monday.com Ltd. Q2 FY2022 Earnings Call

Good day. My name is Charlie, and I'll be your conference operator today. At this time, I would like to welcome everyone to monday.com's Second Quarter Fiscal Year 2022 Earnings Conference Call. I would now like to turn the call over to monday.com's Director of Investor Relations, Mr. Byron Stephen. Byron, 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 second quarter fiscal year 2022. 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 second quarter fiscal year 2022 earlier today. This quarter, we have introduced a new shareholder letter with our results commentary for the quarter. You can find the shareholder letter along with our investor presentation that accompanies our prepared remarks and a replay of today's webcast under the News and Events section of our Investor Relations 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 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 second quarter earnings call. It's been one year since our IPO and monday.com continues to grow. Our total revenue in Q2 was $123.7 million, up 75% from Q2 last year. We continue to move up market at a fast pace, growing our enterprise customer base to more than 1,000 customers this quarter, while maintaining our best in the industry net dollar retention rate. We continue to see strong growth across all customer segments, with enterprise customers leading the way. In the second quarter of fiscal 2022, we finished with 1,160 enterprise customers, a 147% year-over-year increase. The second quarter saw significant improvements in our operating margin as we continue to make our business more efficient. Since the company was founded, we've generated approximately $4 in recurring revenue for every $1 we burn. The secret behind our efficiency is our bigbrain analytics platform. If you have ever visited our offices, you have seen dashboards on nearly every wall displaying insights from bigbrain, our in-house business intelligence tool. Bigbrain collects over 200 million events a day, which informs each of our marketing campaigns and every interaction we have with our customers. By measuring everything, we empower employees to make efficient, data-driven decisions, optimizing for cash flow and maximizing efficiency. Another key part of our long-term strategy is the expansion of our product offerings. This past quarter, we announced our new Work OS product suite, and we've already seen impressive adoption. Within two months, we have had over 1,000 new paying accounts sign up with our new Work OS product. Our new end-to-end products are tailored by vertical and build on top of the Monday Work OS platform, including Monday Projects, Monday Sales CRM, Monday Dev, and Monday Marketer. Customers can now switch between products within their Work OS platform so they can unify work across their organization. We're committed to being best-in-class in every one of our product categories, and we're confident that we can achieve that, thanks to the flexibility and unique infrastructure of our Work OS. These new products expand and elevate our go-to-market strategy and create additional entry points for new customers to our platform. Let me now turn it over to Eran to walk you through how customers are using monday.com to run their businesses better.

Thank you, Roy. monday.com is core to our customers' business success. We're proud of the efficiency and reach with the Work OS platform. With a customer base of more than 152,000 in over 200 countries and 200 different industries, our customers span thousands of diverse use cases. We've pulled a handful of examples to give you a sense of that range. Renault Group recently signed up with monday.com and now uses the Work OS platform to share and manage the communication activities of its brands around the world. They're using the platform to increase their communication functions, collaboration, and efficiency across 39 countries. As part of their goal to innovate the property industry, Savills turned to monday.com to execute impactful marketing campaigns across the global market. Limitation consultants are partnering with Savills to standardize their marketing processes, minimize wasted time, and align faster decisions with their KPIs and OKRs. Lastly, in the total economic impact study released in March, Forrester studied Motorola's use of monday.com for its global internal creative agency. Their report showed that Motorola had significant cost savings along with increases in overall productivity, producing an overall return on investment of 346%. Reading this report was really exciting. We built monday.com as a unifying workspace that increases operational efficiency and productivity, and it's amazing to see that in action. Our dedicated product alignment team works on meeting the complex needs of our increasing enterprise customer base. This past quarter, we prioritized making our platform even more resilient and reliable. With less platform friction and more customizable administrative permissions, we improved our platform infrastructure and database, strengthened our board stability by 75%, improved our board loading time by over 15%, extended our multi-region architecture, and made our core building blocks worthily with hundreds of fixes and improvements across boards, dashboards, and docs. In addition to those platform improvements, we prioritized the granular customizable security and administration features that our customers need, including editing permissions by sub-item and item-specific review information. These new features have helped us maintain our best-in-the-industry retention rates and enabled higher ARR. Finally, every quarter, our customer success managers help hundreds of customers reach their business goals and add measurable value to the company. For example, in Q2, one of our customer success managers worked with a larger consumer goods customer to maintain 100% of the monday.com licenses of remaining employees during layoffs. Our efforts resulted in more than a 65% jump in average monthly active paying users and high satisfaction with the platform. At the same time, we're improving the way we communicate with customers around the platform. We started rolling out support over chat, as well as an email to the CEO feature, which allows users to directly send us feedback. Growth initiatives have shown us where our platform can grow while increasing customer engagement. Let me now turn back over to Roy.

Thank you, Eran. Our marketplace and partnership continue to be one of our larger growth drivers across our company, increasing our ability to serve any and all types of organizations. At the end of Q2, our partner ecosystem consists of 177 active channel partners, 470 new referral partners, and over 150 marketplace apps with 30 monetized apps that show meaningful traction. Such strong product innovation, expanding ecosystem, and consistent growth is only possible with our amazing team. We finished Q2 with nearly 1,500 monday.com employees around the world, and even as we grow, we maintain our culture and employee engagement levels. We see that not just from our internal surveys but from outside the world as well, winning two major workplace awards this year with Fortune certifying monday.com as a great place to work and Inc recognizing us as one of the best workplaces of 2022. With this success, we remain committed to aiding nonprofits with digital transformation through our Digital Lift initiatives, including our commitment to donate 10% of our equity over time to foundations. During the past quarter, we launched a Digital Lift product and opened applications for a year-long grant of up to $100,000. In parallel, our emergency response team partnered with organizations around the world to streamline their relief efforts. We leverage the monday.com platform to support humanitarian and disaster relief efforts of NGOs on the ground, including initiatives in Durban, Ukraine and more. All in all, it's been a strong, impactful quarter and we're excited to see what the next quarter brings. With that, I'll turn it over to Eliran to cover the financials and guidance.

Thank you, Roy, and thank you to everyone for joining our call. Today, I will review our second quarter results in detail and provide updated guidance for the third quarter and full year 2022. We delivered another strong quarter of growth driven by customers increasingly adopting the broader monday.com Work OS and our product suites across the organization. Total revenue came in at $123.7 million in the second quarter, up 75% from the second quarter a year ago. Additionally, we saw significant margin expansion during the quarter, stemming from our platform-based land and expand strategy and operational efficiencies. We continue to see strong expansion within our existing customer base, which is reflected in our best in industry retention rates. Our net dollar retention rate remained stable across all categories in the second quarter. Net dollar retention rate for customers with more than $50,000 in ARR was over 150%. Net dollar retention rate for customers with more than 10 users was over 135%, and our net dollar retention rate for all customers was above 125%. As a reminder, our net dollar retention rate is a trailing four quarters weighted average calculation. For the reminder 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. Second quarter gross margin was 89%. In the medium to long term, we continue to expect gross margin to remain in the high 80% range. Research and development expense was $24 million or 19% of revenue compared to 16% in the year ago quarter. We will continue to invest significantly in R&D throughout the remainder of the year as we build our product suite and scale our Work OS platform, both horizontally and vertically. Sales and marketing expense was $86.7 million or 70% of revenue compared to 79% in the year ago quarter. We anticipate sales and marketing expenses as a percentage of revenue to remain at the low to mid-70s throughout the remainder of the year. G&A expense was $14.6 million or 12% of revenue compared to 9% in the year ago quarter, reflecting increased cost since becoming a public company. Operating loss was $16.4 million and operating margin was negative 12%. Net loss was $14.9 million. Total employee headcount was 1,489, an increase of 205 employees since Q1 2022. We hired across all major functions with over 60% of new hires in customer-facing roles. We anticipate that the levels of hiring will slow in the second half of fiscal 2022. We anticipate that the levels of hiring will slow in the second half of fiscal year 2022. Moving onto the balance sheet and cash flow, we ended the quarter with approximately $834.6 million in cash and cash equivalents. Net cash used in operating activities was $14.1 million in the quarter. Deferred revenue increased to $177.9 million at the end of the second quarter, up from $160 million at the end of the first quarter. Adjusted free cash flow was negative $19.2 million and included year-end bonus payments of $6.6 million and an insurance payment of $7 million. Adjusted free cash flow margin, as defined as adjusted free cash flow as a percentage of revenue, was negative 15.6%. Adjusted free cash flow is defined as net cash from operating activities less cash used for property and equipment and capitalized software costs, excluding nonrecurring items. Now let's turn to our updated outlook for fiscal year 2022. For the third quarter of fiscal year 2022, we expect our revenue to be in the range of $130 million to $131 million, representing growth of 57% to 58% year-over-year. We expect a non-GAAP operating loss of $25 million to $24 million. For the full year 2022, we now expect revenue to be in the range of $498 million to $502 million, representing growth of 62% to 63% year-over-year. We expect the full year non-GAAP operating loss of $112 million to $108 million and a negative operating margin of 22% to 21%. With the recent strengthening of the US dollar, we now expect FX to negatively impact our full year revenue growth estimated by approximately 300 basis points. Given the concerns about the macro economy and the market, we have provided prudent yet achievable forward-looking guidance. It should be noted that we did see some softness in demand in Europe at the end of Q2. And while one month is not enough data to extrapolate a longer trend, we are closely monitoring the demand environment across all areas of our business and we will be transparent with our investors about our expectations. We clearly have momentum across all of the areas critical for us to drive sustained levels of high revenue growth over the long term, including new customer acquisition, strong net dollar retention, and an expanding product suite. Our strategic focus remains on balancing healthy investment in the business with improving efficiency and profitability. We'll continue to measure and monitor our returns and adjust investment levels as needed. I'll now turn it over to the operator for your questions.

Now our first question comes from Kash Rangan of Goldman Sachs.

Reporting on the day like Monday wouldn't expect anything less from monday.com, so spectacular results. Congratulations to the entire team. I had two questions. One is with the rebranding around the Work OS and having new functionality focused on the developer market or CRM, etc. How are sales cycles changing for the company and who are the kind of targets you're able to reach out to, and what kind of budgets are you able to tap into? That's one thing, and second is more of a financial question. You talked about operating efficiencies, and I'm curious how you do that while not sacrificing the growth potential of the company?

I'll address the first part of your question and then I'll hand it over to Eliran. So first of all, it's not a rebranding, we see this more of an evolution from where we were. So just as a reminder, originally, the platform up until this day is very dynamic and flexible, allows everybody to build anything on top of our Work OS. And then last quarter, we took it a step further and further packaged our product as a CRM product, as a tool for developers, a tool for marketers, and we saw great momentum in the last quarter. Just before that, we saw more than 1,000 paying customers using those products in addition to using the work management platform, and this is again, part of our strategy. We offer the flexible platform. But in addition to that, we help customers onboard with those specific solutions. We see this create better dynamics in terms of our ability to sell to larger enterprises, our ability to land new customers, while also offering the flexibility to grow into once they start using this initial product. So overall, this increases our ability to go to market and also land larger customers and offer better solutions for our customers.

With regard to your question, as a reminder, we always said that we invest based on the return that we see from our investments, and this is the playbook of monday.com. So when we think about investing into the future, we're focusing on making sure that we invest in product and engineering, and we grow the revenue-generating sales outcomes as we did in H1. We hired a lot of employees, added a lot of talent, and we continue to invest also in online marketing. But the important thing is if it doesn't meet our guidance, internal expectations with regards to the return, we kind of take it in a modest way. So from our perspective, we continue to invest when we see the returns that we are used to, and this is a playbook that we operate in accordance.

Our next question comes from Ittai Kidron of Oppenheimer.

Eliran, maybe you could just talk about the softness you've seen late in the quarter in Europe. How much of this you think is macro effects, a little bit more of a play here? And maybe you can give us some color on the month of July. Has that weakness continued into July, or have you seen an improvement? Help us think about how you qualified what you've seen into the rest of the year guidance?

So as we said, we did see some softness in Europe. We think it's broad-based. It's not specific to countries, but you see it across many countries, and also not specific to any segments. It started in June, and we also see it in July, to be honest. If you combine this with the FX impact, it's also definitely something that we should account for. So we said that in Q2, we estimate the FX impact to be approximately 2% negative on our growth rates, and we estimate that by the end of the year, it's going to be around 300 basis points. We don't have a crystal ball. But looking at the macro economy and geopolitical terms, the Russia-Ukraine war, inflation, and everything, we definitely monitor carefully the level of impact on our businesses and we adjust our assessments accordingly. So I would assume that we should take it into account even when we speak about guidance, probably by the end of the year.

And just as a follow-up regarding your expectations of a slower hiring in the second half of the year. Is that just because you've pretty much done what you needed to do on headcount or again, is this with the macro environment in mind, trying to be a little bit more cautious and focused on margins?

So when you think about hiring, we did what we expected to do in H1. We hired the positions that we think we needed in order to scale the company for future growth. Now we are more focused in H2 on bringing additional headcount definitely not only related to the macro economy, but this is according to the plans that we had originally and also looking at the macro economy. But this is not the main driver. So we're going to slow down the hiring and focus on positions that will now help us to complete the supporting functions to scale the company.

Our next question comes from Arjun Bhatia of William Blair.

I want to touch on the enterprise traction. It seems like you are getting really good performance in that $50K cohort. It's kind of like I think this was the highest sequential adds that we have seen. Can you just talk about the dynamics that you are seeing there? Is that customers expanding seats, are those new customers landing at those high ARR metrics? And then I'm curious as customers do grow with you, are you starting to see more consolidation of spend on monday across several different software solutions perhaps and departments as well?

So definitely, we are very focused on our enterprise customer segment and we keep seeing great growth there and we see the momentum increasing over time. So definitely, we see fruits from that investment, and we are committed to continue to invest going forward. I will say that to your question specifically, we do see larger initial deals as a trend, so that's definitely one trend. I would say that the additional new products that we launched last quarter definitely also make a big impact on the customers, our ability to sell more products over time and expand their usage. So definitely another trend that we are seeing. Also in regard to your question about consolidation, I think that kind of, in addition to what Eliran said with the macro economy, we see here a great opportunity for us as a company, because a lot of our customers realize that they can do much more with monday.com as a platform. They might have several use cases, but now this is the potential of expanding monday.com throughout many more departments and perhaps consolidate a few different tools under monday.com. So definitely, we are starting to see this as a trend. This is also very interesting, so I think we are kind of also pushing that, given the macro economy.

And just I think, Eliran, you just touched on this. But I wanted to maybe ask a little more pointedly, just when you think about the go-to-market strategy in the back half of the year, how much are you balancing between performance marketing versus the direct sales investments? Is it just that the direct sales investments are already made and you don't need to add more, or are you pulling back on performance marketing even further in this environment? How do you view that in the back half?

As a reminder, during our Q1 discussion, we mentioned that the closing expenses in online marketing for Q1 were an outlier. Moving into Q2, we plan to make more modest investments. We still see value in performance marketing as a key tool for generating leads. Additionally, we will continue hiring salespeople, but in two ways: first, we will evaluate the return on investment from our performance marketing efforts, and second, we will slow the pace of hiring for additional salespeople and CPMs in the partner team.

Our next question comes from Scott Berg of Needham.

I guess, two questions here. First of all, I want to start on partner impact on the quarter where you discussed some of the momentum that you're having here. But if you look at kind of your new bookings in the quarter or whether it was directly through a partner or just influenced from your ecosystem. How would you compare the traction in the quarter, say, versus a year ago?

Hi Scott, it's Eran. So we continue to see strong momentum with our partners channel. We now have, with regards to global expansion, we are covering new markets where we don't have reps directly. As of today, we have more than 177 active channel partners with 26 channel partners added in Q2. And we have, outside of monday.com, additional 470 new referral partners in Q2. So overall, we see momentum. Obviously, with the current situation in Europe, potentially, there might be some slowdown in the future, but this is something that we account for and measure or look at on a constant basis.

And then from a follow-up question perspective, and other was a question that was already asked, I think Kash asked it on the new Work OS launches recently, the new functionality there. But how should we think about the impact on that? And on your bookings going forward, is that more to help land with new customers, or does it help expand with your existing customers better?

So that move with introducing new products was both of the things you said. One, it allows us to open up new markets and have other customers consider monday.com on a different approach and gain more market share and more quickly. And on the other hand, especially in these times, it helps customers expand into new use cases, adding more departments, and deepening their usage of monday.com even within existing departments. So it plays on both ends, and that's how we see it.

Our next question comes from Pinjalim Bora of JP Morgan.

I wanted to ask on retention. I know you don’t give the figures against renewal, but it's been pretty stable over a certain amount. But is there a way to understand qualitatively the directionality of that metric, and how has gross dollar retention been trending in the business?

Pinjalim, it's Eliran, and congratulations on covering us for the first time. So good question on retention. So when we speak about retention, we mentioned that we believe we are now at a stage where it's stabilized. So we also spoke about ranges. When we are now with all customers above 125%, and when we think about the range, probably the range that we expect is between 120 to 125. If we think about 10 plus users, it's 135 to 140. And when we think about enterprise customers of $50K, it's around 145 to 150 and above. So potentially this is kind of the ranges that we believe that are going to be. With regards to gross retention, we look at gross retention. Obviously, it's getting better. The fact that we're actually getting more momentum with customers with 10 plus users and enterprise accounts also improving our gross retention. We usually don't disclose this number, but this is getting better as we continue to move up market.

One follow-up for you, Eliran. You mentioned that there is some softness in Europe that has continued into July. The upside to the revenue guidance seems a bit cautious compared to prior years or quarters. Can you provide an estimate of the macro impact you are considering at this point and what other assumptions you are making for the guidance?

So naturally, when we look at guidance, we take into account all of the number of considerations inclusive, of course, the geopolitical situation, as well as the FX impact and other macroeconomic environments that are out there. So this is part of the way we measure, this is part of the way we do our projections, so we take it into account altogether.

Our next question comes from Brent Bracelin of Piper Sandler.

I wanted to go back around some of the momentum you're seeing here with the enterprise customers. Your vendor consolidation is a narrative we're starting to hear a little bit more about. You've obviously come out with a new Work OS platform that expands the reach into CRM, dev marketing. Are you seeing that play out and drive some of that momentum record number of enterprise customers this quarter or not? Is that a narrative you're going to lean in more on? Just love to get your views around the opportunity you see with kind of your low-cost platform, given vendor consolidation as a narrative we're starting to hear a lot more in the enterprise space?

We see this as a strong growth opportunity. While we may not see immediate effects on our already significant momentum with enterprise customers, it could take some time to achieve additional growth on top of what we already have. However, this consolidation is quite beneficial, and the timing aligns well with market trends. monday.com is an excellent platform for consolidation because it has always been adaptable and versatile, allowing customers to use it across various cases. Even prior to recent market developments, customers have utilized monday.com for numerous applications, with some companies managing all their departments on our platform. This positions us well to provide consolidation, a process we have supported in the past, and we are currently having positive discussions about it. Our customer success and sales teams are actively promoting this, and we are receiving encouraging feedback from customers undergoing this transition. This presents a significant upside for our company, and we will continue to provide these opportunities to our customers moving forward.

And then just Eliran, as we think about maybe the path to positive free cash flow here. You have certainly a very strong balance sheet of $800 million in cash, you only burned $14 million. But how much of that cash position do you think you are going to need to consume before you kind of get to positive free cash flow?

So with regards to free cash flow, maybe to start and say that we expect margins in H2 to improve as part of the business growth. I don't know to tell you the exact number of how much we are going to consume. But I think if we continue to deliver the growth and improved margins as we see now, potentially with regards to free cash flow, as we said in the past, it's going to be low double digits free cash flow as a percentage of revenue by the end of the year. I would assume that somewhere next year in H2, we are going to see a shift towards breakeven or some free cash flow positive. This is kind of the plan. As you think about the ranges we are currently consuming, I expect it's not going to be very meaningful from our total cash.

Our next question comes from Andrew DeGasperi of Berenberg.

I know this has been asked several times on this call, but in terms of the annual guidance. What I just want to make clear is, you flagged the weakness in Europe and you said that you're accounting for that. But are you also accounting for any additional potential weakness in other regions or end markets as part of the guide you have for the year?

So when we look at the guidance, we examine a wide range of potential outcomes and set our guidance to the level that we feel confident that we will be able to meet and exceed. And certainly, the wide range of potential outcomes includes the macroeconomic environment that could be worse, and potentially the geopolitical situation can be longer than expected. So we try or we make sure we take it into account to a certain extent. We don't want to be completely conservative or pessimistic so we take all of this into account when we do the projections.

And then just one on your pricing strategy. I know you haven't raised prices since 2019. Just curious to know given the inflationary and wage pressures a lot of companies are facing. Are you thinking or changing that, or are you taking a closer look at it?

So we haven't made any significant changes to our pricing structure. If anything, we always try to make it easier and simple for our customers. I would say, as we mentioned, we have a big upside with our new Work OS products that offer us the ability to charge a premium over our work management platform, and we'll give this value to our customers. So definitely this is a big upside that we have. Also in terms of pricing and engagement and usage, we also see this as a potential to increase the number of seats within accounts. So that's the big offset that we have in terms of pricing. But in regards to our kind of basic pricing model, we don't expect to see any kind of changes right now.

I would add that as we shift towards enterprise, we are noticing that the percentage of enterprise seats within our revenue is increasing. This isn't due to a price increase, but rather represents a much larger portion of our business.

Our next question comes from David Hynes with Canaccord.

So R&D spend ticked up a little bit, you're clearly investing in product. I'm curious, what do you see as the more significant opportunity, is it horizontal expansion of Work OS or vertical expansion?

So we actually see both. The reason we launched the product is because we saw our past horizontal moves and what customers actually did with us; we took that and launched the product. So we can go deeper inside each one and be best-in-class within every vertical. What happens outside these products is that customers onboard to the Work OS and still use us for many more use cases, which we in the future will probably turn into products as well. So all these products move is actually to get deeper into areas.

And then a follow-up for Eliran. Just the softness you're seeing versus your expectations. Is that showing up more in top-of-funnel activity or expansion momentum?

I think it's both. On one hand, expansion conversations are different. Sales cycles are taking longer, and companies are carefully considering their spending and expansion decisions. This relates to the extension side. On the other hand, when targeting new audiences, the spending, particularly online, is noticeably different. Therefore, I believe there is some slowdown in the environment due to macroeconomic challenges.

Our next question comes from Derrick Wood of Cowen and Co.

It's Andrew on for Derrick, nice quarter. The Renault Group was an impressive win; they have 170,000 employees. Was this a displacement or greenfield, and can you give us any color on how many seats this deployment is? And then to reach, like, close to 50k seat levels, what would need to improve on the product to get to those levels?

So it's a very significant deployment. We didn't disclose the amount of seats, but it's a very significant deployment. I would say a few hundred, more to the kind of top part. But definitely this is an account that we prioritize to call in. We will continue to expand our footprint within this account for the reason we're so excited about the upsell opportunity that we have with that customer and the ability to expand to more departments over time. This is just one use case out of many that we saw this quarter of larger enterprises that adopt monday.com on a big scale and continue to scale over time.

So I don't think it's much of things that need to be improved with the product, although we keep investing more and more in terms of product features that allow enterprise companies to scale. First of all, it's the process. Companies go and scale over time gradually. So we definitely see this as a process. Our future enterprise customers are now growing, and this is probably the reason why we see so much momentum in that group. But our sweet spot is still under 10,000; we continue to invest and raise the bar every year. We'll continue as a company to invest and allow larger enterprises to use monday, both from a security perspective, governance, and also in terms of features. So we are heavily investing into that part of the business.

Eliran, regarding the billings number. Was there anything that contributed to the softer upside? Were there any invoicing flexibilities with customers that affected this, and do you expect this to continue in the second half?

So billings tend to be a bit lumpy, and we do not measure the business or manage the business to billing. We look at the net dollar retention rate, revenue growth, and customer growth. If you think about revenue growth on a sequential basis, we grew 14% quarter by quarter and 75% year-over-year. So these are the measures that or the metrics that we use to look when we look at the business, as well as comparisons are more difficult this quarter when we are getting bigger on the numbers.

Our next question comes from Brent Thill of Jefferies.

I'm curious if you could update us on your quota-carrying sales rep hiring plan for the year, and if you’ve changed your plan relative to kind of what you're seeing. Can you just give us any color on what you're expecting this year?

In terms of quota-carrying, we have indeed changed our plan, and the numbers keep increasing. This is another area, along with R&D, where we continue to invest, even in the current environment. Our plans remain consistent with what we established when we set the plan for the year.

And just real quick, what you're embedding in your overall guidance? Are you seeing a flat environment, an improving environment, or slightly worsening environment? How would you characterize your guidance relative to the back half in your plan?

So as I mentioned earlier in most of my replies, we do account for the macroeconomic environment and the geopolitical challenges to continue by the end of the year. Again, I don't have a crystal ball and I don't have better expectations than anyone else. We're trying to be a bit cautious, remaining optimistic with regard to next year. But by the end of this year, we think it's going to be the same environment that we see today.

Our next question comes from Robert Simmons of D.A. Davidson.

You have 30 technical difficulties so far. Is there any cadence we can expect to the number of assets that will become monetized over the next quarters or years? And then are you earning revenue on those that are currently monetized? And if not, what's the timeline for doing so?

We have strong momentum in our marketplace and are continuing to invest and collaborate with third-party developers to help them create apps for it. Two quarters ago, we launched our payment service in the marketplace, which is gaining traction. We are observing app developers transitioning from independent payment solutions to our system, as well as new developers adopting it. While it is still relatively small compared to our overall revenue, it is experiencing positive growth. We are closely monitoring this aspect, as it is a strategic component of our product, allowing us to broaden our use cases and provide long-tail solutions to our customers. We are making significant investments in research and development focused on the marketplace, and we are pleased with the ongoing momentum.

At this time, we currently have no further questions. And therefore, this concludes today's call. Thank you for joining. You may now disconnect your lines.