Economic and geopolitical uncertainty have not held back Israeli work operating system company monday.com (Nasdaq: MNDY). The company reported strong second quarter results earlier this week, pushing up its share price 15% to a 30-month high. Yesterday the share price rose a further 1.21%, giving the company a market cap of $13.072 billion, making it the third most valuable Israeli company on Wall Street after Check Point Software Technologies Ltd. (Nasdaq: CHKP) and Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA), having recently overtaken Mobileye Global Inc. (Nasdaq: MBLY).
monday.com, which was cofounded by co-CEOs Roy Mann and Eran Zinman has developed operating systems to help enterprises manage work procedures. The company held its IPO during the peak of the tech boom in 2021 at a company valuation of $6.8 billion and within a few months its market cap soared to $19.4 billion. As the tech bubble burst, monday.com’s share price plunged below its IPO level but has since recovered, rising nearly 40% since the start of 2024.
The company reported $236 million revenue in the second quarter, up 34.4% from the corresponding quarter of 2023, and above the analysts’ forecast. GAAP operating profit in the second quarter was $1.8 million, after an operating loss of $12.2 million in the corresponding quarter of 2023. monday.com reported non-GAAP net profit of $49.3 million. monday.com raised its annual guidance to $956-961 million from $942-948 million.
Mann says, "As a company, we have several strengths that provide a solid base from which to grow. Customers stay with us. Times are difficult for many companies, there are markets that are not doing well and there is volatility. Customers stay because the system we built at monday allows companies to operate both in periods of growth, and In times when they should be more efficient. In addition, in this period we see that we have the ability to buy advertising and market the company, and precisely now to capture market shares."
"Limitless market"
Monday.com CFO Eliran Glazer adds, "As of the end of 2023 we had 225,000 customers in various segments. As a company that is very data-orientated, we know how to invest money in places that generate growth and ROI (return on investment). We manage ourselves all the time in an efficient manner and this is reflected in the bottom line."
Does the fact that monday.com is an Israeli company have any impact? Have you had any customers boycott you, or investors who start asking questions?
Mann: "The impact on us is minimal. I do have to say that there have been investors who have asked questions here and there but what interests them is basically whether the situation will affect us. They try to understand from us whether there might be disruptions to the business or not."
"We have a lot of good investors, leaders in the market. We don't get a lot of questions, but it's an issue we're dealing with, the company's ability to continue operating (in terms of business continuity in cases of war, for example). We are of course an Israeli company, but global, and we have teams all over the world. Our ambition is to become a 10 times bigger company, building it to its next level is a natural process."
And what is the next stage?
Mann says, "The market in which we operate is limitless. The market of employees sitting in front of computers. We have the vast potential to be the work operating system for almost every organization in the world - that’s our target market and we haven’t yet scratched the surface of the potential. We are only just setting out."
In the second quarter, monday.com signed the biggest agreement in its history with an international health services company with 80,000 employees that now use monday.com. Mann says, "The biggest customer that we had before that had 25,000 users. This is a very major deal and milestone for the company. We have a long way to go and grow."
"We will consider returns for shareholders"
monday.com sees itself today as a company with several products, and not just its original product, the monday system itself. Mann explains, "In the last two years, we have made a transition from a one-product company to a company with many products, which means that we are building teams that are like separate companies for each product. We have the core product, a CRM (customer relationship management) product, a management product for developers, and a process management product, organizational and IT. It's like four different companies that need to be taken forward and compete in different and separate markets, and what's amazing is that we are able to build a product on one unified platform, which is the advantage and the infrastructure."
At the end of the quarter you had $1.29 billion in cash. How will you use this money?
CFO Glazer: "We have three goals. We continue to invest in the company - in hiring and in the platform. The second is acquisitions - a few months ago a business development manager joined us and we are mapping the industry and companies, focusing on those that interest us. In the longer term, we will think about returns for shareholders - either through buying back shares or, at a later stage, perhaps a dividend."
Mann adds that companies that might interest monday.com in terms of acquisitions are those that will deepen its product capabilities, and allow it to reach the market with a more advanced product.
To what extent do AI developments affect you?
Mann says, "AI affects us in two ways. The first is through the internal efficiency of organizations. we reported that we saw an improvement by using AI in our support. We didn't increase the team but we improved the service, the customers are satisfied and get quick responses.
"The second is in the platform: the monday.com platform is built from 'cubes' that can be assembled according to what you want to manage. In the last few quarters, we launched the AI cubes. Let's say you want to automate emails, there is a cube that reads the email, summarizes and issues tasks or conclusions. This is something that a person once did and today it streamlines the work."
62% of employees are in Israel
At the end of 2023, monday.com had 1,854 employees, up 20% from the end of 2022 and the company expects the workforce to grow by 30% this year. Today the company has 2,210 employees, of which 62% are in Israel. Glazer says, "Our expansion and results as an Israeli company make statement that is important to us. It shows that even in challenging times in the global and domestic economy, the company is successful. This is important and it radiates both outward and inward."
How is an Israeli tech company seen today on Wall Street?
Mann comments, "I think that Wall Street looks at things in terms of performance and numbers. If a company lives up to what it says, and the management transmits transparency, it receives credibility. There is much less concern about the issue of an Israeli company or not. There is another point that I have learned over the past few years as a public company - many of the things that investors relate to are not necessarily the company but its market, and that things are not necessarily about the company.
"For example, in the market if they decide that AI will 'hit' a certain field - immediately all the stocks in the field fall. Investors also refer to trends, interest rates, etc. Where the company is geographically located, in my opinion, is a more marginal matter for them."
Published by Globes, Israel business news - en.globes.co.il - on August 14, 2024.
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