Monday.com’s earnings are a vibe check for unicorns

For SaaS companies, growth may no longer be enough.

Venture capitalist and SaaS sage Jason Lemkin shared notes yesterday on Monday.com’s recent earnings report. Highlighting the positives he saw from the team productivity service’s Q1 results, Lemkin noted that the company announced strong growth and 125% net revenue retention in its most recent quarter.


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Monday.com’s quick growth, per Lemkin, is an indication that in business terms, “times are still very, very good in SaaS,” regardless of whether the stock market agrees. The point about the market is a good one. The change in the value of public technology companies has taken six months to reach its current point, and the ripples are still working their way through the startup market in the wake of last year’s private-capital bonanza.

Lemkin considers SaaS fundamentals still strong, despite the sector finding itself as far outside of investor favor this year as it was in their hearts back in 2021. It’s not hard to see why. Monday.com’s first quarter had a lot to like in it, and yet the company’s value is down from an all-time high of $450 per share to a few bucks over $100 this morning.

Monday.com is a therefore good example of how companies in the SaaS market are being graded along a much steeper curve than they once were. So let’s unpack its actual results against Q1 expectations, the company’s guidance against analyst forecasts and how to read the market’s view on its current health.

The resulting picture is one that unicorns should pay close attention to. After all, how many unicorns wouldn’t love to post the following results?

Monday’s Q1 results, 2022 guidance

In the first quarter of the company’s fiscal 2022, Monday.com reported revenue of $108.5 million, up 84% compared to the year-ago period. Per the company’s release, its aggregate net dollar retention was 125%, a figure that rose to 135% “for customers with more than 10 users” and to 150% for “customers [worth] more than $50,000 in annual recurring revenue.”

In growth terms, then, Monday.com had a whip-ass first quarter.

What about profits? Well, there aren’t any. Monday.com’s loss widened to $66.7 million in net terms, while its non-GAAP operating loss also widened to $43.8 million from a year earlier.

The scale of Monday.com’s losses, however, was not a surprise. The company reported lower-than-expected adjusted net loss came in smaller than expected, while revenue was ahead of analysts’ estimates. More simply, the company posted a top-and-bottom beat in the first quarter and is so far being rewarded by investors with what amounts to a shrug.

Looking ahead, things are still in good shape for Monday. Here’s how the company described its growth expectations:

  • Q2 2022: “Total revenue of $117 million to $119 million, representing year-over-year growth of 66% to 69%.”
  • 2022: “Total revenue of $488 million to $492 million, representing year-over-year growth of 58% to 60%.”

Per Yahoo Finance data, both figures are ahead of analyst estimates — the company’s watchers had penciled in $110.9 million in Q2 revenue and $474.5 million for the year.

So what?

With a market value around $4.6 billion, Monday.com is worth just over 10x its current ARR (calculated by taking its Q1 revenue and multiplying by four, which will scoop up some non-recurring revenues, but is a close enough figure for our needs this morning).

That is pathetic compared to 2021 SaaS valuation norms and should be a clear warning for unicorns. A huge chunk of the cohort of richly priced private companies expecting to go public when market conditions improve may find themselves competing with Monday.com for investor attention. This will be a struggle, as Monday is priced far cheaper than unicorns are.

Call the investor reaction to Monday.com’s Q1 earnings report a vibe check for unicorns: Can you meet the SaaS company’s level of performance at its current revenue multiple? If not, why not? And how much of a discount are you ready or willing to accept to get public?

I wonder what portion of unicorns will manage to go public with greater than 100% growth and be able to hold the figure aloft after reaching nearly $500 million worth of ARR. Most? Some? A few?

The good news, as Lemkin said, is that selling software still appears to be a great business. The bad news is that quick growth and stiff losses just aren’t worth what they were before, even when results beat street expectations. Good luck, everyone.