What happened
Shares of work management software company Monday.com (MNDY 0.18%) popped on, well, Monday, after the company reported financial results for the fourth quarter of 2022. Monday.com outperformed expectations and issued guidance that was ahead of expectations. And that's why Monday.com stock was up 11% as of 10:30 a.m. ET.
So what
In Q4, Monday.com generated revenue of $149.9 million, well ahead of its previous guidance of $140 million to $142 million. Of course, investors have come to expect results like these from this company. In fact, last week, D.A. Davidson analyst Robert Simmons lowered his rating for the stock to neutral, according to The Fly. And he did this because, while he was expecting a beat, he didn't expect Monday.com to beat expectations by very much.
Profitability may be why the market is so enthused by Monday.com's financial results. The company uses a lot of adjusted financial metrics, including operating income metrics that aren't according to generally accepted accounting principles (GAAP). That said, management guided for a non-GAAP (adjusted) operating loss of up to $22 million in Q4. However, it had non-GAAP operating income of $14.3 million -- its first time ever with positive non-GAAP operating income and well ahead of its guidance.
The market didn't expect Monday.com to outperform on the bottom line and the top line. And it's why the stock popped today.
Now what
In 2022, Monday.com's full-year revenue jumped 68% year over year to $519 million. For 2023, the company expects revenue of up to $693 million, which would represent growth of 34%. Therefore, growth is slowing dramatically. But 34% growth is still quite good. And it's especially good when considering that many enterprises are currently cutting back on software spend because of the economy.
I believe it's important to note that Monday.com ended 2022 with over 186,000 customers, which was up 23% year over year. However, most are small customers, considering less than 1,500 spend more than $50,000 annually.
Monday.com's customers spending more than $50,000 were up a whopping 86% in 2022. Looking at that growth and looking at the size of its customer base below that spending level, I'd feel very good right now if I were a Monday.com shareholder. It has a large customer base that it can grow with, provided its workflow applications deliver enough value to get them to increase their spending in time.
