How I see Monday
I have the feeling that, as with many of our companies, people “can’t see the forest for the trees.” What I mean by that is that (in my opinion) they can’t see the shape and health of the forest because they get lost examining every little tree, in other words they have a long list of metrics to satisfy and are looking for perfection on each of 10 or 20 details. They get lost in the details. No company can meet the 20 metrics you set out for it so there will always be things to be unhappy about.
Here’s what I see in Monday:
We have a company growing revenue at 75% per year. That’s basics, not details. Yes it’s down from over 100% growth at one point, but how many companies are growing at 75%? They are being very conservative in guidance because a lot of their business is in Europe which is in a certain amount of economic chaos at present due to Russia’s invasion of Ukraine, and the cut off of oil and natual gas to Europe, but all of that doesn’t mean that there is anything wrong with Monday, the company,or its business model. The invasion was in March, and they just grew at 75% in their April to June quarter, for gosh sakes!
Then we have their enterprise customers, customers spending over $50k per year, which are growing at 147% this quarter, and with a record number of new $50k customers (200 this quarter).
Now, it can be a little bit difficult to grasp what 147% growth means. It doesn’t mean they have 47% more of these customers than they had a year ago. It means that they now have roughly two and a half times as many $50k customers as they had a year ago. I’ve never before seen ANY company grow enterprise customers that quickly, or anywhere close to that quickly, and I doubt you have either.
Then there is their net retention rate. For the whole company it is over 125%. For companies with more than 10 employees it’s over 135%. (That means excluding the tiny 3 or 4 employee companies). And for their enterprise customers (over $50k), the NRR is over 150%.
They are also pivoting to making their Work OS into a platform, not just for collaboration but for doing just about anything.
They announced it a quarter ago and released four new products during this quarter: Monday Sales CRM, Monday Developers, Monday Projects, and Monday Marketer, all to work through Work OS. Customers can switch between them within Work OS. Although these products were released so recently, they already have over 1000 paying users. That’s pretty remarkable in itself.
This company has a consistent gross margin around 89% (!) which shows clearly that they do not need to give major discounts to get customers.
In the first quarter they had high operating expenses and an operating margin of -40%, very possibly due to the cost of producing and preparing to introduce all those new products. This quarter that had improved back to -12%.
After the first quarter they guided to 54% revenue growth for the year. This quarter they raised that guidance by 9 points to 63% (!). To me that says at least 70% by the end of the year. It’s impossible that they could average as low as 63% for four quarters with the first two quarters at 84% and 75%.
Finally, for a view from another source, Google’s President of Americas and Global Partners showcased Work Os’s momentum in his Keynote Speech at Google Marketing Live. There’s a link to his talk in Monday’s Investor Letter which came out with the earnings yesterday.
So that’s how I see Monday. I could be totally wrong but I bought some more this morning. It’s still only a 6% position and my smallest by far.