$MNDY Monday.com Q1 2026 Earnings Conference Call

Thank you, Iran, and thank you to everyone for joining our call today. I'll review our first quarter fiscal year 2026 results in detail and provide updated fiscal year 2026 guidance. As Roy mentioned, we have had a strong start to 2026. Total revenue in Q1 came in at 351 million, up 24% from the year ago quarter. Our overall NDR was 110% in Q1. We now expect overall NDR to slightly decline by the end of fiscal year 2026. As a reminder, our NDR is a trailing four quarter weighted average calculation. For the reminder of the financial metrics disclosed, unless otherwise noted, I will be referencing a non-GAAP financial measures. We have provided a reconciliation of GAP to non-GAAP financial in our earnings release. First quarter growth margin was 89% compared to 90% in the year ago quarter. Research and development expense was 78.4 million in Q1 or 22% of revenue, up from 19% in the year ago quarter. Sales and marketing expense was 158.2 million in Q1 or 45% in revenue compared to 48% in the ago quarter. General administrative expense was 28.6 million in Q1 or 8% of revenue compared to 9% in the year ago quarter. Operating income was 49 million in Q1, up from 40.8 million from the year ago quarter and operating margin was 14% similar to the year ago quarter operating margin in Q1 add and approximately 190 basis points negative ethics impact mainly from the appreciation of the Israeli sheer compared to the US dollar net income was 56 million in Q1 compared to 58.4 million from the year ago quarter. Diluted net income per share was $1.15 in Q1 based on 48.9 million fully diluted shares outstanding. Total employee headcount was 3,211 and increase of 56 employees since Q425. For the remainder of fiscal year 2026, we expect headcount to stay largely flat, reflecting the productivity gains AI is already delivering across our organization. Moving on to the balance sheet and cash flow, we ended the quarter with $1.21 billion in cash cash equivalent and marketable securities compared to $1.67 billion at the end of Q4 2025, reflecting $553 million of shares repurchase executed during the quarter. As of the end of Q1, approximately 182 million remained available under our existing share repurchase authorization program. Adjusted free cash flow for Q1 was 102.8 million and adjusted free cash flow margin was 29%. We now estimate that the accelerated share buyback executed during Q1 will reduce full year 2026 adjusted free cash flow by approximately 20 million. Adjusted free cash flow is defined as net cash from operating activities, less cash used for property and equipment, and capitalized software cost, plus cost associated with the build out and expansion of our corporate headquarters. Let's now turn to our updated outlook for fiscal year 2026. For the second quarter of fiscal year 2026, we expect our revenue to be in the range of 354 million to 356 million, representing growth rate of 18% to 19% year-over-year. We expect non-GAAP operating income of 46 million to 48 million with an operating margin of 13% to 14% which assumes a negative ethics impact of 100 to 200 basis points. For the full year 2026, we expect revenue to be in the range of 1.466 billion to 1.474 billion representing growth of 19% to 20% year-over-year. We expect full year non-GAAP operating income of 185 million to 191 million with an operating margin of approximately 13% which assume a negative FX impact of 100 to 200 basis point. We expect full year adjusted free cash flow of 280 million to 290 million with adjusted free cash flow margin of 19% to 20% which assume a negative ethics impact of 100 to 200 basis points. Let me now turn it over to the operator for your questions.

Hi Ryan, this is Alan. So thank you for the question. So there is a lot on retention and expansion side that we are very positive on. Gross retention is at historical highs. We're still seeing double digit feed growth year-over-year in our mid-market and enterprise customers. 34% of our 50k of 50k customer has adopted more than one product. It was 29% in Q4. So we're seeing a lot of positing signs. As a reminder, we're lapping the pricing actions from 2024 two years ago in 2025 and they increased our NDR by 10 or 2%. We're going to lap this at the end of Q2 or during Q sorry at the end of Q2 and we don't believe that extension or new adoption will now be enough to offset some of the pricing grow over that we have seen in the past.

Hi, it's Alan. So Jos, it's still early stage. You know we will have much clearer picture in the coming months and then we can provide updates or more color on once what we're going to see. For now we didn't assume any significant impact or any impact on the numbers.

Yeah. Hi. So with regards to headcount being flat, this is being staged throughout the year. So there is still the impact of the hiring that we have done in prior years and the fact that the shekel is strong versus the dollar. So there is going to be some benefit from that. But we're going to see it more into going into next year rather than this year.

Hi Ke this is Alan. So nothing has changed since what we have provided in Q1 but what we have seen is the outperformance was broad-based. It wasn't driven by any single segment and core or region. It was broad-based. Of course, up market momentum remains strong as Casey spoke about. We have record net heads of 500k and we continue to grow up market and obviously the AI contribution as we mentioned 10% of the net new AR approximately is coming from AI. So this is encouraging drivers that kind of drove the results and the beat for this quarter.

This is Alan. Hi John. I will answer the question on the MDR. So John to your question. So first of all, lending expand dynamics. So we are seeing recent enterprise deals they are lending bigger but larger customers typically commit to a multi-year agreement with more structured expansion. So if you think about the 100k customers they are lending and taking a multi-year deals. So this is one of the reasons why we're saying that the 100k NDR is slightly below the 50k one. It's not related to churn actually our growth retention is at all-time high. And we expect and it's important to say we expect a one or two% of temporary pressure for the upmarket NDR metrics for the reminder of fiscal year 2026 as we have the pricing benefit that we spoke about.

So we said when we were in the investor day we said that we expect gross margin to be mid 80s we were used to 90% but because of the computing cost of AI we said that we are expecting for the short term or in the foresee future to have some impact overall again we're not seeing yet a significant impact on our growth margin but we believe there is going to be additional cost regarding computing cost related to AI.

Yeah. Hi Alex, this is Alan. So we said that there is some seasonality usually with Q4 and Q2 are the strongest up market performance. We saw a record net heads of 100k in Q4 of last year. So there was possibly some pull forward. And when we look at the mid and up market metrics, we look at them as a whole. So if you think about the 50k and the 500k customers, they were very healthy with 500k netted at historical highs. So we look at them all together and this is the way we view it.

Hi hello this is Alan. So as we said I think the positive surprise was AI contribution with ARR growing to almost 10% of net coming from the AI product and this is something that we are very pleased with. Other than that, we continue to see the up market momentum that we have seen in the past and enterprise customers continue to grow with the 500k net ads and numbers with regards to FX we did see small tailwinds from FX in Q1 but it didn't impact the overall reported growth rate so it was very very small.

Hi this is Elan. So what we said is basically that we provide our guidance based on everything that we know today and we believe that with the investment that we are doing on AI and the fact that we're going to see the impact throughout the year we remain focused basically on managing the year expectation rather than looking at just the next quarter. So on the cost side we're investing in our product and GTM capabilities the potential increase of expenses from AI as I mentioned earlier compute we are expecting this to be increasing throughout the year and there is an inherent uncertainty on how that revenue ramps when we are thinking about throughout the rest of the year. So when we take all of this together into account our guidance does imply some moderation in H2.