monday.com Ltd. (MNDY) Q2 2021 Earnings Call Transcript

monday.com Ltd. (MNDY 1.59%)
Q2 2021 Earnings Call
Aug 17, 2021, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the monday.com Q2 fiscal 2021 earnings 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] I would now turn the call over to your host, Keenan Zopf.

You may begin.

Keenan Zopf -- Investor Relations

Certain statements on the call today may be forward-looking statements, which reflect management's best judgment based on currently available information. These statements involve risks and uncertainties that may cause actual results to differ from my 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 may be discussed in the call.

Reconciliations to the most directly comparable GAAP financial measures are available in our earnings release and the earnings presentation of today's call, which is posted on our investor relations web page at ir.monday.com. With that, I will turn the call over to Roy Mann, co-CEO of monday.com.

Roy Mann -- Co-Chief Executive Officer

Thank and thank you, everyone, for joining us today. We are very excited to have completed a successful IPO and to announce a very strong result for our first quarter as a public company. As you've seen from our press release, our business continues to accelerate across revenues, paying customers, and customer expansions. We generated $70.6 million in revenue up 94% year over year.

Eliran, our CFO, will provide you with more financial details and commentary on what drove Q2 results. He'll also provide our guidance for the rest of the year. Since this is our first earnings call as a public company, I'd like to take a few minutes to tell you a bit about monday.com. We've also posted the slide deck on our IR website that provides you with additional color on our business and a review of our Q2 financials.

When we first started monday.com, we started it with a mission to give our customers the power to create their own work software. To do that, we revolutionized the way people use software, giving them the same low-code/no-code capabilities once reserved for software creators and designers. Today more than nine years later our customers use monday.com in ways we could have never imagined, across virtually limitless use cases and in organization of all sizes with that mission we are leading in a new category called Work OS. Eran?

Eran Zinman -- Co-Chief Executive Officer and Co-Founder

Thank you, Roy. Before we dive deeper into our platform we'd like to highlight our market opportunity. Our Work OS is broadly applicable for any organization and team across a growing number of use cases. According to estimates from IDC, our total addressable market was $56.1 billion in 2020 and will grow to $87.6 billion in 2024.

Further, we believe our Work OS platform is applicable across the 1.25 billion information workers that industry analysts estimate exist globally. Now, let's dive deeper into our platform. Our cloud-based platform is a no-code/low-code framework. It consists of modular building blocks that allow our customers to create their own software applications and work management tools.

By using our platform, our customers can simplify and accelerate their digital transformation, create a unified workspace across departments, and increase operational efficiency and productivity. Our software is simple enough for anyone to use, yet it's powerful enough to drive core functionality within any organization. Our platform also integrates with our systems and applications creating a new connective layer for organizations that links departments and bridges information silos. We believe this makes our Work OS a core solution that customers can rely on to run their business.

Our customers are our partners. We are continuously molding our platform future together. We distinguish customers with more than 10 users from our broader customer base and they are the core focus of our sales and marketing efforts. The revenue growth rate of our customers with more than 10 users has outpaced the rest of the business in each of our previous fiscal years.

And our expectation is that such customers will continue to grow in the future. Moreover, our ability to successfully move up market is demonstrated by the consistent growth in the number of our enterprise customers, which we define as customers with more than 50,000 ARR. We ended the quarter with 470 enterprise customers compared to only 144 in the year-ago quarter an increase of 226%. We employ an efficient go-to-market model combining our extensive self-service funnel and a direct sales approach, which consists primarily of our sales team, our customer success, and our partner's team as well as our apps marketplace.

I want to share some of our product solution go-to-market approach. Product solutions are complete products. Horizontal or vertical built on top of the worker's platform. This allows the customer with different intents, define, and in-depth monday.

Now, I will turn this over to Roy to discuss our apps in our apps marketplace.

Roy Mann -- Co-Chief Executive Officer

Thank you, Ron. We took our no-limits approach to new heights to allow any developer to build on top of monday.com with monday apps. We added even more freedom with our app marketplace where each customer can extend the platform on their own. This no-limits approach leads to happy customers that not only love our product but also feel they're part of our journey.

As the number of our customers grew, we heard more and more stories on how we changed our business and for some their lives. We began to feel an ever-growing sense of responsibility, a responsibility to be there for our customers with world-class support and an ever-improving platform that allows them to do anything their business demands or their imagination takes them toward. This responsibility extends toward the communities we live in as well. We saw the amazing impact monday.com has on a nonprofit organization.

From work, we have done together, we see that many nonprofit organizations have a massive technological divide. A divide that prevents them from making the impact that they seek. Our equal impact initiative aims to close that digital divide with the long-term ambitions goals of making an elastic impact on nonprofit organizations. With our knowledge and resources in digital transformation, running businesses, and scaling teams, we aim to be a partner for the world's nonprofit organization, want to make a positive change for all of us.

I want to give a quick shoutouts for our employees. Monday.com success happened only because of our amazing employees and the strong culture of transparency, ownership, and trust we have built together. All of us at monday feel we share the same goal and walk on the same path forward. We believe that we are on the cusp of a massive change in work software.

If the last 10 years were defined by the SaaS cloud, then the next 10 years will be focused on giving people the power to create software that treats their own needs. We believe that we are best positioned to be the leaders in this change. We have built a company to take such an opportunity head-on while keeping our culture, our values, and the love we still have toward creating beautiful powerful digital products. Today, we are thrilled to introduce a completely new capability to monday.com's Work OS platform monday workdocs.  Workdocs represents the next step in our Work OS platform.

Documents provide a great canvas for people to start their work in. We see this as a massive opportunity to expand how monday is adopted so our customers couldn't create no-code/low-code work software. With monday workdocs our customers now have the ability to manage their work, ideas, and data in a completely unstructured way. Our workdocs include two powerful technologies embedded in them.

Our real-time engine and document connectivity. We believe document-based collaboration is crucial for many work processes. That's why we've built our real-time engine from scratch. It's a completely new technology that allows for hundreds of people to work together on the same document.

It's a strong foundation that will allow us to take documents collaboration to uncharted territories. Another critical part of our workdocs is that they're connected to other applications. We see this as part of our connectivity to their Work OS provides. We allowed any monday object such as widget, chart, and views to be embedded into documents.

This means that our workdocs have a live object that updating in real-time whenever there are sorts of data changes. So monday workdocs are never stale because they are connected documents. These make workdocs and other no-code ways for our customers to build work applications on top of monday.com Work OS. Traditional documents were never designed to be used in the way many teams use them today.

Teams use documents to start work processes and collaborate together, but the documents themselves were never created to support this. We see this as an opportunity to turn these beginnings of documents into real work tools that people can use to work together better. Workdocs represents the next step in our journey to give our customers the ability to create their own work software. No matter how they begin or continue their work.

Until now boards were just sole entry points to our platform. Workdocs are an additional unstructured more flexible way to onboard and deepen adoption in companies. Workdocs are now live and working on monday's Work OS and are available to all our plans. Eran?

Eran Zinman -- Co-Chief Executive Officer and Co-Founder

Thank you, Roy. In Q2 we officially launch a free tier of monday.com Work OS. This is geared to small teams and limited only to two users. We believe that this is an excellent way to drive awareness and broader adoption among a new set of audiences.

We're encouraged by the earlier response to the free offering and see this as a way to seed monday usage and ultimately drive conversion to enterprise customers. We had a great quarter in terms of customer wins and expansions. These were broad base across industry verticals with major companies including Headspace, Mintel, Adyen, and Welling Altus. Let's talk about Headspace as an example, Headspace is a very well-known mindfulness and meditation app dedicated to improving the health and happiness of the world.

Headspace has begun to use monday.com Work OS to increase collaboration and efficiency for all of their marketing and the creative process across the globe. In order to win subscription-based companies like Headspace must operate in real-time adjusting to changes in each of their markets every day. Which is why they chose our platform. This win is another example of how monday can help high-growth global companies and we're very happy to be part of their growth and success.

During Q2, we continue to expand our partnership ecosystem. To that end, we kick off new strategic alliances with global system integrators across key industries such as manufacturing and real estate including Hitachi solutions and NTT Data. We accelerate our growth and expansion into the Latin American market with new channel partners, customer deals, increasing our ARR in this region as part of our expansion into a new market. We also added Polish as an additional language available on our platform, increasing the total number of languages to 14.

One of the things that we are most excited about is that we are truly developing monday.com ecosystem of third parties, interfaces, partners, and developers that collectively drive usage and multiple monetization opportunities. You will be hearing more much more from us on this front in the coming quarters and years. As I hope as come through in our presentation in our comments today monday.com is the highly differentiated company with a strong a unique point of view about the future of work and collaboration. We are capturing a massive market opportunity that is expected to reach over $85 billion in the next few years.

Monday.com can help drive results for almost every business of every size around the world. We're very excited to speak with analysts covering the company and investors who join us on this journey today. I'll turn it over to Eliran to cover our financials and guidance.

Eliran Glazer -- Chief Financial Officer

Thank you, Roy, and Eran. And thank you to everyone for joining our call today. We are very excited about the opportunities we see for the company to continue to grow and evolve. I will go to our second-quarter results then discuss in more detail the business and close with guidance.

We were pleased with the results for the quarter, which demonstrated continued high growth at scale. Revenue in the second quarter came in at $17.6 million up 94% year over year laid by larger expansion within our existing customer base. Our net dollar retention rate for customers with more than 10 users was over 125% and our net dollar retention rate for all customers was over 111%. As a reminder, our net dollar retention rate is a trailing four-quarter weighted average calculation.

Also, our focus on moving upmarket is working. We ended the quarter with 470 enterprise customers up 226% for 144 in the year-ago quarter. On the hiring front, during the last two quarters, we added more than 170 employees to monday.com, particularly focusing on R&D and sales and marketing. These new hires account for more than 70% of the new talent added during this period.

We ended Q2 with more than 850 employees globally and we plan to continue investing aggressively in adding new talent with the focus on R&D and our enterprise sales force. Next, I'll provide more detail on the second-quarter financial results. Before turning to expenses item and profitability I would like to point out that unless otherwise noted all metrics are non-GAAP. We have provided the reconciliation of GAAP to non-GAAP financials in our earnings release.

The gross margin came in at 89.7% up from 88.3% in the year-ago quarter. Research and development expense was $11.2 million or 16% compared to 20% in the year-ago quarter. We continue to invest significantly in R&D including high growth in our engineering headcount, but the pace of our revenue growth has outpaced the investment growth. Sales and marketing expenses were $55.5 million or 79% of revenue compared to 101% in the year-ago quarter.

The improvement was driven primarily by lower marketing investment as we are becoming more efficient. Allocating our marketing spend to focus on customers with 10 plus users and enterprise customers. We continue to make a substantial investment in our sales organization and have significantly expanded our sales team over the last year. Similar to R&D the pace of our revenue growth has outpaced the investment growth.

G&A expense was 6.5 million or 9% of revenue compared to 8% in the year-ago quarter reflecting the increased cost of being a public company. Operating loss was $9.9 million and operating loss margin came in at 14%. Net loss was $11.3 million and loss per share was negative $0.26. Moving on to the balance sheet and cash flow, we ended the quarter with approximately $878 million in cash, cash equivalents, short-term deposit, and restricted cash.

Net cash used in operating activities was 0.4 million in the quarter. Adjusted free cash flow was negative $1.5 million and it was driven by strong collections stemming from our strong billings in Q4 and Q1. 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. Such as costs related to the buildup of our corporate headquarter in Tel Aviv.

Now turning to our outlook for the third quarter and the full year of 2021, we believe we can deliver high growth for the foreseeable future. As we are addressing a large and growing market and we believe we are well-positioned to be one of the long-term winners in this space. There are more than 1 billion global knowledge workers today that could potentially use monday. We're introducing Q3 and full-year guidance as follows.

For the third quarter of the fiscal year 2021, we expect our revenue to be in the range of $74 million to $75 million representing a growth of 74%to 76% year over year. We expect a non-GAAP operating loss of $26 million to $25 million. For the full-year 2021, revenues are expected to be in the range of $280 million to $282 million representing growth of 74% to 75% year over year. We expect a full-year non-GAAP operating loss of $93 million to $91 million and a negative operating margin of between 33% and 32% compared to a negative operating loss of $86.2 million in 2020 and a negative operating margin of 53%.

We believe we can deliver high growth for the foreseeable future as we are addressing a large and growing market that is still very early in its maturity. As a result, we will continue to prioritize investments in the business of near-term profitability and we continue to make progress against our growth phase targets margins. I'll also note that we intend to be active with regard to investor relations and we'll be conducting a number of non-deal roadshows and starting to present at investor conferences in September. With that, I'll turn it over to the operator for questions.

Operator?

Questions & Answers:

Operator

[Operator instructions] Our first question comes from Kash Rangan with Goldman Sachs.

Kash Rangan -- Goldman Sachs -- Analyst

Hi. Thank you very much. Lovely day. Fantastic results and congratulations on the first quarter as a public company.

What a great start. Roy, one question for you. You talked about sales and marketing investments. Can you talk about, how should we think about how productive the shift toward more selling and a little bit less marketing as a pretense to have said in marketing is likely to drive traction? And the enterprise going forward because it certainly seems that you had a great quarter, but you're just getting started building out and scaling your sales effort for the enterprise.

And one for you Eliran. It does look like you made significant progress with operating margins and free cash flow yet your guidance still calls for a snap back to the sounds of losses. So just wondering if there is any specific investment you're making in the second half or just trying to keep things conservative and wait till the quarters prove themselves. Thank you so much.

Congrats.

Roy Mann -- Co-Chief Executive Officer

Thanks, Kash. Thank you. It's Roy. And so yeah it's -- we're putting a lot of emphases on growing.

And like we mentioned before in our ad during the IPO, we have and funnel that is driven by -- and no-touch like we do marketing that we get leads. Those leads to becoming paying customers and our sales force are and addressing those customers after they pay and help them scale. So why do we invest a lot in marketing? We see that we're doing that in a more efficient way. OK.

This is what you can see with the results of this quarter. Our approach to new customers is becoming more efficient. While we scale the sales team and needs approach to grow our customers way more. So you see both of these working really well and I think as we mentioned before seeing our sales team that has been growing in the last two years reach more maturity.

And it's like working better and better.

Eliran Glazer -- Chief Financial Officer

And, Kash, hi. This is Eliran. With regard to your question on guidance. So first of all, we are very confident in our guidance and we feel comfortable with the plan that we have to continue to invest aggressively.

One of the things that is important for us to say is that while we did very good results in Q2 we are going to continue to invest aggressively in the second half of the year in order to generate additional hyper-growth at scale Just in terms of numbers, our capital efficiency is well above 2.5. Just as a reminder for every dollar that we invested in inception we basically generate more than $2.5 in terms of ARR. So there is a huge opportunity it's a greenfield market. Therefore, we would like to ensure that we don't pass this opportunity and continue to invest and they are going to be additional costs.

We're going to continue to hire aggressively in sales and marketing R&D. We're going to have the full impact of our new headquarters in Tel Aviv. We're going to continue to invest across other places in the organization and hopefully, we're going to see some continued growth as we continue to go forward. Does this answer your question, Kash?

Kash Rangan -- Goldman Sachs -- Analyst

Absolutely. Great start. Congratulations. Thank you so much.

Operator

Our next question comes from Mark Murphy with JPMorgan.

Matt Coss -- JPMorgan Chase & Co. -- Analyst

Hey. Good morning. This is Matt Coss on behalf of Mark Murphy. I have my congratulations on the quarter.

Can you talk to us about the distribution of new use cases by prepackaged solutions versus someone using monday to build something completely from the ground up? And then, maybe you can help us understand how many of your customers who have adopted prepackaged solutions are using sort of the low-code/no-code advantages of the platform to really customize their application.

Eran Zinman -- Co-Chief Executive Officer and Co-Founder

Sure. This is Eran. Can you just repeat the first part of the question, please?

Matt Coss -- JPMorgan Chase & Co. -- Analyst

Yeah. So if you have a sense of your customers using monday.com new customers you buy a prepackaged solution versus sort of just using monday to build their own application from the ground up.

Eran Zinman -- Co-Chief Executive Officer and Co-Founder

Yeah. OK. So this is Eran. So basically, the majority of our customers usually start with one use case.

And then over time expand to more use cases. I would say the vast majority start with a prepackaged solution just because usually the way it works is that users search for a very specific problem they're trying to solve and this is kind of how we led them through the ongoing process. But I think this is part of that over time we see two trends. One is further customizing their existing solution, meaning matching that to their need, but then finding more and more approach solutions that they can use and expanding the use of within the organization.

And also building their own kind of solutions on their own templates and use cases. In terms of the low-code/no-code, so basically everybody using monday essentially is using no-code capability using the building the board itself and customizing the coms is essentially if you think about it building a database to capture data. And as we disclosed during the IPO process over 90% of our customers use automation and integration. So it's pretty popular within our enterprise accounts.

So everybody -- I would say broadly speaking every customer of monday has to leverage in our no-code and low-code capabilities.

Matt Coss -- JPMorgan Chase & Co. -- Analyst

OK. Thank you very much.

Eran Zinman -- Co-Chief Executive Officer and Co-Founder

Sure.

Operator

Our next question comes from Brent Thill with Jefferies.

Brent Thill -- Jefferies -- Analyst

Thank you. I was curious if you could spend a little more time on the enterprise traction and maybe provide some examples of where you're seeing great traction. I think maybe you could also talk about your largest deployment and give us a little more color in terms of how that buildout is going.

Eran Zinman -- Co-Chief Executive Officer and Co-Founder

Yeah. So this is Eran. So we see very high growth in the customers over 50 k over 226% year-over-year growth from our side of the company. This is a strategic part of our business going forward.

We do invest heavily into the no-touch and bringing new paying customers into our funnel. But at the same time as we mentioned at the beginning of the call, we invest heavily into making the product better for enterprise customers keep adding features and capabilities. And this part of the business is growing significantly faster than the whole of the business. Those customers demonstrate very high natural retention numbers.

They extend more and we are keeping and launching new features to that part of the business going forward.

Roy Mann -- Co-Chief Executive Officer

Yeah. Hi. It's Roy. I can add that we're in enterprise we're focusing on security control features and governance.

And that's basically enabling us to get to larger customers. They want it and we need to just open the door right now with enabling all those things. And that's where our biggest focus is product wise.

Brent Thill -- Jefferies -- Analyst

Great. Just curious if there were any geographic trends that you're seeing that are different between the U.S., EMEA, and APAC. Any stand out. There's been a lot of questions as it relates to kind of the return to the office to some people that come back in.

If you've seen any noticeable differential in the customer behavior. Obviously, the numbers suggest that it doesn't really matter what environment we're in for you guys right now given the great growth. But any color on that would be helpful.

Eliran Glazer -- Chief Financial Officer

Brent, hi. This is Eliran. So as a reminder we enjoyed the hyper-growth before COVID and we expect to continue to grow to the type of scale also post-COVID. Hopefully, it will come soon.

As a reminder, we see the breakdown geographical breakdown 52% of our revenue is outside of the US, 48% in the US, 70% of our customers are non-cash and we even added another Polish -- another language to our platform, which is Polish. Now we have 14 languages. So what it is basically we are expanding within existing customer-facing those geographies we already operate in. But as a reminder, we also have our partnered channel that's in places where we don't have the sales force we expand within the ability of our partners' ecosystem.

And this helps us to gain additional markets where we don't operate holistically through this channel.

Brent Thill -- Jefferies -- Analyst

Thank you.

Operator

Our next question comes from Bhavan Suri with William Blair.

Bhavan Suri -- William Blair -- Analyst

Hey, guys. Let me echo my congrats. It's a great quarter out of the gate. I guess I want to touch on on the enterprise traction you've added more than hundred customers to the 50k-plus ARR.

I guess I'm trying to understand, how much of this you attribute to the point of getting more sophisticated its ability to handle complex workflows or do you think it's more driven by the fact the direct sales motion and customer adoption as maturing? Like how would you balance those two?

Eran Zinman -- Co-Chief Executive Officer and Co-Founder

Yeah. Hi, this is Eran. So my short answer will be both. I think we've seen the combination of two forces.

One is obviously, the fact that we are maturing our self team we have more sales reps on our company and they're becoming more experienced. So definitely this is one part of this effect. The second part is that we invest heavily into the product for enterprise accounts and we're keeping to do that. So we're doing a lot on that front just to make the product more scalable.

And we see that as we progress larger and larger accounts are able to adopt monday and another very interesting trend that we see is that every sale cycle that goes with this in an account is for another sales cycle. So it's like an end never-ending process of funding in these cases the department that could use monday. So it's not a one-time deal that you sign off, but more of a process. So, therefore, we get larger and larger accounts using us.

Bhavan Suri -- William Blair -- Analyst

Gotcha, gotcha, gotcha. And then, I want to touch a little bit on the premium offering. I guess I'd love to understand and you give some great color, but just what impact did you see on the top of the funnel because of premium? And then, it makes sense to me that they'll grow. But have you seen any customers downgrade at all saying "hey I've only got a small handful" maybe over a premium? Have you seen that motion at all? The reverse of what we would like to happen.

Thank you.

Eran Zinman -- Co-Chief Executive Officer and Co-Founder

This is Eran again. So this is very exciting for us. So as we launch this free tier we see that you just add more customers that use monday. It didn't hurt or cannibalize our existing convert into payment in terms of acquiring customers, but increase the top of the funnel for the company.

And we didn't see any impact on our existing customers. So customers are not going to reducing their plans or anything like that. One thing that is super interesting but again this is still very early days. But we will now see a new type of funnel being created of freemium accounts that over time and again we see early signs of the converting to paying company.

So I think this will increase the exposure of monday as a tool. What we offer and the amount of people that are exposed to its capability and how they can use it.

Roy Mann -- Co-Chief Executive Officer

Hi. It's Roy. I will just add that our free tier is now limited to only two users. OK.

So it's not really impacting the larger customer it's just a way to keep on using us and use us for and those types like two use their plan, So.

Bhavan Suri -- William Blair -- Analyst

Gotcha. Gotcha. It's very helpful. Thanks for the color gentlemen and congrats again.

Roy Mann -- Co-Chief Executive Officer

Thank you.

Operator

Our next question comes from Brent Bracelin with Piper Sandler.

Brent Bracelin -- Piper Sandler -- Analyst

Thank you and good morning. Or should I say? Good afternoon. I want to go back to the growth drivers of the business. Growth accelerating here to 94% you're taking your for your full-year outlook up to 75% growth for the year.

I think we were at 60% kind of going into the quarter. So as you look at just the overall business, what's performing better it sounds like enterprises strong existing customers a strong. Is that the main driver here giving you optimism just stronger adoption and expansion than you expected? Is it broad-based? Is there a particular region or second the business that's outperforming? It just seems like the business here is much stronger and your optimism is much higher? Trying to understand what the primary kind of rank order drivers here the business are? Thanks,

Eliran Glazer -- Chief Financial Officer

Hey, Brent. This is Eliran. Basically, I think everything that you've said it's all of the above. So obviously, our growth was being driven by long-term secular tailwind and momentum in the space in the category.

And there was a combination of the following there is new customers as we continue to add to our platform. There is obviously an expansion within our existing customer base. High quality and which can be demonstrated from our net dollar retention rate, which is now over 125% as a reminder, it was 121% in Q1. And we are also seeing obviously the enterprise momentum and the motion of 470 enterprise accounts up 226% year over year.

And the indications that we are seeing is basically that continue to trend up and I believe that there is of use of monday. The fact that we are a market leader the brand awareness hopefully also supported by the IPO. The first forward motion that was mentioned by Eran and Roy, we kind of had the sales organization in mid-2018. So now we see the fruits of this investment.

So all of the things the combination of all of these things are creating our optimism with regards to this growth and potentially continuous growth.

Brent Bracelin -- Piper Sandler -- Analyst

Great to hear there and appreciate that color. I guess on the flip side of that, operating losses have narrowed meaningfully in the quarter it looks like your guidance suggests that operating losses here could continue to narrow. Is that a function of just not being able to hire as aggressively as you would like? I know it's a tight labor market right now or is there something structurally more efficient about your sales and marketing spend? Where do you feel you can drive this hyper-growth without aggressively investing as much as you have in the past? Just trying to understand, why you're kind of narrowing the operating loss here look for the second half of the year. Thanks.

Roy Mann -- Co-Chief Executive Officer

So as I mentioned earlier Brent. So we're not trying to optimize cost. Actually, we are going to continue and invest aggressively, but definitely, we see some efficiencies within our sales and marketing investments but we will continue to invest aggressively. I don't want to think about it as an indicator of a kind of direction as we are operating in accordance with what you presented in the workspace model.

We are going to see further additional costs I believe in the second half of the year. As I mentioned, we just moved to the new building. We're going to continue to hire aggressively even though there are some challenges with hiring. We are still are in very well and are going to be salary increases.

We're going to have events by the end of the year. So I think we are going to be costs that really are going to be incurred in the second half of the year, but obviously, we're working in accordance with our growth phase operating model.

Brent Bracelin -- Piper Sandler -- Analyst

Helpful color. Great to see the momentum in the business. Thank you.

Operator

Our next question comes from Ittai Kidron with Oppenheimer.

Ittai Kidro -- Oppenheimer -- Analyst

Hey, guys. Great quarter out of the gate good stuff. I wanted maybe Roy and Eran, to talk about workdocs, the announcement you made today. If you could give us a bit more color and more interestingly how does that work its way to your pricing plan? What are the odds that within the next 12, 18 months you actually raise prices across your plans?

Roy Mann -- Co-Chief Executive Officer

Hi, and it's Roy. Yeah. So that's super exciting. The workdocs, so we're essentially -- we see a lot of starting points for monday in our monday boards where it's like a very structured way of free information.

And the documents essentially allow customers to start in an unstructured way. Right? Like you start something and then usually it stops with like old fashioned docks with monday we saw a massive opportunity with continuing that work on the platform adding more people. So we see this as a new way for customers to start using monday. So the docs as you ask are accessible to everyone.

We don't want to limit that by pricing tier and those kinds of limitations because we want everyone to start. We will in the future consider adding more and tiers into the documents for the like extended functionality, but we don't have that now.

Eran Zinman -- Co-Chief Executive Officer and Co-Founder

And if I can add, Ittai. This with Eran. So I think another point that that's super interesting is the combination between growth and workdocs. So effective you can embed into a workdoc aboard where you can actually change the board from within the doc.

Everything inside you can have several people working together in this very intuitively and in real-time it is again a power multiplier in terms of to and vice versa. You can have a doc within the port. So combine those two products together I think for generative bright very exciting ways that our customers can leverage the power of growth.

Ittai Kidro -- Oppenheimer -- Analyst

Great. Maybe as a follow-up if you could update us on right now, how big is your largest deployment? How many seats are in your largest deployment?

Eliran Glazer -- Chief Financial Officer

Currently, Ittai. This is Eliran. Currently, it's 7,000 seats. This is a customer that we have.

This is the biggest account that we currently have.

Ittai Kidro -- Oppenheimer -- Analyst

Got it. Excellent. Good stuff. Thanks.

Operator

Our next question comes from DJ Hynes with Canaccord.

DJ Hynes -- Canaccord -- Analyst

Hey, guys. Great start here. Thanks for taking the questions. Just one for me I'll direct it at Eran, but anyone feel free.

I was hoping to talk a little bit about co-existence with other work management tools in your large enterprise accounts, right? I mean, I look at Fortune 500 penetration for guys Smartsheet, Asana, yourselves. I mean there's clearly overlap there. So I'm hoping you could talk about how you see this playing out. Well, there always be room for multiple vendors in these large accounts.

Or do you think they consolidate around a single vendor over time? And how do you position monday to be that vendor?

Eran Zinman -- Co-Chief Executive Officer and Co-Founder

Yeah. Thanks, DJ. It's Eran. So it's a great question.

Overall may not come it is a Work OS. So essentially there's a lot of things that can build within monday. But one of the key things that were super important for us being a Work OS. Integrate really well with our tools.

So essentially our goal is not to replace all tools with an organization, but to be a place where people can build stuff and manage a lot of the core functionality within monday. But any app that's the organization already you can be integrated into monday. Then it can be presented within monday you can change things and then it can sink back into a third-party application. So essentially kind of our philosophy is to work well with everybody.

We're not trying to replace everything within our organization. I don't think it's a point of consolidation and that's where we make this position in the way that we're kind of the worker's organization. The backbone that connects everything within the organization. If it makes sense?

DJ Hynes -- Canaccord -- Analyst

Perfect. Thank you, guys. Congrats on the start.

Eran Zinman -- Co-Chief Executive Officer and Co-Founder

Thank you.

Operator

Our next question comes from Derrick Wood with Cowen and Company.

Derrick Wood -- Cowen and Company -- Analyst

Great. Thanks for taking my questions and congratulations on my end as well. Maybe the first one for Eliran. The Enterprise net revenue retention rate you mentioned was 125, but from 121 last quarter.

Could you kind of unpack how much has come from improvements in gross retention? And how much is from stronger expansion trends? And then, speaking about expansion I mean project management is a core area for you, but we get a lot of questions from investors kind of what are the next most popular two or three use cases and what's growing the fastest? So if you could comment on that as well, they'd be helpful.

Eliran Glazer -- Chief Financial Officer

Definitely. So this is Eliran. On the question with regards to use cases, I will defer later to Roy or Eran. But let me start with the net dollar retention rates.

So as a reminder the core focus for our business is customers with 10-plus users. They include an enterprise account and an account that are less than $50,000. What we see is basically a strong expansion within the existing customer base and is that kind of a proxy for this expansion if you think about the recent cohorts. So when we are looking at our cohorts.

The recent cohorts and this is something that we showed historically. We see that the customers that we have are lending and bigger accounts. So that they have a larger ARR in our retention and because of the net dollar return the retention calculation is trailing four quarters weighted average four quarters. What you see is basically it's catching up.

So the impact of these cohorts, which are getting much better are impacting the net dollar attention. And this is the result that you see in our net dollar in retention basically getting to 125% and obviously also impacted by our expansion within enterprise accounts. With regards to use cases. Is this is OK with you? I mean this is -- before I defer to Roy.

Derrick Wood -- Cowen and Company -- Analyst

Yeah. Perfect.

Eliran Glazer -- Chief Financial Officer

Roy, I would refer to you on the use cases.

Roy Mann -- Co-Chief Executive Officer

Yeah. So I would appreciate it if you can repeat the question?

Derrick Wood -- Cowen and Company -- Analyst

Yeah. I was just I get -- we get questions from investors on kind of what are the most popular two or three use cases outside of core project management. In terms of where you guys are seeing kind of most traction. I know there's a lot of different fronts that you guys compete and offer, but you had the top two or three that be helpful.

Roy Mann -- Co-Chief Executive Officer

Yeah. So that's great. So I would say one more and that is -- CRMs for like smaller use cases up to mid-sized use cases. We see that as a big trend for us.

And also, we have a lot of customers there build their own use case. So they might manage -- we have customers from over 190 different business verticals. So they do their own manufacturing plant some manage clinical trials a search run production. So it's not project management as much as like they run their own processes and they build their own tools to run those processes.

So whatever that might be and that's more in the workflow process management kind of space.

Derrick Wood -- Cowen and Company -- Analyst

OK. Thanks for the color.

Roy Mann -- Co-Chief Executive Officer

Thank you.

Operator

Our next question comes from Scott Berg with Needham.

Scott Berg -- Needham & Company -- Analyst

Hi, everyone. I also echo my congratulations on the strong first post quarter IPO results. I guess the first question is and I don't know who wants to take it, but is on the workdocs and that's specifically the product. But just how you think about pricing more, in general, going forward.

Today, you released the functionality or you talked about functionality be included in the base price, but do you ever get to a situation maybe over the next couple of years where you kind of modularize or componentize some of that functionality and sell that as an upside premium tier versus an all in all you can eat today scenario?

Eran Zinman -- Co-Chief Executive Officer and Co-Founder

Yeah. So thanks, Scott, for the question. This is Eran. So it's a great question, when we launched workdocs today our thinking that we want this to be available in our whole pricing plan because the idea was that anything that can drive usage and have more people within the organization and can use monday makes sense to be available in all plan because essentially we want to get everybody on board.

In regards to the kind of future size in terms of pricing and packaging. So definitely the way that we think about the kind of future pricing is around packaging in terms of different product solutions that we offer. So in different industries, we have different pricing levels. For example, in CRM we can charge more per user in other industries as well.

So our thinking going forward is to package the product more significantly for those product solutions and then we can add differentiated pricing and perhaps different tiers for those products solutions. So definitely going forward it is in our roadmap.

Scott Berg -- Needham & Company -- Analyst

Understood. Quite helpful and then from a follow-up perspective, you all have mentioned partners a couple of different times during your script. As we've had a chance to speak with different partners that you're currently starting to engage with. It's still very early in that lifecycle.

But how should we think about partners contributing to the monday.com business maybe over the next two to three or four years? Do they can become a substantial part of your go-to-market sales strategy or were there always be -- have or maybe a smaller kind of ancillary opportunity there. Thank you.

Roy Mann -- Co-Chief Executive Officer

Great. So it's Roy. So, yeah, the partner is a big part of our roadmap going forward. So, first of all, like you mentioned it is helping us with global expansion and places we don't have the sales team on, but also they are and we're working with a lot of them together to offer solutions for larger companies larger enterprises that want to tailor-made the platform connected to other stuff.

So they help us a lot with professional services and many of them also are large contributors to our marketplace. They develop apps and then a lot of stuff. People across the platform use. So it's a very we have varied partnerships.

Obviously, not everyone are the same, but as a whole, the partnership is like a big part of our vision going forward.

Scott Berg -- Needham & Company -- Analyst

Thank you.

Operator

Our last question comes from Andrew DeGasperi with Berenberg.

Andrew DeGasperi -- Berenberg Capital Markets -- Analyst

Thanks for taking my question and congrats on going public. First, I guess I wanted to ask a follow-up on the competition question. I know that a lot of other work management tools are also chasing the larger end of the market or the enterprise customer. So I was just wondering if any of these bids are competitive that you're seeing right now.

Are they mostly greenfield?

Eran Zinman -- Co-Chief Executive Officer and Co-Founder

Yeah. So thanks. Andrew this is Eran. So anything that we see this is a huge greenfield and opportunity for us.

This is something we follow as part of the IPO. On 70% of the deals we see literally no competition. Usually, customers use email, and spreadsheets, and PowerPoint, and email to communicate and collaborate. And it just seems that everybody are trying to improve update work and make it more efficient.

So it doesn't seem like a greenfield. On 30% of the deals we see, I would say more of a vertical competition. So if somebody use monday for CRM for example we might compete with SMB focused CRMs. If somebody is in project management we might see other competitors in the project management space.

But broadly speaking this is a huge greenfield and it is a huge opportunity to grow within this market.

Andrew DeGasperi -- Berenberg Capital Markets -- Analyst

That's helpful. And just as a follow-up these other solutions, the CRM, the software development, the HR, it seems pretty unique relative to your competitors and it seems to also, I guess, expand into other end markets that there are some bigger players in like [Inaudible] and Salesforce. I'm just wondering are you really just focused on that smaller end of the market with these tools and you don't really see these other larger software companies in that field or those fields?

Roy Mann -- Co-Chief Executive Officer

Hi. It's Roy. So that's a really great question because it's -- we see a lot of those verticals as they go to market for us like we want to put the foot in the door and get into companies. And as we scale and we are partnering and integrating into those larger players as you mentioned.

Meaning that we see ourselves as unifying the workspace like creating a unified workspace for companies with no-code/low-code capabilities and the integrations. That really connects all the tools you mentioned to the rest of their organization and allowing them to create more workflows with them if they want to replace it, fine. But usually, like the bigger pain points are connecting, breaking silos, having people work together. So it's a two-way go-to-market that we land on the smaller and use cases and even the small size CRM and we have a lot of large enterprises that start with the smaller one on different stuff that they use.

So it's a great foot in the door for our segment for enterprises and then we integrate with the larger players.

Andrew DeGasperi -- Berenberg Capital Markets -- Analyst

Great. Thank you.

Operator

[Operator signoff]

Duration: 53 minutes

Call participants:

Keenan Zopf -- Investor Relations

Roy Mann -- Co-Chief Executive Officer

Eran Zinman -- Co-Chief Executive Officer and Co-Founder

Eliran Glazer -- Chief Financial Officer

Kash Rangan -- Goldman Sachs -- Analyst

Matt Coss -- JPMorgan Chase & Co. -- Analyst

Brent Thill -- Jefferies -- Analyst

Bhavan Suri -- William Blair -- Analyst

Brent Bracelin -- Piper Sandler -- Analyst

Ittai Kidro -- Oppenheimer -- Analyst

DJ Hynes -- Canaccord -- Analyst

Derrick Wood -- Cowen and Company -- Analyst

Scott Berg -- Needham & Company -- Analyst

Andrew DeGasperi -- Berenberg Capital Markets -- Analyst

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