanks.

[Operator]

Thank you. Our next question comes from the line of Andrew DeGasperi with Berenberg. Your line is open.

[Andrew DeGasperi, Berenberg]

Thanks for taking my question. First on the NRR progression, I mean, I’ve noticed it pick up quite a bit in Q4 at a 120% or above a 120%. And given this is a trailing metric, it sounds like you had a lot of expansion in the quarter. Can you maybe elaborate on what happened there? What was popular? And I have a follow-up.

[Eliran Glazer, Chief Financial Officer]

Yes. Sure, Andrew. Thank you. So, as we said, regarding revenue and ARR is driven by two main things. One is adding new customers and as you can see, we have now more than 152,000 customers and many of these customers that we add are becoming, we start more than 80% of our ARR is coming from foreign enterprise tiers and what you see basically is that once they are becoming customers of monday there is an expansion process, because we are already have been as customers and the searching will actually expanding inside and you can see either few of the products the fact that we are already embedded inside the fact that we have Multiple Champion is a key driver and as we continue to go up market with customers with 10+ users, now already represent 70% of total ARR as well as the expansion within the enterprise accounts, this is basically driving this expansion within this existing customer base.

[Andrew DeGasperi, Berenberg]

Thanks for that. And then, in terms of large deal activity, maybe another way to ask you this question is, I think last quarter you mentioned you were approaching seven figure deals. I was just wondering if any were booked this quarter or if you are seeing anymore activity on that front for this year?

[Eran Zinman, Co-Founder & Co-CEO]

Yes. Thanks, Andrew. So, this is Eran. So, definitely we see also acceleration in the amount of bigger deals that we managed to close. Another data point that we can share is that, we have several deals over $1 million for the first time. So this is also very exciting. But it’s not a one-time thing. We see this is a trend that continues to happen and expand over time. So definitely we manage to land bigger deals and to close bigger companies using the product and we see this trend continuing in 2022 as well.

[Andrew DeGasperi, Berenberg]

Clear. Thank you.

[Operator]

Thank you. Our next question comes from the line of DJ Hynes with Canaccord. Your line is open.

[DJ Hynes, Canaccord Genuity]

Hey. Thanks guys. Congrats on the continued momentum here. As you think about the evolution to a product suite as you kind of talked about in the prepared remarks, how do you envision that impacting the go to market motion? I mean, should we expect more in terms of kind of bundling and packaging various solutions and I guess, what could the implications be on landing ASPs?

[Roy Mann, Co-Founder & Co-CEO]

H. Thanks you. It’s Roy. So, yes, we see this as a massive go to market for us, an additional go to market for us mainly because the need for those two is separate. And an important think to note is that these are complete standalone products both WorkForms and Canvas. And so, we expect it to be another addition for different types of customers who maybe looking for something else other than a platform such as a Work OS to join the ecosystem in a separate place and then they expose to the suite of the products and maybe try out other stuff. So we definitely see opportunities all around with this approach.

[DJ Hynes, Canaccord Genuity]

Got it. And then a follow-up, just with respect to kind of your new partnership with KPMG, like at what spend level would a partner like KPMG typically start to get involved? And I guess, do you anticipate that they can bring new customers that start and use these levels or is it more about helping you to kind of scale your more mature customers on those use cases?

[Roy Mann, Co-Founder & Co-CEO]

Hey, it’s Roy. So, yes, with KPMG it’s a special partnership because we see the future together and I feel KPMG, we manage to find a way to get into existing practices, okay, like digital transformations and others and we are very – you know experimenting a lot with like a carbon measurement and a lot of other stuff that I think will be the future for many different practices. So, I think they see the no-code/low-code capabilities we have that has a big leverage to solve many big problems and that’s where it grew from.

[DJ Hynes, Canaccord Genuity]

Got it. Okay. Thanks for the color. That’s all.

[Operator]

Thank you. Our next question comes from the line of Derrick Wood with Cowen and Company. Your line is open.

[Derrick Wood, Cowen and Company]

Good morning. Thanks. My first question I wanted to touch on the net revenue retention rate 10+ cohort up from 119 to 136 that’s a 17% increase, really impressive. So, how much of that was improvement in churn and how much of that was just pure expansion and then if you looked at the expansion, that you think about more viral adoption with better brand awareness. So what you guys have done with direct sales and customer success teams and maybe what area would you point to have a great impact on it?

[Eran Zinman, Co-Founder & Co-CEO]

Yes. Thanks Derek. This is Eran. So, basically, it’s a result of both. So we are both seeing less churn with our cores and also we see more expansion within some users. The more expansion we can attribute that to our ability to allow larger enterprises to use monday and expand more, also product improvement that we introduced and the fact that those companies can use monday across multiple departments. So, they can expand more and more, add the scale of the deployment of monday within the company. And also thanks to a lot of product improvements that we introduced and see all those cohorts having less churn. Also I think the feature kind of, a little bit contributed to that. People are able to try the product more and then churn less and kind of have more confidence. So lot of great things that we introduced a product, managed to increase the net dollar retention. And as Eliran mentioned, not only does net dollar retention itself grew but also the proportion of the 10+ user population has increased. So it’s a double kind of increase that we see within our customer base. So, two great trends that we are seeing and we also see this is going to continue in 2022.

[Derrick Wood, Cowen and Company]

That’s very helpful color. And maybe, Eliran, a follow-up for you on the operating income guide for 2022. Obviously, you guys – and product development and R&D is going to be a big focus, as well as sales and marketing as you invest more in growth. But wanted to unpack that sales and marketing a bit more. I mean, on the marketing side, is there any impacts from IDFA that changed in the calculus there and then on the sales side what should we expect kind of continue the headcount growth levels as we saw in 2021?

[Eliran Glazer, Chief Financial Officer]

Hey, Derek. So with regard to the IDFA, this is less of a concern to us. It’s mostly for the B2C companies. We don’t see an issue with that in our B2B model with regard to the performance marketing. So, when you think about our business model, we have a hybrid model. Just as a reminder, we started performance marketing, we generated the leads and then there is the sales people and the customer success and the partners is actually the - continue the motion. So, we are investing in both these categories, on one hand continue to invest in performance marketing. We have a phenomenal unit economics as you can see by the level of the cash flow, by the level of returns, but and on top of that we are bringing additional sales people to the SMB categories, to the mid-market and to the enterprise. And this is a place if you think about the way we plan our headcount growth this year and this is why we said that we are going to accelerate high and we are front loading expenses in the first quarter and in fiscal year 2022 as whole in order to continue to drive the growth that we are seeing. So, definitely continue to invest in sales on headcount. Already increasing the quota bearing significantly, also increasing the partners channels an impact that where we don’t have sales people and continue also to expand our customer success management group that is also helping us a lot, which we knew of and supporting the big customers who are becoming more meaningful. So, investing at all fronts to drive further growth.

[Derrick Wood, Cowen and Company]

Perfect. Thank you. Congrats on a great quarter.

[Operator]

[Operator Instructions] Our next question comes from the line of Robert Simmons with D.A. Davidson. Your line is open.

[Robert Simmons, D.A. Davidson]

Hey guys. Thanks for taking my questions. I was wondering how much revenue are you expecting from the payment solution in the app market marketplace and how much is included in guidance.

[Eran Zinman, Co-Founder & Co-CEO]

Robert, can you – this is Eran. Can you repeat the question please?

[Robert Simmons, D.A. Davidson]

Yes. On the payment solutions that you have now in the app marketplace, how much revenue from that is included in the guidance?

[Eran Zinman, Co-Founder & Co-CEO]

Oh okay. Yes, thanks for the question Robert. So, this is basically a new feature that we introduced just recently analysis now is for the earnings call. So it’s just early days. Very insignificant, almost none so far and also this year within add this revenue is for the guidance. So, and again, this is for us a beginning of kind of evolution of our app marketplace. We see more and more developers creating apps within the marketplace. Already some of them have created their own solution to monetize those apps and we now introduced a way for those developers to easily charge our customers, using the enough payment systems which will reduce the friction allow more developers to charge and build more applications that they get monetized. So definitely we are very excited about this. But again, it’s early days and this year it’s going to be insignificant as part of our revenue.

[Robert Simmons, D.A. Davidson]

Got it. Great. And then, so, it looks like both the number of clients and the revenue per client grew quite a bit in the last year. How much of the revenue per client growth is coming from kind of suite growth and how much is coming from other factors besides just the number of paid users?

[Eliran Glazer, Chief Financial Officer]

Robert, so first of all, welcome on board. I think this is your first call. So, we – when we look at the revenue per client because we have a large and diversified customer base, more than 152,000 customers, we don’t really differentiate between the two. But if you want to think about the way the business model works is, it’s the combination of what we mentioned earlier. We have the new customers and the expansion. So there is a certain ratio between the two and they basically when we look at the total revenue per client, because of the diversity in the clients, big clients versus small clients, the ACV is kind of – that we look, but we don’t use as an indicator of our business health.

[Robert Simmons, D.A. Davidson]

Got it. Great. Thanks for taking the questions.

[Operator]

Thank you. Our next question comes from the line of Scott Berg with Needham. Your line is open.

[John Godin, Needham & Company]

Great. Hey guys. This is John Godin on for Scott Berg. Thanks for taking my question. Just as far as 2022 goes, how should we think about the contributions from the partner channel for this year? And how do you see that kind of revolving over the past couple of years? Thanks

[Eliran Glazer, Chief Financial Officer]

So, the partner channel is something that we started very early in the life of monday and we are very proud of. It continues to grow quickly. As a reminder, in places where we don’t have the sales people, we have eleven offices around the world in Latin America, in Asia Pacific, in other places in Europe, we actually have partners that are becoming very meaningful in our contribution of total ARR. We have more than 150 channel partners globally. This is obviously the network with key partner example you are going to see Google, Microsoft, Salesforce, Zoom, et cetera. But we also continue to hire internally, partner channel managers, they are becoming also very meaningful in our total headcount. So, I would say that they are very, very significant in our total ARR.

[John Godin, Needham & Company]

Great. And just second on the workdocs, how are you going to see customers use that functionality the most initially? Have you think about cost line that you switch within the product platform in the near term and maybe over the long-term as well? Thanks.

[Eran Zinman, Co-Founder & Co-CEO]

Yes. Thanks, Scott. This is Eran. So, basically work as we just announced is out of beta. We’ve made a lot of progress in terms of product innovation. We mentioned this earlier but the trend still continued. It’s one of the fact that’s building block or feature that we have released with the highest adoption rate. More than 60,000 existing accounts are already using workdocs and those customers created over 800,000 wokdocs to-date, which they use and engage with. So, it’s a very meaningful part of our platform. It became a meaningful part of what people do with the platform. And again, the fact that this in terms of retention and usage and revenue, we will see over time, but in terms of engagement and usage and value that our customers get from workdocs, it’s a phenomenal feedback and specifics that we see so far. So we are very proud of that product.

[John Godin, Needham & Company]

Okay. Thanks guys. Congrats.

[Eran Zinman, Co-Founder & Co-CEO]

Thank you.

[Operator]

Our next question comes from the line of George Iwanyc with Oppenheimer. Your line is open.

[George Iwanyc, Oppenheimer]

Thank you for taking my question. So, with the continued aggressive hiring, can you give us maybe some perspective on how quickly the recent sales hires have ramped up and as you look at adding people this year, are there any changes in where your folks senior hiring be either from a vertical perspective or a regional perspective?

[Roy Mann, Co-Founder & Co-CEO]

So, hey, George. Yes, so we continue to add aggressively in the sales team. We also did some initiatives that actually accelerated hiring. I can tell you that in December, January and February, sorry, in Q4 of last year, December, November, December and already in the beginning of this year, we are getting very close to achieving our target, which results to sales. We are hiring in Israel, as well as in other places in the U.S., in Europe and in other places where we are now opening offices such as Tokyo and Asia Pacific. This is in our plans. And this is something that we are pursuing aggressively.

[George Iwanyc, Oppenheimer]

Okay. Just one more question. Given the continued strong customer growth, are you seeing any changes in the way customers land either from a use case perspective or the type of change that initially engage?

[Roy Mann, Co-Founder & Co-CEO]

So, we see customers landing bigger as we have a very - thousands of use cases. Basically, we have a number of products that customers are landing, project management, work management. We also see others like CRM marketing. We have different solutions that we offer to the customers and we can see them coming from all kinds of directions as part of their searching Google or other searching engines online.

[George Iwanyc, Oppenheimer]

Thank you.

[Operator]

Thank you. I am not showing any further questions in the queue. Ladies and gentlemen, that concludes today’s conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.