This article came across my browser homepage’s news section today: https://www.haaretz.com/amp/israel-news/tech-news/.premium-t…
Although the above linked article is probably “biased”, as the authors disclose that they are customers of one of MNDY’s competitors, Clickup, I found it quite illustrative of the market space that MNDY operates within.
This only bolsters the decision I made in the afterhours of MNDY’s last earnings report day to sell out completely, as the quarter was disappointing to my expectations.
For a company that burns so much cash and throwing money around like crazy in sales/marketing (like $8 million on a Super Bowl advertising experiment in Q1 2022), I expect more ‘bang for the buck’ in revenue growth.
When MNDY delivered 15% QoQ growth at $95.5M revenue for Q4 2021, that just doesn’t cut it.
The sequential addition in revenue in Q4 2021 was a flat-line:
Q2-21 Q3-21 Q4-21
Sequential rev add 11.6 12.4 12.4
The S/M expense continues to climb and S/M expense as percent of revenue didn’t decrease much from Q3-2021.
Q2-21 Q3-21 Q4-21
S/M expense 61.1 67.4 76.5
S/M as % of rev 86.5% **81% 80% [flat!]**
Non-gaap S/M exp 55.5 61 69.4
Non-gaap S/M %rev 79% **74% 73%**
I’d much rather have seen closer to 20% QoQ growth at $100M revenue for Q4 2021, which would be a sequential addition of $17M instead of $12.4M, and would have brought the S/M percent of rev down to 76.5%.
Now let’s compare to SentinelOne for example.
Although SentinelOne is at a smaller run rate, its revenue growth at >120% YoY for the past 3 quarters has been crushing it with S/M expense barely increasing at all.
Q2-22 Q3-22 Q4-22
S/M expense 41 41 42
S/M as % of rev 90% **74% 64% [drop!]**
Non-gaap S/M exp 37.1 36 36.3
Non-gaap S/M %rev 81% **64% 55%**
SentinelOne’s kind of trend is what I’d prefer to see! It hints to me that their product is ‘selling itself’ despite competition from CRWD and MSFT and loads of other endpoint providers out there, while MNDY is having to work hard to generate that next dollar in sales.
Finally, from the above linked article, here are the highlights:
In a podcast in November, Evans told how the company had reached annual recurring revenues (ARR) of $85 million, and he expected another jump in the ARR rate of 200 percent in 2022 to $250 million.
MNDY guides this year for $470M, at a growth rate of 53% YoY. Yes, it’s likely very conservative, but still, ClickUp is catching up real fast at 200% growth rate, and growing way faster than MNDY historically did, albeit we don’t know ClickUp’s cash burn to achieve this.
What makes ClickUp a company with the highest growth rate in the category of task management tools is the combination of timing, strategy and aggressive pricing. Monday.com and Asana were founded a decade ago, during a period in which the sector was still in its infancy – and the two firms were forced to work hard and invest a lot of resources in getting development teams to adopt their tools. When ClickUp was launched in 2018, its product met a market much more ready for it, and the company could concentrate on product development and finding customers through organic traffic – without having to burn the cash needed to buy its initial customers.
Another aspect that enabled the rapid growth of ClickUp was the price. The company offered a limited free subscription at the beginning, or a $5 a month subscription that included more features – without any limit on the number of users. Monday.com’s basic package costs $10 a month per user, with a minimum of three users. Monday.com launched its first free version just last year. Asana has a free version and a basic version that costs $13.50 a month – without a minimum number of users. All of these prices are for a package that renews every month automatically – but they all have a discount if you buy an annual subscription. ClickUp is also generous in the discounts it gives for a commitment for an annual subscription: Between 35 percent to 45 percent – compared to about 20 percent for Asana and Monday.com
Now THAT is a major market narrative red flag to me, with the details about pricing discounts. This sounds like it could become a race to the bottom and heavy commoditization of the entire space.
If you throw in the looming giant of Microsoft entering to compete later in 2022, this would only be an accelerant to burn down pricing power. It’s rumored that Microsoft Loop will be “free” (https://news.thewindowsclub.com/microsoft-loop-launched-1064…). And given that many enterprises already use Microsoft, if Loop is bundled in without cost, why wouldn’t enterprise decision makers cut MNDY or ASAN or Clickup etc loose to save money?
Anyway, these are just my thoughts and opinions, I could be very wrong, and for those who hold MNDY, I sincerely hope that I am, so that MNDY outperforms and crushes it through 2022.