Economic and geopolitical uncertainty hasn’t stopped Israeli operating system company Monday.com (Nasdaq: MNDY). The company reported strong second-quarter results earlier this week, sending its stock price up 15% to a 30-month high. Yesterday, the stock rose another 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 Co., Ltd. (NASDAQ: CHKP) and Teva Pharmaceutical Industries Co., Ltd. (New York Stock Exchange: Tifa; level: Tifa), having recently surpassed Mobily International Company (NASDAQ: MBLY).
monday.com, founded by co-CEOs Roy Mann and Eran Zinman, develops operating systems to help businesses manage work processes. The company held its initial public offering at the height of the tech boom in 2021 for $6.8 billion, and within months its market value had risen to $19.4 billion. As the tech bubble burst, monday.com’s stock price fell below its IPO level, but it has since recovered, rising about 40% since the start of 2024.
The company reported revenue of $236 million in the second quarter, up 34.4% from the same quarter in 2023 and beating analyst expectations. GAAP net operating income in the second quarter was $1.8 million, after an operating loss of $12.2 million in the same quarter in 2023. monday.com reported non-accounting net income of $36.6 million. monday.com raised its full-year guidance to $956-961 million from $942-948 million.
“As a company, we have a lot of strengths that provide a solid foundation for growth,” says Mann. “Customers stay with us. Times are tough for many companies, there are markets that aren’t doing well and there are volatility. Customers stay because the system we’ve built at Mondi allows companies to operate in periods of growth, in times when they need to be most efficient. In addition, we see this as a period where we have the ability to buy advertising and market the company, and now specifically to capture market share.”
“Market without borders”
“As of the end of 2023, we had 225,000 customers across various sectors,” adds Eliran Glazer, CFO of Monday.com. “As a data-driven company, we know how to invest money where it generates growth and ROI. We manage ourselves efficiently all the time and that reflects in the bottom line.”
Does the fact that monday.com is an Israeli company affect anything? Have any customers boycotted you or investors started asking questions?
Mann: “The impact on us is minimal. I have to say that there are investors who have asked questions here and there, but what they are mainly interested in is whether the situation will affect us. They are trying to understand from us whether there could be disruptions to the business or not.”
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“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 deal with, which is the company’s ability to continue operating (in terms of business continuity in war situations, for example). We are of course an Israeli company, but we are a global company, with teams all over the world. Our ambition is to become a company ten times bigger, and building it to the next level is a natural process.”
What is the next stage?
“The market we operate in is limitless,” says Mann. “It’s the market of employees sitting in front of computers. We have the enormous potential to be the operating system for almost every organization in the world – that’s our target market and we’ve only scratched the surface of the potential. We’re just getting started.”
In the second quarter, monday.com signed its largest deal in history with an international health services company with 80,000 employees that now uses monday.com. “Our largest customer before had 25,000 users,” says Mann. “This is a big deal and a milestone for the company. We still have a long way to go and grow.”
“We will look at the returns to shareholders.”
Today, monday.com sees itself as a company with multiple products, not just its original product, the monday.com system itself. “Over the last two years, we’ve gone from a single-product company to a multi-product company,” Mann explains. “That means we’re building teams that are like separate companies for each product. We have the core product, which is a CRM product, a developer management product, and an operations management product, organization and IT. It’s like four different companies that need to advance and compete in different, separate markets. What’s amazing is that we’re able to build a product on one unified platform, which is the feature and the infrastructure.”
At the end of the quarter, you had $1.29 billion in cash. How will you use this cash?
CFO Glazer: “We have three goals. We continue to invest in the company – in hiring and in the platform. The second goal is acquisitions – a few months ago our business development manager joined us and we are mapping out the industry and companies, focusing on those that interest us. In the longer term, we will think about returns to shareholders – either through share buybacks or at a later stage, perhaps a dividend.”
The companies that monday.com might be interested in acquiring are those that will deepen their product capabilities and allow them to come to market with a more advanced product, Mann adds.
How do AI developments affect you?
“AI impacts us in two ways,” says Mann. “The first is through the internal efficiency of organizations. We have reported that we have seen an improvement through the use of AI in our support. We have not increased the team size but we have improved the service, customers are satisfied and get quick responses.
“The second thing is about the platform: the monday.com platform is built from ‘cubes’ that can be grouped together depending on what you want to manage. In the last few quarters, we’ve launched AI cubes. Let’s say you want to automate emails, there’s a cube that reads the email, summarizes the tasks or conclusions, and issues them. This is something that someone once did and now simplifies the work.”
62% of employees in Israel
At the end of 2023, monday.com had 1,854 employees, up 20% from the end of 2022, and the company expects to grow by 30% this year. Today, the company has 2,210 employees, 62% of whom are in Israel. “Our expansion and results as an Israeli company underscore how important this company is to us,” says Glazer. “It shows that even in difficult times in the global and local economy, the company is successful. This is important and has an impact both abroad and at home.”
How do people view an Israeli tech company on Wall Street today?
“I think Wall Street looks at things through the prism of performance and numbers,” Mann says. “If a company sticks to what it says, and management is transparent, then it has credibility. There’s a lot less interest in whether a company is Israeli or not. Another thing I’ve learned over the past few years as a public company is that a lot of what investors relate to is not necessarily the company but its market, and it’s not necessarily about the company.”
“For example, if they decide in the market that AI is going to ‘hit’ a certain area, all the stocks in that area immediately go down. Investors also point to trends, interest rates, etc. In my opinion, the geographic location of the company is a marginal issue for them.”
This article was published in Globes, Israeli Business News – en.globes.co.il – on August 14, 2024.
© Copyright Globes Publisher Itonut (1983) Ltd., 2024.
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