Good day. My name is Melissa, and I'll be your conference operator today. At this time, I would like to welcome everyone to monday.com's first quarter fiscal year 2022 earnings conference call. I would like to turn the call over to monday.com's Director of Investor Relations, Mr. Byron Stephen. Please go ahead.
Good day, everyone, and thank you for joining us on today's conference call to discuss the financial results for monday.com's first quarter fiscal year 2022. Joining me today are Roy Mann and Eran Zinman, Co-CEOs of monday.com, and Eliran Glazer, monday.com CFO. We released our results for the first quarter fiscal year 2022 earlier today. Our earnings and materials are available on our investor relations website at ir.monday.com. There you will find the investor presentation that accompanies our prepared remarks and a replay of today's webcast under the News and Events section. Certain statements made on the call today will be forward-looking statements, which reflect management's best judgment based on the currently available information. These statements involve risks and uncertainties that may cause actual results to differ from our expectations.
Please refer to our earnings release for more information on the specific factors that could cause actual results to differ materially from our forward-looking statements. Additionally, non-GAAP financial measures will be discussed on the call. Reconciliations to the most directly comparable GAAP financial measures are available in the earnings release and the earnings presentation for today's call, which are posted on our investor relations website. With that, let me turn the call over to Roy.
Thanks, Byron. Good day, everyone, and welcome to our Q1 2022 earnings call. Our first quarter revenue grew 84% to a record $108.5 million. This is an exciting milestone for us as it represents our first $100 million revenue quarter as a company. We continue to see strong demand for our product with our sales teams driving new logo acquisition and strong expansion within our existing customer base during the quarter. 50% of the Fortune 500 companies use our platform, up from 38% just a year ago. To address the needs of our customers in the enterprise segment, we are investing in creating more value for these customers, including in security, governance, and compliance requirements.
Because we see enterprise customers as an important growing segment of our business, we are releasing our net dollar retention rates for enterprise customers with more than $50,000 in ARR and their percentage of our total ARR. In Q1, the total number of these customers was 960, up 187% from a year ago. These enterprise customers with more than $50,000 ARR now represent 22% of our total ARR. As we continue to go upmarket, more customers are increasing their adoption and usage of monday.com across their organization. In Q1, the net dollar retention rate for customers over $50,000 in ARR was above 150%. This high NDR reflects our potential to continue to expand among large customers. Please refer to our Q1 investor presentation for historical comparisons for these metrics.
Among customers with more than 10 users, net dollar retention rate is above 135%. Among all customers, the Net Dollar Retention was over 125%. As a reminder, our net dollar retention rate is a trailing four-quarter weighted average calculation. In the first quarter, we increased sales and marketing spend by approximately $50 million, up 84% from Q1 2021. These sales and marketing efforts accelerated our acquisition of new customers while keeping the same marketing efficiency metrics. We've also been very successful in meeting our aggressive talent requirement targets. We believe that these efforts have great potential to grow our business over time, as also our strong net dollar retention rate indicates. As we expand our customer base, we continue to invest in and grow our partner ecosystem to serve our customers.
This quarter, we are excited to announce we have signed an authorized reseller agreement with SHI International, one of North America's largest IT solution providers. This partnership will help us work with and sell to more public, state, and local agencies and federal agencies in the United States. Our customers span industries and use cases, and they use monday.com to run complex operations around the world. Recently, we partnered with Vogue for the Met Gala's first-ever branded content software partnership. Using our platform, the Met Gala's set designer managed the core workflows for fashion's biggest night of the year. Let me now turn it over to Eran to walk you through how we plan to better serve our larger customers.
Thank you, Roy. This quarter, we are excited to announce the launch of our new Work OS product suite with four new products, each with their own unique pricing models. These new products represent an exciting new evolution of our existing product solutions based on the momentum and success we've seen among our customers. We are stepping up our product solutions to become four new end-to-end products, monday projects, monday dev, monday marketer, and monday sales CRM. Marketing and creative teams use monday marketer to manage marketing and creative processes all in one place. Product design and R&D teams can plan, execute, and collaborate to deliver better products faster using monday dev. Project managers use monday projects to run, manage, and track projects and portfolios. Sales team use monday sales CRM to manage all aspects of their sales cycle.
Work OS products are complete end-to-end products built on top of the monday.com Work OS. They are designed to completely and comprehensively address the needs of a specific use case and live within the entire Work OS ecosystem with seamless integrations and connectivity. Customers can add more products at any given time or move data between products. That way, when customers purchase one of the new products, they also get the same flexibility, connectivity and ease of use that they know and love from monday.com. Those new products will allow us to better address growth within our existing accounts and capture new markets. With products, we are better positioned to compete and win deals against vertical tools in specific markets. We plan to gradually increase the rate of accounts with access to the products, with the goal of fully launch them to all of our customers later this year.
Let me now turn back over to Roy.
Thank you, Eran. To close, it's amazing to see the progress we've made in the short time period. Our growth efforts in Q1 placed us on a new growth trajectory, breaking the $100 million revenue per quarter milestone. Our market-leading retention rate and focus on our enterprise segment continues to drive our products focus and vision. We're proud of the work we've made to evolve monday.com from a single product company to a multiple product company. Two of the reasons we've been able to do this include, one, the work and continued dedication of our amazing team across the globe. The second is our flexible architecture, which has allowed us to execute extremely quickly and with high quality to meet the growing needs of our customers.
This emphasis on agile and quick execution at high level has enabled us to continue to meet the needs of customers across verticals, with 70% of our customers coming from non-tech industries. With that, I'll turn it over to Eliran to cover our financials and guidance.
Thank you, Roy, and thank you to everyone for joining our call. Today, I will review our first quarter results in detail and provide an update guidance for the second quarter and full year 2022. We continue to deliver strong growth driven by customers increasingly adopting the broader monday work operating system platform across their organization. As Roy mentioned, revenues surpassed $100 million for the first time ever this past quarter. Total revenue came in at $108.5 million in the first quarter, up 84% from a year ago. Growing and scaling the company remains our top priority. With the large and growing market opportunity in front of us, and with most deals still being greenfield, we executed on an ambitious hiring plan this quarter and remain committed to investing in top-tier talent to scale the company.
We ended the first quarter with 1,284 employees globally, representing an increase of 220 employees, our largest headcount growth quarter on record. Over half of the added headcount during the past year is attributable to increase in client-facing roles and R&D. For the remainder of the financial metrics disclosed, unless otherwise noted, I will be referring to non-GAAP financial measures. We have provided a reconciliation of GAAP to non-GAAP financials in our earnings release. First quarter gross margin was 89%. In the medium to long term, we continue to expect gross margin to remain in the high 80%s range. Research and development expense was $19.2 million or 18% of revenue. We'll continue to invest significantly in R&D as we build out our product offerings and scale our work operating system platform both horizontally and vertically.
Sales and marketing expense was $108.6 million or 100% of revenue, compared to 100% of revenue in the year-ago quarter. This includes one-time Super Bowl advertising cost of $11 million during the quarter. As mentioned above, we accelerated our hiring of employees during the quarter, reflecting on our ability to attract some of the best talent to scale the business. As we have front-loaded certain expenses which have driven our growth, we anticipate sales and marketing expenses as a percentage of revenue to come down to lower 80s by the end of the year. G&A expenses was $12.4 million or 11% of revenue, compared to 10% in the year-ago quarter, reflecting increased costs since becoming a public company. Operating loss was $43.8 million, and operating margin was -40%.
Net loss was $43.2 million, and loss per share was -$0.96. It is important to note that as we scale the company, we remain focused on improving operating margins and capital efficiency. We anticipate that operating margins will improve throughout the year and into fiscal year 2023. Moving on to the balance sheet and cash flow. We ended the quarter with approximately $849.6 million in cash and cash equivalents. Net cash used in operating activities was $12.9 million in the quarter. Adjusted free cash flow was - $16.2 million, reflecting the additional investment we made during the quarter. Adjusted free cash flow is defined as net cash from operating activities, less cash used for property and equipment and capitalized software costs, excluding non-recurring items. Now, let's turn to our updated outlook for fiscal year 2022.
For the second quarter of fiscal year 2022, we expect our revenue to be in the range of $117 million-$119 million, representing growth of 66%-69% year-over-year. We expect a non-GAAP operating loss of $35 million-$33 million. For the full fiscal year 2022, we now expect revenue to be in the range of $488 million to four-
$9 million-$135 million, and a negative operating margin of 28%-27%. Looking ahead, we'll continue to invest in growth with a strong focus on driving business efficiency. With that, for questions.
If you would like to ask a question today, one on your telephone keypad. If your question has already been answered, you can press star followed by two to withdraw your question. Please also ensure that you are unmuted locally when you go to ask your question. Goldman Sachs, Kash, over to you.
Great to see monday.com's results on a Monday. Congratulations on an excellent start to the fiscal year. Roy or Eran, if you could chime in on the macroeconomic environment. Obviously, everybody's concerned about recession, the value proposition of software. Can you just give us your take on how customers are prioritizing monday? If you noticed any changes in the demand environment as the quarter progressed. Secondly, maybe this is an Eran question as well. You sound very confident that you can improve op and leverage for the business as the year unfolds. Can you just give us a little bit more detail and color as to how you expect this op and leverage to really come to fruition? Thank you so much, and congratulations.
Hey, Kash. Thank you for the question. I'll start, and maybe Eran will follow on. We saw a great Q1 in terms of our ability to grow and find new customers. We see a lot of demand, and we feel confident about where we are as a business and our ability to keep growing. We are obviously aware of the macroeconomics now and what's happening, and we're keeping a very close watch on everything that is unfolding.
Okay, hey, Kash, it's Eliran. To your question, with regards to why we are confident about the margins getting better. As a reminder, this is what we said we are going to do on the last call, on the last earnings call.
From a spend perspective, if we think about Q1 in sales and marketing, for example, this is an outlier. We did it in accordance with monday.com playbook, if you look back at Q1 2021. We front-loaded expenses. We invested in bringing the best headcount that we can, which was on record. From now on, we believe that we are going to continue to invest in accordance with efficiency metrics, unit economics, taking into account the net dollar retention rates that we have, the payback time, the CAC. Altogether, when we're going back to normal in Q2, as we mentioned in the script, that S&M, for example, is going back to low 80%s. We believe that we are going to leverage the investment that we did and benefit from the fact that this will improve margins and capital efficiency.
Wonderful. Thank you so much.
Thank you, Kash. We'll take our next question today from Arjun Bhatia of William Blair. Arjun, please go ahead.
Perfect. Thank you very much and congrats on a great quarter to the team. Maybe for Roy or for the company, built-in capabilities like WorkForms and Canvas, like in some of the more recent products that you've launched into each of these suites, from a pricing and packaging perspective. Then as you think about the future, how do you envision adding more suites to this, to the four that you announced today? Is there room to, you know, create more additional product suites like IT or other use cases that you might go after in the future?
Yeah. Thanks, Arjun, for the question. This is Eran . First of all, we're very excited about launching those new four products. Like you've mentioned, this is an evolution. Really what we've done as a company is to take all those products once and build for our solutions. We felt it makes a lot of sense to mature them and to make our solutions more deep. More features, more capabilities, pack them in a proper way, have specific onboarding and specific feature sets for each one of them. Going forward, we're dedicated as a company to continue and invest in each one.
Obviously, also the fact that we're able to package those products as independent products will also give us the ability to sell them separately and have different pricing for each one while benefiting from having the entire company on our Work OS platform. For us, it's very strategic. In terms of the other product that we announced in the previous quarter, meaning the WorkForms, and the Canvas. Those are two other products that are independent of our platform and those products, and we'll continue to, you know, offer them to our customers separately, with separate pricing. If this answers your question.
Yes, perfect. No, that's very helpful. And then I noticed the 50K NDR disclosure at 100%+, obviously very healthy, but it's also ticked up quite a bit from last year or from when it was four quarters ago. What are you attributing that uptick to? Is it the ability to retain your customers better? Are you? I think you called out maybe wall-to-wall adoption a little bit more. Would just love to hear a little bit more of the drivers that have driven that enterprise net retention rate higher.
Great, Arjun . This is Roy . This is something we've been talking about for a while, that there is a shift in our business enterprise segment. We have more customers, as you can see in the metrics we disclosed. Also, their expansion within each company is always growing. The sweet spot we have within those companies are growing. It's something that we should expect that will continue in terms of, like, our growth into enterprise customers. We also invest a lot in the product in that respect, like adding a lot of, like, enterprise security and a lot of stuff into those markets or those customer segments.
Perfect. That's very helpful. Thank you very much, and congrats again, guys.
Thank you.
Thank you, Arjun. Our next question comes from the line of Mark Murphy from JP Morgan. Mark, over to you.
Thank you very much, I'll also add my congrats on a very healthy looking top line, a great start to the year. First question is, I believe your largest deployment is sitting at 7,000 seats. Do you have line of sight into when you might break through that ceiling, either through an expansion process or perhaps even landing a new customer with a larger footprint? Then secondly, kind of following up on Kash's question earlier, because you produce more than half of revenue outside of the U.S., can you provide any sense of business confidence, specifically in Europe, any degradation at all, as you know, many other software companies have seen, or is it basically feel like it's all systems go for monday.com at this point?
Thank you, Mark. It's, I've lost the other one. We're like I mentioned, really excited about enterprise. We see the sweet spot always growing, and we're widening our approach to more and more customers, as you can see in the growth in the number of customers and also the depth of solutions that we offer them. I think we have, like, great results also in NDR and, you know, definitely a major focus area for the company.
Okay. Hi, Mark, it's Eliran. Nothing unique in Europe or elsewhere to the overall company. Because we have a very diverse customer base of more than 150,000 customers in our last earnings, and the number keep SMB to the largest global companies across all kinds of industries and geographies. Therefore, we don't see any sign of softness yet in this term.
maybe one more thing I would add, Mark, this is Eran, is that still 70% of our customers come from non-tech companies, and we serve over 200 different business verticals. You know, there is this effect or any specific trend that we've seen.
Thank you very much.
Thank you, Mark. We'll take our next question today from Scott Berg of Needham.
Hi, everyone. Congrats on the good quarter. Thanks for taking my questions. I guess two. First one was on, I think it was Eran's commentary about accelerating acquisition of new customers. Can you help maybe qualify or quantify that signal a little bit this quarter? I know you don't report total customers necessarily, but how should we think about what that quote-unquote acceleration looks like?
Yeah, Scott, this is Eran . I think the best indicator is that we've increased our sales and marketing expense this quarter. Eliran mentioned that this is part of our playbook and how we kind of plan our year throughout. One thing we can comment, just to give you some more color, is that our customer acquisition in Q1 remained very efficient. We measure everything, every click and every new customer acquisition cost, and we managed to maintain very high efficiency in acquiring new customers. This is a huge investment for us going forward, as we feel this is the right thing to do given the huge opportunity that we have as a company. Our economic unit economics remain strong and very efficient as we manage to scale our marketing efforts.
Got it. Helpful. Then from a follow-on perspective, I know there's commentary, I think it was 60% of the Fortune 500 is now customers of yours in some scenario. How should we think about how those customers purchase today relative to some of your smaller customers? Is the purchasing motion or I guess the products they're buying is very similar and it's just a larger seat count, or have you noticed any nuances on how they acquire that might be different than your historical smaller customer?
Hey, Scott, it's Roy. I think alongside the growth we have in enterprise, we see a slow shift in those adoption partners. First of all, the vast majority of customers do land and expand. They start with a small account, and then we expand over time. Like every new deal we have, okay, so that's one. On the other side, we do see larger deals happening upfront, like they start bigger, and we also expand faster. That's a trend that's been happening in the last like two years even, okay, all the time.
I think as monday grows as a brand, as customers understand it's a solution and they can trust them more and more, like, we see more of those top-down deals, like, starting. Hope that helps.
Very much. Thank you. Congrats again.
Thank you, Scott. We will now move over to our question from Brent Thill of Jefferies. Brent, over to you.
Thank you. This is John Byun for Brent Thill. I had two questions. On the new Work OS products, just want to you know how full featured they may be versus you know the best-of-breed solutions out there. You know, does that mean you're gonna compete more versus some of the partners you integrated with? And I guess timing and G&A. Second, on your SHI resale partnership, does that mean you're making a bigger push into the U.S. public sector? You know, how is your presence today? Thank you.
If you don't mind, this is Eran. Just repeat the first part of your question. You were breaking up.
Sure. On the new Work OS products, you know, in terms of capabilities, how do they compare versus best-of-breed solutions out there? You know, does this mean you're competing more with, and any update on timing for general availability?
Hi. Thank you. It's Roy here. It doesn't mean that we're competing with other, like, I don't know, like large enterprise solutions. We actually integrate really well into them. Like, this quarter, we're also enhancing our integration into Salesforce and Atlassian. You know, we see a lot of deep integrations into companies' workflows in many ways. The partnership with SHI actually opens the door for a lot of enterprise customers in America. Yeah, we're excited about that.
Thank you.
Yeah. I think we missed the second part of the question. Sorry.
Yes.
Yeah. Sorry, you were breaking up with the second question. If you repeat that, please. Thank you.
Yeah. In the prepared remarks, I think you mentioned, you know, that they do a lot with, you know, U.S. government sector. Wondering, you know, does that mean you're making a bigger push into the U.S. public sector and, you know, do you have a meaningful presence today in that sector or industry?
Yeah. Thank you. This is Eran. Definitely, you know, the new partnership with SHI is very strategic for us as we go more to enterprise companies and larger enterprises. You know, definitely this specific sector is very interesting for us. You know, this specific partner is working in North America with a lot of focus on local government and other companies. For us, this is a very strategic part of allowing our products to be available to more sectors and more parts of our customer base. Definitely we're gonna invest more resources into that going to the future.
Thank you for that.
Thank you.
Thank you. Our next question comes from Brent Bracelin of Piper Sandler. Brent, please go ahead.
Thank you. Maybe I'll start here with Eliran. Net dollar retention across all users has increased pretty substantially here this quarter. Is that a function of just the mix shift to enterprise? Maybe can you talk a little bit about churn at all? Just a little surprised to see that metric continue to move up. I suspect it's all enterprise, but just trying to understand why you're seeing that improve so much here sequentially. Thanks.
Hey, Brent, it's Eliran. Thank you for the question. Obviously, I would say that first we are seeing product improvement because we are very focused on continuing to innovate and invest in our products. This is why we are adding, you know, R&D talent. This is one of the reasons for the expansion. Second is our ability to expand within existing customers. You know, once they unlock the value of the monday product together with the additional solutions, product solutions that we introduce, they continue to increase the number of seats and number of verticals, horizontally.
I would expect with regards to the numbers that, you know, we got to a point, this is really best in the industry to be above 125% for total customers and, you know, about 150% to enterprise. I believe we're going to see potentially 2 basis point improvements, but we believe this is kind of stabilizing, and we're going to see these rates over time.
It makes sense. I guess, Eran, following up on the four monday products
Intuitively, it seems like Monday products would be the bulk of the use cases, but maybe could you talk about which of those four use cases, sales, marketer, projects dev is kind of the fastest growing use case for Monday? That would be helpful. Thanks.
Yeah, Brent. Thank you. First of all, we're excited about all four, part of the reason that we focused on those four is that because we saw a lot of demand. Our customers use monday for many use cases, but those four really stood out to have the most potential. I would say that we see a lot of traction in our sales CRM product, but also our developer product is very interesting. We see a lot of demand in the marketing product as well. And obviously project management, for us it's really the sweet spot. We see a lot of momentum in each one of those. I would say that when we kind of plan the guidance and our model, you know, we didn't take those products into account.
They're still new, and we have a lot of growth to do in each one of them. Definitely we see a lot of positive signs and a lot of very excited, exciting customer feedback from our customers using them. We're very excited for the future of those products.
Yeah. Hey, Roy, I have something small to add. I'd like to add to what Eran said. What makes monday special is the fact that you can build anything you want on top of it. That's also true for each one of these products. If you adopt one, you can still build whatever you want on top of each one, and also connect them together and have them work really well together because it's all one platform. It's all built on top of the Work OS. I think that's also something important to understand when customers are adopting them. They can still do anything else they want, even now, on top of the other bases of products.
Thank you.
Thank you, Brent. Our next question comes from Andrew DeGasperi of Berenberg. Andrew, over to you.
One of the metrics you used to provide, just wondering how that trended, the percent of ARR from over 10 users. I know you gave the over 50K. Just wondering if, you know, if you had anything to add to that comment. Then secondly, in terms of your deferred, it sequentially increased quite a bit. I was just wondering if there's any kind of larger seven-figure deals that you've added this quarter. Anything that you could provide would be appreciated.
Okay. Hi, Andrew, this is Eliran. With regards to your first question, the share of ARR from customers with 10+ users is continuing to improve. Last time we disclosed it was above 70%. As part of us going upmarket together with enterprise accounts, we see this trend continue to improve, and they are becoming more meaningful in our total ARR. I can tell you that, more than 85% of our customers are, you know, of our ARR is coming from customers that are buying the pro and enterprise tiers. This is definitely a trend that we see continue moving forward. With regards to your question, your second question, you were asking about calculated billings, just to make sure what you were asking about.
Yes, that's right.
Sorry. I understand.
There was a sequential increase.
Yes. While we are very happy with the increase, we said it in the past that calculated billings is not a leading indicator of our business. We usually look at growth, revenue growth, net dollar retention rate, number of customers. This is a more leading indicator. Obviously, there is going to be fluctuation with calculated billings, but we definitely saw a sequential increase this quarter versus the previous one.
That's helpful. If I may add another one, sales and marketing, you mentioned you front loaded it in Q1, and you obviously had a pretty sizable headcount increase. I was just wondering what drove you to do that, this quarter? Secondly, can you maybe provide a little more data in terms of where the distribution of this headcount is? Is it mostly U.S., or other regions? Thank you.
Yeah, Andrew, this is Eran. Just to give you more color about the increase in spend. About $10 million-$11 million of it was Super Bowl advertising, which we mentioned the previous quarter. Another $10 million, I would say roughly is increasing our headcount. Usually we accelerate hiring around Q1 in terms of salespeople, customer success managers, customer support and so on. Which the effect of this in terms of sales power will unfold in the next few quarters. For us it was an opportunity to increase our sales force. The rest of the increase, you know, give or take, is increasing performance marketing. Usually in Q1 we see strong demand in the market for tools like ours, which continues to Q2, Q3, and Q4.
There's usually an acceleration in Q1. For us it's a great opportunity. As I've mentioned previously, we managed to scale our performance marketing while keeping the same efficiency and unit economics, in terms of acquiring new customers. We're very happy about our investment, in terms of performance marketing.
I can add, it's Roy, that, like, if you look at the history of the company, you know, we've been doing this around each year during January. Compared to last year, you know, we kept the same efficiency metrics and ratios. We're really happy with the results.
Andrew, maybe. This is Eliran, just to add with regards to the distribution of the headcount that we hired. We hired people in both outside of the U.S., not in Israel. There is a combination of Israel, U.S., and London, Sydney, and other places around the world. With regards to sales and marketing resources, we're also hiring enterprise sales managers and quota-bearing to continue the growth of the business outside of Israel.
Thank you.
Thank you, Andrew. Our next question comes from George Iwanyc of Oppenheimer. George, please proceed with your question.
Thank you for taking my question. Maybe just following up on the sales comments. With the introduction of the new Work OS products, do you anticipate any changes to your sales and go-to-market motion, layering in either specialists or putting more focus on particular verticals?
Yeah. Hi. Its R oy or George? Sorry. Sorry.
Yeah. I'll take it. This is Eran . In terms of our go-to market for those new Work OS products. Definitely, we see here a huge opportunity, mainly because those products allow us to market to specific audiences and specific customers, so we can have more targeted marketing to those audiences as opposed to having like a more of a broader broadcast to a mass audience when we talk about the Work OS. Having those independent products will allow us to have more specific targeting, resulting in what we already seen early signs of, lower customer acquisition costs and, you know, better adoption in terms of acquiring new customers. Over time, this is the big opportunity here. We already see that as well.
We see those customers expanding from that specific use case to start with, to more use cases and eventually, you know, as part of our vision as a company to have the whole company working on the Work OS platform. This is part of the reason why we're so excited about those new products. Not only that, it allow us to have a more efficient go-to-market, but better onboarding and more potential to expand within an organization.
Yeah, I only wanted to add, it's Roy, that we see this as a long term, like all these products that we released, you know, like it's not something, it's a gradual change into those areas. Like Eran mentioned, we didn't model this year according to any results from them.
Just maybe following up on the kind of broader competitive landscape. Are you seeing any changes? Are you mostly landing in greenfield opportunities? Are you seeing any vendor displacement, or, you know, just changes in the way you're dealing with multiple products at individual customers?
Yeah, this is Eran. We kind of see the same environment that we saw before. 70% of the deals, we see no competition. It's still a huge greenfield in terms of the opportunity and our ability to acquire new customers. In terms of those new products, definitely in each one of those categories, there are existing competitors. It's still early days. As I've mentioned, from what we already see, by releasing those products and doing, although limited, but some marketing to them, we see a lot of efficiency in terms of customer acquisition, and products is another growth opportunity in terms of go-to-market. That is kind of the dynamics that we see.
Yeah. I can add that, you know, or emphasize that we for the last two years have been marketing to those exact four segments, okay? What we're doing now is another step of evolution of packaging it as separate products. We've always had those as solutions that monday customer adopted. We feel very confident in, you know, in this going forward.
Thank you very much.
Thank you, George. At this time, and before we move on to our next questions, we would like to remind you that if you would like to ask a question, you can do so by pressing star followed by one on your telephone keypad. If you do change your mind, please press star followed by two and ensure that you are unmuted locally when proceeding with your question. We will now move over to our next question, which comes from the line of DJ Hynes of Canaccord. DJ, please go ahead.
Hey, good morning, guys. Just one question on my end. Roy or Eran, can you just remind me of the signals that you guys use internally to trigger direct sales engagement? Like, are you looking at spend thresholds? Is it usage metrics? I guess the question is, like given the strength you're seeing in your largest cohorts, which I assume is favorably impacted by, you know, direct sales touch, does it make you think direct sales engagement even earlier in the funnel would be beneficial? Like, how do you think about that?
Thank you, David, DJ. This is Eran. Thank you for your question. This is a great question because, like we've mentioned, usually the way customers adopt monday is bottom up. We see customers start using monday from all companies, all sizes and different roles, different positions within the company. The way our sales algorithm works is that whenever a customer signs up, we ask that customer a bunch of detail during the sign-up process about company size, their role in the company and how large deployment they want. Also we're using third-party tools to enrich that information. Using all that information, we classify accounts that have potential to grow.
Once we see a paying account with engagement within the account and a potential to grow, let's say, you know, 1,000 people or more, our sales team is engaging that customers. It's a different process because the customer is already using monday, happy with the product, and then we try to extend the usage to more of their footprint. Usually it's a short sales cycle which leads to future sales cycles as well. The motion is pretty much the way I've described it. Any question you ask about any changes we see. Definitely we see a lot of opportunity on top of that. We see an opportunity to create a strong outbound motion. We see a strong opportunity to create a B2B mechanism where we can market to senior executives.
Definitely, that's a huge upside that we have as a company, which we're also investing in. We are investing in all fronts in terms of customer acquisition and creating more opportunities for our sales team.
Excellent. Thank you for the color.
Thank you, DJ.
Thank you.
Our next question comes from Derrick Wood of Cowen. Derrick, please go ahead.
For taking my questions. You guys keep announcing some new SI partners. You've mentioned SHI and you've mentioned Tata in the past. Can you just talk about the kind of growth you're seeing from the partner channel and what kind of incremental leverage you're expecting this year?
Hi, it's Roy. Hi, Derrick. We see a lot of the partnerships we have with them as something that is long term. Obviously, the bigger the partner, you know, the larger customers they address and, you know, the true significant results is a flywheel that takes more time. I think we're very bullish on those partnerships, as you mentioned, that we're adding them and putting a lot of emphasis on it. We see partners as a true, well, partners, because they add a lot of value to customers in a lot of ways and especially the large ones. We definitely see this as a strategic for the company.
Got it. I wanted to ask about pricing too, given the inflation rates and we're seeing other vendors change pricing. How are you guys thinking about potential price increases or, you know, what kind of price changes can we expect coming out of these new products being launched? Thank you.
Yeah, Derrick, this is Eran. Thank you for the question. I'll start with the product. In terms of the new products, we do intend to have different pricing for each one of those products, depends on the industry. That's regardless of the market macroeconomics and inflation. It's more about our go-to-market and what people expect from each one of those product segments. In terms of inflation. We monitor everything that's going on very closely, but currently we don't have any specific plans to raise prices. We're continuing to monitor and if anything changes, we evaluate as we go.
Understood. Thanks.
Thank you, Derrick. We'll take our next question from Robert Simmons of D.A. Davidson. Robert, please proceed with your question.
Thank you. Guys, can you update us on marketplace, the traction you're seeing there, updates on the monetization plans, and then also does the annual guidance include any contribution from marketplace?
Yeah, Robert. This is Eran . Thank you for the question. Definitely our marketplace is something that's very important for us as we scale the company. Last quarter, we released our own payment system within the marketplace. Basically, app developers can now monetize their apps using our payment platform. We didn't release any numbers attached to it, but just to give you the sentiment, we see very good results from that new release. New app developers that create new applications see higher conversion rates, more customers are willing to pay using that payment system. Definitely, it's something that made a huge impact on our marketplace, and we continue to invest.
We've seen the number of developers going up and our numbers of applications being created and also used, going up consistently, quarter-over-quarter. We continue to heavily invest into that. I wouldn't say it has much impact on our revenues yet because it's still small numbers, but going forward, this is a big product, has a lot of potential as well.
Got it. Great. Thank you very much.
Thank you, Robert. Our final question is a follow-up question from Kash Rangan of Goldman Sachs. Kash, the floor is yours.
Hi. Thank you so much for taking my question. I'm curious just, given that you just started hiring heavy-duty sales capacity, but you're already starting to see net expansion rates in 50,000+ customers at 150, could this metric even get better as it progresses? That's it for me.
Yeah, Kash. This is Eran. Thanks for the follow-up question. This is the first quarter that we released our NDR for 50K accounts and, you know, we're super happy with it. Definitely those customers have a lot of room to grow. We still have much more scale to have in them. I would say that over time we'll continue to keep releasing that metric, quarter-over-quarter. We do see this metric stabilizing. Going forward, definitely we're gonna have more upsell opportunities. Now with the new products that we've released and also the WorkForms and the Canvas, they're gonna be more opportunities to extend our usage with other products. Definitely there's potential for that number to go up.
As it is right now, when we also benchmark this compared to other companies, this is definitely plus NDR numbers, and we'll continue to invest in those enterprise customers.
Kash, your line still open? Okay, thank you, Kash. That was our last question today, so we would like to conclude by thanking you all for joining the call, and we wish you a lovely rest of your day. You may now all disconnect.