MNDY - monday.com Ltd. (MNDY) Q1 2023 Earnings Call Transcript
2023-05-15 13:50:05 ET
monday.com Ltd. (MNDY)
Q1 2023 Results Earnings Conference Call
May 15, 2023, 08:30 AM ET
Company Participants
Byron Stephen - Head of Investor Relations
Roy Mann - Co-Founder and Co-Chief Executive Officer
Eran Zinman - Co-Founder and Co-Chief Executive Officer
Eliran Glazer - Chief Financial Officer
Conference Call Participants
Kash Rangan - Goldman Sachs
Noah Herman - JP Morgan
Jackson Ader - SVB MoffettNathanson
Arjun Bhatia - William Blair
Brent Bracelin - Piper Sandler
Steven Enders - Citigroup
Devin Au - KeyBanc Capital Markets
Brent Thill - Jefferies
Scott Berg - Needham & Company
George Iwanyc - Oppenheimer & Co.
Derrick Wood - TD Cowen
David Hynes - Canaccord Genuity
Andrew DeGasperi - Berenberg Research
Shebly Seyrafi - FBN Securities
Robert Simmons - D.A. Davidson
Presentation
Operator
Good day. My name is John Louis and I will be your conference operator today. At this time, I would like to welcome everyone to monday.com's First Quarter Fiscal Year 2023 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.
Byron Stephen
Hello, everyone. And thank you for joining us on today's conference call to discuss financial results for monday.com's first quarter fiscal year 2023.
Joining me today are Roy Mann and Eran Zinman, co-CEOs of monday.com, and Eliran Glazer, monday.com's CFO.
We released our results for the first quarter earlier today. You can find our quarterly shareholder letter along with our investor presentation, and a replay of today's webcast under the News & Events section of our IR website at ir.monday.com.
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.
Now, let me turn the call over to Roy.
Roy Mann
Thank you, Byron. And thank you everyone for joining us today. After a strong fiscal year of 2022, we are happy to say that we kept the momentum going with an exceptional Q1 in fiscal year 2023.
Despite the persistent uncertainties in the macroenvironment, we continue to invest in our growth and profitability at scale, and we are seeing the results. Q1 revenue totaled $162.3 million, an increase of 50% year-over-year. We generated a record $38.7 million in free cash flow during the quarter and are well positioned in meeting our goal of positive free cash flow for the third straight year.
Additionally, we are pleased to report that we are now guiding to positive non-GAAP operating profit for fiscal year 2023, two years ahead of expectations. Eliran will walk you through our guidance in more detail.
Customers acquisition continued to be exceptionally strong. Our fastest growing customer segment remains the enterprise where we grew customers by 75% to 1,683 customers, marking a record number of quarterly net new enterprise customers.
Equally impressive has been the fast adoption and strong customer feedback of our monday sales CRM product. Customers love monday sales CRM as it's more customers and easy to use than traditional CRM tools.
In Q1, we opened our monday sales CRM to a selection of our existing customer base. And the response has been tremendous. Total sales CRM account accelerated to 5,441 accounts, representing a record number of quarterly net new sales CRM accounts.
We are incredibly pleased about all the recent business and product accomplishments this quarter, and believe we are well positioned to deliver our goals for fiscal year 2023 and beyond.
Let me now turn it over to Eran to walk you through some of our recent innovation efforts.
Eran Zinman
Thank you, Roy. This quarter, we're excited to announce our plans for incorporating AI into our Work OS platform, which we've already started implementing. The key components of our AI strategy includes increasing monday.com users efficiency, increasing our own internal efficiency, and in the future, harnessing the power of our proprietary data, spanning over 200 different business verticals.
This month, the first version of monday AI Assistant is going live, with features such as automated task generation, email composition, and document salaries, all features which will greatly increase the efficiency, speed and general experience of our users.
In June, we are opening our platform to third party developers to build AI apps on the monday.com Work OS, increasing collaboration and speedy innovation. These apps will be available on our monday AI Assistant infrastructure.
Internally too, we are focusing on using the monday.com data to enhance our operations through AI, including automating parts of our sales operations, our customer experience and adding an AI layer to our inhouse business intelligence tool, BigBrain.
Finally, we plan to harness our data to help future customers navigate the best ways to set up and maintain the most optimal work flows and automations as well as connect the right people to the right processes. This can significantly improve monday.com's speed of adoption within companies and further enhance data driven product development initiatives.
This quarter, we're also delighted to kick off the first phase of mondayDB. As a reminder, mondayDB is a brand new data infrastructure for the monday Work OS platform, enabling bigger workflows, larger boards and dashboards, more robust developer capabilities and improved overall performance. mondayDB is being released in multiple phases over the next year, with each phase expected to boost performance and scale.
The first phase of mondayDB is focused on monday Boards. Now available to 30% of accounts, mondayDB 1.0 is already having a big effect on board performance and roll times, especially on large and complex boards. MondayDB 1.0 loads boards with thousands of items within a matter of seconds, allowing customers to work with bigger, more complex workflows than ever. We expect mondayDB 1.0 to be rolled out to all customers by the end of Q2.
In addition to our innovation efforts, we continue to make strides in accelerating our efforts in building our apps marketplace. This quarter, enterprise collaboration app provider, the Adaptavist Group, joined us for an app accelerator project. The event focused on introducing several potential new apps and supercharging Adaptavist's first monday.com app, Unlimited Subitems, which has quickly become a customer favorite.
Working with a large enterprise app provider such as Adaptavist, and AppFire, will allow us to build a strong foundation and take our marketplace to the next level.
With that, let we turn it back over to Roy.
Roy Mann
Thank you, Eran. We continue to make progress on our ESG efforts and leading publications are taking notice. monday.com's emergency response team recently received an honorable mention in the corporate social responsibility category of Fast Company's 2023 World Changing Ideas List. This prestigious list honors initiatives that use companies' platforms and power to help advance change, either internally for the community or for the world at large.
To read more about our emergency response team's effort and all of our ESG initiatives, please see our recent published 2022 ESG report. None of our achievements this quarter would have been possible without our amazing monday.com team.
We continue to invest in our people with recent opening of the new APAC headquarters in Sydney and increased our overall headcount in the quarter to 1,582 employees. We are grateful to all our employees for their hard work and their contribution to the strong start to fiscal 2023.
With that, I'll now turn it over to Eliran to cover our financials and guidance.
Eliran Glazer
Thank you, Roy. And thank you to everyone for joining our call. Today, I'll review our first quarter fiscal 2023 results in detail and provide updated guidance. We started the year exceptionally strong. Total revenue in Q1 came in at $162 3 million, up 50% from the year-ago quarter. Excluding the impact of foreign exchange, revenue grew 51% year-over-year.
As expected, our overall net dollar retention rate declined slightly in Q1, reflecting slower enterprise customer seat expansion amid the challenging macroeconomic environment. We continue to expect moderate pressure on NDR throughout fiscal year 2023. As a reminder, our NDR is a trailing four quarter weighted average calculation.
For the remainder of the financial metrics disclosed, unless otherwise noted, I will be referencing our non-GAAP financial measures. We have provided a reconciliation of GAAP to non-GAAP financials in our earnings release.
First quarter gross margin was 90%. In the medium to long term, we continue to expect gross margin to remain in the high 80s range. Research and development expense was $28.5 million or 18% of revenue in line with Q1 2022. We plan to continue investing significantly in R&D in fiscal year 2023 as we build out our product suite and scale our Work OS platform both horizontally and vertically.
Sales and marketing expense was $102.7 million or 63% of revenue compared to 100% in Q1 2022. G&A expense was $15.8 million or 10% of revenue compared to 11% in Q1 2022.
Net income was $7.2 million, up from a loss of $43.2 million in Q1 2022. Diluted net income per share was $0.14, based on 50.8 million fully diluted shares outstanding.
As Roy mentioned, total employee headcount was 1,582, an increase of 33 employees since Q4 2022. WE expect to continue hiring throughout fiscal 2023 with the focus on our R&D and product team as we build out our platform and product suite.
Moving on to the balance sheet and cash flow. We ended the quarter with $935.6 million in cash and cash equivalents, up from $885.9 million at the end of Q4 2022.
Free cash flow for Q1 was $38.7 million and free cash flow margin as defined as free cash flow as a percentage of revenue was 24%. We now expect to report positive free cash flow on a consistent quarterly basis moving forward and to achieve our third consecutive year of being free cash flow positive in fiscal 2023.
Free cash flow is defined as net cash from operating activities less cash used for property and equipment and capitalized software costs.
Now let's turn to our updated outlook for fiscal year 2023. For the second quarter of fiscal year 2023, we expect our revenue to be in the range of $168 million to $170 million, representing growth of 36$ to 37% year-over-year.
We expect non-GAAP operating income of $2 million to $4 million and an operating margin of 1% to 2%.
For the full year 2023, we now expect revenue to be in the range of $702 million to $706 million, representing growth of 35% to 36% year-over-year. We expect folio non-GAAP operating income of $8 million to $12 million and an operating margin of approximately 1%.
I'll now turn it over to the operator for your question.
Question-and-Answer Session
Operator
[Operator Instructions]. Your first question comes from the line of Kash Rangan of Goldman Sachs.
Kash Rangan
Congratulations on these fantastic results. It's always good to see monday's results on a Monday. Question for you is, if you look at the packaging of monday based on individual persona, you have the CRM application right now. What other applications do you foresee coming down the research and development organization? And where do you draw the line between what monday does versus leaving it to the third parties to build applications on top of the platform?
Roy Mann
That's a great question of where are we taking the capabilities of the platform forward towards our growth. So, our strategy now is to focus this year on the core product that we have. Like, CRM is doing amazingly well and we're pushing on that. We're doubling down on what we're really good at, which is project and work management. And the dev is also out of beta, and that's great momentum there.
Going forward, when we're looking into where we are going into and where we are not, we're seeing monday going into areas where it is very highly differentiated across the organization, meaning that the customers will know exactly which product to take. And we're not going down specific vertical areas, the longtail. And this is something we're going to leave for the community to fail as it's like – and we're building out within the company teams that focus on each specific product and taking it to be best-in-class.
Kash Rangan
If you can expand on the generative AI capabilities and what kind of large language models are you guys taking advantage of? Is it your own model? And what is the future product strategy for generative AI on the monday platform?
Roy Mann
When we think about AI, and we mentioned that briefly in our intro, so we think about different aspects. One are already capabilities that we added into the product. So a lot of the things that you can do now with monday can be automated using AI, whether it's creating content, meaning generating documents within the platform, generating tasks. So all that can be done using AI.
Also, another aspect is to make the platform work for you. So, automations, formula, all those things that are presumed to be low code, we also enable with AI to further automate that. So that's one aspect.
The second aspect is making our own company more efficient, optimizing sales processes, customer success, and so on. So I think that, in the long term, has the potential to improve margins and improve the company efficiency.
But if I think about long term, monday has a very unique dataset. If you think about it, we have customers across so many verticals. And they all use monday in different ways. And over time, we generate so many ways of how customers work with monday and how to leverage the platform. So it's really unique dataset. And going forward, we're thinking about adding capabilities that allow customers that are new to the platform or want to explore more opportunities through the platform to generate for them different ways to work. So I think that's going to be a big game changer for us as a company.
In terms of vendors, we use multiple vendors, not one specific. We didn't build the AI capabilities themselves ourselves, but we're using different vendors and teach the AI using our unique data set.
Operator
Your next question comes from the line of Pinjalim Bora of J.P. Morgan.
Noah Herman
This is Noah on for Pinjalim. Congrats on a great quarter. I just wanted to touch a little bit about the mondayDB infrastructure upgrade. Could you maybe just provide some context as to what the customer feedback has been since rolling that out? And just any more color around it would be really helpful. And I also have a quick follow-up.
Eran Zinman
This is Eran. At present, we're very excited with the progress of mondayDB. We're over our schedule in terms of releasing that to our users. It's now open to 30%. I would say that, generally speaking, from the customers that's already open for them, reactions are super positive, especially for the larger customers who have large boards. The user experience, high load times for their boards and content, that dramatically improved with the new mondayDB and reactions are super positive.
Our plans going forward is to further release this first version, mondayDB 1.0, to all of our customers, by the end of Q2. And again, this is ahead of plan. We initially thought about releasing by the end of the year. But just to remind you, this is just version 1.0. Further, throughout the year, we're going to release additional version with further improvements. So a lot of exciting things are happening. But, overall, very happy with the gradual release so far. Reactions are super positive. And there's a lot of things that will happen going forward.
Noah Herman
Just for a quick follow-up, what are some of the levers you're pulling to drive the strong guidance on margins?
Eliran Glazer
It's Eliran. When we're looking at guidance, what drove the beat was we did $7 million more on the revenue side. On the expensive side, we had $5 million less of expenses due to improved operating cost, the marketing expenses as well as less consultants than we anticipated. In addition, we had some additional OpEx savings across multiple operating expenses, like headcount. In fact, we are below plan slightly. Travel and other operating expenses that we were [indiscernible].
And when we look into guidance, we're always taking into account the latest trends that we are seeing. So, obviously, we are looking at currently the challenging macroeconomic conditions that probably is going to continue to apply some moderate pressure on NDR. So we're looking at around 110% overall NDR for all population and around 115% to 120% for 10 plus users and 50K. While we're seeing this, we're also seeing a consistent top of funnel demand and strengthened customer slope that will drive further growth into the future.
So overall efficiency and cash generation is looking good. And, obviously, with CRM in development [indiscernible] this is something that we also anticipate will contribute to the growth of the business. So we took all of this into account when we did the guidance for the year.
Operator
Your next question comes from the line of Jackson Ader of SVB.
Jackson Ader
The first one is, I think on the continued growth, if you had to think about what – has there been a change in the competitive environment that's allowed you to maybe win more deals from legacy competitors. Is it the same story that we've seen at other competitors, start to recede in their investments? Like, can you rank order some of the things that are causing the outperformance on the top line?
Eran Zinman
This is Eran. I don't think we can pinpoint one specific factor. But I would say the fact that monday offering is so broad, it's not exposed to one specific sector. Also, just to remind you, 70% of our customers are non-tech. Only 30% are tech. I think we have very high stability in our customer base.
Also, we continue to see very strong demand. And we've doubled down on marketing. We still have been very bullish, and there's more demand than ever before. And I think the quality of customers that are joining us right now is even higher than before. Because given what's happening in the economy, everybody's searching for a solution, are really kind of putting a lot of effort into that. So I think all those things combined creates a great environment of opportunity for us as a company, and we'll continue to invest.
I think also the success we've seen with the CRM and now with dev product and continued innovation in our product really help scaling customers and acquire new ones.
Eliran Glazer
This is Eliran. Just as to what Eran said, in prior quarters, we mentioned the BigBrain brand and our ability to actually look at every campaign and see the returns, while others pull back, we actually double down on our investment. So we continue with this playbook of monday. When we see good returns, we continue to invest. And this is something we believe is providing us with differentiation versus our competition.
Jackson Ader
The follow up is, I guess, more conceptual. When you guys talk about focusing on the core product and kind of letting the third party develop the vertical-specific applications, like going deep in their own vertical, I'm curious how that actually works. So what happens if somebody goes really deep on a specific vertical? And then, are you guys then – maybe subject to having to maintain or develop capabilities on top of this industry-specific stuff that maybe you didn't plan on, and so your product roadmap kind of gets out of – I don't know, like, out over your skis. I'm just curious how that will work maybe two years from now.
Roy Mann
It's Roy. That's a great question. Actually because monday is a platform, a true platform and an open one, everyone can develop whatever they need. So whatever builders want to build, they never hit the wall because it's all open, they can develop their own missing capabilities for that vertical. And that's why we're also opening it up for them. So essentially, it's never going to limit us.
What it will do is provide a lot of very wide feedback on where we should take the platform. And those capabilities that we offer developers are also the same ones that we ourselves are developing our own product. So we are completely aligned with our ecosystem. And so, it's one roadmap and, like, just helps us speed up in those longtail that we would probably not go into anyway.
Operator
Your next question comes from the line of Arjun Bhatia of William Blair.
Arjun Bhatia
Maybe I just wanted to circle back on the product solutions. It seems like CRM is doing really well. Looks like you've more than doubled the customer base since last quarter. What are you seeing with the other product solutions? I think there's two or three other ones at least that are in market and would love to hear how progress on those are going. And as you roll those out, what does that do for vendor consolidation at your customers? Is that something that can increase as those get introduced to the market?
Eran Zinman
Arjun, this is Eran. As we mentioned during the call, so CRM is going really well. Also, the dev product is gaining a lot of momentum. We actually just announced that it's out of beta. So this is another product we're very excited about. Already seen great signs of very good momentum in terms of acquiring customers.
The project management, we actually kind of renamed that to work management. It's a broader category. Again, this is the bread and butter of monday. We'll continue to double down on that, adding more features and capabilities.
And in terms of marketing, we're actually consolidating that into the work management as it's much more of a vertical of work management. And going forward, we plan to release more kind of horizontal, large products like that. So, overall, when we look at the overall strategy of packaging the platform into products and adding more deep features and capabilities, we're very pleased with the progress and how it's going. And already now, we've seen signs of our ability to cross sell those products and having customers will multiple products being sold to them, whether it's upfront or after the initial purchase of one product. So I think going forward, there's a lot of upside baked into our model.
Arjun Bhatia
One for Eliran. I noticed the commentary that NRR is going to be pressured a little bit more. Is it fair to say that a lot of the traction that you're seeing is coming on the new customer side? And would love to hear some color, if that's the case, where some of those new customers are coming from. Does that tend to be displacements? Are you seeing expansion into new customer segments? Any color there would be helpful.
Eliran Glazer
With regard to NDR, in general, as we said, we continue to see slowdown in expansion of sales compared to year ago. Larger customers especially have become more cautious with their budget, if you think about what happened in Q3 and Q4 of last year, and we believe it's going to persist by the end of this year as well.
On the positive side, we believe that the NDR decline has been offset by strong customer acquisition. So the fact that we are actually seeing a very healthy top of funnel activity with the expansion into CRM and other use cases, it's going to bring, we believe, next year, some recovery on that front. It's important to say that growth retention has remained stable. This is something that we are very much encouraged by. And as part of going up market with enterprise accounts, we're also landing in larger customers from day one, so expansion is probably going to be a bit more slower.
Arjun Bhatia
Congrats on the strong quarter, guys.
Operator
Your next question comes from the line of Brent Bracelin.
Brent Bracelin
I wanted to go back to the demand picture here. Clearly, I get we're in a challenging environment. But the strength of demand here is impressive here in the quarter and outlook despite the moderating NDR. What's driving the optimism here for you guys here for the guide up for June and full year? Is it larger new lands? Are you really excited about the CRM cross selling and installed base? Maybe a mix shift to higher tier pricing. Just walk us through what's driving your near term optimism, with the caveat of the challenges you face.
Eliran Glazer
This is Eliran. We're seeing strong customer demand of our Work OS platform and product suite, basically around all customer segments. So this is not something that we can call out that is unique. It's across the board, having in mind the multiple use cases that we have. And again, the fact that 70% of our customers are non-tech also provides us with some strength.
On the other hand, as we said, we continue to see a slow enterprise customer seat expansion, but this is mostly related to the challenging macroenvironment. However, if you think about where we see the strength, is that the largest number of net new enterprise customers in the quarter came this quarter. This is the biggest. I think more than 200 customers were added this quarter. And if you think about the structure of the subscribers, 80% of our contracts are now annual versus almost 70% a year ago. So, we kind of became more of an – and our subscribers, if you think about the profile, which pay upfront.
So I believe all of these things, together with the additional add-ons and functionalities that we are adding, mondayDB, as mentioned earlier, is providing us with some positive view for the rest of the Q2 and fiscal year 2023.
Brent Bracelin
Sounds like pretty broad-based strength. Last question for me is just a follow-up on profitability. Clearly surprised us here this quarter on positive cash flow, guiding to profitability for the full year. You have over $900 million in cash. The commentary suggests you're not done improving efficiencies internally. What do you do with all that cash?
Eliran Glazer
It's a million dollar – actually, it's a $935 million question. So, what we are trying to do is, obviously, we are going to continue to invest in the business. Priority number one is organic growth, reinvest into the growing company. We have a lot of initiatives, expanding the platform, the product, the operations, and obviously a global reach to build the market share further. [indiscernible] monday is a very innovative company. So this is something we would love to continue, not only thinking about 2023, but also on the longer term in 2024 and beyond.
We're also thinking about potentially – when the market now is becoming more normal, potentially, there are going to be opportunities for an M&A. It can be small tuck-in acquisition, which is more an opportunistic or strategic. And then we can also enhance or escalate our product roadmap. But this is not something that is going to be on the shorter term. But obviously, longer term, we're thinking about non-organic growth as well as organic growth.
Operator
Your next question comes from the line of Steve Enders of Citigroup.
Steven Enders
I just want to ask on the kind of customer feedback from CRM now that it's been sold and pushed back into the customer base? Are you primarily seeing like net new CRM use cases coming from that? Or is there some level of converting customers over who may already be using some of the monday platform for CRM-like functionality there?
Roy Mann
It's Roy. We're seeing both. We're seeing that we are really well positioned for customers maturing from the long tail of CRM product for the smaller ones, the more rigid ones. And they see in Monday the flexibility that they need to really operate their business. And then they're maturing form an existing CRM. But the CRM space is also a huge area in digitization. A lot of customers are coming from literally nothing and where can they find us there. So we're really seeing both and it's a really exciting market for us as it opens the door for a lot of other opportunities as CRM is really very wide, widely used in different scenarios within large customers.
Steven Enders
That's helpful context there. I guess, on the competitive outlook and kind of what you're seeing out there in the marketing world, how should we think about like where we are in terms of the cost per add at this time? And has there been kind of any change in the environment out there in the past quarter versus maybe we were seeing in the back half of last year?
Roy Mann
It's Roy. So I would say we're still seeing the cost per add in media is still way cheaper than it was a year ago. And I think it stabilizes now compared to a quarter ago, it's not dropping anymore. But that still puts us in a very good place. And we're still gaining market share compared to, let's say, last year. So for us, it's a really good space. And it's a very – it's one that the costs are moderate and very good. And as well, like Eran mentioned before, like the customers we're gaining now are also ones that really are looking for solutions. It's not a nice to have for them. They really are looking for them if they're to put their money in there. So they're like better customers on average than we would have seen like a year ago.
Operator
Your next question comes from the line of Jason Celino Of KeyBanc Capital Markets.
Devin Au
Great. This is Devin on for Jason today. Maybe just one from us. Wanted to double click on the strong enterprise customer net add of 200, a really nice acceleration there. Want to ask, are you seeing more opportunities in the marketplace just because you have more products? For example, the monday devs out of beta. Or is it just attributed to the strong go-to-market team execution there that drove the acceleration?
Eran Zinman
This is Eran. I don't think it's specifically related to monday CRM or dev. I think it's more about our continued momentum and our investment in the enterprise tier. We keep adding features and capabilities. Keep scaling our sales team and partners team. So I think that's the result of our investment. And we'll continue to invest and accelerate that part of the business. So I think that's kind of our focus has been as a company for the last few years. And we continue to double down on that.
Operator
Your next question comes from the line of Brent Thill of Jefferies.
Brent Thill
Just if you could double click on the enterprise strength, and ultimately, what you're doing to help build out that go-to-market to continue the process of penetration out market.
Eran Zinman
This is Eran. So I think it's pretty much what I said about continued demand. I think mondayDB is definitely something that we see that will help to accelerate our ability to not just acquire enterprise customers, but also to scale them. And we also see a trend where we see enterprise customers land bigger, our initial deals, meaning customers upfront are buying bigger licenses and seats. I think that's another very positive trend that we've seen. Maybe putting a little bit of pressure on NDR. But, overall, a very good trend that we've seen. And again, we continue to develop a lot of – apart from mondayDB, a lot of features around security, admin, permissions. We just this quarter released a bunch of features. So I think all that investment really drives the enterprise growth.
Brent Thill
Just real quick, in terms of your assumptions in the back half of the year, I think you beat Q1 by roughly $7 million, but you raised your guidance more than double that beat. So it seems that your visibility and your confidence level was pretty high. Can you just speak to the factors that you're taking into account on the back half of your guide?
Eliran Glazer
It's Eliran. Overall, we took into account the fact that basically we had a strong Q1, so it's going to impact the rest of the year. So we definitely kind of account for that when we provided the guidance for the year. As I mentioned earlier, although we had some of the rate pressure on NDR, we assume that we're going to continue to see positive around 110% overall NDR for entire customers and around 120% for the 50k NDR. So if we will continue to see the top of funnel demand and we continue to see stronger new customers growth, as we've seen, together with efficiencies, overall efficiency and cash generation, we believe this is something that provides us with some positive view on the rest of the year. So something that allows us to make this guidance.
Operator
Your next question comes from Scott Berg of Needham.
Scott Berg
I want to start off talking about other application on the Monday Work OS, with the success of your CRM solution. Can you envision a world maybe a year, three, four years from now that you've built other prepackaged applications versus users just using the freeform platform?
Eran Zinman
This is Eran. Can you just repeat the last part of the question? Sorry, there was some noise.
Scott Berg
Just how do you think about building other kind of prebuilt applications on the Monday Work OS? You've had success with CRM. But outside of having it just be a freeform platform that customers can build themselves on top of, how do you think about just adding other kind of prebuilt applications?
Eran Zinman
Definitely, we've seen success with CRM and dev. Obviously, work management is a huge one for us years ago. Going forward, we're probably going to add a few more kind of core products to our product suite. Might be HR, might be other categories we're going to double down on. So, we're open on adding new products, we see a lot of opportunity within our own customer base, we see demand from our own customer base. So, definitely, there's opportunity there and the results from CRM and also dev now are very encouraging. And like we mentioned, for the longtail, we're going to open up for third party vendors to extend our product suite. But, overall, if you can have me to envision monday two, three years, I see a company offering a very strong product suite, maybe four or five, six potential products that are kind of core to the company, in addition to a long offering of longtail solutions from different kind of more nuanced vertical industries. So that's how kind of I envision the monday suite going forward.
Roy Mann
It's Roy. I can add that we have a lot of visibility into what's working and what's not. Because like you said, like, monday is a platform, our customers are building whatever they want on top of us. And when we see something succeeds exceptionally and identify use case in a penetration point, it's much more clear to us where to start and what is the need that is out there. So we have great visibility into, like, the areas that we might go into next, some of them Eran mentioned.
Scott Berg
For my last question, want to talk about traction within your partner ecosystem. You give plenty of commentary, the overall business right now in this general macroenvironment, have you seen any changes specifically within your partner ecosystem in terms of how they're bringing net new customers or new opportunities?
Roy Mann
Overall, we continue to see great momentum with our partner ecosystem. They continue to kind of extend our ability to sell across different regions. But also, I think some trends that we've seen that is increasing is our ability to do professional services for our customers. As we go upmarket with larger enterprises, I think the fact that our enterprises help onboard those customers and develop customized feature for them really help us scale our enterprise offering. So we see great momentum with our partner ecosystem. It's a great extension of our ability to sell. And we continue to invest in that part of the business.
Operator
[Operator Instructions]. Our next question comes from the line of George Iwanyc of Oppenheimer.
George Iwanyc
Congrats on the strong results. Eran, maybe building in a little bit more color on your AI commentary, how do you see this changing the competitive landscape? Do you see this as a net positive? And how do you see it changing kind of the seat growth opportunity?
Roy Mann
It's Roy. So, we're super excited about AI because when you think about it, monday has always been a place where customers – we gave customers more power to build their own software, more power to run their own businesses in the way that they want to run. Like, AI is exactly that. Like, it's a technology. It's something that people want to harness. And monday is in an area that we feel we're in a great place to offer that, alongside everything else we do. So I do think it's too early to say what competitive edge it will give us. But as a leader in this category, I feel like it's a great opportunity for us and definitely going to be huge values for customers. We're super excited about.
Operator
Your next question comes from the line of Derrick Wood of TD Cowen.
Derrick Wood
A lot of questions on the enterprise side, which is great to see. Maybe I'll take the other side of that and just ask about the SMB cohort. Just give us a sense for how that's trending, has there been any change in churn rates, kind of what you're expecting through the year and kind of an update and focus at the lower end of the market?
Eran Zinman
I think it's a great question because, obviously, we put a lot of focus on our enterprise segment. But I think if anything in the last few quarters, I think SMBs also showed their strength. I think the fact that we have a mixture of both enterprise, but also SMBs, as part of our business model, really was a big benefit for us as a company. Surprisingly, SMBs' net retention was pretty much stable, given the current economy. We saw SMBs stabilizing on monday, adding more solutions, unifying different tools into monday. So, I think that's a very interesting segment in long term as well. If anything, and just through the fact that we need to double down not just an enterprise, but also the SMBs like we've done throughout the years, and we see a lot of stability in that part of the business. Obviously, keep investing, but very interesting dynamic here.
Operator
Our next question comes from the line of David Hynes of Canaccord.
David Hynes
Two quick ones on mondayDB. So, with the phased approach to the rollout there, the 30% of accounts that are live, did you start with your largest customers who would see the most benefit? Or how did that play out?
Second, Eran, I'd love to hear you talk a little bit about what v2 and v3 of that effort looks like. Like, where would the focus be in future iterations of mondayDB?
Eran Zinman
Overall, when we started initially, we started with the smaller accounts, but then we just open it up for different sizes of accounts. Some of the largest accounts were, I would say, the most eager to get mondayDB. So we actually rolled those accounts sooner. So, now we have a mixture of both small counts, but also very large accounts, using mondayDB. The most gain was obviously in the larger accounts. Smaller accounts didn't experience much lag, but the larger ones did. So we saw most of the benefit over there.
Version 1.0 is focused mainly on consuming data and viewing data where the next few versions are going to focus on different parts of the platform. For example, dashboards are going to be blazing fast going forward. We're going to offer more scaling opportunities. So that means larger data sets. And I think those further investments in the products will be a big game changer because it will just allow us to be significantly better than what we are today and offer significant different customers the ability to use monday. So looking forward for the next version. I think the first step is always the hardest. And the next day, this will be easier to implement.
Operator
Your next question comes from the line of Andrew DeGasperi of Berenberg.
Andrew DeGasperi
I just had one question on the Monday dev platform you're planning to roll out? I know it's already accessible to existing customers. But just wondering, being out of beta at this point, is it essentially live with essentially everything that it would come with? Maybe can we touch on, in terms of the customer adoption, could it be similar to monday CRM in terms of how quickly do you think that could ramp up?
Eran Zinman
Monday dev is now out of beta. It doesn't mean that all the features are out there. It's far from where we want the product to be. We have a lot of exciting features we're planning to roll out. We just reached a place of stability and scale that we feel comfortable migrating monday dev out of beta. We're seeing great momentum. That's one of the reasons why it was important for us to emphasize that. It's hard to compare it to CRM because it's kind of earlier phase of the CRM, but we're very encouraged from seeing the momentum that we've seen in the product. And overall, when I look at both the CRM and the dev, we're very pleased with the rate of adoption, with the feedback that we're getting. And if the momentum keeps this way, this is a great win for us as a company.
Operator
Your next question comes from the line of Shebly Seyrafi of FBN Securities.
Shebly Seyrafi
I'm very impressed by your billings growth, which was 43%, up from 41% in Q4, and it came in 11%above consensus versus in line basically the prior two quarters. So what drove that strong billing speed? Was it pricing? Was it enterprise? Was it geo? Any other factors?
Eliran Glazer
It's Eliran. As a reminder, we said that billing is an imperfect measure of the underlying health of the business. It's a bit lumpy. We look at revenue growth, we look at the new customers. Nevertheless, we did see strong new customers demand in Q1. The combination of 80% of the contracts are now annual, paying upfront, also contributing for the fact that the billing number has gone up. In addition, largest number of net new enterprise customers in the quarter. We added more than 200 enterprise customers. The combination of these two drivers, together with a strong top of funnel activity, drove the billing upside.
Operator
And your next question comes from the line of Robert Simmons of D.A. Davidson.
Robert Simmons
I was wondering where have you seen the fastest uptake of sales CRM so far? Has there been a vertical or a geography that's been the most receptive to it?
Eran Zinman
Can you repeat the question?
Robert Simmons
I was wondering on sales CRM, where have you seen the most receptivity to it? Has it been certain verticals or geographies or any kind of color there would be helpful?
Eran Zinman
I can't point on any specific segment or industry. I think that was pretty much across the board, different industries, different verticals looking for a certain solution. I think what was surprising for us is that there's a good balance between customers looking for kind of their first version of CRM, but also a lot of customers migrating from existing solutions. They've been using a CRM for different reasons to manage their sales operation. And now they wanted to kind of go to the next level and bought monday CRM [indiscernible] large percentages. So, that was interesting kind of insight into those customers. We're just now, in the last quarter, started to open it up for our existing customers. And going forward, we plan to offer that solution kind of more proactively. So, there's also upside to that.
Operator
Thank you. There are no further questions at this time. I'd like to turn the call back over to Byron for closing remarks.
Byron Stephen
Thank you for everyone for joining the call today and hope you have a great rest of the day.
Roy Mann
Thank you.
Operator
This concludes today's conference call. You may now disconnect.
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monday.com Ltd. (MNDY) Q1 2023 Earnings Call Transcript