May 17, 2021
Work management platform Monday.com confidentially filed IPO paperwork in early May and released its F-1 on May 17. The Tel Aviv-based SaaS provider was founded in 2012 and achieved a valuation of $2.7 billion in a funding round uncovered by Bloomberg in May 2020.
The F-1 reveals impressive revenue growth since then, with total revenue for 2020 more than doubling that of 2019 to reach $161 million. At the same time, however, Monday.com disclosed exorbitant sales and marketing costs that suggest a difficult path to profitability.
Monday.com will go public via Nasdaq under the "MNDY" ticker symbol. It has yet to disclose a target valuation or date for its trading debut.
Monday.com is a work management tool. For readers fortunate enough to not know what that means, work management tools help companies track project workflows and related employee activity. The platforms are cloud-based, so employees can update the status of projects in real time, yielding a set of dashboards that (in theory) provide a bird's-eye view of everything getting accomplished within an organization.
Monday.com's platform consists of modular building blocks such as columns, widgets, views and automations. As with Slack or Teams, the Monday.com platform allows third-party software providers to make and distribute integrations. For example, the Twilio integration allows Monday.com users to send project updates out through SMS, the Mailchimp integration provides real-time newsletter statistics directly in a Monday.com card and the Salesforce integration makes it easier to track sales leads in project dashboards.
In its F-1, Monday.com emphasizes the importance of platform customization. It calls its platform a "no-code and low-code framework" that allows "customers to create their own software applications and work management tools with robust capabilities and an enjoyable user experience."
Monday.com isn't profitable, but it has posted consistent revenue growth in recent years. Between 2019 and 2020, the company more than doubled annual revenue from $78 million to $161 million. It is nearly on track to maintain that growth rate in 2021, as it reported $59 million in the first three months of the year, up nearly 85% from the same period in 2020.
Monday.com generates revenue through the SaaS model. At the end of March 2021, it had just under 128,000 customers spanning over 190 countries. Larger companies account for a disproportionate share of total revenue, and Monday.com's ability to grow that client segment has helped increase revenue in recent years: It had 76 customers with more than $50,000 in annual recurring revenue at the end of 2019, but by the end of 2020, that figure grew 247% to reach 264 such clients.
While Monday.com is headquartered in Tel Aviv, end customers located in the U.S. accounted for 48% of total revenue in 2020. This proportion has remained fairly consistent over time, even as revenues have scaled several times over.
The biggest area of concern for Monday.com — and a key reason why it isn't profitable — is exorbitant sales and marketing costs. Sales and marketing costs have exceeded revenue in every quarter reported by the company since the middle of 2019. That means even if all other costs were reduced to zero, the sales and marketing cost alone would be enough to make Monday.com unprofitable. In Q1 2021, for instance, Monday.com generated $59 million in revenue with $63 million in associated sales and marketing costs.
Overall, Monday.com posted a net loss of $92 million in 2019 and $152 million in 2020. Though this is obviously moving in the wrong direction, this change represents an improvement of net loss relative to total revenue — net loss exceeded total revenue in 2019 but was slightly below total revenue for 2020. The first three months of 2021 were even more promising on this front, as Monday.com posted a net loss of $39 million alongside total revenue of $59 million.
Two risk factors stand out from Monday.com's F-1: sales and marketing costs, and competition.
Interpreting the sales and marketing line item is fundamental to judging Monday.com's long-term business outlook:
In Monday.com's risks section, it details numerous risks associated with its sales and marketing costs:
And adding to the pressure on sales teams, there's stiff competition in the workplace management industry.
Add to that the ever-present threat of Microsoft or Google deciding to grow their presence in the work management space.
Monday.com disclosed the following ownership stakes, as they stood prior to any offering: